Prpa v. Wheaton Franciscan Med. Group, Inc. (Summary)

PHYSICIAN CONTRACTS

Prpa v. Wheaton Franciscan Med. Group, Inc., No. 2011AP3013 (Wis. Ct. App. Jan. 23, 2013)

The Wisconsin Court of Appeals affirmed a trial court’s award of two-thirds attorney’s fees and costs to a physician who sued his medical center employer for breach of contract.

The medical center that employed the physician was a nonprofit entity and, as such, was required to keep physician compensation consistent with fair market value. Accordingly, the medical center obtained a consultant’s opinion that its new compensation plan was consistent with fair market value and, in turn, began compensating physicians pursuant to the plan.  Within seven months, the medical center discovered that the data that it had supplied to the consultant had inadvertently altered the fair market value analysis.  This ultimately resulted in the consultant withdrawing its opinion and the medical center changing its compensation model in July of that year.  The medical center notified the surgeon of the change and the fact that it would be applied retroactively to January 1.  The surgeon continued working and, at the end of the year, was notified that his draws had exceeded his earned income by over $300,000.  The medical center informed the surgeon that it would adjust his draws during the next calendar year to make up for the difference.  The surgeon then sued the corporation for breach of contract, arguing that the changes to his compensation were in violation of the contract and that the restrictive covenants contained in the contract should not be enforced.

The trial court upheld two of the three restrictive covenants included in the contract (upholding the covenant not to compete and the confidentiality covenant; finding the nonsolicitation covenant unenforceable).

With respect to compensation, the trial court held that pursuant to the contract between the medical center and physician, the medical center had the right to change the surgeon’s compensation periodically and could, accordingly, impose changes to the physician’s compensation following the July modification to the compensation plan.  However, the court also found that the corporation could not retroactively apply changes to the compensation model when calculating the physician’s compensation from January through July.  Accordingly, the court awarded over $100,000 to the physician.

Most importantly, the court then awarded attorney’s fees and costs to the physician, pursuant to a provision of the contract which required the unsuccessful party in any litigation to enforce the contract to pay the successful party’s costs of litigation.

On appeal, the medical center argued that it, not the physician, was the successful party since it had won two of the three restrictive covenant challenges and had won one of the two compensation disputes (the dispute over whether it could modify the physician’s compensation from July through December).

The appeals court disagreed and upheld the lower court’s award of two-thirds costs to the physician, noting that the lower court’s manner of calculating the success of the parties was not unreasonable.  Specifically, the lower court had assigned each of the restrictive covenant claims a weight of one and had assigned the compensation claims, collectively, a weight of three.  Accordingly, of the six total “points,” the trial court held that the physician was successful on four (all three of the compensation points and one of the restrictive covenant points).  Accordingly, the court awarded a proportionate amount of the costs to the physician.