Shelbyville Hospital Corporation d/b/a Heritage Medical Center v. Mosley
Filing
173
MEMORANDUM AND OPINION finding that the Defendants 137 Motion for Summary Judgment is DENIED; the Hospitals 140 Motion for Summary Judgment on its Breach of Contract Claim is GRANTED, except as to damages; the Hospitals 143 Mo tion for Summary Judgment Dismissing Plaintiffs Defenses for Fraud and Misrepresentation is hereby GRANTED. The Plaintiff will submit proof of its damages no later than April 8, 2016. Defendant shall respond with any objections no later than May 23, 2016. A hearing on damages will be scheduled thereafter. To the extent that Plaintiff seeks recovery of attorneys fees, it shall submit a separate motion in accordance with Rule 54 of the Federal Rules of Civil Procedure.Signed by District Judge Thomas W Phillips on 2/10/2016. (MGM)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT WINCHESTER
SHELBYVILLE HOSPITAL CORP.,
d/b/a THE HOSPITAL CENTER
Plaintiff,
v.
E. WAYNE MOSLEY, M.D.
Defendant.
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No. 4:13-CV-0088
MEMORANDUM OPINION
This case comes before the Court on the parties’ cross-motions for summary judgment.
The Plaintiff, Shelbyville Hospital Corporation d/b/a Heritage Medical Center (hereafter the
“Hospital” or “Plaintiff”), has filed a Motion [doc. 140] for Summary Judgment seeking a full
judgment with regard to its breach of contract claim against the Defendant, Dr. E. Wayne Mosley
(hereafter “Dr. Mosley” or “Defendant”). The Hospital submitted a brief [doc. 142] and a
Statement of Facts [doc. 141] in support of its Motion. Dr. Mosley has submitted responses to
both documents. [docs. 147, 148]. The Hospital filed a reply brief [doc. 156] and its Motion is
now ripe. In accordance with this opinion and the order filed herewith, The Hospital’s Motion
[doc. 140] will be GRANTED.
Dr. Mosley also filed a Motion for Summary Judgment [doc. 137], with a supporting
brief and Statement of Facts. [docs. 138, 139]. The Hospital responded [docs. 152, 153]. Dr.
Mosley filed a reply brief [doc. 163], and the Motion is now ripe. In accordance with this opinion
and the order filed herewith, Dr. Mosley’s Motion [doc. 137] will DENIED.
The Hospital filed a separate Motion for Summary Judgment [doc. 143], with a
supporting brief and Statement of Facts [docs. 144, 145] seeking to preclude Dr. Mosley’s
affirmative defenses. Dr. Mosley responded in opposition [doc. 149], and the Hospital has
replied [doc. 157] and filed a supplemental brief [doc. 164]. The Motion is now ripe. In
accordance with this opinion and the order filed herewith, The Hospital’s Motion [doc. 143] is
GRANTED.
BACKGROUND
This case arises from a contract dispute. The Hospital is a for-profit corporation that
operates an orthopedic clinic in Shelbyville, Tennessee. The Hospital is owned by Community
Health Investment Co., LLC, which also owns the Shelbyville Clinic Corporation (hereafter the
“Clinic”). Dr. Mosley is an orthopedic surgeon. In July 2011, the parties made an agreement (the
“Agreement”) whereby Dr. Mosley would move to Shelbyville, Tennessee and establish a
medical practice. Dr. Mosley would lease office space from the Clinic.
Under the Agreement, Dr. Mosley would engage in a “Full-Time Private Practice of
Medicine” in Shelbyville for thirty-six months. (Agreement at Section B.1). The Agreement set
out the requirements of Dr. Mosley’s full-time obligation, providing that failure to work for more
than ten consecutive business days would be a breach of the Agreement (Section B.4). Under the
“income guarantee” provisions, the Hospital guaranteed that Dr. Mosley’s practice would collect
at least $84,416.66 for each of its first eighteen months (the “Cash Collections Guarantee Period”
or “Guarantee Period”), or that the Hospital would meet that amount through advancement loans,
up to an aggregate loan total of $1,013,000.000. Following the Guarantee Period, the Hospital
would forgive a portion of Dr. Mosley’s debt for each additional month of practice for eighteen
months (the “Cash Collections Continuation Period” or “Continuation Period”). His debt would
be fully forgiven at the end of the thirty-six month period. However, if Dr. Mosley failed to meet
his obligations to practice full-time, he would be required to repay the advancements
immediately. (Section D.7).
During the negotiations period, Dr. Mosley negotiated with Dan Buckner, the Hospital’s
CEO. He also communicated with Tisha Rader, the Hospital’s Director of Physician Practice
Management. On July 19, 2011, Dr. Mosley e-mailed Ms. Rader a list of his “Contract
Concerns.” [doc. 138-8]. He listed concern with the Full-Time Practice requirements, and with
Section B.4’s ten-day limitation, noting that “[t]hey need to allow for Reserve service.” 1 (Id.)
The Hospital provided a draft agreement to Dr. Mosley on July 26, 2011 via e-mail (the “July
Agreement”) [doc. 140-1]. The July Agreement was apparently intended to be the final draft. Dr.
Mosley made several hand-written changes to the July Agreement’s terms, including changing
the number of consecutive days that he would be permitted to miss work from ten to twenty
(Section B.4). He also modified the provision that required him to immediately repay the debt if
he breached the Agreement by failing to maintain a full-time practice in Shelbyville during the
Guarantee period (Section D.6), and crossed out the repayment provision (Section D.7). He
signed the July Agreement and returned it. (Mosley Depo. [doc. 140-1] at p. 187). Dr. Mosley
testified that he did not inform the Hospital that he had made handwritten changes, because he
“thought it would be self-explanatory.” (Mosley Depo. [doc. 140-1] at p. 198-99).
1
Dr. Mosley was enlisted in the military reserves.
Dan Buckner, the Hospital’s CEO, signed on behalf of the Hospital. Mr. Bucker claims
he was unaware of the changes when he signed the July Agreement. (Buckner Affidavit, ¶ 3
[doc. 140-1]; Rader Affidavit, ¶ 3 [doc. 140-1]). The Hospital contends that it became aware of
the handwritten terms during the course of this lawsuit.
On August 5, 2011, Tisha Rader e-mailed Dr. Mosley another revised contract (the
“August Agreement” [doc. 140-1]), which was again amended to include a pay advance prior to
Dr. Mosley’s commencing practice (Section D.3). The accompanying e-mail message (e-mail
[doc. 140-1]) read:
Section D3 is the revised verbiage that explains we will pay you one month
guarantee prior to Commencement Date. Please sign pages and scan or fax back
to me by Monday, Aug. 8. Then either mail the original to me or bring with you
when you come next Thursday.
