Uintah Basin Medical Center v. Hardy

2008 UT 15
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
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Uintah Basin Medical Center, No. 20050951
Plaintiff and Appellee,
v.
F I L E D
Leo W. Hardy, M.D.,
Defendant and Appellant. February 22, 2008
_________________________________
Leo W. Hardy, M.D.,
Counterclaimant and
Third-Party Plaintiff,
v.
Uintah Basin Medical Center
and Thomas J. Allred, M.D.,
Counterclaim Defendants
and Third-Party Defendants.
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Eighth District, Roosevelt
The Honorable John R. Anderson
No. 990000109
Attorneys: Blaine J. Benard, E. Blaine Rawson, J. Andrew
Sjoblom, Salt Lake City, for plaintiff
John P. Harrington, Jennifer L. Lange, Salt Lake City
for defendant
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PARRISH, Justice:
INTRODUCTION
¶1 This case comes before us on appeal from the district
court’s grant of summary judgment. Defendant Dr. Leo W. Hardy
argues that the district court erred when it held that Uintah
Basin Medical Center (“UBMC”) had just cause to terminate his
contract. Because we agree, we reverse the district court’s

No. 20050951 2
grant of summary judgment and remand for further proceedings
consistent with this opinion.
BACKGROUND
¶2 Originating more than ten years ago and now on its
third appeal, this case arose from a 1994 agreement for
professional services (the “Agreement”) between UBMC and
Dr. Hardy, a pathologist. Pursuant to the Agreement, Dr. Hardy
visited UBMC once a week for approximately two hours and received
$400 per month as compensation. The Agreement did not state a
termination date but provided that either party could terminate
the Agreement for just cause following ninety days’ notice.
¶3 On July 18, 1996, the UBMC board of trustees (the
“Board”) voted to terminate the Agreement and to invite
Dr. Thomas Allred, another physician, to join its medical staff
as both a pathologist and an emergency room physician. Pursuant
to the Agreement, the Board gave Dr. Hardy ninety days’ notice of
termination.
¶4 In October 1996, UBMC filed this action seeking a
declaratory judgment that it had just cause to terminate the
Agreement. Dr. Hardy counterclaimed, alleging breach of
contract. The district court granted summary judgment to UBMC on
the basis that the Agreement was voidable because it improperly
bound successor Boards.
¶5 Dr. Hardy appealed the summary judgment to this court.
On August 30, 2002, we held that the Agreement was enforceable
against successor UBMC Boards if it was of a reasonable duration.
Uintah Basin Med. Ctr. v. Hardy, 2002 UT 92, ¶ 17, 54 P.3d 1165.
We remanded to the district court for a determination of whether
the Agreement’s duration was reasonable. Id. ¶ 18. On remand,
the district court granted UBMC’s motion for summary judgment,
holding that the Agreement was unenforceable because it unduly
limited the Board’s discretion and was therefore unreasonable in
its duration.
¶6 Dr. Hardy appealed the second order granting summary
judgment in UBMC’s favor to the court of appeals. The court of
appeals concluded that the Agreement was for a reasonable
duration because it allowed the Board to terminate the Agreement
for legitimate business reasons. Uintah Basin Med. Ctr. v.
Hardy, 2005 UT App 92, ¶¶ 18-19, 110 P.3d 168. The court of
appeals concluded that “[t]he only remaining issue [was] whether
the Board discharged Dr. Hardy for just cause.” Id. ¶ 20.
Because the district court’s summary judgment order did not
address the just cause question, the court of appeals remanded

