Williams was reassigned to a facility in St. Louis and did not appear for duty.
As a result of these false publications by the agency's employees, Williams contends her reputation was injured. As to damages on her counterclaims, Williams seeks $ 60,000 in actual damages, $ 500,000 in compensatory damages, and $ 5 million in punitive damages.
Standard for Summary Judgment.
A court may grant summary judgment "only if the evidence, viewed in the light most favorable to the party opposing the motion, presents no genuine issue of material fact," Cable Science Corp. v. Rochdale Village, Inc., 920 F.2d 147, 151 (2d Cir. 1990), and the movant is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); see also Fed. R. Civ. P. 56(c). The Court must, however, resolve all ambiguities and draw all reasonable inferences in the light most favorable to the party opposing the motion. See Twin Laboratories, Inc. v. Weider Health & Fitness, 900 F.2d 566, 568 (2d Cir. 1990); Liscio v. Warren, 901 F.2d 274, 276 (2d Cir. 1990); Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986), cert. denied, 480 U.S. 932, 94 L. Ed. 2d 762, 107 S. Ct. 1570 (1987).
Once a party moves for summary judgment, in order to avoid the granting of the motion, the non-movant must come forward with specific facts showing that a genuine issue for trial exists. Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1990) (quoting Fed. R. Civ. P. 56(e)); National Union Fire Ins. Co. v. Turtur, 892 F.2d 199, 203 (2d Cir. 1989). A genuine issue of material fact exists if "a reasonable jury could return a verdict for the nonmoving party." Liberty Lobby, 477 U.S. at 248; Converse v. General Motors Corp., 893 F.2d 513, 514 (2d Cir. 1990). If there is evidence in the record as to any material fact from which an inference could be drawn in favor of the non-movant, summary judgment is unavailable. Rattner v. Netburn, 930 F.2d 204 (2d Cir. 1991).
However, mere conclusory allegations, speculation or conjecture will not avail a party resisting summary judgment. Western World, 922 F.2d at 121. Although the non-moving party need not produce evidence in a form that would be admissible at trial in order to avoid summary judgment, Fed. R. Civ. P. 56(c) and (e) provide that the non-moving party cannot rest on the pleadings, but must set forth specific facts in the affidavits, depositions, answers to interrogatories, or admissions on file showing there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986).
Finally, in reviewing a summary judgment motion the Court is charged with the function of "issue finding", not "issue resolution." Eye Assocs., P.C. v. Incomrx Sys. Ltd. Partnership, 912 F.2d 23, 27 (2d Cir. 1990).
Breach of the NHSC Scholarship Agreement.
The factual background, as set forth above, would normally preclude a motion for summary judgment, as multiple issues of disputed facts are raised by the defendant which implicate a breach of the implied covenant of good faith by the United States. The implied covenant of good faith requires that each party to a contract will not intentionally and purposefully do anything to prevent the other party from carrying out the agreement on its part. See e.g., M/A-Com Security Corp. v. Galesi, 904 F.2d 134, 136 (2d Cir. 1990); Geler v. National Westminster Bank USA, 770 F. Supp. 210, 215 (S.D.N.Y. 1991) (citing cases, applying New York law).
However, this case is not governed by contract law, because the conditions imposed upon an NHSC scholarship arise by statutory directive and not by a negotiated agreement between the parties. As a result, statutory intent and not common law contract principles controls the interpretation of the conditions imposed on the scholarship recipient and the NHSC. Accordingly, the issues raised by Williams regarding breach of the covenant of good faith and impossibility of performance are not material to the dispute at issue. See Rendleman v. Bowen, 860 F.2d 1537, 1541-42 (9th Cir. 1988). Rather, the provisions of the statute govern the interpretation of the parties' rights under the agreement. Id.
In Rendleman, the plaintiff was a doctor who received a NHSC scholarship and a subsequent three year deferment from performing his service obligation. The plaintiff dropped out of the deferment program, and went to work at a hospital that was not a designated health manpower shortage area. The NHSC assigned the plaintiff to another hospital, at which he refused to serve. After being placed in default, the plaintiff brought an action for a declaration that he was not in default. On cross-motions for summary judgment, the district held in favor of the plaintiff, on the basis that the NHSC did not make a good faith effort to work with the plaintiff in placing him at a site more to his liking, and that the agency actively worked against the plaintiff's interests.
The Ninth Circuit reversed the district court, holding that contract law was not determinative of the plaintiff's claims:
The plain language of the statute demonstrates that Congress did not intend that contract principles govern the interpretation of the relationship between the Secretary and a scholarship recipient. The only terms contained in the written agreement signed by the recipient are those required by the statute -- that the recipient agrees to accept the aid, that upon completion of the educational program the recipient will serve in an HMSA, and that the recipient will pay treble damages if found in default on the obligation. Other conditions that affect scholarship recipients' service . . . are not included in the contract, although Congress addressed those issues in the statute. Thus, the obligations of the Secretary are to be based on statutory and not contractual principles.
