Springdale Diagnostic Clinic v. Northwest Physicians, L.L.C., and Northwest Primary Care Physicians, P.A.

ca03-103

ARKANSAS COURT OF APPEALS
NOT DESIGNATED FOR PUBLICATION
DIVISION III

CA03-103

September 17, 2003

SPRINGDALE DIAGNOSTIC

CLINIC AN APPEAL FROM WASHINGTON

APPELLANT COUNTY CIRCUIT COURT

v. [CIV 2001-329]

NORTHWEST PHYSICIANS, L.L.C., HONORABLE KIM SMITH,

and NORTHWEST PRIMARY CARE CIRCUIT JUDGE

PHYSICIANS, P.A.

APPELLEES AFFIRMED

Josephine Linker Hart, Judge

Appellant, Springdale Diagnostic Clinic, appeals from a summary judgment entered for appellees, Northwest Physicians, L.L.C., and Northwest Primary Care Physicians, P.A., in appellant's cause of action against appellees that stemmed from appellees' hiring of two physicians formerly associated with appellant. On appeal, appellant argues that the circuit court erred in concluding that there was not a remaining genuine issue of material fact in appellant's claims of conversion, tortious interference with a business expectancy, aiding and abetting a breach of fiduciary duty, and for fraud and constructive fraud. We hold that it did not err and affirm.

The sole shareholder of appellant, a professional association, is Dr. Curtis Hedberg. Other physicians, including Dr. Jennifer Bingham and Dr. Burton Bledsoe, also saw patients at appellant's clinic. Drs. Bingham and Bledsoe received no salary from appellant; instead, they were compensated by the local hospital, and in addition, they received the amount by which their collections for patient care exceeded their share of expenses, as calculated by appellant. Neither doctor was bound by a covenant not to compete. Both doctors were dissatisfied with their association with appellant, and Dr. Bingham was actively seeking alternative professional opportunities. In her quest, she contacted appellees' chief executive officer, Dr. William Kendrick. She told Dr. Kendrick that Dr. Bledsoe might also be interested in talking with him. Dr. Kendrick declined to contact Dr. Bledsoe; however, after Dr. Bledsoe made contact with him, appellees made offers of employment to both him and Dr. Bingham.

In the weeks before the doctors left appellant's business premises, and before obtaining contracts with appellees, they obtained their patient lists and appointment schedules. Dr. Bingham also invited some of appellant's support staff to a meeting at her home, during which they discussed the doctors' departure from the clinic. While the doctors did not encourage any staff members to leave their employment with appellant, Dr. Bingham told them that there would be opportunities to work with her should she terminate her business at appellant's clinic. Although both doctors anticipated and, in fact, did receive proposed future contracts of employment with appellant, they were also offered and ultimately accepted contracts with appellees. Immediately after the doctors stopped seeing patients at appellant's clinic, they signed employment contracts with appellees and moved into an office provided by appellees that was located next door to appellant. Using patient lists and appointment schedules taken from appellant's clinic, Dr. Bingham notified her patients of her inability to see them at appellant's clinic and informed them of her new location. The day following their departure, the doctors saw many of their old patients at the new office. There is no contention, however, that Dr. Hedberg's patients followed suit.

On March 13, 2001, appellant filed this action against appellees but did not name Drs. Bingham or Bledsoe as defendants. Appellant's complaint alleged that appellees sought to obtain appellant's practice by proselytizing Drs. Bingham and Bledsoe and by using stolen patient lists and appointment records taken by Drs. Bingham and Bledsoe to solicit appellant's patients. Appellant argued that appellees and Drs. Bingham and Bledsoe solicited and encouraged the patients to end their relationships with appellant. Appellant asserted claims for conversion of its business records and practice; for aiding and abetting Drs. Bingham and Bledsoe in breaching their fiduciary duty to appellant; for fraud and constructive fraud; and for tortious interference with business expectancy. Appellees filed a counterclaim for abuse of process.

Appellees moved for summary judgment on all claims and, in support of their motion, filed copies of excerpts from several depositions. In its response denying appellees' motion, appellant filed additional excerpts from several depositions and Dr. Bingham's employment contract with appellees. The circuit judge awarded summary judgment to appellees, and appellant appeals that award.

Standard of Review

We have ceased referring to summary judgment as a drastic remedy. Cumming v. Putnam Realty, Inc., 80 Ark. App. 153, 92 S.W.3d 698 (2002). We now regard it simply as one of the tools in a trial court's efficiency arsenal; however, we approve the granting of the motion only when the state of the evidence as portrayed by the pleadings, affidavits, discovery responses, and admissions on file is such that the nonmoving party is not entitled to a day in court, i.e., when there is not any remaining genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Id. The burden of proving that there is no genuine issue of material fact is upon the movant, and all proof submitted must be viewed favorably to the party resisting the motion. Id. On a summary-judgment motion, once the moving party establishes a prima facie entitlement to summary judgment by affidavits or other supporting documents, the opposing party must meet proof with proof and demonstrate the existence of a material issue of fact. Welch Foods, Inc. v. Chicago Title Ins. Co., 341 Ark. 515, 17 S.W.3d 467 (2000).

