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Radiologix, Inc. v. Radiology And Nuclear Medicine, LLC

United States District Court, D. Kansas

February 19, 2019

RADIOLOGIX, INC. and RADIOLOGY AND NUCLEAR MEDICINE IMAGING PARTNERS, INC., Plaintiffs,
v.
RADIOLOGY AND NUCLEAR MEDICINE, LLC, Defendant.

          MEMORANDUM AND ORDER

          DANIEL D. CRABTREE UNITED STATES DISTRICT JUDGE

         On February 5, 2019, a jury trial began in this case. After presenting evidence for about five days, plaintiffs rested their case in chief. At the close of plaintiffs' evidence, defendant filed a 27-page Motion for Directed Verdict as a Matter of Law at the Close of Plaintiffs' Evidence. Doc. 461. Plaintiffs have submitted a Response opposing defendant's motion. Doc. 465. After considering the parties' arguments and the evidence presented at trial-in the light most favorable to plaintiffs, the non-moving party-the court denies defendant's Motion for Directed Verdict.

         I. Factual Background

         This case involves a breach of contract dispute. Plaintiff Radiologix, Inc. (“Radiologix”) is a national provider of imaging services based in California. Plaintiff Radiology and Nuclear Medicine Imaging Partners, Inc. (“RNMIP”) is a wholly owned subsidiary of plaintiff Radiologix. Defendant Radiology and Nuclear Medicine, LLC (“RNM”) is a Kansas limited liability company and physician-owned radiology practice based in northeast Kansas.

         Since 1997, plaintiff Radiologix or one of its predecessors-in-interest has provided management services to defendant under a long-term management Service Agreement. This lawsuit arises from defendant's termination of that Agreement in 2014. Plaintiffs assert a breach of contract claim against defendant, alleging that defendant breached the parties' Agreement by terminating it in 2014. As a defense to this claim, defendant argues that it had a right to terminate the Agreement because plaintiffs had breached their material obligations to defendant under that Agreement.

         Defendant also asserts a Counterclaim against plaintiffs for breach of contract. Defendant argues that plaintiffs breached the Agreement before the 2014 termination by failing to provide management, administrative, and billing services, as well as management and capital resources, to defendant as the Service Agreement requires.

         Defendant's Motion for Directed Verdict argues that plaintiffs' evidence at trial establishes that they failed to perform their obligations under the Service Agreement. And thus, defendant contends, plaintiffs have failed to prove one of the essential elements of their breach of contract claim. Also, defendant contends that plaintiffs' evidence fails to prove their damages claim. Thus, defendant argues, plaintiffs' breach of contract claim fails as a matter of law. For both of these reasons, defendant asserts that it is entitled to judgment as a matter of law against plaintiffs' breach of contract claim.

         II. Legal Standard

         Rule 50(a) provides:

(1) In General. If a party has been fully heard on an issue during a jury trial and the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue, the court may:
(A) resolve the issue against the party; and
(B) grant a motion for judgment as a matter of law against the party on a claim or defense that, under the controlling law, can be maintained or defeated only with a favorable finding on that issue.

         When considering a Rule 50(a) motion, the court must draw “[a]ll reasonable inferences . . . in favor of the nonmoving party and [cannot] make credibility determinations or weigh the evidence.” Liberty Mut. Fire Ins. Co. v. Woolman, 913 F.3d 977, 983 (10th Cir. 2019) (citations and internal quotations marks omitted). “Judgment as a matter of law is appropriate only if a ‘reasonable jury would not have a legally sufficient evidentiary basis' to find for the opposing party.” Id. at 983-84 (quoting Fed.R.Civ.P. 50(a)(1)). In other words, “‘[t]he evidence [must] point[ ] but one way and [be] susceptible to no reasonable inferences which may support the opposing party's position.'” Id. at 984 (quoting Finley v. United States, 82 F.3d 966, 968 (10th Cir. 1996)).

         III. Analysis

         Defendant asserts several arguments supporting its Motion for Directed Verdict. The court addresses each argument, separately, below.

         A. Does the Evidence Establish that Plaintiffs Failed to Perform Their Obligations Under the Service Agreement?

         Defendant asserts that plaintiffs' evidence failed to prove one of the required elements of their breach of contract claim-that plaintiffs performed their obligations under the Service Agreement. In Kansas, [1] the elements of a breach of contract claim are: “(1) the existence of a contract between the parties; (2) sufficient consideration to support the contract; (3) the plaintiff's performance or willingness to perform in compliance with the contract; (4) the defendant's breach of the contract; and (5) damages to the plaintiff caused by the breach.” Stechschulte v. Jennings, 298 P.3d 1083, 1098 (Kan. 2013). Here, defendant asserts that plaintiffs cannot prove the third element of a breach of contract claim because plaintiffs' evidence establishes that plaintiffs failed to perform their obligations under the Service Agreement. Defendant argues that plaintiffs failed to perform their obligations under the Service Agreement in eight, different ways.[2]

         1. Did plaintiffs fail to perform their obligations under the Service Agreement by reducing the scope of services under that Agreement while charging the same Service Fee?

         Defendant argues that plaintiffs' evidence shows that plaintiffs failed to perform their obligations under the Service Agreement when they closed the Imaging Center and eliminated Technical Operations in Topeka in 2010, but still charged the same Service Fee under the contract.

         Section 7.1 of the Service Agreement provides:

Payment of the Service Fee is not intended to and shall not be interpreted or implied as permitting Administrator to share in the Group's fees for medical services but is acknowledged as the negotiated fair market value compensation to Administrator considering the scope of the services and the business risks assumed by Administrator.

         Doc. 270-10 at 37.

         Plaintiffs contend that defendant cannot assert this argument because defendant failed to preserve it in the Pretrial Order. In a narrow, technical sense, plaintiffs are correct. Doc. 227 at 26 (“Defenses of Defendant[ ]”). But defendant did provide fair notice that it would defend plaintiffs' contract claim by establishing, among other things, that “[p]laintiffs' were in material breach of the Service Agreement . . . .” Id. And though defendant advanced this defense as a reason ...


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