The August Agreement contained a cover page stating that it incorporated the terms and
conditions of the earlier contract, which was attached. However, the version of the agreement
attached did not contain Dr. Mosley’s handwritten revisions 2. Dr. Mosley signed the cover page,
initialed each page, and made a notation that he agreed to the revision in Section D.3. He does
not deny that he signed the document, but contends that he did not read the entire contract and
believed it incorporated the earlier terms. The parties now disagree on which version of the
Agreement controls.
Dr. Mosley began practice in Shelbyville on August 15, 2011, commencing the
Guarantee Period. Problems arose almost immediately. There were disagreements over Dr.
Mosley’s lease with the Clinic. He also contends that the Hospital’s actions, including removing
2
Other than Dr. Mosley’s handwritten changes and the new payment term in Section D.3, the July Agreement and the
August Agreement were identical.
equipment from his office, collecting Hospital payments through his office, and establishing a
competing practice with shared office space interfered with his ability to build and grow a
practice. He also claims that the Hospital stopped providing him with x-ray imaging services in
February 2013, which prevented him from operating his practice. The Hospital paid Dr. Mosley
$1,013,000 in advances (the maximum amount under the Agreement) between August 2011 and
October 2012.
On November 14, 2012, Dr. Mosley traveled out of the country for a mission trip,
returning on December 17, 2012. The Hospital claims that Dr. Mosley’s absence during the
Guarantee Period was a breach of Section B.4 because he missed more than ten business days.
The Hospital also identifies three additional periods between March and August 2013, during
which it alleges that Dr. Mosley did not treat patients for more than ten consecutive business
days and one period, from July 4, 2013 to August 2, 2013, during which he did not treat patients
for twenty-one business days. Dr. Mosley’s office manager testified that Dr. Mosley treated
patients in Shelbyville only four days in March 2013 (Dortch Depo. at p. 23 [doc. 140-2]), six
days in April 2013 (id. at p. 27), four and a half days in May 2013 (id. at p. 28), two and a half
days in June 2013 (id. at p. 33), two days in July 2013 (id.), three and a half days in August 2013
(id. at p. 38), and two days in October 2013 (id.) Dr. Mosley testified that he spent some of this
time filling in for other physicians in Florida, and that he saw less patients as a result. (Mosley
Depo. [doc. 140-1] at p. 175, 179). The Guarantee Period having ended in February 2013, those
absences occurred during the Continuation Period.
STANDARD OF REVIEW
Rule 56(a) sets forth the standard for governing summary judgment and provides in
pertinent part: “The court shall grant summary judgment if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” The procedure set out in Rule 56(c) requires that “[a] party asserting that a fact cannot be
or is genuinely disputed must support the assertion.” This can be done by citation to materials in
the record, which include depositions, documents, affidavits, stipulations, and electronically
stored information. Fed. R. Civ. P. 56(e)(1)(A). Rule 56(c)(1)(B) allows a party to “show[ ] that
the materials cited do not establish the absence or presence of a genuine dispute, or that an
adverse party cannot produce admissible evidence to support the fact.”
After the moving party has carried its initial burden of showing that there are no genuine
issues of material fact in dispute, the burden shifts to the non-moving party to present specific
facts demonstrating that there is a genuine issue for trial. Matsushita Elec. Indus. Co., v. Zenith
Radio Corp., 475 U.S. 574, 586-87 (1986). “The ‘mere possibility’ of a factual dispute is not
enough.” Mitchell v. Toledo Hosp., 964 F.2d 577, 582 (6th Cir. 1992) (citing Gregg v. AllenBradley Co., 801 F.2d 859, 863 (6th Cir. 1986)).
In order to defeat the motion for summary judgment, the non-moving party must present
probative evidence that supports its complaint. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
249-50 (1986). The non-moving party’s evidence is to be believed, and all justifiable inferences
are to be drawn in that party’s favor. Id. at 255. The court determines whether the evidence
requires submission to a jury or whether one party must prevail as a matter of law because the
issue is so one-sided. Id. at 251-52.
ANALYSIS
1. Which Version of the Agreement is Controlling?
Section E.3, the Agreement’s merger clause, provides that:
This Agreement constitutes the entire agreement between the Parties with
respect to the subject matter hereof, and no amendment, alteration or modification
of this Agreement, whether in written or verbal form, shall be valid unless . . .
reviewed and approved in writing by the President of the owner of the Hospital
and Hospital’s in-house legal counsel.
Even without a merger clause, the last agreement as to a subject matter is supersedes all
former agreements. Bringhurst v. Tual, 598 S.W.2d 620, 622 (Tenn. Ct. App. 1980). Under
normal circumstances, therefore, there would be no question that the August Agreement was the
final word on Dr. Mosley’s recruitment. However, Dr. Mosley claims that he did not assent to
the terms of the August Agreement because he was not aware of them. A contract will only be
valid where there was mutual assent to its terms. Moody Realty Co. v. Huestis, 237 S.W.3d 666,
674 (Tenn. Ct. App. 2007). The determination of mutual assent is decided objectively, by the
manifestations of the parties’ intent in the agreement itself. An individual’s signature on a
contract is objective proof of his assent to its terms. Robert J. Denley Co. v. Neal Smith Const.
Co., No. W2006-00629-COA-R3CV, 2007 WL 1153121, at *6 (Tenn. Ct. App. Apr. 19, 2007).
This case is unique in that there are competing contracts and both parties take the
apparent position that there was a meeting of the minds as to their preferred version of the
Agreement because it transmitted the document to the other, even if the other failed to read it.
They likewise argue that there was not a meeting of the minds as to whatever version of the
Agreement is unfavorable to them because, although it may have been received, there was no
reason to believe that changes had been made to the previous draft 3. Simply put, the Hospital and
Dr. Mosley appear to agree that each party to a contract bears the burden of actually reading it,
but they differ on whose failure to read the contract should be excused in this case.
“It is a bedrock principle of contract law that an individual who signs a contract is
presumed to have read the contract and is bound by its contents.” 84 Lumber Co. v. Smith, 356
S.W.3d 380 (Tenn. 2011) (citations omitted). Tennessee courts have unequivocally held that,
where a contract is clear and unambiguous, a party cannot hide behind his own failure to review
its terms. Were courts willing to invalidate an arms-length contract merely because a party
decided not to read it, any businessman would have a quick mechanism to escape unfavorable
terms at their election, and indeed, no one would have any incentive to read one’s agreements, as
knowledge of an agreements contents would be a disadvantage under the law. In short, contracts
would not be “worth the paper on which they are written.” 84 Lumber, 356 S.W.3d at 383
(quoting Beasley v. Metro. Life Ins. Co., 229 S.W.2d 146, 148 (1950)). Tennessee law is clear on
its policy of upholding contracts.
