Crosby Memorial Hosp v. Abdallah ( 2002 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 01-60329
CROSBY MEMORIAL HOSPITAL,
Plaintiff-Appellee,
versus
HALA MOHAMMED ABDALLAH, MD,
Defendant-Appellant.
Appeal from the United States District Court
for the Southern District of Mississippi
(97-CV-635)
August 13, 2002
Before KING, Chief Judge, and GARWOOD and HIGGINBOTHAM, Circuit
Judges.
PER CURIAM:*
Dr. Hala Mohammed Abdallah (“Abdallah”) appeals the district
court's grant of summary judgment to Crosby Memorial Hospital
*
Pursuant to 5TH CIR. R.47.5 t he Court has determined that this opinion should not be
published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
1
(“Crosby”) on its breach of contract complaint and against her on
her counterclaims for breach of contract, fraud in the inducement,
breach of the duty of good faith and fair dealing, and tortious
interference with contract and prospective business relations.
Because Abdallah produced enough evidence to survive summary
judgment on the issue of Crosby's promises to help her get a green
card, we reverse the grant of summary judgment on her counterclaim
for fraudulent inducement. Because this fraud may also serve as a
defense to breach of contract, we reverse the summary judgment
granted on Crosby's breach of contract action. We affirm the
summary judgment, however, as to all other arguments raised by
Abdallah. Finally, we reject Abdallah's appeal of the district
court's order striking the legal conclusions in the affidavit of
her expert witness.
Background
Dr. Hala Mohammed Abdallah, a citizen of Jordan, came to the
United States in 1987. After she completed a residency in
pediatrics, she was contacted by Glenn Lowery, an administrator
with Crosby Memorial Hospital in Picayune, Mississippi who was
attempting to recruit a pediatrician to that relatively rural area.
When Abdallah met Lowery, he explained that Picayune was in a
designated health care professional shortage area, which suggested
that practicing medicine there would allow Abdallah to receive a
waiver of the two-year foreign residency requirement otherwise
2
applicable to graduate medical students in the United States under
a J-1 visa. Lowery added that he would help Abdallah obtain her
green card and told her he had similarly helped other physicians in
the past.
On July 28, 1994, Abdallah and Crosby Memorial Hospital
entered into a contract titled a “Net Income Guarantee Agreement.”
Under the terms of the contract, Crosby would guarantee Abdallah a
salary of $140,000 a year for two years by loaning her a subsidy
equal to the difference between that amount and her “net practice
income.” “Net practice income” was defined in the contract as gross
collections minus reasonable professional expenses; “reasonable
professional expenses” was defined with reference to the IRS
guidelines and a non-exclusive list of permissible expenses. The
definition of “reasonable professional expenses” then specified
that notwithstanding the above rule, any money expended as purchase
price, rental or lease on depreciable property would be disallowed
as a “reasonable expense” to the extent it exceeded $10,000
annually. The contract then specified that this loan of income
assistance would be forgiven if Abdallah continued to practice
full-time for an additional two years. If she didn't, she would
have to repay the subsidy over twelve months. Moreover, Abdallah
would have only three months to repay under certain enumerated
circumstances, one of which was if her “medical staff privileges at
hospital [were] terminated in accordance with the hospital's
3
medical staff bylaws.” In contrast, Abdallah could only terminate
the contract if Crosby violated its duties to pay subsidy.
In addition to this income subsidy loan, the contract provided
that the hospital would “reasonably” assist Abdallah in setting up
her office, hiring personnel, setting up accounting records, and
marketing her practice, though the contract reiterated that the
“primary” responsibility for the practice remained on Abdallah.
Another section of the contract specified that Abdallah was to be
considered an “independent contractor” with her own unfettered
judgment concerning the care of her patients. Similarly, the
contract notes that Abdallah was not obligated to admit her
patients to Crosby. Finally, the contract explicitly states that
it is the entire agreement between Abdallah and the hospital, and
that it supersedes any other oral or written agreements.
After signing the agreement, Abdallah and her family moved to
Picayune where they purchased a home, rented a temporary office,
and built an office facility for her clinic. When she began
practicing full-time in Picayune, Abdallah's practice operated at
a net practice loss, requiring substantial subsidy payments. She
alleges the hospital did not assist her as required by the contract
even though she submitted the required monthly accounting reports.
In light of her difficulties, Abdallah bristled that the hospital
continued to attempt to recruit doctors to the area. Abdallah also
discovered that although there was only one other pediatrician in
4
town, she faced competition from family practitioners who did some
pediatrics. Moreover, Abdallah's pursuit of a green card also
failed. During 1995, Lowery wrote letters and contacted government
officials in an apparent attempt to assist Abdallah with her
application for permanent resident status. These attempts were
unavailing because Abdallah could only receive a waiver of the
foreign residency requirement if she were directly employed by a
hospital under a three-year contract, and Crosby declined to alter
the Net Income Guarantee Agreement.
In June 1996, Crosby hired the Horne CPA Group to examine
Abdallah's records and expenses under the Net Income Guarantee
Agreement. The CPA examined the clinic's records and practices and
reported that the hospital had overpaid Abdallah by $63,795.73 due
to “understated cash receipts and overstated operating expenses.”
The CPA acknowledged his report could not meet generally accepted
auditing standards and advised a total reconstruction of Abdallah's
accounting records and receivables. Upon receiving this report,
Lowery wrote a letter to Abdallah detailing Crosby's concerns and
asking for her cooperation in achieving the recommended audit.
