The opinion
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FAYETTEVILLE DIVISION
WASHINGTON REGIONAL MEDICAL CENTER PLAINTIFF
v. No. 5:17-CV-05245
MICHAEL R. RABER, M.D. DEFENDANT
OPINION AND ORDER
This matter came before the Court on October 9, 2018 for a bench trial on Washington
Regional Medical Center’s (“WRMC”) Complaint (Doc.1) against Michael R. Raber, M.D.
(“Raber”) for breach of contract (Count 1) and unjust enrichment (Count 2). Before trial, the Court
granted WRMC’s motion for partial summary judgment (Doc. 14) for breach of contract for a sign-
on bonus of $48,000 and stated it would enter judgment on the $48,000 following final resolution
of all issues. (Doc. 21). Before trial, the Court granted in part and denied in part Raber’s motion
for partial summary judgment (Doc. 22) and dismissed the claim for unjust enrichment. (Doc. 31).
The parties stipulated before trial that Raber breached his employment contract with WRMC
(Docs. 29 & 30), and that the remaining issue for trial was the amount of damages. The parties
stipulated to some exhibits received into evidence, and the Court overruled Raber’s objection to
certain exhibits that were also received into evidence. The Court heard the testimony of two
witnesses and then took the case under submission. Having considered the testimony of the
witnesses and the exhibits received into evidence, and made credibility determinations on the
evidence, the Court makes the following findings of fact and conclusions of law in accordance
with Rule 52(a) of the Federal Rules of Civil Procedure.
I. Findings of Fact
WRMC is a nonprofit corporation organized under the laws of the State of Arkansas with
its principal place of business in Fayetteville, Arkansas. Raber is a medical doctor who is a citizen
and resident of the State of Texas.
Raber is a board-eligible neurosurgeon, having graduated from medical school at Wake
Forest University. Following his graduation from medical school, Raber did residency training at
the University of Arkansas for Medical Sciences (“UAMS”) and Harvard Medical School, and did
fellowship training at Johns Hopkins Medical School. After nine years of residency and fellowship
training, Raber sought employment with several hospitals as a general neurosurgeon.
Raber was referred to WRMC by Dr. John Barr (“Barr”), who was a general neurosurgeon
at WRMC. Raber and Barr worked together for three years in the residency program at UAMS.
Beginning in early 2016, Raber made three visits to WRMC before signing an employment
contract with WRMC on December 16, 2016. During the three visits, Raber met with WRMC’s
management and neurosurgical staff, including Dr. David Ratcliff, director of WRMC’s trauma
center. He also met with neurosurgeons Barr, Dr. Brandon Evans, and Dr. Larry Armstrong.
WRMC is a community hospital serving 25 counties in Northwest Arkansas, Southwest
Missouri, and Eastern Oklahoma. WRMC is classified by the State of Arkansas as a Trauma II
medical center. A Trauma II designation requires the medical center to have 95% on-call
neurosurgery coverage in the emergency department. At the time Raber interviewed with WRMC,
Drs. Barr, Evans, and Armstrong were providing on-call neurosurgery coverage for WRMC. Two
other neurosurgeons provided endovascular coverage, but not general on-call neurosurgical
coverage.
Raber executed an employment contract with WRMC on December 16, 2016. The term of
employment was for three years, beginning on July 1, 2017. Raber was to provide general
neurosurgical services for WRMC and clinical services at the Northwest Arkansas Neurosciences
Institute, a neurological department of WRMC. The contract specifically provided that Raber
would provide a minimum of 90 days of annual neurosurgical on-call coverage in the emergency
department. Raber would conduct his clinical practice in the separate offices at the Northwest
Arkansas Neurosciences Institute.
Under the employment contract, WRMC would pay Raber a sign-on bonus of $48,000,
which was subject to federal and state taxes. Raber was to receive a base salary of $716,000, with
a quality compensation bonus and additional compensation for any emergency call in excess of
the 90 days of on-call coverage in the contract. Total compensation was not to exceed $1,474,000.
Upon execution of the contract, WRMC paid Raber the $48,000 sign-on bonus and paid federal
payroll taxes in the amount of $3,672.
On March 7, 2017, Raber called Larry Shackelford, the chief executive officer of WRMC,
and told him that for personal reasons he would not be coming to WRMC. Shackelford told Raber
that patient care at WRMC was going to be adversely impacted if he did not honor his commitment
because it would create a problem in emergency care coverage. Shackelford followed up with a
letter to Raber on March 10, 2017 explaining that his failure to honor his commitment would result
in 1/3 of the days in the emergency department without neurosurgical coverage, and that WRMC
would have to secure locum tenens neurosurgical coverage at significant cost. Raber did not claim
the certified letter which required a return receipt.
On March 15, 2017, Raber sent a letter to Shackelford confirming his telephone call that
he was withdrawing his commitment as a neurosurgeon on July 1, 2017, and that he would make
efforts to repay the $48,000 sign-on bonus. Raber did not take the opportunity to cure his default
although WRMC’s counsel sent a letter to Raber giving him the opportunity to do so. In a
telephone call with Cindy Tabor, nursing director for neurosciences at WRMC, Raber also
declined WRMC’s offer to work for only one year and then be released from the contract.
