SAINT ALPHONSUS DIVER. CARE v. MRI ASSOC. No. 34885-2007.
224 P.3d 1068 (2009)
SAINT ALPHONSUS DIVERSIFIED CARE, INC., an Idaho nonprofit corporation, Plaintiff-Appellant, v. MRI ASSOCIATES, LLP, an Idaho limited liability partnership, Defendant-Respondent. MRI Associates, LLP, an Idaho limited liability partnership, on its own behalf, and on behalf of MRI Limited, an Idaho limited partnership, and MRI Mobile Limited, an Idaho limited partnership, Counter claimant-Respondent, v. Saint Alphonsus Diversified Care, Inc., an Idaho nonprofit corporation; and Saint Alphonsus Regional Medical Center, Inc., Counter defendants-Appellants.
Supreme Court of Idaho, Boise, August 2009 Term.
Opinion Denying Rehearing January 12, 2010.
Jones Day, Washington, D.C.; Gjording & Fouser, PLLC, Boise; and Givens Pursley LLP, Boise, for appellants. Donald B. Ayer argued.
Banducci Woodard Schwartzman PLLC, Boise, for respondent. Thomas A. Banducci argued.
EISMANN, Chief Justice.
This is an appeal from a judgment against a general partner for wrongful dissociation, breach of a noncompete clause, breach of the covenant of good faith and fair dealing, intentional interference with prospective contractual relations or business expectations, breach of fiduciary duties, and civil conspiracy. We vacate the judgment and remand this case for further proceedings.
Doctors of Magnetic Resonance, Inc.; Saint Alphonsus Diversified Care, Inc.;
For years following the creation of MRIA, physicians at St. Alphonsus used MRI Center to produce MRI scans and radiologists from the Saint Alphonsus Radiology Group, also known as Gem State Radiology (GSR), to read the scans. The radiologists organized as GSR were under an exclusive contract to serve the professional radiological needs of St. Alphonsus's patients.
In 1998, the radiologists at GSR began planning to construct and operate an outpatient medical imaging facility that would provide a full range of medical imaging services, including both MRI imaging and other imaging services that were not provided by MRI Center. After GSR had acquired land in downtown Boise, it disclosed its plans to St. Alphonsus and encouraged it to become involved in the project. Thereafter, there were unsuccessful negotiations among the
The radiologists formed the partnership Intermountain Medical Imaging, LLC (Intermountain Imaging), which began operating on September 1, 1999. On July 1, 2001, Saint Alphonsus became a partner in the non-MRI part of the business of IMI.
On February 24, 2004, Saint Alphonsus Diversified Care, Inc. gave notice to MRIA that it would dissociate from the partnership effective on April 1, 2004, and on October 18, 2004, it filed this lawsuit seeking a judicial determination of the amount it was entitled to receive for its interest in MRIA. MRIA responded by filing a multi-count counterclaim against Saint Alphonsus Diversified Care, Inc., and against St. Alphonsus
Ultimately, the case went to a jury trial on the remaining causes of action in MRIA's counterclaim alleging causes of action for wrongful dissociation, breach of a noncompete clause, breach of the covenant of good faith and fair dealing, intentional interference with prospective contractual relations or business expectations, breach of fiduciary duties, and civil conspiracy. The jury found St. Alphonsus liable on all causes of action, and awarded damages of $63.5 million. The district court reduced the verdict to $36.3 million after determining that the jury had totaled damage awards on two alternative theories. The court also denied St. Alphonsus's motions for a judgment notwithstanding the verdict or a new trial. St. Alphonsus then timely appealed.
1. Did the district court err in holding that St. Alphonsus wrongfully dissociated from MRIA?
2. Did the district court err in submitting to the jury the issue of whether the partnership agreement contained a definite term?
3. Did the district court err in admitting into evidence a memorandum that included a reference to legal advice received by St. Alphonsus?
4. Did the district court err by admitting into evidence a settlement offer made by MRIA?
5. Must the award of damages be vacated because it includes damages sustained by nonparties?
6. Must the award of damages be vacated because it includes lost profits beyond the term of the partnership?
7. Must the award of damages be vacated because there was insufficient evidence to support the award of lost profits?
8. Does the evidence support an award of damages based upon the value of MRIA?
9. Did the district court err in denying MRIA's motion to amend to add a claim for punitive damages?
10. Did the district court err in dismissing MRIA's antitrust cause of action?
11. Is either party entitled to an award of attorney fees on appeal?
A. Did the District Court Err in Holding that St. Alphonsus Wrongfully Dissociated from MRIA?
St. Alphonsus dissociated from MRIA on April 1, 2004. MRIA included in its counterclaim a cause of action for wrongful dissociation alleged under two theories: (a) the dissociation breached an express provision of the partnership agreement and (b) the partnership agreement had a definite term and the dissociation occurred prior to the expiration of that term. MRIA and St. Alphonsus both filed motions for partial summary judgment on that cause of action. The district court granted MRIA's motion for summary judgment, holding that St. Alphonsus's dissociation was wrongful because it breached an express provision of the partnership agreement. The court did not discuss the alternative theory that the dissociation occurred prior to the expiration of the definite term of
"A partner who wrongfully dissociates is liable to the partnership and to the other partners for damages caused by the dissociation." I.C. § 53-3-602(c). A partner's dissociation is wrongful if "[i]t is in breach of an express provision of the partnership agreement." I.C. § 53-3-602(b)(1). Whether there is an express provision in the partnership agreement that was breached by the dissociation is an issue of law over which we will exercise free review. See Howard v. Perry, 141 Idaho 139, 142, 106 P.3d 465, 468 (2005) ("Whether a contract is ambiguous is a question of law over which we exercise free review."). The partnership agreement was effective on April 26, 1985. Because of a subsequent change in the applicable law, it is necessary to first discuss how the agreement is to be viewed when addressing this issue.
