JOHN Z. LEE, District Judge.
Defendants, CONSULTANTS IN PATHOLOGY, S.C. (CIP) and PATHOLOGY CONSULTANTS, INC. (PCI), (collectively the "Defendants"), through their counsel, Kristine S. Phillips and Kate Kosartes of O'Hagan Meyer, move this Court for entry of judgment in favor of CIP and PCI pursuant to an arbitration award, and against Plaintiff KALISHA HILL, M.D. ("Plaintiff"), denying and dismissing Plaintiff's First Amended Complaint At Law. In support of their motion, Defendants state as follows:
1. Plaintiff filed her initial complaint on February 2, 2018 against CIP and PCI alleging race discrimination under Section 1981 and retaliation under Title VII and Section 1981. (Doc. 1)
2. On March 26, 2018, Defendants moved to dismiss the complaint. (Docs. 8, 9, 11, 12).
3. On November 1, 2018, this Court issued a written memorandum opinion and order dismissing Plaintiff's claims against PCI, with leave to replead. (Doc. 32). This Court further stayed all claims against CIP, and compelled arbitration of those claims with the American Health Lawyers Association ("AHLA") pursuant to the parties' contract. (Doc. 32)
4. Plaintiff then filed her First Amended Complaint on November 6, 2018 against CIP and PCI again alleging race discrimination under Section 1981 and retaliation under Title VII and Section 1981. (Doc. 34)
5. Thereafter, PCI filed a motion to stay proceedings as the parties agreed to arbitrate their claims before the AHLA, along with the claims asserted against CIP (Doc. 38), which this Court granted (Doc. 40).
6. The parties proceeded to an arbitration hearing held June 10-14, 2019. An arbitration award was entered on October 29, 2019. Attached hereto as Exhibit A is a true and accurate copy of the AHLA arbitration award.
7. Specifically, the arbitrator found that Plaintiff failed to establish her claims of discrimination and retaliation asserted against both Defendants and as such, entered judgment in favor of Defendants.
8. Pursuant to the arbitration award, Defendants move this Court for entry of a judgment in favor of Defendants CIP and PCI and against Plaintiff, denying and dismissing Plaintiff's First Amended Complaint.
9. Counsel for Plaintiff has no objection to this motion.
WHEREFORE, Defendants CONSULTANTS IN PATHOLOGY, S.C. and PATHOLOGY CONSULTANTS, INC. move this Court for entry of an order granting judgment in their favor and against Plaintiff KALISHA HILL, M.D. denying and dismissing Plaintiff's First Amended Complaint at Law, and for any further relief this Court deems fair and just.
This case involves the relationship between Claimant, Consultants in Pathology, S.C. ("CIP") and Respondent, Kalisha Hill, M.D. ("Dr. Hill"). CIP provides pathology services in Illinois and its related company, Pathology Consultants, Inc. ("PCI"), provides them in Indiana. The two entities have identical shareholders and boards of directors, and are generally treated as one entity by both. Most of the management responsibilities of the boards of directors have been delegated to their management committee (the "Management Committee"). For the period relevant to these proceedings, Dr. Mark Fritsch ("Dr. Fritsch") was the president of both companies.
CIP hired Dr. Hill in 2003 to work for it as a pathologist. Dr. Hill initially worked at various labs serviced by CIP and PCI. In 2005, CIP began providing pathology services to St. Mary's Hospital in Kankakee, Illinois (the "Hospital"), which was part of the Presence Health Network ("Presence").
CIP did not have a direct contract to provide pathology services to hospitals in Presence's network. Instead, it was a member of Associated Pathology Professionals, L.L.C. ("APP"), which in turn had a contact with Presence to provide pathology services to Presence hospitals. Under the APP-Presence contract effective from June 1, 2014 through June 30, 2017 (the "APP Contract"), the individual pathologists assigned to Presence hospitals were given the title of Medical Director. APP assigned CIP to provide pathologists to the Hospital.
CIP and PCI had a defined process for career progression: a pathologist began as a Junior Associate, and could advance to Associate, then Senior Associate and, finally, to Shareholder. Dr. Hill was elevated to shareholder in 2009. Thus, effective January 1, 2009, she signed a Stock Purchase Agreement with CIP (the "CIP Stock Purchase Agreement"), a Stock Purchase Agreement with PCI (the "PCI Stock Purchase Agreement") and a Shareholder Employment Agreement with CIP (the "Shareholder Employment Agreement"). Under her Stock Purchase Agreements, Dr. Hill paid $500.00 for ten shares of CIP and $500.00 for 124 shares of PCI.
Under Paragraph 3.a of the Shareholder Employment Agreement, Dr. Hill agreed, inter alia, to "under the general supervision of the Board of Directors of CIP, devote in good faith [her] working time, skill and experience to advancing and rendering profitable the interests of CIP." She also agreed to "accept assignments for service scheduled by the Board of Directors of CIP." Under Paragraph 3.b of the Agreement, Dr. Hill agreed "that only CIP shall be entitled to claim and receive all fees and charges attributable to services rendered by [Dr. Hill] for or on behalf of CIP, except as otherwise agreed in writing by CIP. Employee assigns to CIP all of Employee's right to bill and collects [sic] for all of Employee's professional services." It also provides that: "Honoraria from presentations, compensation from teaching and research activities, fees from medical-legal activities and royalties from publications shall belong to [Dr. Hill]."
Paragraph 5 of Dr. Hill's Shareholder Employment Agreement required her to abide by all published policies and procedures of CIP. Paragraph 11 entitled her to vacation and personal leave in accordance with the policies established by CIP's board of directors.
