Opinion ID: 1362540
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Heading Rank: 1

Heading: memorial clinic partnership agreement

Text: This document is a portion of the Memorial Clinic Partnership Agreement and its purpose is to set forth the special stipulations controlling the relations of Frank P. Mathews, an associate partner, to the partnership, in addition to the provisions and stipulations of the principal partnership agreement. 1. Withdrawal : Frank P. Mathews may withdraw from the partnership by giving a three-month written notice of his intention to withdraw to the executive committee of the partnership. In the event that the executive committee requests him to revoke his notice of withdrawal prior to the effective date thereof, and he refuses to comply with such request, his withdrawal shall become effective and shall be subject to the following conditions: (a) He shall not engage in the practice of medicine or surgery in a location within a twenty-five mile radius of the City of Olympia, Washington. Some time in 1950, he became dissatisfied with the arrangement, feeling that his salary and participation in the profits should be more generous. September 6, 1950, he wrote the following letter: The Executive Committee September 6, 1950 Memorial Clinic Olympia, Washington Gentlemen: By the terms of my initial partnership agreement with the Clinic I was to have, after one year of active participation as an Associate Partner, an opportunity to meet with the Executive Committee to discuss revision of my present share in the proceeds of this enterprise. This has been to date 40% of a share, or $600.00 a month, whichever was the greater. To determine what would be a fair increment of my income at the present, I have made the following calculations: MONTHLY GROSS INCOME FOR FIRST YEAR OF OPERATION Sept. 1949 $829.90 (One-fourth of 1949 total) Oct. 1949 829.90  Nov. 1949 829.90  Dec. 1949 829.90  Jan. 1950 1,280.15 Feb. 1950 996.45 Mch. 1950 1,523.10 Apr. 1950 1,500.80 May 1950 1,528.75 June 1950 1,125.75 (Vacation) July 1950 1,326.30 []Aug. 1950 1,293.85 (Estimated by extrapolation) _________ $13,894.75 Yearly net $7,200.00 Yearly overhead: $6,694.75, or 93% of net. Recent surveys indicate that the average overhead of independent practitioners is about 40% of net income. [] 1950 figures include credit for one-half of the x-ray fee on my gastrointestinal radiological work. There is a stipulation in my agreement with the clinic to the effect that should I leave the clinic I would not be permitted to practice medicine within 25 miles of Olympia. Since this seriously impairs my bargaining power in asking for a raise, I have asked my lawyer about this. My lawyer is almost sure that this stipulation is nonenforceable, on a technicality. The point can be settled any time by getting a court Declaratory Judgment, or permanent interpretation of this clause in the contract. To save the clinic an embarrassment and a nuisance, and to save me legal fees, I would appreciate a formal cancellation of this 25 mile no-practice clause. To summarize, in view of my formidable share of the overhead of the clinic, and in view of the healthy increase month by month in my gross income, I feel very strongly that, starting as of September 1, 1950, I am worth $900.00 a month, or 75% of a share, whichever is the greater. (Signed) Frank P. Mathews, M.D. As a result of this letter, a rather extensive amendment to the partnership agreement was entered into on September 18, 1950. It set up three classifications, (1) senior partner, (2) junior partner, and (3) associate partner. It made salary adjustments and also liberalized the provisions with respect to capital investment requirements. It also made changes as to participation of assets on withdrawal. It provided that voluntary withdrawal should be divided into two sections, approved voluntary withdrawal and unapproved voluntary withdrawal. It provided that the decision as to whether such withdrawal be approved or unapproved should rest solely with the management committee. It stated that if a member, for personal reasons not acceptable to the management committee, merely wished to sever his relationship with the partnership, such withdrawal would fall into the unapproved withdrawal classification. The amendment provided that a partner making an unapproved withdrawal would be entitled to fifty per cent of his capital investment or equity in the general partnership, and provided the manner in which such payment should be made. This amendment to the partnership agreement was signed by all of the partners, including Dr. Mathews. November 1, 1951, Dr. Mathews wrote the following letter: T.R. Ingham, M.D. Chairman, Management Committee Memorial Clinic 529 West 4th Avenue Olympia, Washington Dear Reed: Pursuant to the provisions of Exhibit B, which is the specific contract between the Memorial Clinic partnership and the undersigned, I hereby notify the Management Committee