Full opinion text
MEMORANDUM ORDER MARTEN, District Judge. The present action involves claims by the plaintiffs, Wichita Clinic and Integrated Healthcare Systems, Inc., against the defendants, Columbia/HCA and Wesley Hospital, for federal antitrust violations, along with state tort claims. The substance of the action was previously addressed by the court in its resolution of the defendants’ motion to dismiss. Wichita Clinic v. Columbia/HCA Corp., No. 96-1336-JTM, 1997 WL 225966 (D.Kan. April 8, 1997). The matter is currently before the court on the competing motions for partial summary judgment submitted by the parties. Summary judgment is proper where the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). In considering a motion for summary judgment, the court must examine all evidence in a light most favorable to the opposing party. McKenzie v. Mercy Hospital, 854 F.2d 365, 367 (10th Cir.1988). The party moving for summary judgment must demonstrate its entitlement to summary judgment beyond a reasonable doubt. Ellis v. El Paso Natural Gas Co., 754 F.2d 884, 885 (10th Cir.1985). The moving party need not disprove plaintiffs claim; it need only establish that the factual allegations have no legal significance. Dayton Hudson Corp. v. Macerich Real Estate Co., 812 F.2d 1319, 1323 (10th Cir.1987). In resisting a motion for summary judgment, the opposing party may not rely upon mere allegations or denials contained in its pleadings or briefs. Rather, the nonmoving party must come forward with specific facts showing the presence of a genuine issue of material fact for trial and significant probative evidence supporting the allegation. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Once the moving party has carried its burden under Rule 56(c), the party opposing summary judgment must do more than simply show there is some metaphysical doubt as to the material facts. “In the language of the Rule, the nonmoving party must come forward with ‘specific facts showing that there is a genuine issue for trial.’ ” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting Fed.R.Civ.P. 56(e)) (emphasis in Matsushita). One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses, and the rule should be interpreted in a way that allows it to accomplish this purpose. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Findings of Fact In 1994, two Wichita hospitals, St. Francis and St. Joseph, announced their intention to merge into a single hospital system that would later become known as “Via Christi.” The merger was announced with the intention to create a stronger, more efficient health care system which minimized costs. The proposed merger was “cleared” after an inquiry by the United States Department of Justice. The resulting Via Christi is the largest health care system in Kansas. In addition to the merger, the Via Christi hospitals began employing physicians in order to integrate their health care delivery system. The plaintiffs contend that Via Christi “has been employing primary care physicians to secure referrals to that hospital.” (Resp. Facts at 3). The evidence cited in support, however, establishes only that this was a concern of Wesley CEO Jim Kelly, who testified that Via Christi’s hiring of its own physicians “certainly increased the likelihood” of more referrals to Via Christi. (Exh. 66 at 349). The plaintiffs have not produced evidence from any witness with personal knowledge of increased referrals. Via Christi’s advent significantly affected the market for health care in the area. Via Christi owns its own Health Maintenance Organization (HMO) product, Preferred Health Systems, Inc. The centerpiece of HMO managed care is the primary care physician “gatekeeper” who controls utilization of services by members. Family practice physicians are particularly well suited to provide gatekeeper services for managed care health plans. Vertical integration of hospitals allows Via Christi to offer “one stop shopping” for insurance companies and other third-party payors. The efficiencies derived from physician integration can be obtained by physician-hospital affiliation, or through effectively managed physician groups. Physician groups and clinics unaffiliated with hospitals are an important source of competition to hospital-based outpatient services and hospital-based family practice physician services. The advent of managed care has forced many single practitioner physicians to join physician groups. Columbia/HCA, which owns and operates over 350 hospitals, is the largest company of its type in the United States. The plaintiffs allege that, in 1996, Columbia/HCA was worth $4.4 billion, and earned $2.7 billion before taxes. The plaintiffs do not cite to any evidence for this assertion however, other than a reference to the report of their expert witness. The expert’s report does