In 2014, a series of decisions by CIP and PCI led to Dr. Hill being reassigned from Franciscan Hospital in Olympia Fields to the Hospital in Kankakee. PCI began providing pathology services to a hospital in Lafayette, Indiana, and transferred a pathologist from a hospital in Dyer, Indiana to Lafayette. CIP and PCI then moved Dr. Morphew from the Hospital in Kankakee to the hospital in Dyer. They decided to transfer Dr. Hill to the Hospital in Kankakee to fill Dr. Morphew's position. Dr. Hill resisted this move, as the Franciscan Hospital in Olympia Fields was much closer to her home than the Hospital in Kankakee. Although she ultimately accepted the transfer, she harbored resentment over it which continued throughout her remaining tenure with CIP. CIP and PCI promoted Dr. Hill to membership in the Management Committee as a result of the transfer.
In 2016, the Hospital offered Dr. Hill a position as Physician Advisor. She wanted to accept the position, and worked with Dr. Fritsch to obtain approval to do so. Among the issues that needed to be resolved before Dr. Hill could accept the job was whether the Hospital would contract with APP or CIP for it or whether it would contract with Dr. Hill for the position. The Hospital initially proposed a contract with APP, but CIP considered entering into the contract itself. Finally, CIP determined that it should not enter into the contract, and permitted Dr. Hill to enter into a contract with the Hospital though her wholly-owned company, Pathology Expert Consulting, LLC. Another significant issue was how the compensation for the position would be split between CIP and Dr. Hill. The position had a time commitment of 38 hours per month, with a daily commitment of 2-4 hours, 1-2 of which would be during normal work hours. The position would pay $125 per hour, up to an annual maximum of $57,000. In consultation with Dr. Fritsch, Dr. Hill proposed that she retain 40% of the compensation, up to an annual maximum of $20,000, with CIP receiving the remainder.
At the July 20, 2016 Management Committee meeting, however, a different arrangement was approved. The Management Committee required Dr. Hill to submit timesheets for the time she spent as Physician Advisor. Based upon her representations at the meeting, the Management Committee expected Dr. Hill turn in copies of the timesheets she submitted to the Hospital for her Physician Advisor work. Any income for time she spent during the normal eight hour work day would be turned over to CIP, and Dr. Hill would be permitted to retain any income earned after hours up to a $20,000 cap. Dr. Hill never complied with these requirements.
In October or November of 2016, Dr. Hill contacted Dr. Fritsch and told him that she wanted to renegotiate the split of her Physician Advisor salary with CIP. He responded by telling her that she needed to raise the issue with the Management Committee. Neither of them brought the issue up with the Management Committee until the following year, when Dr. Hill's outside activities and earnings became an issue of contention.
Dr. Hill avoided submitting her timesheets to CIP, despite repeated requests from its Chief Operating Officer, Richard Keilman. Finally, at the end of a Management Committee Meeting in December, she submitted timesheets for the months of August through November and a check for $6,675. She offered no explanation for amount of the check. Although she signed the timesheets attesting to their accuracy, and obtained the signature of Presence's director of social services on them, they were not the timesheets that she submitted to the Hospital to document her work as Physician Advisor. The timesheets she submitted to CIP reported only the time she spent during her normal working hours, and thus underreported the total time she worked as a Physician Advisor. Underreporting the time, of course, resulted in the timesheets underreporting the income Dr. Hill received from the Hospital. Dr. Hill submitted different timesheets to the Hospital that reported all of the time she worked as a Physician Advisor.
Dr. Hill testified that she submitted the fabricated timesheets to CIP to report only what she wanted it to know, and submitted the $6,675 check, which represented 60% of the time reported on those timesheets, because she believed it was fair.
In the meantime, in October of 2016, the new president of the Hospital, Christopher Shride ("Shride"), asked Dr. Hill if she would be interested in becoming the Chief Medical Officer ("CMO") of the Hospital. By December of 2016 and early January of 2017, Dr. Hill had discussions about the CMO position with the Hospital. At the time, the job was described as being a .5 FTE position, but Dr. Hill sought assurances that the position would not actually require four hours of work a day, which both she and the Hospital recognized would interfere with her responsibilities as a pathologist. While there may be a reasonable explanation of why the position would be described as a .5 FTE when the demands on Dr. Hill would be substantially less, none was offered at the Arbitration hearing.
Dr. Hill did not mention her consideration of the CMO position to anyone at CIP until the January 11, 2017 Management Committee meeting. Keilman, Dr. Fritsch and Dr. Judy Lyzak, another member of the Management Committee ("Dr. Lyzak") were already questioning Dr. Hill's prior submission of timesheets and a check for her Physician Advisor position. Dr. Hill's request for a change in the compensation formula was discussed at the meeting. After the meeting, Dr. Hill mentioned that she was being considered for the CMO position at the Hospital. She testified that she believed that she did not need further approval from CIP to accept that position because the demands on her time would be the same as the Physician Advisor position.
On February 6, 2017, Presence offered Dr. Hill the CMO position, with a starting date of February 20, 2017. The offer recited that "[t]he base salary for this .5 Full Time Equivalent (FTE) will be $167,000." Dr. Hill accepted the offer on the following day, February 7, 2017. She did not seek or obtain the prior approval of CIP before accepting that position, and did not inform CIP that she had done so immediately afterward.
