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Schindler v. Regional Health Physicians, Inc.

United States District Court, D. South Dakota, Western Division

September 23, 2015

DR. JAY J. SCHINDLER, Plaintiff,




Plaintiff Dr. Jay Schindler filed a multi-count complaint against the defendant Regional Health Physicians, Inc. (“RHP”), his former employer. (Docket 1). RHP filed an answer and counterclaim. (Docket 6). Based on the parties’ stipulation, an order dismissing count XIII of the complaint was entered. (Docket 14). On January 27, 2015, defendant filed a motion for partial summary judgment supported by defendant’s statement of undisputed material facts. (Dockets 23 & 25). Plaintiff filed a statement of material facts in opposition to defendant’s motion. (Docket 33). For the reasons stated, defendant’s motion for partial summary judgment is granted.


Under Fed.R.Civ.P. 56(a), a movant is entitled to summary judgment if the movant can “show[] that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Once the moving party meets its burden, the nonmoving party may not rest on the allegations or denials in the pleadings, but rather must produce affirmative evidence setting forth specific facts showing a genuine issue of material fact exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). Only disputes over facts that might affect the outcome of the case under the governing substantive law will properly preclude summary judgment. Id. at 248. “[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Id. at 247-48 (emphasis in original).

If a dispute about a material fact is genuine, that is, if the evidence is that a reasonable jury could return a verdict for the nonmoving party, then summary judgment is not appropriate. Id. However, the moving party is entitled to judgment as a matter of law if the nonmoving party fails to “make a sufficient showing on an essential element of her case with respect to which she has the burden of proof.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). “There can be ‘no genuine issue as to any material fact, ’ since a complete failure of proof concerning an essential element of the nonmoving party’s case necessarily renders all other facts immaterial.” Id.

In determining whether summary judgment should issue, the facts and inferences from those facts must be viewed in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). In order to withstand a motion for summary judgment, the nonmoving party “must substantiate [his] allegations with ‘sufficient probative evidence [that] would permit a finding in [his] favor on more than mere speculation, conjecture, or fantasy.’ ” Moody v. St. Charles County, 23 F.3d 1410, 1412 (8th Cir. 1994) (citing Gregory v. Rogers, 974 F.2d 1006, 1010 (8th Cir. 1992), cert. denied, 507 U.S. 913 (1993)). “A mere scintilla of evidence is insufficient to avoid summary judgment.” Moody, 23 F.3d at 1412. The key 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.” Anderson, 477 U.S. at 251-52.

Once the moving party meets its burden, the nonmoving party may not rest on the allegations or denials in the pleadings, but rather must produce affirmative evidence setting forth specific facts showing a genuine issue of material fact exists. Id. at 256; see also Thomas v. Corwin, 483 F.3d 516, 527 (8th Cir. 2007) (mere allegations, unsupported by specific facts or evidence beyond a nonmoving party’s own conclusions, are insufficient to withstand a motion for summary judgment); Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc) (“The nonmovant must do more than simply show that there is some metaphysical doubt as to the material facts, and must come forward with specific facts showing that there is a genuine issue for trial. Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.”) (internal quotation marks and citation omitted). The non-moving party’s own conclusions, without supporting evidence, are insufficient to create a genuine issue of material fact. Anderson, 477 U.S. at 256; Thomas, 483 F.3d at 527; Torgerson, 643 F.3d at 1042.


Defendant seeks judgment on the following breach of contract counts of the complaint: count I, failure to pay salary; count II, termination without cause;[1] count III, lack of notice and opportunity to cure; count IV, termination for cause; count VI, disability salary continuation plan; count VIII, failure to pay capital accumulation account benefits; count IX, failure to pay benefits due from extended illness accrual bank; count X, failure to pay for transportation to outreach clinic; and count XII, failure to pay production-based compensation.[2](Docket 23). Defendant also seeks judgment on its counterclaim. Id.

The following recitation consists of the material facts undisputed by the parties. These facts are developed from the complaint (Docket 1), defendant’s answer and counterclaim (Docket 6), plaintiff’s reply (Docket 9), defendant’s statement of undisputed material facts (Docket 25), and plaintiff’s response to defendant’s statement of undisputed material facts and additional statement of undisputed material facts (Docket 33). Where a statement of fact is admitted by the opposing party, the court will only reference the initiating document.

