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Contractual Law

1) Read the following case study "Contract Violates Antitrust Laws".
2) Write a paper (1,000-1,500 words) that addresses the two discussion questions and include a detailed rationale for your answers with references.

CONTRACT VIOLATES ANTITRUST LAWS Case Study
Citation: Oltz v. St. Peter's Community Hosp.,19 F.3d 1312 (9th Cir. 1994)
Facts
Oltz, a nurse anesthetist, brought an antitrust action against physician anesthesiologists and St. Peter's Community Hospital after he was terminated. Oltz had a billing agreement with the hospital, which provided 84% of the surgical services in the rural community that it served. The anesthesiologists did not like competing with the nurse anesthetist's lower fees and, as a result, entered into an exclusive contract with the hospital on April 29, 1980, in order to squeeze the nurse anesthetist out of the market. This resulted in cancellation of the nurse anesthetist's contract with the hospital. Oltz filed a suit against the anesthesiologists and hospital for violation of the Sherman Antitrust Act, 15 U.S.C. ยง 1. The anesthesiologists settled for $462,500 before trial. The case against the hospital proceeded to trial. The jury found that the hospital conspired with the anesthesiologists and awarded the plaintiff $212,182 in lost income and $209,649 in future damages. The trial judge considered the damage award to be excessive and ordered a new trial. The hospital motioned the court to exclude all damages after June 26, 1982, which was the date that the hospital renegotiated its exclusive contract with the anesthesiology group. The court decided that Oltz failed to prove that the renegotiated contract also violated antitrust laws, thus ruling that Oltz was not entitled to damages after June 26, 1982. Because Oltz conceded that he could not prove damages greater than those offset by his settlement with the physicians, his claim for damages against the hospital was disposed of by summary judgment. The judge who presided over Oltz's request for attorneys' fees restricted the amount that he could claim. Because Oltz had been denied damages from the hospital, the judge refused to award attorneys' fees or costs for work performed after the 1986 liability trial.

Issue
Was Oltz entitled to seek recovery for all damages resulting from destruction of his business after June 26, 1982?

Holding
The US Court of Appeals for the Ninth Circuit held that Oltz was entitled to seek recovery for all damages.

Reason
Oltz introduced evidence that the initial exclusive contract violated antitrust laws and that such violation destroyed his practice. "Because the initial conspiracy destroyed his practice, Oltz is entitled to seek recovery for all damages resulting from the destruction of his business. . . . The legality of any subsequent agreements between the conspirators is irrelevant, because the April 29, 1980, contract severed the lifeline to Oltz's thriving practice. . ." [Id. at 1314].

Discussion
1. What should parties to a contract be aware of when negotiating exclusive contracts?
2. What remedies are available when one party breaches a contract by refusing to perform an agreed-upon service?

Solution Preview

Discussion
1. What should parties to a contract be aware of when negotiating exclusive contracts?

Parties engaging in negotiating exclusive contracts should ensure that scope of services, hospital politics, compensation structure, termination issues, and obligations after termination are addressed. In reference to scope of services it's vital for the contract to clearly and concisely detail the full services that will be exclusively provided by the parties in the contract. This requires diligence on behalf of those involved in negotiating the contract wherein the scope of services are broadly defined including all current and future services that are required in the contract.

The medical group that is involved in the negotiations should ensure that it has the resources capable of performing the services required under the contract as hiring subspecialists wouldn't be desirable for performing services that are supposed to be exclusive to the group. To protect the medical group's exclusivity in regard to its of expertise and specialty, the medical group should consider negotiating with the hospital for the right of refusal with respect to any expansion of services associated with the medical group and the contract of services for their area of expertise.

Hospital politics must be taken into consideration when negotiating exclusive ...

Solution Summary

Contractual law and exclusive contracts

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