Johnson Regional Medical Center v. Halterman

Filing 26

OPINION AND ORDER denying 12 Defendant's Motion for Summary Judgment and granting 16 Plaintiff's Motion for Summary Judgment, as set forth. This case remains set for Jury Trial on August 17, 2015 as to Count 2. Signed by Honorable P. K. Holmes, III on July 24, 2015. (jas)

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FORT SMITH DIVISION
JOHNSON REGIONAL MEDICAL CENTER
v.

PLAINTIFF

Case No. 2:14-CV-02174

DR. ROBERT HALTERMAN

DEFENDANT
OPINION AND ORDER

Currently before the Court are cross motions for summary judgment as to Count 1 (Docs. 12
and 16), and Defendant’s motion for summary judgment as to Count 2 (Doc. 12). Also before the
Court are the parties’ responsive filings, and various exhibits in support. Having reviewed the
filings, the Court finds that Plaintiff’s motion for summary judgment as to Count 1 should be
granted, and Defendant’s motion for summary judgment as to both counts should be denied.
I.

Legal Standards
In determining whether summary judgment is appropriate, the burden is on the moving party

to establish both the absence of a genuine dispute of material fact and that it is entitled to judgment
as a matter of law. See Fed. R. Civ. P. 56; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 586-87 (1986); Nat’l Bank of Commerce of El Dorado, Ark. v. Dow Chem. Co., 165 F.3d
602 (8th Cir. 1999). The same standard applies where, as here, the parties file cross-motions for
summary judgment on an issue. Each motion should be reviewed in its own right, with each side,
respectively, “entitled to the benefit of all inferences favorable to them which might reasonably be
drawn from the record.” Wermager v. Cormorant Twp. Bd., 716 F.2d 1211, 1214 (8th Cir. 1983);
see also Canada v. Union Elec. Co., 135 F.3d 1211, 1212-13 (8th Cir. 1998). In order for there to
be a genuine issue of material fact, the evidence must be “such that a reasonable jury could return
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a verdict for the nonmoving party.” Allison v. Flexway Trucking, Inc., 28 F.3d 64, 66 (8th Cir. 1994)
(quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
II.

Background
Plaintiff Johnson Regional Medical Center (“JRMC”) filed suit against Defendant Dr. Robert

Halterman in Johnson County Circuit Court on June 17, 2014. JRMC removed the case to this Court
on August 13, 2014. JRMC brings two claims for breach of contract against Halterman. In Count
1 of the complaint, JRMC alleges that Halterman breached a recruitment agreement (“the
Recruitment Agreement”) and seeks damages for Halterman’s failure to pay the balance on an
attached promissory note (“the Note”) to JRMC. In Count 2, JRMC alleges that Halterman breached
an employment agreement (“the Employment Agreement”).
Dr. Robert Halterman received a degree in Doctor of Osteopathy in 1988. Halterman
subsequently focused his practice in obstetrics and gynecology (“OB/GYN”). In early 2013, JRMC
sought to recruit Halterman to work in its facilities as a full time OB/GYN practitioner. On March
20, 2013, Halterman executed a promissory note in favor of JRMC, in which he agreed to make
monthly payments to JRMC in exchange for JRMC’s issuance of a loan to him in the original
principal sum of $50,000. (Doc. 16-1). In conjunction with the promissory note, Halterman also
executed the Recruitment Agreement, which provided in part that JRMC would forgive Halterman’s
payments on the promissory note as they came due provided certain conditions were met. (Doc. 162). On the same day, Halterman also executed the Employment Agreement, setting out the terms
of Halterman’s employment with JRMC.
Halterman subsequently began working for JRMC full-time in July 2013. It is undisputed
that just four months later, on November 6, 2013, Halterman accidentally slipped on some liquid in
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the stairwell next to his office at JRMC’s facilities. It is also undisputed that Halterman injured his
shoulder as a result of the slip and fall and that he was not immediately able to perform certain
medical procedures. However, the extent to which the shoulder injury prevented Halterman from
returning to work at JRMC and from fulfilling any employment obligations is in dispute. Halterman
states that he resigned from JRMC due to the fact that his shoulder injury made him “unable to
perform many of the types of medicine he had been hired to do by [JRMC].” (Doc. 13, ¶ 6, 9).
JRMC disputes that Halterman’s injury made it impossible or impracticable for him to return to work
for JRMC and disputes that Halterman’s injury was ultimately the reason for his resignation. (Doc.
20, ¶ 6, 9).
Halterman resigned his employment with JRMC effective December 23, 2013, by letter sent
to JRMC Administrator Larry Morse. (Doc. 16-4). On January 17, 2014, JRMC sent Halterman a
letter informing Halterman that it had exercised its option to terminate the Recruitment Agreement,
stating “[p]ursuant to Sections 5.1(b)(i) and 1.1 of the Recruitment Agreement, this Letter serves as
written notice to you that the Recruitment Agreement is terminated, effective as of December 23,
2013.” (Doc. 16-5, p. 1). The letter further informed Halterman that, due to the termination,
JRMC’s monthly forgiveness of payments due on the Note would cease, and JRMC demanded
payment of the remaining balance of $37,894.00 by February 28, 2014. Id. Halterman has since
failed to make any payment on the Note to JRMC.
A.

