IN THE COURT OF APPEALS OF IOWA

No. 13-1358

Filed July 16, 2014

MEDICAL ASSOCIATES OF

CLINTON, P.L.C.,

Plaintiff-Appellant,

vs.

CHRISTOPHER S.E. MARTIN, M.D.,

Defendant-Appellee.

________________________________________________________________

Appeal from the Iowa District Court for Clinton County, Nancy S. Tabor, 

Judge. 

Medical Associates appeals from a district court judgment for a contract 

action tried at law. AFFIRMED.

David M. Pillers and Ryan F. Gerdes of Pillers & Richmond, DeWitt, for 

appellant.

Mark Schwiebert of Schwiebert Law, P.C., Rock Island, Illinois, for 

appellee.

Heard by Vogel, P.J., and Doyle and Mullins, JJ. Tabor, J., takes no part.
2

MULLINS, J.

Medical Associates of Clinton, P.L.C., appeals the district court’s judgment 

in favor of Dr. Christopher Martin, a former associate physician employed by the 

clinic. Medical Associates argues (1) there was insufficient evidence to support 

the district court’s finding that the clinic had breached its employment contract 

with Martin, and (2) there was insufficient evidence to support the district court’s 

finding that the clinic’s breach was the reason for Martin’s damages.

I. BACKGROUND FACTS AND PROCEEDINGS

In November 2006, Martin was completing his surgical residency in 

Michigan when he was approached by a recruiter representing Medical 

Associates of Clinton, Iowa.1 He subsequently visited the primary clinic in Clinton 

to meet and interview with staff members. The clinic also arranged for a realtor 

to show Martin and his wife several homes for sale in the Clinton area. Martin 

and the staff of Medical Associates got along well, with one doctor referring to 

him later as “[a] good surgeon, a good doctor and a good man.” Martin accepted 

the clinic’s offer, purchased one of the homes the realtor had shown him, and 

relocated his family from Michigan to Iowa.

The employment contract between Medical Associates and Martin was for 

a period of two years, to commence on July 9, 2007. After two years of 

employment as an associate, Martin would have the opportunity to apply to 

purchase an ownership interest in the clinic. The contract stated that 

 

1 Medical Associates is a private clinic jointly owned by its physicians who are full 

members. Its primary clinic is located in Clinton, with four satellite clinics in Iowa and 

Illinois. As of July 2013, Medical Associates had approximately 320 employees, 

including thirty-eight physicians.
3

compensation was to be based on Martin’s pro-rata share of the clinic’s net 

profits, the distribution of which was governed by “Policy Bulletin No. 6.” 

According to the “Profit Distribution Formula” of Policy Bulletin No. 6, an 

associate’s share of the net profits was distributed based on two factors: fifty 

percent on the associate’s RVU production2and fifty percent on the associate’s 

professional adjusted charge production.3 During Martin’s first year as an 

associate his distribution of the clinic’s net profits was guaranteed by the contract 

to be no less than $250,000.

The contract also stated Medical Associates would provide Martin with 

insurance coverage, to be included in his salary as taxable income. In the event 

Martin terminated his relationship with Medical Associates during his first two 

years, the contract stipulated the clinic would purchase tail insurance for Martin, 

to be reimbursed by Martin or deducted from any amount the clinic owed him. In 

such circumstances, the contract also forbade Martin from practicing medicine 

within fifty miles of the city of Clinton for a period of two years.

For the first year of his employment Martin was paid a draw of $10,416.17 

bi-weekly. After his first year ended in July 2008, the $250,000 minimum floor on 

his salary expired and his compensation began to be calculated solely on his prorata share of the clinic’s net profits, as governed by the formula explained above. 

Nevertheless, Martin continued to receive the same bi-weekly draw he had 

 

2 RVU stands for Relative Value Units. It is a system of value measurement for medical 

service fees, as published and updated by the Federal Register. In short, it measures 

the productivity level of a physician during a particular period of time.

3 A physician’s actual charges for professional medical services rendered as adjusted to 

reflect net insurance carrier, third-party pay or discounts and/or reimbursements, 

courtesy discounts, other discounts, and any uncollectable accounts.
4

received over the previous year. In September 2008, at the end of his first 

quarter since being put on production in July 2008, Martin visited with the 

company CFO (Chief Financial Officer) to inquire how his draw and production 

were doing. Although every physician at Medical Associates received monthly 

reports regarding their personal RVU productivity and adjusted charge 

production, most relied on the administration and the CFO to determine their 

draw versus their actual income. The CFO at the time of Martin’s employment 

was James Holstein, who informed Martin in September that his production was 

on track for him to receive at least the same income as the previous year. Martin 

made the same inquiry in November, to which Holstein again told him everything 

was fine. Finally, when Martin asked Holstein in January about his year-end 

bonus, he was informed by Holstein that his account was overdrawn $48,000.

