In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 02-1555

ANTHONY B. LEWIS,

Plaintiff-Appellant,

v.

METHODIST HOSPITAL, INCORPORATED,

Defendant-Appellee.

____________

Appeal from the United States District Court

for the Northern District of Indiana, Hammond Division.

No. 2:01 CV 175JM—James T. Moody, Judge.

____________

ARGUED SEPTEMBER 26, 2002 —DECIDED APRIL 7, 2003

____________

Before COFFEY, ROVNER, and DIANE P. WOOD, Circuit

Judges.

DIANE P. WOOD, Circuit Judge. Anthony Lewis is a

physician specializing in cardiology. This case concerns

a contract between Lewis and Methodist Hospital in which

Methodist agreed to provide billing services for Lewis’s

cardiology practice. Disputes arose over Methodist’s handling of its responsibilities under the contract, which in

the end caused the parties to end their relationship.

Invoking the diversity jurisdiction of the federal courts,

Lewis (acting in his individual capacity) then sued Methodist for breach of contract and tortious interference

with prospective advantage in business. The district court
2 No. 02-1555

granted Methodist’s motion for summary judgment, on the

ground that Lewis was really asserting tort claims, and

any tort claim was barred by Indiana’s two-year statute

of limitations.

Lewis appeals the district court’s characterization of

his claim as solely a matter of tort law. In his view, Methodist failed to perform its obligations under the contract.

This breach in turn gives rise to a claim for breach of

contract that is subject to Indiana’s more generous tenyear statute of limitations for written contract actions.

Although we appreciate the district court’s careful effort

to ascertain the governing Indiana rule on this point, we

nevertheless have come to the conclusion that Lewis’s

complaint in part stated a claim for breach of contract.

Accordingly, we reverse and remand for further proceedings on that part of the case. (In so doing, we express no

opinion on the question whether Lewis as an individual

is entitled to sue to enforce rights that may belong only

to his professional corporation, as this was not discussed

in any way by the district court or the parties.)

I

The actual parties to the agreement in question were

Lewis’s professional corporation, Anthony B. Lewis, M.D.,

P.C. (of which he was the sole shareholder) and Methodist

Hospital. On January 1, 1994, they entered into a Management Services Agreement (the Agreement) in which the

Hospital agreed to manage Lewis’s cardiology practice

for a one-year term. The Agreement specified that Methodist would provide “staff services, administrative services, management support services, billing services, and

purchasing services” to Lewis’s practice. The provision in

the Agreement titled Billing and Collection of Accounts

stated in part, “Hospital shall implement and carry out

billing and collection procedures for medical services using

the Practice’s provider numbers.” The Hospital committed
No. 02-1555 3

itself to hiring and supervising employees as needed to

carry out its duties under the Agreement. The Hospital

received 40% of the net receipts of Lewis’s practice as

payment for its services. The parties twice renewed their

Agreement before allowing it to end on December 31, 1996.

After several unsuccessful attempts to have the Hospital

address his concerns about billing and fee collection, Lewis,

in his individual capacity, filed this lawsuit in federal

court on March 19, 2001.

At the heart of Lewis’s complaint is his allegation that

Methodist Hospital failed adequately to bill and collect

fees from his patients and their insurers for cardiology

services that he provided. In the breach of contract count

he alleged that the Hospital breached its duties under

the Agreement by improperly hiring and supervising

staff or contractors who performed coding, billing and collection work for the practice. Lewis seeks $15,515,806.00

as damages and losses for unbilled and improperly billed

services as well as uncollected charges.

Lewis’s complaint also included a second count for

tortious interference with prospective advantage in business. This too was dismissed on summary judgment. Lewis

does not contest that ruling, conceding that his claim

was barred by Indiana’s two-year statute of limitations

for torts. Therefore, the only issue presented in this appeal is whether the Indiana courts would characterize

