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HomeMy WebLinkAbout2004-2982 Civil ALFRED R. LEAL, M.D., : IN THE COURT OF COMMON PLEAS Plaintiff/Appellant : CUMBERLAND COUNTY, : PENNSYLVANIA : : DOCKET NO. 04-2982 v. : : CENTRAL PENNSYLVANIA : CIVIL ACTION - LAW HEMATOLOGY & MEDICAL : ONCOLOGY ASSOCIATES, P.C., and JOHN D. CONROY, D.O., Defendants/Appellees IN RE: OPINION PURSUANT TO PA. R.A.P. 1925 Ebert, J., February 1, 2010 - Plaintiff/Appellant appeals the jury verdict entered on September 24, 2009 and the Order denying Plaintiff’s Post Trial Motions entered on October 6, 2009. Plaintiff/Appellant complains 1 of the following matters on appeal: 1. The Court committed an error of law and abuse of discretion by failing to grant Plaintiff’s Motion for Judgment Notwithstanding the Verdict for the following reasons: (a) The Court committed an error of law by failing to require Defendants to make a threshold showing of ambiguity or a legally recognized exception to the parol evidence rule prior to making a determination, sua sponte, that the Shareholder Agreement was ambiguous. (b) The Court committed an error of law by allowing the jury to consider the Defendants’ testimony purporting to “explain the true intention” of the Parties to the Shareholders Agreement absent a showing of ambiguity by the Defendants. (c) The Court committed an error of law by allowing the jury to consider the extrinsic or parol evidence offered by the Defendants to defeat the clear language of the Shareholder Agreement that Defendants’ team of attorneys had drafted. (d) The Court committed an error of law and abuse of discretion by concluding that there was an ambiguity simply because the Parties disagreed on the proper construction of paragraph 15 of the Shareholder Agreement when Pennsylvania law is clear that a contract is not rendered ambiguous by the mere fact that the parties do not agree on the proper construction. (e) The Court committed an error of law and abuse of discretion by failing to properly instruct the jury regarding the common law principle of contra proferentem. (f) The Court committed an error of law by instructing the jury regarding “modification” in the absence of any evidence submitted by Defendants that Plaintiff waived 1 Plaintiff/Appellant’s Concise Statement of Matters Complained of on Appeal, filed Oct. 13, 2009. (expressly or impliedly) the clause in the Shareholder Agreement requiring a signed writing for all modifications. (g) The Court committed an error of law by failing to instruct the jury that in order to find that a modification had occurred, the Defendants had to demonstrate the same elements of the original contract, to wit: offer, acceptance and consideration. (h) The Court likewise committed an error of law by failing to instruct the jury that in order to find that a modification had occurred, they had to find mutual assent. (i) The Court committed an error of law by deciding to instruct the jury on modification when the record in this matter is completely void of any evidence that would establish that Plaintiff had accepted and/or assented to the alleged modification or that Defendants had provided Plaintiff with the required consideration for the modification. (j) The Court committed an error of law by failing to instruct the jury that the Defendants had the specific burden of proof (i.e. clear, precise and convincing) regarding modification. (k) The Court committed an error of law by failing to instruct the jury that the evidence submitted by the Defendants for the purpose of showing parol modification was entirely inadequate, as not up to the required legal standard. 2. The Court committed an error of law and abuse of discretion by failing to grant Plaintiff’s Motion for a New Trial for the following reasons: (a) All of the reasons set forth in paragraph 1(a)-(k) herein. (b) The Court’s failure to apply controlling Pennsylvania law as to Defendants’ heavy burden to overcome the Parties’ Agreement that no modifications would be binding unless and until put in writing signed by the Parties led it to commit critical errors in the conduct of the trial. (c) The Court failed to instruct the jury that the evidence submitted by the Defendants for the purpose of showing parol modification was entirely inadequate, as not up to the required legal standard. (d) The Court improperly allowed Defendants to introduce testimony purporting to “explain the true intention” of the parties to the Shareholder Agreement when the Defendants never testified that the Shareholder Agreement was ambiguous. (e) The jury charge provided by the Court regarding modification and ambiguity did not clarify the relevant issues and failed to instruct on the governing law applicable under the circumstances of this case. Statement of Facts From all accounts Central Pennsylvania Hematology and Medical Oncology Associates, PC, (hereinafter CPHMOA) was a well-respected medical firm founded by Defendant John Conroy, D.O. (Conroy) on December 2, 1993. The firm prospered and new physicians were added to the staff. By and large, the business decisions made by CPHMOA were done in a generally democratic manner with each employee/shareholder physician having an opportunity 2 to provide input. This Court finds that the record reflects that Defendant Conroy never voted his majority shares to dictate policy in the practice. As is so often found in cases such as this, the doctors were more interested in providing quality care for their patients than in holding corporate meetings or ensuring that detailed, accurate business minutes were taken of each meeting and then reviewed. Plaintiff, Alfred Leal, M.D. (“Leal”), is a licensed physician, board certified in internal 2 medicine and hematology oncology. Plaintiff began working for Defendant’s medical practice 3 on January 22, 1996 and he signed an employment agreement. He was given a starting salary of 4 $104,000 per year. Plaintiff was to be offered the opportunity to become a shareholder of the 5 practice after two years of employment. Plaintiff did actually become a shareholder on 67 September 17, 1997 and signed a Shareholder Agreement. 