Opinion
No. 109,876.
2015-03-6
Eustaquio O. ABAY, II, M.D., and E A 2, P.A., a Kansas Professional Association, Appellees/Cross-appellants, v. ABAY NEUROSCIENCE CENTER, L.L.C., a Kansas Limited Liability Company, Appellant/Cross-appellee.
Appeal from Sedgwick District Court; Douglas R. Roth, Judge.Carrie E. Josserand, of Lathrop & Gage, of Overland Park, and Jean Paul Bradshaw, II, of Lathrop & Gage, of Kansas City, Missouri, for appellant/cross-appellee.Jay F. Fowler, Holly A. Dyer, and Paige D. Pippin, of Foulston Siefkin L.L.P., of Wichita, for appellees/cross-appellants.
Appeal from Sedgwick District Court; Douglas R. Roth, Judge.
Carrie E. Josserand, of Lathrop & Gage, of Overland Park, and Jean Paul Bradshaw, II, of Lathrop & Gage, of Kansas City, Missouri, for appellant/cross-appellee. Jay F. Fowler, Holly A. Dyer, and Paige D. Pippin, of Foulston Siefkin L.L.P., of Wichita, for appellees/cross-appellants.
Before HILL, P.J., McANANY, J., and BURGESS, S.J.
MEMORANDUM OPINION
PER CURIAM.
Eustaquio Abay, II, M.D. and E A 2, P.A, the professional association under which Dr. Abay practices neurosurgery (collectively referred to as Dr. Abay), brought this action against Abay Neuroscience Center, LLC (ANC), for breach of contract and for tortious interference with prospective business advantage. ANC counterclaimed for breach of contract and breach of fiduciary duty.
The jury found in favor of Dr. Abay on his tortious interference claim and assessed Dr. Abay's actual damages. The jury also found in favor of Dr. Abay on his breach of contract claim, but assessed damages significantly less than sought by Dr. Abay under his theory that he was entitled to annual guaranteed compensation for his professional services.
The jury rejected ANC's breach of fiduciary duty counterclaim but determined Dr. Abay had breached the contract with ANC and determined the actual damages sustained by ANC as a result. The court awarded punitive damages of $875,000 on Dr. Abay's tortious interference claim. ANC appealed, and Dr. Abay cross-appealed.
ANC's points of error on appeal focus on the awards of actual and punitive damages. ANC also claims the court erred in admitting evidence and instructing the jury on the tortious interference claim. In his cross-appeal, Dr. Abay points to claimed erroneous rulings by the court related to ANC's breach of contract claim which was based on his contention that he was entitled to guaranteed annual compensation from ANC.
An extensive recitation of facts well known to the parties is unnecessary for purposes of these appeals. The same can be said for the procedural history of the case. The following will suffice.
Facts
Dr. Abay, the founder of the Spine Hospital, began his successful practice of neurosurgery in Wichita in 1986. Over time other doctors joined the practice. In July 2004 the doctors, all of whom were equal owners in the practice, executed a working agreement whereby Dr. Abay served as manager of the practice with a fixed salary of $60,000. As compensation each doctor, including Dr. Abay, was paid quarterly based on a formula which calculated gross receipts less direct expenses attributable to the particular doctor and less a share of common expenses. None of the doctors was subject to a covenant not to compete.
More doctors joined the practice, and in April 2005 the practice was converted to a limited liability company named Abay Neuroscience Center, LLC. Dr. Abay continued as manager of the practice. The doctors signed a new operating agreement with terms similar to those of the earlier agreement. It provided for “Guaranteed Compensation,” which was defined as “the compensation which a Member is required to receive under such Member's employment agreement with Company, if any.” Compensation was calculated under the same type of formula used before for the members of the LLC. New associates in their first 2 years of practice were guaranteed a fixed salary.
Dr. Abay entered into annual services agreements with ANC that defined his compensation. In the August 2007 services agreement, Dr. Abay was engaged by ANC as a physician and agreed to use his “best efforts to provide the Services as required.” The agreement further provided: “In consideration for Contractor's Services hereunder, Abay shall pay Contractor compensation of Four Hundred Twenty–Five Thousand Dollars ($425,000) (‘Guaranteed Compensation’), payable in monthly installments.” Dr. Abay contended that under these provisions he was guaranteed annual compensation of $425,000.
Over the years Dr. Abay reduced his patient load. He stopped taking trauma calls, doing brain surgeries, and taking pediatric cases. He decided to focus on building the spine program at the Spine Hospital. Dr. Abay's gross patient revenues fell significantly in 2006 and 2007. By November 2007, Dr. Abay's expenses exceeded his revenues. Though this deficit was corrected over later months, a similar deficit arose in October 2008. Dr. Abay's revenue production continued to deteriorate. In 2011, ANC drafted proposed revisions to Dr. Abay's services agreement, but Dr. Abay refused to sign them.
On May 16, 2011, Dr. Abay's impending departure from the practice was announced. ANC staff was told that Dr. Abay planned to move his individual practice to ANC's old address on East Douglas Avenue in Wichita.