When the parties entered into the partnership agreement, the applicable law in Idaho was the "Uniform Partnership Law" (UPL), former I.C. §§ 53-301 et seq.
In 1998, the UPL was repealed effective July 1, 2001, and the "Uniform Partnership Act (1996)" (RUPA), I.C. §§ 53-3-101 et seq., was enacted effective January 1, 2001.
Under the RUPA, "[a] partnership is an entity distinct from its partners." I.C. § 53-3-201(a). An association of two or more persons to carry on as co-owners a business for profit forms a partnership; they are not the partnership. I.C. § 53-3-202(a). A partner who chooses to withdraw from the partnership is dissociated, I.C. § 53-3-601(1), but "[t]he dissociation of the partner does not require the dissolution of the partnership and the winding up of its affairs." Costa v. Borges, 145 Idaho 353, 357, 179 P.3d 316, 320 (2008). A partner has the power to dissociate at any time, rightfully or wrongfully. I.C. § 53-3-602(a). If a partner wrongfully dissociates, a majority in interest of the remaining partners can, within ninety days, agree to continue the partnership, I.C. § 53-3-801(1) & (2)(i), but they will have to purchase the dissociating partner's interest. I.C. § 53-3-701.
The relevant provision of the partnership agreement is as follows:
When deciding whether St. Alphonsus's dissociation was wrongful, the district court considered only the first sentence in section 6.1 of the agreement. It concluded that the words "Any Hospital Partner may withdraw from the Partnership at any time if" followed by four defined circumstances was an express provision limiting the circumstances under which St. Alphonsus could rightfully dissociate. The court reasoned as follows:
The district court picked one definition of the word "if" ("on condition that") and concluded that section 6.1 established the conditions that must exist before a hospital partner could withdraw from the partnership without breaching the agreement. Another definition rejected by the court would also be consistent with the context. The sentence could be read to state that the hospital partner may withdraw in the event that one of the listed events occurs. For example, the second sentence of the section begins, "In the event that a Hospital Partner withdraws. . . ." It would not change the meaning to substitute "If" for "In the event that." The district court found some support for its interpretation by the section title, "Conditions for Withdrawal." However, the word "conditions" is synonymous with "circumstances." Roget's II: The New Thesaurus 164 (Houghton Mifflin Co.1988). With "if" and "conditions" given these alternative meanings, the section is not an express provision limiting the circumstances under which St. Alphonsus could withdraw without breaching the partnership agreement.
With these meanings, the section would provide that St. Alphonsus could withdraw from the partnership in the event that any of four circumstances occurred. To conclude it prohibited withdrawal unless one of those four circumstances occurred, one would have to apply the maxim expressio unius est exclusio alterius (the expression of one thing is the exclusion of another). "When certain persons or things are specified in a law, contract, or will, an intention to exclude all others from its operation may be inferred." Black's Law Dictionary 581 (6th ed.1990). Application of the maxim is not mandatory. Hewson v. Asker's Thrift Shop, 120 Idaho 164, 166-67, 814 P.2d 424, 426-27 (1991). However, even if that maxim were applied to infer that these four circumstances were exclusive, that would not be an express provision limiting the circumstances in which St. Alphonsus could rightfully dissociate.
In Asker's Thrift Shop, a statute granted an injured employee "the right to have a physician or surgeon designated and paid by himself present at an examination by a physician or surgeon so designated by the employer." The employer's surety arranged for the employee to undergo a panel evaluation by a psychiatrist and neurologist, and the employee refused to undergo the examination unless either she could tape record it or her former husband could observe it. The Industrial Commission applied the maxim expressio unius est exclusio alterius and concluded that the statute only permitted the employee to have either a physician or surgeon present during the examination. It then dismissed the employee's case for refusing to submit to the examination, and she appealed. We held that the statute did not limit whom the employee could have present during the examination. We stated:
120 Idaho at 167, 814 P.2d at 427 (emphasis added). If we inferred that the listing of four circumstances excluded all others, it would not be an express provision limiting the circumstances under which St. Alphonsus could withdraw from the partnership.
It is also necessary to consider the section in the context of the UPL to see if there was a reason for the provision other than limiting the circumstances under which a hospital could withdraw from the partnership without breaching the agreement. The four circumstances listed were ones beyond the control of the hospital partner in which it would, in essence, be compelled to withdraw from the partnership. They were:
Under the UPL, if St. Alphonsus withdrew the partnership would be dissolved and its affairs wound up. Absent an agreement to the contrary, the partnership property would be applied to discharge its liabilities and the surplus, if any, paid to the partners. Former I.C. § 53-338(1).
Article 6 could be read as a dissolution agreement applicable if a hospital partner was, in essence, forced to withdraw from the partnership for one of the four reasons listed. If that occurred, the partnership would be dissolved, but it would not have to be wound up. The remaining partners could continue the partnership business and pay off the withdrawing hospital partner over time. The hospital partner would receive an amount equal to the balance of its capital account, which may be more than it would receive if the partnership were wound up, and the remaining partners could have the benefit of continuing with the business.
In addition, the district court held that article 6 was ambiguous insofar as whether the dissolution agreement in that provision applied to any withdrawal by a hospital partner or only to withdrawals for one of the four reasons listed. The court held that both interpretations were equally plausible. If the dissolution agreement only applied to those four reasons, it would add credence to the interpretation that article 6 was drafted only to permit a hospital partner to withdraw if it felt compelled to do so for one of those four listed reasons and, if it did so, to recover its investment. Thus, article 6 may have been drafted to cover the most likely situations in which a hospital partner may be forced to withdraw from the partnership due to circumstances beyond its control in order to allow the hospital partner to recover its investment and to permit the remaining partners to continue with the partnership business.