3 No. 20050951
the case to the district court “to determine whether the Board
terminated Dr. Hardy for legitimate business reasons or whether
the termination was capricious, in bad faith, or illegal.” Id.
¶7 On March 22, 2005, the district court ordered the
parties to prepare and submit briefs on the just cause issue.
UBMC filed a brief entitled “Remand and Summary Judgment Brief,”
requesting judgment in its favor, and Dr. Hardy filed a
responsive brief. Following oral argument, the district court
issued a ruling and order granting summary judgment to UBMC. The
district court, “upon reviewing the record in this case. . .
found nothing to indicate or suggest that the [B]oard’s decision
to terminate the Agreement was compelled by non-business reasons
constituting bad faith, caprice, or illegality.” Dr. Hardy
appeals the district court’s grant of summary judgment to this
court. In his appeal, Dr. Hardy also challenges the jurisdiction
of the district court and whether the district court properly
considered and ruled upon UBMC’s summary judgment motion, given
that it had ordered the parties to brief only the just cause
issue. We have jurisdiction pursuant to Utah Code
section 78-2-2(3)(j) (2002).
ANALYSIS
I. THE DISTRICT COURT PROPERLY EXERCISED
JURISDICTION OVER THE CASE
¶8 The district court ordered the parties to file briefs
regarding the just cause issue on March 22, 2005. Dr. Hardy
argues that the district court did not have jurisdiction to order
the parties to undertake any action until May 3, 2005, the date
of the court of appeals’ remittitur of the case. Because the
district court conducted the hearing and entered its summary
judgment order subsequent to the remittitur, we find that
jurisdiction was proper and the arguably premature order
requiring briefing was of no significance.
II. THE DISTRICT COURT PROPERLY CONSIDERED AND RULED
UPON UBMC’S MOTION FOR SUMMARY JUDGMENT
¶9 Dr. Hardy argues that the district court erred by
hearing and considering UBMC’s motion for summary judgment when
the court’s order requested merely “a brief on the remaining
issue.” A court’s interpretation of its own order is reviewed
for clear abuse of discretion and we afford the district court
great deference. See Enodis Corp. v. Employers Ins. of Wausau
(In re Consol. Indus. Corp.), 360 F.3d 712, 716 (7th Cir. 2004).

No. 20050951 4
¶10 The title of UBMC’s motion to the district court,
“UBMC’s Remand and Summary Judgment Brief,” clearly put Dr. Hardy
on notice that UBMC was requesting summary judgment. Dr. Hardy
did not file an objection to UBMC’s motion but rather opposed it
on the merits. During the August 4, 2005 hearing, UBMC stated,
“[W]e’re here today stating that it’s time to dismiss this case.”
Dr. Hardy’s counsel still did not object to the district court’s
consideration of UBMC’s summary judgment motion. Dr. Hardy’s
counsel responded, “I think that the court should be apprehensive
about ruling as a matter of law when we are contesting various
facts.” We conclude that the district court did not abuse its
discretion when it considered and ruled upon UBMC’s motion for
summary judgment.
III. THE DISTRICT COURT ERRED IN GRANTING SUMMARY JUDGMENT
BECAUSE DR. HARDY RAISED A DISPUTED ISSUE OF MATERIAL FACT WITH
RESPECT TO WHETHER UBMC HAD JUST CAUSE FOR TERMINATING THE
AGREEMENT
¶11 We review the district court’s legal conclusions
resulting in summary judgment for correctness. Schurtz v. BMW of
N. Am., Inc., 814 P.2d 1108, 1111-12 (Utah 1991). Our task is to
determine whether the undisputed facts in the record demonstrate
just cause for UBMC to terminate the Agreement.
¶12 The term “just cause” connotes a “fair and honest cause
or reason, regulated by good faith on the part of the party
exercising the power.” Pugh v. See’s Candies, Inc., 250 Cal.
Rptr. 195, 200-01 (Ct. App. 1988) (internal quotation marks and
citation omitted); R. J. Cardinal Co. v. Ritchie, 32 Cal. Rptr.
545, 558 (Ct. App. 1963). Additionally, a just cause reason for
termination is not “trivial, arbitrary or capricious, unrelated
to business needs or goals, or pretextual.” Cotran v. Rollins
Hudig Hall Int’l, Inc., 948 P.2d 412, 422 (Cal. 1998) (citation
omitted).
¶13 The interpretation of a contractual just cause
provision requires the court to strike a careful balance. On one
hand, the just cause standard cannot be so stringent as to make
the duration of the contract unreasonable. Uintah Basin Med.
Ctr. v. Hardy, 2002 UT 92, ¶ 18, 54 P.3d 1165. For example, even
though unsatisfactory job performance would most likely establish
just cause, satisfactory job performance alone does not establish
the lack of just cause. On the other hand, the just cause
standard cannot be so lax as to render the just cause provision
meaningless.
¶14 The requirement that a contract be terminated only for
just cause protects the parties to the contract from termination

