Saint Alphonsus Diversified Care, Inc. v. MRI Assocs. (Summary)

JOINT VENTURES

Saint Alphonsus Diversified Care, Inc. v. MRI Assocs., No. 34885-2007 (Idaho Oct. 21, 2009)

The Supreme Court of Idaho vacated a jury verdict of $36.3 million against a hospital that was alleged to have wrongfully dissociated from a joint-venture partnership which provided, through two limited liability affiliates, MRI services.

In this case, the hospital filed suit six months after providing its notice of intent to dissociate from the partnership, seeking a judicial determination of the amount it was entitled to collect for its share. The partnership filed a counterclaim alleging a litany of claims, including: wrongful dissociation, breach of a noncompete clause, and breach of the covenant of good faith and fair dealing. The lower court held that the hospital had violated the express provisions of the partnership agreement by dissociating from the partnership and, on the issue of wrongful dissociation, instructed the jury that it only needed to determine the amount of damages. The jury awarded $63.5 million, which was later reduced to $36.3 million by the court.

On appeal, the Supreme Court of Idaho held that the lower court incorrectly concluded that the hospital had violated an express provision of the partnership agreement and, in turn, was liable for wrongful dissociation. The court noted that the agreement listed several circumstances in which withdrawal from the partnership was permissible, but did not explicitly state that partners were prohibited from dissociating from the agreement in situations other than those listed. Finding the agreement to be open to differing interpretations, the court held that the statutory requirements for a finding of wrongful dissociation (i.e., violation of an express provision of the statute) were not met. The court remanded the case for a new trial.

UPDATE:

A retrial resulted in a jury verdict awarding damages totaling $52,084,513, which the Idaho Supreme Court affirmed on appeal.  Saint Alphonsus Diversified Care, Inc. v. MRI Assocs., No. 40012-2012 (Idaho June 17, 2014)