Idaho Code § 53-3-602(b)(1) provides that a dissociation is wrongful if it is "in breach of an express provision of the partnership agreement." The statute does not simply provide that dissociation is wrongful if it is in breach of the partnership agreement, or if it is in breach of a provision in the partnership agreement. It is only wrongful if it breaches an express provision of the partnership agreement. We have defined the word "express" as follows: "Black's Law Dictionary defines `express' as, `[c]lear; definite; explicit; plain; direct; unmistakable; not dubious or ambiguous. Declared in terms; set forth in words. Directly and distinctly stated. Made known distinctly and explicitly, and not left to inference. `Express' means `manifested by direct and appropriate language.'" Sweeney v. Otter, 119 Idaho 135, 140, 804 P.2d 308, 313 (1990) (citations omitted). Because the provision limiting the right to withdraw rightfully must be an express provision, any doubt as to the meaning of the provision at issue must be resolved in favor of not limiting the right to withdraw. The provision of the partnership agreement at issue does not contain any prohibitive language. For example, it does not state that a hospital partner shall not withdraw from the partnership except under the specified circumstances. Likewise, it does not state that a hospital partner may only withdraw from the partnership under the specified circumstances.
St. Alphonsus was clearly prejudiced by the district court's determination that it had wrongfully dissociated from the partnership. At the beginning of the trial before opening statements, the district court instructed the jury, "The Court has already determined as a matter of law that Saint Alphonsus Diversified Care breached the MRI Associates Partnership Agreement when Saint Alphonsus Diversified Care, Inc., dissociated from MRI Associates in April of 2004." At the beginning of MRIA's opening statement, its counsel stated:
At the conclusion of the evidence, the court again instructed the jury, "The following facts are not in dispute: St. Alphonsus and MRIA were partners and entered into a Partnership Agreement in 1985. St. Alphonsus disassociated from the partnership in April of 2004, and this dissociation has been determined by the Court to be a wrongful dissociation." When instructing the jury on the cause of action for wrongful dissociation, the court instructed the jury that the elements of the existence of the contract (partnership agreement) and St. Alphonsus's breach by wrongfully dissociating had already been established, and the jury need only decide the amount of damages proximately caused by that breach. In the damages instructions, the court again instructed the jury, "The Court has already determined that Saint Alphonsus's dissociation from the partnership was wrongful" and that if MRIA was damaged the jury should award an amount that will reasonably and fairly compensate MRIA "for any benefit of the bargain that the evidence proves they have lost and was proximately caused by Saint Alphonsus's wrongful dissociation from the partnership."
"An erroneous instruction is prejudicial when it could have affected or did affect the outcome of the trial." Garcia v. Windley, 144 Idaho 539, 543, 164 P.3d 819, 823 (2007). In this case, the court's erroneous instructions regarding wrongful dissociation were prejudicial in two respects. First, the court instructed the jury that St. Alphonsus had wrongfully dissociated, and the jury need only determine the amount of damages proximately caused by such wrongful dissociation. In the special verdict, the jury found that MRIA had been damaged by that wrongful dissociation. The jury awarded damages, which were not separated by cause of action. Second, instructing the jury at the beginning of the trial that "the Court has already determined as a matter of law" that St. Alphonsus had breached the partnership agreement when it dissociated and instructing the jury at the conclusion of the evidence that the "facts are not in dispute" that St. Alphonsus's dissociation "has been determined by the Court to be a wrongful dissociation" could have affected the jury's determination on MRIA's other causes of action.
Two of the items of evidence introduced by MRIA were internal memoranda from the investment banking firm Shattuck Hammond. It had been retained to review various options under consideration by St. Alphonsus regarding its relationship with MRIA. One memorandum was dated August 22, 2001 (August Shattuck memorandum), and the other was dated September 25, 2001 (September Shattuck memorandum).
The August Shattuck memorandum included the following:
The September Shattuck memorandum included the following:
MRIA's counsel questioned St. Alphonsus's chief executive officer (CEO) extensively about St. Alphonsus's withdrawal from the partnership and about the memorandum stating that the withdrawal would likely engender litigation with MRIA. The CEO testified that she believed St. Alphonsus could rightfully dissociate under RUPA. She was asked, "[S]o, are you telling this jury that the — that you could withdraw without breaching the Partnership Agreement in 2004?" She answered, "I believe that Idaho law said that Saint Al's could withdraw from this agreement." Prior to asking the next question, MRIA's counsel stated, "We'll talk about Idaho law and your interpretation of Idaho law in a while." During the CEO's continued examination on the following day, she was asked, "It's fair to say that you
The court's instructions that the dissociation was wrongful as a matter of law coupled with the Shattuck memoranda could have caused the jury to disbelieve other testimony by the CEO. The district court acknowledged that her belief as to the legality of the dissociation would be relevant to the claims for breach of fiduciary duty and breach of the covenant of good faith and fair dealing. When the court's erroneous instructions are considered with other evidence such as the above-quoted statements from the Shattuck memoranda, the erroneous instructions could have affected the jury's determination of other causes of action.
B. Did the District Court Err in Submitting to the Jury the Issue of Whether the Partnership Agreement Contained a Definite Term?
As mentioned above, MRIA alleged its claim of wrongful dissociation under two theories. The second theory was that the partnership agreement was for a definite term and St. Alphonsus dissociated prior to the expiration of that term. Dissociation can also be wrongful if a partner withdraws by express will "[i]n the case of a partnership for a definite term ..., before the expiration of the term." I.C. § 53-3-602(b)(2). The parties disagreed as to whether the partnership agreement had a definite term.