Crosby then suspended the remaining two-and-a-half months of income
subsidy payments until this accounting was completed.
An independent audit by Abdallah's financial expert,
Northshore Financial Services, ultimately determined that Abdallah
had been underpaid by $47,510.13. In arriving at this number, the
5
analyst deducted all business expenses allowed by the IRS without
applying the $10,000 cap on expenditures on depreciable assets
contained in the contract. Abdallah demanded the withheld
subsidies and a per-hour salary for the time she had spent on call
at the hospital, but Lowery refused to pay the subsidies or release
her from the on-call requirements in the contract. On March 6,
1997, Abdallah wrote the Chief of Staff at Crosby announcing her
resignation from staff privileges at Crosby. Because a termination
of staff privileges was one of the enumerated circumstances in
Article V permitting Crosby to terminate the contract, Crosby did
just that and demanded full repayment of the subsidy.
On August 27, 1997, Crosby filed suit in Mississippi state
court against Abdallah alleging that she had breached the Net
Income Operating Agreement. Abdallah timely removed to federal
court and counterclaimed for breach of contract, fraud,
misrepresentation, breach of the duty of good faith and fair
dealing, tortious interference with contract, and tortious
interference with prospective business relations. During
discovery, the District Court entered an agreed order appointing an
independent accounting firm to audit Abdallah's records. This CPA,
Kenneth Lefoldt, made minor adjustments to the audit provided by
Abdallah's accountants, applied the $10,000 cap on depreciable
property, and concluded that Abdallah was overpaid by $53,525.80.
Crosby moved for summary judgment on its breach of contract
6
claim, and soon thereafter moved for summary judgment on Abdallah's
counterclaims. After Abdallah filed her responses, Crosby moved to
strike the affidavit of Abdallah's expert, Paul A. Harris, on the
grounds that it introduced parol evidence regarding an unambiguous
contract and violated Rule 702 and 704 because it expressed a legal
conclusion. On June 24, 1999, the district court struck those
portions of Harris's affidavit that were legal conclusions. The
same day, the district court granted summary judgment to Crosby on
all points, dismissed the case with prejudice and ordered Abdallah
to pay all amounts required by the contract including the subsidy
payments and Crosby's attorneys' fees. On March 26, 2001, the
district court entered an order setting the total amount as
$352,041.95. The present appeal followed.
Discussion
I. Breach of Contract
The majority of the parties' arguments in this case concern
the breach of the Net Income Guarantee Agreement. Crosby argues
that Abdallah breached the agreement by resigning her staff
privileges at the hospital and moving her practice to Slidell,
Louisiana. Under the agreement, this would definitely be a breach
of contract. Article V of the contract lists circumstances under
which Crosby could terminate the contract; one of these
circumstances was if Abdallah's medical staff privileges at Crosby
were terminated in accordance with the Hospital's medical staff
7
bylaws. Abdallah submitted a resignation of her staff privileges,
and she does not dispute that Crosby's termination of her
privileges was done according to the bylaws. Thus, under Article
V Abdallah is “required to repay Hospital within three (3) months
the sum of all subsidy advances . . . .” Crosby was entitled to
repayment of the subsidies it had paid, and Article XI gives it the
right to recoup its attorneys' fees in an enforcement action.
Abdallah makes numerous arguments as to why she did not breach
the contract, which we shall address in turn. This court reviews
both grants of summary judgment de novo, reviewing all evidence in
the light most favorable to non-movant Abdallah. Lee v. E I
Dupont De Nemours & Co., 249 F.3d 362, 364 (5th Cir. 2001). In
doing so, this court looks to the substantive law of Mississippi.
Id. The district court's interpretation of a contract is a
question of law this court should review de novo. Ham Marine, Inc.
v. Dresser Indus., Inc., 72 F.3d 454, 458 (5th Cir. 1995). The
same is true for the district court's decision whether the contract
is ambiguous. Id. If the contract is determined to be ambiguous,
however, the intent of the parties is a question of fact. Id.
A. Ambiguity of the Contract
Abdallah claims that the contract language is ambiguous, and
that under Mississippi law an ambiguous contract should be
submitted to a jury for interpretation. We generally agree with
this statement of Mississippi law, see Pursue Energy Corp. v.
8
Perkins, 558 So. 2d 349 (Miss. 1990), but we conclude that the
contract is not ambiguous.
1. The Subsidy Provisions Are Clear
Abdallah first argues that the contract is ambiguous because
the Agreement's formula for calculating the subsidy is unclear.
She argues that key terms like “net practice income” and
“reasonable professional expenses” are not adequately defined and
further claims that the contract's reference to the “technical” IRS
regulations renders the contract unclear. She also suggests that
because the three auditors arrived at different conclusions, the
rules for calculating the subsidy must be ambiguous. We disagree
with Abdallah on all points. The contract describes the meaning of
its key terms in painstaking detail. The fact that those
definitions are rendered with reference to the IRS regulations does
not introduce ambiguity; the complexity of the IRS regulations
increases the clarity of the contract by providing a wealth of
guidelines and examples for the parties to rely upon.
We also disagree that the fact that three auditors each came
to different results reflects poorly on the clarity of the
contract. Abdallah has not provided evidence that the variance
between the audits can be attributed to ambiguity in the text
rather than variances in the reconstruction of her recordkeeping.
