Schell v. Lifemark Hosps. of Mo.,
No. WD #59826 (Mo. Ct. App. Oct. 31, 2002)

A physician with an employment contract to provide medical services to patients provided by the employer hospital sued for breach of contract, alleging that the hospital did not pay the severance pay owed to him under the contract. The agreement contained a provision stating that failure to renegotiate the incentive pay provisions by the annual anniversary of the agreement would constitute termination of the agreement without cause. In addition, the agreement provided that "without cause" terminations triggered severance pay provisions. Following protracted negotiations over the incentive pay provisions which extended three months beyond the anniversary date, the physician invoked the clause and notified the hospital that the failure to come to terms constituted termination without cause. The trial court held that the physician was not entitled to severance pay because each side had violated the covenant of good faith and fair dealing in the negotiations. The Missouri Court of Appeals reversed, holding that the physician had not violated his duty to act in good faith and that he had not acted to hinder or prevent the hospital from renegotiating the terms. The court held that the mere fact that the changes that the physician suggested would increase his salary did not equate to acting in bad faith.