Todd P. Smith v. Robert Casali

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 06-1601
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Baptist Health, doing business as *
Baptist Health Medical Center, *
*
Plaintiff, *
*
v. *
*
Todd P. Smith, M.D., *
*
Defendant/Appellee, *
*
v. * Appeal from the United States
* District Court for the
Robert Casali, M.D., * Eastern District of Arkansas.
*
Third Party Defendant/ *
Appellant, *
*
Central Arkansas Vascular *
Surgery, P.A., *
*
Third Party Defendant. *
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Submitted: October 20, 2006
Filed: February 9, 2007
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Before SMITH, BOWMAN, and COLLOTON, Circuit Judges.
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SMITH, Circuit Judge.
Dr. Todd Smith filed a third-party complaint against Dr. Robert Casali seeking
indemnity against a $154,000 judgment awarded to Baptist Health Medical Center
("Baptist Health"). The district court granted summary judgment in favor of Dr.
Smith. Dr. Casali appeals. We affirm in part, reverse in part and remand.
I. Background
Dr. Casali is the President and sole shareholder of Central Arkansas Vascular
Surgery ("CAVS"). Baptist Health and CAVS jointly hired Dr. Smith to offer medical
services with both institutions. As part of this arrangement, Baptist Health offered Dr.
Smith a loan agreement to help start his practice. Under the terms of the loan
agreement, if Dr. Smith provided medical services in Arkansas for six years, then
Baptist Health would forgive the loan debt.
Dr. Smith, hesitant to enter into such an agreement, expressed his concern to Dr.
Casali, who responded with a letter stating:
You will be an employee of Central Arkansas Vascular Surgery, with a
beginning employment date of July 1, 2002. Your responsibility to
Central Arkansas Vascular Surgery is the professional practice of
vascular surgery. You will not be responsible for repayment of any loan
to Baptist Health Center in any form or fashion.
Dr. Smith entered the agreement but, after practicing for two years, left
Arkansas for Texas. Baptist Health filed suit against Dr. Smith seeking to recover the
roughly $154,000 loaned to Dr. Smith. Dr. Smith, in turn, filed a third-party complaint
against Dr. Casali and CAVS, alleging that Dr. Casali's letter constituted an agreement
to indemnify Dr. Smith against any obligations owed to Baptist Health.
After filing his answer to Dr. Smith's third-party complaint, Dr. Casali was
granted permission to file an amended answer. Five days later, Dr. Casali requested
permission to file a second-amended answer that attempted to assert several new
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defenses. The district court denied Dr. Casali's request to file a second-amended
answer and entered judgment in favor of Baptist Health. The district court entered
summary judgment in favor of Dr. Smith after concluding Dr. Casali's letter was an
indemnity agreement and ordered Dr. Casali to indemnify Dr. Smith against the
Baptist Health judgment. Dr. Casali appeals, arguing the district court erred in
concluding that the letter was an indemnity agreement and in denying his motion to
amend.
II. Discussion
"We review the district court's legal conclusion that a contract existed de novo."
Diesel Power Equip., Inc. v. ADDCO, Inc., 377 F.3d 853, 856 (8th Cir. 2004).
Decisions from the state supreme court as to state law are binding on this court.
Garnac Grain Co., Inc. v. Blackley, 932 F.2d 1563, 1570 (8th Cir. 1991). "Decisions
of the various intermediate appellate courts are not, but they are persuasive authority."
Id.
The focus of this appeal is a single sentence in a three-sentence letter from Dr.
Casali to Dr. Smith. The sentence states, "You will not be responsible for repayment
of any loan to Baptist Health Center in any form or fashion." Dr. Casali argues that the
district court erred by interpreting this statement as a clear expression of his intent to
indemnify Dr. Smith sufficient to constitute an enforceable indemnity agreement
under Arkansas law. We agree.
Under Arkansas contract law, for language to constitute an indemnity
agreement, the intent to indemnify must be expressed in clear and unequivocal terms
and to such an extent that no other meaning can be ascribed. Chevron U.S.A., Inc. v.
