Schindler v. Regional Health Physicians, Inc.
ORDER granting 23 Motion for Partial Summary Judgment. Signed by Chief Judge Jeffrey L. Viken on 9/23/15. (SB)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
DR. JAY J. SCHINDLER,
REGIONAL HEALTH PHYSICIANS,
Plaintiff Dr. Jay Schindler filed a multi-count complaint against the
defendant Regional Health Physicians, Inc. (“RHP”), his former employer.
(Docket 1). RHP filed an answer and counterclaim. (Docket 6). Based on the
parties’ stipulation, an order dismissing count XIII of the complaint was entered.
(Docket 14). On January 27, 2015, defendant filed a motion for partial
summary judgment supported by defendant’s statement of undisputed material
facts. (Dockets 23 & 25). Plaintiff filed a statement of material facts in
opposition to defendant’s motion. (Docket 33). For the reasons stated,
defendant’s motion for partial summary judgment is granted.
STANDARD OF REVIEW
Under Fed. R. Civ. P. 56(a), a movant is entitled to summary judgment if
the movant can “show that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.” Once the moving
party meets its burden, the nonmoving party may not rest on the allegations or
denials in the pleadings, but rather must produce affirmative evidence setting
forth specific facts showing a genuine issue of material fact exists. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). Only disputes over facts that
might affect the outcome of the case under the governing substantive law will
properly preclude summary judgment. Id. at 248. “[T]he mere existence of
some alleged factual dispute between the parties will not defeat an otherwise
properly supported motion for summary judgment; the requirement is that there
be no genuine issue of material fact.” Id. at 247-48 (emphasis in original).
If a dispute about a material fact is genuine, that is, if the evidence is that
a reasonable jury could return a verdict for the nonmoving party, then summary
judgment is not appropriate. Id. However, the moving party is entitled to
judgment as a matter of law if the nonmoving party fails to “make a sufficient
showing on an essential element of her case with respect to which she has the
burden of proof.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). “There
can be ‘no genuine issue as to any material fact,’ since a complete failure of proof
concerning an essential element of the nonmoving party’s case necessarily
renders all other facts immaterial.” Id.
In determining whether summary judgment should issue, the facts and
inferences from those facts must be viewed in the light most favorable to the
nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 587-88 (1986). In order to withstand a motion for summary judgment, the
nonmoving party “must substantiate [his] allegations with ‘sufficient probative
evidence [that] would permit a finding in [his] favor on more than mere
speculation, conjecture, or fantasy.’ ” Moody v. St. Charles County, 23 F.3d
1410, 1412 (8th Cir. 1994) (citing Gregory v. Rogers, 974 F.2d 1006, 1010 (8th
Cir. 1992), cert. denied, 507 U.S. 913 (1993)). “A mere scintilla of evidence is
insufficient to avoid summary judgment.” Moody, 23 F.3d at 1412. The key
inquiry is “whether the evidence presents a sufficient disagreement to require
submission to a jury or whether it is so one-sided that one party must prevail as
a matter of law.” Anderson, 477 U.S. at 251-52.
Once the moving party meets its burden, the nonmoving party may not
rest on the allegations or denials in the pleadings, but rather must produce
affirmative evidence setting forth specific facts showing a genuine issue of
material fact exists. Id. at 256; see also Thomas v. Corwin, 483 F.3d 516, 527
(8th Cir. 2007) (mere allegations, unsupported by specific facts or evidence
beyond a nonmoving party’s own conclusions, are insufficient to withstand a
motion for summary judgment); Torgerson v. City of Rochester, 643 F.3d 1031,
1042 (8th Cir. 2011) (en banc) (“The nonmovant must do more than simply show
that there is some metaphysical doubt as to the material facts, and must come
forward with specific facts showing that there is a genuine issue for trial. Where
the record taken as a whole could not lead a rational trier of fact to find for the
nonmoving party, there is no genuine issue for trial.”) (internal quotation marks
and citation omitted). The non-moving party’s own conclusions, without
supporting evidence, are insufficient to create a genuine issue of material fact.
Anderson, 477 U.S. at 256; Thomas, 483 F.3d at 527; Torgerson, 643 F.3d at
UNDISPUTED MATERIAL FACTS
Defendant seeks judgment on the following breach of contract counts of
the complaint: count I, failure to pay salary; count II, termination without
cause;1 count III, lack of notice and opportunity to cure; count IV, termination
for cause; count VI, disability salary continuation plan; count VIII, failure to pay
capital accumulation account benefits; count IX, failure to pay benefits due from
extended illness accrual bank; count X, failure to pay for transportation to
outreach clinic; and count XII, failure to pay production-based compensation.2
(Docket 23). Defendant also seeks judgment on its counterclaim. Id.
The following recitation consists of the material facts undisputed by the
parties. These facts are developed from the complaint (Docket 1), defendant’s
answer and counterclaim (Docket 6), plaintiff’s reply (Docket 9), defendant’s
statement of undisputed material facts (Docket 25), and plaintiff’s response to
defendant’s statement of undisputed material facts and additional statement of
Dr. Schindler has abandoned this claim and consents to summary
judgment in defendant’s favor as to count II. (Docket 32 at p. 22).
Dr. Schindler has abandoned this claim and consents to summary
judgment in defendant’s favor as to count XII. (Docket 32 at p. 22).
undisputed material facts (Docket 33). Where a statement of fact is admitted by
the opposing party, the court will only reference the initiating document.
At all times relevant to this litigation Dr. Jay J. Schindler was a boardcertified neurosurgeon licensed to practice medicine in the State of South
Dakota. (Docket 1 ¶ 1). RHP is a South Dakota not-for-profit corporation
located in Rapid City, South Dakota.3 Id. ¶ 2. On or about April 30, 2007, Dr.
