Joseph Livingston, M.D. v. Kent Diagnostic Radiology Associates, P.A.

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
JOSEPH LIVINGSTON, M.D., )
)
Plaintiff, ) C.A. No. K23C-12-023 RLG
)
KENT DIAGNOSTIC RADIOLOGY )
ASSOCIATES, P.A., )
)
Defendant. )
Submitted: June 28, 20241
Decided: October 23, 2024
MEMORANDUM OPINION AND ORDER
On Plaintiff’s Motion for Partial Judgment on the Pleadings
DENIED
On Plaintiff’s Motion to Dismiss Counterclaim
DENIED in PART, GRANTED in PART
Adam F. Wasserman, Esquire, Ciconte Wasserman & Scerba, LLC, Wilmington,
Delaware. Attorney for Plaintiff.
Josiah R. Wolcott, Esquire, Connolly Gallagher LLP, Newark, Delaware. Attorney
for Defendant.
GREEN-STREETT, J.
1
The transcript from the hearing in this matter was not received until August 12, 2024.
1
I. Introduction
Before the Court are Plaintiff Dr. Joseph Livingston’s Motion for Partial
Judgment on the Pleadings and Motion to Dismiss Counterclaim. Dr. Livingston
formerly belonged to Defendant Kent Diagnostic Radiology Associates, P.A.
(“KDRA”) as a shareholder.2 On June 30, 2023, Dr. Livingston terminated his
partnership with KDRA. The parties have since engaged in the instant litigation
surrounding how much money KDRA still owes Dr. Livingston. As the contract
between the parties contains ambiguity, Dr. Livingston’s Motion for Partial
Judgment on the Pleadings is DENIED. KDRA has pled its breach of contract claim
with enough specificity to state at least one claim sufficiently. Accordingly, Dr.
Livingston’s Motion to Dismiss Counterclaim is GRANTED in part and DENIED
in part.
II. Background
A. Factual Background
Dr. Livingston belonged to KDRA as a shareholder from July 1, 2020 until
June 30, 2023.3 Dr. Livingston’s departure coincided with four other shareholders
leaving KDRA.4 Under the Shareholder Agreement, upon terminating their
2
Compl. at 2, D.I. 1 (Dec. 26, 2023).
3
Pl.’s Mot. for Partial J. at 1, D.I. 17 (Mar. 20, 2024).
4
Id. at 2.
2
association with KDRA, shareholders were entitled to: (1) a disbursement of their
share of any excess funds in KDRA’s operating account; and (2) compensation for
any accrued, unused medical leave valued at $11,000.00 per week.5 Dr. Livingston
accrued five weeks of unused medical leave at the time of his departure from
KDRA.6
The departure of five of the fourteen shareholders from KDRA caused the
remaining nine shareholders to begin winding up the partnership. 7 KDRA’s
accountant notified all fourteen shareholders that “KDRA never held aside” the
money to pay out unused medical leave to any departing shareholders.8 Stated
another way, KDRA never accounted for the liability it accrued when shareholders
accumulated medical leave.9 After accounting for the liability KDRA owed to each
shareholder and subtracting that amount from KDRA’s cash account, the accountant
determined KDRA possessed a negative account balance.10 The shareholders were
informed the deficit would be borne by all fourteen shareholders – including the five
5
Id. at 2.
6
Def.’s Resp. at 5, D.I. 24 (May 3, 2024); see also Compl. at 7, D.I. 1.
7
Compl. at 4-5, D.I. 1.
8
Id. at 9.
9
Id.
10
Id.
3
departing shareholders paying their share of the deficit as a deduction from their
medical leave disbursement.11
B. Procedural Background
Dr. Livingston filed the Complaint asserting a single claim of breach of
contract.12 He argues: (1) KDRA deprived him of $8,909.60 derived from a grant;
(2) KDRA improperly excluded him from two shareholder meetings; and (3) KDRA
owes him $27,618.55 for unused medical leave.13 Dr. Livingston seeks the money
he believes KDRA owes him, as well as pre-judgment interest and attorney fees.14
KDRA disagrees with Dr. Livingston’s interpretation of the Shareholder
Agreement; denies excluding him from any shareholder meetings; and asserts a
counterclaim against Dr. Livingston for breach of contract.15 KDRA contends Dr.
