Vraney v. Med. Specialty Clinic, P.C.

• Decision Date: 09 September 2013
• Docket Number: No. W2012-02144-COA-R3-CV,W2012-02144-COA-R3-CV
• Citation: Vraney v. Med. Specialty Clinic, P.C., No. W2012-02144-COA-R3-CV (Tenn. App. Sep 09, 2013)
• Court: Tennessee Court of Appeals
• Parties: GEORGE R. VRANEY, M.D. v. MEDICAL SPECIALTY CLINIC, P.C.

GEORGE R. VRANEY, M.D. v. MEDICAL SPECIALTY CLINIC, P.C.

No. W2012-02144-COA-R3-CV

COURT OF APPEALS OF TENNESSEE AT JACKSON

July 16, 2013 Session

Filed September 9, 2013

Direct Appeal from the Chancery Court for Madison County

No. 65204 Tony A. Childress, Chancellor by Interchange

This is a breach of contract case. Appellant, a medical doctor, was hired by Appellee Clinic under terms outlined in an employment agreement. After four years employment, the relationship between the parties reached an impasse and Appellant made plans to leave the Clinic to open his own practice. When the parties could not agree concerning payments due under the contract, the instant lawsuit was filed by Appellant, claiming that the Appellee had breached the contract. Appellee counter-sued for breach of contract, breach of duty of loyalty, and conversion, claiming that the Appellee had retained certain of his accounts receivable and had limited his work schedule in contravention of the contract. The trial court granted summary judgment in favor of the Appellee on the breach of contract and duty of loyalty claims, and set damages pursuant to the report of the Special Master. Appellant appeals. We conclude that remaining questions of law and fact preclude the grant of summary judgment, but that the trial court properly denied Appellant's claim for unpaid vacation time and properly referred the issue of damages to the Special Master. Reversed in part, affirmed in part, and remanded.

Tenn. R. App. P. 3. Appeal as of Right; Judgment of the Chancery Court Reversed

in Part; Affirmed in Part; and Remanded

J. STEVEN STAFFORD, J., delivered the opinion of the Court, in which ALAN E. HIGHERS, P.J.,W.S., and HOLLY M. KIRBY, J., joined.

Tim Edwards and Whitney Boshers, Memphis, Tennessee, for the appellant, George R. Vraney, M.D.

Todd P. Photopulos and Elizabeth E. Chance, Memphis, Tennessee, for the appellee, Medical Specialty Clinic, P.C.

OPINION

I. FACTUAL HISTORY

A. Employment Agreement

George R. Vraney, M.D. ("Dr. Vraney," "Appellant," or "Plaintiff") began his employment with Medical Specialty Clinic, P.C. (the "Clinic," "Appellee," or "Defendant") in January of 2003. At all relevant times, and pursuant to the employment agreement (infra), Dr. Vraney was a Clinic employee, but was not a partner in the practice. While the last written agreement between the parties is dated 2005 and expired (by its own terms on December 31, 2006), it is undisputed that the terms of that agreement governed the relationship between the parties until Dr. Vraney's employment was terminated in 2007. The pertinent provisions of the employment agreement are set out in full context below, however, it is undisputed that the original agreement provides, in relevant part, that: (1) either party could terminate the agreement "on sixty days' notice to the other [party];" (2) "[Dr. Vraney's] salary will continue as [he] work[s] those sixty days, or until [he] obtain[s] other employment or otherwise commences practice;" (3) [Dr.Vraney] will be "involved full-time in our practice of medicine, practicing the specialty of pulmonology and [] will not take any outside employment during any term of this agreement without [the Clinic's] written approval;" (4) Dr. Vraney will be paid a base salary of $12,500 per month as well as bonuses based on "net receipts" (as that term is defined in the contract); (5) unused vacation time will not carry over to following years and the Clinic will not pay for unused time; (6) Dr. Vraney will not have any ownership interest in the Clinic and will not be entitled to his accounts receivable; and (7) during the pendency of the contract, and for two years thereafter, Dr. Vraney will not "induce or attempt to influence any hospital or any other healthcare facility or any physician or any other professional with a referring relationship with the practice to terminate that relationship."

During negotiations for a new contract in the early part of 2007, Dr. Vraney requested that he be given the right to his accounts receivable. The Clinic would not agree to this arrangement based upon the fact that Dr. Vraney did not wish to make a financial contribution to become a shareholder in the Clinic. As noted in his letter of March 13, 2007, which was sent to Dr. Robert Hollis, a partner in the Clinic, see infra, Dr. Vraney was of the opinion that he had already made a financial contribution to the Clinic sufficient to constitute a "purchase" of his accounts receivable.