In response, Martin was told by a senior physician that the clinic would 

need to decrease his bi-weekly draw “slightly” until the $48,000 was paid back. 

However, his next draw check was the same as before, and he was soon 

informed his account had become $68,000 overdrawn and as a result his draw 

would be reduced by fifty percent. Concerned he would be unable to meet his 

family’s living expenses on this reduced draw compensation, in February 2009 

Martin handed in his resignation, to take effect in July 2009 when his two-year 

contract was scheduled to expire. After accepting his resignation, Medical 

Associates gradually stopped giving Martin referrals and removed the staff and 

nurses assigned to him, before eventually reducing his draw to zero. This 

essentially forced Martin to leave the clinic in May 2009. Due to the contract’s 
5

competition clause forbidding him from practicing medicine within fifty miles of 

Clinton for two years, Martin and his family sold their home and left the city. He 

purchased tail malpractice insurance on his own in the amount of $52,782.

In August 2011, Medical Associates brought suit against Martin alleging 

breach of contract, unjust enrichment, and amounts due under an open account. 

The clinic alleged Martin had “with[drawn] funds in excess of the predetermined 

formula,” in the amount of $108,445.75. Martin counterclaimed, alleging the 

clinic itself had breached its contract with Martin by miscalculating his production 

and erroneously reporting he had overdrawn his account. Martin sought general 

and consequential damages as a result of the clinic’s alleged breach. After a 

bench trial in July 2013, the district court dismissed Medical Associates’s claims 

and ruled for Martin. The court held Medical Associates breached the contract

by failing to correctly calculate Martin’s income according to the language in the 

contract and awarded damages to Martin.

The district court found several factors that demonstrated a contractual 

breach by Medical Associates. First, there was no dispute Holstein had 

erroneously deducted insurance costs from Martin’s income, instead of adding it 

to his gross income as the contract required. James Dobbyn, the clinic’s current 

CFO (Holstein had resigned shortly after Martin left), also confirmed Holstein had 

calculated Martin’s compensation using a different ratio of RVU production and 

adjusted charges than the ratio stipulated in Martin’s contract.4 In addition, the 

 

4 While Martin’s contract required his distribution of the clinic’s net profits to be 

determined by a calculation of 50% RVU production and 50% professional adjusted 

charge production, in 2008 the clinic’s membership changed the formula to 25% RVU 
6

court noted the contract did not contain any language authorizing a fifty percent 

reduction of a physician’s draw or the proper procedure for overdrawn associates

to repay the clinic.

Furthermore, Alan Reusch, Martin’s expert,5testified at trial that Holstein, 

when calculating Martin’s distribution of the net profits, had erroneously 

compared only five months of Martin’s RVU production to twelve months of 

production by the entire clinic. According to Reusch, the result reduced Martin’s 

RVU production by half and, when coupled with the insurance payments 

wrongfully charged to Martin, caused Holstein to mistakenly believe Martin had 

overdrawn his account. Reusch’s calculations further showed Martin had in fact 

been underpaid by the clinic. The court found Reusch’s testimony convincing 

and “the most appropriate considering the plain language of the employment 

contract that applied to Dr. Martin.” The court also found the clinic’s removal of 

support staff from Martin’s service and reducing Martin’s salary to zero to be a 

breach of good faith and fair dealing. The court concluded that “Dr. Martin did 

not breach his employment agreement by withdrawing funds in excess of the 

predetermined formula, did not get unjust[ly] enriched and does not owe plaintiff 

on an open account.” The court awarded Martin $13,819 for income owed him 

 

production and 75% professional adjusted charge production. This new formula was 

used to determine Martin’s income rather than the formula in his contract. The trial court 

noted the difference but did not attach great weight to its effect on the calculations: 

“While this factor may not be major in the overall calculations it is indicative of how Mr. 

Holstein did not follow the contract provisions as they pertained to Dr. Martin’s written 

agreement as an associate physician.”

