Trinity Health v. NCES

• Citation: 2003 ND 86,662 N.W.2d 280
• Decision Date: 03 June 2003
• Docket Number: No. 20020317.,20020317.
• Parties: TRINITY HEALTH, Plaintiff and Appellee, v. NORTH CENTRAL EMERGENCY SERVICES, P.C., Defendant and Appellant.
• Court: North Dakota Supreme Court

662 N.W.2d 280

2003 ND 86

TRINITY HEALTH, Plaintiff and Appellee, v. NORTH CENTRAL EMERGENCY SERVICES, P.C., Defendant and Appellant.

No. 20020317.

Supreme Court of North Dakota.

June 3, 2003.

James B. Lynch, Dorsey & Whitney LLP, Minneapolis, MN, and David J. Hogue (appeared), Pringle & Herigstad, P.C., Minot, ND, for plaintiff and appellee.

Randall J. Bakke, Smith Bakke Oppegard Porsborg Wolf, Bismarck, ND, for defendant and appellant.

VANDE WALLE, Chief Justice.

[¶ 1] North Central Emergency Services, P.C. ("NCES") appealed a summary judgment in Trinity Health's action for a declaratory judgment that NCES breached an agreement to provide emergency room services and that Trinity Health had no further obligations to NCES under the agreement. We conclude genuine issues of material fact about what the parties meant in an exchange of letters by their attorneys, whether or not NCES breached the contract, and whether Trinity Health terminated the contract preclude summary judgment. We affirm in part, reverse in part, and remand for further proceedings.

[¶ 2] On May 1, 2001, "QHG of Minot, Inc. d/b/a UniMed Medical Center-St. Joseph's Hospital (`the Hospital')" ("UniMed") and NCES, which employed its sole owner, Dr. Michael Boulter and two other physicians, entered into an agreement for emergency room medical services. Under the agreement, NCES was required to have a physician, initially Dr. Boulter, serve as medical director and "schedule work hours and supervise the work of Hospital employees in the Department" and be "available at reasonable times for consultations with" UniMed staff, and to "provide coverage seven (7) days per week, twenty-four (24) hours per day." The agreement further provided:

8. EXCLUSIVITY. As long as [NCES] and Physician have not failed to fulfill any of their obligations under this Agreement, [UniMed] will not hereafter extend Active Medical Staff privileges to any other Physician not affiliated with [NCES] to practice Specialty in the Department....

15. TERMINATION OF AGREEMENT.

A. Term. The term of this Agreement will be for four years commencing September 1, 2000 and ending on August 31, 2004 unless otherwise terminated as provided below. It may be renewed upon mutual agreement of the parties.

B. Termination.

1. This Agreement may be terminated immediately by [UniMed] upon the occurrence of any of the following events:

....

(c) upon the dissolution of [UniMed] if no successor to [UniMed] is formed for at least thirty (30) days thereafter; upon closure of [UniMed];

....

5. After the initial 24 months, this Agreement can be Terminated without cause by either party upon one-hundred eighty (180) Days written notice to the other.

....

16. NOTICES. Any notices or payments permitted or required by this Agreement shall be deemed made on the day personally delivered in writing or mailed by certified mail, postage prepaid, to the other party....

21. ASSIGNABILITY. The right and obligations of [UniMed] shall inure to the benefit of and be binding upon the successors and assigns of [UniMed]. [NCES] may not assign its rights or obligations under this Agreement, by operation of law or otherwise, without [UniMed's] written consent....

23. AMENDMENTS. Any amendments to this Agreement will be effective only if in writing and signed by the parties.

[¶ 3] On March 20, 2001, UniMed informed the UniMed staff, including Dr. Boulter, that a sale of UniMed to Trinity Health was tentatively scheduled for April 27, 2001. By letter of March 29, 2001, NCES's attorney, Richard P. Olson, advised Trinity Health his law firm had been retained by NCES in connection with NCES's agreement with UniMed and said "[i]t would appear to be appropriate for immediate discussions to take place relative to your fulfillment of the contract." [¶ 4] On April 4, 2001, UniMed informed its contract providers it was being sold to Trinity Health, which would assume UniMed's third-party contracts and service agreements. NCES asserts Trinity orally indicated on April 20 and 21, 2001, it was going to terminate the contract. NCES's attorney advised Trinity Health's attorney that, in his view, under Paragraph 15B(5), "the contract is not terminable until September 1, 2002, and then only after 180 days written notice to the other party." NCES's attorney also related:

It is my understanding ... Trinity Health ... plans to prematurely terminate the services of [NCES]. Subsequent to receiving formal notice of the premature termination by Trinity Health, we will put forth an outline of our proposed resolution.

