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IN THE SUPREME COURT OF IOWA
No. 28 / 04-1893 Filed May 12, 2006 CLINTON PHYSICAL THERAPY SERVICES, P.C., Appellant, vs. JOHN DEERE HEALTH CARE, INC. and JOHN DEERE HEALTH PLAN, INC., f/k/a HERITAGE NATIONAL HEALTH PLAN, INC., Appellees. ________________________________________________________________________ On review from the Iowa Court of Appeals.

Appeal from the Iowa District Court for Scott County, Nancy S. Tabor, Judge.

Appeal from denial of motion for new trial on grounds of inconsistent special verdicts. VACATED; REMANDED. DISTRICT DECISION OF COURT OF APPEALS JUDGMENT REVERSED AND

COURT

Peter C. Riley of Tom Riley Law Firm, P.L.C., Cedar Rapids, for appellant.

Jeffrey D. Martens of Bozeman, Neighbour, Patton & Noe, LLP, Moline, Illinois, for appellees.

2 CADY, Justice. In this appeal from a judgment entered by the district court following a jury verdict in a breach-of-contract action, we must primarily consider the parameters within which the district court may resolve and correct inconsistencies in a verdict and reform the jury's answers to questions in the verdict in lieu of granting a new trial. We conclude the district court erred in failing to grant a new trial in this case. We reverse and remand for a new trial on all issues. I. Background Facts and Proceedings Physical Therapy Services, P.C. (CPT) is an Iowa

Clinton

corporation with its principal place of business in Clinton. It also has offices in DeWitt and Davenport, Iowa and Morrison and Savanna, Illinois. On April 15, 1996, CPT entered into a contract with John Deere Health Care, Inc. (John Deere), a health maintenance organization, to be a "network provider" of physical therapy services to John Deere plan members. The Davenport office was not in existence at the time the

contract was executed, and the agreement was silent on which of CPT's offices were covered by the agreement. The Davenport office, also called the Plaza office, opened in August 1997. CPT notified John Deere of the new Davenport office by letter on August 11 and indicated it wanted the office to be covered by the network-provider contract. John Deere initially paid for services

provided at the Davenport office, but claimed it did not realize the payments were for services performed at the office at the time the payments were made. It later took the position that the office was not a covered facility under the contract, and denied claims for services performed at the Davenport office.

3 John Deere sent CPT letters on April 23 and June 1, 1999 stating the Davenport office was not covered by the contract. Nevertheless, CPT continued to provide services to John Deere plan members at the Davenport office. Ultimately, CPT provided services to approximately 300 John Deere plan members over 2775 visits at the Davenport office without reimbursement from John Deere at the $50-per-visit rate under the contract. This amounted to $138,750 in unpaid services up to

August 2001. Of this amount, $128,200 in services were rendered after John Deere notified CPT in writing that services at the Davenport office would not be paid. In August 2001, the parties entered into a new

contract. The new contract contained a specific clause indicating that John Deere had discretion to pay for services provided by CPT at a new office location. In February 2003, CPT brought a breach-of-contract action against John Deere. CPT claimed John Deere breached the 1996 contract by

refusing to pay for services provided to John Deere plan members at the Davenport office. John Deere claimed the Davenport office was not

covered by the contract. It also claimed that even if it was covered, CPT failed to mitigate its damages by continuing to treat John Deere plan members at the Davenport office after receiving notice from John Deere that the services would not be reimbursed, and not billing the plan members for the services. 1
1The failure-to-mitigate-damages issue appears to be based on Restatement (Second) of Contracts section 350. Comment b to this section provides:

As a general rule, a party cannot recover damages for loss that he could have avoided by reasonable efforts. Once a party has reason to know that performance by the other party will not be forthcoming, he is ordinarily expected to stop his own performance to avoid further expenditure. . . . The amount of loss that he could reasonably have avoided by stopping performance . . . is simply subtracted from the amount that would otherwise have been recoverable as damages.

4 The case was tried to a jury. At trial, CPT offered the 2001

contract into evidence as an aid to interpret the 1996 contract. John Deere claimed the clause pertaining to new locations in the 2001 contract was in the nature of a subsequent remedial measure and was not relevant. The district court excluded the contract from the evidence. The case was submitted to the jury on a verdict form that required the jury to answer a series of questions and determine the amount of damages in the event a breach of contract was established. The form provided: We find the following verdict on the questions submitted to us: Question No. 1: Did the terms of the contract allow for the Plaintiff to add its new Plaza or North Scott location by providing written notification to Defendants of the opening of that office? Answer "yes" or "no." ANSWER: _____

(If your answer is "no," do not answer any further questions) Question No. 2: Did the Plaintiff comply with all the terms of the contract that were required unless excused? Answer "yes" or "no." ANSWER: _____

(If your answer is "no," do not answer any further questions) Question No. 3: Did contract with Plaintiff? ________________________
Restatement (Second) of Contracts

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