of my intention to withdraw from the partnership. This withdrawal is to become effective ninety days from this date in accordance with the provisions of Exhibit B. FPM: J Yours sincerely, [signed] Frank P. Mathews, M.D. cc: Dr. J.M. Burkhart Dr. T.R. Hazelrigg Mr. T.S. Hough Mr. Doane Brodie, Atty. Dated at Olympia, Washington November 1, 1951 Receipt of original of this notice acknowledged, November 1, 1951, by __________________________________ Partner, Memorial Clinic As a result of this notice of intention to withdraw, a general meeting of the members of the partnership, including Dr. Mathews, was held, November 20, 1951. A motion was made and seconded that Dr. Mathews rescind his notice of withdrawal. The minutes show that this motion was approved unanimously. January 16, 1952, Dr. Mathews wrote another letter to Dr. Ingham, notifying him of his intention to withdraw. With the exception of the dates, the letters of November 1, 1951, and of January 16, 1952, are identical. February 2, 1952, Dr. Mathews commenced action in the superior court for Thurston county, seeking a declaratory judgment concerning his rights under the restrictive clause of the partnership agreement. In his complaint, he alleged that since the service of the notice of January 16, 1952, he had been notified by the partners to retract his notice of intention to withdraw. This allegation was denied by the defendant partners in their answer. In his reply, dated April 18, 1952, Dr. Mathews admitted that the defendant partners had not orally or in writing notified him to retract his notice of intention to withdraw, and prayed that the action be dismissed without prejudice. The action was dismissed June 15, 1952. No formal action on the second notice of withdrawal was taken by the executive committee or by the partnership. Dr. Ingham, the chairman of the executive committee (the other two members being Dr. Burkhart and Dr. Hazelrigg), testified: Q. And did you speak to Dr. Mathews about this notice of withdrawal he had given you? A. Yes. I expressed great surprise in view of the fact that we had just completed the signing of a new agreement that I thought had been drawn very carefully to suit many of his desires, and we had just completed providing a leave of absence for him at our expense for some post graduate study, and I believe I made it quite clear to him that we wanted him to withdraw that notice right now; that we didn't want him to leave and we could not approve of his leaving. I pointed out to him that I was speaking as an individual, that I was also the Chairman of the Board and I knew that was the way every doctor in our group felt about the matter. Q. Did you explain to him or discuss with him the matter of treatment of patients that requires his specialty in the Clinic in the event he was to leave? A. Yes. I pointed out that we were short of help in internal medicine, that we were overburdened with the same and that his presence was most necessary to us. Q. What was Dr. Mathews' response to your discussion, to your statements to him? A. Well, frankly, I don't recall that he gave much of an answer to the subject. I asked him repeatedly what his desires really were and I don't recall that I got a straight answer. Q. Did you at that time or any time subsequent give him notice to come to the meetings of the partnership to discuss the matter? A. Yes. We had several meetings after that date and on one particular occasion had a general meeting. We made it a point to do our best to get him to come to the general meeting and I was told he had his lunch with him and ate his lunch in the car rather than attend our meetings. Q. How often did you hold these meetings? A. We had a general meeting once a month and management meetings were had in between and at which all members were welcome to attend. Q. After the 16th of January, 1952, as a matter of fact, did Dr. Mathews attend any of the meetings of either the management meetings or the general meetings? A. No, sir. Q. Now, did Dr. Mathews take any action, any legal action of any kind after he gave his notice to you on January 16th that he intended to withdraw? A. Yes, we were served with a notice to appear in court and to defend ourselves on a charge regarding the validity of the restriction clause in case he should leave our Clinic. Dr. Ingham also testified that he saw Dr. Mathews about 5:15 on the evening of April 15th, and that Dr. Mathews told him that the ninety days had elapsed and that there was nothing the partnership could do about the restrictive clause. His testimony continued: He stated that is why he hadn't attended the meetings and made it a point not to have a discussion with me for fear that I would make an official request for him to rejoin the Clinic, and therefore influence his restriction clause. Dr. Mathews remained at the clinic during the ninety day period, but avoided the other members. April 15th, the committee wrote the following letter: April 15, 1952