Medical Operations Management, Inc. v. National Health Laboratories, Inc.

Defendant National Health Laboratories, Inc. (NHL) appeals a judgment after a jury returned a special verdict favoring plaintiff Medical Operations Management, Inc. (MOM) for breach of contract in connection with forming a medical laboratory enterprise, California Medical Laboratories, Ltd. (CML).

Factual and Procedural Background

Frederick Spong is a physician specializing in kidney disease. NHL is a commercial laboratory headquartered in San Diego. In 1973, Spong began negotiating with NHL’s controller, Hal Lawrence, to establish a physician-owned laboratory in San Diego. The proposal for the lab (CML) included a limited partnership format wherein each participating limited partner/physician would be offered a fixed number of partnership units. This was done to avoid any direct relationship between a particular doctor’s use of the lab and the return on his investment, a violation of Business and Professions Code section 650. Spong was to serve as president of CML’s general partner, MOM.

*889 The plan called for CML to contract with NHL for the actual operation of the laboratory. There was to be, however, no separate CML laboratory in the physical sense. Rather, all…

concur in the majority’s result. Despite my opinion that the interpretation of paragraph 1.5 as rendered by the jury and concurred *896 in by the trial court, is a tenable interpretation based upon the record before us, I agree that a more reasonable interpretation based upon the entire record is the one rendered here. Since the Parsons case requires us to independently interpret paragraph 1.5 from a record disclosing uncontroverted nonconflicting extrinsic evidence and the contract itself, we choose to adopt the inferences therefrom propounded by the appellant NHL rather than those inferences vigorously propounded by respondent MOM.

A petition for a rehearing was denied February 20, 1986, and the opinion was modified to read as printed above. Respondent’s petition for review by the Supreme Court was denied April 16, 1986.

Assigned by the Chairperson of the Judicial Council.

WIENER, Acting P.J.

Defendant National Health Laboratories, Inc. (NHL) appeals a judgment after a jury returned a special verdict favoring plaintiff Medical Operations Management, Inc. (MOM) for breach of contract in connection with forming a medical laboratory enterprise, California Medical Laboratories, Ltd. (CML).

Frederick Spong is a physician specializing in kidney disease. NHL is a commercial laboratory headquartered in San Diego. In 1973, Spong began negotiating with NHL's controller, Hal Lawrence, to establish a physician-owned laboratory in San Diego. The proposal for the lab (CML) included a limited partnership format wherein each participating limited partner/physician would be offered a fixed number of partnership units. This was done to avoid any direct relationship between a particular doctor's use of the lab and the return on his investment, a violation of Business and Professions Code section 650. Spong was to serve as president of CML's general partner, MOM.

The plan called for CML to contract with NHL for the actual operation of the laboratory. There was to be, however, no separate CML laboratory in the physical sense. Rather, all CML testing would be…