Dr. Abay moved his practice in June 2011. On June 3, 2011, ANC's telephone operator sent an e-mail to all ANC staff which listed the new phone number for Dr. Abay's relocated practice, which would be conducted under the name “Abay Neurosurgery.” Dr. Abay spoke to his physician's assistant, to ANC's scheduler, and to ANC's care coordinator about referring patients to his new location. But when Dr. Abay left, ANC's administrator, Earle Brown, met with ANC's schedulers and told them to tell patients that Dr. Abay was no longer with ANC and they did not know what Dr. Abay was going to do. Brown told one employee not to give any information to patients calling for Dr. Abay because they did not have his contact information or know his whereabouts. She was told to schedule those patients with ANC's other physicians, which she did.
On June 21, 2011, ANC sent a mailer to over 2,000 physicians, stating that Dr. Abay had left ANC “to pursue other interests” and wished Dr. Abay luck. All of this led to a substantial drop in referrals to Dr. Abay at his new location and, ultimately, to this suit.
Following the trial, the district court awarded punitive damages to Dr. Abay on the tortious interference claim in the amount of $875,000.
Punitive Damages—Amount
On appeal, ANC argues that the award of punitive damages was grossly excessive in violation of the Due Process Clause under the Fourteenth Amendment of the United States Constitution.
Our review of this issue is unlimited. But we defer to the district court's findings of fact unless they are clearly erroneous. Hayes Sight & Sound, Inc. v. ONEOK, Inc., 281 Kan. 1287, 1307, 136 P.3d 428 (2006).
The Due Process Clause of the Fourteenth Amendment of the United States Constitution prohibits states from imposing grossly excessive punitive damage awards on tortfeasors. BMW of North America, Inc. v. Gore, 517 U.S. 559, 562, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996). In Gore, 517 U.S. at 574–75, the Supreme Court identified three standards for considering the propriety of a punitive damage award: (1) the degree of reprehensibility of the defendant's conduct, the most important factor; (2) the disparity between the harm or potential harm suffered by the plaintiff and the punitive damage award, i.e., the ratio of punitive damages to actual damages; and (3) the difference between the punitive damage award and the civil penalties authorized or imposed in comparable cases. See State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S 408, 418–428, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003). Here, there is no provision for civil penalties for tortious interference claims, so there are no facts with which to consider this third standard.
With respect to the reprehensibility of the defendant's conduct, many of the findings justifying the district court's punitive damages award were made by the jury, which found that ANC's acts were intentional and malicious and that ANC ratified the acts of its employees. ANC points to a laundry list of ways Dr. Abay contributed to the rough start of his new practice, but those contributions speak to the reasonableness of his compensatory damages and do not mitigate ANC's wrongful acts in regard to punitive damages, which are meant to punish and deter such conduct.
While Dr. Abay was hardly impoverished at the time of ANC's misconduct, ANC's misconduct was undertaken at a time when Dr. Abay's compensation had been cut and he was entering a new and inherently less stable professional situation. ANC repeatedly gave patients and referring physicians false information about Dr. Abay and misled referring physicians by sending out a mailer saying he had left the practice to pursue other interests. In doing so, ANC caused delays for patients trying to contact Dr. Abay and to exercise their right to choose their own doctor. ANC's actions were motivated by its own pecuniary interests, not the interests of patients.
There is no bright-line ratio which a punitive damages award may not exceed. But the Supreme Court has noted that few awards exceeding a single-digit ratio between punitive and compensatory damages will satisfy due process. State Farm, 538 U.S. at 424–25. Here, the punitive/actual damages ratio was 8.6 to 1. Under the facts of this case, we do not find this award of punitive damages to be excessive.
Punitive Damages—Timing of Request
Next, ANC argues that the district court erred in allowing Dr. Abay to bring a claim for punitive damages because Dr. Abay did not comply with the statutory requirements for doing so. Dr. Abay filed a motion to amend his petition before the pretrial conference, as required by statute, but failed to submit supporting affidavits until after the conference. ANC contends that the district court erred in finding good cause for this late filing.
K.S.A. 60–3703 governs the procedure for amending a petition to claim punitive damages. Normally, a district court's ruling regarding an amendment for punitive damages is reviewed for an abuse of discretion. Adamson v. Bicknell, 295 Kan. 879, 887, 287 P.3d 274 (2012). But ANC does not challenge the sufficiency of Dr. Abay's motion to amend or the sufficiency of the evidence to support granting the motion. Rather, ANC raises an issue of law regarding the timeliness of Dr. Abay's motion, an issue over which we have unlimited review. Gates v. Goodyear, 37 Kan.App.2d 623, 630, 155 P.3d 1196, rev. denied 284 Kan. 945 (2007).
The district court is required to deny a motion seeking to amend a pleading to add a claim for punitive damages “if the motion for such an order is not filed on or before the date of the final pretrial conference held in the matter.” K.S.A. 60–3703. K.S.A. 60–206(c)(2) requires that any affidavit supporting a motion “must be served with the motion.” Because the motion must be filed before the final pretrial conference, ANC argues that the affidavit must be filed before the pretrial conference along with the motion. See Sullwold v. Barcus, 17 Kan.App.2d 410, 417, 838 P.2d 908, rev. denied 251 Kan. 941 (1992). But in Sullwold, the defendant was never served with the motion, a supporting affidavit was never filed, and no notice was given to the defendant of the hearing on the motion.
