Winn & Associates, PLLC v. Emcare Physician Providers, Inc. et al
Filing
89
ORDER AND OPINION by District Judge James H. Payne: granting 55 Plaintiff's Motion for Summary Judgment; dismissing without prejudice EmCare Physician Services, Inc. (cjt, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF OKLAHOMA
(1) WINN & ASSOCIATES, PLLC,
An Oklahoma Professional Limited
Liability Company,
Plaintiff,
v.
(1) EMCARE PHYSICIAN
PROVIDERS, INC.,
A Missouri Corporation,
(2) EMCARE PHYSICIAN
SERVICES, INC.,
A Delaware Corporation,
(3) EMCARE, INC.,
A Delaware Corporation,
(4) EMCARE HOLDINGS, INC.
A Delaware Corporation,
(5) ENVISION HEALTHCARE
HOLDINGS, INC.
A Delaware Corporation,
Defendants.
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Case No. 13-CV-00427-JHP
ORDER AND OPINION
Now before the Court is Plaintiff’s Motion for Summary Judgment and Brief in Support
(Doc. 55). Plaintiff has moved for summary judgment on its breach of contract claim against
Defendants EmCare Physician Providers, Inc., EmCare Physician Services, Inc., EmCare, Inc.,
EmCare Holdings, Inc., and Envision Healthcare Holdings, Inc.
I.
FACTUAL BACKGROUND
Plaintiff Winn & Associates, PLLC, is owned and operated by Dr. Berry E. Winn, M.D.
It is in the business of providing physician staffing services to local emergency rooms. In the
past, Plaintiff provided physicians to staff Muskogee Regional Medical Center’s Emergency
1
Department by directly contracting with Muskogee Regional Medical Center (“Muskogee ER”).
Over time, Plaintiff had assembled a highly-talented team of doctors for this purpose. Plaintiff
has stated that it typically spends approximately $50,000 in the recruitment and training of a
qualified physician, and that is typical for Plaintiff to pay a recruiter $35,000.
On or about April 20, 2012, EmCare Physician Providers, Inc., (“EmCare”) contracted
with Muskogee Regional Medical Center to staff the Muskogee ER. EmCare, in turn, entered
into a Professional Practitioner Services Agreement (“Agreement”) with Plaintiff, whereby
Plaintiff agreed to provide EmCare with physicians from Plaintiff’s own team to staff the
Muskogee ER. The provision of the Agreement sued upon in this case is Section 14.2 which
provides that in recognition of the expenditure of resources and effort by Plaintiff in making
qualified physicians available to staff the Muskogee ER, EmCare was to “pay Plaintiff the sum
of $35,000 per physician if EmCare elected to directly retain, employ, or contract with any of
Plaintiff’s physicians during the term of the Agreement and for the period of one year following
its termination.” The amount of money EmCare agreed to pay Plaintiff pursuant to Section 14.2
was negotiated over several revisions of the Agreement, starting at $10,000.00 and ending with
$35,000.00 as the agreed-upon amount.
The duration of the contract was to be three years, commencing on May 1, 2012, and
ending on April 30, 2015. EmCare drafted the agreement with Plaintiff. The Agreement was
negotiated over a period in excess of one month. Negotiating on behalf of EmCare were Sean
Richardson, COO, and Barbara Fit (formerly Bogucki), corporate counsel. Negotiating on
behalf of Plaintiff was Berry E. Winn, M.D., assisted by counsel. Berry E. Winn, M.D.,
executed the agreement on behalf of Plaintiff on April 20, 2012, and Sean Richardson executed
the Agreement on behalf of EmCare on April 23, 2012.
2
However, in January 2013, EmCare elected to terminate the agreement.
After the
agreement was terminated, EmCare did not immediately provide its own physicians to staff
Muskogee ER, so Plaintiff continued to perform under the terms of the agreement through
March 2013. Beginning April 1, 2013, Plaintiff ceased providing staffing services to EmCare
for the Muskogee ER.
However, EmCare continued to use Plaintiff physicians to staff
Muskogee, by directly retaining, employing, or contracting with them to do so; indeed, EmCare
does not dispute that it directly retained, employed, or contracted with ten (10) of Plaintiff’s
physicians. Specifically, beginning in April 2013, and up until the present day, EmCare directly
employed, retained, or contracted with Dr. James Campbell, Dr. Ann Campbell, Dr. Randell
Chapman, Dr. Thomas DiGiovanna, Dr. Craig Kennedy, Dr. Vijay Randive, Dr. Douglas
Raymer, Dr. Michael Riley, Dr. Asif Sarfraz, and Dr. H. Kuper Upchurch, Jr., to staff the
Muskogee ER. Defendants do not dispute that all of these physicians were previously under
contract with Plaintiff to provide emergency medical services at the Muskogee ER.