At all times relevant to this litigation Dr. Jay J. Schindler was a board-certified neurosurgeon licensed to practice medicine in the State of South Dakota. (Docket 1 ¶ 1). RHP is a South Dakota not-for-profit corporation located in Rapid City, South Dakota.[3] Id. ¶ 2. On or about April 30, 2007, Dr. Schindler entered into a Physician Employment Agreement (“Agreement”) with RHP. Id. ¶ 5; see also Docket 25 ¶ 1. A copy of the Agreement is attached to the complaint. (Docket 1-1; see also Docket 28-1). The Agreement commenced on May 1, 2007, and was to continue until April 30, 2010. (Docket 28-1 § 1.2). Dr. Schindler was hired to practice neurosurgery and provide medical services in his specialty to RHP’s patients. (Docket 25 ¶¶ 6 & 7).

Under the Agreement, Dr. Schindler was obligated to hold regular office hours at RHP’s clinic in Rapid City and the outreach clinic in Aberdeen, South Dakota. (Docket 1 ¶ 8). For purposes of maintaining the outreach clinic in Aberdeen, RHP agreed to pay the costs of travel for Dr. Schindler between Rapid City and Aberdeen.[4] (Docket 25 ¶ 45).

Dr. Schindler began his employment with RHP in May 2007. (Docket 1 ¶ 6). Dr. Schindler was paid on a production model which compensated him based upon his work. (Docket 25 ¶ 15). His work was tracked by RVUs, [5]which are the values assigned by the Centers for Medicare and Medicaid Services to each of the procedures and services provided by physicians. Id. ¶ 16. Compensation was determined at the end of the fiscal year which ran from July 1 to June 30. Id. ¶ 17. Dr. Schindler was guaranteed a minimum salary of 75 percent of the compensation earned in the preceding year. Id. ¶ 18. At the beginning of each fiscal year Dr. Schindler decided how much money he wanted to draw in anticipation of that year’s earnings. Id. ¶ 19. This draw election could be between 75 percent and 95 percent of the preceding year’s earnings. Id. At the end of each fiscal year the total RVUs produced by Dr. Schindler would be multiplied by an agreed conversion rate which would determine his total compensation for that year. Id. ¶ 20. Total compensation would be reconciled with Dr. Schindler’s draw during that year. Id. ¶ 21. If Dr. Schindler earned more than what had been drawn, RHP would pay him the difference. Id. If Dr. Schindler’s account was overdrawn at the end of the fiscal year, he would reimburse the difference to RHP. Id.

In 2009, Dr. Schindler “began to experience back and leg pain, difficulty walking and maintaining balance, reduced stamina, lack of sleep, temperature intolerance, and bowel and bladder complaints.” (Docket 28-10 at p. 4). “As Dr. Schindler began to experience these symptoms, which he . . . attributed to a history of low back pain, RHP provided a number of measures to accommodate them while he worked.” Id. RHP “purchased a cooling vest . . . [and] a set of steps for him to use in the operating room so that he could support his body weight while he worked over patients, and it reimbursed [him] for a brace to wear during surgery.” Id. Dr. Schindler never requested time off for illness while he was employed by RHP. (Docket 25 ¶ 43).

In October 2009, RCRH notified Dr. Schindler that the hospital planned to suspend his surgical privileges to perform “elective instrumental cervical and lumbar fusion procedures” except “those procedures in an emergency situation.” (Docket 33 at p. 7 ¶ 1). On October 16, 2009, Dr. Schindler took a 60-day voluntary leave of absence from RCRH in lieu of the medical staff at the hospital suspending some of his surgical privileges.[6] (Dockets 1 ¶ 10; 25 ¶ 2 & 28-2 at p. 3). RHP acknowledged Dr. Schindler’s leave of absence from medical privileges at RCRH and the parties agreed he should continue performing clinic duties during the leave of absence. (Dockets 1 ¶ 11 & 28-16).

On October 19, 2009, RHP reconfirmed this decision and advised Dr. Schindler that it “retains all of its rights pursuant to Dr. Schindler’s Physician Employment Agreement and will be reviewing this situation internally to determine how Dr. Schindler’s Leave of Absence from doing surgical care at Rapid City Regional Hospital might affect Dr. Schindler’s compensation or other facets of that Agreement.” (Docket 28-3). On October 29, 2009, RHP notified Dr. Schindler that it believed his primary duty was to provide medical services as an operating neurosurgeon and that his leave of absence limited him to “clinical work” which “constitutes a very small portion of the neurosurgical services for which RHP is contracting.”[7] (Dockets 25 ¶ 12 & 28-4).

