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A partner who wrongfully dissociates is liable to the partnership and to the other partners for damages caused by the dissociation. Idaho Code Ann. § 53-3-602(c). A partner's dissociation is wrongful if it is in breach of an express provision of the partnership agreement. Idaho Code Ann. § 53-3-602(b)(1). Whether there is an express provision in the partnership agreement that was breached by the dissociation is an issue of law over which the supreme court exercises free review.
Doctors of Magnetic Resonance, Inc.; Saint Alphonsus Diversified Care, Inc.; Mednow, Inc.; and HCA of Idaho, Inc., formed a general partnership named MRI Associates (MRIA). The parties executed a written partnership agreement that was effective on April 26, 1985. The purpose of the partnership was to acquire and operate diagnostic and therapeutic devices, equipment, and accessories, beginning with a magnetic resonance imaging (MRI) scanner; to acquire related buildings and other facilities; and to transact all business matters incident to such activities. MRIA and others formed two limited partnerships: MRI Limited Partnership (MRI Center), which owned and operated an MRI scanner located on the hospital campus of St. Alphonsus Regional Medical Center (St. Alphonsus) under the name of MRI Center of Idaho, and MRI Mobile Limited Partnership (MRI Mobile), which owned and operated mobile MRI scanners. MRIA owned thirty percent of, and was the general partner of, each limited partnership. For years following the creation of MRIA, physicians at St. Alphonsus used MRI Center to produce MRI scans and radiologists from the Saint Alphonsus Radiology Group, also known as Gem State Radiology (GSR), to read the scans. The radiologists organized as GSR were under an exclusive contract to serve the professional radiological needs of St. Alphonsus's patients. In 1998, the radiologists at GSR began planning to construct and operate an outpatient medical imaging facility that would provide a full range of medical imaging services, including both MRI imaging and other imaging services that were not provided by MRI Center. After GSR had acquired land in downtown Boise, it disclosed its plans to St. Alphonsus and encouraged it to become involved in the project. Thereafter, there were unsuccessful negotiations among the GSR radiologists, St. Alphonsus, and MRIA to have one medical imaging entity. The radiologists formed the partnership Intermountain Medical Imaging, LLC (Intermountain Imaging). On July 1, 2001, Saint Alphonsus became a partner in the non-MRI part of the business of IMI. On February 24, 2004, Saint Alphonsus Diversified Care, Inc. gave notice to MRIA that it would dissociate from the partnership effective on April 1, 2004, and on October 18, 2004, it filed this lawsuit seeking a judicial determination of the amount it was entitled to receive for its interest in MRIA. MRIA responded by filing a multi-count counterclaim against Saint Alphonsus Diversified Care, Inc., and against St. Alphonsus (both herein called St. Alphonsus) and by filing third-party claims. The claims against the third-party defendants were ultimately dismissed. Ultimately, the case went to a jury trial on the remaining causes of action in MRIA's counterclaim alleging causes of action for wrongful dissociation, breach of a noncompete clause, breach of the covenant of good faith and fair dealing, intentional interference with prospective contractual relations or business expectations, breach of fiduciary duties, and civil conspiracy. The jury found St. Alphonsus liable on all causes of action, and awarded damages of $ 63.5 million. The district court reduced the verdict to $ 36.3 million after determining that the jury had totaled damage awards on two alternative theories. The court also denied St. Alphonsus's motions for a judgment notwithstanding the verdict or a new trial. St. Alphonsus then timely appealed.
Did the district court err in holding that St. Alphonsus wrongfully dissociated from MRIA?
The supreme court found that a provision of the partnership agreement was not an express provision limiting the right to dissociate rightfully. The district court's instructions that the dissociation was wrongful as a matter of law could have caused the jury to disbelieve other testimony. By failing to object when the memorandum was offered into evidence during the trial, St. Alphonsus waived any objection. The district court erred by admitting a settlement letter into evidence under Idaho R. Evid. 408 as it was offered to prove liability for and/or the amount of MRIA’s claim against St. Alphonsus. The district court also erred by allowing MRIA to proceed without naming the other legal entities as distinct parties. As the damage award exceeded any damages suffered by the MRIA and because MRIA could not recover damages on behalf of nonparties, the damage award was improper. Denial of a punitive damages award under Idaho Code Ann. § 6-1604(1) was proper as there was a lack of evidence of oppressive, fraudulent, malicious or outrageous conduct on the part of St. Alphonsus.