Schindler entered into a Physician Employment Agreement (“Agreement”) with
RHP. Id. ¶ 5; see also Docket 25 ¶ 1. A copy of the Agreement is attached to
the complaint. (Docket 1-1; see also Docket 28-1). The Agreement commenced
on May 1, 2007, and was to continue until April 30, 2010. (Docket 28-1 § 1.2).
Dr. Schindler was hired to practice neurosurgery and provide medical services in
his specialty to RHP’s patients. (Docket 25 ¶¶ 6 & 7).
Under the Agreement, Dr. Schindler was obligated to hold regular office
hours at RHP’s clinic in Rapid City and the outreach clinic in Aberdeen, South
Dakota. (Docket 1 ¶ 8). For purposes of maintaining the outreach clinic in
Aberdeen, RHP agreed to pay the costs of travel for Dr. Schindler between Rapid
City and Aberdeen.4 (Docket 25 ¶ 45).
is undisputed that RHP and Rapid City Regional Hospital (“RCRH”) “are
both wholly-owned subsidiaries of Regional Health, Inc., [and] they are separate
corporations with separate management.” (Docket 28-5 at p. 1).
It is undisputed that RHP paid all of Dr. Schindler’s air transportation
costs. (Dockets 25 ¶ 46 and 33 ¶ 46). Dr. Schindler claims he is entitled to
reimbursement for his mileage from the RHP clinic to the Rapid City airport and
from the Aberdeen airport to the outreach clinic. (Docket 33 ¶ 46).
Dr. Schindler began his employment with RHP in May 2007. (Docket 1
¶ 6). Dr. Schindler was paid on a production model which compensated him
based upon his work. (Docket 25 ¶ 15). His work was tracked by RVUs,5
which are the values assigned by the Centers for Medicare and Medicaid Services
to each of the procedures and services provided by physicians. Id. ¶ 16.
Compensation was determined at the end of the fiscal year which ran from July 1
to June 30. Id. ¶ 17. Dr. Schindler was guaranteed a minimum salary of 75
percent of the compensation earned in the preceding year. Id. ¶ 18. At the
beginning of each fiscal year Dr. Schindler decided how much money he wanted
to draw in anticipation of that year’s earnings. Id. ¶ 19. This draw election
could be between 75 percent and 95 percent of the preceding year’s earnings.
Id. At the end of each fiscal year the total RVUs produced by Dr. Schindler
would be multiplied by an agreed conversion rate which would determine his
total compensation for that year. Id. ¶ 20. Total compensation would be
reconciled with Dr. Schindler’s draw during that year. Id. ¶ 21. If Dr.
Schindler earned more than what had been drawn, RHP would pay him the
difference. Id. If Dr. Schindler’s account was overdrawn at the end of the fiscal
year, he would reimburse the difference to RHP. Id.
In 2009, Dr. Schindler “began to experience back and leg pain, difficulty
walking and maintaining balance, reduced stamina, lack of sleep, temperature
intolerance, and bowel and bladder complaints.” (Docket 28-10 at p. 4). “As
“Relative Value Units.” (Docket 24 at p. 13).
Dr. Schindler began to experience these symptoms, which he . . . attributed to a
history of low back pain, RHP provided a number of measures to accommodate
them while he worked.” Id. RHP “purchased a cooling vest . . . [and] a set of
steps for him to use in the operating room so that he could support his body
weight while he worked over patients, and it reimbursed [him] for a brace to wear
during surgery.” Id. Dr. Schindler never requested time off for illness while he
was employed by RHP. (Docket 25 ¶ 43).
In October 2009, RCRH notified Dr. Schindler that the hospital planned to
suspend his surgical privileges to perform “elective instrumental cervical and
lumbar fusion procedures” except “those procedures in an emergency situation.”
(Docket 33 at p. 7 ¶ 1). On October 16, 2009, Dr. Schindler took a 60-day
voluntary leave of absence from RCRH in lieu of the medical staff at the hospital
suspending some of his surgical privileges.6 (Dockets 1 ¶ 10; 25 ¶ 2 & 28-2 at p.
3). RHP acknowledged Dr. Schindler’s leave of absence from medical privileges
at RCRH and the parties agreed he should continue performing clinic duties
during the leave of absence. (Dockets 1 ¶ 11 & 28-16).
Dr. Schindler’s attorney claimed there were two reasons for the leave of
absence. First, any suspension of privileges lasting more than thirty days must
be reported to the National Practitioner’s Data Bank and the leave of absence
would allow the RCRH investigative process to proceed without needing to be
completed before the expiration of thirty days. (Docket 28-2 at pp. 1-2).
Second, this time period would allow Dr. Schindler to prepare a response to
RCRH’s medical review committee. Id. at p. 2. Dr. Schindler also claimed he
was suffering significant back pain and hoped a leave of absence would allow him
time to recover. (Docket 33 at p. 7 ¶ 2).
On October 19, 2009, RHP reconfirmed this decision and advised Dr.
Schindler that it “retains all of its rights pursuant to Dr. Schindler’s Physician
Employment Agreement and will be reviewing this situation internally to
determine how Dr. Schindler’s Leave of Absence from doing surgical care at
Rapid City Regional Hospital might affect Dr. Schindler’s compensation or other
facets of that Agreement.” (Docket 28-3). On October 29, 2009, RHP notified
Dr. Schindler that it believed his primary duty was to provide medical services as
an operating neurosurgeon and that his leave of absence limited him to “clinical
work” which “constitutes a very small portion of the neurosurgical services for
which RHP is contracting.”7 (Dockets 25 ¶ 12 & 28-4).
