Brenda J. Crowder, M.D. v. Brent D. Laing, M.D. and John D. Green, M.D., David Dobyns, First Medical Group and Healthcare Consultants, Inc.

IN THE COURT OF APPEALS
AT KNOXVILLE
BRENDA J. CROWDER, M.D., ) C/A NO. 03A01-9801-CH-00083
)
Plaintiff-Appellee, )
v.
)
)
)
FILED
)
) November 9, 1998
)
) Cecil Crowson, Jr.
BRENT D. LAING, M.D., ) Appellate C ourt Clerk
) INTERLOCUTORY APPEAL FROM THE
Defendant-Appellant, ) CARTER COUNTY CHANCERY COURT
) PURSUANT TO RULE 9, T.R.A.P.
and )
)
)
)
JOHN D. GREEN, M.D., DAVID )
DOBYNS, FIRST MEDICAL GROUP, )
also known as FMG, INC., and )
HEALTH CARE CONSULTANTS, INC., )
doing business as HCI, INC., )
) HONORABLE LEWIS W. MAY, JR.,
Defendants. ) JUDGE
BRENT D. LAING, M.D., ) C/A NO. 03A01-9801-CH-00013
)
Plaintiff-Appellant, )
)
v. ) APPEAL AS OF RIGHT FROM THE
) CARTER COUNTY CHANCERY COURT
)
)
BRENDA J. CROWDER, M.D., )
) HONORABLE LEWIS W. MAY, JR.,
Defendant-Appellee. ) JUDGE
For Appellant For Appellee
MARK S. DESSAUER LOIS B. SHULTS
Hunter, Smith & Davis Shults & Shults
Kingsport, Tennessee Erwin, Tennessee
O P I N IO N
1
REVERSED AS TO RULE 9 APPEAL
APPEAL AS OF RIGHT DISMISSED AS MOOT
REMANDED Susano, J.
We granted the Rule 9, T.R.A.P., application of the
appellant, Brent D. Laing, M.D. (“Laing”), in order to review the
propriety of the trial court’s denial of Laing’s motion to amend
his answer filed in litigation instituted against him and others
by the appellee, Brenda J. Crowder, M.D. (“Crowder”). In the
same order, we consolidated that interlocutory appeal with the
appeal of Laing’s separate suit against Crowder, which latter
appeal is before us as of right. See Rule 3(a), T.R.A.P. The
claims asserted by Laing in the second suit are identical to
those in the counterclaim which Laing attempted to pursue, albeit
unsuccessfully, in the earlier litigation. We reverse the trial
court’s denial of Laing’s motion to amend in the first suit. We
dismiss, as moot, the appeal of Laing’s subsequent suit against
Crowder.
I. Facts
In July, 1987, Crowder and Laing each opened a medical
practice in Elizabethton, Tennessee. They shared space under a
signed “Practice Agreement” that addressed their respective
rights and obligations in their combined practices. In late 1994
or early 1995, the parties merged their practices into a
professional corporation known as First Medical Group, Inc.
(“FMG”). FMG also included other medical practice groups in the
same building. Following this merger of the various medical
practices, Crowder and Laing became employees of FMG’s OB/GYN
division.
2
Crowder later became dissatisfied with the new work
environment and other aspects of FMG’s business. In January,
1996, Crowder discussed with Laing and another physician her
intention to leave FMG. In May of that year, she wrote a letter
giving notice of her intention to disassociate herself from FMG.
Problems arose between Crowder and Laing shortly thereafter.
Specifically, the parties had disagreements regarding the date of
Crowder’s departure, the handling of her accounts receivable and
patient files, the disposition of her interest in the office
suite and equipment, and other matters attendant to her
departure.
In September, 1996, Crowder notified Laing of her
intention to relocate her practice to Johnson City, Tennessee.
The parties’ Practice Agreement contains the following “buy-out”
provision:
The value of the practice goodwill is
recognized by both physicians. While this
goodwill value is not considered as part of
the hard assets, should Dr. Crowder wish to
terminate this agreement and continue to
practice in Carter or surrounding counties,
the compensation for this goodwill value must
be made to Dr. Laing. By agreement of the
physicians the value of the goodwill
compensation is set at [$]120,000....
On October 2, 1996, Crowder presented Laing with a copy of the
Practice Agreement that contained handwritten changes to the
above-quoted provision. The changes purport to limit the buy-out
provision to the first five years of the agreement. The initials
“BL” and “BJC” are affixed next to the handwritten
interlineations. These changes were purportedly made on December
3
27, 1987, as evidenced by the insertion of “12/27/87” next to the
changes.1
II. Procedural History
On October 28, 1996, Crowder filed suit against Laing,
Dr. John D. Green, David Dobyns, FMG and Health Care Consultants,
Inc., alleging that the defendants had interfered in various ways
with her medical practice. Laing subsequently filed an answer.