In addition to the accounts receivable issue, evidence in the record suggests that Dr. Vraney also felt overworked by the schedule he was keeping at the Clinic and did not see the possibility of any reduction in his hours or any additional employees being hired to palliate the work load.

B. March 2007

At some point in March 2007, Dr. Vraney and Dr. Hollis had a private meeting, or meetings, concerning accounts receivable and possible payment for unused vacation time. At one of these meetings, Dr. Hollis allegedly offered Dr. Vraney $25,000 for unused vacation time (we will discuss this offer further infra). However, these discussions did not result in complete resolution of all issues concerning Dr. Vraney's compensation and the parties' relationship deteriorated further.

With negotiations at an impasse, Dr. Vraney made plans to leave the practice. On March 13, 2007, Dr. Vraney sent a letter to Dr. Hollis in which he reiterated his contention that he had made sufficient financial contribution to the Clinic to result in an accounts receivable "purchase":

When I started here in April of 2003 I was promised a base salary. At the end of that first year my productivity had produced a negative "bonus" of $101,491. My accounts receivable at that time less current month's charges was $35,828.

Had I required the clinic to stick to the income guarantee the net negative $101,491 would have been zeroed out. I did not [consider it zeroed out]. Over the next two years, I paid back that $101, 491 and would not receive my first bonus money until that was repaid. Certainly the accounts receivable were "purchased" at that time.

* * *

While the clinic could opt to make good on the original contract and reimburse me the $101,491 plus interest I think that unlikely. Short of that option if, after reconsideration, the partners decide they are entitled to any part of my earnings beyond the generous contribution I make monthly to the general overhead I will plan to begin a long deferred extended vacation beginning the 1^st of April.

On March 29, 2007, Dr. Vraney incorporated his own medical practice. Also in March 2007, Dr. Vraney hired Advanced Medical Billing and Consultants, L.L.C. ("Advanced Medical") to assist him in credentialing his new practice with various insuranceproviders, and to ultimately do all the billing and collection work for his new practice.

Sometime in early March 2007, Dr. Vraney sent an undated note to the Clinic's scheduling staff. The note indicated that Dr. Vraney should only be scheduled to see office patients on a limited basis, beginning in May 2007; specifically, he instructed the staff that his in-office availability would be limited to the dates of May 1, 3, 10, 15, 17, 22, and 24, 2007. According to Dr. Vraney's deposition testimony, he did not speak directly to the partners before giving the staff the order to reduce his office hours during the month of May. Dr. Vraney stated that he did not communicate the fact that he was reducing his office hours to the other doctors because his usual practice was to set his own hours. At any rate, there is some dispute in the record as to whether, or to what extent, Dr. Vraney's colleagues were aware of his desire for an abridged May schedule before he notified them, by letter dated March 30, 2007, that he would be leaving the Clinic:

As I complete four years with the clinic and see no possibility of help in the foreseeable future I am forced to face the simple reality that I can not continue with the current and seemingly ever increasing demands of both the inpatient and outpatient practices. Therefore, effective July 1^st I will complete my employment by the clinic and close my outpatient practice of Pulmonary Medicine.

* * *

It will be my objective over the next few months to make this transition as smooth as possible. I would hope that we could get notification out to patients in the very near future so that I can address their immediate needs and help them plan for future care.

I will continue to work in the hospital as a Pulmonary/Critical Care consultant and look forward to continuing our professional relationship with those of you who will need consultation . . . .

C. May 2007

Dr. Vraney testified that after sending the March 30, 2007 letter, he continued with the Clinic under the assumption that June 30, 2007 would be his last day of work. There is no indication that he limited his office hours until the beginning of May 2007, when he began to work the truncated schedule he had set out in his note to the staff, supra.

We infer from the record and the course of events that the Clinic partners did not became aware of Dr. Vraney's limited office schedule until that schedule began at the beginning of May 2007. The Clinic partners were of the opinion that Dr. Vraney's limited schedule was a breach of the contractual requirement that he be a "full-time" employee, as they defined that term. As Dr. W. Patrick Teer testified: "[T]he fact that [Dr. Vraney] was indicating to the scheduling staff that he was curtailing how many patients he was seeing to me would indicate that he is no longer working full-time." Despite this statement, Dr. Teer admitted that the Clinic did not define the doctors' hours; rather he stated that "the individual physician" sets his or her hours. Dr. Teer opined, however, that in order to be considered "full-time," he would expect that Dr. Vraney would need to work a schedule consistent with that he had worked during his four-year...