Pursuant to the Agreement, Plaintiff sent EmCare invoices in the amount of $35,000.00
for each physician that EmCare directly employed, retained, or contracted with to staff shifts at
the hospital. These invoices total $350,000.00 ($35,000.00 per physician x 10 physicians =
$350,000.00).
These invoices have not been paid, and Plaintiff contends that EmCare is
therefore in breach of the Agreement with Plaintiff.
In addition, Plaintiff states that it has
sustained consequential damages in the amount of $30,000.00. Defendant EmCare does not
dispute this assertion with any contrary evidence or testimony.1 (See Dkt. #68 at 6).
1
Contrary to Local Rule 56.1, Defendants’ “amended” response brief does not begin with a
section which contains a concise statement of material facts to which Defendants assert a genuine
issue of fact exists, nor do Defendants controvert Plaintiff’s statement of material facts with
reference to any particular evidence. (Dkt. 68). For that reason, Plaintiff’s statement of material
facts “shall be deemed admitted” for purposes of summary judgment. See, e.g., Spangler v. State
Farm Mut. Auto. Ins. Co., 2008 WL 2782708, at 1 n.1 (E.D. Okla. 2008).
3
II.
DISCUSSION
A. Summary Judgment Standard
Summary judgment is appropriate if the pleadings, affidavits, depositions, and evidence
on file “show that there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56©. A fact is material if it is essential
to the proper disposition of a claim under controlling law and an issue is genuine if the evidence
is such that a rational trier of fact could resolve the issue either way. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). All facts and inferences must be viewed in the light most
favorable to the non-moving party.
Id. at 255.
The movant bears the initial burden of
demonstrating the absence of a dispute of material fact warranting summary judgment. Celotex
Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). If a party who would bear the burden of proof at
trial lacks sufficient evidence on an essential element of a claim, then all other factual issues
concerning the claim become immaterial. Id. at 322. If the movant carries its burden, the nonmovant must then “set forth specific [admissible] facts,” outside of the pleadings, that show the
existence of a genuine issue for trial. See Anderson, 477 U.S. at 248. Where the record taken as
a whole could not lead a rational trier of fact to find for the non-moving party, there is no
“genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
586–87 (1986) (citations omitted).
B. Breach of Contract
1. Breach of Contract, Defined
Plaintiff has made only one claim for relief: breach of contract. The Agreement at issue
in this case stipulates that Oklahoma law governs the contract. A claim for breach of contract is
comprised of three elements under Oklahoma law: (1) formation of a contract; (2) breach of the
4
contract; and (3) actual damages suffered as a result of the breach. See Digital Design Group,
Inc. v. Information Builders, Inc., 2001 OK 21, ¶ 33, 24 P.3d 834, 843; see also Oltman Homes,
Inc. v. Mirkes, 2008 OK CIV APP 64, ¶ 8, 190 P.3d 1182, 1185. Oklahoma statutory law, 23
O.S. § 21 et seq., governs damages arising from breach of contract. Damages arising from the
breach of a contractual obligation to pay money are defined accordingly: “The detriment caused
by the breach of an obligation to pay money only is deemed to be the amount due by the terms of
the obligation, with interest thereon.” 23 O.S. § 22. Additionally,
[f]or the breach of an obligation arising from contract, the measure of damages,
except where otherwise expressly provided by this chapter, is the amount which
will compensate the party aggrieved for all the detriment proximately caused
thereby, or which, in the ordinary course of things, would be likely to result
therefrom. No damages can be recovered for a breach of contract, which are not
clearly ascertainable in both their nature and origin.
23 O.S. § 21. Thus, the measure of actual damages for breach of a contract is the amount of
money due under the terms of the contract, plus interest on said amount, and any other clearly
ascertainable amounts proximately flowing from the breach. 23 O.S. §§ 21, 22.
2. The Agreement Was Formed Between Plaintiff and EmCare
Under Oklahoma law, a contract is formed when there is an offer, acceptance of the offer,
exchange of valid consideration, and mutual assent. Massey v. Matrix Service Co., 2013 WL
5603805, * (N.D. Okla. Oct. 11, 2013) (citing Brewer v. City of Seminole, 204 P.3d 87, 89 (Okla.