Instead, on February 15, 2017, Dr. Hill participated in a Management Committee meeting telephonically while on vacation. Although the issue of how CIP and PCI should allocate shareholders' outside revenues was discussed at that meeting, Dr. Hill did not volunteer that she had accepted a new position at the Hospital for considerably more money than her previous one. The other shareholders learned that she had accepted the CMO position on the following day, when the Hospital announced it via email blast. They were shocked to learn that Dr. Hill had accepted the CMO position, and upset at the manner in which they found out. The relationship between Dr. Hill and the other shareholders deteriorated quickly.
Dr. Fritsch asked Dr. Hill to provide the details of her CMO position, including her expected hours and her compensation. He also asked for a copy of her employment agreement. Dr. Hill refused to provide the requested information. Instead, on March 3, 2017, she circulated a letter from her attorney which opined that her acceptance of the CMO position did not conflict with her employment by CIP or violate the terms of her Shareholder Employment Agreement. The letter recited that Dr. Hill had "advised" her attorney that the CMO position would "entail approximately two (2) hours per day." Although his letter recited that he had reviewed Dr. Hill's CMO agreement, which stated that the "base salary for this .5 Full Time Equivalent (FTE) will be $167,000," Dr. Hill's attorney did not report those facts or explain how a .5 FTE position might only require two hours a day of Dr. Hill's time.
On March 8, 2017, Drs. Fritsch and Lyzak met with Shride to discuss Dr. Hill's CMO position. There is conflicting testimony about whether Shride told them that the position would be a .22 FTE or a ".5 (ish)." At the March 15, 2017 Management Committee meeting, Fritsch and Lyzak reported on their meeting, and Dr. Hill represented that the position was a .22 FTE. She also represented that she would quit the position if it became a .5 FTE because patient care would be affected. Although Shride had told Dr. Hill that he described the CMO position as ".5 (ish)," it appears that she never sought to clarify that comment to the Management Committee. Dr. Hill and the others on the Management Committee were at odds regarding her acceptance of the CMO position, and she was asked to resign from the Committee. Dr. Fritsch stated that Dr. Hill had exhibited poor judgment in her handling of the CMO position. He asked Dr. Hill to leave the meeting, and she responded that she was prepared to claim that she was experiencing racial discrimination.
Dr. Hill's actions triggered a consideration of a policy regarding the outside activities of the shareholders of CIP and PCI. While none of them had accepted a position with the responsibilities and compensation of Dr. Hill's CMO job, some of them were compensated for their outside activities and uniformity was lacking in the way they handled the compensation they received and when those activities were performed. Dr. Hill suggested that the Management Committee consult certain people for their opinions on how to handle these issues, but those people were not consulted.
At the March 27, 2017 combined meeting of the boards of directors of CIP and PCI, Dr. Hill was removed from the Management Committee. Dr. Hill attended the meeting. The boards also adopted a policy with respect to outside revenue opportunities. Those opportunities were to be brought to the Management Committee for review for potential conflicts of interest and scheduling implications. Additionally, the default position of the companies would be that all outside revenues would be paid directly to them. Employees could seek exceptions to that general rule through the Management Committee, with a right to appeal to the boards of directors.
The combined boards of directors adopted their official written Outside Activities Policy at a meeting on May 15, 2017, which Dr. Hill attended. That Policy required CIP and PCI employees to seek approval from the Management Committee for outside professional activities that might impact the time they devote to the practice and which might generate revenue. For employees like Dr. Hill who were already engaging in outside activities, those activities were to be reviewed by the Management Committee for approval. If the Management Committee denied a request to participate in an outside activity, the Policy gave the employee the right to appeal that decision to the board of directors.
Dr. Hill initially refused to comply with the Outside Activities Policy and disclose her CMO contract. After being threatened with termination, she finally submitted a completed approval form and a copy of her CMO contract to CIP on June 27, 2017. The other shareholders of CIP then quickly decided to terminate Dr. Hill. Despite their adoption of procedures in the Outside Activities Policy as a direct result of Dr. Hill's acceptance of the CMO job, they terminated her without regard to those procedures and their contractual obligations to Dr. Hill, CIP's by-laws and the APP Contract.
At the July 19, 2017 Management Committee meeting, the Committee adopted its recommendation that Dr. Hill be terminated. The minutes of that meeting recite:
The other shareholders of CIP kept this recommendation secret from Dr. Hill. On July 24, 2017, she attended a meeting of the combined boards of directors, where a vote was taken to discharge her as a shareholder. Only Dr. Hill voted against that proposition. The minutes of that meeting recite:
At the conclusion of the meeting, Dr. Hill was handed a letter from Dr. Fritsch, which recited that it would "serve as written notice that your employment with CIP is terminated effective July 24, 2017, as the result of your discharge as a shareholder of Consultants in Pathology, S.C. and Pathology Consultants, Inc."
On the following day, July 25, 2017, Dr. Fritch sent Dr. Hill another letter which recited that it was sent to:
The letter enclosed a proposed Stock Redemption, Separation, and Release Agreement, which Dr. Hill never signed. Among other things, that proposed Agreement provided for the purchase and sale of Dr. Hill's stock in CIP and PCI, $75,000 in severance pay to Dr. Hill and her release of any claims she might have against CIP and PCI. Paragraph 2(a) of the Agreement stated:
On September 20, 2017, Dr. Fritsch, as President of both PCI and CIP, tendered to Dr. Hill a $500 check from PCI and a $500 check from CIP "as full and final consideration for the entirety" of her stock in the two entities. Dr. Fritch's letter recited that "As a result of the foregoing, you no longer hold any ownership interest or other rights as a stockholder of CPI or PCI." Dr. Hill apparently cashed those checks on September 27, 2017.
