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FOR PUBLICATION

FILED
Mar 20 2008, 10:16 am
of the supreme court, court of appeals and tax court

CLERK

ATTORNEY FOR APPELLANTS:

ATTORNEY FOR APPELLEE UNION HOSPITAL: N. KENT SMITH Hall, Render, Killian, Heath & Lyman, P.C. Indianapolis, Indiana ATTORNEYS FOR WABASH VALLEY ANESTHESIA: JEFFRY A. LIND JOHN WILKINSON Fleschner, Stark, Tanoos & Newlin Terre Haute, Indiana

ROBERT P. KONDRAS, JR. Hunt, Hassler & Lorenz, LLP Terre Haute, Indiana

IN THE COURT OF APPEALS OF INDIANA
EDWARD J. ALLISON and HENRY CHARLES SAFFORD, Appellants-Plaintiffs, vs. UNION HOSPITAL, INC., and WABASH VALLEY ANESTHESIA, P.C., Appellees-Defendants. ) ) ) ) ) ) ) ) ) ) )

No. 77A01-0709-CV-435

APPEAL FROM THE SULLIVAN CIRCUIT COURT The Honorable Ann Smith Mischler, Magistrate The Honorable P. J. Pierson, Judge Cause No. 77C01-0511-CT-400

March 20, 2008

OPINION - FOR PUBLICATION

BAKER, Chief Judge Appellants-plaintiffs Edward J. Allison and Henry Charles Safford (collectively, the appellants) appeal the trial court's order entering partial summary judgment in favor of appellees-defendants Union Hospital, Inc. (Union), and Wabash Valley Anesthesia, P.C. (WVA) (collectively, the appellees). The appellants argue that the trial court

erroneously entered summary judgment in the appellees' favor on the appellants' claims for tortious interference with contractual relationship against both appellees and constructive fraud and breach of the duty of good faith and fair dealing against Union. Finding that summary judgment was erroneously entered on the tortious interference claim against Union but properly entered on all remaining counts, we affirm in part, reverse in part, and remand for trial on the tortious interference claim against Union. FACTS 1 Allison and Safford are Certified Registered Nurse Anesthetists (CRNA) who have worked for Union as independent contractors since July 1991. The parties

renegotiated and executed a new contract on October 22, 2001, and that agreement included a provision specifying that either party could terminate the contract without cause. The appellants eventually concluded that the terms of the October 2001 contract were causing them financial difficulty. Thus, on May 31, 2005, they sent a letter to Steve Reed, Union's former Executive Vice President and COO, providing ninety days of

1

We direct the attention of counsel for the appellants and WVA to Indiana Appellate Rule 46(A)(6)(c), which requires that the statement of facts "shall be in narrative form . . . ."

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notice of their decision to terminate the contract pursuant to a without cause termination provision in the document. In the letter, the appellants expressed their desire to negotiate a new contract and referenced a previously scheduled meeting with Reed that was to take place on June 28, 2005. In the meantime, Union tried to find other CRNAs to replace the appellants but received no bids from other service providers. On June 28, 2005, the appellants met with Reed as planned. Reed told the appellants that he wanted a three-year agreement and that he wanted the appellants "locked in to the three-year term." Appellants' App. p. 417. Union proposed a new contract in a June 30, 2005, letter, which the appellants rejected. submitted a counteroffer on July 9, 2005. appellants' July 9 counteroffer: This letter is to accept your proposal dated July 9, 2005 regarding [Union] paying [the appellants], collectively, a monthly stipend amount of $29,166.00 to continue providing 24/7 OB Anesthesia coverage here at [Union]. This agreement will be effective August 1, 2005, and continue in force until August 31, 2008. All other terms and conditions of the Obstetrics Area Anesthesia Agreement dated October 22, 2001, as well as the three separate addendums [sic] to this agreement, will continue in force and effect. Please sign a copy of this letter below . . . . I will then ask [Union's attorney] to prepare a fourth addendum to the Obstetrics Area Anesthesia Services Agreement which contains the new monthly stipend amount for your review and signature in the very near future. Id. at 141. Reed and the appellants signed the July 22, 2005, letter. The appellants

On July 22, 2005, Union accepted the

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Union's attorney proceeded to draft a formal agreement for the appellants' signature, but instead of being an addendum it was a wholly new, thirteen-page "Amended Obstetrics Area Anesthesia Services Agreement" (the Contract), which he sent to the appellants on August 16, 2005. Id. at 143. The Contract has an effective date of August 1, 2005, and was to expire on July 31, 2008. It also has a lengthy termination provision, which states that the Contract may be terminated in a number of different ways, all of which are for cause, because of governmental action, or based on the parties' mutual written agreement. Id. at 151-52. The Contract does not permit termination without cause. Additionally, the document contains a provision requiring the parties to hold its terms "strictly confidential," prohibiting disclosure of its terms to third parties "except as specifically required by law or upon agreement of the parties." Id. at 154. It provides that as of its effective date, the Contract shall supersede all previous agreements between the parties and that it "may be amended only by an instrument in writing signed by the parties . . . ." Id. Safford signed the Contract on August 18, 2005, and Allison signed on August 20, 2005. On September 12, 2005, Reed sent the appellants a letter terminating the Contract: This letter puts in writing [Union's] notice that we will be terminating the current OB Anesthesia Services Agreement effective December 31, 2005 . . . . This termination is pursuant to Section 8 of the current [Contract] requiring us to provide you with Ninety (90) days written notice for terminating said agreement without cause. Id. at 93. After receiving this letter, the appellants demanded to see copies of the Contract. Reed's secretary then e-mailed the appellants an altered copy of the Contract. 4

