No. 87-282 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1988 

STATE MEDICAL OXYGEN & SUPPLY, 

INC., a Montana corp., 

Plaintiff and Appellant, 

-vsAMERICAN MEDICAL OXYGEN CO., a 

Montana corp., J.C. LYNDES, GARY 

GOMEZ, RONALD WRIGHT, JAMES LINK, 

LYLE FATZ and ANNA TOPE, 

Defendants and Respondents. 

APPEAL FROM: District Court of the Eighth Judicial District, 

In and for the County of Cascade, 

The Honorable John McCarvel, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Keller & German; Robert S. Keller argued, Kalispell, 

Montana 

For Respondent : 

Moses Law Firm; Michael Moses argued, Billings, Montana 

Philip McGimpsey argued, Billings, Montana 

Submitted: February 11, 1988 

Decided: March 1, 1988 

Filed: MAR 1 - 1988 

Clerk 
Mr. Justice William E. Hunt, Sr. , delivered the Opinion of 

the Court. 

Plaintiff, State Medical Oxygen & Supply, Inc. (State 

Med.) appeals from an order of the Eighth Judicial District, 

Cascade County, granting summary judgment in favor of 

defendants, American Medical Oxygen Co. (American Med. ) . State Med. brought this action to recover damages from its 

ex-employee, James Link, and the directors of American Med. 

for the alleged breach of an employment contract pursuant to 

5 1877(b) of the Social Security Act, 42 U.S.C. S 1395(nn). 

Summary judgment for American Med. was granted on the grounds 

that a Federal Social Securities Act violation does not give 

rise to a private civil cause of action. 

While we affirm the summary judgment granted on the 

grounds that a Federal Social Securities Act violation does 

not give rise to a private civil cause of action in this case 

we reverse and remand for reasons set forth in this opinion. 

Affirmed in part, reversed in part and remanded with 

instructions. 

The main issue presented for our review upon appeal is 

whether the District Court erred in granting summary judgment 

in favor of the defendants. Subissues raised by the parties 

are as follows: 

1. Does an alleged violation of 5 1877(b) of the Social 

Security Act, 42 U.S.C. S 1395(nn) give rise to a private 

cause of action under 5 27-1-202, MCA? 

2. Did the court err in deciding the motion for summary 

judgment prior to receiving the depositions of three material 

witnesses? 

3. Were the restrictive covenants contained in the 

employment agreement between the defendant, James Link, and 
plaintiff sufficient to give rise to a claim upon which 

relief could be granted, or were they void as against public 

policy, and unenforceable as a matter of law? 

Plaintiff (State Med.) and defendant (American Med.) are 

Montana corporations engaged in the business of supplying 

oxygen and allied health care to patients in their homes and 

in hospitals. Defendants Lyndes, Gomez and Wright were the 

sole directors and stockholders of American Med. Defendants 

Link, Fatz and Tope were employees of State Med. until August 

9, 1985, when they became employees of American Med. 

Defendants Fatz and Tope were dismissed as parties prior t.o 

the filing of this appeal. 

State Med.'s principal place of business is Kalispell, 

but it had offices in Missoula, Billings, Butte, Great Falls, 

Bozeman and Havre. To deliver supplies to patients, a route 

driver based out of one of the company's branch offices, 

delivers the product along a prescribed route of customers. 

Typically, within the industry, customers follow the route 

driver and buy services from the company for which the drl i ver 

works. 

Link, Fatz and Tope were unhappy with their jobs with 

State Med. Link contacted American Med. about quitting his 

job with State Med. and starting employment with American 

Med. On August 9, 1985, the three State Med. employees quit 

their jobs and immediately began work for American Med. When 

Link left State Med.'s employ and went to work for American 

Med., he memorized his customer route. He offered his 

customers an opportunity to switch to American Med. and most 

of his regular patients switched from State to American Med. 

as their health care provider. Prior to that time, American 

Med. did not have an office in Great Falls, with few patients 

in that area. 
The testimony showed that the American Med. directors 

met with Link, Tope and Fatz prior to their job switch to 

plan the opening of an American Med. office in Great Falls. 

Fatz and Link, the State Med. route drivers, estimated the 

necessary equipment which would be needed by American Med. in 

Great Falls to open an office which could accommodate their 

State Med. patients' needs, assuming the patients would 

transfer their health care to American Med. 

On Friday morning, August 9, 1985, at 8:00 a.m., Link 

and Fatz quit their jobs with State Med. Tope had given 

prior notice of her intent to quit. All three immediately 

went to work for American Med. at American Med. 's newly 

opened Great Falls office. Link testified that although he 

had just begun working for American Med., on August 9, 1985, 

he followed by memory the same patient route as he had driven 

while employed by State Med. On his first day on the job for 

American Med., he asked his former patients whether they 

wanted to go with American Med. as their health care 

provider. He took along forms for them to sign. Link 

testified that he also had an advertisement placed in the 

local paper requesting that former patients of his (and the 

other former State Med. employees) contact them at the new, 

American Med. office. A large number of State Med.'s former 

patients switched to American Med. as their health care 

provider as a result of this employee job switch. 