However, because this dispute arises from contract revisions, rather than original terms,
there are two unique wrinkles in the facts. First, the Hospital takes the position that it did not
receive any document with changes, and that the version of the July Agreement that Dr. Mosley
returned did not contain the handwritten changes. (Aff. of Tennie McCord [doc. 152-1]). If true,
then the July Agreement cannot be the operative contract. However, the revised July
3
Dr. Mosley claims that he was “tricked” into signing the August contract because the Hospital did not tell him it made
changes. Mosley apparently hasn’t thought this argument through, however, since he fails to extend the logic to cover his
own trickery in changing the terms in the July Agreement. The inverse is true as well. Since Dr. Mosley claims that the
July Agreement became valid on the Hospital’s receipt of it, the same logic should apply to the August Agreement, which
he admittedly received from the Hospital, sans changes. As for the Hospital’s position: there was a meeting of the minds in
August because Dr. Mosley received the August Agreement, regardless of whether he actually read it. The Hospital
contends that it never received Dr. Mosley’s handwritten changes.
Agreement’s origin and the question of whether the Hospital received it at all are disputed
matters of fact, and are improper at this stage.
Second, the Hospital contends that, setting the July contract aside, the August Agreement
must control because it is the later agreement and Dr. Mosley will be bound to its terms even if
he did not read them. Dr. Mosley claims that he only intended to agree to the modification in
Section D.3. (Mosley Depo. [doc. 140-1] at 248). He testified that he did not know if his
handwritten terms were incorporated into the agreement he signed in August, because he did not
check for them, but he considered them to be part of the final agreement. (Mosley Depo. [doc.
140-1] at p. 248, 260).
The Hospital points to a 2009 case, Broadnax v. Quince Nursing and Rehabilitation
Center, wherein the Tennessee Court of Appeals addressed facts analogous to those in the
present case. No. W2008-2130-COA-R3-CV2009 WL 2425959 (Tenn. Ct. App. August 10,
2009). There, the court considered whether to enforce a contract’s fine print where the plaintiff
admitted that she did not read it, but assumed the contract was identical to a prior agreement
based on an oral representation that it contained “standard admissions forms.” Id. Upon a later
dispute, the plaintiff discovered that the agreement contained an arbitration clause. She argued
that there had been no meeting of the minds because she had been unaware of the term, which
was not contained it the earlier contract. The court rejected the plaintiff’s argument that she
should not be bound to the arbitration agreement, stating the rule in Tennessee:
[i]f, without being a victim of fraud [the individual] fails to read the
contract or otherwise to learn its contents, he signs the same at his peril
and is estopped to deny his obligation, will be conclusively presumed to
know the contents of the contract, and must suffer the consequences of his
own negligence.
Id. at *9 (quoting Giles v. Allstate Ins. Co. Inc., 871 S.W.2d 154, 156 (Tenn. Ct. App.
1993)).
Dr. Mosley does not dispute the law, but responds that his failure to read the contract was
immaterial, because Ms. Rader’s e-mail was an affirmative statement that the document had not
changed. Dr. Mosley cites to the Teague Brothers v Martin & Bayley case, in which the state
appellate court stated an exception to the rule in situations “when neglect to read is not due to
carelessness alone, but was induced by some stratagem, trick, or artifice on part of one seeking
enforcement of the contract.” 750 S.W.2d 158 (Tenn. Ct. App. 1987). In that case, the defendant
added a term releasing the parties from liability to a late draft of a lease modification agreement.
750 S.W.2d 152 (Tenn. Ct. App. 1987). The defendant did not inform the plaintiff of the change,
and plaintiff did not notice it when he signed the agreement. The appellate court found the
agreement invalid, ruling that the duty to read a contract before signing can be suspended where
a party’s negligence is induced by false representations as to its contents. However, that case was
decided on facts that the contract had been “intentionally altered so that the contents were
changed while the appearance of the document remained the same.” Id. at 157. Where
modifications are conspicuous, such as handwritten dates or terms, a party signing an agreement
without reading it first does so at his own peril. Moody, 237 S.W.3d at 677.
Dr. Mosley has not presented any evidence that would rise to the level of the fraudulent
inducement he alleges. The Hospital did not make any untrue statements as to the contents of the
Agreement, and it did not “trick” him into signing a contract he had not read; Ms. Rader’s e-mail
merely directed his attention to the section of the Agreement that contained a new term. It did not
assure Dr. Mosley that his changes—which he failed to bring to the Hospital’s attention—were
incorporated into the August Agreement, and there is nothing in the record to suggest that it had
any intent to act in bad faith. Unlike the plaintiff in Teague Brothers, who had no reason to be on
notice regarding the challenged section, the additional/missing handwritten terms in the August
Agreement were conspicuous. Dr. Mosley agrees that he received a new contract, rather than an
amendment to a previous contract. (Mosley Depo. [doc. 140-1] at p. 250). He agrees that he did
not check to see if his additional terms were there, and that he did not knew if they were.
(Mosley Depo. [doc. 140-1] at p. 248-49).
Dr. Mosley is an educated man, well capable of understanding the terms of the
Agreement. And he had the incentive to understand its terms—the Agreement entitled Dr.
Mosley to, and obligated him to repay, more than one million dollars. He does not dispute that he
received the August Agreement and that he had ample time to review it. Even if he only paged
through the Agreement (which he did, as evidenced by his initials on each page), even a
modicum of diligence would have revealed that changes he himself made only a few days before
were not part of the contract. He must also have known that the Agreement contained a merger
clause since he had read it a few days prior. Nonetheless, he signed his assent and returned it
without question. The Court finds that there was mutual assent as to the August Agreement, that
the August Agreement supersedes the July Agreement, and that it will be the controlling
document for the resolution of this case. Dr. Mosley’s Motion for Summary Judgment based on
the July Agreement is therefore DENIED.
2. Did the Agreement Become Effective?
The parties next raise the issue of whether the Agreement became effective under the
condition precedent contained in Section E.7:
THIS AGREEMENT SHALL NOT BE EFFECTIVE . . . UNTIL IT HAS
BEEN REVIEWED AND ELECTRONICALLY APPROVED BY [THE
HOSPITAL’S MANAGEMENT COMPANY AND COUNSEL]. THE
EFFECTIVE DATE OF THIS AGREEMENT SHALL BE THE DATE THAT IT
IS ELECTRONICALLY APPROVED [].
The Hospital argues that the July Agreement did not become valid because the changes
were not approved. In fact, the Hospital never sent the Agreement through the approval channels
because it was amended again within a few days. (Decl. of Sarah Smith [doc. 140-3]). Because
the July contract is immaterial, the Court declines to rule on the argument.
However, Dr. Mosley also asks to enforce Section E.7. In his brief supporting his own
motion for summary judgment [doc. 139], he points out that he sought verification of the
Hospital management company’s approval during discovery, and implies that the Agreement
never became effective. Dr. Mosley offers no affirmative proof that the Agreement was not
approved, and the Hospital submitted an affidavit of an employee of its management company,
who stated that such approval occurred. (Decl. of Sarah Smith [doc. 140-3]). The Hospital also
submitted internal e-mails and documents noting that the August Agreement had been approved.
