York v. Health Mgmt. Assocs., Inc. (Summary)

PHYSICIAN EMPLOYMENT CONTRACTS

York v. Health Mgmt. Assocs., Inc., No. 5:10–cv–00094–RLV–DSC (W.D. N.C. Feb. 20, 2013)

The United States District Court for the Western District of North Carolina granted summary judgment, in part, in favor of a hospital management corporation and its physician-recruiting/employing subsidiary (the employer), both of which were being sued for breach of contract by an orthopedic surgeon whose employment contract fell through after he failed to obtain a state license to practice medicine.

The physician alleged that he incurred costs in relocating his family to North Carolina from California and that the employer was obligated to reimburse him for moving expenses, among other things.  The employer, on the other hand, argued that no payment was due because the employment contract was conditioned on the physician obtaining state licensure.

The court held that because the terms of the employment contract did not specify when the physician was required to obtain state licensure, it was implied that he had a reasonable amount of time to do so – and a “reasonable” time period for compliance may or may not correlate with the employer’s obligation to pay the physician pursuant to the contract.  Noting, though, that “reasonable” is an ambiguous contract term, the court allowed parole evidence to be admitted to further clarify whether the licensure requirement was truly a condition precedent to the contract or, alternatively, a requirement of the contract with which failure to comply would be deemed breach.

The parole evidence to be admitted included an agreement whereby the employer retained counsel to represent the physician before the state medical board.  That agreement specified that the physician was employed by the employer, conditional on his receiving a license from the state.  Noting that the parole evidence to be submitted by the employer was generally partial or related to other ongoing contractual negotiations, the court held that the jury should weigh the evidence and decide its effect on the contract’s interpretation.

Finally, the court dismissed the hospital management corporation from the lawsuit, noting that, without any allegations of fraud, or actual or constructive agency, against the company, it could not, as a parent of the subsidiary, be held liable for the subsidiary’s actions.