To determine if summary judgment was properly granted, 

we will first discuss appellant's contention that respondents 

violated S 27-1-202, MCA, by violating S 1877(b) of the 

Social Security Act. 

Section 27-1-202, MCA, states that " [elvery person who 

suffers detriment from the unlawful act or omission of 

another may recover from the person in fault a compensation 

therefor in money, which is called damages." Section 1877(b) 
of the Social Security Act, 42 U.S.C. S 1395(nn) states in 

relevant part: 

(b) (1) Whoever knowingly and willfully solicits or 

receives any remuneration (including any kickback, 

bribe, or rebate) directly or indirectly, overtly 

or covertly, in cash or in kind-- 

(A) In return for referring - an individual to 

- a person -- for the furnishing or arranging for 

the furnishinq of any -- itemor service for 

which payment Kbe --- made in whole -- or in part 

under this title, 

. . . shall be guilty of a felony . . . 

(2) Whoever knowingly and willfully offers or gays 

any remuneration (including any kickback, bribe, or 

rebate) directly or indirectly, overtly or - 

covertly, in cash or in kind - to any person to 

induce such person-- 

(A) - to refer an individual to - - a person for 

the furnishings or arrangin 

- 

for the 

Gnishing of g -- iFem or servize fF whm 

payment maybe --- made in whole - or -- in part under 

this subchapter, 

. . . shall be guilty of a felony . . . 

(3) Paragraphs (1) and (2) shall not apply to-- 

(A) . . . 

(B) any amount paid by an employer to an 

employee (who has a bona fide employment 

relationship with such employer) for 

employment in the provision of covered items 

or services. (Emphasis added.) 

Appellant contends that when a route driver in this 

business asks a competitor for a job, he is impliedly 

offering patients to that competitor, and when a competitor 

offers a job to a route driver, he is offering to buy 

patients. Further, appellant asserts that the offer of the 
job is the "remuneration" found in the Social Security Act. 

See U.S. v. Greber (3d Cir. 1985), 760 ~.2d 68, 71-72. 

Since a large number of the Great Falls area State Med. 

customers are Medicare and/or Medicaid patients, appellant 

claims that this business practice falls within the Social 

Security statute. Appellant then extends its argument, 

stating that a civil complaint for damages can be based on an 

alleged violation of a criminal section in the federal Social 

Security statutes, citing Conway v. oni id ah Trust Co. (1913) , 

47 Mont. 269, 132 P. 26. 

In summary, appellant claims that it is not asserting a 

federal claim, but a claim under § 27-1-202, MCA, and that a 

breach of a federal statute comes within the context of the 

Montana statute. 

We cannot agree with this argument. 

The Social Security Act, 42 U.S.C. S 1395(nn), was 

enacted for the benefit of recipients of medical care 

benefits, not for the benefit of a health care provider. See 

Home Health Care Services, Inc. v. Currie (D. S.C. 19821, 531 

F.Supp. 476. Further, a private cause of action is not 

available to appellant through an alleged violation of a 

federal statute unless certain criteria are met: 

First, is the plaintiff "one of the class for whose 

especial benefit the statute was enacted," . . . that is, does the statute create a federal right in 

favor of the plaintiff? Second, is there any 

indication of legislative intent, explicit or 

implicit, either to create such a remedy or to deny 

one? ... Third, is it consistent with the 

underlying purposes of the legislative scheme to 

imply such a remedy for the plaintiff? . . . And 

finally, is the cause of action one traditionally 

relegated to state law, in an area basically the 

concern of the States, so that it would be 

inappropriate to infer a cause of action based 

solely on federal law? 
Cort v. Ash (1975), 422 U.S. 66, 78, 95 S.Ct. 2080, 2088, 45 

L.Ed.2d 26, 36. We conclude that the plaintiff is not of the 

class for whom this act was enacted and therefore hold that, 

as to the issue of a violation of the Social Security Act 

giving rise to a private cause of action pursuant to 5 

27-1-202, MCA, summary judgment was properly granted in favor 

of respondents. 

We now turn to the issue of whether the District Court 

erred in granting American Med.'s motion for summary judgment 

prior to receiving the depositions of three material 

witnesses. 

The depositions of Link, Fatz and Tope were taken either 

on the morning of, or the morning before the hearing for 

summary judgment on the issue addressed above. At that 

point, the depositions had not been transcribed for the 

court's review. Counsel for appellant State Med. agreed at 

that hearing that he did not need more discovery, but did not 

waive the introduction and consideration of those depositions 

as relevant to the issue of summary judgment. 

