Uintah Basin Medical Center v. Hardy

• Decision Date: 03 March 2005
• Docket Number: No. 20030632-CA.,20030632-CA.
• Citation: 110 P.3d 168,2005 UT App 92
• Parties: UINTAH BASIN MEDICAL CENTER, Plaintiff and Appellee, v. Leo W. HARDY, M.D., Defendant and Appellant. Leo W. Hardy, M.D., Counterclaimant and Third-party Plaintiff, v. Uintah Basin Medical Center and Thomas J. Allred, M.D., Counterclaim Defendants and Third-party Defendants.
• Court: Utah Court of Appeals

110 P.3d 168

2005 UT App 92

UINTAH BASIN MEDICAL CENTER, Plaintiff and Appellee, v. Leo W. HARDY, M.D., Defendant and Appellant.

Leo W. Hardy, M.D., Counterclaimant and Third-party Plaintiff, v. Uintah Basin Medical Center and Thomas J. Allred, M.D., Counterclaim Defendants and Third-party Defendants.

No. 20030632-CA.

Court of Appeals of Utah.

March 3, 2005.

Jennifer L. Lange, John P. Harrington, Holland & Hart, Salt Lake City, for Appellant.

Blaine J. Benard, E. Blaine Rawson, Christine T. Greenwood, Holme Roberts & Owen, LLP, Salt Lake City, for Appellee.

Before Judges DAVIS, JACKSON, and THORNE.

OPINION

JACKSON, Judge:

¶ 1 Dr. Leo W. Hardy appeals the trial court's order granting summary judgment in favor of Uintah Basin Medical Center (UBMC) in a suit regarding UBMC's termination of his employment agreement. We reverse and remand.

BACKGROUND

¶ 2 Dr. Hardy is a board-certified pathologist. On November 29, 1994, he executed an employment agreement (the Agreement) to provide pathology services for UBMC, which is owned by Duchesne County and operated by the UBMC Board of Trustees (Board). Under the Agreement, which consists of only two pages taken almost verbatim from that of Dr. Hardy's predecessor, UBMC was to refer certain types of laboratory work to Dr. Hardy and pay a $400 monthly laboratory director's fee. In return, Dr. Hardy would work as the director of UBMC's laboratory and provide related services, which included weekly visits to the hospital. The Agreement does not include a fixed termination date; rather, it would "continue to bind parties ... until terminated after ninety (90) days written notice for just cause of termination by either party or by mutual consent of the parties to a shorter notice period." The Agreement does not define "just cause" or otherwise clarify what grounds would justify termination.

¶ 3 On July 29, 1996, UBMC sent Dr. Hardy notice of termination and later hired Dr. Thomas Allred in his place. On October 28, 1996, UBMC brought a suit for declaratory judgment to establish that its termination of the Agreement with Dr. Hardy was for "just cause." Dr. Hardy filed a counterclaim alleging that the termination was without "just cause" and a breach of contract. Following discovery, the trial court granted UBMC's motion for summary judgment. The court determined that the Board in place at the time Dr. Hardy was hired had, during the course of Dr. Hardy's employment, been replaced by a successor Board and that the successor Board was no longer bound by the Agreement.

¶ 4 Dr. Hardy appealed the order to the Utah Supreme Court, which reversed. The court explained, in essence, that a contract is binding upon a successor governmental board as long the contract (1) involves a non governmental "proprietary power or function" and (2) is for "a reasonable duration." Uintah Basin Med. Ctr. v. Hardy, 2002 UT 92, ¶ 11, 54 P.3d 1165. The court determined that the Agreement involved a proprietary function and not a government power, see id. at ¶ 16, but remanded "to allow further development of the record" with respect to the reasonableness of the Agreement's duration, id. at ¶ 18. In gauging the reasonableness of the Agreement, the court instructed the trial court to consider how the "just cause" provision was understood by the parties. Specifically, the court suggested that the trial court should consider: (a) whether "the `just cause' provision gives successor boards broad discretion to terminate Dr. Hardy," in which case the duration would likely be reasonable, or whether "the `just cause' provision permitted termination only for deficient job performance," in which case the duration would likely be unreasonable; and (b) "[t]he extent to which the durational limitations in Dr. Hardy's contract conform to UBMC's usual practices in similar situations." Id.

¶ 5 On remand, UBMC again moved for summary judgment, arguing that there were no factual disputes and that the duration of Dr. Hardy's agreement was unreasonable as a matter of law. UBMC relied on statements in Dr. Hardy's deposition testimony that the Agreement could not be terminated except for deficient job performance or physical incapacity. UBMC also emphasized that it had only rarely used the "just cause" provision in its employment contracts with physicians. In response, Dr. Hardy submitted a post-remand affidavit explaining that he understood that "just cause" permitted UBMC boards to terminate the Agreement under a variety of circumstances, which included deficient performance, physical incapacity, and fundamental changes in the hospital's need for pathology services. Dr. Hardy also argued that although UBMC's use of the "just cause" provision had been erratic, UBMC had included the same clause in its 1992 contract with Dr. Joseph J. Sannella, the pathology physician immediately preceding him.