5 No. 20050951
for reasons that are trivial, arbitrary, capricious, pretextual,
or unrelated to business needs. Cotran, 948 P.2d at 422.
Accordingly, just cause cannot be synonymous with any cause or no
cause. Indeed, if just cause is met when a party terminates a
contract without a preexisting reason and only later conceives of
a justification for the termination, the line between just cause
termination and termination at will becomes indistinct for all
practical purposes.
A. UBMC’s Evidence of Good Faith
¶15 In arguing for summary judgment, UBMC relied on a
number of facts, established variously by affidavit, deposition
testimony, and relevant documents. UBMC argued that these facts
establish a good faith basis for the termination of its Agreement
with Dr. Hardy. Specifically, UBMC asserted the following
reasons for terminating the Agreement: (1) Dr. Allred would be
at the hospital full time; (2) Dr. Allred would work both as a
pathologist and as an emergency room physician; (3) Dr. Allred
would bring about $70,000 worth of equipment with him to install
in UBMC facilities; (4) Dr. Wayne Stewart, a UBMC Board member,
believed that there was a need for additional pathology services
at UBMC; (5) Brad LeBaron, hospital administrator, explained that
UBMC was constantly recruiting physicians for the emergency room;
(6) the Board determined that the addition of Dr. Allred to its
medical staff would benefit Duchesne County and the surrounding
community because he would become a full-time resident and member
of that community; and (7) UBMC investigated Dr. Allred’s
background, and its check of his references produced favorable
responses.
¶16 Summary judgment is appropriate upon a showing “that
there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.” Utah
R. Civ. P. 56(c). The party moving for summary judgment has the
burden of presenting evidence that no genuine issue of material
fact exists. Id. 56(e). Once the moving party has challenged
the nonmoving party’s case on this basis, the burden shifts to
the nonmoving party to demonstrate the existence of a genuine
issue of material fact. Id. Because UBMC came forward with
evidence of good cause to terminate the Agreement, the burden
then shifted to Dr. Hardy to show that the reasons advanced by
UBMC were trivial, arbitrary or capricious, unrelated to business
needs or goals, or pretextual.
B. Dr. Hardy’s Evidence of Pretext
¶17 To meet his burden of showing that the reasons advanced
by UBMC were arbitrary, capricious, or pretextual, Dr. Hardy

No. 20050951 6
identified what he characterizes as deficiencies in UBMC’s
termination process. He claims that one of the possible
inferences to be drawn from these deficiencies is pretext. We
agree. Because pretext is one of the logical inferences arising
from the facts raised by Dr. Hardy, we conclude that he has
raised a genuine issue as to whether UBMC terminated the
Agreement for just cause.
¶18 The summary judgment standard recognizes that the
nonmoving party is entitled to all inferences arising from the
facts of record. See Hermansen v. Tasulis, 2002 UT 52, ¶ 10, 48
P.3d 235. This case turns on such inferences because even though
neither party disputes the facts surrounding the termination,
both parties heartily dispute whether the facts support UBMC’s
position that it terminated Dr. Hardy for just cause.
¶19 A district court is precluded from granting summary
judgment “if the facts shown by the evidence on a summary
judgment motion support more than one plausible but conflicting
inference on a pivotal issue in the case . . . particularly if
the issue turns on credibility or if the inferences depend upon
subjective feelings or intent.” 73 Am. Jur. 2d Summary Judgment
§ 46 (2001) (emphasis added); see also Romero v. Union Pac. R.R.,
615 F.2d 1303, 1307 (10th Cir. 1980). As the nonmoving party,
Dr. Hardy “is entitled to the benefit of having the court
consider all of the facts presented, and every inference fairly
arising therefrom in the light most favorable to him.” Morris v.
Farnsworth Motel, 259 P.2d 297, 298 (Utah 1953).
¶20 We conclude that the inferences on which Dr. Hardy
relied in opposing summary judgment are reasonable, fairly arise
from the facts in the record, and do raise a genuine issue of
fact appropriate for jury resolution. That genuine issue is
whether the business reasons offered by UBMC for Dr. Hardy’s
termination were pretextual. UBMC claims that it hired
Dr. Hardy’s replacement because he would be on-site at the
facility and would bring with him some $70,000 worth of
equipment. However, Dr. Hardy points to additional facts that
could convince a reasonable jury that these business
justifications were merely pretextual.
¶21 First, UBMC did not give Dr. Hardy any contemporaneous
reason for the termination of his Agreement. UBMC simply thanked
Dr. Hardy for his service and told him that he had been replaced.
And UBMC’s administrator, Brad LeBaron, admitted in his
deposition that he told Dr. Hardy after the termination that he
would need to look and see what kind of potential issues could be
raised to defend UBMC’s decision. In addition, even though UBMC
now relies on its desire for an on-site pathologist as a