2009).
“Mutual assent’ means a ‘meeting of the minds . . . on all material parts of the
agreement.’” Id. (quoting Watkins v. Grady County Soil and Water Conserv. Dist., 438 P.2d
491, 494 (Okla 1968). In this case, it is undisputed that the Agreement existed between Plaintiff
and EmCare.
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3. EmCare Breached the Agreement with Plaintiff
In Oklahoma, a contract is breached if a party to the contract intentionally fails to meet a
material obligation of the contract. See Zenith Drilling Corp. v. Internorth, Inc., 869 F.2d 560
(10th Cir. 1989) In Zenith, the Tenth Circuit Court of Appeals affirmed a district court ruling
that, under Oklahoma’s materiality standard, the plaintiff was entitled to summary judgment on a
breach of contract claim where defendant refused to pay invoices for standby charges. The court
held that the standby charges in question were a material element of the subject contracts
because the plaintiff would not have consented to the contracts without their presence in the
agreements. Id., at 564.
EmCare does not dispute that it directly retained, employed, or contracted with ten of
Plaintiff’s physicians during the period of one year following termination of the Agreement.
EmCare also does not dispute that it has not tendered payment for its direct retention,
employment, or contracting with Plaintiff’s physicians. Therefore, the undisputed facts show
that EmCare breached the Agreement with Plaintiff when it refused to tender payment for each
of the physicians it directly retained, employed, or contracted with, pursuant to Section 14.2 of
the Agreement with EmCare.
4. Plaintiff Suffered Damages as a Result of the Breach
As for the third element of breach of contract, the undisputed facts in this case
demonstrate that Plaintiff has suffered actual damages as a result of EmCare’s breach. The
Agreement, in its final negotiated form, specifically provided that EmCare would be obligated to
pay Plaintiff $35,000 per physician that it elected to retain, employ, or contract with, as
compensation for the loss of Plaintiff’s investment in each physician. Id.
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Section 21 of Title 23 requires that damages be clearly ascertainable in their nature and
origin. The amount of damages cannot be based on mere speculation, conjecture, or surmise
alone. See Florafax Intern. Inc. v. GTE Market Resources, Inc., 1997 OK 7, 933 P.2d 282, 296
(citing Larrance Tank Corporation v. Burrough, 1970 OK 205, 476 P.2d 346, 350. The nature
of Plaintiff’s damages arising from EmCare’s failure to meet its obligation to pay money is clear,
as are the origin of the damages.
a.
Compensatory Damages
“[T]he detriment caused by the breach of an obligation to pay money only is deemed to
be the amount due by the terms of the obligation, with interest thereon.” 23 O.S. § 22 (emphasis
added). Plaintiff has been actually damaged because EmCare breached its agreed obligation to
pay money in return for electing to retain, employ, or contract with ten of Plaintiff’s physicians
within a year of the termination of the Agreement, causing a detriment to Plaintiff in the amount
due by the terms of the obligation, which in this case, totals $350,000.00.
It is clear from the terms of Section 14.2 of the Agreement that the $35,000.00 per
physician that EmCare agreed to pay Plaintiff in the event it elected to directly retain, employ, or
contract with Plaintiff’s physicians represents the value of the labor and services Plaintiff
incurred in locating and retaining each physician. Plaintiff has demonstrated, and Defendants do
not dispute, that Plaintiff typically pays recruiters a finder’s fee of approximately $35,000.00 per
physician that Plaintiff retains to staff an emergency room. In addition to a finder’s fee, Plaintiff
must pay the physician’s travel and boarding expenses during the recruiting process. Following
recruitment, Plaintiff must train each physician as to the computer systems and procedures in
place at each hospital the physician will serve. In addition to the monetary burden incurred by
Plaintiff in making physicians available to staff emergency rooms, Plaintiff also incurs a
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substantial burden of time. The undisputed facts establish that, due to EmCare’s refusal to honor
Section 14.2 of the agreement, Plaintiff has suffered compensatory damages in the amount of
$350,000.00.
b.
