Tredrea v. Anesthesia & Analgesia, P.C.

• Decision Date: 23 September 1998
• Docket Number: No. 96-1117,96-1117
• Citation: 584 N.W.2d 276
• Parties: Colin R. TREDREA and Douglas G. Wells, Appellees, v. ANESTHESIA & ANALGESIA, P.C., an Iowa Professional Corporation, Appellant, and Edwin A. Maxwell, Appellee. Colin R. TREDREA and Douglas G. Wells, Appellants, v. GENESIS MEDICAL CENTER, Appellee.
• Court: Iowa Supreme Court

Page 276

584 N.W.2d 276

Colin R. TREDREA and Douglas G. Wells, Appellees, v. ANESTHESIA & ANALGESIA, P.C., an Iowa Professional Corporation, Appellant, and Edwin A. Maxwell, Appellee.

Colin R. TREDREA and Douglas G. Wells, Appellants, v. GENESIS MEDICAL CENTER, Appellee.

No. 96-1117.

Supreme Court of Iowa.

Sept. 23, 1998.

Miles J. Zaremski, David G. Susler, and Bruce C. Nelson of Rudnick & Wolfe, Chicago, Illinois, for appellant Anesthesia & Analgesia.

Ralph W. Heninger of Heninger & Heninger, P.C., Davenport, and Deborah M. Tharnish of Davis, Brown, Koehn, Shors & Roberts, P.C., Des Moines, for appellees Colin R. Tredrea and Douglas G. Wells.

Robert A. Van Vooren and Michael P. Byrne of Lane & Waterman, Davenport, for appellee Edwin A. Maxwell and Genesis Medical Center.

Considered by HARRIS, P.J., and LARSON, LAVORATO, SNELL, and ANDREASEN, JJ.

LARSON, Justice.

The Genesis Medical Center in Davenport, Iowa, signed a contract with Anesthesia and Analgesia, P.C. (A & A) under which A & A would provide anesthesiology services for Genesis. These plaintiffs, Colin R. Tredrea and Douglas G. Wells, had previously provided such services for the medical center. However, under this new contract, the services of A & A were to be exclusive, subject to a provision in the contract that other anesthesiologists, including these plaintiffs, could provide services under agreements with Genesis which were to be executed by a certain date. Any extensions in the deadline were subject to the consent of A & A. The Genesis-A & A agreement provided that A & A would not "unreasonably withhold" its consent to an extension of the deadline.

These plaintiffs, two independent anesthesiologists, attempted to enter into a contract with Genesis after the deadline. A & A consented to two extensions of the deadline but refused to consent to a third. The plaintiffs sued several defendants, claiming to be third-party beneficiaries of the Genesis-A & A agreement. Their petition alleged that A & A had unreasonably refused the third extension and improperly interfered with the plaintiffs' right to contract with Genesis. A jury found for the plaintiffs, and A & A appealed. The plaintiffs cross-appealed from the court's dismissal of their claim against Genesis. We affirm on both appeals.

I. Facts.

The plaintiffs, Colin R. Tredrea and Douglas G. Wells, were two of fifteen anesthesiologists on staff at Genesis as of October 1994. Seven of the other doctors were employees of A & A, which was a professional corporation of anesthesiologists organized as a group practice.

The anesthesiology department at Genesis had been suffering from a number of problems, including critical evaluations by the Iowa Board of Medical Examiners. As a result, Genesis decided to reorganize its system of employing anesthesiologists. Genesis reached this decision after conducting an extensive review process of the various models for delivering anesthesiology services. It eventually adopted a model under which it would enter into an exclusive contract with a single group of anesthesiologists. Genesis contacted all fifteen anesthesiologists on its staff, explained the new model, and requested bids for contracts.

In January 1995 Genesis signed the contract under which A & A would be the exclusive provider of anesthesiology services. Although the contract was "exclusive," it provided that Genesis could offer contracts to independent anesthesiologists, including these plaintiffs, during a limited time period. In relevant part the contract provided:

2. Exclusivity. During the term of this Agreement and any subsequent renewal, Contractor shall have the exclusive right to provide all anesthesiology services to in-patients and out-patients of the Hospital, including patients of any out-patient facilities established, directly or indirectly, by the Hospital.