Count 1: Breach of Recruitment Agreement/Promissory Note

As to Count 1, JRMC alleges that Halterman breached his obligation to repay $50,000
advanced to him by JRMC pursuant to the Note executed in conjuction with the Recruitment
Agreement. JRMC argues that the promissory note is a stand-alone agreement requiring Halterman
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to make monthly payments to JRMC over a twenty-four month period beginning on or about July
1, 2013. Halterman argues that the promissory note cannot be viewed in isolation and, instead, must
be considered together with both the Recruitment Agreement and the Employment Agreement and
that, if his performance of his obligations under one Agreement is excused, so too should his
obligation to repay the amount owed under the Note be excused. This dispute as to how the
Agreements should be construed is a purely legal dispute that may be resolved by the Court as a
threshold matter. By virtue of the fact that this is a diversity action and by virtue of the fact that the
Agreements at issue have choice-of-law provisions stating that Arkansas law will apply to any
disputes (Doc. 12-3, ¶ 15; Doc. 12-4, § 5.3), the Court will apply Arkansas law to the substantive
issues in this action.
Halterman cites to Arkansas Model Jury Instruction 2420 for the proposition that “[i]f the
parties’ contract is contained in more than one document, all of the documents must be considered
together.” The commentary to that instructions cites Stokes v. Roberts, 289 Ark. 319 (1986). In
Stokes, the Supreme Court of Arkansas set forth the standard for when separate contractual
documents should be considered together:
When two instruments are executed contemporaneously, by the same parties in the
course of the same transaction, they should be considered as one contract for
purposes of interpretation, in the absence of a contrary intention. To arrive at the
intention of the parties to a contract, courts may acquaint themselves with the persons
and circumstances and place themselves in the same situation as the parties who
made the contract. We may also consider the construction the parties themselves
place on the contract.
289 Ark. at 322-23. Here, while the Employment and Recruitment Agreements were executed
contemporaneously by the same parties, it is clear from their terms that they are separate agreements
intended to be construed separately.

Looking to the agreements themselves, both contain
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independent merger clauses (Doc. 12-3, ¶ 23; Doc. 12-4, § 5.14). The merger clause in the
Employment Agreement states unambiguously that “[t]his Agreement . . . contains the entire
agreement between the parties concerning the subject matter hereof . . .” (Doc. 12-3, ¶ 23). The
Recruitment Agreement likewise states that “[t]his Agreements and all Exhibits hereto as well as the
agreements and other documents referred to in this Agreement constitute the entire agreement
between the parties with regard to the subject matter hereof and thereof.” (Doc. 12-4, § 5.14). The
Court has not found any reference to the Employment Agreement in the Recruitment Agreement, and
a section in the Recruitment Agreement with the heading “PRACTICE OBLIGATIONS” was
purposefully omitted. Id. at p. 2. The Employment Agreement sets forth the terms of Halterman’s
employment with JRMC—Halterman’s duties and responsibilities, insurance requirements, billing
arrangements, non-compete and non-solicitation prohibitions, etc. The Recruitment Agreement
specifically addresses the $50,000 advance paid to Halterman and the terms of repayment and loan
forgiveness.