She claims the experts disagree over the meaning of the contract
because they dispute whether “rent” was a permissible expense. Her
9
argument fails because the contract is simply not ambiguous on this
point. The contract very clearly allows rent as a “reasonable
business expense,” but just as clearly limits Crosby's liability
for rent on depreciable property to $10,000 per year. Abdallah has
not explained why the office building she rents to herself is not
“property wherein depreciation is allowable under I.R.S. Code
Section 167.”
2. There Is No Conflict Between Articles V and VIII
Abdallah next purports to find ambiguity in the alleged
conflict between her Article V obligation to maintain staff
privileges at Crosby and her Article VIII power to admit her
patients at other hospitals. We find no conflict between these
provisions. The freedom to admit patients to other hospitals
coexists well with the contract's limited requirement that Abdallah
maintain the option to admit patients at Crosby. This argument
fails as well.
3. There Is No Conflict Between Articles IV and V
Abdallah then claims that the contract is ambiguous because
Article V only allows her to terminate the contract if Crosby
violates Article I, II or III. Article IV, the article concerning
Crosby's duty to assist Abdallah in establishing her practice, is
not listed as a reason for Abdallah to terminate the contract.
Abdallah believes this raises questions about the meaning of
Article IV that amount to ambiguity. We disagree. A violation of
10
Article IV is still a breach of contract, even though Article V
prevents Abdallah from rescinding the contract as a remedy for that
breach. See J.O. Hooker & Sons, Inc. v. Roberts Cabinet Co., Inc.,
683 So. 2d 396, 403 (Miss. 1996) (distinguishing breach of
contract, which confers the right to sue for damages, from a
material breach conferring the right to terminate). Article IV has
meaning and purpose, and thus the careful choice to omit Article IV
from Article V introduces no ambiguity into the contract.
4. Abdallah's Move to Slidell Was Not Briefed And Is
Moot
Abdallah's final argument concerning ambiguity relates to the
requirement that she remain in practice for an additional twenty-
four months to receive the loan forgiveness promised in Article II.
The “Witnesseth” and “Statement of Fact and Intent” portions of the
contract contain references to Pearl River County and the
“surrounding communities” in the “Hospital's service area,” but
those sections make clear the parties contemplated that Abdallah
would establish and maintain her practice in Pearl River County,
Mississippi. Similarly, Article I (“Moving Expenses”) and Appendix
A (“Relocation Assistance”) state that Abdallah will continue her
practice in Picayune, Mississippi for the additional two year term
or she will become obligated to repay those sums within three
months.
The alleged ambiguity arises from the language of Article II,
which requires Abdallah to remain in practice for another two years
11
to receive forgiveness of her loaned subsidies. Article II only
speaks of “leav[ing] or ceas[ing] full time practice” and does not
specify where that practice must take place. Abdallah argues that
because she moved to Slidell, Louisiana and continued to practice
there full time, and because Slidell is in the same general area as
Pearl River County,1 she arguably did not violate Article II such
that she was required to repay the subsidy. Abdallah testified in
her deposition that she thought she would be able to continue her
practice in Slidell and still serve her patients in Picayune.
Crosby rebuts her argument by claiming Abdallah confessed in her
deposition that her choice to move away from Picayune obligated her
to repay the subsidy, but that is an incorrect reading of the whole
of Abdallah's deposition testimony.
We might be inclined to give weight to Abdallah's argument
except for two countervailing considerations. First, Abdallah
failed to brief this argument on appeal and she did not even raise
this argument in her summary judgment memorandum before the
district court. Arguments not briefed before this court are waived
except in extraordinary circumstances. See United States v.
Martinez, 263 F.3d 436, 438 (5th Cir. 2001); FED. R. APP. P.
28(a)(9)(A). Second, Abdallah breached the contract when she
1
Slidell is about twenty-five miles away from Picayune.
According to Abdallah, the nearest hospital to Picayune (Crosby
excepted) is in Slidell and is about thirty minutes' drive away.
12
resigned her staff privileges and thereby became obligated to repay
the loaned subsidies within three months. It is therefore moot
whether she also became obligated to repay the subsidies because
she moved to Slidell. Though it is difficult to say whether the
language of Article II contains more than a scintilla of ambiguity,
we find no reason to answer that difficult question when the
argument is improperly presented and moot.
We find no ambiguity in the contract and affirm the grant of
summary judgment as to each of those challenges.
B. Breach of the Contract by Crosby
Abdallah also argues that she did not breach the Net Income
Guarantee Agreement because it had been previously breached by
Crosby. She has two separate arguments for why Crosby breached the
agreement before she did.
1. Failure to Assist In Establishing Her Practice
Abdallah claims that Crosby failed to meet its contractual
duties under Article IV of the Net Income Guarantee Agreement,
which obligates Crosby “reasonably to assist Physician in
organizing/setting up Physician's office, ordering supplies, hiring
personnel, setting up accounting records, and marketing/promoting
Physician's practice.” Article IV adds that it “does not absolve
Physician of primary responsibility for the set-up of Physician's
practice.” Abdallah claims that Crosby's failure to assist her
constitutes a material breach of the contract. A material element
13
of the contract is one that is “vital to the existence of the
contract” or “essential.” J.O. Hooker & Sons, Inc. v. Roberts
Cabinet Co., Inc., 683 So. 2d 396, 403 (Miss. 1996). A material
breach of the contract by Crosby could allow the termination of the
contract under Mississippi law. UHS-Qualicare, Inc. v. Gulf Coast
Community Hospital, Inc., 525 So. 2d 746, 756 (Miss. 1987).