not contain any reference to the source for these figures. The court notes that this sort of bootstrapping of factual, nonopinion evidence clearly fails to satisfy the rules of evidence. Columbia/HCA acquired Wesley in 1994 when Columbia merged with HCA. Wesley has been very profitable. (Plf.Exh. 66, J. Kelly dep. at 22). At some point it was the most profitable hospital in the Columbia/HCA system. (Plf.Exh. 58, Dougan dep. at 96; Exh. 66, J. Kelly dep. at 22). On the other hand, there is evidence that, in terms of total profit margin, Wesley in 1996 was not even in the top ten hospitals in the Columbia/HCA system. (Plf.Exh.144). Wesley’s profits grew from $56 million in 1994 to $89 million in 1996. Wesley has higher profit margins than its competitor Via Christi. Wichita Clinic, with approximately 150 physicians, is the largest multi-specialty physician group in Kansas. The shareholder owners of the Clinic also own Integrated Healthcare Systems, Inc. (IHS), a management service organization which provides the Clinic with administrative and support services. Wichita Clinic has spent over 20 years and millions of dollars to develop its primary care physician base. The Clinic’s 1994 Strategic Plan called for expanding Wichita Clinic’s primary care physician base to 220 physicians by acquiring 75 primary physicians to create a physician-directed integrated delivery system. The plaintiffs claim that, at the time they were approached by defendants, “they were searching for other capital partners” among four entities (PhyCor, Humana, St. Joseph, and St. Francis). The evidence indicates, however, that Wichita Clinic had independently rejected PhyCor and Humana, while the Via Christi hospitals showed little real interest in such a partnership. Contrary to the argument of the plaintiffs, the Court finds the February 2, 1995 Letter of Intent between the parties did not prohibit them from negotiating with other capital partners. The relationship between plaintiffs Wichita Clinic and IHS has been memorialized in a Management Operating Agreement. This agreement states that the relationship between Wichita Clinic and IHS “is that of independent contractors.” (Def.Exh.4). IHS has the same officers and directors as Wichita Clinic. IHS’s contract with Wichita Clinic is nonexclusive, but IHS has not attempted to contract with any physician group other than Wichita Clinic. There is some evidence that its revenues were disrupted during the time period discussed herein, because one of its sources of revenue management fees was provided by Wichita Clinic. In April 1994, St. Francis paid its primary care physicians more than Wichita Clinic. There was concern that these salaries would change the competitive level in the community. Later, Via Christi was establishing the market for primary care physician salaries. The joint venture negotiations between Wesley and Wichita Clinic appear to have been motivated both by the desire to compete effectively with Via Christi and to maintain existing relationships with important insurance providers. It was in this context that Tom Kelly, Wichita Clinic’s consultant, recommended that Wichita Clinic partner with a hospital to form an integrated health care system. In April or May of 1994, John Knack, President and CEO for Blue Cross told Wesley CEO Jim Kelly that Blue Cross wanted to replace its existing exclusive hospital relationship with Wesley, which he characterized as “an older, aging product” with “more of a capitated arrangement.” (Exh. 38, J. Kelly dep. at 95). Knack told Kelly that Blue Cross had unsuccessfully attempted to develop a relationship with Wichita Clinic, and had begun to talk to St. Francis about investing in their health maintenance organization. Knack told Kelly that he would give him the opportunity to try to develop a relationship with Wichita Clinic. Wesley approached Wichita Clinic with the idea of partnering in the development of a physician network in part as a response to the potential move of Blue Cross’s business from Wesley to CorTech, the Via Christi company which owns HMO Preferred Plus of Kansas. In May or June of 1994, Kelly discussed with Rod Van Pelt, Wesley Chief Financial Officer, the potential for a joint venture or partnership between Wesley and Wichita Clinic. According to Wichita Clinic CEO Steven Perkins, the Clinic’s officers also felt that “finding some method to link to or partner with others made sense.” (Exh. 12, Perkins Dep. at 165). Wesley, Blue Cross, and Wichita Clinic all believed that fee-for-service reimbursements would eventually be replaced by capitated fee arrangements. Each felt that a joint venture which integrated healthcare delivery in Wichita would create a “synergy” that would be a win-win proposition for all concerned. It is uncontroverted that Blue Cross wanted both Wesley and Wichita Clinic