St. Joseph's Regional Health Center v. Munos

• Decision Date: 18 November 1996
• Docket Number: No. 95-1217,95-1217
• Citation: 326 Ark. 605,934 S.W.2d 192
• Parties: ST. JOSEPH'S REGIONAL HEALTH CENTER; Sisters Of Mercy Health System, St. Louis, Inc.; and Randall J. Fale, Appellants, v. Dr. Louis R. MUNOS, M.D., Appellee.
• Court: Arkansas Supreme Court

Page 192

934 S.W.2d 192

326 Ark. 605

ST. JOSEPH'S REGIONAL HEALTH CENTER; Sisters Of Mercy Health System, St. Louis, Inc.; and Randall J Fale, Appellants, v.Dr. Louis R. MUNOS, M.D., Appellee.

No. 95-1217.

Supreme Court of Arkansas.

Nov. 18, 1996.

Edwin L. Lowther, Claire Shows Hancock, Anna Hirai Gibson, Little Rock, for appellants.

Jess Askew, III, Grace Ann Weber, Little Rock, for appellee.

NEWBERN, Justice.

Sisters of Mercy Health System, St. Louis, Inc.("Sisters"), is a Missouri corporation that operates twelve hospitals, one of which is St. Joseph's Regional Health Center ("St. Joseph's") in Hot Springs.St. Joseph's is described as a "member" of the Sisters hospital system.We do not know all the details of the relationship between Sisters and St. Joseph's, but we understand from pleadings and from oral argument that St. Joseph's is an Arkansas non-profit corporation owned by Sisters.Sisters employs Mr. Randall J. Fale to act as chief executive officer and president of St. Joseph's.

In 1989, St. Joseph's formed a partnership with Dr. Louis R. Munos and four other physicians.The purpose of the partnership was to provide magnetic resonance imaging services at a facility operated by the partnership and known as the Hot Springs MRI Center.St. Joseph's owns 51 percent of the partnership, and it appointed Mr. Fale, along with two others, to represent it in the partnership.Dr. Munos owns 19.8 percent of the partnership, and the other four physician partners own varying lesser amounts.

On March 8, 1989, the partnership entered a ten-year agreement with Dr. Munos to manage the MRI Center.The partnership terminated the contract in 1993.Dr. Munos sued the partnership for breach of the contract, Sisters and Mr. Fale for tortious interference with the contract, and St. Joseph's and Mr. Fale for breach of the fiduciary duty between partners.The alleged liability of Sisters and St. Joseph's was derivative, based upon the conduct of Mr. Fale.

The jury returned a verdict upon interrogatories and found that the partnership did not breach the contract but that Mr. Fale and Sisters interfered with the contract and that St. Joseph's and Mr. Fale violated their fiduciary duty to Dr. Munos.The three defendants were held jointly and severally liable for damages of $100,000.

We agree with the argument of Sisters and Mr. Fale that the acts of Mr. Fale resulting in the termination of the contract were taken on behalf of St. Joseph's rather than Sisters.Sisters' motion for directed verdict should have been granted on this point because St. Joseph's, through its membership in the partnership, was a party to the contract in question and could not have interfered with its own contract.We also agree with the argument of Mr. Fale and St. Joseph's that the evidence produced at trial failed to show a breach of the fiduciary duty owed by one partner to another.The directed verdict motion of St. Joseph's and Mr. Fale on the latter point also should have been granted.

As we reverse and dismiss the two parts of the judgment upon which the liability was based, we need not consider Dr. Munos's cross-appeal, which concerns only the amount of damages.

The contract between the partnership and Dr. Munos provided that Dr. Munos, as an independent contractor, would "provide professional radiology and administrative services to the [MRI] Center and ... manage the provision of MRI services at the Center."Dr. Munos agreed to "protect the confidentiality of patient records" and to "comply with all applicable federal, state and local laws and regulations relating to such records."Although the contract was for a term of ten years, the parties agreed that it could be terminated immediately in a "duly called meeting" of St. Joseph's and two of the four physician partners.This termination clause required that Dr. Munos receive notice of the termination, but it did not confer on him the right to be present at the "duly called meeting."

At some point after the partnership was created, St. Joseph's and two of the individual physician partners became involved in medical malpractice litigation.In late 1992 and early 1993, the partners began to question whether Dr. Munos was protecting the confidentiality of patient records at the MRI Center.They suspected information was being "leaked" from patients' records for which there had been no release authorizations.The partners investigated the record-keeping practices of various departments within the St. Joseph's system, and they focused on the MRI Center.