In Logan v. Logan, 23 Kan.App.2d 920, 933–34, 937 P.2d 967, rev. denied 262 Kan. 961 (1997), the plaintiff timely filed his motion to amend his petition to include punitive damages but did not file an affidavit with the motion. The trial court concluded that the motion was timely filed and there was no undue burden or surprise on the defendants. The court granted the plaintiff 10 days to file its supporting affidavits and gave the defendants 10 days thereafter to respond. On appeal this court held “[i]f a motion to amend the petition to allow punitive damages is timely filed and good cause is given for a delay in filing the supporting affidavit, the trial court may grant a reasonable time for the affidavit to be filed.” 23 Kan.App.2d at 934.
The following year, in the Supreme Court's decision in George v. Capital South Mtg. Investments, Inc., 265 Kan. 431, 445, 961 P.2d 32 (1998), the court held that while it is preferable that the affidavits be filed with the motion and before the pretrial conference, “it is clear from the language of the statute that only the motion must be filed prior to the pretrial conference.” George remains controlling Supreme Court authority, and we are bound to follow it. Anderson Office Supply v. Advance Medical Assocs., 47 Kan.App.2d 140, 161, 273 P.3d 786 (2012).
Here, the court found excusable neglect based on the “flurry of activity” that had surrounded the case at the time the motion was filed and found further that ANC had not been prejudiced by the delay. The motion gave ANC notice that the affidavits would be filed within a few days. The affidavits were filed within that time period, and ANC had the time and opportunity to respond and substantively argue its opposition to the motion. We find no abuse of discretion in this ruling.
Judgment as a Matter of Law on Tortious Interference Claim—Proof of Damages
ANC argues that the district court erred by denying its motion for judgment as a matter of law on Dr. Abay's tortious interference claim. ANC argues that patients initially diverted from Dr. Abay, with one exception, ultimately found their way to Dr. Abay for treatment. Further, referring physicians could not identify any patients they would have referred to Dr. Abay but for ANC's conduct. Finally, ANC argues that Dr. Abay's declining revenues were caused by his leaving ANC and starting a new practice and by Dr. Abay's own conduct during the transition to his new practice.
When ruling on a motion for judgment as a matter of law, the trial court is required to resolve all facts and inferences that may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. When reasonable minds could reach different conclusions based on the evidence, the motion must be denied. We apply this same analysis when reviewing the ruling on the motion. “The inquiry is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.' “ “ Bussman v. Safeco Ins. Co. of America, 298 Kan. 700, 706–07, 317 P.3d 70 (2014) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–52, 106 S.Ct. 2505, 91 L.Ed.2d 202 [1986] ).
The elements of tortious interference with a prospective business advantage or relationship are: (1) the existence of a business relationship or expectancy with the probability of future economic benefit to the plaintiff; (2) defendant's knowledge of the relationship or expectancy; (3) a reasonable certainty that, except for the conduct of the defendant, plaintiff would have continued the relationship or realized the expectancy; (4) intentional misconduct by defendant; and (5) damages sustained by plaintiff as a direct or proximate result of defendant's misconduct. Cohen v. Battaglia, 296 Kan. 542, 546, 293 P.3d 752 (2013). ANC's arguments address this last element of the cause of action.
Claims for lost profits are, by their nature, fact intensive. A plaintiff can recover lost profits as damages when those lost profits are proven with reasonable certainty and when they may reasonably be considered to have been within the contemplation of the parties. The fact that damages cannot be calculated with absolute exactness will not render them so uncertain as to preclude an assessment.
“As to evidentiary matters a court should approach each case in an individual and pragmatic manner, and require the claimant furnish the best available proof as to the amount of loss that the particular situation admits. [Citation omitted.] It is the responsibility of a district court to see that speculative and problematical evidence does not reach the jury. [Citation omitted.]” Vickers v. Wichita State University, 213 Kan. 614, 620, 518 P.2d 512 (1974).
Here, significant evidence showed that ANC misled patients and referring physicians into believing that Dr. Abay was no longer practicing. Dr. Abay testified about the estimated number of surgeries, new patient office visits, and established patient office visits he had lost by comparing his recent history at ANC with his first year at his new practice. Dr. Abay also testified about his total revenue production at ANC in the 11 months before he left and his total revenue at his new practice in its first year. He believed the difference of $201,781.14 demonstrated the revenue he had lost due to ANC's tortious interference with his business. But the jury awarded actual damages on the tortious interference claim in the amount of $101,390.58. In doing so, it obviously took into account Dr. Abay's conduct as a contributing factor and the drop in revenue naturally occurring from moving a practice to a new location, none of which was associated with ANC's tortious conduct.
Because Dr. Abay was conducting the exact same business in the exact same market, his estimate of lost profits was not so uncertain as to preclude assessment. Dr. Abay could not show his losses with certainty, as there is no practical way of determining the exact number of referrals lost from referring physicians who received ANC's mailer and sent their patients elsewhere. And there is no practical way of knowing the exact number of patients lost due to ANC's handling of patient phone calls for Dr. Abay. But Dr. Abay's estimate of lost profits based on his recent past revenue was not too speculative and was the best available evidence of his losses.
The question then becomes whether these damages were demonstrated to be caused by ANC. ANC argues that Dr. Abay needed to identify particular patients who tried to reach Dr. Abay but were prevented from doing so by ANC or particular patients who would have been referred to Dr. Abay but for ANC's interference.