Each Agreement has differing obligations for each party as well as different

occurrences that might trigger termination of the Agreement, indicating that the Agreements were
separately negotiated and intended to set forth independent contractual obligations. Furthermore,
each Agreement contains independent sections addressing choice of law (Doc. 12-3, ¶ 15; Doc. 12-4,
§ 5.3), assignment (id. at ¶ 16 and § 5.5), severability (id. at ¶ 12 and § 5.6), notices (id. at ¶ 21 and
§ 5.4), waiver (id. at ¶ 22 and § 5.8), and general interpretation and ambiguities (id. at § 25 and §
5.21). It is not likely that parties who included differing substantive obligations and what would be
duplicative (and, in the case of certain provisions, conflicting) boilerplate provisions in two separate
contracts would have actually intended that the two contracts be construed together as one. The
Court finds therefore that the Recruitment Agreement and Employment Agreement should be treated
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as separate contracts. The Court will proceed, then, with analysis of JRMC’s claim as to the
Recruitment Agreement and attached Note.
The Recruitment Agreement provides that, as Halterman’s monthly payments of the Note
became due, “provided that [Halterman] remains in full compliance with all his obligations
hereunder, [JRMC] shall forgive the payment of principal and interest on [the Note] due on that
date.” (Doc. 16-2, § 4.2). The Recruitment Agreement further provides that “[f]orgiveness of the
[promissory note] shall cease upon the occurrence of any event” of termination described in the
agreement and that “all amounts due under the Note at such time shall be immediately due and
payable to [JRMC] . . .” Id. at § 4.3. This is again reiterated later in the Recruitment Agreement
with the statement that “[u]pon termination of this Agreement, [JRMC’s] obligations hereunder shall
cease, and all amounts advanced by [JRMC] pursuant to this Agreement, plus accrued interest, less
amounts repaid by [Halterman] to [JRMC] or forgiven pursuant to this Agreement, shall become an
obligation of [Halterman] to [JRMC] immediately due and payable.” Id. at § 5.1(d).
Halterman argues that JRMC’s obligation to forgive his loan repayments was “tied directly
to [Halterman’s] ability to perform” under the Recruitment and Employment Agreements taken
together. (Doc. 14, p. 6). Halterman reasons that if his performance of the Employment Agreement
is excused, so is repayment of the $50,000 advance. This does not follow. First, the Court has
already found that the Recruitment and Employment Agreements are separate Agreements to be
considered independently. Second, Halterman conflates JRMC’s obligation to forgive his loan
payments with his own obligation to make the payments in the first place. The Recruitment
Agreement contemplates that JRMC will confer a benefit on Halterman in the form of loan
forgiveness, if Halterman remains “in full compliance with all his obligations hereunder.” (Doc. 16-6-

2, § 4.2). Halterman’s obligation to repay the $50,000 advance is separate and apart from any
obligation of JRMC to forgive those payments. Therefore, even if Halterman’s non-performance
of his obligations under the Employment Agreement or the Recruitment Agreement (or both taken
together) were found to be excused, it does not follow that JRMC would have a continuing
obligation to forgive Halterman’s loan repayments.