Shackelford made the same offer to Raber which would give WRMC time to recruit a replacement
for Raber. Raber began employment with the Baylor College of Medicine in Houston, Texas on
September 5, 2017 as a faculty member with clinic duties.
The Trauma II facility designation is critical to the mission of WRMC, which is the only
medical center in the region providing full time neurosurgery coverage. If WRMC did not provide
the Trauma II coverage, patients from the region would have to be transported to Springfield,
Missouri or Tulsa, Oklahoma for emergency neurosurgical services. Before execution of the
contract, Shackelford explained to Raber the significance of the Trauma II designation and the
need to provide emergency neurosurgical coverage.
Raber would have been the fourth neurosurgeon employed by WRMC which would have
given WRMC one in four coverage for emergency coverage. Before Raber’s commitment, three
neurosurgeons handled the on-call coverage. In January 2017, Dr. John Barr notified WRMC that
he would not renew his annual contract when it expired in July 2017. Raber, a friend and resident
colleague of Barr, said he did not learn of Barr’s decision to leave WRMC until February 2017
when Barr told him of his decision to leave and return to academia at Duke University Medical
School. In an email to WRMC staff in January 2017, Shackelford said that Barr’s decision to leave
WRMC would not impact patient care since Raber’s arrival would coincide with Barr’s departure.
During his testimony, Raber downplayed having knowledge and understanding of the
critical importance of on-call coverage at WRMC, other than to say he knew it was a “necessary
evil.” Raber denied being told by Shackelford that the Trauma II designation required 95%
neurosurgery coverage and the significance of the designation for WRMC. Raber testified no one
ever talked to him about what on-call coverage would mean in his practice although he met with
Dr. Ratcliff, the director of the trauma center and the three neurosurgeons who were handling the
on-call coverage. Raber testified that his primary responsibility was to build an elective spine
practice with Drs. Barr, Evans, and Armstrong. Raber’s testimony that he did not comprehend the
significance of his contractual obligation to provide 90 days of on-call neurosurgical services is
simply not credible. Raber spent nine years training at top rate medical centers that provided on-
call neurosurgical care, and Raber no doubt understood the significance of his contractual
obligation of on-call coverage. It was specifically expressed in the contract, reiterated by
Shackelford before Raber signed the contract, and likely explained to him by the director of the
trauma center and the three neurosurgeons.
Upon Raber’s failure to cure his breach of contract, WRMC commenced recruitment of a
replacement neurosurgeon. WRMC had already obtained a commitment from a neurosurgeon to
begin in July of 2018, but did not have sufficient neurosurgical coverage in the interim. Dr. Evans
and Dr. Armstrong worked with Shackelford to provide as much coverage as they could. WRMC
had to secure locum tenens neurosurgical coverage since it only had two neurosurgeons on staff.
WRMC contracted with Hayes Locums, LLC to provide neurosurgical care for two to three
weekends a month from July 1, 2017 to August 1, 2018. During this period, WRMC paid Hayes
Locums, LLC $305,911.74 for neurosurgery coverage. Shackelford, who secured the Hayes
Locums, LLC, testified that the concept of locum tenens is a widely known and an accepted
practice in extreme circumstances. WRMC also incurred recruitment expenses to find another
neurosurgeon and eventually found a neurosurgeon to begin in 2019. WRMC incurred $9,177.02
in recruitment expenses during its recruitment of Raber to WRMC.
When Shackelford and WRMC negotiated the employment contract with Raber, neither
Shackelford nor any other WRMC representative told Raber that he would be responsible for the
costs of locum tenens neurosurgical coverage if he breached his employment contract. Although
Raber was fully aware of WRMC’s need for 95% on-call coverage, he was not informed by anyone
at WRMC that it would expect him to pay for the on-call coverage if he breached his contract.
II. Conclusion of Law
Because there is complete diversity of citizenship and the amount in controversy exceeds
$75,000, the Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332.
Because this is a diversity case, the Court applies Arkansas substantive law. Murray v. Greenwich
Ins. Co., 533 F.3d 644, 648 (8th Cir. 2008) (citing Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938)).
The parties have stipulated that Raber breached his employment contract with WRMC
when he notified WRMC that he would not begin his employment on July 1, 2017, and that he had
no intention to perform his contractual obligations other than to repay the $48,000 sign-on bonus
he received upon execution of the contract in December 2016. WRMC is entitled to damages for
the breach of contract under Arkansas law.
When a contract has been breached, the wronged party is entitled to those damages that
may fairly and reasonably be considered as arising naturally, or according to the usual course of
things, from the breach of the contract itself. Caldwell v. Guardian Tr. Co., 26 F.2d 218, 223 (8th
Cir. 1928). The wronged party may recover such special damages “as may reasonably be supposed
to have been in contemplation of both parties at the time they made the contract, as the probable
result of a breach of it.” Miles v. American Ry. Express Co., 233 S.W. 930, 931 (Ark. 1921); see
Howard W. Brill & Christian H. Brill, Law of Damages § 4.4 (6th ed. 2014).