Causation, like any other fact in question, may be shown by circumstantial evidence. American Family Mutual Ins. Co. v. Grim, 201 Kan. 340, 344, 440 P.2d 621 (1968). Such evidence need not rise to a degree of certainty that will exclude any and every other reasonable conclusion. 201 Kan. at 343. Our Supreme Court has relied upon Prosser & Keeton on Torts § 41, pp. 269–70 (5th ed.1984) when considering this notion:
“The plaintiff need not [negate] entirely the possibility that the defendant's conduct was not a cause, and it is enough to introduce evidence from which reasonable persons may conclude that it is more probable that the event was caused by the defendant than that it was not. The fact of causation is incapable of mathematical proof, since no one can say with absolute certainty what would have occurred if the defendant had acted otherwise. Proof of what we call the relation of cause and effect, that of necessary antecedent and inevitable consequence, can be nothing more than “the projection of our habit of expecting certain consequents to follow certain antecedents merely because we had observed these sequences on previous occasions.” If as a matter of ordinary experience a particular act or omission might be expected, under the circumstances, to produce a particular result, and that result in fact has followed, the conclusion may be permissible that the causal relation exists.' “ Yount v. Diebert, 282 Kan. 619, 628–29, 147 P.3d 1065 (2006).
Dr. Abay demonstrated ANC's interfering behavior through the language in the mailer and through patient and referring doctor testimony, circumstantially showing that ANC was generally misleading patients and referring doctors about Dr. Abay's whereabouts and activities. The testimony certainly demonstrated ANC's intent that there be a cause and effect relationship between the false message to patients and referring doctors and the diversion of patients to ANC's remaining medical staff. There was sufficient circumstantial evidence to create a question of fact for the jury as to whether ANC's conduct caused Dr. Abay's damages. Viewing the evidence in the light favoring Dr. Abay, as we must, the trial court did not err in refusing to divert this issue from the jury's consideration by refusing to grant ANC's motion for judgment as a matter of law.
Admission of Damages Testimony
As a collateral issue ANC argues that the district court abused its discretion by allowing Dr. Abay to testify about his damages based on speculation as to the number of patients and revenue he lost due to ANC's tortious conduct. ANC also argues that Dr. Abay should not have been allowed to have patients and referring physicians testify at trial because their testimony was irrelevant.
All relevant evidence is admissible. K.S.A. 60–407(f). Evidence is relevant if it has any tendency in reason to prove any material fact. K.S.A. 60–401(b). Rulings on relevance rest in the sound discretion of the trial court, and we review the trial court's decision on relevancy for abuse of discretion. Noel v. Pizza Management, Inc., 258 Kan. 3, 9, 899 P.2d 1013 (1995).
We have already addressed ANC's argument that Dr. Abay's testimony regarding his lost revenue was too speculative. Having determined that the testimony was not too speculative to show Dr. Abay's damages, its relevance is the only remaining question.
As noted earlier, the final element of an intentional interference with a business expectation cause of action is damages caused by the tortfeasor's misconduct. Dr. Abay's estimate of the number of patients lost was relevant to demonstrate the reason for the lost revenue. The trial court's admission of this evidence was not erroneous because the testimony was relevant for the purpose of demonstrating Dr. Abay's damages. In turn, ANC was able to demonstrate at trial that Dr. Abay's productivity had been dropping for reasons attributable only to Dr. Abay, and the jury obviously took that into consideration in determining what damages were attributable to ANC.
The testimony of patients and referring physicians presented at trial provided circumstantial evidence relevant to the reason Dr. Abay saw fewer patients at his new practice—ANC's interference—and relevant to Dr. Abay's damages. Further, this evidence was relevant to show that Dr. Abay had a business expectancy in the form of returning patients and patient referrals. The district court did not err by allowing the jury to consider this evidence.
Hearsay Testimony
Trial witness Jerome Kessler needed a consult with a neurosurgeon and asked his doctor's office to arrange for him to see Dr. Abay, whom he had seen before. Jerome and his wife, Cheri, testified about a telephone conversation that occurred between “Pam” and an unknown employee of ANC. Pam was the employee at Jerome's doctor's office who was arranging for the consult. Pam relayed to the Kesslers the substance of the phone conversation she was engaged in with ANC's employee as the conversation took place. The Kesslers understood from Pam's statement that Dr. Abay had retired and no longer available. ANC asserts that this was inadmissible hearsay testimony because it was offered to prove the truth of the matter asserted: what the unidentified ANC employee told Pam.
K.S.A.2013 Supp. 60–460 states that “[e]vidence of a statement which is made other than by a witness while testifying at the hearing, offered to prove the truth of the matter stated, is hearsay evidence and inadmissible....” All evidence which fits within this definition is inadmissible unless one of the many exceptions provided by the rule can be shown to apply. If the evidence of the statement does not fit within the definition of hearsay, our analysis ends and the evidence is admissible, provided the other rules of evidence are satisfied. In re Estate of Kasper, 20 Kan.App.2d 309, 318, 887 P.2d 702 (1994).
When a statement is offered as evidence of the truth asserted in it, the credibility of the person making the statement must be available for cross-examination. State v. Harris, 259 Kan. 689, 698, 915 P.2d 758 (1996). But if such a statement is offered not to prove the truth of the matter asserted but to prove that the statement was made, it is not hearsay. See State v. Getz, 250 Kan. 560, Syl. ¶ 2, 830 P.2d 5 (1992); State v. Crowley, 220 Kan. 532, 536–37, 552 P.2d 971 (1976).
