Johnson Regional Medical Cntr. v. Dr. Robert Halterman, 867 F.3d 1013

Background

In March 2013 Dr. Robert Halterman signed three documents with Johnson Regional Medical Center (JRMC): a Physician Recruitment Agreement, a Promissory Note for a $50,000 signing advance, and a Physician Employment Agreement; JRMC advanced $50,000 in installments beginning April 2013.
The Note provided for monthly payments forgiven for each month Halterman practiced as an OB/Gyn at JRMC; the Recruitment Agreement described forgiveness terms and incorporated the Note.
Halterman worked roughly five months (started July 31, 2013) and resigned December 23, 2013, citing a shoulder injury; JRMC accepted the resignation and stopped forgiving loan payments.
JRMC sued for unpaid balance on the Note; district court granted summary judgment for JRMC on Count 1 (promissory note) and later awarded $64,931.81 (principal, interest, attorney’s fees, costs); JRMC voluntarily dismissed employment-agreement claim.
On appeal, Halterman argued the documents formed a single contract, that his obligations were excused by JRMC’s breach/fraud or his injury, and that the attorney-fee award was improper. The Eighth Circuit affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the three documents constitute one contract	All three documents are a single integrated contract	Recruitment Agreement and Note form one contract; Employment Agreement is separate	Recruitment Agreement and Note are one contract; Employment Agreement is separate and distinct
Whether fraud or hospital breach excuses repayment of the Note	Fraudulent inducement re: call duties and breach of good faith excuse performance and permit retention of loan proceeds	Even if fraud/breach occurred, rescission (not keeping funds) is plaintiff’s remedy; performing after knowing fraud is a new contract	Fraud/breach do not excuse repayment; rescission would require return of consideration, so Halterman remains liable
Whether Halterman’s shoulder injury excuses repayment	Injury prevented performance and therefore excuses obligations	Recruitment Agreement permits termination for permanent disability and contains obligations to pursue remedies in good faith; plaintiff resigned abruptly and later worked elsewhere	Injury does not excuse repayment as a matter of law; plaintiff failed to show impossibility/impracticability or good-faith attempts to perform
Entitlement to attorney’s fees and costs	Plaintiff argued JRMC was not entitled under statute or was not prevailing party	Note contains a contractual attorney-fees clause; JRMC was prevailing party and district court reduced fees for unrelated claims	Award of reasonable attorneys’ fees and costs enforced under the Note; district court did not abuse discretion

Key Cases Cited

Stokes v. Roberts, 711 S.W.2d 757 (Ark. 1986) (contemporaneous instruments may be treated as one contract absent contrary intent)
PC Scale, Inc. v. Roll Off Servs., Inc., 379 S.W.3d 649 (Ark. Ct. App. 2010) (inconsistent provisions can show separate agreements)
McDonough v. Williams, 92 S.W. 783 (Ark. 1905) (party alleging fraud may rescind or perform; performance after fraud is equivalent to a new contract)
Rhodes v. Survant, 192 S.W.2d 880 (Ark. 1946) (rescission requires return or offer to return consideration)
McCuistion v. City of Siloam Springs, 594 S.W.2d 233 (Ark. 1980) (terms of contract govern measure of damages when contract exists)
Bank of Am., N.A. v. JB Hanna, LLC, 766 F.3d 841 (8th Cir. 2014) (enforcement of contractual loan repayment terms under Arkansas law)
Griffin v. First Nat’l Bank of Crossett, 888 S.W.2d 306 (Ark. 1994) (agreement provision for attorney’s fees is enforceable)
Ark. Realtors Ass’n v. Real Forms, LLC, 442 S.W.3d 845 (Ark. 2014) (defense of impracticability requires showing of good-faith efforts to perform)