On November 12, 2009, Regional Health Physicians agreed to continue “paying Dr. Schindler his guarantee amount (75% of his annual projection) through the remainder of his 60-day Leave of Absence from the RCRH Medical Staff.”[8] (Docket 28-7 at p. 1). The letter advised Dr. Schindler’s attorney that:

[RHP] maintains Dr. Schindler is not meeting the obligations of Section 1.3 of his Physician Employment Agreement, which contemplates Dr. Schindler’s maintenance of a robust neurosurgical practice and provision of call coverage to . . . RCRH. [Dr. Schindler’s attorney’s statement] that he took his leave of absence in lieu of a precautionary suspension says only that he chose one form of breaching his employment agreement over another form of breaching his employment agreement. His ability and willingness to practice neurosurgery is the fundamental obligation of his agreement.[9]

Id. In the same letter, RHP stated “[f]or the month of October 2009, even with the reduction made to Dr. Schindler’s draw for the pay period ending October 31, Dr. Schindler overdrew his actual production compensation by $146, 618.10. It is readily apparent that even with the reduction in Dr. Schindler’s draw amount, he will owe RHP a significant amount of money by the end of FY 2010.” Id. at pp. 1-2. Dr. Schindler testified he did not know whether he was overdrawn or underdrawn on his account. (Docket 34-1 at p. 6 (p. 90:5-14)).

On December 23, 2009, RHP responded to earlier letters from Dr. Schindler’s attorney.[10] (Docket 28-5). Assuming Dr. Schindler’s leave of absence from the medical staff of RCRH had been extended, RHP indicated:

[It would] continue to pay Dr. Schindler at his guarantee amount. However, the continuance of . . . pay is not a waiver of any rights RHP might assert under the Agreement with respect to Dr. Schindler’s failure to satisfy the requirements of Section[s] 1.3., 3.3.2, or any other section of the Agreement. The performance of neurosurgical services per Section 1.3 is at the very heart of what the Agreement is all about, and RHP currently is not receiving those services from Dr. Schindler. Section 3.3.2 . . . provides RHP the right to terminate Dr. Schindler’s employment “for cause” in the event of any suspension of Dr. Schindler’s medical staff appointment and privileges. . . . In spite of Dr. Schindler’s breaches of the Agreement, RHP will continue his pay. However, under the current circumstances RHP will not be able to pay Dr. Schindler at his guarantee indefinitely, and reserves the right to revisit the issue of Dr. Schindler’s breaches at any point in time.[11]

Id. at pp. 1-2. Dr. Schindler continued to perform all clinic duties in Rapid City and Aberdeen during his leave of absence, including seeing patients, performing in-clinic procedures, overseeing nurse practitioners and other activities. (Docket 25 ¶ 27).

On March 10, 2010, RHP terminated Dr. Schindler’s employment “for cause.” (Dockets 1 ¶ 16 & 25 ¶ 4). The cause asserted for termination was Dr. Schindler’s failure to maintain medical staff privileges necessary to perform surgery at RCRH.[12] (Docket 25 ¶ 5). The letter to Dr. Schindler’s attorney announcing the termination decision stated:

RHP has provided Dr. Schindler, through counsel, prior written notices of Dr. Schindler’s breaches and failures under the Agreement. Reference [RHP’s] letters to you dated October 29, November 12 and December 23, 2009 for those notices. Dr. Schindler’s breaches and failures have continued for over four months. While RHP consented to advances to Dr. Schindler during the pendency of his leave without waiving any of its rights or remedies, RHP no longer will continue this course of action.

(Docket 28-6 at p. 1).

Other undisputed facts will be addressed during the analysis of each count of plaintiff’s complaint.


A. Applicable Law

The court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332 as it is a diversity action. (Dockets 1 ¶ 3 & 6 ¶ 3). In diversity actions, the court applies the substantive law of the forum state. See Jordan v. NUCOR Corp., 295 F.3d 828, 834 (8th Cir. 2002). “[F]ederal courts sitting in diversity cases, when deciding questions of ‘substantive’ law, are bound by state court decisions as well as state statutes.” Hanna v. Plumer, 380 U.S. 460, 465 (1965) (referencing Erie R. Co. v. Tompkins, 304 U.S. 64 (1938)). See also In re Baycol Products Litigation, 616 F.3d 778, 785 (8th Cir. 2010) (“in a suit based on diversity of citizenship jurisdiction the federal courts apply federal law as to matters of procedure but the substantive law of the relevant state.”) (internal citations omitted). Only then can the court determine ...

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