Interest on Compensatory Damages
In addition to Plaintiff’s damages arising from EmCare’s breach of its obligation to pay
Plaintiff, Plaintiff is also entitled to interest on the damages arising from EmCare’s breach of its
obligation to pay money pursuant to 23 O.S. § 22. The Agreement itself provides for an interest
rate of 10% on unpaid balances due, which is also the maximum interest rate allowable under
Oklahoma law. See Okla. Const. Art. 14, § 2. As of April 18, 2014 (the date of the filing of
Plaintiff’s Motion for Summary Judgment), Plaintiff has calculated interest was due in the
amount of $25,876.00. Defendant has not provided any arguments disputing this amount.
Accordingly, Plaintiff is entitled to interest on the amount of $25,876.00 pursuant to the
Agreement between the parties. In addition, Plaintiff is entitled to additional interest accruing
from April 18, 2014 through the date of the judgment rendered in this case.
c.
Consequential Damages
In addition to the damages provided for specifically by the terms of the Agreement, and
the interest thereon provided for by statute, Plaintiff has also claimed to have suffered
consequential damages arising from EmCare’s retention, employment, or contracting with each
of Plaintiff’s physicians. Each time EmCare elected to retain, employ, or contract with one of
Plaintiff’s physicians during the months following the termination of the Agreement, that
physician would be unable to work shifts at another hospital at which Plaintiff contracts to
provide emergency room physicians. As such, Plaintiff was denied the benefit of that physician
working at another location. In some instances, Plaintiff would have to find a replacement
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physician to cover shifts, often at unfavorable hourly rates far exceeding what Plaintiff would
otherwise pay the physician retained by EmCare. Plaintiff not only lost money due to EmCare’s
retention, employment, or contracting with Plaintiff’s physicians, but time as well. Dr. Berry
Winn, M.D., and his staff were required to shift their attention from other tasks to address
scheduling gaps at other hospitals caused by EmCare directly retaining, employing, or
contracting with Plaintiff’s physicians at the Muskogee ER. In its response brief, Emcare does
not dispute the fact that Plaintiff suffered consequential damages in the amount of $30,000.00,
but instead denies the fact solely on the basis of Plaintiff’s alleged “prior material breach.” (Dkt.
#68 at 6).
In light of the foregoing, and because the Court rejects Defendants’ “prior material
breach” defense, see infra, the Court finds Plaintiff has suffered consequential damages in the
amount of $30,000.00 based on the undisputed record.
C.
Defendants’ Defenses
In their Response to Plaintiff’s Motion (Doc. 66), rather than deny that EmCare breached
the Agreement, Defendants instead advance three defenses: 1) EmCare’s breach of the
agreement is excused because Plaintiff previously breached the Agreement; 2) the language of
Section 14.2 of the Agreement creates a fact issue as to Plaintiff’s damages; and 3) Plaintiff has
failed to establish alter ego liability. The Court addresses each one of these arguments, in turn.
1.
“Prior Material Breach” Defense
Defendants contend that they are not liable for EmCare’s breach of the Agreement
because Plaintiff previously breached the Agreement. Specifically, Defendants argue Dr. Berry
E. Winn, M.D. failed to fulfill certain conditions of a separate “Medical Director Agreement” he
entered into with Oklahoma EM-I Medical Services, P.C., and failed to assist EmCare with
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fulfilling EmCare’s obligations under another separate “Services Agreement” between EmCare,
Inc., and the owners of Muskogee Regional Medical Center.
The Court rejects Defendants’ arguments.
The defense of “excused performance”
resulting from a party’s prior material breach is an affirmative defense and, as such, it must be
pled or its assertion is waived. See Shelter Mortgage Corp. v. Castle Mortg. Co., LC, 117
Fed.Appx. 6, 11 (10th Cir. 2004). Defendants’ Answer does not contain this defense. (Doc. 14).
The Scheduling Order of the Court, entered November 7, 2013, set a deadline for amendment of
pleadings of December 9, 2013. (Doc. 25). On March 17, 2014, (i.e., three months out of time),
Defendants filed a Motion for Leave to Amend to Answer to Add Affirmative Defenses and to
Assert Counterclaim, including a defense of “breach of a material condition.”
(Doc. 33).
Defendants claimed they had just discovered within their own documents, which had been in the
possession of Defendants since the filing of this lawsuit, information supporting the affirmative
defenses. However, on April 17, 2014, this Court entered an Order denying Defendants leave to
amend their answer to add a counterclaim and assert these additional affirmative defenses. (Doc.