Rendleman, 860 F.2d at 1542. The Ninth Circuit directed the district court to enter summary judgment in favor of the agency on the issue of the plaintiff's default. See also U.S. v. Hatcher, 922 F.2d 1402, 1406-07 (9th Cir. 1991) (contract-based defenses that agency breached its duties under NHSC scholarship agreement and misled recipient held to be inapplicable as defense to action for recovery of treble damages under statute).
The rationale of Rendleman has been followed by other courts that have been presented with contract-based defenses to an action by the United States to recover treble damages under the NHSC Scholarship Program statute. See e.g., U.S. v. Arron, 954 F.2d 249, 251 (5th Cir. 1992) (contract claim by recipient in action by government to recover treble damages "does not raise a genuine issue of fact material to the dispute"); U.S. v. Melendez, 944 F.2d 216, 218-19 (5th Cir. 1991) (counterclaim by recipient that agency's breach of its obligations under the scholarship agreement prevented recipient from completing his service obligation rejected); U.S. v. Hugelmeyer, 774 F. Supp. 559, 561 (D. Ariz. 1991) (claims in defense to action for treble damages that scholarship contract provisions are oppressive and grossly excessive rejected); accord U.S. v. Turner, 660 F. Supp. 1323, 1329-30 (E.D.N.Y. 1987) (recipient's traditional contractual rights not at issue when government seeks to recover treble damages under NHSC scholarship statute; court rejected defense of economic duress and granted summary judgment in favor of the United States).
Although the Second Circuit has apparently not ruled on the issue, this Court is of the view that the rationale of Turner and Rendleman are correct. Accordingly, Williams' counterclaims which allege that the agency's breach of contract made it impossible for her to fulfill her service obligation under the scholarship agreements are rejected as not material to the disposition of the present motion for summary judgment. Further, the first three counterclaims are dismissed as a matter of law. Any defense to the underlying action must arise from the terms of the statute itself.
The terms of the Statute are clear. 42 U.S.C. § 254l provides that the written Scholarship contract shall contain, inter alia, an agreement by the individual recipient to accept provision of the Scholarship; maintain enrollment in a designated course of study and complete the course of study; maintain an acceptable level of academic standing while enrolled in the course of study; and Serve as a provider of primary health services in a health professional shortage area for a time period equal to one year for each school year for which the recipient received a Scholarship, or two years, whichever is greater. Each scholarship contract must also include the obligations of the Secretary of the HHS, and a statement of damages to which the United States is entitled to under 42 U.S.C. § 254o in the event of a breach by the recipient.
Section 254o governs a breach of the Scholarship contract. Section 254o(b)(1)(A) provides that "if an individual breaches his written contract by failing (for any reason not specified in subsection (a) of this section or section 254p(d) of this title) either to begin such individual's service obligation under Section 254l . . . or to complete such service obligation, the United States shall be entitled to recover from the individual" an amount that is determined according to the formula given in the statute. Subsection (a) concerns failure of the recipient to complete their course of study in school after receiving a scholarship, and section 254p(d) concerns breach of certain private practice loans, both of which are not applicable to Williams. Accordingly, since Williams failed to complete her service obligation, she is liable to the United States for damages calculated according to the formula.
The fact that Williams entered into the Special Repayment Program does not alter her liability under the statute, but does change the calculation of the amount of damages she owes. The SRP provides for relief of liability under section 254o only if the recipient agrees to complete the remainder of his or her service obligation at a site on the Health Manpower Shortage Area Placement Opportunity List. Failure to complete the remainder of the service obligation subjects the individual recipient to the original liability under the statute. Moreover, the regulations promulgated under the statute provide that in cases where a recipient breaches an SRP contract by completing part of the remaining service, only one-half of the time they served will be credited towards their liability.
Thus, under the terms of the statute and regulations Williams is liable to the United States for damages calculated according to the formula set forth in the SRP regulations, at 42 C.F.R. § 62.75. Summary judgment must, therefore, be entered in favor of the United States.
Having found Williams liable on the debt, the Court next considers whether her liability is in the full amount of $ 267,552.30, or whether it may be waived or reduced by the Secretary. The statute provides for a partial or total waiver or suspension of any service obligation or payment by the HHS "whenever compliance by the individual is impossible or would involve extreme hardship to the individual and if enforcement of such obligation with respect to any individual would be unconscionable." 42 U.S.C. § 254o(d)(2).
The regulations promulgated pursuant to the statute prescribe the criteria to be considered by the HHS when deciding waiver requests. With regard to impossibility as the ground for waiver, the regulations provide:
Compliance by a participant with a service or payment obligation will be considered impossible if the Secretary determines, on the basis of information and documentation as may be required, that the participant suffers from a physical or mental disability resulting in the permanent inability of the participant to perform the service or other activities which would be necessary to comply with the obligation.
42 C.F.R. § 62.12(c). With regard to undue hardship and unconscionability as the grounds for waiver, the regulations provide that the HHS is to consider:
(1) The participant's present financial resources and obligations;