CIP has asserted claims against Dr. Hill for breach of the Shareholder Employment Agreement, arising out of Dr. Hill's work as Physician Advisor and CMO as well as for her alleged breaches its non-compete provisions. It has also alleged a claim for breach of fiduciary duty arising out of Dr. Hill's conduct before her termination from CIP.
Dr. Hill countered with claims that CIP breached her Shareholder Employment Agreement when it terminated her on July 24, 2017, that its board of directors breached its fiduciary duty to her and that both CIP and PCI engaged in racial discrimination and retaliation against her in violation of 42 U.S.C. § 1981.
I conclude that Dr. Hill breached her Shareholder Employment Agreement by failing to turn over to CIP all of the money she was required to remit from her Physician Advisor position, as well as by accepting the CMO position without approval of CIP's board of directors and keeping all of the money she earned from that position. I also conclude that Dr. Hill breached her fiduciary duties as a director of CIP by submitting fabricated timesheets relating to her Physician Advisor position and concealing the true nature of, and compensation for, her CMO position. CIP's damages, however, for those breaches of fiduciary duty are the same as its damages for Dr. Hill's breach of her Shareholder Employment Agreement. I am awarding CIP $16,513 on those claims.
I also conclude that CIP breached the Shareholder Employment Agreement when it terminated Dr. Hill on July 24, 2017 without complying with the termination provisions of that Agreement or the provisions of its Outside Activities Policy. For that reason, it cannot enforce the Agreement's non-compete provisions. CIP did not terminate the Shareholder Employment Agreement on July 24, 2017 in accord with its termination provisions. In any event, I find that Dr. Hill would not have violated those prohibitions even if her employment had been properly terminated.
While I find that CIP breached the Shareholder Employment Agreement, Dr. Hill has not claimed, nor has she established, any ascertainable damages from that breach. I thus do not award her any damages. I find that Dr. Hill did not establish her remaining claims for breach of fiduciary duty, racial discrimination and retaliation, for which she also has not claimed, nor established, any ascertainable damages.
Reading Paragraphs 3.a and 3.b of Dr. Hill's Shareholder Employment Agreement together, I conclude that Dr. Hill was required to devote all of her professional activities to CIP's interests, and to assign all of her earnings from her professional activities to CIP. She thus breached that Agreement when she failed to tender all of the earnings from her Physician Advisor position to CIP as required by the arrangement approved by the Management Committee on July 20, 2016. She breached the Agreement again when she accepted the CMO position without obtaining the prior approval of CIP's board of directors and failed to remit all of her earnings from that job to CIP.
Under Paragraph 3.a of her Shareholder Employment Agreement, Dr. Hill agreed to "devote in good faith [her] working time, skill and experience to advancing and rendering profitable the interests of CIP." I interpret this provision to require Dr. Hill to devote all of her "working time, skill and experience to advancing and rendering profitable the interests of CIP." Paragraph 3.a cannot reasonably be interpreted to only require Dr. Hill to devote her working time, skill and experience as a pathologist to CIP.
My conclusion about Paragraph 3.a is reinforced by Paragraph 3.b's express provision allowing Dr. Hill to keep money she earned from "[h]onoraria from presentations, compensation from teaching and research activities, fees from medical-legal activities and royalties from publications." While the Shareholder Employment Agreement contemplated that Dr. Hill might engage in professional activities other than providing pathology services, it only mentions presentations, teaching and research activities, medical-legal activities and publications as those in which she could engage for her own profit.
Paragraph 3.b also provided that "Employee assigns to CIP all of Employee's right to bill and collects [sic] for all ofEmployee's professional services" (emphasis mine). This provision refers to "professional services," not "pathology services." And, unlike the prior sentence of Paragraph 3.b, this provision is not limited only "to services rendered by [Dr. Hill] for or on behalf of CIP." That leads me to conclude that Dr. Hill was required to remit all income she received from her professional services, from any source, to CIP. Her work as a Physician Advisor and CMO fit comfortably into these definitions.
Paragraph 3.a of the Shareholder Employment Agreement required Dr. Hill to work "under the general supervision of the Board of Directors of CIP," and thus it could make exceptions to the requirement that Dr. Hill devote all of her "working time, skill and experience to advancing and rendering profitable the interests of CIP." The evidence established that CIP's board of directors (through authority delegated to the Management Committee) allowed Dr. Hill to accept the Physician Advisor position with the Hospital and required her to remit to CIP all the income she received from Presence for time spent during her normal eight hour work day. While Dr. Hill may not have believed that this arrangement was fair, and subsequently sought to renegotiate it, she was required to comply with the requirements established by the Management Committee. By her own admission, she did not do this.
Misreading the Shareholder Employment Agreement, Dr. Hill argues that it did not require her to remit her earnings as Physician Advisor and CMO to CIP, and that the parties never agreed to a modification of that Agreement regarding those earnings. This misapprehension led her to view CIP's demands with respect to her earnings as a negotiation, rather than an obligation. Thus, she claims that she was entitled to ignore the requirement to provide timesheets "while the disagreement continued," as well as to pay what she "determined was CIP's fair share of her compensation." But, CIP was not seeking a modification of her Shareholder Employment Agreement. She was seeking a modification of the Management Committee's July 20, 2016 decision regarding her Physician Advisor position. The Shareholder Employment Agreement required her to comply with that decision.