On November 12, 2009, Regional Health Physicians agreed to continue
“paying Dr. Schindler his guarantee amount (75% of his annual projection)
through the remainder of his 60-day Leave of Absence from the RCRH Medical
Staff.”8 (Docket 28-7 at p. 1). The letter advised Dr. Schindler’s attorney that:
[RHP] maintains Dr. Schindler is not meeting the obligations of
Section 1.3 of his Physician Employment Agreement, which
Schindler does not deny this statement was made, but asserts his
employer “did not notify [him] that it considered his leave of absence to be a
‘suspension . . . or loss’ of the required hospital privileges that could result in
immediate termination without any opportunity to cure under the Contract or
ask Dr. Schindler to ‘cure’ by ceasing his leave of absence from the Hospital and
resume performing surgery.” (Docket 33 ¶ 12).
did not submit his attorney’s letters of November 4 and November
10, 2009, to which this letter was responding. See Docket 28-7 at p. 1. The
court must assume the contents of those letters would not create disputed
material facts. D.S.D. Civ. LR 56.1(B), (C) and (D).
contemplates Dr. Schindler’s maintenance of a robust neurosurgical
practice and provision of call coverage to . . . RCRH. [Dr.
Schindler’s attorney’s statement] that he took his leave of absence in
lieu of a precautionary suspension says only that he chose one form
of breaching his employment agreement over another form of
breaching his employment agreement. His ability and willingness
to practice neurosurgery is the fundamental obligation of his
Id. In the same letter, RHP stated “[f]or the month of October 2009, even with
the reduction made to Dr. Schindler’s draw for the pay period ending October 31,
Dr. Schindler overdrew his actual production compensation by $146,618.10. It
is readily apparent that even with the reduction in Dr. Schindler’s draw amount,
he will owe RHP a significant amount of money by the end of FY 2010.” Id. at
pp. 1-2. Dr. Schindler testified he did not know whether he was overdrawn or
underdrawn on his account. (Docket 34-1 at p. 6 (p. 90:5-14)).
On December 23, 2009, RHP responded to earlier letters from Dr.
Schindler’s attorney.10 (Docket 28-5). Assuming Dr. Schindler’s leave of
absence from the medical staff of RCRH had been extended, RHP indicated:
[It would] continue to pay Dr. Schindler at his guarantee amount.
However, the continuance of . . . pay is not a waiver of any rights
RHP might assert under the Agreement with respect to Dr.
Schindler’s failure to satisfy the requirements of Section[s] 1.3.,
3.3.2, or any other section of the Agreement. The performance of
neurosurgical services per Section 1.3 is at the very heart of what
footnote 7 and Docket 33 ¶ 13.
did not submit his attorney’s letters of November 24 and
December 8, 2009, to which this letter was responding. See Docket 28-5 at p. 1.
The court must assume the contents of those letters would not create disputed
material facts. D.S.D. Civ. LR 56.1(B), (C) and (D).
the Agreement is all about, and RHP currently is not receiving those
services from Dr. Schindler. Section 3.3.2 . . . provides RHP the
right to terminate Dr. Schindler’s employment “for cause” in the
event of any suspension of Dr. Schindler’s medical staff
appointment and privileges. . . . In spite of Dr. Schindler’s breaches
of the Agreement, RHP will continue his pay. However, under the
current circumstances RHP will not be able to pay Dr. Schindler at
his guarantee indefinitely, and reserves the right to revisit the issue
of Dr. Schindler’s breaches at any point in time.11
Id. at pp. 1-2. Dr. Schindler continued to perform all clinic duties in Rapid City
and Aberdeen during his leave of absence, including seeing patients, performing
in-clinic procedures, overseeing nurse practitioners and other activities.
(Docket 25 ¶ 27).
On March 10, 2010, RHP terminated Dr. Schindler’s employment “for
cause.” (Dockets 1 ¶ 16 & 25 ¶ 4). The cause asserted for termination was Dr.
Schindler’s failure to maintain medical staff privileges necessary to perform
surgery at RCRH.12 (Docket 25 ¶ 5). The letter to Dr. Schindler’s attorney
announcing the termination decision stated:
RHP has provided Dr. Schindler, through counsel, prior written
notices of Dr. Schindler’s breaches and failures under the
Agreement. Reference [RHP’s] letters to you dated October 29,
November 12 and December 23, 2009 for those notices. Dr.
Schindler’s breaches and failures have continued for over four
months. While RHP consented to advances to Dr. Schindler during
the pendency of his leave without waiving any of its rights or
remedies, RHP no longer will continue this course of action.
(Docket 28-6 at p. 1).
See footnote 7 and Docket 33 ¶ 14.
It is undisputed that Dr. Schindler extended his leave of absence from
medical privileges at RCRH from December 16, 2009 through March 10, 2010
Other undisputed facts will be addressed during the analysis of each count
of plaintiff’s complaint.
The court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332
as it is a diversity action. (Dockets 1 ¶ 3 & 6 ¶ 3). In diversity actions, the court
applies the substantive law of the forum state. See Jordan v. NUCOR Corp.,
295 F.3d 828, 834 (8th Cir. 2002). “[F]ederal courts sitting in diversity cases,
when deciding questions of ‘substantive’ law, are bound by state court decisions
as well as state statutes.” Hanna v. Plumer, 380 U.S. 460, 465 (1965)
(referencing Erie R. Co. v. Tompkins, 304 U.S. 64 (1938)). See also In re Baycol
Products Litigation, 616 F.3d 778, 785 (8th Cir. 2010) (“in a suit based on
diversity of citizenship jurisdiction the federal courts apply federal law as to
matters of procedure but the substantive law of the relevant state.”) (internal
citations omitted). Only then can the court determine whether summary
judgment is appropriate. United States v. One Parcel of Real Property, 27 F.3d
327, 329 n.1 (8th Cir. 1994). In this case, the forum state is South Dakota.
