Charles Cagin v. McFarland Clinic ( 2006 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 05-3592
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Charles Cagin, *
*
Appellant, *
* Appeal from the United States
v. * District Court for the
* Southern District of Iowa.
The McFarland Clinic, P.C., *
*
Appellee. *
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Submitted: April 20, 2006
Filed: July 31, 2006
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Before ARNOLD and COLLOTON, Circuit Judges, and BOGUE,1 District Judge.
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BOGUE, District Judge.
Dr. Charles Cagin (“Cagin”) appeals the district court’s2 adverse grant of
summary judgment in his breach of contract action against The McFarland Clinic (the
“Clinic”). Cagin argues the district court erred (1) in finding no material fact
questions existed regarding the Clinic’s alleged breach of an employment contract,
1
The Honorable Andrew W. Bogue, United States District Judge for the District
of South Dakota, sitting by designation.
2
The Honorable Thomas J. Shields, Chief United States Magistrate Judge for
the Southern District of Iowa, to whom the case was referred for final disposition by
consent of the parties pursuant to 28 U.S.C. § 636(c).
and (2) in concluding that extrinsic evidence should not be admitted to aid in
interpreting the employment contract. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Cagin was an interventional cardiologist in solo practice in Des Moines, Iowa.
The Clinic was a multi-specialty medical clinic located in Ames, Iowa. In 1999,
Cagin began negotiating with Dale Anderson, Chief Executive Officer of the Clinic,
regarding Cagin joining the Clinic as a cardiologist in an office the Clinic was opening
in Des Moines. Cagin understood that as the first cardiologist hired, he would be the
only physician in the Cardiology Department when he started. Cagin estimated he
would be working as the only cardiologist in the department for six to eighteen
months. Cagin was told that, if he joined the Clinic’s Des Moines office, he would
receive sufficient backup and call coverage from other cardiologists the Clinic would
hire in the Des Moines area.
The parties entered a three-year employment agreement (the Agreement) on
January 10, 2000, and Cagin soon began working for the Clinic. Under the
Agreement, Cagin was entitled to six weeks of vacation and two weeks of professional
meeting time per year. Vacation and professional meeting time could not be carried
forward. The Clinic did not keep track of vacation or professional meeting time for
physicians and did not pay for vacation or professional meeting time a physician did
not take. Cagin received a Physician Policy Manual (“Manual”), which was
incorporated into the Agreement. The Manual set out a physicians compensation plan,
holiday schedule, fringe benefits, provided that Clinic physicians were entitled to
seven holidays per year, and provided they would work a minimum of four and
one-half days per week. Cagin testified in his deposition that he understood that the
policy stated that if he were in a department with only one physician, he would be
responsible for all call coverage. The Agreement did not provide that the Clinic
would furnish call coverage for Cagin by any particular date, or that Cagin would be
provided with any particular level of call coverage. After negotiations regarding
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Cagin’s salary and the length of the Agreement, during which Cagin was represented
by counsel, the parties agreed that a salary of $275,000 per year would compensate
Cagin for cardiological services, call coverage time, and time spent on vacation and
in continuing medical education meetings. Cagin could earn more than the $275,000
guaranteed salary, under the Clinic’s “Compensation Plan for Physicians” if he
exceeded certain annual production goals. The $275,000 salary was guaranteed for
three years, after which Cagin’s compensation was to be “as determined by the Board
of [the Clinic].” The Agreement contained an integration clause, which provided that
it was the entire agreement between the parties, superceding all negotiations, prior and
contemporaneous discussions, preliminary agreements, and understandings of the
parties as to the subject matters of the Agreement. The Agreement also provided that
any modification thereto must be in writing.
Cagin worked for the Clinic from January 2000 to August 2003. In July 2000,
Dr. Narish Solankhi (“Solankhi”) joined the Clinic Cardiology Department, practicing
in Ames and performing interventional cardiologic procedures in Des Moines. In
September 2001, Dr. Charles Laham (“Laham”) began working in the Cardiology
Department in the same office as Cagin in Des Moines. Cagin later became displeased
with the amount of call coverage he received from Solankhi and Laham.
From 2000 to 2002, Cagin’s salary exceeded his guaranteed salary of $275,000.
In July 2002, the Clinic decided to change its compensation system for the next year.
Under the new system in 2003, Cagin, by then a shareholder of the Clinic, earned less
than he had under the terms of the Agreement. Cagin never complained to the Clinic’s
board of directors about his workload or call coverage, and never requested a reduced
call requirement from the Clinic’s board. Although Cagin claims he worked “24/7”
during his time with the Clinic, this was shown to be an exaggeration during his
deposition, when Cagin stated he took six weeks of vacation during that time. Cagin
also admitted he took adequate time off for professional meetings to keep his medical
license. Cagin did complain verbally about vacation time and backup and call
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coverage to Roger Kluesner, the Clinic’s Chief Operating Officer, and Joyce Lee, a
registered nurse who was administrative head of the Cardiology Department.