Dr. Hill also breached her Shareholder Employment Agreement by accepting the CMO position without first having the approval of CIP's board of directors. While CIP can be faulted for moving too slowly after learning that Dr. Hill had accepted that position before adopting the Outside Activities Policy, she remained in breach of her Shareholder Employment Agreement while she was the CMO and pocketing the income she earned in that position.
CIP's damages expert, Mark Hosfield, calculated that Dr. Hill owed CIP $16,513 in earnings from her Physician Advisor and CMO positions. I accept that calculation, award CIP $16,513 in damages from Dr. Hill.
As a director of CIP and PCI, Dr. Hill owed the corporations and their shareholders a fiduciary duty. That duty required her to deal openly and honestly with them. Levy v. Markal Sales Corp., 268 Ill.App.3d 355, 364-65, 643 N.E.2d 1206, 1214 (1st Dist. 1994). Dr. Hill breached that duty when she submitted fabricated timesheets to CIP, underpaid the portion of the money she received as Physician Advisor, accepted the CMO position without CIP's approval, refused to disclose details of the CMO job and kept all of the money she received for that job. CIP's damages from this conduct are the same $16,513 that I am awarding it for Dr. Hill's breach of her Shareholder Employment Agreement.
But, CIP claims it is entitled to much more. It argues that "her misconduct set into motion a sequence of events that culminated in the termination of CIP's relationship with Presence, a loss that damaged CIP in the amount of $1,032,933." I disagree that Dr. Hill's conduct proximately caused the termination of CIP's relationship with Presence. As discussed below, CIP's reaction to Dr. Hill's conduct caused the termination of its relationship with Presence. Its decision to terminate Dr. Hill, without first consulting Presence, proximately caused CIP to lose its relationship with Presence. Dr. Hill, of course, opposed that course of action.
CIP has also requested the disgorgement of the compensation it paid to Dr. Hill while she was breaching her fiduciary duties. But, Dr. Hill did not usurp a corporate opportunity by accepting the Physician Advisor and CMO positions. CIP expressly declined to contract with Presence for the Physician Advisor position, and most of CIP's shareholders did not believe that it was appropriate for any of them to hold the CMO job. While CIP has claimed certain instances of Dr. Hill's CMO responsibilities impinging on her availability to fulfill her pathologist duties at the Hospital, it has not offered any evidence of damages it may have sustained as a result.
It nonetheless argues that Illinois law permits a complete forfeiture of salary paid to a fiduciary during the time when she was breaching her fiduciary duties. The rationale for the complete forfeiture rule has been explained as a form of restitution for the misappropriation of corporate assets or usurping corporate opportunities, and a deterrent to future breaches of duty. Levy v. Markal Sales Corp., 268 Ill. App. 3d at 373, 643 N.E.2d at 1220.
I decline to require Dr. Hill to forfeit her salary for several reasons. First, she did not misappropriate corporate assets or usurp a corporate opportunity. While she clearly sought to enrich herself by accepting positions with the Hospital, the income she received from those positions was not income that CIP would otherwise have received. Second, she actually received CIP's authorization to accept the Physician Advisor position. CIP did not consider revoking that authorization when she failed to turn in her timesheets in August, September, October and November of 2016, and did not consider it when it became suspicious of the timesheets and reimbursement check she submitted in December. Nor did CIP ever consider demanding that Dr. Hill quit her CMO job, despite their outrage at the manner in which she accepted it and the way they found out about it. Even while its shareholders struggled to decide what to do with her CMO income, they acquiesced in her starting and continuing in that job.
CIP was not without remedies in February, 2017. Once it learned that Dr. Hill had accepted the CMO position, it could have put her on notice that she was in breach of her Shareholder Employment Agreement pursuant to its termination provision. Plus, the APP Contract contained a mutual non-solicitation provision that Presence breached when it offered employment to Dr. Hill. CIP could have objected to the Hospital giving Dr. Hill the CMO job, but chose not to. Instead, knowing that Dr. Hill was working for the Hospital and keeping all of the income she earned for herself, it acquiesced in her conduct. It would be inappropriate to order the disgorgement of Dr. Hill's earnings from CIP in order to "deter disloyalty" when CIP sat on its rights and permitted the disloyalty to continue. I will not award CIP anything else in addition to the $16,513 in unremitted income that Dr. Hill received from the Hospital.
Dr. Hill's counterclaim alleges that CIP breached her Shareholder Employment Agreement when it fired her. I conclude that CIP did, in fact, breach that contract when it fired her. Dr. Hill, however, did not prove any damages from that breach, and I thus am not awarding her any.
Until June 27, 2017, when Dr. Hill finally disclosed her CMO agreement to it, CIP moved slowly and deliberately to deal with the implications of her work as a Physician Advisor and then CMO at the Hospital. After that date, however, it rushed to terminate Dr. Hill in violation of its just-adopted Outside Activities Policy, as well as its contracts with Dr. Hill. The Outside Activities Policy required the Management Committee to issue a determination approving or denying a request to participate in an outside activity. It disapproved of Dr. Hill's CMO position at its July 19, 2017 meeting. The minutes of that meeting recite that "The committee was surprised to learn that this position was a .SO FTE and not a .23 FTE position as previously indicated. The committee did not approve this position as the commitment required is inconsistent with her obligations as laboratory medical director."