to be a part of this integrated delivery system. Blue Cross intended to develop a new HMO, which would use as a hospital provider either Wesley or St. Francis. Plaintiffs suggest Blue Cross told Wesley that, without Wichita Clinic’s participation, Blue Cross would terminate its exclusive relationship with Wesley, and begin negotiations with St. Francis. There is, however, no direct evidentiary support for such an ultimatum. It is uncontroverted that Blue Cross knew of Wesley’s working relationship with Wichita Clinic, and asked Wesley to discuss the possibility of a managed care contract with the Clinic. It is also uncontroverted that Wesley understood its relationship could be adversely affected in the long term if it did not develop and implement managed care plans. As a part of its larger April 1995 “Business Acquisition Proposal,” Wesley prepared an internal estimate of the losses which might arise if it lost its fee-for-service hospital contract with Blue Cross. On August 29, 1994, Wesley and the Wichita Clinic signed a Letter of Agreement “to form a relationship between Wesley Medical Center and Wichita Clinic,” which provided that the parties would “negotiate in good faith to reach a definitive agreement.” The plaintiffs agreed to provide tangible assets along with a management fee which the Clinic would pay to the joint entity. The defendants agreed that one of the terms of the joint venture would require them to make a capital/cash contribution equal to the value of Wichita Clinic’s assets. The agreement states: “A range of $80 to $36 million the parties agree is appropriate.” (Def.Exh. 46 at ¶ 2.B). The agreement also provides that the amount Wesley would actually pay “will be determined by an independent appraisal of the value of the assets, net of liabilities,” and that if the appraisal reached a figure outside the $30 to $36 million range, “either party may, at its discretion, terminate this agreement if it finds the value amount unacceptable.” (Id.) The agreement provided: The parties recognize the necessity of exchanging information which is confidential or contains business or trade secrets of the disclosing party. In consideration of this agreement, the negotiations hereunder, and the mutual exchange of such information, the parties do hereby agree to refrain from disclosing in any manner the information received from each other to any third party. The parties further agree to keep confidential the existence and nature of the negotiations hereunder and to refrain from any disclosure thereof to third parties. (Def.Exh.44). On November 9, 1994, Dr. Jim Greer, CEO of Wichita Clinic, wrote to Jim Kelly that the value of Wichita Clinic’s contribution should be based upon the expected performance of the proposed joint venture over its initial three years of operations. (Exh. 47). Wichita Clinic’s consultant, Tom Kelly, viewed the suggested $30-36 million valuation as a “take-it-or-leave-it” number. In the succeeding appraisal work, $30 million thus became a target figure. Because of federal “fraud and abuse” regulations, Wesley could not contribute to the joint venture an amount in excess of the fair market value of the Wichita Clinic contribution. A problem therefore arose when the defendants were never able to internally duplicate this valuation of Wichita Clinic’s assets. The defendants retained Ernst & Young to perform an independent valuation of the Clinic’s contribution. This retention was motivated in part by a concern that, if the defendants contributed more than the fair market value of the Clinic’s'assets, they could violate the federal fraud and abuse regulations noted above. On December 12, 1994, Wichita Clinic wrote to Ernst & Young waiving any potential conflicts, and allowing the accounting firm to undertake its independent valuation. The next day, Cynthia Dotson, the Vice President of Capital Management for Columbia, sent an e-mail to Jim Kelly indicating the fair market value of Wichita Clinic (though not the joint venture) was “in the range of $30 mm” based on the information provided by the Clinic. She also wrote that Ernst & Young had “verbally corroborated” that number. (Exh. 51). Dotson makes an explicit distinction in her memo among “Fair Market Value, Enterprise Value and Investment Value.” Fair Market Value of the Clinic is “its worth ... to a buyer of the business[,] operating it as the owners now do.” It is under this measure, assuming the buyer were to take the Clinic free of all liabilities, that Dotson ascribes the “ballpark number” of $30 million. In contrast, Investment value “is the key number” and is defined as “that amount we should be willing to invest given the deal structure and the total risks/rewards of the deal.” Dotson states that Ernst & Young’s “rough ballpark number is $18 mm for the asset value if no debts were