(Decl. of Sarah Smith, ex. C, D [doc. 140-3]). Dr. Mosley does not dispute the veracity of that
proof. Moreover, even if the condition had failed, there is no dispute that the parties performed
under the contract beginning in August 2011 and continuing through 2013. A party who
performs under a contract waives any right to enforce failed conditions precedent, even where
the contract states that it “will be null and void if the condition is not met.” Tennessee Div. of
United Daughters of the Confederacy v. Vanderbilt Univ., 174 S.W.3d 98, 115 (Tenn. Ct. App.
2005) (citations omitted). Section E.7 does not preclude the Agreement’s enforcement.
3. Did Dr. Mosley Breach the Agreement?
Having determined that the August Agreement is the controlling document in this case,
we now turn to the issue of whether Dr. Mosley breached its terms.
Paragraph B.4 of the Agreement provides, in relevant part:
Physician shall discharge obligations hereunder on a regular and
continuous basis. . . . If Physician fails to render services pursuant to this
Agreement for a period of ten (10) consecutive business days during the
Cash Collections Guarantee Period without Hospital and Physician’s
mutual agreement, Physician shall have failed to carry out Physicians
covenants on a regular and continuous basis.
The parties agree that Dr. Mosley began practice on or around August 15, 2011. The
Guarantee Period expired eighteen months later, on or about February 15, 2013. The Hospital
claims that Dr. Mosley breached the Agreement by missing more than ten consecutive days of
work in November and December of 2012. There is no dispute that Dr. Mosley left the country
on November 14, 2012. (Def. Response to Pl. Statement of Facts [doc. 148) at ¶ 19). His office
manager testified that he did not return to the practice until at least December 17, 2012. (Dortch
Depo. [doc. 140-2] at p. 55). Assuming that Thanksgiving was the only holiday during this
period, Dr. Mosley was absent for 24 business days 4.
However, Dr. Mosley argues that he was not absent because he visited the office in early
December of 2012. He admits that he did not personally treat any patients, but claims he
“rendered services” through his medical assistant, who was there removing sutures and changing
bandages during his visit. (Mosley Depo. [doc. 140-1] at p. 78-80). He also claims that his office
assistant performed administrative tasks (id.) and that he had another physician cover his call
services while he was away. (Mosley Affidavit [doc. 151-2] at ¶ 4). He does not, however,
identify what services the covering physician performed and admits that he postponed surgeries
that had previously been scheduled during that period.
4
The absence appears to run afoul even of Dr. Mosley’s handwritten terms in the July Agreement, which provided that
more than twenty consecutive business days constituted a breach of contact.
Dr. Mosley’s argument is unpersuasive. The clear intent of the Agreement was for Dr.
Mosley to work as full-time orthopedic surgeon in the Clinic. Indeed, it is the entire purpose of
the relationship between the parties; the Agreement’s language identified Dr. Mosley as the
“Physician” and provided that the “Physician [shall] render services.” The term is unambiguous
and contemplated that the services rendered would be the medical services of Dr. Mosley alone.
Providing an office worker to schedule appointments and answer the telephone cannot constitute
“rendering [medical] services” by any standard. The services his assistant performed (changing
bandages and removing sutures), while important, were minor and do not equal the full services
of a medical doctor. Dr. Mosley points to no portion of the Agreement that could be interpreted
to allow a medical assistant’s services to substitute for his own. Where a contract is for services
and involves confidence in a party’s skills, its rights and obligations are not assignable. Fleet
Bus. Credit, LLC v. Grindstaff, Inc., No. W200701341COAR3CV, 2008 WL 2579231, at *5
(Tenn. Ct. App. June 30, 2008). The Agreement does provide that Dr. Mosley could have sought
the Hospital’s consent to be absent for longer than ten days, but there is no evidence that Dr.
Mosley sought such consent. There is no question that Dr. Mosley missed more than ten
consecutive business days of practice in November and December. He therefore breached
Section B.4 of the Agreement.
4. Dr. Mosley’s Defenses
The final issues to resolve concern Dr. Mosley’s defenses. The Hospital filed this Action
on December 17, 2013. [doc. 1]. In his initial pleadings, Dr. Mosley made several counterclaims. [docs. 22, 31]. On the Hospital’s motion, the Court dismissed Dr. Mosley’s claims for
breach of contract, intentional interference with a business relationship, and unjust enrichment
for failure to state a claim in 2014. [doc. 42]. Dr. Mosley later voluntarily dismissed his
remaining claims for negligent misrepresentation and fraud in the inducement. [doc. 159].
Despite having dismissed his claims, Dr. Mosley argues that his allegations as to fraud and
misrepresentation remain relevant for the purposes of his affirmative defenses. Courts will not
enforce a contract against a party that was fraudulently induced. Shelby Electric Company, Inc. v.
Forbes, 205 S.W. 3d 448, at 453 (Tenn. App. 2005).
The Hospital moves to bar Dr. Mosley from arguing the allegations at trial under the
doctrine of collateral estoppel. The Hospital also challenges the merits of the defenses.
(a) Collateral Estoppel
Dr. Mosley argues that the Hospital misrepresented its past profits during the negotiations
and that he was therefore fraudulently induced to enter the Agreement. Specifically, on two
separate occasions, Mr. Buckner and Ms. Rader provided Dr. Mosley with a chart purporting to
disclose the collections of Dr. Elizondo, an orthopedic surgeon who practiced at the clinic in
2010. Dr. Mosley claims that the figures reflected positive collections during Dr. Elizondo’s first
six months of practice at the clinic and that he relied on the information in agreeing to move his
practice to Shelbyville. He later learned that the figures were inflated and that Dr. Elizondo’s
practice had, in fact, operated at a loss. (Amended Answer [doc. 21 at ¶ 36, 39] incorporating
Amended Counter-Claim [doc. 31 at ¶¶ 34-41]). Dr. Mosley also claims that the Hospital
induced his assent by misrepresenting the access he would have to x-ray imaging equipment and
facilities. (Amended Counter-Claim [doc. 31] at ¶ 41).
This is not the first time Dr. Mosley has brought his fraud claims before a court of law.
Prior to the commencement of this case, the Clinic sued Dr. Mosley in the Tennessee Circuit
Court for Bedford County. The Clinic brought claims against Dr. Mosley for breaching his leases
on the office space and equipment. That suit arose from Dr. Mosley’s refusal to pay rent for the
first half of August 2011, for October 2011, when he was sharing space with another physician,
and for other periods in 2013.
In the state court case, Dr. Mosley made similar allegations of fraudulent inducement and
misrepresentation, both as counter-claims and affirmative defenses. The language of Dr.