Contract damages can be general or consequential. “General damages are those that
necessarily flow from the breach. Consequential damages refer to damages that are only indirectly
caused by the breach—instead of flowing directly from the breach, they result from some of the
consequences of the breach.” Hobson v. Entergy Arkansas, Inc., 432 S.W.3d 117, 126 (Ark. App.
2014) (citations omitted). On a claim for consequential damages, Arkansas law follows a minority
rule known as the “tacit agreement” rule. Fed. Deposit Ins. Corp. as Receiver for First S. Bank
v. BKD, LLP, No. 4:13cv720JM, 2014 WL 12769667, at * 3 (E.D. Ark. 2014).
To recover consequential damages on a contract, the plaintiff must prove the defendant
knew at the time he entered the contract that his breach would cause the plaintiff to suffer special
damages, and that the defendant “tacitly agreed” to assume responsibility for those damages.
Reynolds Health Care Svcs., Inc. v. HMNH, Inc., 217 S.W.3d 797, 803-04 (Ark. 2005). In the
absence of an express contract to pay special damages, “the facts and circumstances in proof must
be such as to make it reasonable for the judge or jury trying the case to believe that the party at the
time of the contract tacitly consented to be bound to more than ordinary damages in case of default
on his part.” Id. at 804. Whether notice of any such special circumstances was given to the
breaching party is a question of fact. Id. at 805.
The elements of general damages sought by WRMC are the $48,000 sign-on bonus, on
which the Court has already entered partial summary judgment, the payroll taxes paid by WRMC
on the sign-on bonus, and the recruiting expenses incurred by WRMC for having to recruit a
replacement for Raber. The payroll taxes and recruitment expenses are damages arising naturally
from the breach of contract. The Court concludes that WRMC is entitled to recover as general
damages the payroll taxes paid by WRMC, and a reasonable amount of recruiting expenses to find
a replacement neurosurgeon.
The element of special damages sought by WRMC is the expense of locum tenens
neurosurgeon on-call coverage from July 1, 2017 to August 1, 2018. Under the tacit agreement
rule, a wronged party must not only prove that the other party knew the breach would cause the
wronged party to suffer special damages, but that the other party agreed to assume responsibility
for the special damages. Reynolds Health Care Svcs., Inc., 217 S.W.3d at 803-04. The tacit
agreement need not be written or express. When not written into the contract, “the facts and
circumstances in proof must be such to make it reasonable for the judge or jury trying the case to
believe that the party at the time of the contract tacitly consented to be bound to more than ordinary
damages in case of default on his part.” Bank of America, N.A. v. C.D. Smith Motor Co. Inc., 106
S.W.3d 425, 431 (Ark. 2003) (citing Hooks Smelting Co. v. Planters’ Compress Co., 79 S.W.
1052, 1056 (Ark. 1904)).
Raber’s knowledge of his contractual obligation to provide 90 days of on-call neurosurgical
coverage, based on his nine years of experience as a neurosurgeon and based on being told of
WRMC expectations under the contract, meets the first prong of the test in that he knew his breach
of the contract would cause WRMC to incur special damages. Raber was fully aware when he
executed the employment contract that WRMC was required to have 95% on-call neurosurgical
coverage in its emergency room. Therefore, Raber knew that WRMC would incur expenses
associated with providing alternative on-call neurosurgical coverage if he breached his contract.
However, the facts and circumstances surrounding the negotiation and execution of the
contract do not rise to a level to meet the second prong of the test. There is insufficient evidence
to show that Raber agreed to be responsible for locum tenens on-call neurosurgical expenses if he
breached the contract. Neither Shackelford nor any other WRMC representative told Raber that he
would be responsible for the expense to cover his 90 days of on-call neurosurgical coverage if he
did not perform his duties under the contract. Even though the concept of locum tenens services
in extreme circumstances is generally known and accepted in the medical community, the
testimony regarding the circumstances in this case is not sufficient to allow the Court to infer that
Raber agreed to be responsible for those consequential damages if he breached the contract.
WRMC has not met its burden of proof for consequential damages based on the locum tenens
expense resulting from Raber’s breach of the employment contract.
III. Conclusion
The Court will award general damages in the amount of $3,672 for payroll taxes, and
$9,177.02 for recruitment expenses, which the Court finds to be a reasonable amount. The Court
previously made a finding (Doc. 21) that the sum of $48,000 plus interest was due and that
judgment would be entered with the final judgment. WRMC is entitled to recover attorney’s fees
and costs on the breach of contract action pursuant to Ark. Code Ann. §16-22-308. WRMC is
directed to file a motion for attorney’s fees and costs by November 9, 2018, or a stipulation to the
amount if the parties agree. Any response is due within seven days of the filing of the motion. A
final judgment will be entered pursuant to Rule 54 of the Federal Rules of Civil Procedure after
consideration of a motion for attorneys’ fees and costs.
IT IS SO ORDERED this 26th day of October 2018.
/s/P. K. Holmes, III
P.K. HOLMES, III
CHIEF U.S. DISTRICT JUDGE