Gary Sammons, an attorney who represented plaintiffs in the medical malpractice actions, was a personal friend of Dr. Munos.He also rented office space from Dr. Munos in a building adjacent to the MRI Center.The partners feared that Mr. Sammons might have ascertained the identities of potential plaintiffs by reviewing information from patient records at the MRI Center.The allegation that emerged against Dr. Munos was that he had allowed Mr. Sammons into the non-public areas of the MRI Center and had possibly permitted him to view patients' medical records without authorization.

Evidence presented at the trial showed that Mr. Fale met with Dr. Munos on February 9, 1993, and raised these concerns.Mr. Fale stressed the need for patient confidentiality and instructed Dr. Munos to confine to the public reception area anyone (especially Mr. Sammons) who was not a patient or employee and to release patient information only if the particular patient authorized the release.Dr. Munos relayed Mr. Fale's instructions to other members of the MRI Center staff.

Nonetheless, the partners' anxieties persisted, and Mr. Fale continued to hear allegations that the MRI Center was improperly releasing confidential information.On April 28, 1993, Mr. Fale notified Dr. Munos and the other partners that they would have the opportunity to support or refute the allegations at a meeting scheduled for May 12.In the notice, Mr. Fale stated that the allegations had not been verified.

On May 5, 1993, Dr. Munos wrote a letter denying that he or anyone else had improperly disclosed confidential information.Dr. Munos also requested, and later received, a list of some forty MRI Center patients whose records were allegedly released without authorization in connection with the malpractice litigation.Dr. Munos testified that he and other MRI Center employees reviewed those patients' files to determine if any records had been "checked out" to plaintiffs' attorneys.Dr. Munos claimed that his investigation revealed that records of some of the listed patients had not been released and that records of others had been released but with authorization.

The May 12 partnership meeting was postponed so that the partners could continue to investigate the matter.According to Mr. Fale, none of the partners produced any evidence concerning Dr. Munos or the MRI Center, and "[n]othing happened for another couple of months."In June 1993, however, Mr. Fale learned from Cindy Godwin, an MRI Center employee, that Mr. Sammons had been seen in private areas of the MRI Center.Around June 18, Mr. Fale sought the advice of attorney Edwin Lowther, who interviewed Ms. Godwin and Terri Cooper, another MRI Center employee, and prepared affidavits for them to sign regarding their observations of Mr. Sammons in the Center's private areas.

The evidence concerning Mr. Sammons's visits to the Center was disputed.The affidavits of Ms. Godwin and Ms. Cooper, and testimony they gave later at the trial of this matter, made it seem that Dr. Munos was involved in clandestine activities with Mr. Sammons at the MRI Center.To the contrary, Dr. Munos's testimony characterized the one, and perhaps two, instances in which Mr. Sammons had been in the break room or kitchen of the MRI Center after the issue of the propriety of his visits had arisen as "chance encounters" that were totally innocent.

The upshot of the affidavits was that an "emergency meeting" of the MRI Center partners was convened by Mr. Fale to consider the concerns of the partners with respect to their suspicions about Dr. Munos.When confronted about the allegations that Mr. Sammons had twice visited the MRI Center after the warning, Dr. Munos told the partners he knew of only one visit and explained it had to do with the matter of an unpaid electric bill of an office rented by Mr. Sammons from Dr. Munos.Dr. Munos was asked to leave the meeting and did so without protest.The affidavits were presented, and the partners voted to terminate Dr. Munos's contract without giving Dr. Munos an opportunity to present the results of his own investigation.There was no attempt to dissolve the partnership or to oust Dr. Munos as a partner or to affect in any way his interest in the partnership.

In reviewing the denial of a motion for a directed verdict, we must view the evidence in the light most favorable to the party against whom the verdict is sought and give its highest probative value, taking into account all reasonable inferences deducible from it.If there is any substantial evidence to support the verdict, we must affirm the trial court.

Arkansas Kraft v. Cottrell, 313 Ark. 465, 470, 855 S.W.2d 333(1993)(citations omitted).Applying this standard, we agree that the Trial Court erred in denying the motions for directed verdict.

1.Tortious interference with a contract

Dr. Munos alleged that Mr. Fale, acting in the course and scope of his employment with Sisters, influenced the partners to terminate wrongfully the contract between Dr. Munos and the partnership.Dr. Munos claimed the following actions taken by Mr. Fale constituted improper "interference" with the contract: (1) asking Mr. Lowther to draft the affidavits of Ms. Godwin and Ms. Cooper; (2) concealing the existence of the affidavits from Dr. Munos; (3) calling the partnership meeting on June 22 and revealing the affidavits to the other partners; and (4)...