Mosley’s pleaded counter-claims in the state court action and in this action are nearly identical,
with the primary difference being that Dr. Mosley replaced “Shelbyville Clinic Corp.” in the
former with “Heritage Medical Center” in the latter. (compare Defendant’s Amended CounterComplaint [doc. 31] at ¶¶ 34, 41 with Bedford County Second Amended Counter-Complaint at
¶¶ 36, 41).
The state court action was tried before the Bedford County Circuit Court from October
2015. Dr. Mosley did not put on any proof to support his fraud and misrepresentation claims.
(see Def. Response to Pl’s Motion for Summary Judgment [doc. 149] at p. 6 n.3). The trial court
entered a directed verdict in the Clinic’s favor, finding that there was no evidence of fraudulent
inducement. However, the state court has not yet entered a final judgment on the case.
The doctrine of collateral estoppel precludes issues from relitigation after a determination
on the merits. “[W]hen an issue has been actually and necessarily determined in a former action
between the parties, that determination is conclusive upon them in subsequent litigation.” Stacks
v. Saunders, 812 S.W.2d 587 (Tenn. Ct. App. 1990). Where federal jurisdiction is based on
diversity of citizenship, the Court must apply collateral estoppel according to the law in the state
where the case arises. Federal courts must give state court judgments the same preclusive effect
they would receive under the laws of the rendering state. 28 U.S.C. § 1738; Ingram v. City of
Columbus, 185 F.3d 579, 593 (6th Cir. 1999). In other words, “‘[i]f an individual is precluded
from litigating a suit in state court by the traditional principles of res judicata, he is similarly
precluded from litigating the suit in federal court.’” ABS Indus., Inc. ex rel. ABS Litig. Trust v.
Fifth Third Bank, 333 F. App’x 994, 998 (6th Cir. 2009) (quoting Gutierrez v. Lynch, 826 F.2d
1534, 1537 (6th Cir.1987)).
In Tennessee, a party seeking to establish collateral estoppel must show:
(1) That the issue sought to be precluded is identical to the issue decided in
the earlier suit; (2) that the issue sought to be precluded was actually litigated
and decided on its merits in the earlier suit; (3) that the judgment in the earlier
suit has become final; (4) that the party against whom collateral estoppel is
asserted was a party or is in privity with a party to the earlier suit and (5) that
the party against whom collateral estoppel is asserted had a full and fair
opportunity in the earlier suit to litigate the issue now sought to be precluded.
Patton v. Estate of Upchurch, 242 S.W.3d 781 (Tenn. Ct. App. 2007). However, the doctrine
only applies in so far as the controlling facts of both cases are the same. See Lien v. Couch, 993
S.W.2d 53, 56 (Tenn. Ct. App. 1998) (stating that courts may reexamine a previously-decided
issue where relevant facts have changed).
In this case, Dr. Mosley argues that the state court case cannot preclude his defenses in
this case because (1) he did not have the opportunity to fully litigate the fraud and
misrepresentation claims as they were irrelevant to the lease agreement dispute, and (2) the state
court judgment has not become final. Unfortunately, the Court does not have sufficient
information to determine what opportunities Dr. Mosley had or did not have because the parties
have submitted scant record of the state court trial. The parties did not submit evidence to show
how the lease agreement was negotiated, nor how the recruitment agreement related to the
critical facts of the state court case, whatever they may have been. The only documents before
the Court are Dr. Mosley’s initial pleadings and two pages of trial transcript, unaccompanied by
any context. It is clear from those documents that Dr. Mosley did make the fraud allegations and
that the state court entered a directed verdict, stating “there’s essentially no proof of fraudulent
inducement of the contract.” (Trial Transcript at p. 44 [doc 143-3]). Dr. Mosley explains that he
did not put on proof to support the fraud allegations because it was irrelevant to the lease
agreement. His counsel in the prior case submitted an affidavit stating that the evidence was
limited by objections. (Harvey. Aff. [doc. 151-6] at ¶¶ 4-5).
The Hospital contends that the state court’s fraud ruling is binding here because there is
no distinction between the fraud “as it related to” the lease and the recruitment agreement—
Mosley pleaded that the same fraud committed by the same individuals induced him to signing
both contracts. This may be true, but the agreements are not one and the same. The state court
did not find that “no one defrauded Mosley and no one induced him to sign anything” (Pl. Reply
in Support of Summary Judgment [doc. 157] at p. 12), it found that no one induced him to sign
the lease agreement. That determination alone is not patently conclusive on the issue of whether
Dr. Mosley was induced into entering the recruitment agreement. Without more evidence to
show that the state court considered facts relevant to both documents, this is merely a legal
judgment as to that specific agreement, not a global factual finding.
Moreover, the Hospital admits that the state court has not entered a final judgment on the
trial. (“Mosley is correct that the judgment in state court is not yet final.” (Pl. Reply in Support
of Summary Judgment [doc. 157] at p. 11)). Without a final judgment, the Hospital cannot
establish the elements of collateral estoppel. The Hospital’s Motion is therefore DENIED as it
relates to the state court judgment.
The Hospital has a second theory of collateral estoppel. On January 14, 2016, this Court
entered an Order granting Dr. Mosley’s motion to voluntarily dismiss his counterclaims for fraud
and misrepresentation. [doc. 159]. The Hospital claims that Dr. Mosley’s voluntary dismissal
bars him from bringing the allegations as defenses. In a supplemental brief [doc. 164], the
Hospital relies on a Second Circuit case, Saud v. Bank of New York, as “dispositive” support of
its argument that dismissal of a fraud claim precludes a fraud defense. 929 F.2d 916, 917 (2d Cir.
1991). In Saud, a bank obtained a default judgment against a guarantor on a defaulted loan after
the guarantor failed to respond to the bank’s motion for summary judgment. The guarantor then
brought a separate RICO action against the bank, claiming that the bank’s illegal lending
practices had induced him to act as a guarantor on the loan. The Second Circuit looked to the
plaintiff’s pleadings in the earlier guaranty suit, in which he made similar allegations as
affirmative defenses. The court stated that “the presence of the facts essential to Saud’s RICO
claims [was] amply demonstrated by Saud’s submissions in the Guaranty Action.” Id. at 919.
The court determined that res judicata precluded the plaintiff’s suit because he could have raised
the RICO claim in the prior case.
This Court fails to see the parallel between the present case and Saud. Saud involved two
separate lawsuits, wherein the plaintiff was barred from litigating a claim in the second that he
neglected in the first. The plaintiff’s actions did not preclude an affirmative defense in the same
case; they precluded a claim in a subsequent case. That is entirely different from the posture of
this action, and the Hospital presents no case in which a dismissed counterclaim bars a defense
involving common facts in the same action. Further, as discussed above, it is not clear what facts
were considered in the state court litigation.