Here, the claimed hearsay statements are at two levels: what the ANC employee said to Pam, and what Pam said to the Kesslers. The matter asserted by these statements was that Jerome could not make an appointment with Dr. Abay because Dr. Abay was no longer practicing. The statements certainly were not offered for the truth of the statement: that Dr. Abay was no longer practicing or had retired. They were offered as evidence that the statements were made, thereby providing evidence that ANC was interfering with Dr. Abay's practice by misleading patients who sought to contact him. As such, these statements do not fall within the definition of hearsay.
Further, even if the recounting of what Pam said is viewed as hearsay testimony, the Kesslers' testimony satisfied an exception to the hearsay rule because the statements were made when Pam was perceiving the event. K.S.A.2013 Supp. 60–460(d) provides an exception to the inadmissibility of hearsay statements when the trial judge finds that the statement was made “while the declarant was perceiving the event or condition which the statement narrates, describes or explains....” The district court found that this exception applied. The testimony of the Kesslers of what Pam said was being explained to her by the ANC employee would satisfy the exception set out in K.S.A.2013 Supp. 60–460(d). Either way, the district court did not abuse its discretion allowing this testimony.
Jury Instructions—Vicarious Liability
Next, ANC argues that the district court was clearly erroneous when, in instructing the jury on vicarious liability, it impermissibly shifted the burden of proof to ANC on Dr. Abay's claim of tortious interference, resulting in an adverse verdict. The challenged instruction stated:
“ANC is a corporation and can act only through its officers and employees. The conduct of an officer or employee acting within the scope of his or her employment or authority is the conduct of the corporation.
“ANC is responsible for any tortious act or omission of its employees, whether named or unnamed.
“If you find that one or more of ANC's employees acted wrongfully, then you must find that ANC acted wrongfully. Only in the event you find that none of ANC's employees, name or unnamed, acted wrongfully may you find that ANC did not act wrongfully.”
In evaluating jury instruction issues, we consider: (1) the reviewability of the issue from both jurisdiction and preservation viewpoints, exercising an unlimited standard of review; (2) whether the instruction was legally appropriate, exercising an unlimited review; (3) whether there was sufficient evidence to support giving the instruction, viewing the evidence in the light favoring the requesting party; and (4) if the district court erred, whether the error was harmless, utilizing the test set out in State v. Ward, 292 Kan. 541, 550, 256 P.3d 801 (2011), cert. denied 132 S.Ct. 1594 (2012). Foster v. Klaumann, 296 Kan. 295, 301–02, 294 P.3d 223 (2013). We resolve the question of clear error by deciding whether we are firmly convinced the jury would have reached a different verdict without the error. City of Neodesha v. BP Corp. North America, Inc., 50 Kan.App.2d 731, 334 P.3d 830, 844 (2014).
Instructions are to be considered together and read as a whole, and when they fairly instruct the jury on the law governing the case, we may disregard an error in an isolated instruction as harmless. The test is whether the instructions are substantially correct and whether the jury could reasonably have been misled by them. Wood v. Groh, 269 Kan. 420, 423–24, 7 P.3d 1163 (2000).
Here, an instruction on vicarious liability was appropriate. Dr. Abay presented evidence to the jury about the acts of numerous named and unnamed employees of ANC to prove his claim for intentional interference. But ANC contends that this instruction did not require the jury to consider whether the persons who committed the acts complained of here were actually employees of ANC or whether they were acting in the scope of their employment. ANC did not contend at trial that the persons who performed the acts complained of here were not its employees or were not acting in the scope of their employment. Because the issue ANC raises now was a nonissue at trial, we find no fault with the instruction in this regard, and under the facts it was necessary to instruct the jury that ANC can be held liable for the tortious acts of its employees.
Jury Instructions—Vicarious Liability—Burden of Proof
Next, ANC contends that the third paragraph of the instruction impermissibly shifted the burden of proof to ANC to prove that none of its employees acted wrongfully. Here, the jury had already been informed in the first paragraph of the instruction that ANC could only act through its officers and employees. The first sentence of the third paragraph predicates ANC's liability on the wrongful act of its employees. The second sentence of this paragraph merely states the reverse: If none of ANC's employees acted wrongfully, then ANC did not act wrongfully. A separate instruction, Instruction No. 6, clearly told the jury that Dr. Abay bore the burden of proving his claim of tortious interference based on the wrongful conduct of “ANC, its Members, and its staff.” ANC fails to demonstrate that this instruction was clearly erroneous.
Jury Instructions—Laches, Equitable Estoppel, and Qualified Privilege
Finally, ANC argues that the district court erred in not instructing the jury on laches, equitable estoppel, and qualified privilege, as ANC requested. When an instruction has been requested on an issue, the trial court must instruct the jury on the issue, viewed in the light favoring the requesting party, if there is supporting evidence from which reasonable jurors could reach difference conclusions. Foster, 296 Kan. at 302.
Laches
ANC asserts that the doctrine of laches applies because Dr. Abay failed to assert his 2007 rights to his guaranteed compensation until after he left ANC in 2011. The trial court denied ANC's request for a laches instruction.