At that time, he did not assert a counterclaim. Thereafter, on
two separate occasions, Crowder was allowed to amend her
complaint.
On May 6, 1997, an agreed order was entered dismissing
the count of Crowder’s complaint pertaining to the parties’
interests in the medical office suite. Still later, Crowder took
a voluntary non-suit as to her claims of interference with her
business and/or contractual relationship with others.
In the meantime, the parties were involved in
discussions regarding settlement of Crowder’s remaining claims.
On June 27, 1997, Laing’s attorney sent Crowder’s attorney a
letter, in which the former stated that he was transmitting a
“draft” of an agreement regarding the division of personal
property between the parties. Three days later, on June 30,
Laing filed a motion to amend his answer, seeking to assert a
counterclaim against Crowder. In his proposed counterclaim,
1
Since the Practice Agreement was signed in 1987, the buy-out
requirement would have expired in 1992 if the changes are valid.
4
Laing alleged, among other things, that Crowder had forged his
initials to the handwritten changes to the Practice Agreement.
Laing asserted that he did not agree to the changes, which
Crowder in her deposition had acknowledged making. Laing also
alleged that Crowder had engaged in “a scheme to defraud Laing
and FMG of their patient base; their assets; and their future
earning capacities.” The counterclaim sought damages for
Crowder’s alleged breach of the Practice Agreement, fraud, and
intentional or negligent misrepresentation. With respect to a
portion of his proposed counterclaim, Laing relied upon the buy-
out provision in the Practice Agreement as originally signed. He
claimed that the facts supporting his counterclaim were developed
in discovery conducted with respect to Crowder’s claims.
Following a hearing on the motion to amend, the trial
court denied Laing’s request to amend his answer to assert a
counterclaim. In a subsequent order, the trial court stated that
Laing’s motion had been “withheld until lately filed to induce
compromise of plaintiff’s claims while withholding... Laing’s
proposed counterclaim.” The trial court also found “that the
proposed counterclaim was a known compulsory counterclaim
pursuant to R[ule] 13 of the Tennessee Rules of Civil Procedure
and should have been filed with defendant’s answer in January of
1997.”
Following the denial of his motion to amend, Laing, on
July 31, 1997, filed a separate complaint against Crowder setting
forth the identical causes of action that he had sought to assert
in the counterclaim. At some unidentified time thereafter, Laing
5
and Crowder apparently reached a final settlement of the latter’s
claims,2 and on August 25, 1997, the trial court entered an
“Order of Dismissal on Voluntary Non-suit”, dismissing, without
prejudice, Crowder’s claims against Laing,3 Green and FMG.
Pursuant to Crowder’s motion, the trial court subsequently
dismissed Laing’s complaint in the second lawsuit. As to Laing’s
proposed counterclaim in the original case, the trial court
ultimately denied Laing’s motion to reconsider its refusal to
allow the amendment, but granted Laing’s motion for a
discretionary appeal. See Rule 9, T.R.A.P.
III. Applicable Law
Rule 15.01, Tenn.R.Civ.P., provides, in pertinent part,
that “leave [to amend a pleading] shall be freely given when
justice so requires.” The Supreme Court has emphasized the
liberality of this rule:
...Rule 15.01 provides that leave (to amend)
shall be freely given when justice so
requires. This proviso in the rules
substantially lessens the exercise of pre-
trial discretion on the part of a trial
judge.... That rule needs no construction;
it means precisely what it says, that “leave
shall be freely given.”
Branch v. Warren, 527 S.W.2d 89, 91-92 (Tenn. 1975); see also
Gardiner v. Word, 731 S.W.2d 889, 891 (Tenn. 1987) and HMF Trust
v. Bankers Trust Co., 827 S.W.2d 296, 301 (Tenn.App. 1991). The
2
The settlement documents are not in the record.
3
The record does not indicate why the settled claims against Laing were
dismissed without prejudice, rather than with prejudice.
6
denial of a motion to amend lies within the sound discretion of
the trial court, and will not be reversed absent a showing of an
abuse of that discretion. Hall v. Shelby County Retirement Bd.,
922 S.W.2d 543, 546 (Tenn.App. 1995). Nevertheless, as this
court has stated, “[a]lthough amendments to the pleadings lie
within the discretion of the trial court, the rule mandates the
allowance of amendments if justice requires.” HMF Trust, 827
S.W.2d at 301; Garthright v. First Tennessee Bank of Memphis, 728
S.W.2d 7, 9 (Tenn.App. 1986).
There are several factors that a trial court should
consider in determining whether to grant a motion to amend.