assumed.” In a December 15 memorandum, Dotson wrote to Kelly that she “would be comfortable” with a $30 million capital contribution, plus or minus 15%. She stated that Ernst & Young “confirmed $30-$35 million as reasonable range comfort level in anticipation of getting a formal engagement to do a full valuation.” (Exh. 52). This valuation, however, was subject to some explicit qualifications. Dotson cautioned that this value would be diminished by $6-8 million if the management fee to be paid by the Clinic was capped at 3%, and diminished by a further $6 million if the risk sharing pool was not properly defined and the predicted managed care savings were not obtained. Plaintiffs respond that Steve Davidson was unable to remember hearing any such confirmation from Ernst & Young. There is no showing that he was a party to all communications between Dotson and the accountants. The December 15 informal valuation by Ernst & Young referred to by Dotson in the $30-35 million range included the assumption that the 3% cap on management fees was removed. The plaintiffs agreed to the removal of the cap. The plaintiffs stress in their response that Ernst & Young provided valuations of only $13.5 to 18 million. But these valuations were tied to the problems relating to the assumption of debt and the cap on earnings. These were problems which plaintiffs knew about, and, as to the 3% cap, actually agreed to modify. (Dotson e-mail, Plf. Exh. 105). On December 14, 1994, Wichita Clinic agreed to remove the 3% cap, and provide that IHS’s “net income would be the greater of actual earnings or 3% (post phase-in) of total operating revenue.” (Plf.Exh. 139). Dotson received notice of this waiver of the 3% cap. (Plf.Exh. 106). Davidson performed a final valuation analysis on January 5, 1995. He concluded that the value of the venture without debt was $17.9 million with the cap and $30.8 million without the cap. On February 2, 1995, Wichita Clinic and the defendants signed a nonbinding Letter of Intent to create a joint venture which would create an integrated health care delivery system. The agreement states that it is “not intended to be a binding agreement, [but] an expression made in good faith of our present intentions.” (Plf.Exh. 25). The agreement explicitly restricted Wesley’s ability to acquire or partner with other physician groups, requiring the hospital to “focus its efforts to build physician capacity through IHS and Clinic.” (Def. Exh. 46, at ¶ 15). Conversely, the Letter of Intent did not prohibit Wichita Clinic from attempting to obtain other capital partners or obtaining capital for its 1994 “Strategic Plan.” The 1994 Plan is not identified in the Letter of Intent, which speaks generally of an intent by the parties to “develop a plan” for Clinic expansion. Finally, the Letter of Intent expressly provided that the amount Wesley would pay would be determined by an independent appraisal, and that Upon review of the appraisal, either party may, at its discretion, terminate this agreement if it finds the valuation amount unacceptable. If the valuation is less than $30 million, the agreement may be terminated and WCBC, the Clinic and Wesley would have no further obligation hereunder. (Plf.Exh. 25). The Letter of Intent also provided that it is further understood and agreed that if either party determines for whatever reason to terminate further negotiations with the other party in respect of the Definitive Agreements referred to above, then there shall be no liability between us [as] a result of the execution of this letter.... (Id.) During the negotiations, Wesley CEO Jim Kelly told negotiators for Wichita Clinic that they were “having difficulty coming up with that level of valuation.” (Exh. 66, J. Kelly dep. at 459). The agreements between the parties did not provide that the capital developed would be used to implement the Clinic’s 1994 Strategic Plan. In addition the agreements did not prohibit the submission of additional terms or negotiations. The same day, the parties held a joint press conference to announce the signing of the Letter of Intent. The press release stated that the parties had not completed “the financial arrangements.” (Exh. 54). After the Letter of Intent was signed, Jim Greer and Jim Kelly actively marketed the IHS concept to other physicians outside the Clinic. While some physician groups expressed interest, no outside physicians committed themselves to associating with the proposed joint venture. On February 9, 1995, Ernst & Young representatives visited Wichita Clinic, and told its representatives that the 3% management fee cap was “quite restrictive,” and that they would perform valuations with and without the cap. The first detailed, written valuation of Wichita Clinic’s contribution was completed by Ernst & Young on March 31, 1995. This valuation was lower than