Crosby claims that Abdallah provided no summary judgment
evidence whatsoever supporting her assertion that Crosby failed to
assist her as required by Article IV. This assertion appears to be
correct. Abdallah's response to the motion for summary judgment
refers the district court to the deposition testimony of Calvin
Green, but Green clearly testified that he had no knowledge of the
issue. Abdallah does not direct us to any other source of
evidence, either in her briefs or in her otherwise well-cited
memorandum in support of her response to the motion for summary
judgment. We can find no evidence either. Abdallah does not
testify in her deposition that Crosby failed to assist her. The
affidavit of Abdallah's expert Paul A. Harris mentions in passing
that Crosby “ignored” her and demonstrated a “lack of effort,” but
nothing indicates that these assertions were or could have been
made on his personal knowledge and thus cannot suffice as summary
judgment evidence. See FED. R. CIV. P. 56(c). Once Crosby
presented its case for summary judgment, Rule 56(e) prevented
Abdallah from resting on her pleadings and required her to
14
introduce evidence supporting her allegations. See FED. R. CIV. P.
56(e); WRIGHT, MILLER & KANE, FEDERAL PRACTICE & PROCEDURE: CIVIL 3D § 2721
(1998). Abdallah failed to introduce any evidence to support her
allegations, not even a verified pleading. Summary judgment is
proper.
Moreover, Crosby's alleged breach of Article IV could not have
been a “material” breach justifying Abdallah's refusal to perform
under the contract. As we have already discussed, Article V of the
Net Income Guarantee Agreement notoriously failed to list Article
IV as one of the provisions entitling Abdallah to terminate the
contract in case of breach. Article IV cannot be considered
“vital” or “essential” if it was so limited; indeed, the limitation
in Article V seems to make Article IV the very antonym of
“material” as defined in the case law. What's more, Article IV
reiterates that the “primary” responsibility for establishing her
practice remained on Abdallah. It would normally be difficult to
imagine what failings would constitute a “material” breach under
these circumstances, and it is impossible to imagine in this case
because Abdallah has provided no evidence. We therefore affirm
the grant of summary judgment on this issue.2
2. Crosby's Termination of Subsidy Payments
Abdallah also claims that Crosby breached the Net Income
2
As this is not a case concerning the sale of goods under the
U.C.C., we will not consider Crosby's argument regarding the right
to cure.
15
Guarantee Agreement when it refused to pay her subsidies for the
last two and a half months of the contract. Crosby's refusal was
spurred by the report from the Horne CPA Group stating that
Abdallah's records were in disarray, that Abdallah had been
overpaid by tens of thousands of dollars, and that a complete
reconstruction of her records would be necessary. Abdallah argues
that payment of subsidy was calculated on a monthly basis, and
because the $140,000 annual income guarantee was based on net
practice income Crosby should not have withheld the remaining
subsidy payments. That is, because Abdallah might have earned less
than $11,666 in each of the remaining months, Crosby may still have
been obligated to pay subsidy to bring her income up to a total of
$140,000 for that year. Abdallah claims Crosby was not entitled to
withhold subsidies if those future amounts remained undetermined.
The contract calculates the subsidy due by subtracting the
monthly net practice income from $11,666; this payment was
conditioned on Abdallah's delivery of a report containing various
accounting records including net practice income or loss. At the
point when Abdallah claims she was entitled to her subsidy payment,
Crosby had received an expert report explaining that her accounting
lacked the necessary rigor and veracity and that as a result of
Abdallah's errors she had overstated her net practice loss by over
$63,000. In order to be entitled to any subsidy check at all,
therefore, Abdallah would have to provide a report that “swallowed
16
up” that overpayment through a net practice loss of more than
$63,000 since the date of that expert report. Alternately, she
could produce a report correctly accounting for the previous year
and explaining why any remaining overpayment was less than her net
practice loss. There is no evidence that Abdallah provided either.
Provision of the report was a condition precedent to the subsidy
payment, and therefore we find it was not a breach of contract for
Crosby to withhold payment. We affirm the grant of summary
judgment on this point.
Abdallah also argues that Crosby's withholding of the subsidy
payment is an attempt to profit from its own breach in violation of
the principle set forth in UHS-Qualicare, Inc. v. Gulf Coast
Community Hospital, Inc., 525 So. 2d 746 (Miss. 1987). In that
case, a hospital sued its management company because it revised the
hospital budget and raised rates even though the hospital had the
exclusive power to take that step. Id. at 755. The court held
that because the hospital could change the rates itself instantly
and undo the misdeed, the management company's breach could not be
material. Id. at 756. Moreover, the court noted a party must
avoid damage if possible rather than choosing to suffer the damage
and pass the cost along to the other party. Id.
Abdallah claims that Crosby could have prevented the very
problem of which it complained if only it had honored its agreement
to assist her in setting up her practice, and therefore UHS-
17
Qualicare prevents Crosby from suing her for breach of contract.
There are two problems with this assertion. First, as discussed
above Abdallah introduced no evidence that Crosby failed to fulfill
its duties to help her set up her practice. Second, UHS-Qualicare
concerns the highly unusual circumstance where a party can
completely and effortlessly undo the other party's breach after the
fact, while Crosby's ability to establish and oversee Abdallah's
accounting could not provide the same complete, after-the-fact
cure. We therefore reject Abdallah's argument and affirm the
summary judgment on this issue.
II. Fraud In The Inducement
Abdallah asserts that the district court erred in granting
summary judgment on her counterclaim of fraud in the inducement.