Accordingly, the court shall apply South Dakota law.
In South Dakota “[c]ontract interpretation is a question of law . . . .”
Ziegler Furniture & Funeral Home, Inc. v. Cicmanec, 709 N.W.2d 350, 354 (S.D.
2006). “When the meaning of contractual language is plain and unambiguous,
construction is not necessary. If a contract is found to be ambiguous the rules
of construction apply.” Id. (internal citation omitted). “ ‘Whether the language
of a contract is ambiguous is . . . a question of law.’ ” Id. (internal citation
omitted). “A contract is ambiguous when application of rules of interpretation
leave a genuine uncertainty as to which of two or more meanings is correct.” Id.
at 355 (internal citation omitted). See also Pauley v. Simonson, 720 N.W.2d
665, 668 (S.D. 2006) (“a contract is ambiguous only when it is capable of more
than one meaning when viewed objectively by a reasonably intelligent person
who has examined the context of the entire integrated agreement.”).
“When determining the meaning of a contract, ‘effect will be given to the
plain meaning of its words.’ ” Lillibridge v. Meade School Dist. #46-1, 746
N.W.2d 428, 432 (S.D. 2008) (quoting In re Dissolution of Midnight Star, 724
N.W.2d 334, 337 (S.D. 2006)). “However, if the contract ‘is uncertain or
ambiguous,’ parol and extrinsic evidence may be used for clarification.’ ”
Lillibridge, 746 N.W.2d at 432 (quoting Pauley, 720 N.W.2d at 667-68). The
court must examine “the language that the parties used in the contract to
determine their intention.” Pauley, 720 N.W.2d at 667-68 (internal citation
omitted). “If that intention is clearly manifested by the language of the
agreement, it is the duty of [the] court to declare and enforce it.” Id. at 668
COUNT III: LACK OF NOTICE AND OPPORTUNITY TO CURE
A fundamental question, the answer to which drives resolution of several
of plaintiff’s breach of contract claims which are the subject of defendant’s
motion for partial summary judgment, is: Whether the employment agreement
required RHP to give Dr. Schindler notice of the alleged breach of contract and an
opportunity to cure? (Dockets 24 at p. 8 & 32 at p. 7). The court concludes the
answer to this question is “no.”
The Agreement provided RHP could terminate Dr. Schindler “for ‘cause’ ”
for the “[s]uspension . . . or loss, whether temporary or permanent, of the
required staff appointment and privileges provided in Section 1.1.4.”13 (Docket
1-1 §§ 3.3 and 3.3.2). In clear and unequivocal terms, the agreement separated
those “for cause” justifications for immediate termination from those for which
notice and a right to cure existed.
The causes for which immediate termination is available to the employer
3.3.1. Suspension, revocation or loss, whether temporary or
permanent, of a license to practice [medicine] . . . .
3.3.2. Suspension, revocation or loss, whether temporary or
permanent, of the required medical staff appointment and
privileges . . . .
Schindler claims the phrase “ ‘suspension . . . or loss’ of hospital
privileges” is not defined in the Agreement and does not “include a voluntary
leave of absence.” (Docket 33 ¶ 10).
3.3.3. Cancellation or denial of medical malpractice insurance
coverage . . . .
3.3.4. Conviction of a felony.
3.3.5. Exclusion, debarment or suspension of participation status
in or sanction by the Medicare or Medicaid programs . . . .
3.3.6. Revocation or suspension of the D.E.A. permit . . . .
3.3.8. The Physician acting in an unprofessional, unethical or
fraudulent manner if, in reasonable opinion of the Employer,
such conduct is detrimental to the reputation, character and
standing of the Employer (or any of its affiliated
3.3.9. Expulsion suspension or forced resignation by any medical
3.3.10. Alcohol, substance or drug abuse and refusal or failure to
obtain and strictly comply with treatment requirements, or
repeat alcohol, substance or drug abuse thereafter.
(Docket 1-1 § 3.3). None of these “for cause” termination provisions
contain a notice and right to cure provision. It is only in section 3.3.7.
where notice and a right to cure exists:
Breach of any material provision of this Agreement by the
Physician, but only after the Employer has given the
Physician prior written notice of the alleged breach or
failure and the Physician has not cured such breach or
failure within thirty (30) days of receipt of the notice.
Dr. Schindler argues “RHP was obligated to give him an opportunity to
cure” the breach associated with the leave of absence from the medical staff of
RCRH. (Docket 32 at p. 10). He argues “[w]hile a physician could not ‘cure’ a
felony conviction within 30 days or practice medicine without a license, Dr.
Schindler was capable of ‘curing’ his voluntary leave of absence from the hospital
staff.” Id. Even though Dr. Schindler acknowledges there is no notice and
right to cure provision in paragraph 3.3.2, he asserts “the 30 day notice
requirement of § 3.3.7 should apply.” Id.
The immediate termination provisions without notice and an opportunity
to cure make sense. A physician’s loss of his license to practice medicine, loss
of medical malpractice insurance coverage, loss of Drug Enforcement Agency
(“DEA”) permit privileges, or expulsion from a medical professional organization
are events dictated by others and from which an individual does not have a “right
to cure.” Likewise, the loss of medical staff privileges is dictated by others.