Murphy Exploration & Prod. Co., 151 S.W.3d 306, 310 (Ark. 2004). While no
particular words are required to form such an agreement, Arkansas courts "will not
impose [an indemnity duty] unless the purpose to do so is spelled out in unmistakable
terms." Id. The language of an indemnity agreement can be unambiguous and still not
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spell out in clear, unequivocal, unmistakable terms the indemnitor's intention to
obligate himself to indemnify. Arkansas Kraft Corp. v. Boyed Sanders Const. Co., 764
S.W.2d 452, 453–454 (Ark. 1989).
The letter fails to spell out a promise by Dr. Casali to pay Dr. Smith's debt in
clear, unequivocal, unmistakable terms. Conspicuously absent is any reference to Dr.
Casali assuming responsibility for Dr. Smith's obligation. Under the loan agreement
with Baptist Health, providing medical services in Little Rock constituted repayment
by Dr. Smith. Instead, the letter merely states that Dr. Smith will not have to repay any
loan from Baptist Health. The disputed sentence reasonably could be understood as
Dr. Casali's prediction about whether Baptist Health would hold Dr. Smith responsible
for repayment of the loan, or it could simply be a misstatement by Dr. Casali of the
terms of the agreement. In any event, Dr. Smith must show more than the possibility
that the letter was an agreement to indemnify; the terms must be unmistakable.
Further, the two other sentences in the letter are consistent with a mere
articulation of Dr. Casali's understanding of the contract's terms. "You will be an
employee of Central Arkansas Vascular Surgery, with a beginning employment date
of July 1, 2002. Your responsibility to Central Arkansas Vascular Surgery is the
professional practice of vascular surgery." This declaration does not assume
responsibility for a loan's repayment. It could readily be taken as a summary statement
of the relationship between Dr. Casali, Dr. Smith, and Baptist Health.
Both parties attempt to introduce extrinsic evidence, claiming the letter is
ambiguous. However, we need not consider such evidence because we hold the letter
is not an indemnity agreement. See H & H Brokerage, Inc. v. Vanliner Ins. Co., 168
F.3d 1124, 1127 (8th Cir. 1999) (holding extrinsic evidence of the meaning of a
contract is admissible only when the contract is ambiguous). The parties are not
disputing the meaning of any term or phrase in the purported contract, but instead are
disputing whether a contract was formed.
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Based upon the forgoing analysis, we conclude that the letter is not an
indemnity agreement, that the district court erred by granting Dr. Smith's motion for
summary judgment and that the indemnification claim should be dismissed as a matter
of law.
III. Motion to Amend
"[I]n determining whether to permit an amendment under Fed.R.Civ.P. 15(b),
the district court has broad discretion and will not be reversed except upon a showing
of abuse." Brown v. Cooper Clinic, P.A., 734 F.2d 1298, 1301 (8th Cir. 1984) (internal
quotations and citations omitted). "Amendments [to pleadings] should be allowed with
liberality." Chesnut v. St. Louis County, Mo., 656 F.2d 343, 349 (8th Cir. 1981).
However, there is no absolute right to amend and a court may deny the motion based
upon a finding of undue delay, bad faith, dilatory motive, repeated failure to cure
deficiencies in previous amendments, undue prejudice to the non-moving party, or
futility. Doe v. Cassel, 403 F.3d 986 (8th Cir. 2005).
We are unable to say the district court abused its discretion by denying Dr.
Casali's motion for leave to file a second amended answer. The record evinces a
pattern of delay by Dr. Casali's counsel. After postponing their client's deposition, Dr.
Casali's counsel refused to return phone calls from opposing counsel seeking to
reschedule the deposition. These delays all seem calculated to accommodate the
personal schedule of Dr. Casali's lead attorney, who had an extensive travel schedule
and preferred not to work on Fridays. These delays were so grave that the district
court awarded Dr. Smith $907 in attorney's fees and costs in order to compensate him
for the related inconvenience. Dr. Casali does not contest these facts. We agree that
allowing Dr. Casali to raise three additional defenses after the close of discovery and
so close to the beginning of litigation would have further prejudiced the defendant.
These new defenses would have potentially required additional discovery and
depositions. Accordingly, we find that the district court did not abuse its discretion by
denying Dr. Casali's motion to amend.
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IV. Conclusion
We vacate the district court's grant of summary judgment and direct that the
indemnification claim be dismissed as a matter of law. The district court's denial of
Dr. Casali's motion to amend his answer is affirmed, and the case is remanded for
further proceedings on Dr. Smith's claim for contribution.
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