the suggested $30-36 million range. Shattuck Hammond, a firm hired by the Clinic to establish a valuation, performed a discount cash flow analysis which determined that the value of Wesley’s contribution would be between $30 and 31 million. There is a fact dispute as to whether Ernst & Young was ever able to reach a comparable figure with the 3% cap included. Notes made by Chuck Williams, Director Investment Analyst for Columbia/HCA’s Asset Management Group, in March 1995 show an internal valuation of $10 to 20 million, but these notes also indicate that a “firm” number would need additional work but was “likely to happen.” (Plf.Exh. 110). A memo written by Williams on April 11 expresses concern as to the risk pool assumptions underlying the IHS valuation. The memo also states: “This project appears to be very attractive from a conceptual standpoint, but significant work still needs to be performed before we can determine if the rate of return is acceptable.” (Plf.Exh. 140). On April 10, 1995, Steven Perkins and Frank Condon from Wichita Clinic met with Jim Kelly and Rod Van Pelt from Wesley, and Chuck Williams and Mike Ford from Columbia. Ford told Perkins and Condon that the joint venture would be finalized only when “mirror images of value” were reached by the two appraisers, Ernst & Young (employed by the defendants) and Shattuck Hammond (employed by the Clinic). On April 17, Columbia/HCA and Wesley representatives met to discuss the progress of negotiations. This meeting resulted in a 12-point Addendum of talking points which addressed matters including the issues identified by Ernst & Young as reducing the valuation below the $30-36 million target. The issues related to valuation included defining the Clinic’s “net revenues” for purposes of calculating the management fee, determining whether, if the Clinic was unable to pay the management fee, the fee would accrue and bear interest, and defining the percentages of the hospital and speciality risk pools that the proposed joint venture would receive. In addition, the Addendum proposed changes which would make IHS a limited liability corporation, give Wesley the right to independently acquire physician groups, give IHS the right to control capital expenditures by the Clinic and approve changes in physician compensation, and provide for Wesley’s capital contribution to be made over time. Although some of these issues had been raised previously, this was the first meeting in which they were discussed in detail. Contrary to an argument by plaintiffs, the evidence indicates that these issues were not presented by the defendants as “nonnegotiable” demands. The plaintiffs contend that the Addendum reveals a secret strategy of acquiring the Clinic, and that the Addendum was a violation of the terms of the Letter of Intent. There is no evidence defendants planned to create their own primary care group until the end of the joint venture negotiations. The evidence cited by plaintiffs as illustrating a surreptitious acquisition strategy is equally supportive of the joint venture strategy which was publicly entered into by both parties. Thus, the Wesley Business Plan provides generally to “Integrate key physicians into network model.” (Def.Exh. 359A). Similarly, in his notes from the meeting held in June, Perkins’s notes speak simply of a “TOTAL JOINT VENTURE.” (Plf.Exh. 120). The plaintiffs also rely on their Exh. 107, notes of a December 19,1995 meeting, in which Chuck Williams wrote that “They won’t sell FP’s separately.” (Plf.Exh. 107). But this comment, clearly placed in the future tense, was six months after termination of the joint venture negotiations, and it simply reflects a rejection of an acquisition at the time of the meeting. It does not indicate that Wesley was insisting on an acquisition in July. Importantly, this meeting occurred after Kelly had written to the Wichita Clinic board in October proposing — for the first time — purchasing an equity interest in Wichita Clinic, and Wichita Clinic had responded positively. It is true that the Letter of Intent did not include a “right of first refusal clause” giving Wesley the right to acquire physician practices as there was in the subsequent Addendum, but neither was there any provision excluding such a right. Moreover, the Letter of Intent was clearly subject to additional negotiations. The plaintiffs’ contention that the alterations reflected in the Addendum were radical departures, not advanced as good faith proposals, from the Letter of Intent is not supported by the evidence. For some of the proposed modifications, such as a change of IHS to a Limited Liability Corporation, the control by IHS of capital expenditures, or IHS approval of changes in services by the Clinic, plaintiffs have completely failed to provide proof that the changes fundamentally altered the proposed