In ruling on the parties' motions for summary judgment on the wrongful dissociation claim, the district court did not address the alternative theory that the dissociation occurred before the expiration of the partnership's definite term. The court submitted that issue to the jury, and the jury found "that Saint Alphonsus has breached the Partnership Agreement by dissociating before the end of the partnership term." On appeal, St. Alphonsus does not challenge the jury's finding. Rather, it alleges that the district court committed error by submitting the issue to the jury.
MRIA contends that St. Alphonsus cannot raise this issue on appeal because the district court never ruled on it. In response, St. Alphonsus argues that it "moved for summary judgment on MRIA's claim of wrongful dissociation based on a definite term, and the trial court declined to so order, thus effectively denying the motion and leaving the claim in the case for trial." The district court did not address the issue on the cross motions for summary judgment. MRIA had one cause of action for wrongful dissociation alleged under two theories. Having granted summary judgment to MRIA on one theory, the court apparently did not see any need to address the alternate theory. Even though an issue was argued to the court, to preserve an issue for appeal there must be a ruling by the court. De Los Santos v. J.R. Simplot Co., Inc., 126 Idaho 963, 969, 895 P.2d 564, 570 (1995). St. Alphonsus never obtained a ruling by the district court on the alternative theory for wrongful dissociation. Likewise, St. Alphonsus did not object to the trial court's jury instructions submitting the issue to the jury. By failing to object, St. Alphonsus cannot raise the issue on appeal. Jones v. Crawforth, 147 Idaho 11, 19-20, 205 P.3d 660, 668-69 (2009) (where party failed to request during jury instruction conference that a nonparty be placed on the verdict form, the failure to include the nonparty on the verdict form could not be raised on appeal). "This Court does not review an alleged error on appeal unless the record discloses an adverse ruling forming the basis for the assignment of error." Ada County Highway Dist. v. Total Success Invs., LLC, 145 Idaho 360, 368-69, 179 P.3d 323, 331-32 (2008).
St. Alphonsus argues, "Saint Alphonsus also renewed this argument post-trial, explaining that `[a]s a matter of law, the MRIA partnership was not a partnership for a term, and it was an error in law to submit this issue to the jury.'" It is too late to raise an alleged error in the jury instructions in a post-trial motion for a judgment notwithstanding the verdict or, in the alternative, a new trial. Bates v. Seldin, 146 Idaho 772, 775-76, 203 P.3d 702, 705-06 (2009). St. Alphonsus has not alleged on appeal that the
C. Did the District Court Err in Admitting into Evidence a Memorandum that Included a Reference to Legal Advice Received by St. Alphonsus?
St. Alphonsus contends that the district court erred in admitting into evidence the September Shattuck memorandum mentioned above. This memorandum is a later version of the August Shattuck memorandum, also discussed above. St. Alphonsus challenges only the admission of the September Shattuck memorandum. MRIA counters that St. Alphonsus failed to object to the admission of the memorandum at trial, and therefore cannot raise the issue on appeal. In response, St. Alphonsus asserts that it was not required to object at trial because it "filed two motions in limine to exclude from evidence the portions of the Shattuck Hammond memo that summarized its lawyer's legal advice" and the district court "twice categorically denied" the motions. According to St. Alphonsus:
St. Alphonsus's argument misstates the record.
In connection with its motion to seek punitive damages, MRIA's briefing and affidavits referred to the September Shattuck memorandum. St. Alphonsus moved to strike from the briefs and affidavits references to the memorandum, contending that it was subject to the attorney-client privilege and contained double-hearsay. During oral argument on the motion, St. Alphonsus's counsel clarified the requested relief by stating, "[W]e're not trying to preclude the whole document. We want to preclude the references to `Givens Pursley' and we want to preclude the references to the `scorched earth.'" In its memorandum decision entered on February 6, 2007, the district court ruled that St. Alphonsus had failed to prove that the memorandum was subject to the attorney-client privilege. The court explained as follows:
The court concluded by denying the motion to strike "for purposes of the motions presenting [sic] before the Court, however, this issue can be revisited as discovery in this litigation progresses." Thus, the court did
On June 5, 2007, St. Alphonsus filed a motion in limine seeking to redact portions of the September Shattuck memorandum. In its supporting memorandum, St. Alphonsus stated that it "now seeks the Court's Order, in limine, finding the portions of the Shattuck Hammond Memorandum referring to Givens Pursley LLP's analysis and the `scorched earth' language is not admissible into evidence at trial and precluding MRIA from referring to Saint Alphonsus' withdrawal from MRIA as the `scorched earth' scenario or approach." St. Alphonsus contended that the references to Givens Pursley's analysis were protected by the attorney-client privilege and that references to the "scorched earth" scenario were hearsay and prejudicial.
The motion in limine was scheduled for hearing on July 2, 2007, along with 29 other motions in the case. Time for argument was understandably short. St. Alphonsus's counsel began by stating that there were some "sensitive" phrases in the memorandum that should be stricken. The district court asked, "Your argument goes to the—to the author of that and how in any way, shape, or form that can be an admission by—by your folks?" St. Alphonsus's counsel responded, "Yes. I wanted to talk to you sometime about the admissibility—maybe redacting of parts of that memorandum, to excise those parts that we don't think are admissible." He added that "our papers" will reveal "why it is that we believe some of the information in that memorandum is inflammatory, prejudicial, and inadmissible." When MRIA's counsel responded to the motion in limine, he talked solely about the "scorched earth" scenario mentioned in the memorandum, arguing that it was admissible. In rebuttal, St. Alphonsus's counsel talked only about the "scorched earth" statement in the memorandum, arguing that it was hearsay and that there was nothing showing that anyone from St. Alphonsus or its counsel used that phrase. The district court did not announce how it would rule, but took the matter under advisement.