46). Thus, Defendants’contention that EmCare’s performance under the Agreement is excused
based on Plaintiff’s prior material breaches of the agreement is one that is not properly before
the Court, and as such, does not serve to excuse EmCare from liability for its breach of the
Agreement.
The Court also finds that EmCare waived its right to rely on this defense. In Shelter
Mortgage Corp., supra, the Court rejected a “prior material breach” defense finding that it had
been waived because the appellant never gave notice to the appellee of the alleged breach. Id. at
12. The same is true in this case, as it is undisputed the defense was never brought to the
attention of Plaintiff prior to the instant litigation. To the contrary, the undisputed facts show
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that Dr. Berry E. Winn, M.D., continued to work as a physician at Muskogee for months after
EmCare terminated the contract on March 31, 2013.
Even had Defendants timely raised the affirmative defense that EmCare’s performance
was excused by Plaintiff’s “prior material breaches,” Defendants’ affirmative defense is still
insufficient to excuse EmCare’s breach of the Agreement. The “prior material breach” doctrine
upon which Defendants rely applies when a contract contemplates an exchange of performances
between the parties, and holds that one party’s failure to perform allows the other party to cease
its own performance. See RESTATEMENT (SECOND)
OF
CONTRACTS §237. A duty under the
contract, such as that contained in Section 14.2, is unaffected if it was not one to render a
performance in connection with the duty that was allegedly breached.
(SECOND)
OF
See RESTATEMENT
CONTRACTS § 237 cmt. e (1981) (“Duties affected. . . . A duty under a separate
contract is not affected, nor is a duty under the same contract affected if it was not one to render
a performance to be exchanged under an exchange of promises. Further, only duties to render
performance are affected.”).
The undisputed evidence in this case shows the Agreement was terminated by EmCare
pursuant to Section XVII of the Agreement. The undisputed record also illustrates that the
provisions of Section XIV of the Agreement, including Section 14.2, survive termination of the
Agreement.
Thus, EmCare’s right to terminate the Agreement was independent of the
obligations imposed on EmCare by Section 14.2 of the Agreement. Therefore, EmCare was
independently obligated to comply with Section 14.2 of the Agreement irrespective of EmCare’s
termination of the Agreement.
EmCare’s contractual duty to Plaintiff was unaffected by
11
Defendants’ after-the-fact allegation that Plaintiff (and Dr. Winn) failed to perform under the
contract.2
Accordingly, because EmCare’s “prior material breach” defense is without merit,
Plaintiff is entitled to summary judgment on its claim of breach of contract against EmCare
Physician Providers, Inc.
2.
The Language of Section 14.2 is Not Ambiguous
Defendants have argued that the language of Section 14.2 of the Agreement creates a fact
issue as to Plaintiff’s damages. The language of Section 14.2 of the Agreement is as follows:
Company [EmCare] recognized that Group [Winn & Associates] expends
substantial resources and efforts to make qualified physicians available to serve as
Group Physicians. Therefore, during the Term of this Agreement and twelve (12)
months after the termination or expiration of this Agreement, Company agrees to
pay Group Thirty-Five Dollars ($35,000) [sic] per Group Physician, contracted or
employed with Group, if Company elects to retain, employ or contract with the
Group Physician directly. The amount and terms of payment shall be set forth in
a document of waiver.
Defendants’ argument regarding the language of Section 14.2 is two-fold. Defendants
first claim that, because the text of the Agreement, as executed by the parties, reads, “Company
agrees to pay Group Thirty-Five Dollars ($35,000) [sic] per Group Physician, contracted or
employed with Group, if Company elects to retain, employ or contract with the Group Physician
directly[,]” a question of fact exists as to whether it was the intent of the parties for EmCare to
pay Plaintiff $35.00 or $35,000.00.
Defendants’ argument is not compelling. First, Defendant’s source of authority for
arguing that EmCare only owes Plaintiff $35.00 per physician is U.C.C. § 3-114, which
The Court also rejects EmCare’s reliance on the separate contract between Dr. Berry E.
Winn, M.D., and Oklahoma EM-I Medical Services, P.C., as any alleged failure of Dr. Winn to
perform under that contract has no bearing on the contract at issue in the present case, or on
EmCare’s obligation to comply with Section 14.2.
2
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provides, among other things, that “words prevail over numbers.” However, U.C.C. § 3-114
clearly addresses contradictory terms only in the context of a negotiable instrument.
The
Agreement that is before the Court is not a negotiable instrument.
