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Osborne v. Howard University Physicians

July 20, 2006

NEWTON G. OSBORNE, APPELLANT/CROSS-APPELLEE,
v.
HOWARD UNIVERSITY PHYSICIANS, INC., APPELLEE/CROSS-APPELLANT.



Appeals from the Superior Court of the District of Columbia (CA8767-98) (Hon. Herbert B. Dixon, Jr., Trial Judge).

The opinion of the court was delivered by: Belson, Senior Judge

Argued January 18, 2006

Before FARRELL, Associate Judge, and BELSON and SCHWELB, Senior Judges.*fn1

Appellant Newton G. Osborne, M.D., Chairman of the Department of Obstetrics and Gynecology of the College of Medicine of Howard University ("Howard"), sued Howard University Physicians, Inc. ("HUP"), a corporate entity different from Howard, for breach of contract on the basis of HUP's prolonged failure to sign a contractually-required annual revision to Appendix A of his 1995 contract of employment.

Appendix A controlled the source and amount of the income Dr. Osborne was entitled to receive from HUP for his clinical, non-academic work. Dr. Osborne challenges on appeal the trial court's finding that he was not acting under duress when he signed a 2003 employment agreement with Howard in which he waived any and all claims against HUP, and its conclusion that HUP was a third-party beneficiary of the 2003 agreement. We affirm.

I.

On July 14, 1994, Dr. Osborne was appointed to the rank of professor with "indefinite tenure" and Chairman of the Department of Obstetrics and Gynecology of the College of Medicine of Howard University. Howard University agreed to pay Dr. Osborne a $170,000 annual salary for his services as a professor. Separately, Howard agreed to pay Dr. Osborne, through various grants, $100,000 for the period July 1, 1994 through June 30, 1995 for his participation in Howard's faculty practice plan, which provided clinical services to the community. Dr. Osborne agreed to these terms by signing his appointment letter, which stated:

[Y]our duties and responsibilities as a new Chairman with all the problems in Obstetrics and Gynecology may preclude your earning all of your supplement immediately. As per our custom, this office will advance your supplement for two years even if your duties and responsibilities preclude your earning it. . . . Acceptance to the College of Medicine faculty confirms that you agree to meet all of the requirements of the College of Medicine's Private Practice Plan. Please contact the Office of Clinical Practice.

(Emphasis in original.) Dean Charles H. Epps of the College of Medicine later explained to Dr. Osborne that the amount of his supplemental salary would depend on the number of hours he worked and the amount collected by HUP from patient billings. Shortly after he arrived in Washington to begin work, Dr. Osborne contacted the clinical office.

One year later, HUP assumed responsibility for administering the faculty practice plan. To that end, HUP, Howard and Dr. Osborne entered into a new agreement which became effective July 1, 1995. Attached to the new agreement was an Appendix A, pursuant to which Howard agreed to continue paying Dr. Osborne's annual salary of $170,000 and HUP agreed to pay Dr. Osborne $100,000 for his clinical services performed during the period of July 1, 1995, through June 30, 1996. This agreement specified that Appendix A "may be amended only by subsequent written agreement between the parties [and that] it shall be revised annually by execution of the parties."

When the first date for such annual amendment arrived, July 1, 1996, the parties neglected to execute a revised Appendix A. Nevertheless, Dr. Osborne continued to fulfill his academic and clinical services obligations. In late 1996, he received notification that his clinical salary would be decreased.*fn2 Dr. Osborne contacted the new dean of Howard's College of Medicine, Floyd Malveaux, and requested an explanation for the drastic decrease in his clinical income. Dean Malveaux soon responded, writing that Dr. Osborne's November 1996 salary reduction resulted from "administrative action by HUP management to reconcile expenses with income."

Around this time, Dr. Victor Scott, president of HUP, disseminated several memoranda to the HUP membership explaining that because of financial difficulties, HUP members would not be paid full supplements. He explained that HUP could not meet its payroll obligations, and thus the group had to borrow money from Howard University to cover expenses. In an effort to meet its financial obligations, the HUP board decided that supplemental salaries would be calculated on the basis of the individual physician's collections minus the averaged expenses of HUP allocated to that physician. Dr. Osborne's dissatisfaction with the decrease in his supplemental salary came to a head in 1998, when he began to refuse to accept payment from HUP until the parties agreed on an acceptable method for paying him for his clinical services and, as discussed below, filed a breach of contract action against Howard on November 16, 1998.

Due to the dire financial situation of HUP, and its physicians' increasing dissatisfaction with the amount they received, Howard decided to resume its administration of the faculty practice plan previously administered by HUP. In January 2002, HUP physicians were invited to a retreat to discuss the new faculty practice plan. At the retreat, physicians were encouraged to ask questions about the new plan. Dr. Osborne did so, and the HUP staff directed him to review a pamphlet which outlined compensation policies under the new practice plan -- policies that largely mirrored those of HUP. Dr. Osborne later memorialized his objections to the new plan and sent them to the dean.

By letter dated September 16, 2002, Dr. Osborne received a copy of the new Member Practice Agreement, which was to take effect January 1, 2003 ("the 2003 Agreement"), and concedes that he had the opportunity to review it with his counsel. The letter indicated that his continuation as a member of the Howard faculty necessitated participation in the new faculty practice plan. Dr. Osborne was further instructed to sign the agreement and return his copy to the dean by October 11. Dr. Osborne failed to submit the agreement by the appointed date. Consequently, the Provost wrote to Dr. Osborne, informing him that Howard had not received the ...


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