7th Circuit Affirms Summary Judgment for Employer on Claim for Breach of Employment Separation Agreement

On November 1, 2018, the 7th Circuit affirmed an order of summary judgment in favor of an employer-defendant on a breach of contract claim brought by a former employee-physician, who alleged that the defendant breached her employment separation agreement by releasing a credentialing form with some "fair" ratings to a potential employer.  Gallo v. Mayo Clinic Health System-Franciscan Medical Center, Inc., No 17-1623 (7th Cir. 11/1/2018).  The plaintiff resigned her employment and entered into an employment separation agreement to prevent the defendant from saying anything negative about her to prospective employers in response to employment inquiries.  Subsequently, her former supervisor rated her performance as "fair" on two criteria in a credentialing form.  She sued for breach of the separation agreement, alleging that as a result of the breach, she was not hired for a subsequent position by a prospective employer with whom she had entered into employment contract negotiations.  The separation agreement indicated that no reference will be made to any performance issue and nothing derogatory will be stated to potential employers seeking a reference.

The district court concluded as a matter of law that: (1) the separation agreement did not apply because the credentialing form was not an employment reference sought by a potential employer; and (2) the credentialing form did not cause the non-hiring of the plaintiff.  The district court found that the credentialing form was not a breach of the separation agreement because the agreement only applied to prospective employers seeking a reference.  The hospital to which the form was sent was not the prospective employer.  The actual prospective employer was a health center which had a relationship with the hospital.  The district court also held that the plaintiff could not prove damages resulting from any breach of the separation agreement by the defendant because there was no evidence that the two "fair" ratings caused the health center to not hire the plaintiff.  There was evidence that the heath center had other reasons, unrelated to the credentialing form, for its decision to not hire the plaintiff. 

The 7th Circuit agreed that the plaintiff's breach of contract claim failed.  The separation agreement did not apply to the credentialing form request from the hospital.  The separation agreement only applied to potential employers seeking a reference.  The hospital to which the credentialing form was sent was not a potential employer seeking a reference.  The separation agreement did not apply to every potential employer.  The separation agreement, by its own unambiguous terms, was limited to a potential employer seeking a reference.  There was to be no employment relationship between the plaintiff and the hospital.  The related heath center was the only actual potential employer of the plaintiff.  In addition, the credentialing form was not a reference request.  The hospital sent the form to the defendant only for the purpose of determining whether the plaintiff could have privileges to perform certain procedures at the hospital--not to hire the plaintiff.  Therefore, the credentialing form was not a "reference" request from a potential employer.  Moreover, even if the separation agreement did apply, the plaintiff could not prove that the heath center's decision to not hire her was caused by the "fair" ratings on the credentialing form.