Lewis’s claim relating to the Hospital’s unsatisfactory

performance of its duties under the contract as a tort

claim. We review the district court’s grant of summary

judgment de novo. Lexington Ins. Co. v. Rugg & Knopp, Inc.,

165 F.3d 1087, 1090 (7th Cir. 1999).

II

In a line of cases that stretches back at least to the late

1800s, the Supreme Court of Indiana has wrestled with
4 No. 02-1555

the dilemma posed by claims that arise under a botched

services contract. See, e.g., Foulks v. Falls, 91 Ind. 315

(1883); Boor v. Lowery, 3 N.E. 151 (Ind. 1885); Flint &

Walling Mfg. Co. v. Beckett, 79 N.E. 503 (Ind. 1906). The

problem, as the court has candidly acknowledged, is that

such claims frequently reflect both tort and contract

concerns. Flint & Walling Mfg. Co., 79 N.E. at 505; see

also INS Investigation Bureau, Inc. v. Lee, 784 N.E.2d 566,

576 (Ind. Ct. App. 2003) (“[I]n a contract for work, there

is an implied duty to do the work skillfully, carefully, and

in a workmanlike manner. Negligent failure to do so is

a tort, as well as a breach of contract.”). Where the characterization of the claim matters for purposes of deciding

which statute of limitations should be applied, the Supreme Court of Indiana consistently stresses that “the

applicable statute of limitations should be ascertained

by reference to the nature of the harm alleged rather than

by reference to theories of recovery.” Whitehouse v. Quinn,

477 N.E.2d 270, 273 (Ind. 1985) (citing Boor v. Lowrey, 3

N.E. 151 (Ind. 1885)). This provides us with a starting

point here, but (as the Indiana cases richly illustrate) it

can be a difficult principle to apply in practice.

Our task is to predict how the Supreme Court of Indiana would characterize Lewis’s claim that Methodist

Hospital failed to provide proper billing and fee collection

services for his cardiology practice. See Commonwealth

Ins. Co. v. Stone Container Corp., No. 02-2061, 2003 WL

1400794 at *2 (7th Cir. Mar. 19, 2003); Stephan v. Rocky

Mountain Chocolate Factory, Inc., 129 F.3d 414, 416-17 (7th

Cir. 1997) (citing Todd v. Societe Bic, S.A., 9 F.3d 1216,

1221 (7th Cir. 1993) (en banc) (plurality opinion)). If, as

the district court held, Lewis’s first count in the complaint is properly characterized as a tort, then it is barred

by the two-year statute of limitations for injury to personal property found in Ind. Code § 34-11-2-4. On the other

hand, if Lewis’s claim against the Hospital is, as Lewis
No. 02-1555 5

argues, for breach of contract, then it is governed by the

ten-year statute of limitations found in Ind. Code § 34-11-2-

11, and Lewis’s March 19, 2001, filing was timely.

The district court, in attempting to make sense of the

Indiana authority on this issue, held that the absence of

a specific term for compliance in the Agreement that

Lewis and Methodist executed necessarily meant that

Lewis’s claim arose solely in tort and had no cognizable

contract dimension. The court relied on an earlier decision of this court, Rexnord Corp. v. DeWolff Boberg &

Assocs., Inc., 286 F.3d 1001 (7th Cir. 2001), as well as

one decision of the Indiana appeals court, Insul-Mark

Midwest, Inc. v. Modern Materials, 594 N.E.2d 459 (Ind.

Ct. App. 1992). Rexnord and Insul-Mark hold that when

parties to a contract choose to specify in their agreement

the terms and standards by which compliance may be

measured, it is those terms or standards, as opposed to

a general standard of care imposed by tort law, that

apply. Rexnord, 286 F.3d at 1005; Insul-Mark, 594 N.E.2d

at 465. This rule allows parties to contract around the

level of care that would otherwise govern their conduct.

It makes good sense as a matter of policy, both because it

is consistent with the general rule that parties may bargain for a higher standard of care than the general tort

law requires, and because it respects the correlative rule

recognized by Indiana courts (and courts in other states

as well) that where a contract contains a limiting or

qualifying provision, that provision may not be avoided

by casting a suit for breach of the contract as a tort. See,

e.g., Orkin Exterminating Co. v. Walters, 466 N.E.2d 55, 58

(Ind. Ct. App. 1984) (“Bringing a suit in tort does not

allow Walters to avoid the limitation of liability clause in

the contract.”); Travelers Cas. & Sur. Co. v. Elkins Constructors, Inc., No. IP97-1807-C-T/G, 2000 WL 724006, *11

(S.D. Ind. May 18, 2000) (summarizing Indiana cases); see

also Better Food Mkts. v. American Dist. Tel. Co., 253 P.2d

10, 15-16 (Cal. 1953).
6 No. 02-1555

What Rexnord, Insul-Mark, and these other cases do

not address, however, is the converse proposition: where

a contract does not specify the terms or standards by

which compliance is measured, any performance related

problems may be resolved only by resorting to tort law.