Dr. Schindler argues because the RCRH’s medical staff bylaws were not
specifically incorporated into his employment contract with RHP and the phrase
“ ‘suspension, revocation, or loss’ of hospital privileges” is not defined in the
contract, his voluntary leave of absence from medical staff privileges cannot be
included in section 3.3.2. (Docket 33 at p. 9). This argument is without merit.
Dr. Schindler acknowledged his employment was “conditioned upon” him
“remaining . . . [a]n appointed member, in good standing, of the active or
associate medical staff of a Regional Health affiliated hospital as required by
[RHP].” (Docket 1-1 § 1.1.4). When Dr. Schindler contracted to remain a
member in good standing on RCRH’s medical staff, he was obligated to abide by
all of the rules, policies and procedures of the hospital. The same obligation
existed with respect to his medical license and DEA privileges. Dr. Schindler
was obligated to comply with the rules of the DEA and the South Dakota Medical
Association even though those rules were not expressly incorporated into his
Dr. Schindler knew when he took a leave of absence his hospital privileges
were suspended. Whether by adverse action imposed by the medical peer
review committee or by a voluntary leave of absence, the loss of medical staff
privileges, either temporarily or permanently, constitutes a critical element of Dr.
Schindler’s ability to perform under his employment contract. The language of
section 3.3 of the Agreement is clear and unambiguous. Ziegler Furniture &
Funeral Home, Inc., 709 N.W.2d at 354. RHP was not obligated to give Dr.
Schindler a notice of breach and 30-day right to cure before terminating his
contract pursuant to section 3.3.2.
Dr. Schindler argues that even if there was no right to cure the breach,
RHP never provided him with notice of his breach of the employment contract.
He asserts the Agreement “does not mention ‘surgery’ ” and so his loss of surgical
privileges at RCRH does not constitute a breach of the contract. Id. at p. 14.
This argument borders on the frivolous. RHP contracted to pay Dr. Schindler
nearly $2 million per year for practicing medicine in his specialty as a
“neurosurgeon.” A “ ‘neurosurgeon’ [is] a physician who specializes in
neurosurgery.” Dorland’s Illustrated Medical Dictionary (32nd ed.) at p. 1271.
See also Webster’s Third New International Dictionary (2002) at p. 1521
(“ ‘neurosurgeon’ [is] a surgeon who specializes in neurosurgery.”). In Schedule
1 of the Agreement, Dr. Schindler’s production compensation was to be based on
RVUs for “[n]eurosurgery.” (Dockets 1-1 at p. 19 and 28-1 at p. 19).
of surgical privileges at RCRH constituted a material breach of Dr. Schindler’s
employment contract. Neurosurgery was at the very heart of the Agreement and
the reason RHP hired Dr. Schindler in the first place.
In each of its letters to Dr. Schindler’s attorney, RHP reserved the right
under the contract to take whatever action it deemed appropriate. Specifically,
in the December 23, 2009, letter RHP reserved its contract rights, declaring “[t]he
performance of neurosurgical services . . . is at the very heart of what the
Agreement is all about, and RHP currently is not receiving those services from
Dr. Schindler. Section 3.3.2 . . . provides RHP the right to terminate Dr.
Schindler’s employment ‘for cause’ in the event of any suspension of Dr.
Schindler’s medical staff appointment and privileges.” (Docket 28-5 at p. 1).
When Dr. Schindler lost his hospital privileges, even temporarily, he lost his
ability to perform neurosurgery under his employment contract with RHP. The
fact RHP sought to work with Dr. Schindler for four months after the loss of his
hospital privileges does not change the right of the employer to terminate the
contract for cause. RHP acted within its rights under the Agreement to
terminate Dr. Schindler, effective immediately, on March 10, 2010. (Docket
Defendant is entitled to summary judgment on count III of plaintiff’s
As of March 10, 2010, RHP claimed Dr. Schindler was overdrawn
$64,070.49 in his draw account. (Docket 25 ¶ 22). Defendant’s counterclaim
seeks recovery of this amount from Dr. Schindler. (Docket 6 at pp. 22-23).
Collateral to the date of termination issue is Dr. Schindler’s claim he does
not owe RHP for being overdrawn on his guarantee account on March 10, 2010.
Dr. Schindler acknowledges the existence of the negative balance in his draw
account, but asserts his “effective termination date did not occur until April 10,
2010, he was entitled to an additional 30 days compensation under his
guarantee.” (Docket 33 ¶ 22).
Again seeking application of section 3.3.7 of the Agreement, Dr. Schindler
claims he was “entitled to an additional thirty days following his receipt of the
March 10, 2010 letter . . . .” (Docket 33 at p. 9 ¶ 11). Using the same formula by
which RHP calculated Dr. Schindler to be overdrawn by $64,070.49, Dr.
Schindler believes he is entitled to an additional $88,144.39. Id. at p. 10 ¶¶ 13
and 14. He claims this would eliminate the deficiency. Id. ¶ 14.
For the reasons stated above relating to count III, Dr. Schindler’s
argument is without merit. The court finds Regional Health Physicians is
entitled to summary judgment on its counterclaim against Dr. Schindler for
In South Dakota “[p]rejudgment interest is . . . mandatory, not
discretionary.” Alvine v. Mercedes-Benz of North America, 620 N.W.2d 608, 614
(S.D. 2001). Because the plaintiff has other unresolved claims against the
defendant, the court will wait until resolution of those claims to calculate and
assess prejudgment interest on all claims.
COUNT I: FAILURE TO PAY SALARY
RHP acknowledges it did not pay Dr. Schindler for the period of February
21, 2010 through March 6, 2010, or for the four days of March 7, 2010 through
the date of termination, March 10, 2010. (Docket 24 at p. 15). RHP argues it
did not pay Dr. Schindler “because he was already overdrawn.” Id. When the
decision to terminate Dr. Schindler was made he was already overdrawn on his
guarantee account by $64,070.49. Id. at p. 16; see also supra.