Livingston’s failure to acknowledge his share of the medical leave liability
constitutes a “refusal to abide by the plain language of the 2020 Shareholders
Agreement.”16 Dr. Livingston responded by filing a Motion for Partial Judgment on
11
Id.
12
Compl. at 12, D.I. 1.
13
Id. at 13.
14
Id.
15
Def.’s Resp. at 14-15, D.I. 24.
16
Id. at 15.
4
the Pleadings, a Motion to Dismiss KDRA’s counterclaim, and a Motion for
Sanctions.17
The Court held oral argument regarding these motions on June 28, 2024.18 At
the hearing, Dr. Livingston withdrew his Motion for Sanctions.19 KDRA asserted
two factual bases for its breach of contract claim: (1) Dr. Livingston’s anticipatory
repudiation; and (2) Dr. Livingston’s responsibility for KDRA’s breach of its contract
with Bayhealth.20
III. Standard of Review
The standard this Court applies to both a motion for judgment on the pleadings
and a motion to dismiss is virtually identical.21 This Court may grant such motions
“where there is no material fact in dispute and the movant is entitled to judgment as
17
Pl.’s Mot. for Partial J. at 1, D.I. 17.
18
D.I. 25.
19
Tr. at 1.
20
Id. at 24.
21
Super. Ct. Civ. R. 12(c); Super. Ct. Civ. R. 12(b)(6).
5
a matter of law.”22 The Court must view all “facts pleaded and inferences to be
drawn from such facts in a light most favorable to the non-moving party.”23
“A [Superior Court Civil] Rule 12(c) motion is a proper framework for
enforcing unambiguous contracts, which have only one reasonable meaning and
therefore do not create material disputes of fact.”24 Ambiguity exists within a
contract “when the provisions in controversy are reasonably or fairly susceptible of
different interpretations[,] or may have two or more different meanings.”25 If the
Court can determine the meaning of a contract from “knowledge of the simple facts
on which, from the nature of language in general, its meaning depends,” the Court
must find the contract unambiguous.26
22
Plume Design, Inc. v. DZS, Inc., 2023 WL 5224668, at *4 (Del. Super. Aug. 10, 2023) (internal
quotations omitted) (quoting Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund II,
L.P., 1992 WL 181718 at *1 (Del. Ch. Jul. 28, 1992), rev’d 624 A.2d 1199 (Del. 1993)); Malpiede
v. Townson, 780 A.2d 1075, 1082 (Del. 2001).
23
Plume Design, 2023 WL 5224668, at *4 (citing Warner Communications, Inc. v. Chris-Craft
Indus., Inc., 583 A.2d 962, 965 (Del. Ch. 1989)); Malpiede, 780 A.2d at 1082.
24
Id. (internal quotations omitted) (quoting Bay Point Cap. Partners L.P. v. Fitness Recovery
Holdings, LLC, 2021 WL 5578705, at *4 (Del. Super. Nov. 30, 2021)).
25
Rhone-Poulenc Basic Chemicals Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195 (Del.
1992).
26
Id.6
IV. Discussion
A. Dr. Livingston’s Motion for Partial Summary Judgment must be
denied
Dr. Livingston posits “[t]he 2023 Shareholder Resolution and July 31, 2023
Letter unequivocally require KDRA to prioritize the payment of unused medical
leave to the five terminating shareholders, including [Dr. Livingston].”27 He
contends KDRA’s reduction of his payout, which KDRA calculates by attributing to
Dr. Livingston his share of all fourteen shareholders’ accrued medical leave, violates
his agreements with KDRA.28 Dr. Livingston maintains the only possible
interpretation of the various agreements between himself and KDRA preclude
KDRA from applying a negative “equalization payment” to calculate how much
money it owes Dr. Livingston.29
There is no dispute that the documents referenced by Dr. Livingston
unambiguously establish KDRA owes him $55,000.00 for his five weeks of unused
emergency medical leave.30 KDRA also represented to its shareholders that the five
departing shareholders, Dr. Livingston among them, would be paid the balance of
27
Pl.’s Mot. for Partial J. at 9, D.I. 17.
28
Id. at 9-10.
29
Id. at 10.
30
Pl.’s Ex. C at 2, D.I. 7.
7
their unused medical leave before the nine remaining doctors.31 Nothing in those
documents, however, excuses Dr. Livingston from his obligation under the original
Shareholder Agreement to share in the liabilities incurred by KDRA.32 To the extent
Dr. Livingston argues he possessed no obligation to share in the liability KDRA
accrued, the Court disagrees.