Conversion

Appellant asserts that it raised a genuine issue of material fact as to whether appellees converted its patient and appointment records in order to obtain a substantial portion of its practice. Appellant primarily focuses on the terms of Dr. Bingham's contract with appellees, which stated that patient records would remain appellees' property. Appellees' contract with Dr. Bingham, however, is irrelevant to any relationship appellant may have had with either doctor. Instead, the terms of appellant's agreements, if any, with Drs. Bingham and Bledsoe, especially in regard to the use of patient records and appointment schedules, would have been relevant. Appellant, however, failed to produce any contract with Dr. Bingham and failed to provide any evidence of the terms of any agreement with Dr. Bledsoe.

Dr. Bingham stated in her deposition that she did not consider herself to be an employee of appellant, and appellant has failed to provide any evidence to establish an employee-employer relationship. Although Dr. Bledsoe, in discovery, admitted having an employment relationship with appellant, a copy of any contract or any evidence establishing the terms of that agreement is not in the record. The evidence did not establish the respective rights of appellant or the doctors in the records that are the subject of this controversy.

The tort of conversion is the exercise of dominion over property in violation of the rights of the owner or the person entitled to possession. Grayson v. Bank of Little Rock, 334 Ark. 180, 971 S.W.2d 788 (1998); Tackett v. McDonald's Corp., 68 Ark. App. 41, 3 S.W.3d 340 (1999). The intent required is not conscious wrongdoing but rather an intent to exercise dominion or control over the property that is in fact inconsistent withthe plaintiff's rights. Id. Here, appellant failed to establish the respective rights of the parties to the patient information, and therefore, we affirm on this issue.

Business Expectancy

Appellant further contends that it had a valid business expectancy in the patients of Drs. Bingham and Bledsoe as a source of revenue and that appellees' use of the business records to divert patients to appellees was wrongful. To establish a claim of tortious interference, a plaintiff must prove: (1) the existence of a valid contractual relationship or a business expectancy; (2) knowledge of the relationship or expectancy on the part of the interfering party; (3) intentional interference inducing or causing a breach or termination of the relationship or expectancy; (4) resultant damage to the party whose relationship or expectancy has been disrupted. Vowell v. Fairfield Bay Cmty. Club, Inc., 346 Ark. 270, 58 S.W.3d 324 (2001). It is also necessary that the defendant's conduct be improper. Id. For guidance as to what is improper, the Restatement (Second) of Torts § 767 (1979) states that the court should consider: (1) the nature of the actor's conduct; (2) the actor's motive; (3) the interests of the other with which the actor's conduct interferes; (4) the interests sought to be advanced by the actor; (5) the social interests in protecting the freedom of action of the actor and the contractual interests of the other; (6) the proximity or remoteness of the actor's conduct to the interference; (7) the relations between the parties. Vowell v. Fairfield Bay Cmty. Club, Inc., supra; Dodson v. Allstate Ins. Co., 345 Ark. 430, 47 S.W.3d 866 (2001).

As we previously noted, appellant failed to establish any employment relationship with Dr. Bingham or the terms of such an agreement with Dr. Bledsoe. Without evidence of appellant's and the doctors' respective rights to those records, appellant cannot establish this claim on the wrongful use of the patient lists and appointment records. Without evidence to the contrary, the doctors were free to seek employment independent of appellant. Further, appellant admitted that it had no evidence that appellees had advised Drs. Bingham and Bledsoe to obtain the records. Thus, there was no evidence to support the contention that appellees had interfered with its business expectancy. We affirm on this point.

Aiding and Abetting

Appellant contends that genuine issues of material fact exist as to whether appellees aided and abetted Drs. Bingham and Bledsoe in breaching their fiduciary duty to appellant and in committing constructive fraud. It is settled law that all who actively participate in any manner in the commission of a tort, or who command, direct, advise, encourage, aid or abet its commission, are jointly and severally liable therefor. Hinton v. Bryant, 236 Ark. 577, 367 S.W.2d 442 (1963); Reasor-Hill Corp. v. Kennedy, 224 Ark. 248, 272 S.W.2d 685 (1954). Section 876 of the Restatement (Second) of Torts (1979) provides:

For harm resulting to a third person from the tortious conduct of another, one is subject to liability if he

(a) does a tortious act in concert with the other or pursuant to a common design with him, or

(b) knows that the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself, or

(c) gives substantial assistance to the other in accomplishing a tortious result and his own conduct, separately considered, constitutes a breach of duty to the third person.

However, before appellant has a viable claim of a breach of fiduciary duty, it must establish a legal basis to support a fiduciary relationship. Again, in the absence of proof of an employer-employee relationship, there is no fiduciary relationship from which the trial court could find a breach. Further, there is no dispute that appellees did not contact Drs. Bingham or Bledsoe about leaving appellant. In fact, Dr. Kendrick's unrefuted testimony in his deposition established that he did not discuss the doctors' bringing patients with them. There is nothing in the abstract or addendum to raise a fact question as to whether appellees took any action in regard to the records in question other than to advise Dr. Bledsoe to advertise his change of status in the newspaper.