The logical extension of the Hospital’s argument—that any plaintiff who dismisses a
claim thereby forfeits facts in his own defense—would force claimants to pursue claims and
damages even where they are unwarranted. This would be a powerful weapon for savvy lawyers,
and one in direct conflict with the foundational rule that a plaintiff is the master of his claim. The
Court is not willing to exercise such control over a litigant’s claims, nor give that control to his
opponent. Collateral estoppel imposes limits on a claimant’s ability to re-assert certain claims, it
does not preclude him from defending himself in the same action.
Finally, the Hospital’s argument that a voluntary dismissal of claims operates as a final
judgment on the merits because it cannot be appealed is unpersuasive. There is no Tennessee law
requiring that a final judgment for the purposes of an appeal will always be a final judgment for
purposes of collateral estoppel. Rule 54.02 of The Tennessee Rules of Civil Procedure provides:
When more than one claim for relief is present in an action, whether as a claim,
counterclaim, cross-claim, or third party claim, or when multiple parties are
involved, the court, whether at law or in equity, may direct the entry of a final
judgment as to one or more but fewer than all of the claims or parties . . . In the
absence of such determination and direction, any order or other form of decision,
however designated, that adjudicates fewer than all the claims or the rights and
liabilities of fewer than all the parties shall not terminate the action as to any of
the claims or parties, and the order or other form of decision is subject to revision
at any time before the entry of the judgment adjudicating all the claims and the
rights and liabilities of all the parties. 5
Tennessee courts are also clear that a judgment is final only “when it decides and
disposes of the whole merits of the case leaving nothing further for the judgment of the court.”
Richardson v. Tennessee Bd. of Dentistry, 913 S.W.2d 446, 460 (Tenn. 1995). In this instance,
the Plaintiff’s claims remain pending and the order dismissing Dr. Mosley’s claims [doc. 157]
expressly provides it did not determine the merits of his affirmative defenses. There has been no
final judgment in this case, and collateral estoppel does not apply.
5
Tennessee’s rule on judgments differs from the Fed. R. Civ. Pro. 54(b) only in its choice of words. The effect is identical.
(b) Dr. Mosley’s “New” Theory Of Fraud
The Hospital then argues that Dr. Mosley failed to disclose his defense that the Hospital
defrauded him. It claims that Dr. Mosley’s assertion that the Hospital concealed the fact that Dr.
Elizondo was losing money is a brand new allegation and should be barred. (Pl. Reply [doc. 157]
at p. 1]. The argument is rejected. Dr. Mosley’s Second Amended Counter-Claim asserted that
the Plaintiff provided him with “inaccurate, inflated, and/or false” statements regarding Dr.
Elizondo’s income and that he relied on those statements as proof of his anticipated income.
[doc. 31 at ¶¶ 34-36]. The fact that Dr. Mosley did not state the exact amount by which the
statements were inflated is immaterial.
(c) The Merits of Dr. Mosley’s Defenses
The Hospital next challenges the merits of Dr. Mosley’s affirmative defenses on their
own feet. A party seeking to prove fraudulent inducement must show that the defendant:
(1) made a false statement concerning a fact material to the
transaction (2) with knowledge of the statement's falsity or utter
disregard for its truth (3) with the intent of inducing reliance on the
statement, (4) the statement was reasonably relied upon, and (5) an
injury resulted from this reliance.
Baugh v. Novak, 340 S.W.3d 372, 388 (Tenn. 2011) (citing Lamb v. MegaFlight, Inc., 26 S.W.3d
627, 630–31 (Tenn.Ct.App.2000)); Ingram v. Cendant Mobility Fin. Corp., 215 S.W.3d 367, 371
(Tenn. Ct. App. 2006). The elements of negligent misrepresentation are similar, with the critical
difference that fraud requires the representation to be made knowingly. To prove negligent
misrepresentation, a party must show that:
(1) the defendant is acting in the course of his business, profession,
or employment, or in a transaction in which he has a pecuniary (as
opposed to gratuitous) interest; and
(2) the defendant supplies faulty information meant to guide others
in their business transactions; and
(3) the defendant fails to exercise reasonable care in obtaining or
communicating the information; and
(4) the plaintiff justifiably relies upon the information.
Robinson v. Omer, 952 S.W.2d 423, 427 (Tenn. 1997). Additionally, the false information must
‘consist of a statement of a material past or present fact.’” McElroy v. Boise Cascade Corp., 632
S.W.2d 127, 130 (Tenn. Ct. App. 1982) (citations omitted). Thus, “statements of opinion or
intention are not actionable,” and “representations concerning future events are not actionable
even though they may later prove to be false.” Id.; see also Freightliner of Knoxville, Inc. v.
DaimlerChrysler Vans, LLC, 438 F. Supp. 2d 869 (2006) (finding that an actionable
misrepresentation must consist of a material past or present fact and cannot be based on opinion
or conjecture as to future events). Concealment of material facts can be a form of fraud or
misrepresentation. Homestead Grp., LLC v. Bank of Tennessee, 307 S.W.3d 746, 751 (Tenn. Ct.
App. 2009).
During the negotiations, Dan Buckner represented to Dr. Mosley that the Clinic’s
estimated operating expenses for 2011 would be $234,000 excluding a nurse practitioner’s
salary, or $355,344 including one. [doc. 138-1]. Mr. Buckner also provided him with a chart,
representing that it reflected Dr. Elizondo’s collections during his first six months of practice in
January – July 2010. The Hospital does not deny providing the chart, but notes that it was for Dr.
Elizondo’s last six months of practice. The parties submitted the chart as evidence. [doc. 143-4].
It consists of a simple bar graph and three-column chart stating Dr. Elizondo’s “Actual
Collections” from January to June 2010, which totaled $275,126. The chart next listed the
“Projected Collections” for July through June 2012, assuming the practice continued to grow at a
rate of 7.44% per month. The total for the actual and projected collections is $411,419.
On June 2, 2011, Tisha Rader provided Dr. Mosley the same chart in an attachment to an
e-mail. (Rader e-mail 06/02/2011 and attachment [doc. 143-4]). Ms. Rader’s e-mail reads,
“Attached are Dr. Elizondo’s collections you requested. Please let me know if you have any
questions.” (Id.) The attachment also contained a second page, a billing spreadsheet, purportedly
supporting the figures on the chart. [see doc. 43-4]. Without instruction on how to interpret the
spreadsheet, it is difficult to determine how the figures were calculated, but it is clear that the
numbers do not match up exactly. For example, the chart lists Dr. Elizondo’s Actual Collections
for January 2010 as $36,980, but this figure does not appear anywhere on the spreadsheet; the
same is true for all of the figures listed. As it turns out, the figures on the chart represented the
collections of Dr. Elizondo and a nurse practitioner, Mr. Enroth. (Mosley Depo. [doc. 143-1] at
p. 390). There is no indication of Mr. Enroth in the chart itself, but his collections are reflected
separately in the spreadsheet. Dr. Mosley does not dispute the accuracy of the chart and
spreadsheet, but contends he did not understand that the chart included Mr. Enroth’s collections.
