Missouri State Contract Cases 2012 (Part 01): Covenant of Good Faith and Fair Dealing

Glenn v. HealthLink HMO, Inc.

Dr. Byron Glenn brought breach of contract claims against HealthLink HMO and HealthLink PPO (HealthLink) alleging breach of an HMO Agreement and a PPO Agreement. The Circuit Court of Girardeau County granted summary judgment in favor of HealthLink, and the Missouri Court of Appeals affirmed in part and reversed in part.

Background

Glenn signed HMO and PPO agreements in 2001 to become a network provider for HealthLink. Beginning in 2007, after receiving complaints about Glenn’s services, HealthLink provided Glenn with various notices of termination of the agreements and subsequently rescinded the notices. HealthLink eventually terminated the PPO agreement and provided timely notice of non-renewal of the HMO agreement. HealthLink removed Glenn’s name from two of HealthLink’s online provider directories before the HMO agreement expired.

Breach of contract for failure to provide marketing assistance

On appeal Glenn argued that HealthLink breached the HMO and PPO agreements by failing to provide sufficient marketing assistance to him. Each agreement required HealthLink to provide “marketing of HealthLink’s HMO [PPO] Providers.” The court of appeals rejected Glenn’s contention that the provision required HealthLink to do more than merely include Glenn in its provider directories, but agreed with Glenn that HealthLink’s removal of Glenn’s name from two of its directories before the expiration of the HMO agreement might have been a breach of the agreement. Although Glenn’s name remained on other HealthLink directories and Glenn’s damages might merely be nominal, nominal damages are sufficient to preclude summary judgment. Accordingly, the court of appeals reversed the trial court on that point.

Breach of contract for failure to pay in-network rates

Glenn argued that HealthLink breached the agreements by failing to pay him contract rates. The appeals court agreed that summary judgment was improper because Glenn had submitted sufficient evidence to create a material issue of fact.

Breach of contract for failure to provide a termination hearing

Glenn argued that HealthLink breached the HMO agreement by failing to provide a termination hearing. Although a termination hearing was only required if HealthLink terminated the agreement, Glenn argued that HealthLink notified Glenn that he was required to abide by section 5.6(b) of the agreement, which applies only in the event of termination, thereby treating the non-renewal as a termination. The appeals court noted that it could only consider such extrinsic evidence if the HMO agreement was ambiguous, and concluded that the contract was not ambiguous.

Breach of covenant of good faith

The court of appeals rejected Glenn’s argument that HealthLink breached the implied covenant of good faith and fair dealing by terminating the HMO agreement without providing a hearing. HealthLink followed the requirements of the contract by providing the required notice of non-renewal, and there was no evidence that HealthLink decided not to renew the agreement to deprive Glenn of the benefits of the contract or to undermine the contractual relationship.

Conclusion

The court of appeals affirmed in part and reversed in part and remanded the case to the circuit court for further proceedings.

In Category: Missouri Contract Cases

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