St. Francis Regional Medical v. Critical Care

997 F.Supp. 1413

ST. FRANCIS REGIONAL MEDICAL CENTER, INC., Plaintiff, v. CRITICAL CARE, INC., Flying Nurses, Inc., and Mary Ann Foster, Defendants; and FLYING NURSES, INC., Third Party Plaintiff, v. Sandra K. STERLING a/k/a Sandy Sterling Third Party Defendant.

No. 94-1398-MLB.

United States District Court, D. Kansas.

October 14, 1997.

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Steven C. Day, Woodard, Blaylock, Hernandez, Roth & Day, Wichita, KS, for St Francis Regional Medical Center.

Larry B. Spikes, Kathryn Gardner, Martin, Pringle, Oliver, Wallace & Swartz, L.L.P., Wichita, KS, Jana V. Richards, Blackwell, Sanders, Matheny, Weary & Lombardi L.L.P., Overland Park, KS, for Critical Care, Inc.

Eric B. Metz, Jeffery C. Dahlgren, Triplett, Woolf & Garretson, L.L.C., Nancy J. Strouse, Wichita, KS, for Flying Nurses, Inc.

Anne M. Hull, Turner & Boisseau, Chartered, Wichita, KS, Peter G. Collins, Wallace, Saunders, Austin, Brown & Enochs, Chartered, Wichita, KS, Brian C. Wright, Turner & Boisseau, Chartered, Great Bend, KS, for Mary Ann Foster.

Larry B. Spikes, Martin, Pringle, Oliver, Wallace & Swartz, L.L.P., Wichita, KS, Jana V. Richards, Blackwell, Sanders, Matheny, Weary & Lombardi, L.L.P., Overland Park, KS, for Sandra K. Sterling.

MEMORANDUM AND ORDER

BELOT, District Judge.

This matter comes before the court on motions for summary judgment filed by three defendants: Critical Care, Inc. ("CCI") (Doc. 71), Flying Nurses, Inc. ("FNI") (Doc. 73), and Mary Ann Foster ("Foster") (Doc. 75). Plaintiff St. Francis Regional Medical Center, Inc. ("St.Francis") opposes the motions, and has filed a consolidated response (Doc. 78). Defendants have supported their motions with memoranda and reply briefs (CCI: Docs. 72 & 86; FNI: 74 & 83; Foster: 75 & 87). St. Francis has filed a sur-reply (Doc. 88).

On October 6, 1997, the court conducted a limited hearing on the summary judgment motions. The court heard argument limited to the following five issues:

1. How does St. Francis' negligence claim against Foster differ from its indemnity claim against her?

2. Upon what duty is St. Francis' negligence claim against Foster based?

3. Does St. Francis believe that its implied indemnity claim against CCI and FNI is implied in fact or implied in law or both?

4. Does Texas law govern the issue of successor liability, and if so, why?

5. What is the legal test for determining where and when a transfer of assets occurred?

In advance of the hearing and with leave of court FNI filed a Supplemental Brief on Summary Judgment Issues (Doc. 89). At the hearing the court granted the parties permission to file any new or additional authority they wished the court to consider. Accordingly, St. Francis, FNI and Foster each filed additional authorities in letter form.¹

Upon due consideration and for the reasons set forth in this Memorandum and Order, CCI's and FNI's motions for summary judgment (Docs. 71 & 73) shall be granted in part and denied in part. Foster's motion (Doc. 75) shall be denied. As a result, judgment shall be entered for CCI and FNI on St. Francis' first and second causes of action. St. Francis' fourth cause of action shall be dismissed with prejudice. The remaining claims, cross-claims, and third-party claims will be resolved by a jury trial.

I. TABLE OF CONTENTS
I. TABLE OF CONTENTS ..................................................... 1419
II. NATURE OF CASE ........................................................ 1420
III. STATEMENT OF FACTS .................................................... 1420
IV. STANDARDS FOR SUMMARY JUDGMENT ........................................ 1425
V. ANALYSIS .............................................................. 1425
     A. APPLICABLE LAW .................................................................. 1426
     B. FIRST CAUSE OF ACTION: RESPONDEAT SUPERIOR LIABILITY
OF CCI BECAUSE FOSTER NEGLIGENTLY PERFORMED
DUTIES OWED TO ST. FRANCIS ..................................................... 1426
     C. SECOND AND FIFTH CAUSES OF ACTION: IMPLIED INDEMNITY ............................ 1426
        1. Second Cause of Action: Implied Indemnity Against CCI and FNI ... 1427
           a. Equitable Estoppel to Deny Liability ................................................. 1427
           b. Implying a Contract of Indemnity ..................................................... 1428