Third, Halterman’s failure to render

performances—whether justified or not—would still operate to relieve JRMC of its own obligations
under the agreements. Restatement (Second) of Contracts § 267, 237. Therefore, Halterman’s
failure to fulfill his employment obligations and failure to maintain a full-time practice relieved
JRMC of its obligation to forgive Halterman’s loan repayments. Halterman’s obligation to repay
the loan pursuant to the Note, however, continued. Finally, if Halterman intends to argue that JRMC
somehow has a continuing obligation to forgive his loan repayments, this argument would give rise
to an affirmative claim for breach of contract; it does not give rise to an affirmative defense for his
own failure to repay the loan as required by the Note.
Pursuant to the Recruitment Agreement, JRMC could exercise an option to terminate the
Agreement upon “(i) breach by [Halterman] of any term, convenant or condition hereof; [or] (ii)
death or permanent disability preventing [Halterman’s] performance of his/her obligations
hereunder.” (Doc. 16-2, § 5.1(b)). The first paragraph under Article I “Physician’s Obligations” is
headed “Full-time Practice” and states that “[Halterman] agrees to practice Obstetrics and
Gynecology . . . on a full-time basis . . . . [Halterman] shall, in good faith and with diligence, pursue
his/her practice on a full-time basis and shall maintain regular office and practice hours.” Id. at §
1.1. The Recruitment Agreement also specifically contemplates that “[Halterman intends to engage
in the full-time practice of medicine in the Service Area, and has agreed to repay all obligations with
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respect to amounts advanced pursuant to the terms of this Agreement.” Id. at p. 1. Upon
Halterman’s decision to resign, and therefore discontinue full-time or any other practice with JRMC,
JRMC had the option to terminate the Recruitment Agreement. This is true no matter the reason for
Halterman’s resignation. If the resignation was entirely voluntary, Halterman was in breach of his
obligation to continue full-time practice with JRMC. If the resignation was out of necessity due to
Halterman’s shoulder injury, the fact remains that Halterman was not continuing a full-time practice
with JRMC, even though he might have had a “permanent disability” preventing his performance
of his obligations. In either event, JRMC had the contractual right to terminate the Recruitment
Agreement and demand payment on the Note.
Halterman also argues that he used the $50,000 advance for relocation expenses in moving
to Clarksville, Arkansas. This is immaterial. Presumably the recipient of an advance or loan will
use the funds so advanced for some immediate purpose. Otherwise, there would be no need for an
advance or loan in the first place. The fact that loan funds are used, as expected, certainly does not
excuse later repayment. The purpose for which Halterman used the funds loaned to him is not at
issue in this case. By the clear terms of the promissory note, the $50,000 received by Halterman was
to be repaid in “[e]qual monthly installments of principal and interest . . . continuing over a 24month term until all amounts due hereunder by [Halterman] have been paid to [JRMC].” (Doc. 12-5,
p. 2). The promissory note acknowledged that the “principal and interest due . . .may be forgiven”
as set forth in the Recruitment Agreement. Id. The $50,000 was clearly a loan to be repaid—not a
relocation bonus or some sort of incentive payment. The Court notes that the Employment
Agreement separately provided for Halterman to receive a stipend “in addition to [his]
compensation” for “moving expenses” of up to $15,000. This payment of relocation expenses was
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to be repaid only if Halterman did not ultimately commence employment with JRMC. The two
provisions in the two separate agreements stand in stark contrast.
It is undisputed that JRMC loaned Halterman $50,000, that he was obligated to repay that
sum absent loan forgiveness by JRMC, and that he has failed to make any payments since JRMC
notified him that it was terminating the Recruitment Agreement. While the parties dispute whether
Halterman’s repayment obligation should be excused, this dispute is one that can be decided as a
matter of law. For the reasons set forth above, the Court finds that Halterman and JRMC entered
into two separate agreeements—the Recruitment Agreement and the Employment Agreement, which
can and should be construed independently of one another. In conjunction with the Recruitment
Agreement, Halterman executed a promissory note independently obligating him to repay JRMC the
$50,000 pursuant to the terms of the Note.
Halterman has not set forth any facts that would give rise to a genuine issue of any material
fact as to any affirmative defense that would excuse his obligation to repay what is owed on the
Note. Halterman has not set forth any facts alleging that he agreed to repayment of the $50,000
advance based on fraud in the inducement or that JRMC acted in bad faith in negotiation of the Note.
Halterman has likewise failed to show that it was or is impossible or impracticable for him to repay
the advance, as he gained alternate employment months after his resignation from JRMC and
remains employed to the present time. JRMC has established an absence of a genuine issue as to any
fact material to resolution of Count 1, and the Court therefore finds that summary judgment should
be entered in favor of JRMC on Count 1.
B.