Second, EmCare asks the Court to entertain the possibility that $35.00 was the amount
agreed upon, not $35,000.00, but EmCare has provided the Court with no evidence supporting
this contention. In particular, Plaintiff’s Motion for Summary Judgment states that $35,000.00
was the “agreed-upon” amount for purposes of Section 14.2 of the Agreement. In their response
brief, Defendants state that they “dispute” this fact, but cite no evidence to support such a
dispute, and provide no evidence or testimony in support of the argument that EmCare believed
the amount to be $35.00 instead of $35,000.00. For that reason, the Court finds no genuine
dispute as to any material fact regarding this issue.
Third, it is clear that the omission of the word “thousand” from the clause qualifies as a
typographical error.
The doctrine of scrivener’s error, which governs the analysis where
typographical errors occurs, provides that “the mistake of a scrivener in drafting a document may
be reformed based upon parol evidence, provided the evidence is ‘clear, precise, convincing and
of the most satisfactory character’ that a mistake has occurred and that the mistake does not
reflect the intent of the parties.” SpiritBank v. McCarty, 2009 WL 3526652, *4 (N.D. Okla. Oct.
23, 2009) (citing Int’l Union of Electronic, Elec., Salaried, Machine and Furniture Workers v.
Murata Erie North America, Inc.¸ 980 F.2d 889, 907 (3d Cir. 1992)). Further, “[r]eformation is
a contract remedy available to conform a written contract to the parties’ antecedent agreement
when that written contract differs from the antecedent expressions on which the parties based
their agreement.” Id. (citing Oklahoma Oncology U.S. Oncology, Inc., 2007 OK 12, 160 P.3d
936, 947 n.2).
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Plaintiff has provided various drafts of the Agreement produced during negotiations. It is
clear from a reading of the previous drafts that the amount contemplated by the parties was
$35,000.00, and not $35.00. For instance, previous drafts of the Agreement provided the amount
to be paid by EmCare was $10,000.00; the parties eventually agreed upon the $35,000.00
amount. The omission of the word “thousand” from the recitation in Section 14.2 of the final
draft of the Agreement is a typographical error that can be corrected through the Court’s
equitable powers. “Equity will correct errors in an instrument shown to have resulted from an
unintentional drafting mistake.” See Davenport v. Beck, 1977 OK CIV APP 40, 576 P.2d 1199,
1203.3
The Court also rejects Defendants’ remaining contention, i.e., that Section 14.2 is
“ambiguous” because it contains the following sentence: “The amount and terms of payment
shall be set forth in a document of waiver.” Defendants have argued that this clause creates an
ambiguity because it represents an agreement to “further negotiate” the total amount due under
Section 14.2. The Court disagrees, finding that the obligations imposed by Section 14.2 are clear
and unambiguous. A plain language reading of this clause indicates that the amount and terms
of payment pursuant to Section 14.2 shall be set forth in a future document. However, there is
nothing in the clause itself, Section 14.2, or the Agreement as a whole that suggests that the
amount provided for in Section 14.2 is open to further negotiation. Rather, the clause simply
3
The Court’s conclusion in this regard is confirmed by review of EmCare, Inc.’s Services Agreement with
Muskogee Regional Medical Center, which was attached to EmCare’s response brief. Section 12 of this Services
Agreement contains a provision that is very similar to Section 14.2 found in the subject Agreement. It is structured
somewhat differently, in that it initially prohibits retention of EmCare’s providers by Muskogee entirely, but it
permits EmCare to “waive” that prohibition in return for either $75,000, or 30% of the physician’s annual
compensation, whichever is less.
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provides that the amount due under Section 14.2 will be set forth in a future document, not that
the amount will be further negotiated.4
The Court finds the parties to the Agreement agreed that in the event EmCare directly
retained, employed, or contracted with Plaintiff’s physicians, EmCare would pay Plaintiff
$35,000.00 per physician so retained. The Court also finds that the amount agreed upon was not
subject to further negotiation between the parties.
3.
Plaintiff Has Established Alter Ego Liability
Although Plaintiff has made only one substantive claim for relief, Plaintiff seeks to
impute liability for a contract breached by Defendant EmCare Physician Providers, Inc., to other
named Defendants EmCare Physician Services, Inc., EmCare, Inc., EmCare Holdings, Inc., and
Envision Healthcare Holdings, Inc. In their reply in support of their motion for summary
judgment (Doc. 71), Plaintiff acknowledges that EmCare Physician Services, Inc., is a sister
company of EmCare Physician Providers, Inc., and has dropped its alter ego claim against that
Defendant.
