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Covenant Medical Management, Inc. v. Oss

November 16, 2006

COVENANT MEDICAL MANAGEMENT, INC., PLAINTIFF,
v.
SUZANNE KNEPPER OSS, M.D., DEFENDANT.



The opinion of the court was delivered by: Thomas A. Varlan United States District Judge

(VARLAN/SHIRLEY)

MEMORANDUM OPINION

This civil action is before the Court on cross motions for summary judgment. In plaintiff's Motion for Summary Judgment [Doc. 3], plaintiff seeks judgment against defendant in the amount of $164,086.66, plus costs and attorneys' fees, on the grounds that there are no disputed issues of material fact as to defendant's breach of contract and plaintiff is entitled to judgment as a matter of law. In her Motion for Summary Judgment [Doc. 7], defendant argues that plaintiff breached the contract at issue by rejecting her tender of performance, that her performance under the contract was excused on the basis of frustration of purpose and impossibility, and that the liquidated damages clause of the contract is an unenforceable penalty and that accordingly, she is entitled to judgment as a matter of law.

The Court has carefully considered the pending motions, supporting briefs [Docs. 4, 8] and response and reply memorandums [Docs. 6, 9, 10, 13] in light of the applicable law. For the reasons set forth herein, plaintiff's motion for summary judgment [Doc. 3] will be granted in part and denied in part and defendant's motion for summary judgment [Doc. 7] will be granted in part and denied in part.

I. Relevant Facts

On January 11, 1996, defendant, Dr. Susan Knepper Oss, entered into an agreement with the University of Tennessee (the "College") and the Fort Sanders Health System (the "Hospital") whereby the Hospital agreed to pay Dr. Oss $20,000 for each of four academic years, conditioned upon her fulfillment of various obligations as set forth in the Clinical Scholars Conditional Award Agreement signed by Dr. Oss. The record contains a complete copy of the Clinical Scholars Conditional Award Agreement at issue [Doc. 1, Ex. 1 (hereinafter "Agreement")]. One of the obligations imposed by the Agreement requires that the recipient of the award repay the loan made by the College by "practicing general medicine on a full-time basis (forty hours per week) in a Fort Sanders Health System County of the State of Tennessee, with repayment commencing immediately following the completion a residency program... ." [Agreement at ¶ V]. This was in keeping with one of the stated purposes of the Agreement, which was "to provide heal services in numerous underserved Tennessee Counties, hereinafter referred to as Fort Sanders Health System Counties." [Id. at 1.] The Agreement also provides that breach of it occurs when a recipient of the award either fails to begin or fails to complete his or her service obligation under the Agreement. [Id. at ¶ VII.] In that instance, the Agreement provides the following:

Applicant shall be immediately liable to the College for two (2) times the total uncredited amount of all conditional award payments paid hereunder, the uncredited sums to be prorated on a monthly basis for a maximum of 48 months, respecting the Applicant's actual service and total service obligation, provided that the College and Hospital may, for reasons deemed compelling, agree to a lesser measure of damages for the Applicant's breach of Applicant's service obligation.

Id.

Per the terms of the Agreement, the College made payments to Dr. Oss totaling $82,043.33 while she attended medical school. Upon completing her residency in pediatrics, Dr. Oss engaged in an extensive job search in the Knoxville, Tennessee area. However, she was unable to find a job opening for a pediatrician in the Fort Sanders Health System. Dr. Oss thereupon moved to Sheridan, Wyoming, where she secured a position as a pediatrician.

Plaintiff, Covenant Medical Management, Inc., is the College's assignor under the Agreement and filed suit in Knox County Chancery Court on April 5, 2006, seeking judgment against Dr. Oss in the amount of $164, 086.66 for Dr. Oss's alleged breach of the Agreement. Dr. Oss removed the case to this Court on the basis of diversity of citizenship jurisdiction on May 19, 2006.

II. Motions for Summary Judgment

A. Standard of Review

Under Fed. R. Civ. P. 56(c), summary judgment is proper if "the pleadings, depositions, answers to interrogatories, admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." The burden of establishing there is no genuine issue of material fact lies upon the moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 330 n.2 (1986). The court must view the facts and all inferences to be drawn therefrom in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Burchett v. Kiefer, 310 F.3d 937, 942 (6th Cir. 2002). To establish a genuine issue as to the existence of a particular element, the non-moving party must point to evidence in the record upon which a reasonable jury could find in its favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The genuine issue must also be material; that is, it must involve facts that might affect the outcome of the suit under the governing law. Id.

The judge's function at the point of summary judgment is limited to determining whether sufficient evidence has been presented to make the issue of fact a proper jury question, and not to weigh the evidence, judge the credibility of witnesses, and determine the truth of the matter. Id. at 249. Thus, "[t]he inquiry performed is the threshold inquiry of determining whether there is the need for trial -- whether, in other words, there are any genuine factual issues that ...


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