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Community Health Systems Professional Services Corporation v. Hansen

Supreme Court of Texas

June 16, 2017

Community Health Systems Professional Services Corporation, et al., Petitioners,
v.
Henry Andrew Hansen, II, M.D., Respondent

          Argued March 2, 2017

         On Petition for Review from the Court of Appeals for the Thirteenth District of Texas

          OPINION

          PAUL W. GREEN, JUSTICE

         In this case, we must determine whether the court of appeals erred by reversing the trial court's order granting summary judgment in favor of multiple defendants on the plaintiff's claims for breach of contract and tortious interference with contract. Because we conclude that the plaintiff's employer was not required to prove the reasons it terminated the plaintiff's employment contract "without cause" and that the relevant provisions of the contract are not ambiguous, we hold that the employer is entitled to summary judgment on the plaintiff's breach of contract claim. We further hold that the hospital and its chief executive officer are entitled to summary judgment on the plaintiff's tortious interference claim because the plaintiff presented no evidence on the element of willful or intentional inference. Finally, we hold that the employer's professional services company conclusively established its justification defense to the plaintiff's tortious interference claim and is therefore entitled to summary judgment. Accordingly, we reverse the court of appeals' judgment and reinstate the trial court's judgment in favor of the defendants.

         I. Background

         This action arises from the "without cause" termination of a cardiovascular surgeon's five-year employment contract at the end of his third contract year.

         In 2007, Thomas Jackson, the chief executive officer of the College Station Medical Center (the Hospital), sought to hire a board-certified cardiovascular surgeon so that the Hospital could offer heart surgeries without referring patients to other hospitals or paying to have a cardiovascular surgeon on call. Dr. Henry Andrew Hansen, II, M.D., a cardiovascular surgeon, wanted to move his practice from Lubbock to College Station, Texas, and he arranged a meeting with Jackson to discuss potential employment in College Station.

         Acting as an intermediary between Dr. Hansen and Regional Employee Assistance Program (REAP), a non-profit corporation certified by the Texas Medical Board to employ physicians, see Tex. Occ. Code § 162.001(b), Jackson negotiated the terms of Dr. Hansen's employment contract with REAP, under which Dr. Hansen would work at the Hospital.[1] After extensive negotiations in which Dr. Hansen was represented by counsel, REAP and Dr. Hansen entered into a five-year employment contract, which ran from June 1, 2007, to April 30, 2012. Section 10.1 of the contract provided that during the first three contract years, the contract could be terminated only for cause. Following the end of the third contract year, however, either party could terminate the contract without cause with sixty days' notice if Dr. Hansen's "annual practice losses" exceeded $500, 000 "at the end of years three, four or five." The contract further provided that in the event of a termination without cause, Dr. Hansen would "not be entitled to the due process rights established by [REAP] in its policies and procedures, " but Dr. Hansen would "be entitled to such due process rights if . . . terminated for cause . . . pursuant to sections 10.2, 10.3 or 10.4 of [the contract]."

         A month into Dr. Hansen's employment, Community Health Systems, Inc. acquired the Hospital and REAP. Community Health Systems Professional Services Corporation (PSC) is a subsidiary of Community Health Systems that provides advice on physician employment and termination decisions to other Community Health Systems subsidiaries that own health care facilities and employ physicians.

         Dr. Hansen's practice at the Hospital was initially successful. The Hospital aggressively marketed Dr. Hansen and the new heart program, and Dr. Hansen performed approximately ten to fifteen procedures each month, including procedures that had not historically been done at the Hospital. Dr. Hansen was on pace to perform 100 procedures the first year and suggested that if another surgeon was hired, the Hospital could perform 200 procedures per year. At the end of Dr. Hansen's first contract year, PSC and the Hospital projected that the number of heart surgeries performed at the Hospital would continue to increase and yield financial returns.

         At the end of 2008, however, the number of cardiovascular surgeries performed by Dr. Hansen began to decline significantly due to a series of personal disagreements with two local cardiologists, Dr. Marcel Lechin, M.D. and Dr. Mario Lammoglia, M.D. Dr. Lechin and Dr. Lammoglia were the senior members of a three-member cardiologist team, BCS Heart, which was Dr. Hansen's primary source of patient referrals.[2] PSC's vice president of practice management, Leslie Luke, became concerned and sent a letter to Jackson on February 11, 2009, recommending that Dr. Hansen's employment be terminated "without cause" at the end of the third contract year. Luke explained that: (1) Dr. Hansen's high salary-$750, 000 per year-was disproportionate to the number of hospital procedures he performed; (2) Dr. Hansen's "clinic practice lost $1 million"; and (3) Luke predicted no future growth in the number of procedures. In June 2009, the chief financial officer of the Hospital approached Dr. Hansen to discuss his decreased billings and how to increase his billings. Nevertheless, the relationship between Dr. Hansen and the cardiologists continued to deteriorate and affect Dr. Hansen's practice.