She also asserts that the same fraudulent inducement claim should
have prevented the district court from granting summary judgment on
Crosby's breach of contract claim.
Under Mississippi case law, “[a] claim of fraud must satisfy
nine elements: 1) a representation, 2) that is false, 3) that is
material, 4) the speaker's knowledge of its falsity or ignorance of
its truth, 5) the speaker's intent that the hearer act upon it in
the manner reasonably contemplated, 6) the hearer's ignorance of
its falsity, 7) her reliance on its truth, 8) her right to rely
thereon, and 9) her consequent and proximate injury.” American
Income Life Ins. Co. v. Hollins, ___ So.2d ___, 2001 WL 695516 at
18
*6 (Miss. Jun. 21, 2001). The same elements apply both to fraud
generally and fraudulent inducement specifically. See id. Though
Mississippi law requires that each of the elements of fraud be
ultimately proven by clear and convincing evidence, id., summary
judgment should be denied if there are disputed facts that are
material to the fraud determination. See Simmons v. Thompson
Machinery of Mississippi, Inc., 631 So. 2d 798, 802 (Miss. 1994).
We will similarly apply the federal standards for summary judgment
to this Mississippi case.
Abdallah's claims of fraudulent inducement arise from two
groups of representations made by Glenn Lowery while the parties
were in contract discussions, which we will address in turn.
A. Green Card
In her deposition, Abdallah testified that Lowery promised he
would help her obtain a green card and told her that he had done so
for other physicians in the past. According to Abdallah, Lowery
specifically noted that Crosby was in a health care professional
shortage area, arguably implying that this fact was relevant to her
ability to obtain a green card through working for Crosby. The
record also contains a letter from Lowery to Secretary of
Agriculture Dan Glickman asking the Department to help Abdallah by
assuming the role of an “interested United States Government
agency” based on the agricultural nature of the Picayune area. The
letter refers Secretary Glickman to sections 10(a)(15)(j) and
19
212(e) of the Immigration and Naturalization Act, codified at 8
U.S.C. § 1101(a)(15)(J) and § 1182(e), which contain the
limitations on the ability to grant such a waiver.
Abdallah argues that Lowery made his promise to “help” her get
a green card in order to fraudulently induce her to sign the Net
Income Guarantee Agreement, and she claims that his letter-writing
efforts were no “help” at all. As discussed below, we agree that
Abdallah introduced sufficient evidence to defend this assertion
against a motion for summary judgment. While Crosby relies on the
merger clause in the Net Income Guarantee Agreement, that clause
cannot prevent Abdallah from asserting her claim of fraudulent
inducement. We address this latter point first.
1. The Merger Clause
Crosby primarily defended against the fraud allegations by
relying on the merger clause in the Net Income Agreement. This
clause, Article XVI, states that the contract is the “entire
understanding” between the parties and that it supersedes any other
agreements, whether oral or in writing. Because Abdallah read and
understood this provision, Crosby argues, she could not have
reasonably relied on any oral statements made outside the four
corners of that contract. The district court apparently agreed.
See Memorandum Opinion at 4, 8.
Our reading of Mississippi case law does not comport with
Crosby's assertion, however. In Brown v. Ohman, 42 So. 2d 209
20
(Miss. 1949), the Mississippi Supreme Court considered a contract
for land challenged on the ground that the seller had fraudulently
induced the buyer; the land had far less merchantable timber on it
than the seller had claimed. Id. at 210. Despite the fact that
the contract stated that both parties were relying on their own
estimate of the value of the property, the court affirmed the
decree ordering the seller to reimburse the buyer. Id. at 211.
The court held that contract recitals of “no reliance” were to be
ignored in cases of fraud and deceit, because the alleged fraud and
deceit may have induced the party to sign the contract containing
the recital. Id. at 213. The court added that clauses stating
that the contract contains “all the terms involved and the
representations made” should be similarly ignored when fraud is
alleged. Id. Fraud cannot merge with a contract and thus
completely negates it. Id. at 212.
This holding seems directly on point. Abdallah's claims of
fraudulent inducement should survive a “merger clause” like Article
XVI because that fraud may have induced her to sign the contract,
merger clause and all. Though Brown is an older case, we note that
the Mississippi Supreme Court reaffirmed this point of law only
last year, albeit in dictum. See Turner v. Terry, 799 So. 2d 25,
34 (Miss. 2001). We therefore hold that Article XVI of the Net
Income Agreement does not prevent Abdallah from introducing parol
evidence of Lowery's alleged fraudulent statements and does not
21
negate the element of reliance in the alleged fraudulent
inducement. We next ask whether Abdallah introduced enough
evidence to survive summary judgment on this issue.
2. Sufficiency of the Evidence
In order to understand whether Abdallah introduced sufficient
evidence that Lowery fraudulently induced her to sign the contract,
it is necessary to first carefully examine the immigration laws
applicable to her. Abdallah's J-1 visa was granted for the purpose
of allowing her to pursue her graduate medical education. This
places her generally within the group of “immigrants” defined in 8
U.S.C. § 1101(a)(15)(J) and particularly within the limitations of
8 U.S.C. § 1182. Section 1182(e) prevents such immigrants from
being eligible for change to a more favorable immigration status
until they have returned to their home country and resided there
for two years.3
The Attorney General may waive this requirement, however, when
the Director of the United States Information Agency recommends
3
This requirement enforces the purpose of the exchange
program: to foster relations with foreign countries by allowing
their citizens to be trained in the United States and then return
to apply the fruits of their study in their native land. See
Newton v. INS, 736 F.2d 336, 340-41 (6th Cir. 1984). The
requirement also remedies the “flagrant abuse” of the study program
and likewise prevents the “brain drain” suffered by many countries
whose citizens received training in the United States and then
declined to return. See id. at 341, quoting 1981 U.S. Code Cong.