For the same reasons stated above, Dr. Schindler was not entitled to any
additional draws against his guarantee and is not entitled to additional salary.
Defendant is entitled to summary judgment on count I of plaintiff’s complaint.
COUNT IV: TERMINATION FOR CAUSE – UNPAID PRORATED
Using the same calculations above, Dr. Schindler claims he is still “owed
$88,144.39 . . . in guaranteed compensation.” (Docket 32 at p. 22). RHP
acknowledges plaintiff “was entitled to any compensation due under his
guarantee as of the date of termination.” (Docket 24 at p. 17). However,
because Dr. Schindler was overdrawn by $64,070.49 as of March 10, 2010, RHP
argues he was paid more than the prorated guarantee under the Agreement. Id.
Dr. Schindler’s argument is tied to his claim that the effective date of his
termination should have been April 10, 2010. It is only by asserting this
projected last day of employment that Dr. Schindler arrives at the figure of
$88,144.39. For the same reasons this argument was rejected above, Dr.
Schindler is not entitled to any additional compensation for the period March 11,
2010, through April 10, 2010.
Defendant is entitled to summary judgment on count IV of plaintiff’s
COUNT VI: DISABILITY SALARY CONTINUATION BENEFITS
One of the flexible benefits provided by RHP was “long-term disability
insurance coverage under an individual policy made available by [RHP].”
(Docket 28-21 at p. 11). Schedule 2 of the Agreement described this benefit as
“60% monthly salary replacement due to a disability up to $5,000 per month
maximum.” (Docket 28-1 at p. 21).
On April 6, 2010, Dr. Schindler applied for long-term disability benefits
through Unum Provident because of multiple sclerosis. (Dockets 25 ¶ 29 &
28-15). At the time he submitted his application, Dr. Schindler claimed to be
disabled stating he “cannot function as a neurosurgeon.” (Dockets 25 ¶ 30, 33
¶ 30 & 28-15 at p. 1). On March 17, 2010, Dr. Schindler’s physician had opined
Dr. Schindler was justified in not performing surgery as of January 1, 2010.
(Dockets 33 ¶ 32 & 28-18). During the course of this litigation, Dr. Schindler
claimed to be permanently disabled as a result of his condition. (Docket 33
¶ 30). On August 19, 2013, the United States District Court for the District of
South Carolina, Columbia Division, in Schindler v. Unum Life Insurance
Company of America, C/A No. 3:12-cv-00293-JFA, Docket 54, concluded Dr.
Schindler was permanently disabled and entitled to disability benefits as of
January 1, 2010. (Dockets 25 ¶ 32 & 28-10).
RHP had a separate disability salary continuation plan. (Docket 26-19).
Schedule 2 of the Agreement provided that an employee is entitled to “100% of
salary for 60 days in the event you are unable to work due to a health related
problem.” (Docket 26-1 at p. 21).
RHP asserts it is entitled to summary judgment on Dr. Schindler’s claim
for disability salary continuation benefits because he “was not ‘disabled’ under
the plan and he lost the benefit when he was terminated for cause.” (Docket 24
at p. 20). Dr. Schindler counters first that he “never received a copy of the
Disability Salary Continuation Plan . . . relied upon by RHP.” (Docket 33 at p.
24). Dr. Schindler argues he can rely on the representations made in Schedule
2 for the benefits to which he is entitled. Id. Because Schedule 2 states the
disability salary continuation plan allows for “100% of [his] salary for 60 days”
and his own physician opined Dr. Schindler was “unable to work due to a health
related problem,” plaintiff asserts he is entitled to this benefit. Id. The
definition of “permanently disabled” used in the Unum long-term disability
insurance policy is not before the court. See Dockets 28-21 at pp. 20-22 &
While it is true Schedule 2 described the disability salary continuation
plan in general terms, it is unhelpful to claim the court cannot look to the
detailed documentation describing the plan. Certainly plaintiff could not argue
the other benefits represented in Schedule 2, including health insurance, dental
insurance, life insurance, group long-term disability, qualified pension plan and
the tax sheltered annuity plan are limited only to the descriptions in Schedule 2.
Were that the case, Dr. Schindler should have been restricted by Schedule 2 to
long-term disability benefits of $5,000 per month as opposed to $15,000 per
month provided in the policy with Unum Life Insurance Company. Compare
Docket 28-1 at p. 21 & Docket 28-10.
Whether RHP gave Dr. Schindler a copy of the disability salary
continuance plan is irrelevant. Schedule 2 identified the existence of such a
benefit and it is expected and presumed an employee seeking benefits would
examine the detailed and sometime complex provisions of the documents
creating the benefit indicated.
The court must consider the disability salary continuation plan document
as constituting part of RHP employees’ flexible benefits package. (Docket
28-19). For purposes of the plan, the term “ ‘[d]isability’ means the [p]articipant
must be sick or injured and unable to perform his normal duties for [RHP] for one
or more days, as determined by [RHP].” (Dockets 25 ¶ 34 & 26-19 § 2.6).
While Dr. Schindler’s physician may have diagnosed him as suffering from a
major illness, Dr. Schindler never took a sick leave day and was able to perform
the duties required by his Agreement. While he was not performing surgery at
RCRH because of the leave of absence, Dr. Schindler acknowledged “working
over 70 hours per week, including but not limited to evaluating patients [and]
supervising nurse practitioners who worked exclusively under his license . . . .”