         In August 2009, Dr. Hansen had another dispute with Dr. Lechin, causing Dr. Lechin and Dr. Lammoglia to place Dr. Hansen and the Hospital on "drive-by" status, meaning that they would not refer new patients to Dr. Hansen for surgery at the Hospital. As a result of the ongoing disagreement, which Dr. Hansen described as a "turf battle, " Dr. Hansen similarly refused to accept patients from the two doctors until they "cleared the air" in a joint meeting. After the meeting just one week later, Dr. Lechin and Dr. Lammoglia agreed to resume referring patients to Dr. Hansen, but Dr. Hansen refused to accept the referrals until they issued a public affirmation of his skills as a cardiovascular surgeon. Ultimately, Dr. Hansen declined Dr. Lechin's and Dr. Lammoglia's referrals for approximately four months-from August 2009 to December 2009. Consequently, from August 5, 2009, to June 1, 2010, Dr. Hansen performed only eight heart surgeries.

         At the annual meeting of REAP's board of directors in November 2009, Luke discussed Dr. Hansen's refusal to accept Dr. Lechin's and Dr. Lammoglia's referrals and stated that, except for providing emergency assistance, Dr. Hansen had not worked since September 2009. The meeting minutes noted that the purpose of the discussion "was to prepare the Board for a possible termination" if Dr. Hansen continued to refuse referrals and not fulfill his employment duties. On February 18, 2010, a PSC administrator, Ashley Bosshart, sent an email notifying the members of the REAP Board that Jackson had requested that REAP terminate Dr. Hansen's contract without cause due to his "past behavioral issues and his significant clinic losses." The email also attached the minutes from the November 2009 meeting and noted that Dr. Hansen's "annual losses" were $1, 003, 138 in calendar year 2008 and $908, 609 in calendar year 2009. A few days later, but before the end of the third contract year, the REAP Board voted to terminate Dr. Hansen without cause at the end of his third contract year under section 10.1. Following the vote, Luke and Bosshart completed a "Personnel Action Form" reflecting that Dr. Hansen had been terminated for "unsatisfactory performance" and was not eligible for rehire. Subsequently, on June 1, 2010, REAP sent Dr. Hansen a letter providing sixty days' notice that it was terminating the contract without cause.

         Thereafter, Dr. Hansen sued numerous parties alleging multiple causes of action. In his sixth amended petition, Dr. Hansen alleged that: (1) REAP is liable for breach of contract and breach of fiduciary duties; (2) the Hospital and Jackson are liable for business disparagement, tortious interference with contract, and restraint of trade; and (3) PSC is liable for business disparagement and tortious interference with contract.[3] In response, PSC filed an amended no-evidence and traditional motion for summary judgment. REAP, the Hospital, and Jackson, however, rested on their previously filed traditional and no-evidence motion for summary judgment. The trial court granted the defendants' summary-judgment motions without explaining the basis for its ruling.

         Dr. Hansen appealed, challenging only the trial court's summary-judgment order rendering a take-nothing judgment on his claims for breach of contract, tortious interference with an existing contract, and business disparagement. The court of appeals reversed in part, reversing the trial court's dismissal of the claims for breach of contract and tortious interference but leaving intact the trial court's dismissal of Dr. Hansen's business disparagement claims. ___ S.W.3d ___, ___ (Tex. App.-Corpus Christi-Edinburg 2014, pet. granted) (mem. op.).

         All of the defendants seek review of the court of appeals' decision, raising a number of issues, including: (1) whether REAP was required to prove on summary judgment that it terminated Dr. Hansen's contract on without-cause grounds; (2) whether the contract's stipulation for "annual practice losses" is ambiguous and, if not, whether REAP established the condition to terminate the contract without cause; (3) whether Dr. Hansen presented evidence raising a fact issue on the element of willful and intentional interference to overcome a no-evidence motion for summary judgment on his tortious interference claims; (4) whether the Hospital, Jackson, and PSC conclusively established the affirmative defense of legal justification to bar Dr. Hansen's tortious interference claims; (5) whether PSC waived its qualified-privilege defense by raising it only as a defense to business disparagement in its motion for summary judgment; and (6) whether the Restatement (Second) of Torts' truthful-information defense should be adopted in this case and, if so, whether fact issues nonetheless preclude summary judgment for the defendants. As explained below, we hold that the trial court did not err in granting summary judgment in favor of REAP on Dr. Hansen's breach of contract claim or in granting summary judgment in favor of the Hospital, Jackson, and PSC on Dr. Hansen's tortious interference claims.

