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09/30/94 RUDOLPH F. DOLEZAL v. PLASTIC AND

September 30, 1994

RUDOLPH F. DOLEZAL, M.D., PLAINTIFF-APPELLANT, CROSS-APPELLEE,
v.
PLASTIC AND RECONSTRUCTIVE SURGERY, S.C., DEFENDANT-APPELLEE, CROSS-APPELLANT.



APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. HONORABLE RICHARD L. CURRY, JUDGE PRESIDING.

Petition for Leave to Appeal Denied February 1, 1995.

McNAMARA, Egan, Giannis

The opinion of the court was delivered by: Mcnamara

JUSTICE McNAMARA delivered the opinion of the court:

Plaintiff, Rudolph Dolezal, M.D., appeals from an order of the circuit court of Cook County declaring his employment with defendant, Plastic & Reconstructive Surgery, S.C. ("PRS"), to have been properly terminated, and further declaring the parties' Noncompetition Agreement to be valid and enforceable against him. PRS cross-appeals from the trial court's order entering summary judgment in plaintiff's favor on its causes of action against plaintiff for breach of fiduciary duty and breach of contract.

The relevant facts are as follows. In the summer of 1984, plaintiff accepted an offer to join PRS, located adjacent to Lutheran General Hospital in Park Ridge, Illinois. Co-defendant, Richard Schultz, Sr., M.D., was the sole physician practicing at PRS and also the sole shareholder. On July 30, 1984, Dolezal and PRS, by Schultz, executed a Letter Agreement which summarized the basic agreements relating to their association. The agreement specified that the parties intended their association "to result in the orderly transfer of ownership of and [the] medical practice of Schultz upon the retirement of Schultz." The agreement contained a section entitled "Termination of Employment" which outlined the entitlements owing to Schultz and Dolezal in the event either terminated his employment with PRS. The agreement also expressly contemplated the execution of a formal Employment Agreement as well as a formal Stock Purchase and Repurchase Agreement. The Letter Agreement specified that "all corporate actions shall be consistent with the spirit and intent of this association agreement." Finally, the agreement directed that a $250,000 senior consulting fee would be paid by plaintiff to Schultz in $50,000 installments over a five-year period. Plaintiff paid Schultz the last installment in late 1990.

Plaintiff began his employment with PRS on August 1, 1984. One month later, PRS's attorney forwarded to him a draft Employment Agreement, Noncompetition Agreement and Stock Purchase and Repurchase Agreement, along with an additional copy of the Letter Agreement. Plaintiff executed the three new agreements in October 1984.

The Employment Agreement specified that it was to continue on a year-to-year basis after December 31, 1987, and gave PRS the right to terminate the agreement by the approval of 60% of the holders of PRS's outstanding shares of stock. In the event PRS chose to exercise this right, the agreement stated that PRS was to give plaintiff 90 days' notice to this effect. The agreement also gave plaintiff the unconditional right to terminate the employment relationship upon 90 days' written notice to PRS.

The Employment Agreement contained a provision prohibiting plaintiff from engaging in the practice of plastic, reconstructive, and otolaryngology medicine and surgery for anyone other than PRS without the consent of PRS's board of directors for as long as the agreement remained effective. The agreement provided that any fees derived from medical services rendered outside PRS would accrue to PRS unless prior approval was granted by the board of directors.

The Noncompetition Agreement provided that plaintiff was prohibited from competing with PRS, within a seven-mile radius of PRS's Park Ridge office, in the field of plastic, reconstructive or otolaryngology medicine for a period of three years after the date of termination from PRS. Plaintiff was not prohibited from thereafter maintaining a practice at Good Shepherd Hospital in Barrington, Holy Family Hospital in Des Plaines, and Northwest Community Hospital in Arlington Heights.

The Stock Purchase and Repurchase Agreement permitted plaintiff to acquire 5% of the outstanding shares of PRS stock each year until he acquired a total of 40%. Under the agreement, plaintiff was not entitled to acquire more than 40% of the stock until Schultz retired. At that time, PRS had the first option to purchase the remaining shares of stock. Upon the termination of plaintiff's employment with PRS, either PRS or Schultz was obligated under the agreement to repurchase the shares of PRS stock held by plaintiff.