5 Reusch is a CPA (certified professional accountant)licensed to practice in Iowa and 

Illinois, with over twenty years of accounting experience involving medical and 

professional practices.
7

by the clinic based on Reusch’s calculations, $15,111.90 in accounts receivables 

that had not been credited to him since his departure, $16,600 for “the delay in 

getting the home sold and the mortgage, insurance and real estate taxes paid 

during that period,” and $52,782 for reimbursement of the tail insurance 

purchased by Martin. Medical Associates filed a timely notice of appeal 

challenging the sufficiency of the evidence in support of the court’s verdict.

II. SCOPE AND STANDARD OF REVIEW

This appeal is for a contract action tried at law. We review law cases of 

the district court for correction of errors at law. Iowa R. App. P. 6.907. Factual 

findings of the district court are binding if there is substantial evidence supporting 

the verdict. Iowa Mortg. Ctr., L.L.C. v. Baccam, 841 N.W.2d 107, 110 (Iowa 

2013). Evidence is considered substantial if a reasonable mind would accept it 

as adequate to reach the conclusion of the district court. Smith v. State, 845 

N.W.2d 51, 54 (Iowa 2014). “‘[T]he ultimate question is whether [the evidence] 

supports the finding actually made, not whether the evidence would support a 

different finding.’” Fischer v. City of Sioux City, 695 N.W.2d 31, 34 (Iowa 2005) 

(quoting Raper v. State, 688 N.W.2d 29, 36 (Iowa 2004)). This determination is 

made in the light most favorable to the district court’s judgment. Chrysler Fin. 

Co. v. Bergstrom, 703 N.W.2d 414, 418 (Iowa 2005).

III. BREACH

Medical Associates alleges there is insufficient evidence to support the 

district court’s holding that the clinic incorrectly applied the contract’s formula and 

miscalculated Martin’s compensation account. The clinic points to the language
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under “gross professional fee revenue” in Policy Bulletin No. 6, which states that 

“regular accounting principles utilized by the membership” apply to its calculation. 

Medical Associates argues it follows from this language that “all calculations 

used in determining draws are based upon the accounting principles utilized by 

the membership,” and therefore “[w]ithout an accounting standard or a relevant 

contract term establishing the proper method, Martin failed to establish Medical 

Associates miscalculated Martin’s compensation.”

In response, Martin contends error was not properly preserved on this 

issue because Medical Associates failed to raise any relevant objections or 

arguments at trial. However, as Medical Associates here is challenging the 

sufficiency of the evidence at trial rather than the admissibility of said evidence, 

error has been properly preserved for the sake of this appeal pursuant to rule 

1.904(2) of the Iowa Rules of Civil Procedure.

To prove a breach of contract, a party must show:

(1) the existence of a contract; (2) the terms and conditions of the 

contract; (3) that it has performed all the terms and conditions 

required under the contract; (4) the defendant’s breach of the 

contract in some particular way; and (5) that plaintiff has suffered 

damages as a result of the breach.

Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222, 224 (Iowa 

1998). “A party breaches a contract when, without legal excuse, it fails to 

perform any promise which forms a whole or a part of the contract.” Id. Contract 

interpretation, that is the meaning of contractual language, is a legal issue for the 

court to decide unless the interpretation is dependent on extrinsic evidence. Id. 

“The cardinal rule of contract interpretation is to determine what the intent of the 
9

parties was at the time they entered into the contract.” Pillsbury Co. v. Wells 

Dairy, Inc., 752 N.W.2d 430, 436 (Iowa 2008). The words of the contract are “the 

most important evidence” in this determination. Id. “When there are ambiguities 

in the contract, they are strictly construed against the drafter.” Dickson v. 

Hubbell Realty Co., 567 N.W.2d 427, 430 (Iowa 1997).

At trial, Martin and Medical Associates sparred over the correct application 

of the compensation formula found in the employment contract. The contract 

clearly states compensation is calculated by applying a combination of a 

physician’s RVU production and adjusted charges against the overall clinic’s net 

professional income. However, it is silent as to whether the RVU production and 

charges should be compared against the clinic’s numbers for the same time 

periods. At trial, Martin’s expert demonstrated Medical Associates had compared 

five months of Martin’s RVU production and adjusted charges against an entire 

year of the clinic’s income. Martin contended this calculation was erroneous and 

a breach of the contract. Medical Associates denied its calculation was wrong or 

unfair to Martin.