These factors include: undue delay in filing the amendment; lack
of notice to the opposing party; bad faith on the part of the
moving party; repeated failure to cure deficiencies by previous
amendments; undue prejudice to the nonmoving party; and the
futility of amendment. Gardiner, 731 S.W.2d at 891-92; Hall, 922
S.W.2d at 546.
IV. Analysis
Our review of the record in this case persuades us that
the trial court abused its discretion in denying Laing’s motion
to amend his answer. We find (1) that Crowder would not have
been prejudiced by the allowance of the amendment; (2) that Laing
had not previously amended his answer; (3) that Crowder had
notice of the proposed amendment; and (4) that the amendment of
7
Laing’s answer was facially in pursuit of a valid claim.4 See
Gardiner, 731 S.W.2d at 891-92; Hall, 922 S.W.2d at 546.
As indicated earlier, the trial court found that Laing
had withheld his claim “to induce compromise of [Crowder’s]
claims,” and that the proposed counterclaim was compulsory and
should have been asserted in Laing’s answer. As to the first
rationale given by the trial court, we do not find any indication
in the record to support such a conclusion. Although the parties
were engaged in settlement negotiations when Laing filed his
motion to amend, it does not appear that they had reached a final
settlement. This is evidenced by a number of things: the fact
that the letter from Laing’s attorney to Crowder’s attorney dated
June 27, 1997 -- only three days before the motion to amend was
filed -- makes reference to an enclosed “draft” of an agreement5;
Crowder’s assertion, in her response to Laing’s motion to amend,
that Laing’s motion was filed contemporaneously with his mailing
of the “last proposed settlement” to Crowder; and, most
significantly, the following language in a discovery-related
motion that was subsequently filed by Crowder on July 25, 1997:
On or about the 10th day of July, 1997, the
parties appeared to have reached tentative
agreement concerning certain claims of
plaintiff and plaintiff elected to file a
non-suit as to other claims so that it seemed
at that time that the expense of further
discovery would not be necessary.
4
We express no opinion regarding the merits of Laing’s counterclaim.
5
The draft of the agreement is not in the record.
8
(Emphasis added). Furthermore, the order dismissing Crowder’s
remaining claims against Laing was not entered until August 25,
1997, almost two months after the motion to amend was filed. The
preponderance of the evidence in the record before us is that
Crowder’s claims had not been finally settled when Laing filed
his motion to amend. This seems clear from Crowder’s discovery-
related motion in which she affirmatively indicated that her
claims had not been settled as of a point in time some ten days
after the motion to amend was filed.
Even if Laing strategically delayed the filing of his
motion to amend until after Crowder had entered into settlement
discussions with him regarding her claims, this did not prejudice
Crowder, who, as previously noted, had not settled her lawsuit
against Laing when the motion to amend was filed. There is
nothing in the record to indicate that Laing engaged in some
impropriety that tricked Crowder into doing something that she
did not want to do.
As to the trial court’s second rationale for denying
the motion to amend -- that the motion sought to assert a
compulsory counterclaim -- we do not find that this is a proper
basis for the trial court’s action. Assuming, without deciding,
that the claims which the motion to amend sought to assert amount
to a compulsory counterclaim, this is more of a reason to allow
the amendment than to deny it. This is true because, as a
compulsory counterclaim, it had to be asserted in the first suit
or be lost forever. See Rule 13.01, Tenn.R.Civ.P.
9
Our conclusion in this case is consistent with the
mandate of Rule 15.01, Tenn.R.Civ.P., that leave to amend “shall
be freely given when justice so requires.” See Branch, 527
S.W.2d at 91-92; Gardiner, 731 S.W.2d at 891; and HMF Trust, 827
S.W.2d at 301. With respect to the factors set forth in the
cases, we find no indication in the record that the proposed
amendment to Laing’s answer was inappropriate. See Gardiner, 731
S.W.2d at 891-92; Hall, 922 S.W.2d at 546. A trial court is
responsible for adjudicating claims, and it should not deny a
party the right to assert a facially-valid claim except under
extreme circumstances. In this case, the record does not support
the trial court’s reasons for refusing to allow Laing to pursue
his counterclaim.
V. Conclusion
In light of the foregoing, we hold that the trial court
abused its discretion in denying Laing’s motion to amend. Given
this conclusion, it is not necessary for us to address the
additional issues raised by Laing. We remand this case to the
trial court for the entry of an order allowing the amendment to
Laing’s answer. This disposition renders Laing’s appeal of the
dismissal of his complaint in the second case moot, and that
appeal is therefore dismissed. Exercising our discretion, we tax
the costs of these appeals one-half to each of the parties. This
matter is remanded to the trial court for such further
proceedings as may be necessary, consistent with this opinion.
__________________________
10
Charles D. Susano, Jr., J.
11
CONCUR:
_________________________
Houston M. Goddard, P.J.
_________________________
Don T. McMurray, J.
12