“The doctrine of laches is based upon the maxim that equity aids the vigilant and not those who slumber on their rights. It is defined as the neglect to assert a right or claim which, taken together with the lapse of time and other circumstances causing prejudice to the adverse party, operates as a bar in a court of equity. Laches is the neglect or omission to assert a right that, taken in conjunction with lapse of time and other circumstances, causes prejudice to an adverse party. [Citation omitted.]” State ex rel. Stovall v. Meneley, 271 Kan. 355, 388–89, 22 P.3d 124 (2001).
The doctrine of laches is an equitable device designed to bar stale claims. K.S.A. 60–511(1) provides that an action on a contract must be brought within 5 years. Dr. Abay's pay was reduced in November 2007. Dr. Abay filed suit on October 19, 2011. Dr. Abay asserted his rights within the statutory period allowed. We are guided by the recent statement from our Supreme Court that “[w]hen there is no statute of limitations problem, there is little room for application of the equitable doctrine of laches.” Boucek v. Boucek, 297 Kan. 865, 871, 305 P.3d 597 (2013).
Besides, ANC does not clearly explain how it was prejudiced by Dr. Abay's conduct so as to invoke the doctrine of laches. If Dr. Abay had pressed the contract provision regarding guaranteed compensation sooner, it is certainly not ANC's position that it would have made all guaranteed payments. To the contrary, it was ANC's position throughout the litigation and at trial that Dr. Abay's compensation was not guaranteed. Dr. Abay's earlier reliance on the guaranteed compensation provision would have moved up the time line of this dispute, but it appears that the issues and the positions of the parties would have remained the same. For the most part ANC's position was vindicated by the jury, which rejected Dr. Abay's claim for guaranteed compensation for all but part of 1 year. Thus, we conclude an instruction on laches was not warranted.
Equitable Estoppel
ANC asserts that the factual record at trial established evidence to support a theory of equitable estoppel because Dr. Abay had agreed to reduced compensation at ANC, a position contrary to the guaranteed compensation claim he advanced at trial. The district court refused to instruct on this defense.
“ ‘A party asserting equitable estoppel must show that another party, by its acts, representations, admissions, or silence when it had a duty to speak, induced it to believe certain facts existed. It must also show it rightfully relied and acted upon such belief and would now be prejudiced if the other party were permitted to deny the existence of such facts.[Citation omitted.]’ “ Mutual Life Ins. Co. v. Bernasek, 235 Kan. 726, 730, 682 P.2d 667 (1984).
“The principle underlying the doctrine is that a person will be held to a representation made or a position assumed when otherwise inequitable consequences would result to another who, having a right to do so under all of the circumstances, has in good faith relied thereon.” Coffey v. Stephens, 3 Kan.App.2d 596, 597, 599 P.2d 310 (1979) (citing Maurer v. J.C. Nichols Co., 207 Kan. 315, 485 P.2d 174 [1971] ).
Equitable estoppel requires proof that the party asserting it (1) was induced to believe certain facts existed by another party's acts, representations, admissions, or silence when the other party had a duty to speak; (2) relied and acted upon such belief; and (3) would now be prejudiced if the other party were allowed to deny the existence of such facts. Those facts cannot be ambiguous or subject to more than one construction. Fleetwood Enterprises v. Coleman Co ., 37 Kan App.2d 850, 865, 161 P.3d 765 (2007). See Rockers v. Kansas Turnpike Authority, 268 Kan. 110, 116, 991 P.2d 889 (1999). “Furthermore, if any essential element thereof is lacking or is not satisfactorily proved, there can be no equitable estoppel.” Fleetwood Enterprises, 37 Kan.App.2d at 865 (citing Gillespie v. Seymour, 250 Kan. 123, 129–30, 823 P.2d 782 [1991] ).
Here, no evidence was presented at trial tending to show that Dr. Abay induced ANC to believe that it did not owe him guaranteed compensation under this agreement or that he was required to pay ANC back for his deficit. ANC's position always was, and still is, that Dr. Abay was not entitled to guaranteed compensation and was required to pay ANC back any deficit he accumulated. ANC's management and physicians confronted Dr. Abay about a deficit they believed he owed under the contract, and Dr. Abay agreed to repay it. ANC cannot claim under these facts that it rightfully and in good faith relied on Dr. Abay's assertions to its detriment. An equitable estoppel instruction was not factually warranted here.
Qualified Privilege
ANC argues that it was entitled to an instruction on qualified privilege because it had a right and a duty to inform patients that Dr. Abay had left the practice. The trial court refused to give the requested instruction.
ANC relies on Turner v. Halliburton Co., 240 Kan. 1, 12, 722 P.2d 1106 (1986), to support its contention that the existence of a qualified privilege is a defense to a claim of tortious interference. Turner involved claims of defamation and tortious interference with a business expectancy which arose when Halliburton told Turner's prospective new employer that Turner, a former Halliburton employee, had been fired for stealing tools from a company truck. Witnesses had observed Turner taking the tools and had reported the matter to the local police. Word got back to Halliburton, and Halliburton fired Turner.