He asserts that he relied on the figures in his decision to enter the Agreement because he
believed that they were representative of his future earning potential as an orthopedic surgeon in
Shelbyville. The Hospital claims that Dr. Mosley cannot establish fraud and/or misrepresentation
because the information reporting Dr. Elizondo’s collections did not concern an existing fact.
The Hospital is correct in arguing that Dr. Mosley cannot claim he relied on the
Hospital’s projections of his future earnings because they are not statements of fact. However,
the Hospital’s representations of past collections—Dr. Elizondo’s collections from January to
July 2010 and his growth rate during that period—were representations of past facts. Dr. Mosley
alleges the chart and estimated operating costs led him to believe that the Clinic was profitable,
when it was actually operating at a loss. In other words, the falsity was not merely the figures on
the chart, nor the statement of the Clinic’s operating costs, but the logical conclusion to be drawn
from the pair—that the Clinic was profitable. Dr. Mosley claims he relied on that representation,
which proved to be false, in concluding that his own practice would be profitable. This is
permissible. It does not, however, determine the truth of the Hospital’s statements. If Dr. Mosley
relied on accurate figures to predict his future earnings, the statements would not be actionable if
his predictions failed to materialize. There is a question of fact as to whether the statements were
accurate, e.g., whether Mr. Buckner falsely represented to Dr. Mosley that the collections were
Dr. Elizondo’s alone.
However, even assuming a misrepresentation was made, Dr. Mosley must still prove that
he reasonably relied on it in entering the contract. In determining whether a party reasonably
relied on a statement, the court will look to “[the party’s] business expertise and sophistication,
the availability of the relevant information, and the opportunity to discovery the fraud.” Allied
Sound, Inc. v. Neely, 58 S.W.3d 119, 122 (Tenn. Ct. App. 2001) (internal quotations omitted).
Generally, a party dealing on equal terms with another is not justified in relying upon
representations where he has the means of knowledge within his reach. Soloman v. First
American Nat'l Bank of Nashville, 774 S.W.2d 935, 943 (Tenn. Ct. App. 1989). Tennessee courts
place the burden of investigation on the party claiming fraud, stating that:
“[Where a party to a contract] has the opportunity by investigation
or inspection to discover the truth with respect to matters
concealed or misrepresented, without prevention or hindrance by
the other party, of which opportunity he is or should be aware, and
where he nevertheless fails to exercise that opportunity and to
discover the truth, he cannot thereafter assail the validity of the
contract for fraud, misrepresentation or concealment with respect
to matters which should have been ascertained, particularly where
the sources of information are furnished. . . .
Goodall v. Akers, No. M200801608COAR3CV, 2009 WL 528784, at *7 (Tenn. Ct. App. Mar. 3,
2009) (citations omitted); See also Allied Sound, 58 S.W.3d at 122 (finding that plaintiff with
notice of conditions on lease should have inquired as to their content). In McNeil v. Nofal, the
Tennessee Court of Appeals considered a contract to sell a retail market and its inventory. 185
S.W.3d 402, 409 (Tenn. Ct. App. 2005). Prior to the sale, the seller disclosed some sales
information. Although it was not the most recent information, the seller felt that it was a fair
representation of the store’s sales potential. After the purchase, the buyer discovered that the
market’s sales were in fact lower than the figures the seller had provided. The trial court
determined that the seller had not been clear that the figures were outdated and had negligently
misrepresented the market’s viability. However, the appellate court determined that the buyer
had not reasonably relied on the information because he had not exercised his contractual right to
request sales verification. The court also noted that the buyer had experience in similar
transactions and had independently investigated the market. Id. at 409.
There is a dispute as to whether Dr. Elizondo’s practice was too dissimilar from Dr.
Mosley’s to be comparable for the purposes of reasonable reliance. The Hospital argues that Dr.
Mosley could not have relied on the spreadsheet to predict his own collections because the
spreadsheet represented Dr. Elizondo’s last six months in an established practice, whereas Dr.
Mosley would be starting a practice from scratch. Dr. Mosley testified that he would not expect a
new practice to generate the same profits as an established one and that there would be some
“ramp up.” (Mosley Depo. [doc. 143-1] at p. 403). However, Dr. Mosley testified that Mr.
Buckner told him the figures on the chart represented Dr. Elizondo’s first six months of practice.
(Mosley Depo. [doc. 151-2] at p. 384). Nonetheless, he knew that Dr. Elizondo had entered into
an established practice, whereas he would be beginning a new practice. He testified that
comparing collections of an established practice to collections of a brand new practice would be
“talking about apples and oranges.” (Id.)
The labored focus on whether the chart represented Dr. Elizondo’s first or last six months
of practice and whether those months would be comparable to Dr. Mosley’s practice is
somewhat puzzling. Dr. Mosley has not claimed that he entered the Agreement based solely on
what he expected to earn in the first six months. A party contracting for a three-year term of
employment would consider three years of potential earnings, not only his earnings over the first
six months. It is not unreasonable that Dr. Mosley would use the collections of an established
practice in the area to calculate his own anticipated collections after the “ramp up” period. In
fact, the Agreement’s “Cash Collections” scheme contemplated this scenario—it was expected
that Dr. Mosley’s collections would increase as his practice became established. Therefore,
although Mosley’s and Elizondo’s practices would be initially dissimilar, it was reasonable to
believe that the gap would close over time. Dr. Mosley’s testimony is not inconsistent with
reliance.
However, while reliance on this type of information is not unreasonable, reliance on this
specific information was unreasonable under the circumstances. The facts of this case are
analogous to the McNeil case. As noted, Dr. Mosley is an educated man with experience in his
field. This was not Dr. Mosley’s first contract to practice medicine. (Mosley Depo. [doc. 143-1]
at p. 313). It was not a small contract, nor was it entered in a hurry—the course of the
negotiations shows that Dr. Mosley was given plenty of time to consider the deal and that he was
capable of intelligent review.
Further, Dr. Mosley does not dispute that he received the e-mail from Ms. Rader that
contained the chart and spreadsheet 6. Had Dr. Mosley exercised any diligence in reviewing the
spreadsheet, he would have easily discovered that the figures did not square or at least have
reason to question the underlying information. Despite Ms. Rader’s invitation for questions, he
did not attempt to clarify the chart. He did not ask for additional information. Although Dr.
Elizondo’s collections were only reported through July 2010 and Dr. Mosley received the chart
in June 2011, he did not ask for more recent information or inquire as to why the collections
stopped in July7. (Mosley Depo. [doc. 143-1] at p. 385-86). Parties to a contract have a duty to
educate themselves on the information that is available to them and cannot claim to blindly rely
on unsupported representations. McNeil, 185 S.W.3d at 409-10. Dr. Mosley had information that
contradicted his understanding of the chart and he had full opportunity to request clarification.