On July 30, 2007, the district court entered its memorandum decision granting the motion in limine. The district court identified the issue as follows: "Saint Alphonsus asks the Court to preclude MRIA from referring to Saint Alphonsus' dissociation from MRIA as the `scorched earth' scenario and finding portions of the Shattuck Hammond Memorandum inadmissible at trial." It identified what St. Alphonsus wanted stricken as follows:
The district court then wrote:
The district court did not rule on St. Alphonsus's request also to redact references to Givens Pursley's analysis from the memorandum. The court apparently overlooked that portion of the motion because nobody mentioned it or argued attorney-client privilege during oral argument on the motion.
In its reply brief on appeal, St. Alphonsus contends that in the district court's July 30, 2007 decision, it did rule on the issue of attorney-client privilege and rejected it. According to St. Alphonsus:
Again, St. Alphonsus mischaracterizes the record. The portion of the district court's July 30, 2007 decision to which St. Alphonsus refers is quoted above in context. The court's reference to its prior ruling on attorney-client privilege was simply a historical reference, as shown by its introductory statement, "Based upon the record before the Court at that time" before describing its prior ruling holding that St. Alphonsus had failed to establish grounds for deleting references to Givens Pursley and to the "scorched earth" scenario. The court began the next paragraph with the phrase, "Based upon the record presently before the Court," and then ruled that the reference to the "scorched earth" scenario would be stricken. The district court obviously included the reference to its prior ruling in order to explain why it was now ruling that the "scorched earth" reference should be redacted. Immediately following that reference, the district court stated, "The Court will grant the relief requested by Saint Alphonsus...." It did not state that the motion was granted in part and denied in part. The court's focus was entirely upon the "scorched earth" reference probably because that is what was argued in connection with the motion.
After the district court's ruling on this motion in limine, St. Alphonsus filed another motion in limine on August 3, 2007, seeking "an Order, in limine, for an Order prohibiting MRIA from using documents produced by Shattuck Hammond Advisors in MRIA's opening statement." Because the district court had not yet ruled conclusively on whether portions of the September Shattuck memorandum should be stricken because they were protected by the attorney-client privilege, St. Alphonsus could have again raised this issue in connection with this motion in limine. It did not do so.
In summary, the district court did not, by any stretch of the imagination, unqualifiedly rule on the issue of whether the memorandum, or parts of it, were covered by the attorney-client privilege. If the trial court unqualifiedly rules on the admissibility of evidence prior to trial, no further objection is necessary in order to preserve the issue for appeal. Kirk v. Ford Motor Co., 141 Idaho 697, 702, 116 P.3d 27, 32 (2005). If the trial court does not do so, however, then the party opposing the evidence must continue to object as the evidence is presented. Schwan's Sales Enters., Inc. v. Idaho Transp. Dept., 142 Idaho 826, 833, 136 P.3d 297, 304 (2006). By failing to object when the memorandum was offered into evidence during the trial, St. Alphonsus waived any objection. Gunter v. Murphy's Lounge, LLC, 141 Idaho 16, 25, 105 P.3d 676, 685 (2005).
St. Alphonsus also contends that it preserved the issue for appeal by raising it in its motion for a new trial. A motion for a new trial is not a retroactive, timely objection to evidence.
D. Did the District Court Err by Admitting into Evidence a Settlement Offer Made by MRIA?
MRIA made a settlement offer to St. Alphonsus in a letter dated March 5, 2004. Typed at the top of the letter was the statement, "CONFIDENTIAL SETTLEMENT OFFER MADE PURSUANT TO I.R.E. 408." In that letter, MRIA offered to sell MRI Center and MRI Mobile to St. Alphonsus for a net sum of $23,457,000.
During the trial, MRIA offered the letter into evidence as "a fair market valuation that goes in in the context of negotiations that were initially invited by Saint Alphonsus." St. Alphonsus objected that the letter was not admissible under Rule 408 of the Idaho Rules of Evidence. The district court overruled that objection, stating: "I think that certainly a party can, if they choose to, disclose a—quote, `an offer of compromise,' if it's for the purpose of demonstrating, `This is what we believe our company is worth,' and that was communicated to Saint Alphonsus." The court then gave St. Alphonsus a continuing objection regarding the admissibility of the letter.
After ruling that the letter was admissible, the district court gave a limiting instruction to the jury. The court stated:
The district court erred by admitting the letter into evidence. Rule 408 states:
The Rule states that an offer "is not admissible to prove liability for, invalidity of, or amount of the claim or any other claim." The letter was offered to prove liability for and/or the amount of MRIA's claim against St. Alphonsus. The Rule should be given a broad, not narrow, interpretation in order to encourage settlement negotiations. Holding that the offer of settlement was admissible not to show value, but to show that the other MRIA partners really believed their opinion as to value, is a distinction without a difference.
E. Must the Award of Damages Be Vacated because It Includes Damages Sustained by Nonparties?
Prior to trial, MRIA filed a motion seeking permission to file a second amended counterclaim and a first amended third-party complaint. It sought to amend its pleading in order to assert claims on behalf of MRI Center and MRI Mobile without making them parties to this lawsuit. The proposed pleading contained twenty claims for relief. The fourth claim for relief alleged that St. Alphonsus breached fiduciary duties owing to MRI Center and MRI Mobile and that "[a]s a result of these breaches of fiduciary duties, MRIA, in the name of MRI [Center] Limited and MRI Mobile Limited, has been damaged in an amount to be proved at trial."
St. Alphonsus objected to the proposed pleading upon the ground that MRIA could not recover damages on behalf of MRI Center and MRI Mobile. In a memorandum filed on January 4, 2007, it argued that MRI Center and MRI Mobile were "distinct legal entities" and there is no authority allowing MRIA to bring a counterclaim on their behalf.