           c. Failure to State an Indemnity Claim .......................... 1429
              i. Indemnity Between Joint Tortfeasors at Common Law ......... 1429
              ii. Impact of Adoption of Comparative Fault .................. 1430
        2. Fifth Cause of Action: Implied Indemnity Against Foster...........1431
     D. LACK OF CORPORATE CAPACITY TO BE SUED .............................. 1433
     E. SUCCESSOR LIABILITY ................................................ 1435
        1. Choice-of-Law ................................................... 1436
        2. Equitable Estoppel .............................................. 1437
     F. EQUITABLE DEFENSES: WAIVER, ESTOPPEL, AND LACHES ................... 1438
        1. Waiver .......................................................... 1438
        2. Equitable Estoppel .............................................. 1439
        3. Laches .......................................................... 1439
VI. CONCLUSION ............................................................ 1439

II. NATURE OF CASE

As explained more fully below, CCI was a corporation that provided temporary nurses for St. Francis' hospital; one of those nurses was Foster. Foster participated in the post-operative care of Donna Squier, one of St. Francis' patients. After the treatment of Squier, FNI purchased substantially all of the assets of CCI in a transaction that has been called alternatively an asset purchase and a merger.

Squier brought a medical malpractice claim against St. Francis, predicated in part on Foster's care. St. Francis settled its share of Squier's claim for $625,000. In this diversity suit, St. Francis seeks to recoup its settlement from the defendants. This court has jurisdiction under 28 U.S.C. § 1332(a).

III. STATEMENT OF FACTS

The material facts are not in dispute. To aid readability, they are presented topically and, generally, chronologically.

For purposes of this lawsuit, St. Francis is a Kansas corporation operating a hospital in Wichita, Kansas. FNI is a Texas corporation in the business of providing a full range of temporary nursing services.

CCI was a Colorado corporation in existence from July, 1978, to June 28, 1991, when it dissolved.² Its principal place of business was in Denver. It was in the business of providing hospitals with temporary nurses to fulfill staffing needs. CCI supplied nurses for all purposes, but specialized in critical care nurses. Third party defendant Sandra K. Sterling³ was the owner and chief executive officer of CCI. As discussed more fully below, in March 1991 FNI purchased substantially all the assets of CCI.⁴

The Staffing Contract

On August 5, 1988, CCI and St. Francis executed a contract ("Staffing Contract") under which CCI was to provide temporary registered nurses to St. Francis (Doc. 79, Depo.Ex. 2). CCI agreed to provide St. Francis with a completed application, a skills checklist, a list of references, a copy of state nursing licensure, proof of a recent negative tuberculosis test, and a telephone interview for each registered nurse prior to commencement of temporary employment. Additionally, CCI had to verify that each registered nurse had at least one year of nursing experience.

Under the Staffing Contract, the temporary nurses were to "work at the Hospital for a minimum period of thirteen (13) weeks, but shall at all times remain employed by CCI." (Doc. 79, Depo.Ex. 2, ¶ 2.) CCI paid the nurses, withheld appropriate taxes, paid unemployment insurance, provided workers compensation, made a group health insurance plan available to the nurses, arranged for transportation from the nurses' home towns to Wichita, and provided local housing. Discipline of these nurses was an obligation of CCI. The Staffing Contract specifically provided that CCI would terminate or relocate nurses whose performance was unsatisfactory to St. Francis.⁵

St. Francis was responsible for providing to each registered nurse that it received from CCI, upon arrival, an adequate orientation to the hospital and to each unit where the nurse would work. In practice, these nurses reported directly to the nursing manager. Upon assignment to a unit, the nurses received unit-specific orientation, which informed them of the location of supplies and familiarized them with patient rooms, co-workers, and the type of equipment used at St. Francis.⁶

Permanent staff nurses hired by St. Francis each participated in orientation sessions provided by St. Francis' Human Resources Department. They also received employee handbooks, describing the nurses' general rights and duties as hospital employees. Temporary nurses received neither of these advantages.

During the negotiations over the Staffing Contract, St. Francis was aware of a CCI advertisement in The American Journal of Nursing which represented that CCI provided medical malpractice insurance for its temporary nurses. The Staffing Contract required CCI to maintain professional and general liability insurance for each nurse supplied. Although the Staffing Contract did not specify a minimum dollar amount of coverage, during contract negotiations CCI agreed to provide coverage in the amount of $1,000,000/3,000,000.⁷ In turn, CCI required its nurses to maintain their own professional liability insurance policies. For the year running from December 14, 1989, to December 14, 1990, CCI obtained its general liability policy from Essex Insurance Company.

Foster was one of the temporary nurses provided by CCI to...