¶ 6 The trial court agreed with UBMC and granted its motion for summary judgment. In its June 19, 2003 ruling, the court explained that Dr. Hardy's understanding of the "just cause" provision as described in his original deposition was too limiting because "he could only be terminated for a few specific reasons, including death, physical incapacity, or if the hospital no longer required pathology services." The court went on to conclude that Dr. Hardy's post-remand affidavit clarifying his position was invalid under the "sham affidavit" rule because it contradicted his deposition testimony and served as an "attempt[] to re-draft his interpretation of the just cause clause to more similarly mirror the higher Court's opinion." Finally, the court also noted that the majority of UBMC's contracts contained a specific time limitation or a clause to terminate with proper notice. Thus, in the court's opinion, Dr. Hardy's contract indicated a significant departure from UBMC's normal practices.

¶ 7 Dr. Hardy appeals the trial court's order.

ISSUES AND STANDARDS OF REVIEW

¶ 8 On appeal, we must decide whether summary judgment was proper in this case. Specifically, we must determine (a) whether the trial court properly interpreted the "just cause" provision, (b) whether the Agreement is for a reasonable duration as a matter of law, and (c) whether any questions of fact justify remand to a finder of fact. We review a trial court's grant of summary judgment for correctness. See Speros v. Fricke, 2004 UT 69, ¶ 20, 98 P.3d 28. "In reviewing summary judgments, we view the facts and all reasonable inferences drawn from them in the light most favorable to the non-moving party," id., and affirm if we conclude that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law," Utah R. Civ. P. 56(c).

¶ 9 Similarly, "questions of contract interpretation not requiring resort to extrinsic evidence are matters of law, which we review for correctness." Fairbourn Commercial, Inc. v. American Hous. Partners, Inc., 2004 UT 54, ¶ 6, 94 P.3d 292 (quotations and citation omitted).

ANALYSIS

I. Interpretation of the "Just Cause" Provision

¶ 10 The key question in this case is what the "just cause" provision in the Agreement means. Once this question is answered, we may gauge whether the Agreement was for a reasonable duration and also determine whether UBMC had just cause to terminate Dr. Hardy.

¶ 11 To interpret the "just cause" provision, the trial court relied primarily on extrinsic evidence, namely Dr. Hardy's deposition testimony regarding his understanding of the term. Although this use of extrinsic evidence was urged by our supreme court, see Uintah Basin Med. Ctr. v. Hardy, 2002 UT 92, ¶ 18, 54 P.3d 1165, we note that such evidence must be considered only in the proper context and in accordance with well-settled principles of contract interpretation.

¶ 12 When parties to a contract disagree about the meaning of a provision, principles of contract interpretation require us to give effect to the meaning intended by the parties at the time they entered into the agreement. See Central Fla. Invs., Inc. v. Parkwest Assocs., 2002 UT 3, ¶ 12, 40 P.3d 599 ("In interpreting a contract, the intentions of the parties are controlling."). A court may rely on extrinsic evidence of the parties' intent to interpret a provision, but it may do so only after it has determined that the provision is ambiguous. See, e.g., Nielsen v. Gold's Gym, 2003 UT 37, ¶ 6, 78 P.3d 600. Otherwise, when the agreement is unambiguous, the court must "determine[] the parties' intentions from the plain meaning of the contractual language as a matter of law." Fairbourn, 2004 UT 54 at ¶ 10, 94 P.3d 292 (quotations and citations omitted).

¶ 13 The question of whether a contract is ambiguous is decided by the court as a matter of law. See Wagner v. Clifton, 2002 UT 109, ¶ 12, 62 P.3d 440. The court must first make a preliminary determination of ambiguity, and in doing so, may consider "[r]elevant, extrinsic evidence `of the facts known to the parties at the time they entered the [contract].'" Nielsen, 2003 UT 37 at ¶ 7, 78 P.3d 600 (quoting Yeargin, Inc. v. Auditing Div. of Utah State Tax Comm'n, 2001 UT 11, ¶ 39, 20 P.3d 287) (second alteration in original). Generally, "[a] contract provision is ambiguous if it is capable of more than one reasonable interpretation because of `uncertain meanings of terms, missing terms, or other facial deficiencies.'" Fairbourn, 2004 UT 54 at ¶ 10, 94 P.3d 292 (citation omitted). However, "`[a] contract provision is not necessarily ambiguous just because one party gives that provision a different meaning than another party does. To demonstrate ambiguity, the contrary positions of the parties must each be tenable.'" Novell, Inc. v. Canopy Group, Inc., 2004 UT App 162, ¶ 24, 92 P.3d 768 (quoting R & R Energies v. Mother Earth Indus., Inc., 936 P.2d 1068, 1074 (Utah 1997)). Thus, a contract term may be imprecise, but it is not ambiguous if persons of competent skill and knowledge are capable...