The district court read these cases as creating that rule

of law, and it is with this portion of its decision that we

respectfully disagree.

In fact, fairly read, the core of Lewis’s action against

Methodist Hospital states a claim for breach of contract.

Two principles that can be distilled from the controlling

precedents of the Supreme Court of Indiana lead us to

this conclusion. First, as we have already mentioned,

that court has held that poorly performed duties assumed

under a services contract generally give rise to an action

in either contract or tort. Flint & Walling Mfg., Co., 79

N.E. at 505. Second, and more importantly, in considering how to classify a claim for statute-of-limitations purposes, the Supreme Court of Indiana has warned that

Indiana courts (and thus federal courts sitting in diversity

that are applying Indiana law) must not collapse all

breach of contract claims into tort claims. Doing so would

impermissibly effect a judicial repeal of the separate

statutes of limitations that the Indiana legislature has

enacted for breach of contract and oral contract claims.

Lawyers Title Ins. Corp. v. Pokraka, 595 N.E.2d 244, 247

(Ind. 1992). See also Schuman v. Kobets, 716 N.E.2d 355

(Ind. 1999).

Two earlier Supreme Court of Indiana cases that address a related question—how to deal with attorney malpractice claims—offer helpful guidance as well. The cases

of Shideler v. Dwyer, 417 N.E.2d 231 (Ind. 1981), and

Whitehouse v. Quinn, 477 N.E.2d 270 (Ind. 1985), provide

a useful contrast to Lewis’s case. Shideler and Whitehouse

rest implicitly on the proposition that where one party to

a contract owes a fiduciary duty to the other party, a
No. 02-1555 7

breach of that duty necessarily gives rise to an action in

tort because it is impossible to contract around fiduciary

obligations. Later, in Lawyers Title, the Supreme Court

of Indiana made the point more explicitly, when it explained that “[u]nlike actions for attorney malpractice,

with which we dealt in Whitehouse, a specific limitation

period of six years for fraud and for breach of an oral

contract is provided by statute.” 595 N.E.2d at 247. See

also O.K. Sand & Gravel, Inc. v. Martin Marietta Corp., 819

F. Supp. 771, 781 (S.D. Ind. 1992) (“The substance and

nature of the injuries claimed in parts of Counts I, II and

IV concern breaches of specific contract terms and failed

expectations. Those alleged harms are separate from the

harms alleged to have resulted from the breach of a fiduciary duty.”). Because no fiduciary relationship existed between Methodist Hospital and Dr. Lewis, the concern

about preventing parties from contracting around those

special duties does not exist in our case.

The more recent decisions of the Supreme Court of

Indiana, are more directly on point. In Schuman v. Kobets,

the Indiana Supreme Court reversed an appeals court

decision that characterized all of Linda Schuman’s claims

against her former landlords as tort claims. 716 N.E.2d at

356-57. Schuman was diagnosed with histoplasmosis, an

illness that she likely contracted from the excrement

of pigeons that roosted in the broken window casing and

wall of her rented apartment. Schuman’s efforts to get

her landlords to repair the apartment failed, and after

she suffered a near fatal relapse of the sickness, she and

her mother sued them for negligence, breach of implied

warranty of habitability, and nuisance. Id. at 356. The

court of appeals affirmed the trial court’s dismissal of

Schuman’s claim as time-barred under Indiana’s two-year

statute of limitations for personal injury. While the Supreme Court of Indiana agreed that the portion of

Schuman’s complaint that sought relief for personal injury
8 No. 02-1555

arising from the breach of an oral contract was properly

characterized as a tort claim and thus was barred, it

refused to put all of her claims in the tort basket. Id. at 356.