(Docket 32 at p. 2). Dr. Schindler has not produced any evidence indicating he
submitted a written claim for disability salary continuation benefits because he
was unable to perform his normal duties through the date of termination, March
10, 2010. (Docket 28-19 § 7.1.1). Dr. Schindler was not qualified to receive
disability salary continuation coverage under the flexible benefits plan provided
by his employer.
Defendant is entitled to summary judgment on count VI of plaintiff’s
COUNT VIII: FAILURE TO PAY CAPITAL ACCUMULATION ACCOUNT
To vest in the capital accumulation account benefit offered by RHP, an
individual must be an employee at the time of the vesting event. (Docket 25
¶ 36). On November 20, 2008, Dr. Schindler withdrew all the funds from his
capital accumulation account under a special provision of the Internal Revenue
Code. (Dockets 28-9; 28-20 at p. 1 & 28-31 at p. 3 (p. 25:4-25)). Following the
withdrawal of those funds, a new deferred vesting date of January 1, 2014, was
established.14 (Dockets 25 ¶ 38 & 28-20 at p. 4). When Dr. Schindler chose to
withdraw funds in 2008 he acknowledged in writing “if I terminate my
employment prior to my elected [capital accumulation account] vesting dates . . .
I will forfeit the balance of . . . my Capital Accumulation Account(s), unless I
satisfy one of the following requirements—[t]ermination is due to my death or
disability;15 [t]ermination is involuntary without cause . . . .” (Docket 28-9).
The capital accumulation account plan specifically provided that if an
employee is terminated for cause prior to a deferred vesting date, the employee
would forfeit all rights in the plan. (Docket 28-21 at p. 28 ¶ 3.1.2) (“If, prior to
the [d]eferred [v]esting [d]ate, the [p]articipant separates from service . . . under
an [i]nvoluntary [s]eparation from [s]ervice with [r]easonable [c]ause, the
[p]articipant shall forfeit all rights to receive any unpaid [c]apital [a]ccumulation
[a]ccount [b]enefit under this [p]lan.”). “Reasonable cause” was defined in the
plan to “mean . . . [f]ailure to substantially perform (for reasons other than
[d]isability) the duties reasonably assigned or appropriate to the position, in a
manner reasonably consistent with prior practice.” Id. at p. 26-27 ¶ 184.108.40.206.
Specifically excluded from the term “reasonable cause” is “ordinary negligence or
Each year a new deferred vesting date would occur five years later.
(Docket 28-31 at p. 3 (p. 24:2-10).
If an employee terminates due to a qualifying disability, the investment
account would be liquidated and a check issued to RHP. RHP would withhold
taxes and pay the net balance to the former employee. (Docket 28-31 at p. 4
failure to act, whether due to an error in judgment or otherwise, if the
[p]articipant has exercised substantial efforts in good faith to perform the duties
reasonably assigned or appropriate to the position.” Id. “Disability” is defined
in the plan to mean “the [p]articipant, by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, being unable
to engage in any substantial gainful activity . . . .” Id. at p. 3 § 2.7(i); see also
Docket 25 ¶ 40.
RHP seeks summary judgment on this claim arguing Dr. Schindler “was
not vested at the time he was terminated, and he forfeited the unvested amounts
because he was terminated for cause.” (Docket 24 at p. 23). While “Dr.
Schindler concedes . . . he was not employed by RHP on the [d]eferred [v]esting
[d]ate” he claims entitlement to benefits under the disability provision of the
plan.16 (Docket 32 at p. 26). Dr. Schindler argues “he was disabled before . . .
March 10, 2010, . . . Dr. Flitman diagnosed Dr. Schindler’s disabling condition
on March 17, 2010, and made the further unchallenged finding that Dr.
It must be pointed out that RHPs’ Flexible Benefits Plan, which includes a
capital accumulation account provision, was not attached to Dr. Schindler’s
employment contract. Compare (Dockets 1-1 & 28-21). Yet, when the detailed
explanation may provide some benefit to Dr. Schindler, he would prefer to use
the plan rather than the benefit summary contained on Schedule 2 attached to
his employment contract. The court notes Dr. Schindler’s contradictory
attempt to claim the Schedule 2 representations or to disregard them in
furtherance of his arguments.
Schindler was justified in not conducting surgery beginning on January 1, 2010,
given his symptoms.” Id.
“Disability” for purposes of RHPs’ flexible benefits plan, including access to
a capital accumulation account, requires that the physical impairment made
Dr. Schindler “unable to engage in any substantial gainful activity . . . .”
(Docket 28-21 § 2.7). During the period between October and the end of
December 2009, Dr. Schindler was engaged in “substantial gainful activity” and
admitted this by his own proposed statement of fact: “During October,
November, and December 2009, Dr. Schindler was the sole neurosurgeon at
RHP, managing an enormous practice of his own including the practice of his
newly retired partner and working greater than 70 hours per week caring for the
needs of these RHP patients.” (Docket 33 at pp. 8-9 ¶ 7).
Without suggesting a break in his job performance or disclosing a change in his
work level through March 10, 2010, Dr. Schindler acknowledges:
During his leave of absence, it is undisputed that Dr. Schindler
continued to fulfill his clinical responsibilities. He continued to run
an incredibly busy practice as the only practicing neurosurgeon at
RHP as well as in Northeast South Dakota (Aberdeen outreach
clinic), working over 70 hours per week, including but not limited to
evaluating patients, supervising nurse practitioners who worked
exclusively under his license . . . .
(Docket 32 at p. 2).
The language of the flexible benefits plan is clear and unequivocal.