Martin’s expert, Alan Reusch, has been a CPA for over thirty years. He 

spends “sixty to seventy percent” of his time working with professional practices, 

primarily physicians, and is familiar with compensation procedures based on 

RVUs and adjusted professional charges. Reusch was provided with Medical 

Associates’s records regarding Martin’s compensation account. At trial he 

demonstrated in detail, using the clinic’s own figures and documents, why the 
10

clinic’s calculations were incorrect and how they result in a misrepresentation of 

Martin’s production and charges.6

Medical Associates argues its “accounting principles” control the income 

calculations in the contract and that Reusch’s calculations are invalid because 

they are not based upon these principles. However, nowhere in the contract, the 

evidence at trial, or Medical Associates’s brief is there an explanation of what 

“the accounting principles utilized by the membership” are. The record clearly 

establishes Reusch used the formula from the express terms of the contract and 

the numbers collected by the clinic, applied his longtime experience with 

accounting standards customarily utilized in medical practices, and determined 

Medical Associates had miscalculated Martin’s draw.

Our standard in reviewing the record is to determine whether substantial 

evidence supports the verdict. Smith, 845 N.W.2d at 51. In other words, 

whether a reasonable mind would accept the evidence as adequate to support 

the verdict. Id. Even if we were to accept the clinic’s reading that “all 

calculations used in determining draws are based upon the accounting principles 

utilized by the membership,” it would not detract from the sufficiency of either 

Reusch’s testimony or the overall evidence in support of the district court’s 

 

6 Medical Associates was unable to explain with certainty the calculation methods used 

by its then-CFO, James Holstein, as he had been voted out by the clinic’s membership 

shortly after Martin left and did not appear before the district court at trial. Holstein’s 

replacement, James Dobbyn, speculated at trial that his predecessor had compared five 

months of Martin’s production to the entire clinic’s annual income because Martin’s five 

months were from the latter half of the year, and traditionally the clinic’s income in the 

back half of the year was greater than the front half. The record showed however that 

the actual income from the time period in question, 2008-2009, was the same in the last 

quarter of 2008 as the first quarter of 2009.
11

finding that Medical Associates breached its contract with Martin. We are 

convinced by the record here that substantial evidence supports the court finding 

a breach of contract by Medical Associates.

In addition to Reusch’s testimony that the clinic erroneously compared five 

months of Martin’s production to an entire year of the clinic’s production, Medical 

Associates did not challenge Martin’s assertion that it incorrectly deducted 

insurance costs from Martin’s income, as the contract expressly states the costs 

are to be included as taxable income. Furthermore, neither did the clinic deny it 

had calculated Martin’s draw using a different ratio of RVU production and

adjusted charges than the ratio stipulated by the contract. Based on this record, 

we find the district court did not err in ruling that Medical Associates failed to 

correctly calculate Martin’s income and unpaid accounts receivables according to 

the contract. Accordingly, we affirm the judgment for breach of contract and the 

award of general damages of $13,819, the amount Reusch calculated Martin was 

underpaid as a result of Medical Associates’ miscalculations, and $15,111.90 in 

accounts receivables that had not been credited to him since his departure.

IV. CONSEQUENTIAL DAMAGES

Medical Associates next contends there is insufficient evidence of 

causation to support the district court’s award of consequential damages totaling 

$69,382. The clinic argues it should not have to reimburse Martin for expenses 

incurred by Martin while his home was on the market or the cost of tail insurance 

purchased by Martin after he left the clinic.
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An injured party is “generally entitled to be placed in as good a position as 

he or she would have occupied had the contract been performed.” Midland Mut. 

Life Ins. Co. v. Mercy Clinics, Inc., 579 N.W.2d 823, 831 (Iowa 1998). Any 

damages awarded must relate to the nature and purpose of the contract itself. 

Id. Damages cannot be speculative:

[D]amages based on breach of a contract must have been 

foreseeable or have been contemplated by the parties when the 

parties entered into the agreement. Whether the damages were 

reasonably anticipated by the parties when the contract was formed 

may be discerned from “the language of the contract in the light of 

the facts, including the nature and purpose of the contract and 

circumstances attending its execution.”

Kuehl v. Freeman Bros. Agency, Inc., 521 N.W.2d 714, 718 (Iowa 1994)

(citations omitted) (quoting 22 Am. Jur. 2d Damages § 460, at 541 (1988)). 

Damages may also be considered foreseeable if they arise from “the ordinary 

cause of events” or “as a result of special circumstances . . . that the party in 

breach had reason to know.” Royal Indem. Co. v. Factory Mut. Ins. Co., 786 

N.W.2d 839, 847 (Iowa 2010) (quoting Restatement (Second) of Contracts § 351, 

at 135 (1981)).