Notwithstanding the foregoing, Contractor acknowledges that the Hospital intends to offer to enter into agreements with those anesthesia providers who are performing anesthesia services at the Hospital as of the date of this Agreement and who are identified on Schedule B hereto (the "Independent Contractors") under which Independent Contractors would continue to perform anesthesia services at the Hospital. Contractor agrees that the Hospital may contract with the Independent Contractors to provide anesthesia services in the Department, provided that such agreement shall, by no later than January 31, 1995, be in writing and shall provide that: (i) it shall expire no later than June 30, 1996, (ii) the Hospital shall not be obligated to renew the agreement upon the expiration of its initial term, and (iii) each Independent Contractor shall not be obligated to renew the agreement upon the expiration of its initial term, and (iv) each Independent Contractor shall abide by such rules, regulations and procedures with respect to the operation of the Department as may from time to time be established by the Medical Director.... Contractor agrees that it shall not unreasonably withhold its consent to the Hospital's request for an extension of time to execute the agreement with Independent Contractors contemplated above, provided that Hospital demonstrates that it has used good faith efforts to cause the execution of such agreements by the January 31, 1995 deadline and, provided further, that Contractor shall not, under any circumstances, be obligated to consent to an extension of time beyond March 1, 1995.

(Emphasis added.)

On January 10, 1995, Genesis sent a letter to Wells, Tredrea, and the other six on-staff independent anesthesiologists, advising them that A & A had been granted the exclusive contract and that any of them would be able to sign an "independent contractor" agreement under which they could provide anesthesiology services. The letter set a deadline of January 25, 1995, to execute these agreements. Initially, all eight doctors rejected the contract offer made to them. While the contract established a deadline of January 31, 1995, Genesis offered the plaintiffs three extensions. A & A consented to the first two extensions. The first extended deadline was February 2, then February 10, and then February 15 at 6 p.m. On February 17, the plaintiffs approached Genesis to sign the independent contractor agreements they had previously rejected. Genesis sought the approval from A & A for the extension, but A & A refused.

The plaintiffs sued Genesis, A & A, and Dr. Edwin A. Maxwell, the medical director of anesthesia services at the hospital, on theories of: (1) breach of medical staff bylaws, (2) third-party beneficiary breach-of-contract claims based on the Genesis-A & A contract, (3) promissory estoppel, and (4) intentional interference with prospective business advantage.

The district court granted Genesis summary judgment on all counts. Later, the plaintiffs filed a second amended petition against Maxwell and A & A, alleging a third-party beneficiary breach of contract and intentional interference with prospective business advantages and intentional interference with contractual relationships. The court dismissed the claims for interference with contractual relationships (apparently as against Maxwell and A & A), concluding that the bylaws were not a contract.

The trial began in March 1996 against Dr. Maxwell and A & A. The court granted Maxwell a directed verdict and dismissed him from the case. The court allowed the plaintiffs to prove damages only prior to June 30, 1996, an issue the plaintiffs raise in their cross-appeal. The jury returned judgments in favor of Wells against A & A for $310,560 and in favor of Tredrea against A & A for $306,352.

A & A moved for judgment notwithstanding the verdict, which was denied. It appealed from that decision. The plaintiffs cross-appealed the order dismissing the interference claim against Maxwell and the order granting a motion in limine of A & A and Maxwell to limit the period of recoverable damages. The plaintiffs also appealed the order granting Genesis a summary judgment. This court consolidated the two appeals.

II. The Issues.

Although A & A presents its issues in a different format, we believe they may be most clearly stated as follows: (1) do the plaintiffs have any enforceable third-party rights under the Genesis-A & A agreement, (2) does substantial evidence support the plaintiffs' claims for breach of contract and interference with a prospective business advantage, and (3) did the court abuse its discretion in admitting certain evidence? The plaintiffs' cross-appeal contends the court erred in: (1) precluding them from proving damages beyond June 30, 1996 (the date on which any agreement between Genesis and the independent doctors would expire); (2) dismissing their contract claims based on Genesis' alleged breach of hospital bylaws; and (3) dismissing their claims against Dr. Maxwell and Genesis for interference with existing contracts and contractual relationships.

III. Scope of Review.

We review the denial of motions for directed verdict and motions for judgment notwithstanding the verdict under essentially the same rules: sufficiency of the evidence. As to motions for judgment notwithstanding the verdict:

Our only inquiry ... is whether there is sufficient evidence to justify submitting the case to the jury. A motion for judgment notwithstanding the verdict should be denied if there is substantial evidence to support each element of the plaintiff's claims. A plaintiff must have presented more than a mere scintilla of evidence to avoid a defendant's motion for judgment notwithstanding the verdict. Evidence is substantial when a reasonable mind would find the evidence presented adequate to reach the same findings.

Willey v. Riley, 541 N.W.2d 521, 526 (Iowa 1995) (citations omitted).

The standard of review for denial of a motion for directed verdict is for correction of errors at law, and "where a defendant's challenge is to the sufficiency of...