joint venture. The other proposals — beyond the proposal to add a right of first refusal for Wesley to acquire physician groups — complete or supplement terms of the Letter of Intent; they in no way demonstrate a bad faith attempt by defendants to modify the core of the proposed joint venture. The right of first refusal would modify the Letter of Intent by allowing Wesley to combine with five specified physician groups, but it would also serve to harmonize the explicit goal in the Letter of Intent of Clinic expansion and adding physician specialists, with an otherwise blanket ability by Wichita Clinic to prevent these goals. It is uncontroverted that Wesley knew the issue of valuation was very important to the Clinic. (Plf. Exh. 66, Kelly dep. at 459). Equally, the Clinic knew that Wesley could not live with the exclusivity provisions in the Letter of Intent. (Plf.Exh. 81). Neither party has produced evidence the other was acting in bad faith. By April 21, 1995, Bank IV had approved IHS for a $1.8 million line of credit to invest in Premier Blue, the new HMO product from Blue Cross. The April 1995 Proposal requested $900,000 to purchase an equity interest in Premier Blue. The stated purpose of the proposal was to “[h]elp maintain exclusivity with Blue Cross business.” (Exh. 43, Dep.Exh. 200). Once IHS was formed, the investment was to be “transferred to IHS as part of initial contribution.” (Id.) On April 25, 1995, Harvey. Sorensen, Wichita Clinic’s attorney, wrote to Joe So-well, outside counsel for the defendants, enclosing a copy of Shattuck Hammond’s valuation with the comment it “should assist you in preparing the additional term sheet you are working on.” (Exh. 63). Sorensen noted that Shattuck Hammond concluded the Letter of Intent might be subject to “further clarification and negotiation” and that Sections 7 and 8 of the Letter of Intent were “inconsistent.” (Id.) On May 4, 1995, Sorensen wrote to So-well asking when the Clinic would receive the defendants’ “list of issues/m odification/changes.” (Exh. 64). On May 9, Jim Kelly presented the Clinic with the 12-point additional term sheet, entitled “Addendum.” According to Jim Kelly and Van Pelt, the Addendum was intended to be a set of talking points for additional discussion. In addressing the IHS Board of Directors on May 9, Kelly stated that the defendants wanted to move forward with the joint venture. Sorensen saw the proposed changes as an attempt by Wesley to gain control of the Clinic. Dr. Greer also saw the Addendum making significant changes in the proposed form of the joint venture, but was nonetheless a “good faith” attempt by Wesley to work out unresolved issues. (Exh. 66, Greer dep. at 371-72). Wichita Clinic rejected the terms of the Addendum in a letter of May 18, 1995, stating that under its terms the resulting partnership would be materially different from that provided under the Letter of Intent. Jim Kelly responded the same day by stating that the defendants were willing to do the joint venture, and return to the terms of the Letter of Intent. Kelly wrote: “I believe that through our continued dialogue we will achieve our shared vision — a truly integrated delivery system focused on improving the health of the communities we serve.” (Exh. 68). Wesley and Columbia/HCA intended to consummate the joint venture if an independent valuation of the Wichita Clinic contribution could be obtained and the remaining details could be worked out. Wichita Clinic was informed that Columbia/HCA was having trouble internally verifying the $30-36 million valuation, and it was because of this difficulty that Columbia/HCA’s negotiators asked for, and obtained, language in the Letter of Intent permitting either party to terminate the arrangement if the valuations were unsatisfactory. Wichita Clinic knew by December 1994 that the defendants were having trouble with the valuation. (Plf. Exh. 15, Perkins Aff. at ¶ 15). Julie Deterding is a financial analyst at Wesley. She has worked at Wesley since 1988. She assisted Kelly and Van Pelt in the joint venture negotiations. Deterding testified that she understood Wesley’s investment in the joint venture “had been estimated around $30,000,000.” (Plf. Exh. 57, Deterding dep. at 25-26). According to the testimony of Kelly, Van Pelt, and Deterding, at no time during the joint venture negotiations between late 1994 to mid-1995 did anyone at Wesley have plans to create a primary care physician group at Wesley which would employ physicians directly. Steen, Central Group President of Columbia/HCA, James “Denny” Shelton, and Morgan have testified that no one at Columbia/HCA had such plans. It is uncontroverted that such a policy was discussed only after the joint venture negotiations ended. On or around May 18, 1995, Steve Perkins and Frank Cordon of Wichita Clinic met with John