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Bailey v. Rowan9/17/1999
Darren Rowan, M.D., sued Robert L. Bailey, Jr., M.D., and the Surgical Group of Florence, P.C. (collectively "Bailey"), alleging two counts of breach of contract and three counts of fraud, all in connection with an employment contract he had entered into with Bailey. The trial court entered a judgment as a matter of law in favor of Bailey on both breach-of-contract claims, but submitted the fraud claims to a jury. The jury returned a verdict in favor of Rowan on all three fraud claims, awarding him a total of $375,000 in compensatory damages and $150,000 in punitive damages. The trial court entered a judgment on that verdict, but in doing so reduced the punitive-damages award to $15,000. Because we hold that Rowan could not have justifiably relied on the alleged misrepresentations, we reverse and remand.
I.
Rowan graduated from medical school in 1988 and began his residency at the University of South Alabama Medical Center. During Rowan's last year of residency, Bailey had several meetings with him. The purpose of these Discussions was to persuade Rowan to become an associate of Bailey's medical practice in Florence. In February 1993, Rowan and Bailey met with representatives from Florence Hospital (the "hospital"), to sign a recruitment agreement. This agreement established the obligations of the hospital in the event Rowan became Bailey's associate. Under the agreement, the hospital agreed to lend the doctors $12,500 a month as a guarantee of Rowan's gross cash receipts. Under the agreement, no payment would be made in any month in which Rowan's cash receipts equaled or exceeded $12,500. The hospital also agreed to pay Rowan a total of $26,000 in moving and relocation expenses and to pay Bailey $1,800 a month toward the expense of employing an additional physician. At this meeting, Rowan says, he asked Bailey what would happen if he generated more revenue than was stated in the agreement. Rowan says Bailey told him that he had no intention of making money off Rowan and that Rowan could keep " nything ... over what it takes to bring up [to Florence]."
Several months later, Rowan received a proposed written employment contract from Bailey. That proposed contract provided in pertinent part:
"3. Compensation. As compensation for his services, [Rowan] shall be entitled to a salary of $125,000.00 per year, payable at $5,208.33 bi-monthly, commencing on July 1, 1993. In addition, if [Rowan] remains employed by [Bailey] for the full one (1) year term and [Bailey] and [Rowan] agree to renew this contract for a second year and [Rowan] shall remain employed by [Bailey] at [Bailey's] corporate year end following the first anniversary date of this agreement, then [Rowan] shall be entitled to a bonus equal to the collected revenue attributable to [Rowan's] production, less one-half (1/2) of all expenses of [Bailey] for the same period.
"[Rowan] specifically understands and agrees that all fees earned by him from the practice of medicine, including but not limited to deposition fees, expert witness fees and consultant fees, or any fees received from hospital or medical facility administrative work, excluding however any funds received on investments, are the property of [Bailey]. By execution of this Agreement, [Rowan] hereby assigns all such fees to [Bailey].
"....
"19. Amendments. This Agreement shall not be modified or amended except by a writing signed by both parties."
(Emphasis added.)
Rowan thoroughly read the contract and discussed it with his family. Rowan asked Bailey about the language in the compensation clause. Rowan says Bailey told him that the bonus language was included so that "after a
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