However, as to the remaining named Defendants against which Plaintiff seeks to
establish alter ego liability, this Court finds that EmCare Physician Providers, Inc., is the alter
ego of Defendants EmCare, Inc., EmCare Holdings, Inc., and Envision Healthcare Holdings,
Inc., and that those named Defendants should be held liable for Defendant EmCare Physician
Providers, Inc.’s breach of the Agreement.
The standards for this theory of liability are well-settled in Oklahoma:
One corporation may be held liable for the acts of another under the theory of
alter-ego liability if (1) the separate existence is a design or scheme to perpetuate
4
Additionally, the undisputed evidence shows that Plaintiff, in a series of invoices sent to
EmCare, set forth the amount due to Plaintiff pursuant to Section 14.2, as well as the desired terms
of payment.
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a fraud or (2) one corporation is merely an instrumentality or agent of the other.”
Gilbert v. Sec. Fin. Corp. of Okla., 152 P.3d 165, 175, 2006 OK 58, ¶¶ 22–23
(citing Gibson Prod. Co., Inc. of Tulsa v. Murphy, 100 P.2d 453, 458, 1940 OK
100, ¶ 36) (emphasis supplied). Oklahoma law also includes a list of nine factors
that courts may consider when determining whether to hold one corporation liable
for the acts of another corporation—the factors “hinge primarily on control.” Id.
at 175, 2006 OK 58, ¶ 23 (citing Oliver v. Farmers Ins. Group of Cos., 941 P.2d
985, 987, 1997 OK 71, ¶ 8). As seen supra, Oklahoma law is stated in the
disjunctive, requiring either a showing of fraud or that one corporation is merely
the instrumentality of another.
Canal Ins. Co. v. Montello, Inc., 822 F.Supp.2d 1177, 1181-82 (N.D. Okla. 2011). The factors
that the Court may consider to determine whether to hold one corporation liable for the acts of
another are:
(1) the parent corporation owns most or all of the stock; (2) the corporations have
common officers or directors; (3) the parent provides financing to the subsidiary;
(4) the dominant corporation subscribes to all the other's stock; (5) the
subordinate corporation is under capitalized; (6) the parent pays the salaries,
expenses or losses of the subsidiary; (7) a great deal of business is with parent
corporation or assets of the former were conveyed to the other corporation; (8) the
parent refers to the subsidiary as a division or department; (9) the subsidiary
follows directions from the parent's officers or directors; (10) legal formalities for
keeping the entities separate are observed.
Oliver v. Farmers Ins. Group of Companies, 1997 OK 71, ¶8, 941 P.2d 985, 987 (citing Frazier
v. Bryan Memorial Hosp. Authority, 1989 OK 73, 775 P.2d 281, 288). All of these factors need
not be present for a court to determine that one entity is the alter ego of another. See Lowell
Staats Min. Co., Inc. v. Pioneer Uravan, Inc., 878 F.2d 1259, 1263 (10th Cir. 1989).
Here, Plaintiff has submitted evidence demonstrating that EmCare Physician Providers,
Inc., is the alter ego of EmCare, Inc., EmCare Holdings, Inc., and Envision Healthcare Holdings,
Inc. Plaintiff has established that Envision Healthcare Holdings, Inc., through several whollyowned intermediate subsidiaries, owns all of the stock of EmCare Holdings, Inc., and that
EmCare Holdings, Inc. owns all of the stock of EmCare, Inc., and that EmCare, Inc. owns all of
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the stock of EmCare Physician Providers, Inc. Plaintiff has thereby satisfied the first Frazier
factor.
Plaintiff has also established commonality of officers and directors, satisfying the second
Frazier factor. William Sanger is a member of the Board of Directors of Envision Healthcare
Holdings, Inc., as well as its President and Chief Executive Officer. He is also the sole member
of the Board of Directors of EmCare, Inc., and he is the sole member of the Board of Directors
for EmCare Physician Providers, Inc. Todd Zimmerman is the President of Defendant EmCare
Physician Providers, Inc. Todd Zimmerman is also the Executive Vice President of Defendant
Envision Healthcare Holdings, Inc.. Additionally, he is the President and Chief Executive
Officer of Defendant EmCare, Inc.