Knack of Blue Cross, at the suggestion of the Wichita Clinic Board of Directors, to discuss “the enhancement” of their relationship (Exh. 69). Wichita Clinic did not tell the defendants of this meeting, and asked Blue Cross to keep it “very confidential.” During this time, the Clinic continued to negotiate with Wesley. Wichita Clinic and Wesley had agreed to conduct all negotiations with Blue Cross jointly. (Exh. 44). Perkins and Cordon told Knack that the Clinic had “some disagreements” with the defendants which “endanger[edj” the joint venture. (Id.) Perkins later wrote a memo relating to this meeting, stating he- and Cordon had very confidentially shared with him the fact that we had some disagreements which could in fact endanger our agreement with Wesley. We emphasized to him our interest in participating with Premier Blue. We also floated out the concept that if we were not able to come to terms with Wesley, whether Blue Cross-Blue Shield would have an interest in making a minority investment in IHS, Inc. He did express a real interest in this.... We made it very clear that we wanted to work with them and wanted to see Premier Blue highly successful in the future. He noted that he would be keeping this quiet, visiting only with the President, Tom Miller and his legal counsel. (Def.Exh. 69). Perkins and Cordon emphasized the Clinic’s interest in participating in Premier Blue, and asked if Blue Cross was interested in investing in IHS. Knack expressed interest in such an investment. Previously, Wesley and Wichita Clinic had contemplated splitting a 20% investment in Premier Blue. On or before April 7, 1995, prior to the end of negotiations with Wesley, the Clinic told Blue Cross that it wanted to take “a full 20% ownership in Premier Blue” for itself. (Exh. 69). Wesley tendered the renewal of its Blue Cross hospital provider contract on May 25, 1995. Blue Cross accepted Wesley’s offer and signed the renewal on June 1, 1995. Wichita Clinic had tendered an offer to become a physician provider contractor to Premier Blue HMO on March 31, 1995. This offer ultimately would be accepted by Premier Blue on August 22, 1995. Wichita Clinic continued to negotiate the joint venture with Wesley into June. (Exh. 70). On May 30, the parties met to discuss Shattuck Hammond’s valuation report. The parties met again on June 5. At the latter meeting, George Morgan of Columbia/HCA stated that there existed potential conflicts of interest between Wesley and the joint venture, such as the exclusivity provisions in the Letter of Intent and the possible uses of Wesley’s capital contribution. According to Morgan, the exclusivity clause appeared to prevent Wesley from working with physicians not affiliated with IHS and that Wesley could not afford to give up its preexisting relationships with these physician groups. Morgan proposed that these potential conflicts of interest could be resolved by combining the assets of Wesley and the Clinic into a single joint venture. The plaintiffs claim defendants’ alleged fraud was revealed by June 1995. Plaintiffs have also claimed lost profits for fraud during 1995. The plaintiffs formally terminated negotiations in a letter of June 28, 1995. In this letter, Dr. Greer wrote: The philosophies of our respective organizations are deeply ingrained in each of our cultures, and we have reluctantly come to the conclusion that these philosophies will not produce synergy in IHS and, thus, are not compatible. Consequently, it is with regret that we terminate further discussion at the present time regarding IHS and Wesley Medical Center. We expect to continue to work with you in several areas and trust that our relationship will continue to grow. It is certainly our desire to continue to pursue mutual interests with Wesley Medical Center. (Def.Exh. 77) (emphasis in original). The letter does not make any suggestion of bad faith negotiations by Columbia/HCA or Wesley. Greer has testified that he used the phrase “at the present time” in the letter because he did not want to “close the door” on Wesley. (Exh. 66, Greer dep. at 410). Greer continued (at least until his July 31 resignation) to attempt to maintain a positive relationship with Wesley. (Id.) As noted earlier, Wichita Clinic’s offer to join Premier Blue was accepted on August 22, 1995. IHS signed the shareholder agreement of Premier Blue on August 17, agreeing to buy 10% of the Blue Cross subsidiary which owned Premier Blue. The Shareholder Agreement provides in part: Notwithstanding any other provision contained herein, in lieu of performance as provided in ¶ 2.1, Blue Cross may, upon written agreement by [IHS], at any time sell stock Blue Cross acquires pursuant to ¶ 2.1, plus 300,000 additional shares owned by Blue Cross, to [Wesley] or another hospital or hospitals located in Sedgwick County, Kansas. (Def.Exh. 