8 Plaintiff became dissatisfied with the work environment and ultimately submitted his 910 letter of resignation on September 30, 2003, effective December 31, 2003. Plaintiff continued to report to work at Defendant’s practice through December 31, 2003, but was not assigned new patients after submitting his resignation. Consequently, for the final three month period he 11 actually worked considerably less than before his resignation. Still, when he left the practice 12 he got his full salary and a “$58,000 bonus.” 2 Notes of Testimony Sept. 21, 2009, page 30 (hereinafter N.T. ___) 3 N.T. 35-36. 4 N.T. 37. 5 N.T. 36. 6 N.T. 41. 7 N.T. 43. 8 N.T. 48. 9 N.T. 55. 10 N.T. 60. 11 N.T. 63. 12 N.T. 128-129. 3 Plaintiff claims CPHMOA breached his “Shareholders and Insurance Trust Agreement” by failing to pay him a “termination bonus” that he says he was contractually entitled to 13 receive. Plaintiff asserts that this “termination bonus” was equal to an entire extra year’s salary, which he valued in his complaint as $218,735.00. The Shareholders and Insurance Trust Agreement made reference to the termination bonus being determined “in accordance with the 14 compensation model or formula then in effect.” No compensation model was ever developed 15 or agreed upon. Defendant Conroy testified that the Employment Agreement, not the 16 Shareholders Agreement, was the governing document controlling such matters. Defendants denied that Plaintiff entered into any signed agreement which would have required Defendants to 17 pay a termination bonus to the Plaintiff upon his voluntary resignation from the corporation. Procedural History This case began with the filing of a complaint on June 25, 2004. The Cumberland County Prothonotary’s docket in the case consists of 21 pages. In addition to the usual New Matter and Counterclaims in the pleadings, from March 2005 to December 2008 numerous matters were filed by the Plaintiff to include Motion to Disqualify the Defendant’s Counsel, Plaintiff’s Motion for Partial Summary Judgment as to Defendant’s Counterclaims, and Motions for Special Relief. While this Court cannot say that the amount of contentious pretrial litigation in this matter was unusual given the nature and personalities of the parties, what can be said is at no time did the Plaintiff ever file a Motion for Summary Judgment maintaining that as a matter 13 N.T. 577. 14 N.T. 561. 15 N.T. 562. 16 N.T. 557. 17 Defendant’s Answer to Plaintiff’s Motion for Partial Summary Judgment, ¶ 2. 4 of law the Court should rule that the written agreement upon which Plaintiff bases his claim was 18 unambiguous. This was pointed out to Plaintiff’s Counsel during the trial. After five years of litigation, the case ended in a three day jury trial which began on September 21, 2009, and required 653 pages of testimony. After listening intently to all of the evidence the jury found in favor of the Defendants on September 23, 2009. Plaintiff filed Post- Trial Motions for Judgment Notwithstanding the Verdict and Motion for New Trial, which this Court denied on October 6, 2009. Plaintiff now appeals. Discussion Sadly, this case reads like a script from a TV hospital soap opera. Very intelligent doctors who were once friends, descended into accusations of intoxication in the work place, an affair with a lab technician, substandard performance by at least one of the other doctors in the practice, and general intrigue regarding who was going to work for whom after the inevitable departure of Dr. Leal. None of the doctors had any real interest in the business aspect of this professional corporation. Finally, when their animosity reached a fevered pitch, and “separation” was inevitable, they turned to an examination of the some forty pages of various “employment” and “shareholder agreements” they had signed. Accordingly, we now address the Plaintiff’s claims of error. A.Existence of Ambiguity and Consideration of Parol Evidence The court, as a matter of law, interprets the contract and determines the existence of an ambiguity. The resolution of conflicting parol evidence relevant to what the parties intended by an ambiguous provision is for the trier of fact. Hutchison v. Sunbeam Coal Corp., 519 A.2d 385, 390 (Pa. 1986) (citing Easton v. Washington County Insurance Co., 137 A.2d 332 (Pa. 1957); Fischer & Porter Co. v. Porter, 72 A.2d 98 (Pa. 1950)). Plaintiff claims that this Court erred in 18 N.T. 562-563 5 determining the existence of an ambiguity, and consequently it was error to admit parol evidence to allow the Defendants to explain what they felt was