The altered version included a new "Without Cause Termination" paragraph providing that the Contract may be terminated "[w]ith or without cause upon one party giving the other party at least ninety (90) days written notice prior to the date of intended cancellation or termination." Id. at 172. It is undisputed that the version of the Contract that Union e-mailed to the appellants on September 26, 2005, was different from the version the appellants actually signed and executed. Union insists that it was compelled to enter into the Contract and agree to the financial terms requested by the appellants because it was unable to find another provider and did not want to have an interruption in its OB anesthesia service. But because the appellants had demanded a 325% increase in their monthly stipend, Union was examining other options even as it executed the Contract with the appellants. To that end, in mid-August 2005--even as the appellants were reviewing and executing the Contract--Reed entered into discussions with Elliott McGregory, a principal of WVA, which was an entity capable of providing OB anesthesia services. On August 22, 2005, Reed and McGregory met to discuss a possible agreement between Union and WVA for OB anesthesia services. At the meeting, Reed informed McGregory that "at the present time," Union "worked under an agreement" with the appellants. Id. at 216. Reed also told McGregory that Union's contract with the

appellants allowed the hospital "to terminate the agreement without cause by giving a ninety day notice." Id. The parties agreed on key terms to serve as a basis for a proposed contract. As contract negotiations continued, Reed emphasized to WVA "that we will need to give the existing OB Anesthesia group a 90-day termination notice per the 5

existing contract" before entering into a final agreement with WVA. Id. at 222. Thus, on September 13, 2005--one day after Union sent the termination letter to the appellants-- Union and WVA reached a verbal agreement, which was eventually memorialized in writing on November 8, 2005. Prior to terminating the Contract, Reed had not informed the appellants that he was negotiating with WVA. On November 23, 2005, the appellants filed a complaint against the appellees, alleging breach of contract against Union, tortious interference with a contractual relationship against Union and WVA, tortious interference with prospective economic advantage 2 against Union and WVA, constructive fraud against Union, and breach of the duty of good faith and fair dealing against Union. On December 29, 2006, the appellants filed a motion for partial summary judgment on their claim for breach of contract against Union and for tortious interference with a contractual relationship against both appellees. Union and WVA filed separate motions for summary judgment against the appellants on December 29, 2006, seeking judgment on all of the appellants' claims. Following a hearing, the trial court entered an order on July 17, 2007, denying the appellants' motion for partial summary judgment and partially granting the appellees' respective motions for partial summary judgment. The trial court found that there were ambiguities relating to the terms of the Contract; consequently, it refused to grant summary judgment in any party's favor on that claim. The trial court granted summary judgment in the appellees' favor on the remaining tort claims without explaining its

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Apparently, the appellants' attorney voluntarily withdrew this claim during the summary judgment hearing. Appellants' App. p. 10.

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reasons for doing so. The trial court made its summary judgment ruling a final order on September 11, 2007, and has scheduled the appellants' breach of contract claim against Union for trial beginning December 2, 2008. The appellants now appeal. DISCUSSION AND DECISION I. Standard of Review Summary judgment is appropriate only if the pleadings and evidence considered by the trial court show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Owens Corning Fiberglass Corp. v. Cobb, 754 N.E.2d 905, 909 (Ind. 2001); see also Ind. Trial Rule 56(C). On a motion for summary judgment, all doubts as to the existence of material issues of fact must be resolved against the moving party. Owens Corning, 754 N.E.2d at 909. Additionally, all facts and reasonable inferences from those facts are construed in favor of the nonmoving party. Id. If there is any doubt as to what conclusion a jury could reach, then summary judgment is improper. Id. An appellate court faces the same issues that were before the trial court and follows the same process. Id. at 908. The party appealing from a summary judgment decision has the burden of persuading the court that the grant or denial of summary judgment was erroneous. Id. When a trial court grants summary judgment, we carefully scrutinize that determination to ensure that a party was not improperly prevented from having his or her day in court. Id. II. Tortious Interference with Contractual Relationship Our Supreme Court has commented that 7

Indiana has long recognized that intentional interference with a contract is an actionable tort, and includes any intentional, unjustified interference by third parties with [a] . . . contract. The tort reflects the public policy that contract rights are property, and under proper circumstances, are entitled to enforcement and protection from those who tortiously interfere with those rights. Winkler v. V.G. Reed & Sons, Inc., 638 N.E.2d 1228, 1234 (Ind. 1994) (citation omitted). A plaintiff alleging tortious interference with a contractual relationship must establish five elements: (1) the existence of a valid and enforceable contract; (2) the defendant's knowledge of the existence of the contract; (3) the defendant's intentional inducement of the breach of the contract; (4) the absence of justification; and (5) damages resulting from the defendant's wrongful inducement of the breach. Id. at 1235. The parties herein focus their dispute on whether the actions of Union and WVA were justified. In determining whether a defendant's conduct in intentionally interfering with a contract is justified, our Supreme Court has suggested that we look to the factors set forth by the Restatement (Second) of Torts: (a) the nature of the defendant's conduct; (b) the defendant's motive; (c) the interests of the plaintiff with which the defendant's conduct interferes; (d) the interests sought to be advanced by the defendant; (e) the social interests in protecting the freedom of action of the defendant and the contractual interests of the plaintiff; (f) the proximity or remoteness of the defendant's conduct to the interference; and

(g) the relations between the parties.

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Id. (citing Restatement (Second) of Torts

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