Walton v. Jennings Community Hosp., Inc.
| Decision Date | 20 June 1989 |
| Docket Number | No. 88-1613,88-1613 |
| Citation | 875 F.2d 1317 |
| Parties | F. Richard WALTON, M.D., Plaintiff-Appellant, v. JENNINGS COMMUNITY HOSPITAL, INC., and Louie C. Vaught, Individually and as Administrator of Jennings Community Hospital, Inc., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Richard A. Kemps, Tabbert & Ford, Indianapolis, Ind., for plaintiff-appellant.
Frederick W. LaCava, Frederick W. LaCava & Associates, Indianapolis, Ind., for defendants-appellees.
Before CUDAHY and POSNER, Circuit Judges, and GRANT, Senior District Judge. *
A surgeon, Richard Walton, resigned from the medical staff of Jennings Community Hospital, Inc. ("Jennings") following the initiation of disciplinary proceedings against him. Before leaving, Walton negotiated a settlement agreement with Jennings that specified what the hospital was to say in response to any inquiries regarding Walton's future employment. When Jennings' administrator, Louie Vaught, was subsequently contacted by a hospital interested in employing Walton, Vaught did not abide by the terms of the settlement agreement. Walton has sued the hospital and Vaught for breach of contract and tortious interference with contractual relationship. 1 The district court had jurisdiction by virtue of the diversity of citizenship between Walton, by that time a resident of Iowa, and the defendants, residents of Indiana. The district court granted the defendants summary judgment on all counts. We affirm as to the breach of contract count, but reverse and remand as to the tort claim against the hospital.
Walton joined the staff of Jennings in 1974, and in 1975 was elected to the Board of Directors there. In 1982 the hospital began an investigation of Walton's conduct following allegations that he had sexually harassed a member of the nursing staff. The subsequent investigation turned up allegations of sexual harassment against Walton from three other members of the nursing staff. On July 21, 1982, Vaught (the hospital administrator) wrote Walton informing him that the Executive Committee of the Medical Staff had recommended that Walton be denied any further staff privileges on grounds of unprofessional conduct. Walton then requested an Appellate Review hearing with the hospital Board of Directors.
In August, Walton sent a proposed settlement agreement to the hospital, under which Walton would consent to resign in return for the Board's agreement to drop all disciplinary proceedings against him. The settlement agreement also allowed Walton until March 1, 1983, to leave Jennings. On August 27, 1982, the Board of Directors accepted Walton's proposal despite a strong dissent from the Medical Staff, which apparently maintained its recommendation that Walton be forced to leave immediately. The settlement agreement, which was dated September 23, 1982, contained the following terms:
1. The Board of Directors of the Hospital will reject any adverse recommendations of the Medical Staff or of any committee thereof or any other agency of the Hospital pending against Dr. Walton as of August 26, 1982, and will conclude any such investigations pending at such time.
2. Upon receipt of minutes of the Board of Directors of the Hospital reflecting the action called for in paragraph (1) hereof Dr. Walton will tender his resignation from the Hospital and its staff privileges effective March 1, 1983. The resignation will be accepted effective as of March 1, 1983.
3. The Hospital in replying to inquiries in regard to future employment of Dr. Walton will accurately report that Dr. Walton has voluntarily resigned from the Hospital and if asked, and only if asked, will reply that he was not under any investigation as of the date he submitted his resignation.
4. A full set of medical tools equivalent in value to those provided to the Hospital by Dr. Walton will be provided to him on his departure at a cost not to exceed $3,000.
5. The Hospital will have Dr. Walton replaced as guarantor on the mortgage relating to the Hospital by his successor, subject only to the approval of the FHA. If a full release is not obtainable, a partial one will be obtained to the maximum possible extent.
6. Dr. Walton hereby releases the Hospital, its agents, employees, Medical Staff and Board of Directors for all claims relating to the investigation referred to herein and all other matters of any nature prior to August 26, 1982.... Similarly, the Hospital, its agents, employees, Medical Staff and Board of Directors release Dr. Walton from all claims relating to the investigation.... Additionally, the Hospital will agree not to investigate, prosecute or discipline Dr. Walton for any events (i.e. actions by him) occurring before midnight August 26, 1982.
Appendix of Appellant at A-1--A-3.