By 1988, the relationship between Schultz and plaintiff had become strained. Schultz believed the office staff was misreferring patients from him to plaintiff. Plaintiff himself noted the "numerous and pervasive disagreements" between him and Schultz involving "most aspects of office staffing, patient referrals and billings, insurance coding of medical procedures, collections, corporate expense approvals, documentation and coding (as shared or individual expenses), the need for an audit, and advertising of PRS services."

Schultz subsequently learned that during the late summer and fall of 1991, plaintiff was treating patients at PRS's office for whom no billing or medical records were retained. On November 18, 1991, Schultz notified plaintiff by letter that his employment with PRS would terminate on February 26, 1992.

In December, 1991, plaintiff filed a four-count complaint against PRS and Schultz. In count I, plaintiff alleged that PRS and Schultz breached the employment agreement (consisting of the Letter Agreement and subsequent agreements) by wrongfully terminating his employment; in count II, plaintiff petitioned the court to dissolve PRS; in count III, plaintiff petitioned the court to appoint a receiver to operate PRS's business affairs; and in count IV, plaintiff alleged that Schultz breached his fiduciary duties to PRS.

PRS and Schultz subsequently filed a four-count counterclaim seeking in counts I and II, respectively, declarations that the company had properly terminated plaintiff and that the Noncompetition Agreement was valid and enforceable, and alleging in counts III and IV, respectively, that plaintiff had breached the Employment Agreement and his fiduciary duties to PRS by treating patients at various hospitals without passing the fees derived therefrom to PRS, and by treating his patients from a separate practice he had established in Lake Forest in 1989 at PRS's office without creating medical records for PRS's use and without passing the fees on to PRS. Counts III and IV also alleged that the act of establishing the Lake Forest practice was a breach of the Employment Agreement and also a breach of his fiduciary duty. The trial court issued an order holding plaintiff's termination in abeyance pending its decision as to whether the termination was proper.

On December 18, 1992, plaintiff filed a motion requesting the trial court to set a trial date. At this time, PRS advised the court that plaintiff's deposition was to be completed in January 1993, and it informed plaintiff and the court that it contemplated filing a motion for summary judgment thereafter. Counsel for plaintiff responded that there would still be triable issues remaining, and notwithstanding knowledge of PRS's intent to file a summary judgment motion, it requested a March 1993 trial date. The trial court set a trial date of March 22, 1993.

Following the completion of plaintiff's deposition, PRS, on February 16, 1993, filed a motion for summary judgment on counts I and II of its counterclaim. The motion was noticed for hearing on February 26, 1993. At that time, the trial Judge assigned to the case was not sitting, and another Judge entered an agreed order entering and continuing the motion to March 8, 1993.

At the March 8, 1993 proceeding, plaintiff objected to going forward on the summary judgment motion, claiming that it had not been timely filed. Over plaintiff's objection, the court ordered that the motion be heard on the morning of March 22.

On March 22, the trial court, after considering the arguments of counsel, granted summary judgment in favor of PRS as to counts I and II of its counterclaim. The court determined that the facts surrounding plaintiff's termination were not in dispute, and that the issue of the propriety of his termination was a matter of contract interpretation. The court held that the Employment Agreement clearly and unambiguously provided that plaintiff's employment with PRS could be terminated by the approval of 60% of the holders of the outstanding shares of PRS stock upon 90 days' notice. The court concluded:

"The employment agreement gave [plaintiff] exactly the same right to terminate the agreement upon the exercise of his own unilateral option * * *, and the giving of ninety days prior written notice to .

The employment status was the equivalent of an at will employment relationship, conditioned only on * * * ninety days prior notice. Either side could terminate under this contract for any cause or no cause.

The plaintiff's complaint seemingly ignores the mutual rights to terminate and alleges that the employment agreement was for permanent employment. * * * It's simply impossible to reconcile this claim with the specific language of the [Employment Agreement], or with [the language] on page five and six of the Letter Agreement [discussing the entitlements due Schultz and plaintiff upon their termination from PRS].

That [the letter agreement] is a preliminary instrument or a mere recital of understanding is made clear * * * when the parties agree therein that upon the quote, "determination of all aspects of such agreement to the mutual satisfaction," end quote, specific agreements then will be made and executed and bylaws amended.

Clearly, it is contemplated that yet to be drafted agreements will constitute * * * the embodiment of their agreement. Nowhere in the letter agreement is there any provision for permanent employment or termination of [plaintiff] for cause only. Nor are such provisions found in the employment agreement * * *.

[The] broad generalities [contained in the letter agreement] do not serve to amend, modify or invalidate any of the ...


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