Mariner Health Care Management Co. v. Sovereign Healthcare, LLC
306 Ga. App. 873
| Ga. Ct. App. | 2010Background
- Mariner Health Care Management Company contracted to provide administrative services to Sovereign Healthcare entities for five years starting in 2003.
- In 2005 Sovereign sued alleging an oral termination agreement; Mariner counterclaimed for liquidated damages due to early termination.
- Trial court granted Mariner liability for early termination but denied Mariner’s motion for summary judgment on liquidated damages; Sovereign’s summary judgment on liquidated damages was granted as unenforceable penalty.
- The contract provides liquidated damages equal to 50% of remaining fees if Sovereign terminates early, with specified exceptions.
- Georgia law permits liquidated damages if three conditions are met: difficulty of estimating injury, intent to provide damages not a penalty, and reasonable pre-estimate of loss.
- A written modification clause required any contract modification to be in writing; no written modification of the contract existed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the liquidated damages enforceable or a penalty? | Mariner argues the 50% fee is a valid liquidated damages provision. | Sovereign argues the clause is an unenforceable penalty. | Liquidated damages enforceable as a matter of law. |
| Was there a valid oral modification to terminate early? | Mariner asserts the oral termination agreement was effective. | Sovereign contends modification required written agreement; no written modification existed. | No valid oral modification; contract required written modification. |
Key Cases Cited
- Swan Kang, Inc. v. Kang, 243 Ga.App. 684, 534 S.E.2d 145 (2000) (economic factors support reasonableness of liquidated damages where applicable)
- Triad Drywall v. Bldg. Materials Wholesale, 300 Ga.App. 745, 686 S.E.2d 364 (2009) (lost profits require specificity to recover; reasonableness assessment)
- Bldg. Materials Wholesale v. Triad Drywall, 287 Ga.App. 772, 653 S.E.2d 115 (2007) (to recover lost profits, must show probable gains and expenses with specificity)
- Gerdes v. Russell Rowe Communications, 232 Ga.App. 534, 502 S.E.2d 352 (1998) (modifications must be in writing when contract requires written amendments)
- Hendricks v. Enterprise Financial Corp., 199 Ga.App. 577, 405 S.E.2d 566 (1991) (contractual written-modification enforcement supported)
- Lau's Corp. v. Haskins, 261 Ga. 491, 405 S.E.2d 474 (1991) (evidence on bad-faith claims generally for the jury)
- Liberty Life Ins. Co. v. Thomas B. Hartley Constr. Co., 258 Ga. 808, 375 S.E.2d 222 (1989) (interpretation of damages provisions and reasonableness)
- Nat. Svc. Indus. v. Here To Serve Restaurants, 304 Ga.App. 98, 695 S.E.2d 669 (2010) (summary judgment standard and de novo review in contract cases)
- Southeastern Land Fund v. Real Estate World, 237 Ga. 227, 227 S.E.2d 340 (1976) (framework for enforceability of liquidated damages terms)
- Joyce's Submarine Sandwiches v. California Public Employees' Retirement System, 195 Ga.App. 748, 395 S.E.2d 257 (1990) (statutory reference on enforceability considerations)