The jury awarded damages totaling $63.5 million. In response to St. Alphonsus's motion for a new trial, the district court reduced that award to $36.3 million. The court found that the jury had combined alternative theories of damages: the purchase price of MRI Center in 2001 and lost profits. The court reduced the award to $36.3 million in lost profits because that was "the largest amount of damages that the evidence supports." The lost profits included profits lost by both MRI Center and MRI Mobile for past and future MRI scans diverted to Intermountain Imaging. MRIA did not provide any services. Its income came from management fees. MRI Center agreed to pay MRIA a management fee of $90,000 or 7.5% of its cash receipts from operations, whichever was greater. MRI Mobile agreed to pay MRIA a management fee of 7.5% of its cash receipts from operations. In addition, MRIA would receive its share of the net cash flow from the limited partnerships. MRIA's lost profits would be the management fees and its share of the net cash flow from the limited partnerships.
In Instructions 32 and 33, the district court instructed the jury that one of the issues it must determine was whether St. Alphonsus breached the fiduciary duties of loyalty and of care "to MRIA, MRI Center or MRI Mobile" and that if St. Alphonsus breached the duties of loyalty it "owes to MRIA, MRI Center or MRI Mobile, then your verdict should be for MRIA." In Instruction 34, it also instructed the jury that a party had a duty of care in its conduct of "partnership business" and "[i]f you find that Saint Alphonsus has breached the duty of care in regards to the duty Saint Alphonsus owes to MRIA, MRI Center or MRI Mobile, then your verdict should be for MRIA." During the jury instruction conference, St. Alphonsus asked that separate instructions be given regarding the breach of fiduciary duty owing to MRIA and the breach of fiduciary duty, if any, owing to the limited partnerships. The district court refused to do so, stating, "[T]he Court will decline to differentiate between or give separate instructions as to MRIA and then MRI Mobile and MRI Center, the limited liability partnerships." On the special verdict, it asked the jury, "Do you find that Saint Alphonsus breached a fiduciary duty owed to MRIA, MRI Center or MRI Mobile, as described in Instructions Nos. 32, 33, 34 and 35?" The jury answered "Yes" to that question.
St. Alphonsus contends that the damages awarded exceeded the damages incurred by MRIA. It argues on appeal, "Contrary to ordinary practice, the district court allowed MRIA to assert claims `on behalf of' Center and Mobile without joining these distinct legal entities as parties." It adds:
St. Alphonsus is correct. Idaho Code § 53-2-104(1) states, "A limited partnership is an entity distinct from its partners." Idaho Code § 53-2-105 provides, "A limited partnership has the powers to do all things necessary or convenient to carry on its activities, including the power to sue, be sued, and defend in its own name...." "This Court has clearly held that the trial court cannot enter judgment for or against the person who is not a party to the action." Valentine v. Perry, 118 Idaho 653, 655-56, 798 P.2d 935, 937-38 (1990). The limited partnerships were not parties to this action. They therefore could not recover a judgment. Although MRIA, as the general partner, had the right to manage and conduct the activities of the limited partnerships, I.C. § 53-2-406(1), and would have the power to join the limited partnerships in a lawsuit, there is a difference between having the power to have the limited partnerships join in this lawsuit and actually doing so. Because the damage award exceeded any damages suffered by MRIA and because MRIA could not recover damages on behalf of nonparties, the damage award must be vacated.
F. Must the Award of Damages Be Vacated because It Includes Lost Profits beyond the Term of the Partnership?
St. Alphonsus contends that the district judge erred by permitting MRIA to recover damages based upon MRI scans that MRI Center would have lost after December 31, 2015, the date stated in the limited partnership agreement for the expiration of its term. The partnership agreement provides, "This Agreement may be amended only through written instrument executed by the General Partner and the Limited Partners owning 75% of the outstanding Units." St. Alphonsus asserts that there is no evidence of any written amendment extending the term of the MRI Center limited partnership.
Although we will be remanding this case for a new trial, as mentioned above, MRIA's damages could include the amount it is entitled to receive as a portion of MRI Center's income. We will address this issue because it may arise again on retrial.
Idaho Code § 53-2-110(1) provides that "the partnership agreement governs relations among the partners and between the partners and the partnership." The limited partnership agreement for MRI Center provides that it can only be amended through a properly executed written instrument. The Comment to the Official Text for Idaho Code § 53-2-110 states, "The partnership agreement has the power to control the manner of its own amendment. In particular, a provision of the agreement prohibiting oral modifications is enforceable, despite any common law antagonism to `no oral modification' provisions." There was no properly executed written instrument extending the term of the MRI Center limited partnership beyond December 31, 2015.
G. Must the Award of Damages Be Vacated because There Was Insufficient Evidence to Support the Award of Lost Profits?
The lost profits evidence offered by MRIA was based upon "lost scans." MRIA's expert
In Pope v. Intermountain Gas Co., 103 Idaho 217, 646 P.2d 988 (1982), the trial court found that Intermountain Gas was liable for antitrust violations committed by it and its wholly owned subsidiary Intermountain Gas Company Properties (IGCP) when operating an insulation business under the name HomeGuard. In calculating damages, the trial court assumed that the insulation jobs done by Intermountain Gas and IGCP would have all have been done by their competitors but for the antitrust violations. It therefore calculated the damages suffered by the competitors based upon Intermountain Gas's and IGCP's gross sales figures for those jobs. In reversing, this Court held that this was not a proper manner to measure the competitors' lost profits. We held:
The concerns expressed in Pope should be considered on any retrial.
H. Does the Evidence Support an Award of Damages Based upon the Value of MRI Center?
MRIA's alternative measure of damages was the sum St. Alphonsus would have had to pay to purchase MRI Center. According to MRIA, this was an appropriate measure of damages because
The advice St. Alphonsus received from its consultants does not determine the measure of damages. This is not an action for breach of a contract to purchase MRI Center. The cost to purchase MRI Center is not the measure of damages suffered by MRIA on any of the alleged causes of action. Thus, the jury's alternative award of damages cannot be reinstated.
