St. Joseph's Regional Health Ctr. v. Munos

Supreme Court of Arkansas · 1996 · Corporations

934 S.W.2d 192 (1996)

Updated August 22, 2026

CorporationsPartnershipsTortious InterferenceFiduciary Dutyborrowed servantdirection and controlscope of employmentrespondeat superior

Facts

St. Joseph's, a 51% owner in an MRI partnership, entered a ten-year management contract with partner Dr. Munos that allowed termination at a duly called meeting by St. Joseph's and two physician partners. After concerns arose that confidential patient information might have been disclosed, Fale, St. Joseph's CEO and representative in the partnership, investigated, obtained employee affidavits about attorney Gary Sammons being in private MRI Center areas, and convened an emergency partnership meeting. The partners then terminated Dr. Munos's management contract, but did not dissolve the partnership, expel him as a partner, or alter his 19.8% partnership interest or monthly partnership income. A jury found no breach of contract by the partnership but imposed liability on Sisters and Fale for tortious interference and on St. Joseph's and Fale for breach of fiduciary duty.

Issue

Whether there was substantial evidence that Fale acted on behalf of Sisters, rather than St. Joseph's, so as to support tortious-interference liability against Sisters, and whether Fale himself could be liable for interfering with a contract to which St. Joseph's was a party. Whether terminating Dr. Munos's separate management contract under the agreement, without affecting his partnership status or interest, constituted a breach of fiduciary duty by St. Joseph's or Fale.

Rule

Under the borrowed-servant doctrine, the controlling question is which employer had direction and control over the employee with respect to the specific act in question; if all the evidence points one way, the issue is one of law. A party to a contract, and an agent acting within the scope of authority for that party, cannot be liable for tortiously interfering with that contract. Although partners owe each other fiduciary duties of utmost good faith, a partner does not breach that duty merely by exercising a contractual right to terminate another partner's separate independent-contractor position, absent evidence that partnership rights, status, interest, or income were improperly affected or that the partner derived an improper benefit within the partnership relationship.

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

North River Health Network, a Minnesota nonprofit, owns Lakeview Medical Center in Duluth. North River hires and pays Elena Cruz as Lakeview’s president, but Lakeview appoints her as its representative on a diagnostic-imaging partnership in Duluth, where she pushes for termination of a vendor-management contract; there is no evidence North River directed her actions in the partnership’s affairs.

If the terminated manager sues North River on a theory that Cruz tortiously interfered with the management contract while acting for North River, which result is most consistent with the governing rule?

Explanation. The key inquiry is which entity had direction and control over the employee with respect to the specific act in question, not who generally hired or paid the employee. Where all the evidence points one way, the issue becomes one of law. Here, Cruz acted in partnership matters because Lakeview placed her there and no evidence shows North River controlled those acts, so North River should not be liable. (Derived from St. Joseph's Regional Health Ctr. v. Munos (1996).)