Saint Alphonsus Diversified Care Inc. v. MRI Assocs. (Summary)

BREACH OF CONTRACT

Saint Alphonsus Diversified Care Inc. v. MRI Assocs., No. 40012-2012 (Idaho Aug. 4, 2014)

The Supreme Court of Idaho affirmed a jury’s verdict awarding $52 million to a magnetic resonance imaging (“MRI”) center against a hospital for breach of contract and tortious conduct, holding that the jury’s conclusions were based on sufficient evidence. Plaintiff, an MRI center, entered into a partnership agreement with the hospital to provide MRI services at various locations. Included in the partnership agreement was a provision that, in the event of disassociation, the hospital would not compete with the MRI center for one year. In spite of their agreement, the hospital began discussing a new partnership agreement with the MRI center’s biggest competitor, and even persuaded the MRI center from opening a facility around the competitor. Subsequently, the hospital disassociated with the MRI center and entered into a partnership agreement with the competitor and immediately began competing with the MRI center. The MRI center brought this action in which it claimed breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duties that arise from the partnership.

The court held the jury had sufficient, competent evidence to find that the hospital breached its contract and tortiously interfered with the MRI center. The court stated that evidence was presented from which the jury could conclude that the hospital decided its long-term plan was to partner with the competitor and the plan was implemented before the yearlong prohibition from competing had concluded.   Furthermore, the hospital dissuaded the MRI center from opening a facility around the competitor resulting in more lost profits to the MRI center.

As to the breach of fiduciary duties claim, the court held that the lower court erred by allowing the jury to decide it. The court stated that the fiduciary duties partners owe each other terminates at disassociation. However, the error was moot and the hospital was not prejudiced by it because the jury award of damages for breach of fiduciary duties was identical to the jury’s award for the breach of contract claims.