Further, Dr. Hedberg admitted that he had no witness who would be willing to testify that appellees encouraged either doctor to leave appellant's clinic. Although it was established that Drs. Bingham and Bledsoe met with several of appellant's employees at Dr. Bingham's house and informed the employees that they were considering leaving appellant, there is no evidence that appellees did anything to actively encourage those employees to leave appellant or to take with them any information maintained at appellant's clinic. Accordingly, we hold that appellant failed to meet proof with proof on the issue of whether appellees aided and abetted Drs. Bingham and Bledsoe.

Constructive Fraud

Appellant argues that the doctors committed constructive fraud because Dr. Bingham, while seeking employment with appellee, discussed continuing her association with Dr. Hedberg. Likewise, appellant argues that Dr. Bledsoe committed constructive fraud by talking with Dr. Hedberg about the possibility of becoming a partner while having appellant's employees reproduce patient records and by meeting secretly with appellant's employees to discuss the possibility of employment with appellee. Fraud consists of some deceitful practice or willful device resorted to with the intent to deprive another of his rights or in some manner to do him injury. Mid-Continent Life Ins. Co. v. Hill, 192 Ark. 667, 94 S.W.2d 364 (1936). The elements necessary to prove fraud are: (1) a false representation of a material fact; (2) knowledge that the representation is false or that there is insufficient evidence upon which to make the representation; (3) intent to induce action or inaction in reliance on the representation; (4) justifiable reliance on the representation; (5) damages suffered as a result of the reliance. Riley v. Hoisington, 80 Ark. App. 346, 96 S.W.3d 743 (2003); Stine v. Sanders, 66 Ark. App. 49, 987 S.W.2d 289 (1999).

Constructive fraud is defined as a breach of a legal or equitable duty which, irrespective of the moral guilt of the fraud feasor, the law declares fraudulent because of its tendency to deceive others. Knight v. Day, 343 Ark. 402, 36 S.W.3d 300 (2001); Riley v. Hoisington, supra. Representations are considered to be fraudulent when made by one who either knows them to be false or, not knowing, asserts them to be true. Evans Indus.Coatings, Inc. v. Chancery Court of Union County, 315 Ark. 728, 870 S.W.2d 701 (1994); South County, Inc. v. First W. Loan Co., 315 Ark. 722, 871 S.W.2d 325 (1994). A plaintiff must, however, show a material misrepresentation of fact. Knight v. Day, supra; Scollard v. Scollard, 329 Ark. 83, 947 S.W.2d 345 (1997).

As with the business expectancy issue, a fundamental weakness of this claim is that there was no evidence of deceitful practice. As discussed above, Drs. Bingham and Bledsoe had the right to terminate their association with appellant at any time, and their patients had the right to follow them.1 Thus, we affirm the entry of summary judgment on appellant's constructive fraud claim.

Breach of Fiduciary Duty

Appellant also argues that Drs. Bingham and Bledsoe breached their "fiduciary duty of loyalty" to appellant with appellees' assistance and encouragement. We disagree. A person standing in a fiduciary relationship with another is subject to liability to the other for harm resulting from a breach of the duty imposed by the relationship. Long v. Lampton, 324 Ark. 511, 922 S.W.2d 692 (1996). Breach of fiduciary duty involves betrayal of a trust and benefit by the dominant party at the expense of one under his influence. Cole v. Laws, 349 Ark. 177, 76 S.W.3d 878 (2002), cert. denied, 537 U.S. 1003 (2002). It is vital, however, that the existence of a fiduciary duty be established. The issue of what duty is owed, if any, is always a question of law. Long v. Lampton, supra.

Appellant cites Vigoro Industries, Inc. v. Crisp, 82 F.3d 785 (8th Cir. 1996), and Tandy Corp. v. Bone, 283 Ark. 399, 678 S.W.2d 312 (1984), as support for its argument that Drs. Bingham and Bledsoe owed appellant a "fiduciary duty of loyalty." Neither case, however, holds that a physician associated with a medical clinic, who has no property interest in or management responsibility for that clinic, owes it a fiduciary duty. In Tandy Corp. v. Bone, the supreme court held that the manager of a store owed his employer a fiduciary duty. Vigoro Industries, Inc. v. Crisp followed Arkansas common law holding that an employee has a duty of loyalty to his employer. See Witmer v. Arkansas Dailies, Inc., 202 Ark. 470, 151 S.W.2d 971 (1941); 27 AM. JUR. 2D Employment Relationship § 216 (1996). In this case, there is no evidence to establish that Drs. Bingham and Bledsoe had any duty to continue their association with appellant but instead were free to contract with appellees or appellant at their own discretion. Therefore, we affirm on this issue.

Affirmed.

Crabtree and Roaf, JJ., agree.

1 See section E-7.03 of the American Medical Association's Code of Medical Ethics.