I. Did the District Court Err in Denying MRIA's Motion to Amend to Add a Claim for Punitive Damages?
MRIA sought to amend its pleading to add a claim against St. Alphonsus for punitive
To recover punitive damages, "the claimant must prove, by clear and convincing evidence, oppressive, fraudulent, malicious or outrageous conduct by the party against whom the claim for punitive damages is asserted." Idaho Code § 6-1604(1). "Punitive damages are not favored in the law and should be awarded in only the most unusual and compelling circumstances." Seiniger Law Office, P.A. v. North Pacific Ins. Co., 145 Idaho 241, 249, 178 P.3d 606, 614 (2008). A claim for punitive damages cannot be asserted in the claimant's pleading without the approval of the trial court. The claimant must make a pretrial motion, and, after a hearing, the trial court must conclude that the claimant has established a reasonable likelihood of proving facts sufficient to support an award of punitive damages. I.C. § 6-1604(2).
A trial court's determination that a plaintiff is not entitled to amend the complaint to claim punitive damages is reviewed for abuse of discretion. Seiniger, 145 Idaho at 250, 178 P.3d at 615. In determining whether the trial court abused its discretion in denying a motion to add a claim for punitive damages, we consider: (1) whether the judge correctly perceived that the issue was one of discretion; (2) whether the judge acted within the outer boundaries of that discretion and consistently with the applicable legal standards; and (3) whether the judge reached the decision through an exercise of reason. Id.
In this case, the district court issued a lengthy, well-reasoned opinion explaining the reasons for its decision to deny MRIA's motion to add a claim for punitive damages. The court found that there was a lack of evidence of oppressive, fraudulent, malicious or outrageous conduct on the part of St. Alphonsus. MRIA has not shown that the district court abused its discretion in making that determination.
J. Did the District Court Err in Dismissing MRIA's Antitrust Cause of Action?
MRIA alleged an antitrust claim against St. Alphonsus, based upon its partnership with Intermountain Imaging. The district court dismissed that claim on St. Alphonsus's motion for summary judgment. MRIA has cross-appealed that decision. It argues on appeal that there was sufficient evidence in the record to show that Intermountain Imaging was exercising monopoly power. MRIA relies upon statements by its expert that Intermountain Imaging receives approximately 5% more for its services than other MRI providers in the market area and that Intermountain Imaging's market share "increased from approximately 21 to 23 percent in 2001 to approximately 44 to 53 percent in 2006." Because this cause of action was dismissed on summary judgment, we must accept as true these factual allegations. Stanley v. Lennox Indus., Inc., 140 Idaho 785, 789, 102 P.3d 1104, 1108 (2004). The expert's opinions were based upon his analysis of the claims for non-hospital MRI scans paid by Blue Cross of Idaho Health Services, Inc., and Blue Shield of Idaho Health Services, Inc., at MRI facilities in Ada and Canyon Counties, Idaho, and Ontario, Oregon, and the records of Practice Management, Inc., of MRI scans provided by Intermountain Imaging.
In Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 124 S.Ct. 872, 157 L.Ed.2d 823 (2004), the United States Supreme Court set forth what must be shown to establish an offense of monopolizing or attempting to monopolize in violation of section 2 of the Sherman Act. First, the Court stated, "It is settled law that this offense requires, in addition to the possession of monopoly power in the relevant market, `the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.'" 540 U.S. at 407, 124 S.Ct. 872, 157 L.Ed.2d at 836 (quoting from United States v. Grinnell Corp., 384 U.S. 563, 86 S.Ct. 1698,
Second, the Court stated, "The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system." Id. It added, "The opportunity to charge monopoly prices-at least for a short period-is what attracts `business acumen' in the first place; it induces risk taking that produces innovation and economic growth." Id. Thus, the alleged fact that Intermountain Imaging is receiving about 5% more for its services than the market average does not show a violation of the Sherman Act. Again, MRIA's expert did not attempt to analyze whether there were any quality-based or service-based differences that could account for the allegation that Intermountain Imaging receives higher than average compensation for its services. He simply stated that he was unaware of any such differences. He assumed that if the Current Procedural Terminology codes were the same, the particular services provided were identical.
Finally, the Court stated, "To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct." Id. (emphasis theirs). MRIA does not contend that Intermountain Imaging has engaged in predatory pricing. Likewise, it does not contend that anticompetitive conduct is shown by the fact that St. Alphonsus is a partner in Intermountain Imaging. Indeed, it would be difficult for MRIA to argue that St. Alphonsus being a member of Intermountain Imaging is anticompetitive conduct, but St. Alphonsus being a partner in MRIA would not be. In addition, MRIA's expert had not done any analysis to determine whether MRIA was actually damaged by Intermountain Imaging's alleged anticompetitive conduct, nor had he done any analysis to determine whether such alleged conduct had any effect upon market share. He also did not attempt to determine whether the number of MRI scan providers in the relevant market had increased or decreased over the prior five years. St. Alphonsus offered evidence that they had increased. MRIA cannot show anticompetitive conduct merely from its allegation that it was wrongful for St. Alphonsus to have joined the Intermountain Imaging partnership in the first place. Id. at 408, 124 S.Ct. 872, 157 L.Ed.2d at 836.
The supposed anticompetitive conduct listed in MRIA's brief consisted of St. Alphonsus allegedly disparaging MRIA's services, directing patients to Intermountain Imaging in violation of a non-antitrust law, and failing to cooperate with MRIA. MRIA does not present any authority stating that any of that alleged conduct constitutes anticompetitive conduct. Generally, failing to assist or cooperate with a rival is not anticompetitive conduct. Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 408-09, 124 S.Ct. 872, 879-80, 157 L.Ed.2d 823, 836-37 (2004). Although there are very limited circumstances in which it can be, id., MRIA has not argued that those circumstances apply in this case. "[T]he antitrust laws do not require the courts to protect small businesses from the loss of profits due to continued competition, but only against the loss of profits from practices forbidden by the antitrust laws." Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 116, 107 S.Ct. 484, 492, 93 L.Ed.2d 427, 439 (1986). The district court did not err in dismissing the antitrust claim.