         II. Standard of Review

         We review a trial court's order granting summary judgment de novo, taking "as true all evidence favorable to the nonmovant, " and "indulg[ing] every reasonable inference and resolv[ing] any doubts in the nonmovant's favor." Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003) (citing Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002); FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000); Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex. 1997)). Where, as here, a trial court does not specify the grounds on which it granted the motion for summary judgment, we must affirm if any of the grounds asserted in the motion are meritorious. Id. at 216. Further, when the motion asserts both no-evidence and traditional grounds, we first review the no-evidence grounds. Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 600 (Tex. 2004). If the nonmovant fails to produce more than a scintilla of evidence on the essential elements of a cause of action challenged by a no-evidence motion, there is no need to analyze the movant's traditional grounds for summary judgment. Id.; see Tex. R. Civ. P. 166a(i). To prevail on a traditional motion for summary judgment, however, the movant must "show that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law." See Provident Life, 128 S.W.3d at 216 (citations omitted); Tex.R.Civ.P. 166a(c). An issue is conclusively established "if reasonable minds could not differ about the conclusion to be drawn from the facts in the record." Childs v. Haussecker, 974 S.W.2d 31, 44 (Tex. 1998).

         III. Breach of Contract

         For the reasons explained below, we hold that the court of appeals erred by reversing the trial court's order granting REAP's motion for summary judgment on Dr. Hansen's breach of contract claim.

         A. Grounds for a "Without Cause" Termination

         The court of appeals assumed REAP had established that Dr. Hansen's "practice losses" exceeded the contractual threshold but nevertheless reversed the trial court's summary-judgment order, reasoning that REAP proved only that the contractual condition for a without-cause termination was met, not that it actually terminated Dr. Hansen on "without cause" grounds. ___ S.W.3d at ___. According to the court of appeals, to "uphold summary judgment for REAP without REAP having first established on which grounds it terminated [Dr. Hansen] would effectively require [the court of appeals] to read [the due process requirements of a for-cause termination] out of the Contract." Id. Thus, the court of appeals concluded that REAP did not disprove Dr. Hansen's breach of contract claim because it "did not conclusively establish the grounds on which it terminated [Dr. Hansen's] employment." Id. at ___. We hold that the court of appeals erred on this point.

         This case requires that we interpret the termination provisions in Dr. Hansen's employment contract. We construe unambiguous contracts as a matter of law. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). "An unambiguous contract will be enforced as written, and parol evidence will not be received for the purpose of creating an ambiguity or to give the contract a meaning different from that which its language imports." David J. Sacks, P.C. v. Haden, 266 S.W.3d 447, 450 (Tex. 2008). A court may consider the parties' interpretation of the contract and admit extrinsic evidence to determine the true meaning of its terms only after the court has determined that the contract is ambiguous. Id. at 450-51 (quoting Nat'l Union Fire Ins. Co. of Pittsburgh, Penn. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995) (per curiam)). When the controversy can be resolved by proper construction of an unambiguous document, rendition of summary judgment is appropriate. Lopez v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 862 (Tex. 2000). "On the other hand, if the contract is subject to two or more reasonable interpretations after applying the pertinent rules of construction, the contract is ambiguous, creating a fact issue on the parties' intent." J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003) (citing Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996)).

         The general rule is that, "absent a specific agreement to the contrary, employment may be terminated by the employer or the employee at will, for good cause, bad cause, or no cause at all." Montgomery Cty. Hosp. Dist. v. Brown, 965 S.W.2d 501, 502 (Tex. 1998) (citing Fed. Express Corp. v. Dutschmann, 846 S.W.2d 282, 283 (Tex. 1993) (per curiam); Schroeder v. Tex. Iron Works, 813 S.W.2d 483, 489 (Tex. 1991); Winters v. Hous. Chronicle Pub. Co., 795 S.W.2d 723, 723 (Tex. 1990); Sabine Pilot Serv., Inc. v. Hauck, 687 S.W.2d 733, 734-35 (Tex. 1985); E. Line & R. R. R. Co. v. Scott, 10 S.W. 99, 102 (Tex. 1888)). Further, a contract can modify an employee's at-will status and alter the procedural rights to which an employee is entitled if termination occurs. See City of Odessa v. Barton, 967 S.W.2d 834, 835 (Tex. 1998) (citing Hathaway v. Gen. Mills, Inc., 711 S.W.2d 227, 229 (Tex. 1986)). A contract can also stipulate that it is terminable without cause during one time period and is only terminable for cause at another time. See Evan's World Travel, Inc. v. Adams, 978 S.W.2d 225, 230 (Tex. App.-Texarkana 1998, no pet.).

