Issue Was the language, “mutually acceptable,” ambiguous in the employment contract between the hospital and Dutta?

Citation: Dutta v. St. Francis Reg’l Med. Ctr., 850 P.2d 928 (Kan. Ct. App.
1993)
Facts
On July 1, 1987, Dr. Dutta, a radiologist, began working in the radiology
department of the hospital as an employee of Dr. Krause, the medical
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director of the hospital’s radiology department. On August 5, 1988, the
hospital terminated Krause’s employment as medical director. On August 8,
1988, Dutta and the hospital entered into a written employment contract with
a primary term of 90 days. The contract provided that if a new medical
director had not been hired by the hospital within the 90-day period, the
agreement was to be automatically extended for a second 90-day period.
Following a period of recruitment and interviews, the hospital offered Dr. Tan
the position. Tan and the hospital executed a contract making him the
medical director of the radiology department. The contract granted Tan the
right “to provide radiation oncology services on an exclusive basis subject to
the exception of allowing Dutta to continue her practice of radiation oncology
at the hospital.” On April 24, 1989, the hospital notified Dutta that the 90-day
contract had expired and that Tan was appointed as the new medical
director. The letter provided in part:
It is our intent at this time to establish an exclusive contract with Dr.
Donald Tan for medical direction and radiation therapy at SFRMC. Your
medical staff privileges to practice radiation therapy at SFRMC will not
be affected by this action. You will be allowed to maintain your current
office space for radiation oncology activities; however, you should make
alternative arrangements for your billing and collection activities. [Id. at
931]
Dutta and Tan then practiced independently of each other in the same
facility. On October 13, 1989, Tan became unhappy with this arrangement
and requested exclusive privileges, stating he could not continue as medical
director without exclusivity. On February 2, 1990, an exclusive contract was
authorized by the hospital. Dutta was notified that she would no longer be
permitted to provide radiation therapy services at the hospital after May 1,
1990. By letter, Dutta twice requested a hearing on the hospital’s decision to
revoke her right to use hospital facilities. Both requests were denied.
Dutta sued the hospital for breach of employment contract after the hospital
entered into an exclusive agreement with Tan, thereby denying Dutta the
use of the hospital’s radiology department and equipment. Dutta presented
evidence about the purpose of the requirement in her contract with the
hospital that provided that the new medical director be mutually acceptable
to both parties. A hospital administrator testified that the hospital and Dutta
included the phrase “mutually acceptable” in the contract because “[w]e both
agreed that we wanted the person being recruited to be compatible with
Dutta” [Id. at 932].
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Issue
Was the language, “mutually acceptable,” ambiguous in the employment
contract between the hospital and Dutta?
Holding
The Kansas Court of Appeals held that substantial evidence supported the
jury’s verdict that the hospital breached its written employment contract with
Dutta by hiring a medical director who was not mutually acceptable to both
the hospital and Dutta.
Reason
The language in the contract is ambiguous if the words in the contract are
subject to two or more possible meanings. The determination of whether a
contract is ambiguous is a question of law. Paragraphs 4 and 5 of the
hospital’s employment agreement with Dutta, dated August 8, 1988, read as
follows:
4. During the term of this Agreement the Medical Center shall be actively
recruiting for a full-time Medical Director for the Radiation Therapy
department. . . . Dr. Dutta shall be involved in the interviewing process.
The person selected for [the] above positions shall be mutually
acceptable to the Medical Center and Dr. Dutta. Dr. Dutta may discuss
potential business arrangements with each individual interviewed.
5. Once the full-time Medical Director or part-time radiation therapist is
selected, Dr. Dutta will, in good faith, attempt to reach a satisfactory
business arrangement with the selected individual. [Id. at 936]
The testimony of Dutta, the hospital administrator, and the attorney who
represented Dutta in contract negotiations provides a factual basis for the
jury to find that the phrase, “mutually acceptable,” in the contract was
intended by Dutta to ensure that the hospital would select a medical director
who indicated a willingness to form a partnership or otherwise acceptable
business relationship.