the true meaning of the Shareholders Agreement. The Pennsylvania Superior Court has held that there are two types of ambiguities: patent and latent. Krizovensky v. Krizovensky, 624 A.2d 638, 643 (1993)). The court there described the two ambiguities as follows: A patent ambiguity appears on the face of the [document] and is a result of defective or obscure language. A latent ambiguity arises from collateral facts which make the meaning of a written [document] uncertain, although the language appears clear on the face of the [document]. To determine whether there is an ambiguity, it is proper for a court to hear evidence from both parties and then decide whether there are objective indications that the terms of the [document] are subject to differing meanings. Id. at 643. Ambiguities can be in either a specific term or in the general meaning of a document. This whole case turns on the interpretation of the following clause in paragraph 15 of the Shareholders And Insurance Trust Agreement (Plaintiff’s Exhibit No. 4). The relevant part reads: In addition, unless the Shareholder was terminated for cause as defined in his or her Employment Agreement, the Corporation shall pay the terminating Shareholder a termination bonus equal to his or her compensation including, without limitation, bonus which accrued as of the date the employee last performed full-time services for the Corporation in accordance determined as of the date of separation from employment with the compensation model or formula then in effect , less, however, fifteen (15%) percent of such amount which shall be retained to offset 19 expenses incident to such termination. (emphasis added.) From the very inception of this case, Plaintiff has maintained that this clause clearly entitles him to a bonus equal to his entire annual salary plus his accrued bonus ($218.735.00). Equally adamant, the Defendants have from the very beginning of this case consistently pled that 19 Plaintiff’s Exhibit 4, Shareholders and Insurance Trust Agreement. 6 the physician partners could not reach closure on the termination bonus issue and decided to place vague language in the Shareholders and Insurance Trust Agreement which may have allowed for additional payments after termination if the physicians at a later time determined a specific methodology. Thus, the words “in accordance with the compensation model or formula then in affect” were inserted into the termination bonus clause. This concept was pled by the Defendants in their First Answer with New Matter and Counterclaim (Paragraphs 39-45), and their Answer to the Amended Complaint with New Matter and Counterclaim (Paragraphs 60-64). It is significant that Plaintiff clearly had ample opportunity to raise the claim that no ambiguity existed as a matter of law. The docket for this case contains more than twenty pages of filings. It is clear that Plaintiff examined every angle of the case and challenged Defendant on numerous procedural points, including at one point even a Motion to Disqualify Defendant’s Counsel. If Plaintiff in fact believed that the Shareholders And Insurance Trust Agreement was the controlling document and that there was no ambiguity whatsoever in the termination bonus clause, he could have filed a Motion for Summary Judgment on those grounds. Had such a motion been filed, this Court would have been able to rule as a matter of law whether any ambiguity existed. Plaintiff never did this. Equally interesting, the Plaintiff called every one of the Defendants’ witnesses as on cross examination in her case-in-chief. Consequently, Defendant did not present any witnesses and immediately rested after the Plaintiff rested. Plaintiff never moved for a directed verdict that as a matter of law no ambiguity had been shown. Clearly, any fair reading of this record establishes one thing – none of these physicians knew what paragraph 15 of the Shareholders And Insurance Trust Agreement meant or what was the corporation’s “compensation model or formula.” Accordingly, as a result of the defective or obscure language, the Court found that a 7 patent ambiguity appeared on the face of the Shareholders and Insurance Trust Agreement. The Plaintiff having never formally requested the Court to rule on the ambiguity issue as a matter of law and having consistently demanded a jury trial to resolve the issue is somewhat disingenuous in claiming error now. It is clear from the testimony that there was confusion about whether a compensation model ever existed, and if it did, what it was. There was testimony that other doctors including Dr. Simmonds, who were shareholders, left CPHMOA prior to Dr. Leal and that they did not receive termination bonuses like the type Dr. Leal was requesting. The jury could have concluded that the generally accepted practice was not to give a termination bonus and that in essence the language in Paragraph 15 of the Shareholders and Insurance Trust Agreement had been waived. The case at bar is clearly not like the situation presented in Krizovensky v. Krizovensky, 624 A.2d 638, 643 (1993). In that case both the Plaintiff and Defendants expert witnesses agreed as to what in essence was the meaning of the supposedly ambiguous term. In this case, no one agreed on how the termination bonus amount was to be computed given the fact that no one could state what the “compensation model