         Here, the relevant contractual provision, section 10.1, states:

The Agreement can be cancelled for-cause only during years one through three. Either party may terminate this Agreement, without cause if annual practice losses exceed Five Hundred Thousand ($500, 000) at the end of years three, four or five, by providing not less than Sixty (60) days prior written notice to the other party stating the intended date of termination. If Employer terminates this Agreement without cause . . . Physician shall not be entitled to the due process rights established by Employer in its policies and procedures. Physician shall be entitled to such due process rights if this Agreement is terminated for cause by Employer pursuant to sections 10.2, 10.3 or 10.4 of this Agreement.

         The contract thus modifies Dr. Hansen's at-will status by allowing only "for-cause" termination during the first three years. See id.; Brown, 965 S.W.2d at 502. But in the last two years of the contract's term, the contract authorizes "without cause" termination of the contract "if annual practice losses exceed [$500, 000], " and in the event of a without-cause termination, Dr. Hansen is not contractually entitled to the due process he would receive if terminated for cause.[4] See Barton, 967 S.W.2d at 835.

         We hold that the second sentence of section 10.1 clearly signifies a condition subsequent based on annual practices losses that enables either party to terminate the contract without cause; it does not state that the amount of annual practice losses is the only basis upon which the contract can be terminated without cause. A condition subsequent is "a condition referring to a future event, upon the happening of which the obligation becomes no longer binding upon the other party, if he chooses to avail himself of the condition." E.g., Rincones v. Windberg, 705 S.W.2d 846, 848 (Tex. App.-Austin 1986, no writ) (citation omitted); cf. Restatement (Second) of Contracts § 224 cmt. e (Am. Law Inst. 1981). A condition subsequent excuses an already binding agreement. Rincones, 705 S.W.2d at 848. Although "no particular words are necessary for the existence of a condition, " terms such as "'if, ' 'provided that, ' 'on condition that, ' or some other phrase that conditions performance, usually connote an intent for a condition rather than a promise." Hohenberg Bros. Co. v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex. 1976). Section 10.1 states that either party may terminate the contract with sixty days' written notice "if annual practice losses exceed Five Hundred Thousand ($500, 000) at the end of years three, four or five." This is undoubtedly a condition subsequent.

         Dr. Hansen construes the contract as requiring a certain procedure for a without-cause termination-that the REAP Board receive certain evidence of annual practice losses and that the REAP Board then terminate the contract on that basis alone. The contract's language, however, does not require the REAP Board to make a without-cause termination decision based solely on annual practice losses; rather, it provides that once the condition subsequent occurs, a without-cause termination can be premised on any reason, or no reason at all, and can be accomplished simply by providing sixty days' written notice.[5] In other words, assuming the condition subsequent has occurred, section 10.1's without-cause language is merely a termination-upon-notice provision, requiring only that REAP provide sixty days' written notice to Dr. Hansen stating the intended date of termination. See 14 Tex. Jur. 3d Contracts § 285 (2006) ("When a contract expressly provides that it is subject to termination upon notice, each party to the contract has the legal right to cancel the contract."). The notice need not state the ground, the fact that the condition subsequent has occurred, or anything beyond the requirements of the contractual provision. All that is required is (1) sixty days' written notice to the other party (2) stating the intended date of termination. Thus, because section 10.1 creates a condition subsequent authorizing without-cause termination, REAP did not need to prove that it terminated Dr. Hansen on "without cause" grounds-"without cause" signifies that the reason for the termination is irrelevant.[6]