In considering whether any award of consequential damages was 

appropriate, we must determine the nature of Martin’s voluntary resignation from 

the clinic. Medical Associates contends Martin is not entitled to an award of 

consequential damages arising from his resignation because it was “voluntary.” 

While this may be true in a technical sense, the record shows Martin would not 

have resigned from the clinic but for the breach of the contract by Medical 

Associates. Martin resigned only after learning his draw would be reduced by 
13

fifty percent, a result of the clinic miscalculating his compensation. As Martin 

believed the adjusted draw would not provide him adequate compensation to 

meet the needs of his family, he decided to resign and seek other employment. 

Based on this record, we find his resignation was not “voluntary” but instead was 

“forced” by the clinic’s breach of the contract. As a result, the circumstances of 

Martin’s resignation do not preclude him from recovering consequential 

damages. 

In order to compensate Martin for the expenses he incurred pending the 

sale of his home in Clinton, the district court awarded him damages for the 

mortgage, insurance, and real estate taxes he paid while waiting for the home to 

sell. Medical Associates alleges there is a lack of substantial evidence to find its 

breach of contract caused these damages. The clinic contends the 

miscalculation of Martin’s draw is not sufficiently related to the sale of his house, 

and that such expenses were “neither foreseeable nor contemplated by the 

parties when the agreement was signed.” Finally, Medical Associates argues 

there is no evidence Martin would have become a member of the clinic absent 

the breach, and thus “it cannot be assumed the sale of the house would not have 

occurred without the breach of contract.”

The contract’s no-compete clause forbade Martin from practicing medicine 

within fifty miles of the city of Clinton “[u]pon expiration of [the] Agreement or 

termination of [his] employment with Medical Associates.” Because Martin’s 

resignation was a direct result of the clinic’s miscalculation of his draw, the 

consequence that he sell his home was caused by Medical Associates’s breach 
14

of the contract. The sale of his home was a reasonably foreseeable 

consequence of the clinic’s breach, which effectively forced Martin out of the 

clinic. The no-compete clause was drafted by the clinic and is clearly expressed 

within the contract. The clinic had previously enforced similar clauses against 

former employees. In addition, there is no evidence to support a conclusion that 

Martin would not have bought into the membership of Medical Associates but for 

the clinic’s breach of the contract. Thus, we find substantial evidence supporting 

the district court’s holding that the sale of Martin’s home was a reasonably 

foreseeable result of the breach by Medical Associates.

Medical Associates argues even if the breach had not occurred Martin 

would still be responsible for paying these costs as he would most likely still 

occupy the home. This argument is unpersuasive. Martin was incurring costs on 

an empty house, not a home he was occupying. And if Martin were still 

occupying the home in Clinton and working at Medical Associates, it follows he 

would have been receiving his salary from the clinic as well. As previously noted, 

in order for an injured party to recover, damages based on a breach of contract 

must have been foreseeable at the time the parties entered into the contract.

See Kuehl, 521 N.W.2d at 718. Because the sale of Martin’s home was a natural

and foreseeable consequence of Medical Associates’s breach, we affirm the 

district court’s award of consequential damages for expenses incurred by Martin 

in the sale of his home.

Medical Associates further alleges the purchase of tail insurance by Martin 

is not a consequence of its breach. The clinic contends the contract expressly
15

requires Martin to reimburse it for tail insurance if he terminates his relationship 

with the clinic before the end of the two-year contract. Medical Associates 

argues Martin’s decision to resign, rather than the clinic’s breach, caused him to 

purchase tail insurance.

As we have already established that Martin’s resignation was caused by

the contractual breach by Medical Associates, it follows that Martin’s purchase of 

tail insurance was a direct consequence of the breach. The tail insurance clause 

in the contract is clearly expressed, and it would have been readily apparent and 

contemplated by both parties when they entered into the contract. See id. The 

damages here were thus reasonably foreseeable. We therefore find substantial 

evidence supporting the district court’s award for the cost of purchasing tail 

insurance.

V. CONCLUSION

The record shows substantial evidence that Medical Associates failed to 

correctly calculate Martin’s income according to the terms of the contract. 

Accordingly, we affirm the district court’s finding that the clinic breached its 

contract with Martin, and affirm the award of damages for unpaid compensation. 

Because certain expenses associated with the sale of Martin’s home and his 

purchase of tail insurance were direct and reasonably foreseeable results of 

Medical Associates’s breach, consequential damages for these expenses

incurred by Martin should be awarded, and we find substantial evidence supports 

the findings by the district court.

AFFIRMED.