His failure to exercise that opportunity was a failure to meet his duty of due diligence under
Tennessee law. Simply stated, Dr. Mosley cannot avoid his contractual responsibilities by
claiming ignorance when he had every opportunity to protect himself.
He also could have asked for additional information on Dr. Slusher, another physician at
the Clinic, whose numbers were also listed on the spreadsheet. He testified that Mr. Buckner told
him Dr. Elizondo’s collections would be the most comparable, but further testified that he
personally considered Dr. Slusher “to be the most relevant person to me.” (Mosley Depo. [doc.
143-1] at p. 378). Dr. Mosley claims that the Hospital concealed Dr. Slusher’s records from him,
but he met personally with Dr. Slusher and had the opportunity to ask him about his collections
6
Dr. Mosley admits that he received the e-mail from Ms. Rader (Mosley Depo. [doc. 151-2] at p. 376), but claims that he
did not see the spreadsheet (Mosley Depo. [doc. 151-2] at p. 389).
7
(Mosley Depo. [doc. 151-2] at p. 385). There was reason to question whether the figures were for Dr. Elizondo’s first six
months of practice, since the figures listed for July – December 2010 were “projected,” but should have been actualized by
the time Dr. Mosley received the information in June 2011. At the least, this should have led Dr. Mosley to realize that
there was missing information and/or that the figures were not as he believed.
and did not do so. Dr. Mosley had the means to “obtain the information needed and discover any
fraud if he had simply asked[.]”Allied Sound, 58 S.W.3d at 122. Dr. Mosley is responsible for his
own negligent failure to investigate.
Dr. Mosley must also show that Dr. Elizondo’s reported collections induced him to make
a decision that he would not have otherwise made. Misrepresentations must be “material so as to
determine the conduct of the parties seeking relief.” Jackson v. Travelers Ins. Co. of Hartford,
Conn., 403 F. Supp. 986, 996 (M.D. Tenn. 1975) aff'd and modified sub nom. Edwards v.
Travelers Ins. of Hartford, Conn., 563 F.2d 105 (6th Cir. 1977). Dr. Mosley testified that he
relied on several sources of information in estimating his future collections. He undertook
independent research on his projected earnings. He called other physicians in the area and
researched what services were available in Tennessee. (Mosley Depo. [doc. 143-1] at p. 378-79).
From his investigation, he felt that $75,000 in monthly revenue was a reasonable expectation.
(Id. at p. 378-79). He thus felt that Mr. Buckner’s estimates (based on Elizondo’s collections)
were inaccurate and reached his own conclusion as to what he would likely earn. (Id. at p. 37980). Moreover, Dr. Mosley could not testify that he would not have entered into the Agreement if
he had known that the chart included Mr. Enroth’s collections. (Id. at p. 408). Dr. Mosley’s
alleged reliance on the representations of Dr. Elizondo’s collections was unreasonable.
Finally, the Hospital argues that Dr. Mosley cannot establish fraud and/or
misrepresentation regarding the availability of imaging services because the statements were not
untrue when made. In his initial pleadings, Dr. Mosley asserted that:
•
The Hospital represented that x-ray imaging services and facilities would be
available for his use. [doc. 31 at ¶ 5].
•
Dr. Mosley relied on the availability of the services in deciding to move his
practice to Shelbyville. (Id. at ¶ 41).
•
Following a rental dispute between the Clinic and Dr. Mosley, Dr. Mosley’s
favorable position on opening a new orthopedic surgical suite, which the Clinic
opposed, and Dr. Mosley’s statement to the Department of Labor regarding a
dispute between the Clinic and another physician, the Clinic closed the imaging
facilities in February 2013. [doc. 31 at ¶ 14, 20]. Dr. Mosley asserted that the
action was taken in retaliation. (Id.)
Where an alleged fraud is based on a failed promise, Tennessee recognizes the claim of
promissory fraud. Rather than showing that the defendant made a false statement of existing fact,
a party seeking to prove promissory fraud must show that the defendant made a promise of future
conduct with the present intention not to follow through. Fowler v. Happy Goodman Family, 575
S.W.2d 496, 499 (Tenn. 1978). However, a mere failure to comply with a promise will not
support promissory fraud. Claimants must show the defendant’s lack of intent “by evidence other
than subsequent failure to keep the promise or a subjective surmise or impression of the
promisee.” Stacks v. Saunders , 812 SW.2d 587 (Tenn. App. 1990) (quoting Farmers &
Merchants Bank v. Petty, 664 S.W.2d 77, 81 (Tenn. Ct. App. 1983).
Dr. Mosley does not offer any proof that the Hospital lacked the intent to provide x-ray
imaging services when it executed the Recruitment Agreement. By Dr. Mosley’s own pleadings,
the Hospital intended to keep its promise until decided to retaliate against Dr. Mosley in
February 2013, roughly eighteen months after Dr. Mosley moved his practice to Shelbyville. Dr.
Mosley also testified that he did not believe the Hospital intended to make a false promise in
2011:
Q: So, in 2011, before you signed any contracts, when Buckner
said there will be x-ray services, do you think he meant what he
said?
A: Absolutely.
Q: No reason to think that he was lying to you at that time?
A: No.
Q: [] Do you have any reason to think he was lying to you at the
time?
A: I thought Dan Buckner was telling me the truth when he said xray services were there, were going to be there.
Q: Now, in hindsight, do you think Dan Buckner was lying to you?
A: No. I think Dan Buckner was still telling the truth, because like
I said, every time I needed x-ray services there, they were provided
up until March the 1st, 2013.
(Mosley Depo. [doc. 143-1] at p. 259-60). Dr. Mosley has not made a prima facie showing of
promissory fraud based on the Hospital’s failure to provide x-ray imaging services.
CONCLUSION
Based on the foregoing, the Court finds:
(1) there was a meeting of the minds as to the August 5, 2011 Recruitment Agreement;
(2) Dr. Mosley breached the Agreement when he missed more than ten consecutive days of
work in late 2012;
(3) Dr. Mosley’s affirmative defenses of fraud and misrepresentation fail on their merits.
Accordingly, the Defendant’s Motion for Summary Judgment [doc. 137] is DENIED; the
Hospital’s Motion for Summary Judgment on its Breach of Contract Claim [doc. 140] is
GRANTED, except as to damages; the Hospital’s Motion for Summary Judgment Dismissing
Plaintiff’s Defenses for Fraud and Misrepresentation is hereby GRANTED [doc. 143].
The Plaintiff will submit proof of its damages no later than April 8, 2016. Defendant shall
respond with any objections no later than May 23, 2016. A hearing on damages will be
scheduled thereafter.
To the extent that Plaintiff seeks recovery of attorneys’ fees, it shall submit a separate motion
in accordance with Rule 54 of the Federal Rules of Civil Procedure.
IT IS SO ORDERED.
Enter:
s/ Thomas W. Phillips
UNITED STATES DISTRICT JUDGE
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