Finally, MRIA contends that "[t]he trial court's summary judgment ruling was also in error because it ignores this Court's decision in Twin Falls Farm & City Distributing, Inc. v. D & B Supply Co., 96 Idaho 351, 528 P.2d 1286 (1974)." The two statutes upon which that case was based were repealed in 2000. Ch. 148, § 1, 2000 Idaho Sess. Laws 377.
K. Is Either Party Entitled to an Award of Attorney Fees on Appeal?
Both St. Alphonsus and MRIA request an award of attorney fees on appeal pursuant to Idaho Code § 12-120(3). Because we are vacating the judgment and remanding this case, there is not yet a prevailing party. Once there is a final judgment, the district court can consider attorney fees incurred on appeal in making its award of a reasonable attorney fee to the prevailing party. Lexington Heights Dev., LLC v. Crandlemire, 140 Idaho 276, 287, 92 P.3d 526, 537 (2004).
We vacate the judgment and verdict and remand this case for further proceedings that are consistent with this opinion. We award costs on appeal to appellant.
Justices BURDICK, J. JONES, HORTON and Justice Pro Tem KIDWELL concur.
On Denial of Petition for Rehearing— January 12, 2010
EISMANN, Chief Justice.
MRIA has filed a petition for rehearing asking the Court to reconsider the award of costs on appeal. MRIA raises three arguments in support of its motion for reconsideration.
First, it quotes this Court's statement in the opinion that because this Court was "vacating the judgment and remanding this case, there is not yet a prevailing party." (Emphasis added by MRIA.) MRIA argues, "This finding accordingly precludes an award of costs to either party as a matter of law."
The portion of this Court's opinion quoted by MRIA was addressing the parties' requests for an award of attorney fees pursuant to Idaho Code § 12-120(3). That statute provides that the prevailing party in certain types of civil actions is entitled to an award of a reasonable attorney's fee. A prerequisite to an award of attorney fees under that statute is that the party prevail in the "civil action." In Paloukos v. Intermountain Chevrolet Co., 99 Idaho 740, 588 P.2d 939 (1978), this Court for the first time addressed the issue of awarding attorney fees under Idaho Code § 12-120(3) to a party who had prevailed on appeal, but may not prevail in the action after remand to the district court. This Court held:
Id. at 746, 588 P.2d at 945. Thus, in the instant case, we held: "Both St. Alphonsus and MRIA request an award of attorney fees on appeal pursuant to Idaho Code § 12-120(3). Because we are vacating the judgment and remanding this case, there is not yet a prevailing party."
The holding in Paloukos does not apply to the awarding of costs on appeal because costs on appeal are awarded to the prevailing party on the appeal, not the prevailing party in the civil action. I.C. § 12-107; I.A.R. 40. Therefore, costs can be awarded to the prevailing party on the appeal, even though that party may not ultimately be the prevailing party in the action. Mendenhall v. Aldous, 146 Idaho 434, 438, 196 P.3d 352, 356 (2008); Todd v. Sullivan Constr. LLC, 146 Idaho 118, 126-27, 191 P.3d 196, 204-05 (2008).
Second, MRIA contends it would be inequitable to award costs against it on appeal.
MRIA also contends that it did nothing wrong and should not be assessed $426,944.75 for the trial court's errors. These errors were the result of the trial court agreeing with arguments made by MRIA. MRIA has not shown that it would be inequitable to assess costs on appeal against it.
Finally, MRIA argues that there was no prevailing party on appeal because both parties prevailed in part. MRIA states that its position "carried the day on the issue of whether the jury should have considered whether the partnership agreement contained a definite term," and "it also obtained a favorable ruling from the Court concerning a key piece of evidence." Actually, this Court did not rule on the merits of either issue because St. Alphonsus had failed either to obtain rulings from the district court on the issues or to object at trial. See Parts III.B. and III.C. of the opinion. MRIA adds that "the result of two other important issues can best be described as a draw." It did not identify these two "important issues" other than by stating the pages on which they were addressed. They were apparently the issue regarding evidence of lost profits discussed in Part III.G of the opinion and attorney fees on appeal discussed in Part III.K. As to the first issue, we admonished the trial court to consider our holding in Pope v. Intermountain Gas Co., 103 Idaho 217, 234, 646 P.2d 988, 1005 (1982), on any retrial. As to the second, we merely held that the district court can consider attorney fees incurred on appeal in making its award of a reasonable attorney fee to the prevailing party.
St. Alphonsus appealed the judgment against it for $33,872,677.63 (after offsets and an award of costs and attorney fees) and obtained a ruling vacating that judgment. MRIA cross-appealed and lost on all issues raised by its cross-appeal. St. Alphonsus was the prevailing party on this appeal.
For the above reasons, we deny the petition for rehearing asking that we not award St. Alphonsus costs on appeal.
Justices BURDICK, HORTON and Justice Pro Tem KIDWELL concur.
J. JONES, J., specially concurring.
I fully concur in the Court's opinion regarding the denial of MRIA's petition for rehearing. It is unfortunate for MRIA that it may have to shoulder the burden of a large cost award relating to the appeal. About 97% of St. Alphonsus' cost claim is for the supersedeas bond. Because of the large amount of the jury award, the substantial number of contested issues, and the slight possibility that any judgment would prove uncollectible, it would have been prudent for MRIA to agree to forego collection procedures pending a decision on the appeal.
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