& Ad. News 2577, 2594.
22
it.4 See 8 U.S.C. § 1182(e). The power to recommend waiver is
strictly limited; the Director may recommend waiver when the
Commissioner of Immigration and Naturalization requests it pursuant
to a determination that such a return would impose an exceptional
hardship on the immigrant's family or would expose the immigrant to
persecution on account of race, religion or political opinion. See
id. The Director may also recommend waiver of the two-year foreign
residence requirement on the request of “an interested United
States Government agency” or (in the case of graduate medical
students) “a State Department of Public Health.” See id. For most
cases, the Attorney General may grant a recommended waiver if he
determines it to be “in the public interest.” In contrast, the
Attorney General is strictly forbidden to grant a waiver to a
graduate medical student unless she has met the requirements of 8
U.S.C. § 1184(l).5 Id.
4
Now that the United States Information Agency has been
integrated into the United States Department of State, waiver
review is conducted by the Waiver Review Division of the Office of
Legislation, Regulation and Advisory Assistance in the Visa Office
of the Bureau of Consular Affairs. See
http://travel.state.gov/waiverpa.html.
5
The text of the statute refers to 8 U.S.C. § 1184(k). See 8
U.S.C. § 1182(e). This citation was correct when the law was
passed. See Immigration and Nationality Technical Corrections Act
of 1994, Pub. L. No. 103-416, § 220, 108 Stat. 4305 (1994)
(creating this requirement in section 1182(e) and a new subsection
of section 1184 denominated “k”). Section 1184(k) was modified
and redesignated “1184(l)” in the Omnibus Consolidated
Appropriations Act of 1997, Pub. L. 104-208, §§ 622(a) and
671(a)(3)(A), 110 Stat. 3009 (1996). The same statute added a new
subsection, which was accidentally designated “l” as well. See id.
23
For a graduate medical student to meet the requirements of
section 1184(l), she must demonstrate a bona fide offer of full-
time employment at a health facility or health care organization.
8 U.S.C. § 1184(l)(1)(C)(i). She must agree to begin work within
ninety days and continue to work for not less than three years.
Id. at § 1184(l)(1)(C)(ii). If the position is not for medical
research or training, the immigrant must also agree that this
practice shall be in a geographic area designated by the Secretary
of Health and Human Services as having a shortage of health care
professionals. Id. at § 1184(l)(1)(D).6 Violation of these terms,
including failure to fulfill the contract, will immediately cause
the two-year foreign residence requirement to apply again. Id. at
§ 1184(l)(3).
This examination of the relevant immigration law clarifies the
import of Lowery's actions. We must make all reasonable inferences
in Abdallah's favor, and in doing so we find she has presented
evidence on each of the nine elements of her claim of fraud in the
inducement. (1) As for the first element -- a “representation” --
Lowery promised future conduct that he had no power to actually
at § 625(a)(1). Congress has not corrected this dual subsection
problem, nor has it altered the text of section 1182(e) to reflect
the renaming of section 1184(k). Nevertheless, it is obvious that
the subsection titled “Restrictions on Waiver” is the one that
limits the ability of graduate medical students to receive a waiver
of the two-year foreign residency requirement.
6
The procedure by which the Department of Health and Human
Services makes this determination is contained at 42 C.F.R. Part 5.
24
perform. Lowery asserted that he had helped other physicians get
a green card, he referred to section 1184(l)'s specific requirement
that the hospital be located in a designated health care
professional shortage area, and he wrote a letter to the Secretary
of Agriculture specifically pointing the Secretary to the statutes
limiting Abdallah's ability to get a green card.7 These facts all
suggest that Lowery understood the requirements of sections 1182(e)
and 1184(l). If he understood those sections, he knew that he
could do nothing to move Abdallah closer to her goal of a green
card. He thus would have no present intent to deliver when he made
his promise to help, and this state of mind suffices to make a
promise of future conduct a “representation” for purposes of fraud.
See R.C. Const. Co. v. Nat'l Office Systems, Inc., 622 So. 2d 1253,
1256 (Miss. 1993) (quoting Bank of Shaw v. Posey, 573 So. 2d 1355,
1360 (Miss. 1990)).
Continuing with the elements of fraud, (2) according to
Abdallah's deposition testimony, the representation was material to
her decision. (3) The representation was demonstrably false,
7
More precisely, perhaps, Abdallah’s deposition testimony, in light of the present record,
permits a fact finder to reasonably conclude that a reasonable person in her situation would
understand Lowery’s statements to her as relating that if she accepted the Crosby offer she would be
eligible to receive a green card and that a reasonable person in Lowery’s position would understand
that Abdallah would likely so understand what he was saying to her.
Whether the evidence in fact introduced at any future trial (where Abdallah’s testimony might
differ somewhat from her deposition and where additional evidence of an uncontradicted character
might also cast a different light on the matter) will suffice to sustain a verdict for Abdallah on her
fraud claim, we do not address.