Cagin resigned from the Clinic in August 2003. Cagin left the Clinic because
he felt mistreated by the Clinic; because his 2003 income was well below his previous
annual salaries, largely due to a new formula that changed the way overhead expenses
were assigned; because he had worked “24/7” for three years without a vacation; and
because the Clinic did not provide him with adequate backup and call coverage.
Cagin filed suit against the Clinic on February 5, 2004, alleging breach of the
Agreement and violations of the Iowa Wage Payment Collections Act,3 and seeking
punitive damages. In granting summary judgment to the Clinic, the district court
opined that “this case is about Cagin’s ‘hindsight’ regret that he did not avail himself
of the full benefits allowed under the Agreement.” The district court “believe[d] that
Cagin has only himself to blame for his failure to take a full six weeks of vacation
each year; to attend continuing medical education programs for up to ten days per
year[;] and to not work holidays.” The court ruled Cagin was paid as much as he was
promised in the years 2000, 2001, and 2002, regardless of whether he took six weeks
of vacation, worked every holiday, or took less than ten days allowed for medical
education. The court noted the Clinic did not maintain records for physicians
concerning how much time they took out of the office on a yearly basis. Cagin also
kept no such records. The Clinic had a “use it or lose it” policy with regard to leave,
and “only Cagin knew how much time he was entitled to be gone, and more
importantly, how much time he actually took.” In sum, the district court concluded
Cagin had been paid the full salary to which he was entitled, and no evidence showed
the Clinic breached the Agreement.
3
Cagin has not presented any argument regarding the Iowa Wage Payment
Collections Act. Thus, he is deemed to have abandoned this argument on appeal. See
Geach v. Chertoff, 444 F.3d 940, 946 n.7 (8th Cir. 2006).
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DISCUSSION
Iowa law determines the rights of the parties in this diversity action. R&B
Appliance Parts, Inc. v. Amana Co., L.P., 258 F.3d 783, 786 (8th Cir. 2001). We
review de novo both the district court’s interpretation of Iowa law, as well as the grant
of summary judgment. Ehlis v. Shire Richwood, Inc., 367 F.3d 1013, 1015-16 (8th
Cir. 2004).
A. Material Factual Disputes
Cagin first contends there were material factual disputes in this case that
precluded summary judgment for the Clinic. Cagin asserts he worked “24/7” and was
unable to take professional meeting time, vacations, weekends, or holidays off as
provided in the Agreement. Due to “inadequate back up and call coverage,” Cagin
states, “he was effectively denied these benefits which he had bargained for.” Further,
although the vacation and other time off were calculated into his guaranteed
compensation, Cagin argues he is “still ‘out’ the taking of the actual time off so that
he could spend it with his family and at leisure.” The Clinic responds, arguing it was
Cagin’s “responsibility to cover the patients he treated in order to take personal time
off from work.” Cagin’s claims, it argues, “stem from the fact that he became angry
about the length of time it took the Clinic to recruit other physicians” to his
department and “about the quantity of coverage he received from the two physicians
that were recruited.” Further, the Clinic contends, Cagin could have negotiated for a
timetable as to the recruitment of physicians in his department or as to the amount of
his call coverage.
Under Iowa law, “[i]n a breach-of-contract claim, the complaining party must
prove: (1) the existence of a contract; (2) the terms and conditions of the contract;
(3) that it has performed all the terms and conditions required under the contract; (4)
the defendant’s breach of the contract in some particular way; and (5) that plaintiff has
suffered damages as a result of the breach.” Molo Oil Co. v. River City Ford Truck
Sales, Inc., 578 N.W.2d 222, 224 (Iowa 1998). “A party breaches a contract when,
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without legal excuse, it fails to perform any promise which forms a whole or a part of
the contract.” Id.
The district court noted that the parties agree the Agreement is valid, and the
terms of the contract are contained in the Agreement and incorporated Manual. The
parties also agree that Cagin has fully performed under the Agreement. Thus, the first
issue before the court is whether Cagin has shown a genuine issue of material fact as
to whether the Clinic breached the Agreement in some way.
As the district court observed, while factual disputes may exist in this case,
none of these disputes are material to the issue presented. The Agreement provided
that Cagin was to receive six weeks of vacation, two weeks for professional training
meetings, and seven holidays per year, but the vacation and professional training time
could not be carried forward. Cagin was responsible for tracking the time he took for
vacation and professional training. Cagin also was responsible for covering the
patients he treated in order to take this time off from work. Cagin repeatedly insists
the Clinic failed to provide backup and call coverage, in breach of the terms of the
Agreement. However, Cagin has not pointed to any provision in the Agreement
requiring the Clinic to do so.