Count 2: Breach of Employment Agreement

Halterman moves for summary judgment as to Count 2 based on the affirmative defense of
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impossibility or impracticability of performance. Halterman argues that his shoulder injury
prevented him from performing many of the types of medicine he had been hired by JRMC to do.
He represents that he did not expect to be able to return to full-time practice for at least six months
and might possibly never be able to return to practice full time. Halterman states that his injury and
resultant inability to return to work caused him to submit his letter of resignation to JRMC. JRMC
disputes that Halterman’s shoulder injury was the motivating reason for his resignation and disputes
that it was impossible or impracticable for Halterman to perform his obligations under the
Employment Agreement.
The Arkansas Supreme Court recently re-affirmed

the standard for establishing an

impossibility defense:
The burden of proving impossibility of performance, its nature and extent and
causative effect rests upon the party alleging it. He must show that he took virtually
every action within his power to perform his duty under the contract. It must be
shown that the thing to be done cannot be effected by any means. Resolution of the
question requires an examination into the conduct of the party pleading the defense
in order to determine the presence or absence of fault on his part in failing [to]
perform.
Ark. Realtors Ass’n v. Real Forms, LLC, 2014 Ark. 385, 13 (2014) (finding appellant was not
entitled to jury instruction on impossibility defense where “evidence suggests that Appellant failed
to take ‘every action within its power to perform its duty under the contract’”) (quoting Frigillana
v. Frigillana, 266 Ark. 296, 302-03 (1979)). Arkansas Model Jury Instruction 2439, addressing the
defense of impossibility of performance, instructs that the party asserting the defense “has the burden
of proving each of two essential propositions: First, that [the party] diligently attempted to perform
the contract; and Second, that performance became impossible as a result of” some “legally
recognized event on which [the party] relies.”
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While it does not appear that the law on this issue has significantly evolved in Arkansas
jurisprudence, the Court recognizes that the doctrine of impossibility has generally evolved into one
of impracticability as opposed to strict, objective impossibility. See Restatement (Second) of
Contracts § 261 (1981) (“Where, after a contract is made, a party’s performance is made
impracticable without his fault by the occurrence of an event the non-occurrence of which was a
basic assumption on which the contract was made, his duty to render that performance is discharged,
unless the language or the circumstances indicate the contrary.”). Nonetheless, “a party is expected
to use reasonable efforts to surmount obstacles to performance, and a performance is impracticable
only if it is so in spite of such efforts.” Id. at § 261, comment (d). The Court also recognizes the
principle that “[i]f the existence of a particular person is necessary for the performance of a duty, his
death or such incapacity as makes performance impracticable is an event the non-occurrence of
which was a basic assumption on which the contract was made.” Id. at § 262. Whether or not an
injury results in incapacity to a degree rendering performance of a contractual obligation
impracticable will, of course, depend on the facts and circumstances of each particular case. Finally,
“[w]here only part of an obligor’s performance is impracticable, his duty to render the remaining part
is unaffected if (a) it is still practicable for him to render performance that is substantial, taking
account of any reasonable substitute performance that he is under a duty to render . . .” Id. at § 270.
Halterman avers, and JRMC does not dispute, that Halterman was unable to perform many
of the types of procedures he was hired to perform immediately after his injury. JRMC did not,
however, pressure Halterman to resign or to even make any decisions about returning to full-time
employment. (Doc. 16-6, ¶ 13; Doc. 21-3, p. 11). In his deposition, Halterman acknowledged that
he did not attend all recommended sessions of physical therapy to work towards recuperating his
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shoulder. (Doc. 21-3, p. 4). Halterman stated that he chose not to pursue surgery on his shoulder
and that he did not discuss any options for continuing to work with JRMC, such as bringing in
another physician to fill in on procedures Halterman could not perform. Id. at pp. 8-9. Halterman
stated “I don’t think, after the injury, there was much conversation about building a practice or what
the future would hold. It was just kind of, okay, you’re on your own. We’re on our own. Let’s just
see what happens.” Id. at p. 9. While Halterman may have tried to arrange a meeting with Larry
Morse, ultimately Halterman did not have an in-person meeting with the Administrator about what
could be done to keep Halterman at JRMC. Id. Halterman did inquire about the possibility of a
leave of absence with Morse, but did not receive a definitive response before submitting his letter
of resignation and did not take up the issue with the human resources department. Id. at p. 10.
Subsequent to his resignation with JRMC, Halterman resumed working as a hospitalist just months
later in the spring of 2014. Id. at p. 14. Based on this record, Halterman has failed to show an
absence of a genuine issue as to the material fact of whether he made an appropriate effort to
continue to fulfill his employment obligations to JRMC in the face of his injury, such that
performance of those obligations could be said to have been impossible or impracticable. Even
assuming that Halterman’s performance of his employment obligations was partially impracticable,
there remain issues of fact as to whether Halterman was unable to render performance that was
substantial and in keeping with his obligations to JRMC.
Furthermore, while Halterman’s letter of resignation cited his shoulder injury as the reason
for his resignation, (Doc. 12-5, p. 4), Halterman admitted in his deposition that JRMC was not
pressuring him to make a decision about getting back to work and that he sent his letter of
resignation “primarily . . . because of the every five days off and five—every fifth weekend [of on-12-