(Docket 28-21 at p. 28 §§1.2.3 and 3.1.2). Ziegler Furniture & Funeral
Home, Inc., 709 N.W.2d at 354. By the definition of disability applicable to the
capital accumulation account program, Dr. Schindler was not disabled through
March 10, 2010, the final date on which he could have qualified for the benefits.
Documentation signed by Dr. Schindler acknowledged and put him on
notice that he did not have a vested interest in the capital accumulation account
as of March 10, 2010. (Docket 28-20 at pp. 1, 4 & 8). In order to be vested in
this account for funds deposited by RHP in 2009 and 2010, Dr. Schindler must
have been an employee of RHP on January 1, 2014, and January 1, 2015,
respectively. Id. at pp. 4 & 8. Dr. Schindler was not employed on those dates
because he was terminated for cause under his employment contract and for
“reasonable cause” under the capital accumulation account provisions.
(Docket 28-21 at p. 28 § 3.1.1). The funds contributed to the account on his
behalf by RHP never became funds to which Dr. Schindler was entitled.
RHP is entitled to summary judgment on count VIII of plaintiff’s complaint.
COUNT IX: EXTENDED ILLNESS ACCRUAL BANK BENEFITS
RHP had a personal leave and extended illness accrual bank program.
(Docket 26-14). Dr. Schindler elected to participate in the extended illness
accrual bank (“EIAB”) program. (Docket 1 ¶ 64). Schedule 2 of the Agreement
indicates he would accrue six days per year at full salary in the event of extended
illness or disability. Id.; see also Docket 28-1 at p. 21 (the EIAB benefit
conferred a “[m]aximum of 122.5 days (980 hours) accrued at rate of six (6) days
per year providing full salary in event of long-term illness/disability.”).
Dr. Schindler was never given a copy of the personal leave and illness
program. (Docket 33 ¶ 44). Dr. Schindler claims he is qualified by the
language of Schedule 2 to receive the EIAB benefits. (Docket 32 at p. 20).
For the same reasons applicable to the other benefits which were subject
to the employer’s flexible benefits plan, the court must look to the detailed
explanation of the EIAB benefits plan. See Docket 28-14. The plan specifically
stated “EIAB accruals will not be paid as a terminal benefit.” Id. § D(3). The
language of the EIAB program is clear and unequivocal. Ziegler Furniture &
Funeral Home, Inc., 709 N.W.2d at 354. Dr. Schindler was not entitled to a
pay-out of any accrued EIAB as of the date of his termination from employment.
RHP is entitled to summary judgment on count IX of plaintiff’s complaint.
COUNT X: GROUND TRANSPORTATION EXPENSES
Schedule 4 of the Agreement addresses transportation expenses incurred
by Dr. Schindler for his employer’s benefit. It states that the “[e]mployer shall
provide for and/or pay for or reimburse [p]hysician for the cost of transportation
either by air or by car to/from Aberdeen in accordance with the agreed upon
schedule as well as reasonable accommodations for [p]hysician while providing
services in Aberdeen if needed.” (Dockets 1-1 at p. 24 & 28-1 at p. 24). It is
undisputed that RHP reimbursed Dr. Schindler for all air transportation
expenses incurred during his employment. (Dockets 25 ¶46 & 33 ¶ 46).
In count X of his complaint, Dr. Schindler seeks reimbursement for out-ofpocket expenses for round-trip travel by automobile from the Rapid City clinic to
the Rapid City Regional Airport and from the Aberdeen airport to the Aberdeen
outreach clinic. (Docket 1 ¶ 70). Dr. Schindler argues the language of
Schedule 4 is ambiguous. (Docket 32 at p. 23). Thus, he argues “as the
non-moving party, Dr. Schindler is entitled to the benefit of any factual inference
the Court may draw from the facts on this claim.” Id. Dr. Schindler asserts
because RHP paid Dr. Charles Hart’s mileage to-and-from the airport, the court
should apply the same interpretation to Dr. Schindler’s Agreement. Id.
Addressing the costs subject to reimbursement, Schedule 4 is written in
the disjunctive. The phase “cost of transportation either by air or by car” is clear
and unambiguous. Ziegler Furniture & Funeral Home, Inc., 709 N.W.2d at 354.
If Dr. Schindler had driven from Rapid City to Aberdeen, that mileage would have
been subject to reimbursement. But because Dr. Schindler flew to the
Aberdeen outreach clinic and back to Rapid City that is the cost which was
subject to reimbursement. How RHP dealt with Dr. Hart’s transportation
expenses is irrelevant to Dr. Schindler’s Agreement. Had the parties intended to
reimburse Dr. Schindler for his expenses for driving to and from the airports, the
phrase would have been written in the conjunctive, using language like “both by
air and by car.”
Applying the clear language of Schedule 4, Dr. Schindler is not entitled to
additional reimbursement. RHP is entitled to summary judgment on count X of
Based on the above analysis, it is
ORDERED that the defendant’s motion for partial summary judgment
motion (Docket 23) is granted.
IT IS FURTHER ORDERED that counts I, II, III, IV, VI, VIII, IX, X and XII
of plaintiff’s complaint are dismissed with prejudice.
IT IS FURTHER ORDERED that defendant’s motion for summary
judgment on its counterclaim (Docket 6 at pp. 22-23) is granted.
IT IS FURTHER ORDERED that Regional Health Physicians, Inc., is
entitled to a money judgment against plaintiff Dr. Jay J. Schindler in the
amount of $64,070.49.
IT IS FURTHER ORDERED that because plaintiff has unresolved claims
against the defendant, the court will wait until resolution of those claims to
calculate prejudgment interest on defendant’s money judgment.
Dated September 23, 2015.
BY THE COURT:
/s/ Jeffrey L. Viken
JEFFREY L. VIKEN
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