         Also absent from section 10.1 is any requirement that the REAP Board prove that it knew the annual practice losses condition had been satisfied at the time it voted to exercise its right to terminate the contract without cause. But Dr. Hansen argues the opposite: "The contract, as written, required the REAP Board to have evidence before it that Hansen's 'annual practice losses' exceeded $500, 000 at the 'end of years three, four or five' before it could terminate the contract without cause and avoid having to provide due process." First, as discussed in more detail in the sections that follow, Dr. Hansen's third-year practice losses had already mounted to $686, 888 in February 2010-when the REAP Board voted on Dr. Hansen's future termination. Furthermore, despite Dr. Hansen's argument that he was terminated on the date of the vote, he does not contest that he continued to receive his salary and all the other benefits of his position until July 31, 2010-sixty days after REAP informed him of the without-cause termination at the end of the third contract year. Finally, Dr. Hansen's interpretation of this additional requirement is incorrect because section 10.1 does not require REAP to prove that it knew Dr. Hansen's third-year practice losses had exceeded $500, 000 at the time it voted on the without-cause termination in February 2010 or when it provided notice of the termination in June 2010. Rather, section 10.1 simply requires REAP to prove that, when it exercised its right to terminate the contract without cause in June 2010: (1) the third year of Dr. Hansen's contract had ended; (2) Dr. Hansen's third-year annual practice losses exceeded $500, 000; and (3) sixty days' notice was provided. We decline Dr. Hansen's request to add language to the contract. See Republic Nat'l Life Ins. Co. v. Spillars, 368 S.W.2d 92, 94 (Tex. 1963) (explaining that a contract must be enforced as written when the language of the contract is plain and unambiguous).

         Given that section 10.1 simply provides that either party may terminate the contract without cause on sixty days' written notice if Dr. Hansen's annual practices losses exceed $500, 000 in his third, fourth, or fifth year, we conclude that the court of appeals erred. Indeed, we interpreted a similar provision in Juliette Fowler Homes, Inc. v. Welch Associates, Inc., 793 S.W.2d 660 (Tex. 1990), which stated, "This agreement may be cancelled by either party with the cancellation to be effective sixty days after the mailing or personal delivery of a written notice of cancellation . . . ." Id. at 665 n.8. The plaintiff did not contest that written notice of termination was properly given; rather, it claimed that the termination constituted a breach of contract because there was no good-faith reason for the termination. Id. at 665. We disagreed, explaining:

When a contract provides expressly that it is subject to termination upon notice, the general rule is that each party to the contract has the legal right to cancel the contract. . . . [T]he parties bargained for the flexibility of terminating the contract upon tender of the requisite notice. Neither party should be denied the benefit of its bargain. We hold that Fowler properly terminated the . . . contract pursuant to its express terms; therefore, Welch's breach of contract claim . . . must fail.

Id. (internal citation omitted). Aside from the condition subsequent, section 10.1 of Dr. Hansen's contract is virtually identical to the provision in Juliette Fowler. The provisions in both contracts are effectively "termination-upon-notice" provisions, and "[a] contract that a party may terminate under such a clause is terminable at will." 14 Tex. Jur. 3d Contracts § 263 (2006).

         In short, the court of appeals' decision conflicts with the longstanding precedent cited above, [7] which holds that a party does not need "grounds" to terminate a contract in accordance with a without-cause or termination-upon-notice provision. REAP was not required to prove or disprove any "grounds" for termination; it was required only to establish that: (1) the condition subsequent occurred at the end of the third year of the contract; and (2) it provided sixty days' written notice to Dr. Hansen. Given the court of appeals' assumption that the annual practices losses condition was satisfied, the court was left with a provision allowing for the contract's termination with sixty days' written notice.

         B. Propriety of the Trial Court's Summary-Judgment Order

         As explained above, to prevail on summary judgment, REAP had to present conclusive evidence that: (1) the "annual practice losses" condition subsequent was satisfied when REAP exercised its right; and (2) REAP provided Dr. Hansen with sixty days' written notice specifying the date on which his termination would become effective. We hold that REAP satisfied this burden.

         1. Notice Requirement

         First, it is undisputed that REAP complied with the notice requirement. The third year of the contract ended on April 30, 2010. On June 1, 2010, REAP sent Dr. Hansen a termination letter stating that REAP was terminating Dr. Hansen "without cause, pursuant to Section 10.1" and that "the effective date of termination shall be July 31, 2010." Thus, REAP's summary-judgment evidence conclusively establishes that it complied with the notice requirement.

         2. "Annual Practice Losses" Condition Subsequent

         We also conclude that REAP conclusively established that Dr. Hansen's third-year annual practice losses exceeded $500, 000, such that the trial court's summary-judgment order dismissing Dr. Hansen's breach of contract claim was proper.

         REAP supported its motion for summary judgment with the following evidence: (1) affidavit testimony from the Hospital's chief financial officer, Benjamin Cluff; (2) trend reports prepared by Cluff's office during the time of Dr. Hansen's employment; and (3) deposition testimony from Leslie Luke, PSC's vice president of practice management. Cluff testified that he was in charge of calculating the ...


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