call duty]. I mean, they were not going to stick to that. That’s what I signed on to do, and they
weren’t going to honor it.” (Doc. 21-3, p. 12). Halterman’s letter of resignation acknowledges the
potential for recovery from his shoulder injury and a return to full-time practice after four to six
months if Halterman opted for surgical intervention to treat the injury. (Doc. 12-5, p. 4). The letter
also acknowledges that Halterman “was given the option of waiting with physical therapy and other
rehabilitation options but quite frankly this may have been my ‘wake up call’ or if you will my ‘swan
song’ to either semi-retire or find employment on a part time basis . . .” Id. The record does not
support Halterman’s argument that there is an absence of a genuine issue as to the material fact of
Halterman’s motivation for his resignation—whether his shoulder injury made it impossible for him
to continue fulfilling his employment obligations at JRMC.
In regard to whether JRMC might recover on its claim that Halterman breached the
Employment Agreement, there remain genuine issues of material fact precluding the entry of
summary judgment, including but not limited to: whether Halterman’s shoulder injury made it
impossible or impracticable for him to comply with his obligations under the Employment
Agreement such that his non-performance should be excused, and whether Halterman’s shoulder
injury was the reason for his resignation. Both of these issues will require a fact-intensive inquiry
in this case and are not amenable to resolution by the Court as a matter of law. As to his defenses
of fraud and bad faith, Halterman admits that there remain issues of fact in dispute. (Doc. 23, p. 4
(“This evidence creates questions of fact concerning Defendant’s defenses of fraud and bad faith.”)).
Halterman’s motion for summary judgment as to Count 2 must therefore be denied.
III.

Conclusion
For all the reasons set forth above, IT IS ORDERED that Defendant’s motion for summary
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judgment (Doc. 12) is DENIED.
IT IS FURTHER ORDERED that Plaintiff’s motion for summary judgment as to Count 1
(Doc. 16) is GRANTED.
This case remains set for trial on August 17, 2015 as to Count 2.
The Court will require further briefing on the specific amount of damages to be awarded to
JRMC on Count 1, to include the amount currently owed on the promissory note, interest, and any
attorneys’ fees1 if appropriate and desired. The Court will, however, delay briefing of this issue until
after all issues of liability in this case have been resolved.
IT IS SO ORDERED this 24th day of July, 2015.

/s/P. K. Holmes, III
P.K. HOLMES, III
CHIEF U.S. DISTRICT JUDGE

1

See Doc. 12-5, p.1 (“Maker agrees to pay, to the extent permitted by law, all costs and
expenses incurred by Holder in connection with the collection and enforcement of this Note,
including, but not limited to, expenses and reasonable attorneys’ fees to the extent permitted by
applicable law . . .”); Baptist Memorial Hosp.—Forrest City, Inc. v. Neblett, 2012 Ark. App. 191
(2012) (where physician defendant was found to have breached his obligations under an agreement
and promissory note with hospital, by failing to continue to work full time as required such that loan
forgiveness by the hospital was not triggered in full, attorneys’ fees could be recovered).
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