John E. Smithhisler v. Tenet Healthsystem Medical Inc.
Published: Apr. 8, 2003 | Result Date: Jan. 14, 2003 | Filing Date: Jan. 1, 1900 |Case number: 711600036400 Arbitration – $261,315
Court
American Arbitration Association
Attorneys
Plaintiff
Neville L. Johnson
(Johnson & Johnson LLP)
Defendant
Paul W. Thomas
(Thomas Law Group PC)
Facts
ACCORDING TO THE CLAIMANT: On Dec. 2, 1996, the claimant was employed as the CEO of Centinela Hospital Medical Center by OrNda Healthcorp (OrNda), a for-profit corporation, which had purchased Centinela from its non-profit owners a few months earlier. Shortly, thereafter, Centinela was acquired by Tenet, a fast-growing purchaser and operator of medical facilities. Tenet kept the claimant as CEO of Centinela and offered him a written employment agreement effective Feb. 1, 1997. The claimant's job performance at the hospital included excellent performance evaluations, including a Circle of Excellence Award in June 1998 as one of the top CEO's in the Tenet organization. Centinela's profit for fiscal year 1998 was 147 percent over its stated goals and the claimant earned the maximum incentive bonus possible for that performance. The claimant's agreement provided that he could be terminated at any time, but if such termination was deemed to be without cause, the claimant would be entitled to certain substantial severance benefits. If, however, he was terminated with cause, then he was not entitled to those severance benefits. On or about Oct. 29, 1998, the claimant was removed as CEO at Centinela allegedly "for cause" as a result of various alleged financial improprieties. ACCORDING TO THE RESPONDENT: On Dec. 2, 1996, the claimant was employed as the CEO of Centinela Hospital Medical Center by OrNda Health Corporation (OrNda). Shortly thereafter, Centinela was acquired by Tenet Healthsystem Medical Inc. Tenet retained the claimant as CEO and offered him a written employment agreement effective Feb. 1, 1997. The claimant's agreement provided that he could be terminated at any time, but if such termination was deemed to be without cause, the claimant would be entitled to certain severance benefits. The claimant was removed as CEO of the hospital due a failure to exhibit leadership, team build internally and increase volumes. However, claimant was kept on salary pending consideration of assignment to another one of respondent's facilities and the completion of an investigation of financial improprieties which had been asserted against claimant. When claimant failed over a two month period to meet with his employer to discuss the allegations, he was terminated for cause on Jan. 15, 1999.
Settlement Discussions
The claimant initially demanded $471,500 and then increased this to $570,000; the respondent offered nine months of salary (approximately $144,000) before claimant ever filed this proceeding, and therefore said no offer was on the table.
Result
$182,813.36 (severance pay); $11,000 (severance benefits); $25,872 (costs) and $41,629 (interest)
Other Information
ACCORDING TO THE CLAIMANT: The arbitrator found that Tenet's investigation of the claimant was incomplete and that the alleged reasons for denying him benefits were arbitrary and capricious, as was "the review" which was by the same person who had terminated the claimant. As a result, the arbitrator awarded the claimant his severance benefits and costs amounting to $261,315. The arbitrator, Christine Masters, denied the claimant's claim that he was terminated in violation of public policy. At one point, Tenet stated that claimant was terminated because he refused to come to a "post-removal" meeting without his attorney being present. ACCORDING TO THE RESPONDENT: The arbitrator rejected the claimant's assertion of wrongful termination in violation of public policy, finding that the claimant failed to establish any adverse impact upon patient care at the hospital, the claimant had failed to delineate any public policy violated by the respondent's cost reduction requests and the claimant had failed to establish any causal connection between the cost reduction and the claimant's termination. The arbitrator also rejected the claimant's causes of action for defamation and violation of rights of privacy, citing no evidentiary basis for these claims. As to the claimant's breach of contract claim, the arbitrator determined that claimant was removed from his position as CEO of the hospital due to a lack of confidence in his ability to provide leadership and the removal had nothing to do with an alleged refusal to "cut costs," but did not rule that claimant had breached any contract. However, because the same individual who approved the claimant's termination for cause also reviewed and denied the claimant's request for severance benefits under his employment agreement, the arbitrator determined that she was allowed to make a de novo termination that the claimant had been terminated without cause and was entitled to severance benefits. The arbitrator awarded the claimant the 12 months of severance benefits provided for under the employment agreement in the case of a "without cause" termination, plus interest and arbitration costs.
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