On appeal from a verdict in favor of Turner, Halliburton contended that its communication to the prospective employer was privileged and there was no evidence of malice on Halliburton's part. Our Supreme Court determined the qualified privilege defense was available against both the defamation claim and the tortious interference with contractual relations claim. But the court declared that the defense
“is generally restricted to those situations where public policy is deemed to favor the free exchange of information over the individual's interest in his or her good reputation. One such qualified privilege exists with respect to business or employment communications made in good faith and between individuals with a corresponding interest or duty in the subject matter of the communication. [Citations omitted.]” 240 Kan. at 7–8.
Here, ANC argues on appeal that the defense applies, and ANC was entitled to an instruction on it, because “ANC had a right, arguably a duty, to tell its patients that Dr. Abay had left the practice at ANC.” The problem with this argument is that this statement by ANC to patients and referring physicians was not the basis of Dr. Abay's claim. Dr. Abay contends that ANC wrongfully left patients with the clear impression that he had left the practice of neurosurgery and departed for parts unknown when ANC knew that was absolutely false. ANC makes no argument that it was privileged to make such statements to patients and referring doctors. The conduct charged here clearly did not merit an instruction on qualified privilege, and the district court did not err in refusing to so instruct the jury.
Cross–Appeal
In his cross-appeal, Dr. Abay challenges the district court's denial of summary judgment on his claim for guaranteed compensation and in admitting parol evidence on that subject. He also claims the district court erred in not granting him judgment as a matter of law at the close of all the evidence. Finally, he claims the court erred in issuing jury instructions that reference parol evidence.
Summary Judgment
For his first point of error, Dr. Abay argues that the district court erred in denying his motion for summary judgment on his breach of contract claim.
As we all know, summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. The district court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case. Summary judgment must be denied if reasonable minds could differ as to the conclusions drawn from the evidence. On appeal, we apply these same rules in our de novo review. Stanley Bank v. Parish, 298 Kan. 755, 759, 317 P.3d 750 (2014).
The services agreement called for annual guaranteed compensation of $425,000 “[i]n consideration for Contractor's Services hereunder .” But it also provided that in the performance of his services under the agreement, Dr. Abay would use his “best efforts to provide the Services as required.” Following the district court's ruling, Dr. Abay's claim for guaranteed compensation was submitted to the jury. The jury determined that ANC breached the services agreement. In assessing damages, the jury determined that Dr. Abay was entitled to guaranteed compensation of $59,380 for the period from August 3, 2007, through the end of 2007, the year of the services agreement. But the jury awarded no damages in the form of guaranteed compensation for the years 2008 through 2011.
To be entitled to judgment as a matter of law on his breach of contract claim, Dr. Abay had to show there was no genuine issue of material fact regarding each element of the claim: (1) the existence of a contract between him and ANC; (2) consideration which supports the contract; (3) Dr. Abay's performance or willingness to perform in compliance with the contract; (4) ANC's breach of the contract; and (5) damages caused by the breach. See City of Andover v. Southwestern Bell Telephone, 37 Kan.App.2d 358, 362, 153 P.3d 561 (2007).
Here, the evidence showed a significant drop in Dr. Abay's fee production over time and the diversion of his professional interest into other areas and ventures. Reading the services agreement as a whole, there remained a genuine issue of material fact as to whether Dr. Abay had performed his part of the bargain so as to be entitled to the guaranteed compensation he claimed. Whether a party has met an obligation to use that party's best efforts under an agreement is a question of fact for the jury to decide. T.S.I. Holdings, Inc. v. Jenkins, 260 Kan. 703, 719, 924 P.2d 1239 (1996).
We conclude that there remained a genuine issue of material fact, and Dr. Abay was not entitled to summary judgment on his guaranteed compensation claim. The district court did not err in submitting that issue to the jury for its determination.
Parol Evidence
Next, Dr. Abay argues that the trial court abused its discretion by allowing the admission of parol evidence at trial to determine the intent of the parties after it found that the contract at issue was unambiguous. He asserts that evidence of the contract should have been limited to the four corners of the contract itself.
The resolution of this issue depends on the interpretation of the contracts at issue. The primary rule for interpreting written contracts is to ascertain the intent of the parties. If the terms of the contract are unambiguous, the court does not use the rules of construction, and the intent of the parties is determined from the language of the contract itself. Liggatt v. Employers Mut. Casualty Co., 273 Kan. 915, 921, 46 P.3d 1120 (2002). To be ambiguous, a contract must contain provisions or language of doubtful or conflicting meaning, as gleaned from a natural and reasonable interpretation of its language. Simon v. National Farmers Organization, Inc., 250 Kan. 676, 680, 829 P.2d 884 (1992). Whether a party has defaulted on a contractual obligation is a question of fact for the jury. Waste Connections of Kansas, Inc. v. Ritchie Corp., 296 Kan. 943, 964–65, 298 P.3d 250 (2013).
Dr. Abay argues that the trial court, after having initially found the services agreement to be ambiguous, later reversed itself and found the agreement was unambiguous yet allowed parol evidence thereafter to vary the terms of the unambiguous agreement. But we find terms of doubtful and conflicting meaning in the services agreement. As noted earlier, the services agreement called for annual guaranteed compensation “[i]n consideration for Contractor's Services hereunder.” But it also provided that in the performance of his services under the agreement, Dr. Abay would use his “best efforts to provide the Services as required.” This brings into question the extent to which Dr. Abay's compensation was guaranteed. Thus, parol evidence was admissible to determine what the parties intended by the language they used in the written services agreement. See Simon, 250 Kan. at 679–80. The fact that the trial court admitted the evidence after coming to a different conclusion on the question of ambiguity is of no moment. Regardless of the soundness of its prior ruling, if the trial court reached the correct result in permitting parol evidence we will uphold its decision. See Hockett v. The Trees Oil Co., 292 Kan. 213, 218, 251 P.3d 65 (2011).