25
because Lowery had no power to help her unless he radically altered
the contract. (4) As discussed above, there is some evidence that
Lowery knew the statutory requirements for waiver of the foreign
residency requirement and thus knew he was completely powerless to
help Abdallah. This suffices to establish, for summary judgment
purposes, that he knew his promise was false. (5) Lowery was
trying to recruit Abdallah, and thus he intended that she rely on
his statements. (6) Abdallah testified that she had no knowledge
that his promise was false and that (7) she relied on Lowery's
promise. (8) She also testified that she passed up other job
opportunities, which constituted a consequent and proximate injury.
Finally, (9) there is some evidence that Abdallah had the
right to rely on the promise. We recognize that she is a highly
educated person with some ability to investigate Lowery's claims
for herself, and this weighs in the “right to rely” consideration.
See Martin v. Winfield, 455 So. 2d 762, 765-66 (Miss. 1984) (the
fact that the deceived party was an attorney who could have easily
confirmed the truth of the assertion supported a jury verdict in
his opponent's favor); but see RESTATEMENT (SECOND) OF TORTS § 540
(1976) (no duty to investigate the truth of a representation if not
known to be false). On the other hand, Abdallah is an alien with
no knowledge of immigration law while Lowery is a U.S. citizen who
has recruited foreign physicians and who plausibly represented that
he had experience with immigration. This apparent imbalance of
26
knowledge favors Abdallah's “right to rely,” at least at the
summary judgment stage. See Martin, 455 So. 2d at 765-66; American
Income Life Ins. Co. v. Hollins, ___ So.2d ___, 2001 WL 695516 at
*6 (Miss. Jun. 21, 2001); Allen v. Mac Tools, Inc., 671 So. 2d 636,
642-43 (Miss. 1996); Turner v. Wakefield, 481 So. 2d 846, 849-850
(Miss. 1985). Abdallah has provided some evidence on each element
of her claim.
This examination of immigration law also belies Crosby's claim
that Lowery actually “helped” Abdallah and thus held up his end of
their bargain. The Net Income Guarantee Agreement neither provided
Abdallah with true employment nor required her to practice with
Crosby Memorial Hospital for three years, and therefore 8 U.S.C. §
1182(e) forbade the Attorney General from granting a waiver under
any circumstances. The Department of Agriculture and the
Mississippi Department of Health were utterly powerless to help
Abdallah, and Lowery's letters to these agencies were a waste of
postage. The only thing Lowery could have done to “help” was agree
to transmute the Net Income Operating Agreement into a three-year
direct employment contract, which he refused to do. Crosby has
failed to produce evidence negating Abdallah's counterclaim.
Abdallah's counterclaim for fraudulent inducement is not
barred by Article XVI of the Net Income Operating Agreement, and
she has provided more than a scintilla of evidence on each element
of her claim. The district court thus erred in granting summary
27
judgment against her on the counterclaim for fraud in the
inducement. Moreover, while Abdallah did not expressly raise the
affirmative defense of fraud in her answer to Crosby's lawsuit, a
counterclaim for fraudulent inducement should suffice to raise a
defense of fraud in a breach of contract suit at least so as to
prevent a summary judgment in the present circumstances where these
matters were all considered together. See Turner v. Terry, 799 So.
2d 25, 34 (Miss. 2001). If proven, fraud completely negates a
contract. Brown, 42 So. 2d at 212. The district court therefore
erred in granting summary judgment to Crosby on its breach of
contract cause of action.
B. Other Pediatricians
Abdallah also argues that she was fraudulently induced to sign
the contract in that Crosby represented that there was a strong
need for a pediatrician in the area. According to Abdallah's
deposition, when she first interviewed with Lowery she also met the
only pediatrician in town, Dr. Tibitibiah. Lowery told her that he
felt Picayune needed another pediatrician and that the area had
been designated a health care professional shortage area. During
her time in Picayune, however, Abdallah discovered that other
physicians would potentially compete with her. Abdallah discovered
that Crosby had already recruited two other family practitioners,
Dr. Gipson and Dr. Denney. A third family practitioner, Dr.
28
Delores, was also practicing in the Picayune area.8 Moreover,
after she arrived, Crosby recruited Dr. Hussein, a pediatrician,
and Dr. Weismann, a family practitioner, though these doctors began
practicing in Picayune after Abdallah's contract with Crosby was
broken. Abdallah argues that the family practitioners did some
pediatrics and thus were in competition with her.
We conclude that Abdallah has not produced summary judgment
evidence supporting her claim that these actions constituted
fraudulent inducement. While Lowery asserted that there was a
need for a pediatrician in the area, and the contract itself
recites that, Abdallah has not provided any evidence that this
assertion was knowingly false. It may very well be that Lowery
thought that the family practitioners did not obviate the need for
a second pediatrician; we cannot know, because Abdallah introduced
no evidence on this point. The evidence does indicate that the
hospital continued to recruit pediatricians and family
practitioners, but this strongly indicates that Crosby believed
that Picayune needed even more pediatric care professionals.
Similarly, there was apparently nothing false in Lowery's claim
that Picayune was designated as a health care professional shortage
area. Abdallah has failed to introduce evidence supporting this
element of her claim of fraudulent inducement.
Accordingly, we will affirm the grants of summary judgment on
8
The evidence does not make clear whether Dr. Delores was
recruited by Crosby.
29
these narrow grounds. Nevertheless, as discussed above the
evidence of fraud in the green card issue compels us to reverse the
district court's grant of summary judgment against Abdallah's
counterclaim for fraudulent inducement and the grant of summary
judgment on Crosby's claim for breach of contract.