Specifically, the court reasoned that “[s]everal of her

contentions sound like a contact claim. Since a lease is a

contract, the essence of the landlord-tenant relationship

is contractual in nature. Schuman’s warranty claim, for

example, stems from the oral month-to-month lease between tenant Schuman and landlord Kobets. Thus, this

claim is governed by” the six-year statute of limitations

for oral contracts found in Ind. Code § 34-1-2-1. Id.

Schuman followed the lead of the court’s earlier decision in Lawyers Title Insurance Corp. v. Pokraka, where a

title company’s failure properly to record a purchase money

mortgage had the effect of making Pokraka’s interest in the

property junior to a subsequent mortgage. 595 N.E.2d at

246. The court in Lawyers Title rejected an expansive

reading of Whitehouse, which the court limited to the

attorney malpractice area, and instead held that Pokraka’s

claim relating to her security interest in the property was

covered by the six-year limitation period for fraud and

breach of oral contract. Id. at 247.

Our holding in this case is also supported by many

Indiana appeals court decisions as well as decisions of

the lower federal courts that have refused to apply the

two-year tort statute of limitations to actions that arise

in the context of a contract. See, e.g., Orem v. Ivy Tech

State Coll., 711 N.E.2d 864, 868 (Ind. Ct. App. 1999) (employer’s breach of specific provision in written agreement

gives rise to claim for breach of contract); Wells v. Stone

City Bank, 691 N.E.2d 1246, 1249 (Ind. Ct. App. 1998)

(“Wells does not appear to allege any duty that was owed

to him outside of that duty arising out of his contractual

relationship with the Bank, and he appears to allege no

breach of that duty other than the Bank’s failure to perform the contracted-for-service. His action should not
No. 02-1555 9

be completely barred on the ground that it is essentially

a tort claim.”); Sheridan Health Care Ctr. Inc. v. Centennial Healthcare Corp., No. IP01-0186-C-M/S, 2001 WL

1029111, *8 (S.D. Ind. June 19, 2001) (“In the current circumstances, where two corporate entities have entered

into a contract that defines the rights and duties of the

parties, when one party alleges the other has failed to

perform a duty in the contract, the party is claiming a

breach, not an independent tort that arises from the

relationship between the parties.”).

It is true that there are other decisions of the lower

Indiana courts that point in the opposite direction. See,

e.g., INS Investigation Bureau, Inc. v. Lee, supra; Raquet

v. Thompson, 693 N.E.2d 969 (Ind. Ct. App. 1998); Strayer

v. Covington Creek Condominium Assoc., 678 N.E.2d

1286 (Ind. Ct. App. 1997). If the decisions of the lower

courts pointed consistently toward a different resolution of

the precise question before us, our task would be more

difficult. But they do not, and we must bear in mind

that our ultimate responsibility is to decide this case as

we think the Supreme Court of Indiana would rule. We

are not bound to follow the decisions of the lower Indiana courts except insofar as they serve as a good predictor of how the Supreme Court of Indiana might decide the question. Cf. Allstate Ins. Co. v. Menards, Inc., 285

F.3d 630, 632-33 (7th Cir. 2002) (holding federal courts

must attempt to predict how state supreme court would

decide question in absence of controlling precedent and

in doing so are not bound by conflicting lower court precedents); see also Rocky Mountain Chocolate Factory, Inc.,

129 F.3d at 417. But when the decisions of the Indiana

courts point in different directions, as is the case here, it

is our job to look for other reliable predictors of how the

state’s highest court would rule on this issue.

The best predictors, in our view, come from the court’s

own jurisprudence in this area, especially Lawyers Title
10 No. 02-1555

and Schuman. Lewis and Methodist Hospital enjoyed a

relationship solely on the basis of their contractual agreement. Absent the Agreement, Methodist owed Lewis

nothing. Bearing in mind the Supreme Court of Indiana’s admonition not to collapse all contract claims into

tort, we conclude that under prevailing Indiana law

Lewis’s first count in his complaint against Methodist

Hospital seeks relief for breach of contract and is thus

governed by the ten-year statute of limitations. In reaching

this conclusion, we suggest nothing about the merits of

Lewis’s claim against the Hospital. See Schuman, 716

N.E.2d at 357.

III

The judgment of the district court is REVERSED and the

case is REMANDED for further proceedings on Lewis’s

claim for breach of contract.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—4-7-03