As to the issue of the applicability of the federal 

statute, the depositions were not relevant. However, they 

are relevant in consideration of a claim of tortious 

interference. Upon reviewing the transcript of this hearing, 

we note the following conversation between counsel for 

appellant and the court. 

THE COURT: You are maintaining your action--civil 

action on that statute alone? [Federal statute] 

MR. KELLER: No, but I don't want to be done with 

that. 

THE COURT: I know that. What was your other 

basis? 

MR. KELLER: We think there is a tortious 

interference rationale in the interference with the 
contractual relationship that these employees have 

with State Medical. We think there is a breach of 

a covenant of good faith and fair dealing of 

existing employment relationship that was by the 

employees that made their plans over a period of 

time with the defendant corporation and its 

officers-- 

THE COURT: Even if he were successful in that 

interpretation of the statute, you still wouldn't 

be out, you'd still have that action based on the 

covenant of good faith and fair dealing. 

MR. KELLER: That we clearly have. 

MR. MOSES: Not against the corporation or the 

directors. 

MR. KELLER: There would be the tortious 

interference. 

MR. MOSES: Tortious interference has not been pled 

or alleged against the corporation or the three 

directors. 

THE COURT: It's alleged against these employees? 

MR. KELLER: As against the employees we have 

alleged a breach of the federal statute, and we 

have alleged a breach of covenant of good faith and 

fair dealing. 

As against the corporation and its directors, we 

have alleged solely a breach of the federal 

statute. 

Although counsel for appellants makes this comment, an 

examination of the complaint shows that appellants did plead 

the elements of tortious interference against all of the 

defendants. Furthermore, the record shows disputed issues of 

material fact which may prove tortious interference by the 

corporation, American Med. and its directors. 

This court agreeing with the Restatement (Second) of 

Torts 5 767 defined the tort of intentional interference in 
Bolz v. Myers (1982), 200 Mont. 286, 651 ~.2d 606. The court 

said that the factors to be considered are: 

. . . (a) the nature of the actor's conduct; (b) the 

actor's motive; (c) the interests of the other with 

which the actor's conduct interferes; (d) the 

interest sought to be advanced by the actor; (e) 

the social interests in protecting the freedom of 

action of the actor and the contractual interest of 

the other; (f) the proximity or remoteness of the 

actor's conduct to the interference; and (g) the 

relations between the parties. 

In order to establish a prima facie case of 

interference with contractual or business 

relations, it must be shown that the acts (1) were 

intentional and willful, (2) were calculated to 

cause damage to the plaintiff in his or her 

business, (3) were done with the unlawful purpose 

of causing damage or loss, without right or 

justifiable cause on the part of the actor, and (4) 

that the actual damages and loss resulted. 

(Citation omitted.) 

Bolz, 651 P.2d at 610-611. 

Montana Rules of Civil Procedure provide for liberal 

interpretation of pleadings. Rule 8, M.R.Civ.P.: 

Rule 8(a). Claims for relief. A pleading which 

sets forth a claim for relief, whether an original 

claim, counterclaim, cross-claim or third party 

claim, shall contain (1) a short and plain 

statement of the claim showing that the pleader is 

entitled to relief, and (2) a demand for judgment 

for the relief to which he deems himself entitled. 

Relief in the alternative or of several different 

types may be demanded. 

Rule 8(e). Pleading - to - be concise and direct-- 

consistency. (1) Each averment of a pleading 

shall be simple, concise and direct. No technical 

forms of pleadings or motion are required. 

Rule 8(f). Construction of pleadings. All 

pleadings shall be so construed as to do 

substantial justice. 
As we said in Morse v. Espeland (Mont. 1985), 696 P.2d 428, 

Montana no longer requires strict compliance with 

terms of art and legal phraseology when pleading a 

cause of action. The archaic rules of code 

pleading have been replaced by our new rules of 

civil procedure, which place the spirit of the law 

above strict compliance with the letter of the 

law.. . . 

Assuming appellant's position to be true, which for 

purposes of reviewing this summary judgment we 

must, we then proceed to determine whether an 

action at law is cognizable. We find the essence 

of a claim has been pleaded though not artfully 

described. 

Morse, 696 P.2d at 430. See also, Fode v. Farmers Ins. 

Exchange (Mont. 1386), 719 P.2d 414, 416, 43 St.Rep. 814, 

816-817. 

Rule 15 (a) and 15(b) of the Montana Rules of Civil 

Procedure also require liberality in the allowance of amended 

pleadings "when justice so requires." 

We hold that the court should have considered the 

depositions of the three material witnesses before granting 

summary judgment on all issues. We reverse with leave to 

appellant to amend or supplement its pleadings. 

The last issue raised by defendant Link which pertains 

to the restrictive covenant contained in Link's employment 

contract with State Med. has not been ruled upon by the 

District Court and need not be addressed by this Court at 

this time. 

Affirmed in part, reversed in part and remanded for / 

further proceedings in accordance 

We Concur: