Montana Health Network, Inc. v. Great Falls Orthopedic Associates

Montana Health Network, Inc. v. Great Falls Orthopedic Associates, 2015 MT 186 (June 30, 2015) (Wheat, J.) (5-0, aff’d)

Issue: (1) Whether the Plan was ambiguous and therefore was properly interpreted against the drafter, MHN; and (2) whether GFOA is entitled to attorneys’ fees on appeal.

Short Answer: (1) Yes, and (2) yes.

Summary judgment for GFOA affirmed

Facts: Montana Health Network (MHN) was the sole drafter of a health plan and trust (the Plan), of which it was also the sponsor and trustee. Great Falls Orthopedic Associates (GFOA) and MHN executed an agreement under which GFOA adopted the Plan for purposes of obtaining coverage for its employees. MHN drafted the agreement, which by its terms incorporated the Plan.

The initial term was three years, with automatic two-year renewals. GFOA could withdraw if it gave MHN notice of its intent not to renew at least 30 days before a new term began. On Dec. 10, 2010, GFOA emailed MHN stating it did not wish to renew for 2011-2012. It then sent a letter Dec. 15, 2010, saying it wished to withdraw on Jan. 15, 2011. MHN denied GFOA’s request to withdraw, saying it was required to give notice by Dec. 1, 2010 if it wished to avoid automatic renewal on Jan. 1, 2011.

GFOA then submitted waivers of coverage for 27 of its 32 covered employees, and ceased paying premiums for them. MHN denied the waivers based on a Plan provision that 75% of employees must be participants. GFOA refused to pay and MHN declared it in default. MHN assessed liquidated damages of $400,674, which GFOA did not pay.

Procedural Posture & Holding: MHN sued GFOA for breach of contract. On cross-motions for summary judgment the district court granted judgment to the clinic, and awarded attorneys’ fees. MHN appeals, and the Supreme Court affirms.

Reasoning: (1) The agreement between MHN and GFOA and the Plan must be interpreted as a single contract. The provision in the agreement allowing employees to waive coverage is irreconcilable with the Plan provision requiring 75% participation by GFOA employees, thereby creating an ambiguity. The district court held that the later-drafted agreement modified the Plan. Because the provision allowing employee waivers controlled, GFOA did not breach the contract.

(2) GFOA is entitled to attorneys’ fees as the prevailing party in the appeal.