Besides, ANC apparently claimed mutual mistake and sought to reform the contract at the eleventh hour of the pretrial activities in the case. Reformation is available to alter the written contract so that it states the true agreement of the parties. Schlatter v. Ibarra, 218 Kan. 67, 77, 542 P.2d 710 (1975). Inquiry regarding whether the written contract expressed the agreement between the parties is not precluded simply because the contract is couched in clear and unambiguous language. 218 Kan. at 77.
Establishing a mutual mistake requires a showing by clear and convincing evidence of (1) the existence of an antecedent agreement that the written instrument undertakes to evidence, (2) a mistake in drafting the instrument, and (3) a mutual mistake, which is not the product of fraud or inequitable conduct. See Unified Gov't of Wyandotte County v. Trans World Transp. Svcs., 43 Kan.App.2d 487, 490, 227 P.3d 992 (2010). In pursuing relief under this theory, ANC was entitled to present extrinsic evidence in order to establish an antecedent agreement between the parties that both parties sought to evidence in the services agreement but which was inaccurately stated in the service agreement due to a mutual mistake.
Accordingly, we conclude the district court did not err by allowing ANC to present parol evidence regarding the services agreement.
Judgment As A Matter of Law At The Close of All the Evidence
Dr. Abay next argues that the district court erred by not entering judgment as a matter of law in his favor at the close of all the evidence on his breach of contract claim.
When ruling on a motion for judgment as a matter of law, the trial court is required to resolve all facts and inferences that may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. Bussman v. Safeco Ins. Co. of America, 298 Kan. 700, 706–07, 317 P.3d 70 (2014). When reasonable minds could reach different conclusions based on the evidence, the motion must be denied. On review, we apply a similar analysis. “The inquiry is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” ‘ “ 298 Kan. at 707 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–52, 106 S.Ct. 2505, 91 L.Ed.2d 202 [1986] ).
We have previously addressed this issue with regard to Dr. Abay's summary judgment motion. The same factual dispute persisted at the close of all of the evidence, precluding the court from entering judgment as a matter of law. At the close of all the evidence, there was evidence for the jury to consider with respect to ANC's claim that Dr. Abay did not exercise his best efforts in the performance of his professional duties for ANC under the services agreement. There was substantial evidence that over the years Dr. Abay devoted less time and energy to the performance of his professional duties for ANC, resulting in him operating at a deficit in his personal account. The district court did not err by denying Dr. Abay's motion for judgment as a matter of law and submitting the issue to the jury.
Jury Instructions
Finally, Dr. Abay asserts that the district court wrongly instructed the jury to consider an earlier agreement between the parties and the parties' course of conduct when considering the breach of contract claim. Because the record discloses that Dr. Abay objected to this instruction and stated his grounds on the record after the jury had retired to deliberate, we review for any clear error. See K.S.A.2013 Supp. 60–251(c), (d)(2). To establish clear error, we must find not only that the district court erred in instructing the jury, but we must be firmly convinced the jury would have reached a different verdict without the error. City of Neodesha, 334 P.3d at 844.
Dr. Abay claims the district court erred in Instruction No. 6 and No. 7. Instruction No. 6 provided the jury with a summary of the parties' claims and contentions and informed the jury of the applicable burden of proof on such claims. Dr. Abay does not take issue with the burdens as set out in the instruction. Dr. Abay contends that this instruction erroneously allowed ANC “to contend that the Operating Agreement, Working Agreement and ‘course of performance’ were relevant to Dr. Abay's claim that the Services Agreement was breached.” We previously addressed this issue with respect to Dr. Abay's summary judgment motion. There was evidence upon which to submit this contention of ANC to the jury. This instruction was warranted under the facts and was legally appropriate. The district court did not err in giving it.
Dr. Abay contends that Instruction No. 7 was given in error because it “improperly included references to the other two agreements vis-a-vis Dr. Abay's contract claim.” Dr. Abay notes that trial counsel argued to the district court that “ ‘there just shouldn't have been any consideration of any agreement other than the Services Agreement with respect to D. Abay's claim for compensation.’ “
Instruction No. 7 contains various contractual interpretations which the jury was instructed to follow in rendering its verdict. Those contractual interpretations relate to various documents, including the 2004 working agreement and the 2005 operating agreement, which were received into evidence. Dr. Abay does not argue that the court's construction of the terms of those contracts was incorrect. Rather, he contends the court should not have referenced them at all. But substantial evidence was presented at trial concerning the provisions of these agreements. Considering the evidence in the light favoring ANC on this issue, there was sufficient evidence to support the giving of this instruction. Further, the instruction was legally appropriate given the issues before the court. See State v. Plummer, 295 Kan. 156, 163, 283 P.3d 202, 208 (2012); State v. Ward, 292 Kan. 541, 565, 256 P.3d 801 (2011). The district court did not err in giving this instruction which aided the jury in considering evidence admitted at trial.
Affirmed.