1 In his brief before this court, Dr. Hardy also argues that
UBMC’s termination of the Agreement constituted a breach of the
covenant of good faith and fair dealing. We decline to reach
this issue because it was not preserved and is not properly
before us. When the court of appeals remanded this case to the
district court, it stated that “[t]he only remaining issue [was]
whether the Board discharged Dr. Hardy for just cause.” Uintah
Basin Med. Ctr. v. Hardy, 2005 UT App 92, ¶ 20, 110 P.3d 168.
The district court then ordered the parties to prepare and submit
briefs on the just cause issue. Dr. Hardy did not contest the
scope of that remand or raise the covenant of good faith and fair
dealing issue in his responsive brief filed with the district
court. Given this procedural history, we conclude it would be
improper for us to entertain Dr. Hardy’s argument on the issue of
breach of the covenant of good faith and fair dealing.
7 No. 20050951
justification for the termination decision, this desire was never
expressed to Dr. Hardy before his Agreement was terminated, and
Dr. Hardy was given no opportunity to cure or address any
demonstrated need or desire of UBMC for an on-site pathologist.
Indeed, UBMC undertook no investigation into the actual need or
the financial impact of hiring an on-site pathologist before it
terminated Dr. Hardy’s Agreement. This lack of investigation
before the termination suggests that UBMC’s stated need for an
on-site pathologist was merely pretextual.
¶22 The facts also establish that UBMC failed to conduct a
comprehensive investigation of Dr. Allred prior to hiring him and
did not discover that Dr. Allred had a pending malpractice claim
against him, again suggesting that UBMC’s stated need for an on-
site pathologist was pretextual. Finally, UBMC did not terminate
Dr. Hardy for poor performance, misconduct, breach of the
Agreement, or failure to fulfill his obligations.
¶23 Taken together and construed in the light most
favorable to Dr. Hardy, these facts give rise to the reasonable
inference that UBMC’s stated business reasons for terminating
Dr. Hardy’s Agreement were pretextual. As a result, a reasonable
jury could find that UBMC terminated the Agreement without just
cause, and summary judgment was therefore improper on Dr. Hardy’s
claim for breach.1
CONCLUSION
¶24 In summary, we conclude that the district court
properly exercised jurisdiction over the case and that it
properly considered and ruled upon UBMC’s motion for summary
judgment. The district court erred, however, in granting summary

No. 20050951 8
judgment in favor of UBMC on Dr. Hardy’s claim for breach of the
Agreement. The reasonable inferences arising from the facts put
forward by Dr. Hardy provide a sufficient basis on which a jury
could conclude that UBMC lacked just cause for terminating the
Agreement. We accordingly reverse the summary judgment and
remand this matter to the district court for trial on Dr. Hardy’s
claim for breach of the Agreement.
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¶25 Justice Durrant and Justice Nehring concur in Justice
Parrish’s opinion.
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DURHAM, Chief Justice, dissenting:
¶26 I respectfully dissent. I do not agree with the
majority’s conclusion that Dr. Hardy met his burden of showing
that the reasons advanced by UBMC for Dr. Hardy’s termination
were arbitrary, capricious, or pretextual.
¶27 Dr. Hardy attempted to meet his burden by identifying
what he characterized as deficiencies in UBMC’s termination
process. For example, Dr. Hardy noted that UBMC’s chief
financial officer testified in a deposition that, at the time of
Dr. Hardy’s termination, UBMC had not conducted an investigation
into the financial impact of hiring Dr. Allred. Dr. Hardy also
noted that UBMC failed to contact the National Practitioner
Databank to inquire whether Dr. Allred had any malpractice claims
pending against him until after Dr. Hardy had been terminated. I
do not share the majority’s conclusion that these facts give rise
to any inferences supporting the presence of an improper
pretextual termination. UBMC’s investigation and discussions
regarding whether to hire Dr. Allred took place prior to the
Board’s unanimous vote to terminate Dr. Hardy’s employment
agreement. While UBMC’s investigation may not have been perfect,
or even reached the correct result, Dr. Hardy, in my opinion,
failed to produce evidence that UBMC made its decision to
terminate Dr. Hardy or conducted its investigation of Dr. Allred
in bad faith, or that such actions constituted pretext or
capricious or illegal behavior.
¶28 UBMC presented the district court with uncontroverted
evidence of good faith business reasons why it terminated Dr.
Hardy’s agreement, see supra ¶ 15, and Dr. Hardy failed to
produce evidence discrediting those reasons. Thus, in my view,
the district court correctly concluded that UBMC terminated
Dr. Hardy’s agreement for just cause. I would affirm.

9 No. 20050951
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¶29 Associate Chief Justice Wilkins concurs in Chief
Justice Durham’s dissenting opinion.