By June of 1983 the Kendrick Memorial Hospital ("Kendrick") in Mooresville, Indiana was seriously considering taking Walton onto the staff of the hospital and a related physician's group. As part of Kendrick's review of Walton's credentials, the Kendrick Hospital administrator, Louise Swisher, called Vaught to inquire about Walton's record during his time at Jennings. Swisher's report of what Vaught said is contained in her deposition, in which she states:
Mr. Vaught informed me that Doctor Walton had resigned on March the 1st under the direction of the hospital attorney. He did not tell me who the hospital attorney was, and he also told me that Doctor Walton had been indicted by the local jury for Medicaid theft, and that they had had problems in their hospital with Doctor Walton sexually assaulting a nurse and they asked him to resign.
Exhibit D to Plaintiff's Memorandum in Opposition to Defendants' Motion for Summary Judgment at 19. 2 Approximately four days after this phone conversation, Walton was notified that he would not be allowed to join the Kendrick staffs. Walton eventually found a position at the Gilfillan Clinic in Bloomfield, Iowa. He brought an action against Jennings and its administrator, Vaught, in the District Court for the Southern District of Indiana, and now appeals that court's grant of summary judgment. On appeal Walton raises only the claims against the hospital and Vaught as agent of the hospital; the plaintiff has abandoned his attempts to hold Vaught personally liable for breach of contract or interference with contractual relationship.
We first review the procedural stance of the case. Walton initially filed a complaint on November 19, 1984, seeking money damages for breach of contract from Jennings and Vaught. Walton's amended complaint, filed May 7, 1985, sought compensatory and exemplary money damages for breach of contract from Jennings and Vaught. On October 15, 1985, Walton filed a second amended complaint adding a second count seeking damages for interference with contractual relationship from Vaught only. The court gave Walton leave to file his second amended complaint on November 8, 1985.
On June 3, 1987, Judge Noland granted defendant Vaught summary judgment on all counts, and defendant Jennings summary judgment as to the breach of contract count. However, the court observed that "[a]lthough the plaintiff has no contractual remedy against Jennings Hospital, he retains the possibility of relief under tort law." Walton v. Jennings Community Hosp., Inc., No. 84 C 1555, mem. op. at 13 (S.D.Ind. June 3, 1987) (Walton I ). The district court stated its disposition as follows: "The Court grants the defendants' motion for summary judgment on Count I (as it pertains to Jennings Hospital) to the extent that it seeks relief pursuant to the law of contracts, and denies defendants' motion for summary [judgment] on Count I (as it pertains to Jennings Hospital) on principles of tort law." Id. at 14. As we have noted, Count I stated a breach of contract claim. In August of 1987, Judge Noland denied the plaintiff's request for trial by jury because it was untimely.
The case was then transferred to Judge McKinney. In February of 1988, Judge McKinney denied Walton's motion for reconsideration of the court's previous grant of partial summary judgment to defendants. At the same time Judge McKinney denied the plaintiff's motion for leave to file yet another amended complaint. Walton v. Jennings Community Hosp., Inc., No. 84 C 1555 (S.D.Ind. Feb. 29, 1988) (Walton II ). Judge McKinney's opinion also granted defendants' motion for summary judgment as to the plaintiff's tort claims against the hospital, relying entirely upon this court's decision in Flintridge Station Associates v. American Fletcher Mortgage Co., 761 F.2d 434 (7th Cir.1985).
The two district court decisions leave the case in a somewhat unusual stance. Judge Noland's opinion left open only a cause of action not pleaded by Walton. Judge McKinney then denied the plaintiff's motion to amend the pleadings to include that cause of action (along with numerous other new causes of action), but simultaneously ruled on the merits of the unpleaded claim (granting Jennings summary judgment on the merits of the tort claim against it). The most sensible reading of the situation is to understand Judge McKinney's denial of Walton's motion (for leave to file a new amended complaint) as a refusal to consider the many completely new causes of action that Walton sought to introduce. The proposed amended complaint would have added to the original breach of contract and tort counts new counts for civil conspiracy, section 1983 and section 1985 violations and violation of the Indiana Peer Review Act. Judge McKinney understandably denied Walton's motion, which came more than eight months after Judge Noland's original ruling, two months after the trial date had to be continued due to Walton's "last minute" filing of a witness list and nine days prior to the new scheduled trial date. Walton II, mem. op. at 3. However, because Judge Noland...
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