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