If CIP had followed the Outside Activities Policy, Dr. Hill would have been permitted to appeal that decision at the next regular meeting of the board of directors. The Outside Activities Policy also authorized the Management Committee to implement "appropriate action" if Dr. Hill had failed to adhere to the Management Committee's decision or the board of directors' determination if that decision had been appealed. That "appropriate action" included "termination of shareholder status" and termination of employment.
The Management Committee skipped all of those steps and instead imposed sanctions upon Dr. Hill before she even knew about its decision, much less had a chance to appeal or comply with it. Rather than informing Dr. Hill of the Management Committee's recommendation, as the Outside Activities Policy required, CIP actively sought to conceal it from her. She was thus deprived of any opportunity to appeal or "adhere to" the Management Committee's disapproval for her outside activity. CIP repeated its failure when failed to give Dr. Hill the opportunity to cure her breach of her Shareholder Employment Agreement.
Although Dr. Hill's Shareholder Employment Agreement provided that her employment could have been terminated for her material breach of it, that provision could only be invoked if she had failed to cure that breach within thirty days of receiving written notice from CIP. For reasons that were not revealed at the Hearing, CIP was not willing to invoke that provision. Dr. Hill could have cured her breach of the Shareholder Employment Agreement and adhered to the Management Committee's disapproval of her CMO job by quitting her outside employment with the Hospital and tendering her earnings to CIP. She was denied that opportunity by CIP's material breach of Paragraph 15 of her Shareholder Employment Agreement.
That provision sets forth the various manners in which the Agreement might be terminated. Of relevance to this Arbitration are the following enumerated manners of termination:
Despite its various justifications for its termination of Dr. Hill during the Arbitration proceedings, in July of 2017 CIP repeatedly asserted that she had been "discharged as a shareholder of both CIP and PCI" and that her "employment with CIP terminated effective July 24, 2017, as the result of [her] discharge as a shareholder." There is no evidence that CIP was motivated to terminate Dr. Hill because it believed that she had "provide[d] services on behalf of CIP on less than a seventy-five percent (75%) basis."
CIP's attempt to terminate Dr. Hill's "status as a shareholder" failed for the simple reason that a corporation's board of directors cannot fire its shareholders. Its shareholders can choose its directors, but its directors cannot choose their shareholders. The board of directors of CIP had no authority to discharge Dr. Hill "as a shareholder." Indeed, she remained a shareholder for several more months until September, 2017, when she accepted the tender of $500.00 for her CIP stock.
Nothing in the CIP Stock Purchase Agreement permitted CIP to "discharge" Dr. Hill as a shareholder. Paragraph 5 of the Agreement provides that Dr. Hill could not dispose of her shares in CIP unless she was terminated or withdrew as an employee of CIP, or if she provided services on behalf of CIP on less than a 75% basis. Under those two circumstances, either Dr. Hill or CIP was required to give written notice to CIP and all of its shareholders containing the terms of the sale Dr. Hill's shares in accordance with the Agreement. Within thirty days of that notice, Dr. Hill was required to sell her CIP shares back to CIP. No written notice consistent with this provision was given by either party. And, while CIP has made a convoluted claim that Dr. Hill did not provide services to CIP on a 75% basis while she was CMO, its calculations rely on assuming that her vacation time counted as not providing services to CIP. But Dr. Hill's Shareholder Employment Agreement expressly entitled her to vacation and personal leave in accordance with the policies established by CIP's Board of Directors, and her vacation time cannot be counted as not providing services to CIP.
Paragraph 11 of the CIP Stock Purchase Agreement provides for the automatic termination of Hill's "status as a shareholder" under certain circumstances, none which are applicable here:
No one has claimed that Dr. Hill was convicted of a criminal offense or was made ineligible for participation in any health care program.
Paragraph 5 of the PCI Stock Purchase Agreement also required Dr. Hill to sell her PCI stock back to PCI if she was "terminated or withdraws from PCI," if she ceased to be a shareholder of PCI or if she ceased to hold a valid license to practice medicine in Illinois. Under any of those circumstances, either Dr. Hill or PCI was required to give written notice to PCI and all of its shareholders containing the terms of the sale of Dr. Hill's shares in accordance with the Agreement. Within thirty days of that notice, Dr. Hill was required to sell her PCI shares back to PCI. Again, no such notice was given.
Like the CIP Agreement, Paragraph 11 of the PCI Stock Purchase Agreement provides:
This provision is inapplicable here.
Nothing in Illinois' Business Corporation Act authorizes a corporation's board of directors to expel a shareholder or otherwise change her status or rights as a shareholder. Nothing in CIP's by-laws confers that authority, either. Article II, Section 8 of the by-laws state that in the event of the death of a shareholder or the termination of her employment with the corporation, the corporation shall redeem her stock "as set forth in such shareholder's Stock Purchase Agreement with the corporation." That is the only provision in the by-laws concerning an involuntary transfer of a shareholder's interest in the corporation. Even Section 5 of Article VIII of the by-laws, concerning Professional Practice, Regulation and Conduct, does not provide for the automatic involuntary transfer of a shareholder's stock if she becomes disqualified to practice medicine, is convicted of a crime related to health care or is ineligible to participate in any federal or state health care program. In those circumstances, the by-laws require the corporation to "cause such individual to sever all employment with the corporation and to terminate all of his or her financial interest in the corporation, and such individual shall terminate his or her employment and all of his financial interest in the corporation in an expeditious manner" (emphasis mine).