[¶ 5] In a May 1, 2001, letter, Trinity Health's attorney advised NCES's attorney, in part:

Section 15.B.1 permits Trinity Hospitals to terminate the Agreement "immediately" upon the occurrence of certain events. In particular, clause (c) permits the immediate termination of the Agreement "upon closure of the Hospital." The Agreement defines "Hospital" as UniMed Medical Center-St. Joseph's Hospital ("UniMed").

Upon completion of the acquisition, Trinity Hospitals will maintain a single emergency department at the existing Trinity Hospital facility.... As the Hospital's emergency department effectively will be closed and the terms of the Agreement require North Central to provide emergency services exclusively at the "Hospital", Trinity Hospitals will terminate the Agreement immediately, as permitted under Section 15.B.1(c). In addition, dissolution of UniMed and its Emergency Trauma Center makes it impossible for North Central to perform its services as intended by the Agreement. This would not be "premature termination" of the Agreement.

I hope this letter clarifies our understanding of the Agreement. If you have any questions, please contact me. Meanwhile, Trinity will provide a separate formal termination notice as required by Sections 15 and 16 of the Agreement.

[¶ 6] In a May 16, 2001, letter, Trinity Health's attorney advised NCES's attorney "Trinity Health has decided to continue to utilize the services of [NCES]" and adverted to possible changes in the agreement, including elimination of the exclusivity provision, the medical director obligations, and "the requirement of supervision of anyone other than the physicians supplied by North Central (Agreement at Section 1.F)." The letter also said: "Please let me know if there are other items that we should address in an addendum." The letter also addressed anticipated workload changes:

For quality of care reasons (especially given the expectation that the ER at Trinity will have an increased number of visits over its current workload), ER shifts will be no more than twelve hours in duration. To the extent that [NCES] physicians will work shifts at Convenient Care, a hospital based clinic, those shifts will typically be either 4 or 8 hours in length.

NCES's attorney responded, in part, on May 18, 2001:

You[r] recent suggestion that Trinity Health would like to continue to utilize the services of [NCES] with substantial contract revisions does not appear to be very workable. The work loads at the two emergency rooms have been quite different. The shifts and scheduling between the two emergency rooms are quite different. By way of example, the St. Joseph's emergency room has maintained quality care utilizing 72-hour shifts, and as your correspondence indicates, quality care at Trinity's emergency room requires 12-hour shifts.

[¶ 7] On May 25, 2001, Trinity Health's attorney advised NCES's attorney that Trinity Health would transfer all emergency department services to Trinity Hospital at 7:00 a.m., on June 4, 2001. He also advised:

Although Trinity retains its rights under the Agreement, including its rights under the termination provisions, Trinity is not terminating the Agreement as part of the transfer that will take place on June 4. The focus of some of our prior communications had been understanding the termination rights of the parties, however, the fact of the matter is that Trinity has never provided NCES with a notice of termination.

[¶ 8] Trinity Health closed the UniMed emergency services department on June 4, 2001, and NCES refused to provide emergency services at the Trinity Hospital emergency room.

[¶ 9] Trinity Health's action against NCES seeks a declaratory judgment that, among other things, "failure of NCES to perform under the Agreement since June 4, 2001 constitutes a material breach of the Agreement" and "Trinity Health has no further obligations to NCES under the Agreement." NCES answered the complaint, denying it breached the agreement and asserting affirmative defenses. NCES also counterclaimed for damages, alleging breach of contract by Trinity Health and estoppel.

[¶ 10] NCES moved for partial summary judgment dismissing all of Trinity Health's claims on November 9, 2001. The trial court denied NCES's motion for partial summary judgment, explaining in a July 25, 2002, letter memorandum:

[W]hen Trinity Health purchased UniMed "the hospital" as defined in the agreement, became Trinity Health as a successor and assignee.

The defendants further argue as part of their motion that full performance of the contract limited the performances of services to a specific physical location. I find that it did not.... There is nothing in the agreement to guarantee or require that the performance of the emergency medical services contracted for... take place only at a physical location of UniMed-St. Joseph's. I find nothing in the agreement which prohibited the possibility of a relocation of emergency services required under the agreement.

The defendant also raised the issue of whether or not the modifications to the agreement proposed by Trinity Health were material. I find they were not.

The trial court granted Trinity Health's motion for a protective order and denied NCES's motions to compel discovery and compliance with subpoenas, explaining:

It seems to me, simply put, that since there was no termination of the contract... the side issues as to how

...