or formula then in affect was.” In essence, Dr. Leal’s position was to simply ignore those words in the contract. Unfortunately for him, the jury did not interpret the provision in that fashion and basically agreed with the testimony of Dr. Klein when he stated “I don’t think - - speaking for myself, reading this paragraph, it means that you 20 would get any monies that you didn’t work for. You have to work to get money” It is clear that CPHMOA had not developed any compensation model that provided for a termination bonus to be paid according to Plaintiff’s interpretation. Instead, any bonus paid upon termination was based on special circumstances, and the “termination bonus” clause was created 20 N.T. 349 8 as a safety net to provide for some equalization of what a departing doctor had contributed to the practice in terms of patient care and investment. The meaning of “termination bonus” and whether and how it applied was properly determined by the jury, and the jury was free to find Plaintiff’s interpretation invalid. The jury heard testimony that no compensation model was ever approved and that it was accepted practice not to give a termination bonus as seen by the fact that Dr. Simmonds did not receive a bonus when she left. The jury reasonably interpreted this practice to be the “formula then in effect” as referenced in the Shareholders Agreement. B.Jury Instructions Defendant argues that the Court erred in its instruction to the jury on the concept of contra proferentem and modification. This Court properly instructed the jury on how it was to resolve ambiguities in the contract and provided proper instruction on modification or waiver. The Court instructed the jury that “generally it is a principle of law that the words used in a 21 contact will be construed against the party who drafted the contract.” The jury was further instructed that “when there is an ambiguity in a contract term, the unclear term is to be construed 22 against the drafter of the contract.” This language was put into the jury instructions at 23 Plaintiff’s Counsel’s request. That the jury found in favor of the Defendants’ interpretation does not mean that they were not instructed properly and did not construe the ambiguity against the drafter. It simply means that they did not find that the Plaintiff’s interpretation was the plausible or intended interpretation. The jury was given the standard jury instruction on modification or waiver. Pa.S.S.J.I. (Civ) 1505. The entire instruction is one sentence consisting of five lines. The instruction was 21 N.T. 640. 22 N.T. 640. 23 N.T. 617. 9 approved by the Court in order to deal with the testimony that Dr. Leal may have participated in discussion concerning bonuses for doctors who left the practice prior to him. In short, given the practice that none of the previous doctors got the type of “termination bonus” that Dr. Leal was requesting, and that the Shareholder and Insurance Trust Agreements were the same, that the termination bonus provision had been waived. Additionally, there was testimony that the “employment agreements” were the controlling and governing documents which may have “modified” the provisions of the Shareholders and Insurance Trust Agreement. In any regard, a fair reading of the entire jury charge does not focus on modification. This case was a case in which the jury was called upon to resolve the conflicting interpretations of a clearly ambiguous clause in Paragraph 15 of the Shareholders and Insurance Trust Agreement. The jury could have and did reasonably come to the conclusion that the “termination bonus” referenced in the Shareholders Agreement could not have meant that Plaintiff should have received an additional whole year’s salary when he resigned effective December 31, 2003. Conclusion This Court properly found that an ambiguity existed in the Termination Bonus Clause of the Shareholders Agreement. Although Plaintiff argues that it was incorrect for this Court to determine the existence of an ambiguity, it is quite clear that the primary dispute in this case is over the ambiguity in the interpretation of the Termination Bonus Clause. Once it was determined that an ambiguity existed, it was up to the jury to determine the interpretation of the disputed clause. Admission of parol evidence is proper when an ambiguity is present, and the jury was allowed to hear appropriate testimony based on the existence of an ambiguity. The jury was properly instructed on the rules of construction and interpretation, and the jury was free to determine based on testimony the most plausible interpretation. This Court did not allow any 10 improper testimony or evidence to reach the jury, nor did it improperly instruct the jury on its ability to use the testimony to determine the proper meaning of the contractual clause in question. The jury properly determined that Plaintiff was not entitled to any Termination Bonus based on a proper interpretation of the Shareholders Agreement and the Employment Agreement. By the Court, _____________________________ M. L. Ebert, Jr., J. Paige Macdonald-Matthes, Esq. Serratelli, Schiffman, Brown & Calhoon, P.C. 2080 Linglestown Road Suite 201 Harrisburg, PA 17110 717-540-9170 Attorney for Plaintiff Richard H. Wix, Esq. Wix, Wenger & Weidner, P.C. 4705 Duke Street Harrisburg, PA 17109 717-652-6290 Attorney for Defendants 11