CIP argues that Attachment A to the by-laws states that a shareholder may be discharged by a supermajority vote of all of the board of directors. But, Attachment A is not intended to enumerate or add to the powers of the board of directors. Instead, Article IV, Section 8 of the by-laws recite that "[t]he number of votes of members of the Board of Directors for purposes of conducting business shall be as set forth on
My conclusion that CIP did not properly terminate Dr. Hill's Shareholder Employment Agreement means that it cannot prevail on its remaining claims against her. CIP's failure to follow the Agreement's termination provisions was a material breach, excusing Dr. Hill's compliance with it non-complete provisions. Those provisions were triggered only "[i]n the event this Agreement is terminated for any reason, by either party prior to its expiration, or expires by its terms." Paragraph 15 of the Agreement controls its termination, and it provides: "This Agreement shall be in full force and effect until terminated in any one of the following manners." Because CIP did not terminate the Agreement in any of the manners enumerated in that Paragraph, it remained "in full force" and the non-compete provisions of Paragraph 13 were not triggered.
If the non-compete provisions had been triggered, Dr. Hill would had been prohibited, "directly or indirectly, in an advisory capacity or otherwise" from doing the following:
Dr. Hill waited until CIP's resignation from APP was effective before she resumed her pathology practice at the Hospital. As CIP no longer provided professional services there, and did not provide them anywhere else within twenty miles, Dr. Hill was not prohibited by Paragraph 13.a from practicing there.
But CIP claims that Dr. Hill violated Paragraph 13.b in two principal ways: First, by soliciting Presence to replace CIP at the Hospital with her own practice; and second, by participating in Presence's efforts to have "outreach specimens" reviewed at Presence's hospitals instead of by PCI pathologists at the Alverno Laboratories.
The evidence showed, however, that Presence decided on its own to replace CIP at the Hospital when CIP refused to rehire Dr. Hill. Dr. Hill's contributions to that decision were, first, to be fired, and, second, telling the Hospital about it. By not consulting Presence about its decision to fire Dr. Hill and its decision to replace her, CIP caused APP to breach the APP Contract with Presence. The Hospital wanted to keep Dr. Hill a$ its pathologist and as its CMO, and Dr. Hill could not serve as the Hospital's CMO if she took a job as a pathologist elsewhere. Only when it became apparent to Presence that CIP would not rehire Dr. Hill did it seek to have her move to another group within APP. Ultimately, Dr. Hill formed her own group and essentially replaced CIP in APP. Notably, CIP decided to resign from APP voluntarily, although under duress. CIP's actions proximately caused its departure from APP. Dr. Hill's desire to have her job reinstated was not a solicitation to have Presence sever its relationship with CIP.
The outreach program in which Dr. Hill was involved encouraged doctors who sent their specimens to the Alverno Lab to have those specimens sent to pathologists at Presence Hospitals to be read and reported there. Among other reasons for the program was the opportunity for hospital pathologists, like Dr. Hill, perform and bill for work that had previously been performed by pathologists at Alverno. CIP and PCI argue that Dr. Hill's involvement in the outreach program was a violation of the non-solicitation provision of her Shareholder Employment Agreement, would have been violated if she were to "Solicit or induce, or attempt to induce ... any hospital, health care system, physician or other provider ... to terminate his, her, or its relationship with either CIP or Pathology Consultants, Inc." But the outreach program did not induce any physician or other provider to terminate their relationship with CIP or PCI. The evidence at the hearing demonstrated that physicians had relationships with Alverno, not with the pathologists who were employed there. The outreach program encouraged physicians to maintain their relationships with Alverno, but to establish new relationships with the pathologists at the Presence hospitals. No evidence at the hearing showed that those outside physicians had any particular relationships with the pathologists at Alverno.
CIP's claims for Dr. Hill's alleged breach of her non-compete obligations thus fail. PCI's third-party beneficiary claim against Dr. Hill fails for the same reasons.
Dr. Hill's Post-Hearing Brief focuses on alleged breaches of fiduciary duty that Dr. Fritsch owed her as a shareholder of CIP. But, Dr. Fritsch is not a party to this Arbitration, and I am without jurisdiction to award any relief against him.
Parts of Count II of Dr. Hill's Counter Demand for Arbitration can be fairly read to allege, among other claims, that CIP breached a fiduciary duty of loyalty to Dr. Hill as a minority shareholder when it adopted the Outside Activities Policy and when it terminated her. But, CIP did not owe a fiduciary duty to its individual shareholders like Dr. Hill. And, although it was clearly adopted in response to Dr. Hill's conduct, it applied equally to all of CIP's shareholders.
Count II can also be fairly read to allege that Dr. Fritsch's "intentional and reckless conduct" as the President and as "the lead director" of CIP and PCI constituted a breach of his fiduciary duty ofloyalty and caused significant financial injury to CIP, PCI and their shareholders. But, a claim against Dr. Fritsch for a breach of duty belongs to the corporations, not its individual shareholders. Count II does not assert a derivative claim on behalf of the corporations, and thus Dr. Hill cannot assert it herself. Her breach of fiduciary duty claim fails.
Dr. Hill claims that she was subject to a long period of racial discrimination from CIP and PCI, beginning with her transfer to the Hospital and culminating with her termination. She claims that similarly-situated non-protected individuals were treated more favorably. She claims that Drs. Morphew and Van Gorder, who are white, were "consulted, considered and allowed to express their preferences" concerning their reassignments in 2014 while Dr. Hill was not. Her claim arising out of that reassignment "refers not only to the forced Kankakee reassignment itself, but also Dr. Fritsch's complete improper treatment and disregard of Dr. Hill's unique professional advancement, the acknowledged leadership status that Dr. Hill had earned from her peers at the Olympia Fields Hospital campus, as well as, Dr. Fritsch's complete non-consideration of Dr. Hill's family concerns, while readily accommodating the personal desires and needs of Drs. Morphew and Van Gorder." She claims:
"In the end, Dr. Fritsch successfully convinced the Board to terminate Dr. Hill because he had successfully falsely characterized Dr. Hill's actions as being dishonest and being theft, two highly racially discriminatory `dog whistle' terms routinely used to degrade and demean the good reputations of African Americans."
