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Climax, LLC v. Snake River Oncology of Eastern Idaho

October 6, 2010

CLIMAX, LLC, PLAINTIFF-APPELLANT,
v.
SNAKE RIVER ONCOLOGY OF EASTERN IDAHO, PLLC, AND CHRISTIAN SHULL, M.D., DEFENDANTS-RESPONDENTS.



Appeal from the District Court of the Seventh Judicial District of the State of Idaho, Bonneville County. Hon. Jon J. Shindurling, District Judge.

The opinion of the court was delivered by: W. Jones, Justice

2010 Opinion No. 104

The summary judgment is vacated and this case is remanded to the district court for further proceedings. Costs are awarded to appellant.

I. NATURE OF THE CASE

When the principal of Snake River Oncology of Eastern Idaho, Dr. Christian Shull, left Idaho for military duty, he exercised its rights under the Servicemembers Civil Relief Act to terminate the office-space lease of his practice with Climax, LLC. Climax appeals the district court's grant of summary judgment in favor of Snake River Oncology and Dr. Shull, seeking equitable relief for losses it suffered from the lease termination.

II. FACTUAL AND PROCEDURAL BACKGROUND

Snake River Oncology of Eastern Idaho (―SRO‖) is Dr. Christian Shull's oncology practice in Idaho Falls. In 2004, SRO entered an office lease with Climax, LLC (―Climax‖), the appellant, for a five-year period ending in November of 2009. Dr. Shull personally guaranteed the lease.

Dr. Shull, who in January of 2007 was a major in the U.S. Army Reserves, received a letter summoning him to active duty to begin in February of 2007. The day before he left to report for duty, Dr. Shull signed an agreement to buy a much larger office building for over $1.8 million and to purchase medical equipment for an additional $300,000. Dr. Shull made the purchase primarily because the seller, another oncologist in Idaho Falls, was planning to retire, and Dr. Shull did not want any other oncologists to enter the local market. While he was gone on active duty, Dr. Shull had to pay another oncologist about $100,000 to step in and continue his practice. His absence reduced his net profits from new-patient referrals and required him to take out an operating loan to cover day-to-day expenses. Nonetheless, Dr. Shull's practice was still profitable throughout 2007. His 2007 adjusted gross income was nearly $887,000, an increase of $180,000 over the previous year. Dr. Shull also cannot quantify the actual number of new patients he lost.

Because he had just purchased a new office building, Dr. Shull decided to terminate his lease with Climax. Shortly after he left for active duty with the U.S. Army in California, he sent written notice to Climax that he was exercising his rights under § 305 of the Servicemembers Civil Relief Act of 2003, 50 U.S.C. app. § 501--596 (―SCRA‖), to end the lease. Dr. Shull actually returned from active duty before his lease termination became effective on May 30, 2007. Climax asserts that Dr. Shull's decision to end the lease cost it $75,000 in lost rents and costs associated with finding a new tenant.

Climax filed a lawsuit against SRO and Dr. Shull, requesting compensation for the expenses it incurred due to Dr. Shull's decision to terminate his lease early. Climax sued under § 305(g) of the SCRA, which permits courts to provide equitable relief to lessors when servicemembers terminate leases of premises. The district court declined to award any relief to Climax and granted summary judgment to Dr. Shull. Instead of balancing the equities between the parties, the court stated that Climax could not show ―sufficient grounds to invoke equity, such as mutual mistake, fraud, or impossibility.‖ In particular, it held that Climax could not show a fraud claim against Dr. Shull because he did not mislead Climax about his possible future military service when he entered the lease. Climax appealed, contending that, under § 305(g) of the SCRA, the district court should not have required it to prove a specific equitable cause of action, but instead should have balanced the equities and more broadly considered whether it was fair to relieve Dr. Shull of his obligations under the lease.

III. ISSUES ON APPEAL

1. Whether the district court abused its discretion by refusing to modify SRO's and Dr. Shull's relief under § 305(g) of the SCRA.

2. Whether SRO and Dr. Shull are entitled to attorney fees in the district court under ...


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