Craig Wilson is the Secretary of Defendant EmCare
Physician Providers, Inc. Craig Wilson is also the Senior Vice President, General Counsel, and
Secretary for Defendant Envision Healthcare Holdings, Inc. Steve Ratton is the Treasurer of
EmCare Physician Providers, Inc. Steve Ratton is also the Executive Vice President, Chief
Strategy Officer, and Treasurer of Defendant Envision Healthcare Holdings, Inc. Moreover,
EmCare Physician Providers, Inc. not only shares officers and directors with its parent
companies, it also shares office space – they are all located at 6200 S. Syracuse Way, Suite 200,
Greenwood Village, Colorado 80111.
The most compelling piece of evidence supporting a finding of alter ego liability in this
case, however, lies in the nature of the negotiation and execution of the Agreement that is the
subject of this lawsuit. It is undisputed that no employees of EmCare Physician Providers, Inc.
participated in the negotiation and execution of the Agreement. Instead, employees of Envision
Healthcare participated in the negotiation, drafting, and execution of the Agreement. Indeed,
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Sean Richardson, an employee of Envision Healthcare,5 executed the Agreement on behalf of
EmCare Physician Providers, Inc. Plaintiffs have thereby demonstrated the ninth Frazier factor
– that EmCare Physician Providers, Inc. operates at the direction of its corporate parents.
Plaintiff has also demonstrated the presence of the seventh Frazier factor, in that EmCare
Physician Providers, Inc., is engaged in the same business as its parents. EmCare Physician
Providers, Inc., EmCare, Inc., EmCare Holdings, Inc., and Envision Healthcare Holdings, Inc.
are all ultimately engaged in the business of providing out-sourced medical services.
As
referenced supra, Defendants have called to the attention of the Court the Services Agreement
between EmCare, Inc. and Muskogee Regional Medical Center, which Defendants contend is
related to the Professional Practitioner Services Agreement between EmCare Physician
Providers, Inc. In the Services Agreement, EmCare, Inc. agreed to provide physician staffing
services to the Hospital. It is clear from the Professional Practitioner Services Agreement that
EmCare, Inc. intended to fulfill this obligation to the Hospital through the use of its subsidiary,
EmCare Physician Providers, Inc.
Though EmCare Physician Providers, Inc. satisfied the
discrete function of contracting with Plaintiff so that its parent could meet its obligations under a
different contract, it is clear that both entities are engaged in the same business. Indeed, in the
instant case, EmCare Physician Providers, Inc. and EmCare, Inc. are engaged in the very same
business arrangement.
All of the foregoing also goes to the tenth Frazier factor – that Defendants have not
observed corporate formalities for keeping the entities separate. It is clear that, at the very least,
for the purposes of the Professional Practitioner Services Agreement, the distinctions between
EmCare Physician Providers, Inc. (the contracting party) and its corporate parents were blurred
During the negotiation of the Agreement, Sean Richardson’s electronic signature
purported him to be the Chief Operation Officer of the West Division of Defendant EmCare, Inc.
5
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to the extent that it is clear that EmCare Physician Providers, Inc., was merely the instrument of
its corporate parents.
For all of these reasons, the Court finds that EmCare Physician Providers, Inc., is the
alter ego of EmCare, Inc., EmCare Holdings, Inc., and Envision Healthcare Holdings, Inc., and
as a result, each one is jointly and severally liable for EmCare Physician Providers, Inc.,’s breach
of the Professional Practitioner Services Agreement as if each were a named party to the
contract.
III.
CONCLUSION
IT IS THEREFORE ORDERED that Plaintiff Winn & Associates, PLLC’s Motion for
Summary Judgment (Doc. 55) is HEREBY GRANTED as to Defendants EmCare Physician
Providers, Inc., EmCare, Inc., EmCare Holdings, Inc., and Envision Healthcare Holdings, Inc.,
and Plaintiff is awarded damages against said Defendants, jointly and severally, in the amount of
$350,000.00, plus interest thereon in the amount of $25,876.00 as accrued through April 18,
2014, any additional interest accruing from April 18, 2014 up until the date of this Order and
Opinion, as well as consequential damages in the amount of $30,000.00.
IT IS FURTHER ORDERED, that Defendant EmCare Physician Services, Inc., is hereby
dismissed without prejudice as a Defendant in this case.
The Court reserves the issue of Plaintiff’s entitlement to attorney fees and costs until
such time as an application for payment of attorney fees and costs is made.
IT IS SO ORDERED this 21st day of July, 2014.
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