Neither of Dr. Hill's post-hearing submissions claim any pecuniary damages from the racial discrimination she believes she suffered, much less provide any basis for an award of damages. She also offered little proof that the actions of which she complains were racially motivated. She offered no direct evidence that they were motivated by race. She instead relies upon a handful of racially insensitive remarks by Dr. Fritsch, allegedly the sole decisionmaker for CIP and PCI. While Dr. Fritsch was undoubtedly a very influential figure in the management of the companies, there was little evidence that the other shareholders shared in whatever racial animus he may have harbored toward Dr. Hill. Moreover, while he may have made comments about "little yellow babies" and the "Black Mafia," only the latter comment was directed at Dr. Hill's protected class. His remaining "dog whistle" comments, including referring to Dr. Hill as arrogant, dishonest and living in a "safe neighborhood," are equally susceptible of a non-racial interpretation, especially during the time after he learned that Dr. Hill had accepted the CMO job. Even if all of Dr. Fritch's comments were made in the manner and with the meaning to which Dr. Hill ascribes them, they do not add up to proof that the decisions of CIP and PCI concerning her were racially motivated.
Dr. Hill contends that CIP's proffered reasons for her transfer to the Hospital in Kankakee and her termination were pretextual. Citing McCoy v. WGN Continental Broad. Co., 957 F.2d 368, 372 (7th Cir. 1992), she argues that she can establish pretext if "the decisionmaker's proffered reason is unworthy of credence" or "is incredible." Citing Stewart v. Henderson, 207 F.3d 374, 378 (7th Cir. 2000), CIP argues that the standard is "whether the legitimate reason provided by the employer is in fact the true one or merely a pretext." Citing Hague v. Thompson Distrb. Co., 436 F.3d 816, 823 (7th Cir. 2006), it claims that an employee must show that her employer "lied about its reasons for firing her" to show pretext. Dr. Hill has not established pretext under any of these standards.
CIP's stated reasons for transferring Dr. Hill to the Hospital in Kankakee are believable. Those reasons, which took into account the seniority of the other pathologists, the length of their commutes to their assigned hospitals and their specialties, are plausible. Dr. Hill had no contractual right, or any other assurance, to practice at a hospital conveniently located near her home. I also find CIP's stated reasons for terminating Dr. Hill to be plausible. Although I have concluded that CIP failed to follow the procedures in its Outside Activity Policy and in Dr. Hill's Shareholder Employment Agreement for terminating her, she gave them ample reason to do so. The evidence showed that CIP and its shareholders were motivated by the manner in which Dr. Hill had accepted the CMO position at the Hospital, her refusal to provide them with a copy of her contract and her insistence on retaining all of the income from that position. They took deliberate steps to justify Dr. Hill's termination, culminating in their adoption of the Outside Activities Policy and insisting that Dr. Hill finally provide them with a copy of her contract in compliance with it. They abandoned that deliberate approach when they discovered two key facts about that contract, that the CMO position was an 0.5 FTE and paid Dr. Hill $167,000. Their reaction to learning these facts was immediate and decisive, showing that they were the motivating factors in their decision to fire her, rather than her race. Their reasons are believable, and there is no evidence that they lied about it.
Moreover, Dr. Hill's unique situation after taking the Physician Advisor and CMO positions means that no one else at CIP was similarly situated. While certain other pathologists engaged in professional activities outside of their responsibilities to CIP, none committed to doing so on a daily basis. And though CIP downplayed this aspect of the CMO position, no else made as much money from their outside activities as did Dr. Hill. Fair or not, the evidence showed that CIP was motivated by the time commitment and salary of the CMO position, not Dr. Hill's race.
Dr. Hill's claim for retaliation fails for similar reasons. She claims that to establish retaliation, she needs to show that an adverse employment action was taken against her for opposing impermissible discrimination. CIP argues that Dr. Hill needs to show that her employer had actual knowledge of her protected activity to establish a retaliation claim. Dr. Hill contends that her protected activity began when delivered her $6,675 check to Keilman, "directly opposing what she considered unfair and discriminatory treatment by Dr. Fritsch concerning her working relationship and the lack of support for her professional advancement from CIP." But CIP counters that it did not know that the $6,675 check represented an exercise in protected activity.
In any event, as discussed above, Dr. Hill has not established that CIP's actions against her were motivated by racial bias or a retaliation for her assertion of substantive contractual equality. As with her claim for discrimination, Dr. Hill has also failed to adduce any evidence of damages from CIP's allegedly retaliatory acts.
Accordingly, I AWARD, as follows: Respondent, Kalisha Hill, M.D., shall pay Claimant, Consultants in Pathology, S.C., $16,513.
Pursuant to prior order and Rule 7.6(c) of the AHLA Rules of Procedure for Employment Arbitration, CIP shall remain responsible for the Arbitrator's fees and expenses and any other costs incurred by the AHLA to administer the Arbitration.
This AWARD is in full settlement of all claims submitted to this Arbitration.