III. Breach of the Duty of Good Faith and Fair Dealing
Abdallah's challenge to Crosby's recruitment of other
physicians is not limited to her fraudulent inducement claim. She
also claims that their efforts to recruit other physicians diluted
the market for a pediatrician in Picayune and thus breached the
duty of good faith and fair dealing implicit in contracts.
Mississippi does indeed recognize an implicit duty of good
faith in contracts. We also note that a party cannot violate the
implicit duty of good faith by exercising a right made explicit in
the contract. See American Bankers' Ins. Co. of Fla. v. Wells, 819
So. 2d 1196, 1206 (Miss. 2001); McDonald's Corp. v. Watson, 69 F.3d
36, 43 (5th Cir. 1995). The contract does not explicitly state
that Crosby may continue to recruit physicians to the area,
however, so we cannot rest solely on this basis.9 Instead, we must
9
Crosby claims Mississippi law holds that a party cannot
breach the duty of good faith and fair dealing if it honors the
terms of the agreement. This is a misreading of the relevant case
law. The implicit duty of good faith cannot be breached by the
exercise of a power affirmatively provided for (either by explicit
statement or clear implication) in the contract, but Mississippi
law does not support Crosby's claim that compliance with the terms
of the contract nullifies the effect of extra-contractual actions
taken in bad faith.
30
examine this situation to see if there is evidence of a breach of
the duty of good faith. "The breach of good faith is bad faith
characterized by some conduct which violates standards of decency,
fairness or reasonableness." Wells, 819 So. 2d at 1206. Contrary
to Crosby's suggestions, we find no case law stating further that
the duty is breached only in “blatant, egregious circumstances.”
Abdallah admits that she knew Crosby never promised it would
not continue recruiting other physicians. To the contrary, she
knew that she was taking a position in an area designated as having
a severe shortage of health care professionals and thus could have
easily predicted that other physicians would be recruited. Indeed,
given this unfortunate state of affairs, the decent, fair and
reasonable thing to do may have been to continue recruiting
doctors. Additionally, we note that the doctors of which Abdallah
complains did not begin practicing while the Net Income Guarantee
Agreement was still in force. We find no evidence of indecent,
unfair or unreasonable behavior and therefore affirm the district
court's grant of summary judgment against Abdallah on her
counterclaim for breach of the duty of good faith and fair dealing.
IV. Tortious Interference With Contract and With Prospective
Business Relations
Abdallah also counterclaimed for tortious interference with
contract and tortious interference with prospective business
relations. Though she mentioned these counterclaims in her summary
of argument, she failed to explain her contentions in the body of
31
her brief in this Court. She has therefore waived these arguments
on appeal. See United States v. Martinez, 263 F.3d 436, 438 (5th
Cir. 2001); FED. R. APP. P. 28(a)(9)(A). Her arguments would have
failed anyway. A party to a contract cannot be held liable for
tortious interference with that contract. See Cenac v. Murry, 609
So. 2d 1258, 1269 (Miss. 1992). Moreover, Abdallah has not shown
that Crosby acted with the “malice” necessary for a tortious
interference with prospective business relations claim. See MBF
Corp. v. Century Business Communications, Inc., 663 So. 2d 595, 598
(Miss. 1995). We therefore affirm the district court's award of
summary judgment on the tortious interference claims.
V. The District Court's Choice to Strike the Legal Conclusions in
The Expert's Affidavit
Abdallah's final contention on appeal is that the district
court erred by striking portions of the affidavit of her expert,
Paul A. Harris. Though Crosby moved to completely strike the
affidavit, the district court ultimately struck only the legal
conclusions asserted by Harris. We review this decision for abuse
of discretion. See First United Financial Corp. v. U.S. Fidelity
& Guar. Co., 96 F.3d 135, 137 (5th Cir. 1996).
Though Abdallah raises arguments based on the generally
applicable Federal Rules of Evidence, we need only examine the
specific effect of Federal Rule of Civil Procedure 56 governing
summary judgments. Wright, Miller and Kane opined that:
“Rule 56(e) further limits the matter to be properly included
32
in an affidavit to facts, and the facts introduced must be
alleged on personal knowledge. Thus, ultimate or conclusory
facts and conclusions of law, as well as statements made on
belief or 'on information and belief,' cannot be utilized on
a summary-judgment motion.” WRIGHT, MILLER & KANE, FEDERAL PRACTICE
& PROCEDURE: CIVIL 3D § 2738 (1998).
This circuit adopted Wright, Miller & Kane's reasoning in Galindo
v. Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985), and
reiterated the same point in Orthopedic & Sports Injury Clinic v.
Wang Laboratories, Inc., 922 F.2d 220 (5th Cir. 1991). Harris's
legal conclusions, therefore, were not valid summary judgment
evidence. Because the court excluded only those portions of the
affidavit that were useless at the summary judgment stage, the
district court did not abuse its discretion. We affirm that
ruling.
Conclusion
We are persuaded that the only error in this case was the
district court's choice to award summary judgment on the issue of
Lowery's promise to help Abdallah obtain a green card. We reverse
the summary judgment on her counterclaim for fraudulent inducement
and remand for further proceedings. Because fraud is a defense to
an action for breach of contract, we also reverse the grant of
summary judgment on Crosby's suit against Abdallah and remand for
further proceedings. The district court's order that Abdallah pay
Crosby is also vacated for the same reason. We affirm all other
aspects of the district court's summary judgment opinion, however.
Finally, we find no error in the district court's striking of the
33
legal conclusions in the affidavit of Paul A. Harris.
AFFIRMED IN PART, REVERSED AND REMANDED IN PART
34