While there is no dispute that Dr. Livingston is entitled to payment for his
unpaid medical leave, a great deal of ambiguity remains regarding Dr. Livingston’s
obligations to KDRA. Dr. Livingston cannot, as a matter of law, ask this Court to
enter partial judgment on the pleadings on this issue without clarity on the liabilities
he owes. No agreement exists on either the categorical or calculated liability
exposures for Dr. Livingston. This ambiguity prevents the entry of judgment as Dr.
Livingston requests. Accordingly, Plaintiff’s Motion for Partial Judgment on the
Pleadings is DENIED.
B. Dr. Livingston’s Motion to Dismiss Counterclaim based on
anticipatory repudiation must be denied
KDRA asserts a counterclaim against Dr. Livingston for breach of contract,
alleging his refusal to acknowledge his share of KDRA’s liability qualifies as an
31
Id. at 3.
32
See Pl.’s Ex. A ¶2.2, D.I. 5.
8
anticipatory repudiation of his shareholder agreement with KDRA.33 KDRA further
alleges Dr. Livingston failed to “perform such other functions as may be required by
KDRA’s contract with Bayhealth” because he “failed to perform in a manner that
was required by KDRA’s contract with Bayhealth.”34 Dr. Livingston moves for the
dismissal of those claims under Superior Court Civil Rule 12(b)(6).
Anticipatory repudiation occurs when there exists “an outright refusal by a
party to perform a contract or its conditions.”35 Anticipatory repudiation constitutes
a breach of contract.36 Dr. Livingston “acknowledges that his share of the Net
Account Receipts may be offset by KDRA’s liabilities,” but contests KDRA’s
calculations.37 Dr. Livingston takes issue with KDRA’s assignment of his share of
the other shareholders’ unused medical leave expense. Accepting KDRA’s
allegations as true, KDRA has pled sufficient facts to put Dr. Livingston on notice
of the nature of KDRA’s claim. If Dr. Livingston must pay KDRA in the manner
KDRA asserts, Dr. Livingston’s failure to do so and initiation of litigation to avoid
33
Def.’s Resp. at 15, D.I. 24; KDRA dropped its counterclaim related to Dr. Livingston’s alleged
failure to meet and confer before litigation.
34
Id. at 16.
35
CitiSteel USA, Inc. v. Connell Ltd. P’ship, 758 A.2d 928, 931 (Del. 2000).
36
Cochran v. Denton, 1991 WL 220547, at *1 (Del. Ch. Oct. 28, 1991), aff'd, 612 A.2d 157 (Del.
1992).
37
Pl.’s Mot. for Partial J. at 13, D.I. 17.
9
that payment could conceivably constitute a breach of contract. Accordingly, Dr.
Livingston’s Motion to Dismiss Counterclaim is DENIED as to this claim.
C. Dr. Livingston’s Motion to Dismiss Counterclaim as to KDRA’s
contract with Bayhealth is granted
KDRA does not style their counterclaim as having two parts, but they allege
Dr. Livingston also breached his contract by not honoring KDRA’s contract with
Bayhealth.38 KDRA fails, however, to provide any factual allegations in support of
this claim. To the extent the KDRA intends this allegation to serve as a separate
claim, Dr. Livingston’s Motion to Dismiss Counterclaim is GRANTED as to this
claim.
V. Conclusion
The contracts disputed by the parties appear to contain ambiguity. As the
agreements are ambiguous, the Court cannot enter judgment on the pleadings.
KDRA has pled allegations with enough specificity to survive a motion to dismiss
for failure to state a claim regarding Dr. Livingston’s potential anticipatory
repudiation. As to KDRA’s allegations against Dr. Livingston regarding his failure
to honor KDRA’s contract with Bayhealth, KDRA fails to specify what part of that
contract Dr. Livingston breached.
38
Def.’s Resp. at 16, D.I. 24.
10
Accordingly, Dr. Livingston’s Motion for Partial Judgment on the Pleadings
is DENIED, and Dr. Livingston’s Motion to Dismiss Counterclaim is DENIED as
to his alleged anticipatory repudiation and GRANTED as to any allegations
stemming from KDRA’s contract with Bayhealth.
IT IS SO ORDERED.
11