COA: Surgeon entitled to salary, attorney fees in breach of contract dispute

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A former Franciscan Alliance surgeon will get the money he was guaranteed in his base contract before he was fired and the attorney fees from his case in full but won’t receive any additional performance-based monies or liquidated damages from the health care provider, the Court of Appeals of Indiana has affirmed.

Dr. Louis S. Metzman worked for Franciscan as an orthopedic surgeon starting in 2009. In 2017, he and Franciscan agreed to a new two-year employment contract.

Previously, Metzman had been paid based on his “Worked Relative Value Unit,” a value assigned to each procedure and commonly used in the health care industry to measure physician productivity. Under the new contract, Metzman was to receive $705,786 annually for his work as a full-time employee.

Along with his salary, the agreement included several other types of compensation: $75.63 for each wRVU Metzman performed over the target of 10,369, compensation for time he was “on call” for Franciscan, $175 per hour for work he did as a medical director and up to $7,500 in additional performance-based compensation upon meeting certain goals. The agreement also stated Metzman was entitled to 42 days of paid time off and eight additional days of unpaid leave per year.

Metzman took off 50 days in 2017, contending that eight of those days were “unpaid.” Franciscan prorated Metzman’s base compensation to determine his daily pay, then deducted eight days’ pay, amounting to $21,716.48, from his 2017 base compensation. That same year, Franciscan denied compensation for 23 hours Metzman submitted for his work as a medical director.

In February 2018, Franciscan gave Metzman 180 days’ notice that it was terminating his employment, effective in August. Metzman filed suit against Franciscan, arguing it had breached the contract and violated the Indiana Wage Payment Statute by failing to pay his full 2017 base compensation.

The surgeon kept working until August, and between January and August he took off 31 days.

Contending Metzman had not yet accrued 31 days of paid time off for that year, Franciscan treated four and a half of these days as “unpaid” and deducted $12,215.52 from his 2018 base compensation. Franciscan also denied 78.5 medical director hours submitted by Metzman in 2018 and denied him performance-based compensation for that year.

Metzman then amended his complaint, adding a claim that Franciscan had breached the contract and violated the Indiana Wage Payment Statute by failing to pay the medical director and performance-based compensation. He also asked for liquidated damages under the statute.

In 2019, the Montgomery Circuit Court granted summary judgment to Metzman on the base compensation issue, finding the employment agreement did not allow for a reduction in the base compensation, so Franciscan breached the contract and violated the statute. However, the court found for Franciscan on the performance-based compensation issue, concluding Metzman had not met the performance goal and thus was not entitled to compensation.

Metzman again amended his complaint in March 2020, this time adding a claim that Franciscan breached the contract and violated the statute by deducting four and a half days’ pay from his 2018 base compensation. A bench trial was held on the remaining issues: the 2018 base compensation, the medical director compensation, damages for unpaid wages and liquidated damages under the statute.

The trial court concluded Franciscan breached the contract and violated the statute by “nonpayment of Dr. Metzman’s base compensation due through the last day of his employment in 2018.” As damages for the unpaid wages in both 2017 and 2018, the trial court awarded Metzman $33,932.

As for the medical director compensation, Franciscan pointed to testimony from Terry Klein, Franciscan’s chief operating officer who approved or rejected Metzman’s submitted hours.

According to Klein, in late 2017, Metzman was advised by Franciscan’s risk management team that he needed to be more vigilant in reviewing hours to avoid any violation of federal law. Based on that information, Klein rejected 78 of the surgeon’s submitted hours because he did not believe the work reported could be compensated under the contract. Klein rejected the remaining 23.5 hours because the paperwork was not properly submitted.

The trial court found Franciscan breached the contract and violated the statute by not paying the 78 hours, but it agreed the required paperwork was not properly submitted for the other 23.5. Based on Metzman’s pay of $175 per hour, the court awarded him $13,650 in damages.

Finally, the trial court denied Metzman’s request for liquidated damages under the Indiana Wage Payment Statute, finding Franciscan acted in good faith in not paying his full base compensation.

Metzman next requested full attorney fees and costs while Franciscan requested $229,756.27, representing the fees it incurred arguing the claims it believed it “prevailed” on. Franciscan also requested the trial court “deny Metzman’s petition for all fees and costs which were not incurred on the claims on which Metzman prevailed.”

The trial court denied Franciscan attorney fees and awarded Metzman full attorney fees totaling $390,710.05, finding he was “the prevailing party in this suit having prevailed on the main issue, even though not to the extent of his original claim.”

Franciscan appealed the issues of the base compensation and attorney fees. On cross-appeal, Metzman argued for performance-based compensation and liquidated damages.

The COA affirmed the trial court’s rulings.

On the base compensation claim, the appellate judges concluded the contract didn’t permit Franciscan to reduce Metzman’s pay for his use of contractually permitted unpaid leave. Therefore, Franciscan breached the contract and the trial court properly granted summary judgment.

The judges later wrote that that Metzman’s base compensation was a wage for purposes of the Wage Payment Statute, but the doctor was not entitled to liquidated damages under the statute.

Regarding performance-based compensation, the COA also held the trial court didn’t err.

“… (W)e agree with the trial court that the agreement calls for Dr. Metzman to receive a 92.6 in both the second and third quarters. Indisputably, he did not do so,” Judge Nancy Vaidik wrote, referencing a scoring system tied to the performance-based compensation. “The trial court did not err in granting summary judgment for Franciscan on the issue of Dr. Metzman’s 2018 performance-based compensation.”

Finally, analyzing H & G Ortho, Inc. v. Neodontics Int’l, Inc., 823 N.E.2d 734 (Ind. Ct. App. 2005), the COA found that while it was within the trial court’s discretion to reduce Metzman’s fee award given Franciscan’s successful defense, it did not abuse its discretion in not doing so.

The case is Franciscan Alliance Inc., d/b/a Franciscan Physician Network v. Louis S. Metzman, M.D., 21A-PL-2171.

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