The Clinic paid Cagin according to the terms of the Agreement in the years
2000, 2001, and 2002. Cagin has not presented evidence that the Clinic failed to
provide vacation or other time off work. Cagin did not document the alleged denials
of his contractual rights to take this time off. Further, Cagin claims the Clinic was
required to hire other cardiologists. Cagin goes so far as to contend that these
cardiologists were required to reside in Des Moines. This residency requirement, in
our view, is a transparent attempt to create a factual issue to rebut the fact that the
Clinic recruited and hired two other cardiologists, in accordance with the Agreement.
In fact, Laham actually worked in the Des Moines office with Cagin, and merely
resided in Ankeny, Iowa. Furthermore, notwithstanding Cagin’s claim of breach due
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to the length of time it took to hire these cardiologists and the fact they were not in
Des Moines, nothing in the Agreement required the Clinic to hire them within a
certain time frame, nor that they reside in Des Moines. In sum, Cagin has not
presented evidence to create a factual dispute as to whether the Clinic breached the
Agreement.
B. Extrinsic Evidence
Cagin also argues that the district court erred in concluding that extrinsic
evidence would not be used to aid in the interpretation of the Agreement.
Specifically, Cagin contends the court should have considered as extrinsic evidence
the alleged representations made by Clinic administrators during contract negotiations
leading up to the signing of the Agreement. The extrinsic evidence Cagin claims
should have been considered relates to his understanding about which party (Cagin
or the Clinic) would be responsible for backup and call coverage.
The Agreement contains an integration clause, which states that the Agreement
constitutes the entire agreement of the parties and supercedes all previous negotiations
and discussions on the subject matters contained in the Agreement. Under Iowa law,
“[a]n agreement is fully integrated when the parties involved adopt a writing or
writings as the final and complete expression of the agreement.” Whalen v. Connelly,
545 N.W.2d 284, 290 (Iowa 1996). “When an agreement is deemed fully integrated,
the parol evidence rule prevents the receipt of any extrinsic evidence to contradict (or
even supplement) the terms of the written agreement.” Id. “Whether or not a written
agreement is integrated is a question of fact to be determined by the totality of the
evidence.” Id.
The Iowa Supreme Court has held the parol evidence rule applies to exclude
such evidence when a “handcrafted contract contains an integration clause, where the
parties were sophisticated business persons represented by counsel and of equal
bargaining strength, and where terms of the alleged oral agreement reasonably would
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be expected to be included in the . . . agreement.” Montgomery Props. Corp. v. Econ.
Forms Corp., 305 N.W.2d 470, 476 (Iowa 1981). This rule applies in the instant case.
The Agreement was a handcrafted document, not a form document using boilerplate
language. Compare id. (applying parol evidence rule to “handcrafted” document),
with Levien Leasing Co. v. Dickey Co., 380 N.W.2d 748, 752-53 (Iowa Ct. App.
1985) (distinguishing Montgomery Properties Corp., in a case where the integration
clause was contained in a boilerplate, rather than handcrafted, motor vehicle lease).
The Agreement contained a clear and unambiguous integration clause. The Clinic is
a business and Cagin was a successful physician. Both parties were represented by
counsel during lengthy negotiations on the Agreement. The parties negotiated at
arm’s length, as demonstrated by Cagin’s ability to negotiate a higher annual salary
and an additional year of guaranteed salary, neither of which were originally proposed
by the Clinic. See Whalen, 545 N.W.2d at 291.
Had Cagin desired provisions in the Agreement regarding backup and call
coverage, he should have requested the same. But Cagin did not do so. Neither the
Agreement nor the Manual contains any provision requiring backup and call coverage.
The Agreement does, however, contain the integration clause, stating that it
supercedes all negotiations preceding it. Cagin has not adduced any evidence to
suggest the Agreement did not constitute the final expression of the parties’
agreement. Accordingly, we conclude there are no facts in dispute which could lead
a reasonable person to find the Agreement was not fully integrated. The parol
evidence rule bars introduction of extrinsic evidence to modify the terms of the
Agreement. See id.
CONCLUSION
Cagin was compensated according to the Agreement for the full term of the
Agreement. Although Cagin has established he did not take the time off work to
which he was entitled, he has not produced any evidence that he was not fully
compensated for the time he worked. Cagin’s failure to take vacation or other time
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off was not done at the Clinic’s urging or direction. Instead, this failure occurred
because Cagin did not arrange backup and call coverage for himself. Cagin has not
established any breach of the Agreement by the Clinic, an essential element of his
claim. Although Cagin later became dissatisfied with the deal he struck with the
Clinic, or with the compensation he received after the Agreement expired, this
dissatisfaction does not constitute a breach of the Agreement. Furthermore, the
Agreement contained an integration clause stating that it was the complete agreement
between the parties. The parol evidence rule therefore bars introduction of extrinsic
evidence to modify the terms of the Agreement. For these reasons, we affirm the
district court’s order granting summary judgment to the Clinic.
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