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Iron Mound, LLC v. Nueterra Healthcare Mgmt., LLC

Supreme Court of Kansas

December 6, 2013

Iron Mound, LLC, Appellant,
v.
Nueterra Healthcare Management, LLC, Successor-in-Interest of ASC Group, LLC, Appellee

Review of the judgment of the Court of Appeals in 44 Kan.App.2d 104, 234 P.3d 39 (2010).

Appeal from Riley District Court; Meryl D. Wilson, judge.

SYLLABUS

BY THE COURT

1. An appellate court applies contract law principles to interpret the operating agreement of a limited liability company.

2. The primary rule for interpreting written contracts is to ascertain the parties' intent. If the terms of the contract are clear, the intent of the parties is to be determined from the language of the contract without applying rules of construction.

3. When possible, an appellate court ascertains the parties' intent from the four corners of the operating agreement, construing all provisions together and in harmony with each other rather than by critical analysis of a single or isolated provision.

4. A contract is not ambiguous unless two or more meanings can be construed from the contract provisions. A court should not strain to find an ambiguity where, in common sense, there is none. If the court finds ambiguity, then it may consider additional information in order to clarify the parties' intent, including the parties' subsequent conduct. The conduct of the parties should only be evaluated to interpret a contract after the contract, read as a whole, has been found to be ambiguous.

Jeffery L. Carmichael, of Morris, Laing, Evans, Brock & Kennedy, Chartered, of Wichita, argued the cause and was on the briefs for appellant.

James D. Oliver, of Foulston Siefkin LLP, of Overland Park, argued the cause, and Scott C. Nehrbass and Matthew D. Stromberg, of the same firm, were with him on the briefs for appellee.

OPINION

Page 809

Moritz, J.

We granted Nueterra Healthcare Management, LLC's (Nueterra) petition for review of the Court of Appeals' decision [298 Kan. 413] reversing the district court's grant of summary judgment in Nueterra's favor in this contract action brought by Iron Mound, LLC (Iron Mound). Iron Mound alleged that under the Operating Agreement of ASC Midwest, LLC, a limited liability company formed by Nueterra and Iron Mound and later dissolved, Iron Mound was entitled to receive a percentage of the gross fees earned by Nueterra under a management agreement entered into after the Operating Agreement had expired. Because we conclude the unambiguous terms of the Operating Agreement render it inapplicable to the fees received by Nueterra under the management agreement in question, we reverse the Court of Appeals' decision reversing the district court, and we affirm the district court's grant of summary judgment in favor of Nueterra.

Factual and Procedural Background

Iron Mound and ASC Group, LLC entered into an Operating Agreement on March 26, 1999, for the formation and governance of ASC Midwest, LLC (the Company). The parties created the Company " to develop, own, and operate ambulatory surgical facilities and other healthcare facilities." Nueterra is the successor-in-interest to the ASC

Page 810

Group, LLC. The Company's initial members, Iron Mound and Nueterra, remained its only members until its dissolution.

The Operating Agreement contained specific language regarding the division of fees for services performed by Nueterra. The applicable language provides, in relevant part:

" 10.2 Revenues Relating to Services Performed by [Nueterra] or Its Affiliates. Following the admission of [Nueterra] and Iron Mound as Members of the Company, [Nueterra] and Iron Mound agree that [Nueterra] or its Affiliates may contract with the Company or the Centers to perform the following specialized services (collectively the 'Services') with the percentage of revenues specified below to be received by the Company and allocated among the Members in accordance with their respective Percentage Interests. It is acknowledged by [Nueterra] and Iron Mound that neither the Company nor Iron Mound shall have any right to revenues from the Services which are not included within the percentages set for[th] below. ...

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