82, § 2.3). Thus, without the written consent of IHS, Blue Cross could not sell any Premier Blue stock to Wesley. The Letter of Agreement which had been entered into by the parties on August 29, 1994, limited the ability of Wesley and Wichita Clinic to create links with “a health care management company [or] an integrated delivery system,” by providing that the parties to the agreement would “refrain from negotiating for the formation of either ... with a third party.” (Def.Exh. 44). On October 31, 1995, Jim Kelly wrote to Tom Peters, the President of Wichita Clinic’s Board of Directors, expressing an interest in buying part of the Clinic. This was the first time Wesley had expressed a direct intent to purchase an equity interest in Wichita Clinic. Peters responded in a November 8 letter, which expressed receptiveness to the idea. Peters also asked “whether or not the joint venture concept remains an option?” (Def.Exh. 79). In their motion, the plaintiffs cite Kelly’s October 31 letter as relevant to the issue of misappropriation of trade secrets and misuse of confidential information, stressing that Kelly requested information which included financial documents, physician productivity, and physician compensation. (Plf.Exh. 22). There is nothing in the letter, however, to indicate that Kelly sought to acquire the information for purposes of directly hiring Wichita Clinic physicians. Rather, the letter proposed the idea of acquiring an equity interest in the Clinic. Kelly wrote: After careful consideration and discussion, Wesley Medical Center would very much like to begin discussions with your Board about the possible acquisition of the Wichita Clinic by Wesley Medical Center. In order to facilitate the development of an offer to acquire-the Wichita Clinic, we will need to conduct a document review. I have enclosed a list of documents and a signed Agreement for NonDisclosure of Confidential Information statement for your review. Tom, it is our hope to develop more than one option for the Board to consider in a timely manner. (Id.) (emphasis added). By its terms, the letter dealt only with a hypothetical purchase of the Clinic. Moreover, it is uncontroverted that the plaintiffs refused the request for the information. Plaintiffs also cite a November 6 memo from Chuck Williams to Jim Kelly as evidence of wrongful use of confidential information. In the memo, Williams noted the Clinic had refused to supply the requested information relating to the proposed acquisition, and that in* formulating a proposal the financial status of the Clinic was important but “even more crucial is the information related to individual physician productivity and compensation.” (Plf.Exh.23). As with the earlier letter by Kelly, the Williams memo is explicitly directed at buying the Clinic, rather than hiring away some of its physicians. The memo does contain, in one paragraph, a mention of hiring Clinic physicians — and ultimately concludes that it would be “better to buy them from the Clinic rather than hire them.” (Id.) In addition, there is no indication in the memo that, in reaching this conclusion, Williams was using confidential information acquired during the joint venture negotiations. Rather, the memo indicates that Williams’ calculations were based on employing 28 family practitioners “and assuming median activity according to MGMA.” (Id.) James Kelly has stated that, in signing the Letter of Agreement, it was his intention to honor all of the terms of the agreement. On behalf of Wesley, Kelly and Van Pelt communicated the company’s desire to partner with Wichita Clinic to form an integrated health care delivery system. Shelton and Steen also worked toward creating a co-managed, co-governed integrated health care delivery system. Kelly and Van Pelt have stated that at no time during the joint venture negotiations did they want to acquire Wichita Clinic or control and dominate the proposed joint venture. It is uncontroverted that Kelly, Van Pelt, Shelton, Steen and Morgan used their best efforts in seeking to make the proposed joint venture a success. Both Perkins and Greer have testified in their depositions they believed the defendants acted in good faith during the negotiations. Similarly, John Knack of Blue Cross never questioned that Wesley was acting in good faith in its joint venture negotiations with Wichita Clinic. Wesley did not begin to recruit primary care physicians until the fall of 1995. It first held open meetings attended by many area physicians. The only restriction on the physicians which Wesley targeted for potential employment was that the physicians have admitting privileges with Wesley, a restriction of minimal impact since this includes some 300 physicians in the Wichita area. On October 11, 1995, agents of Columbia/HCA and Wesley met with primary care physicians to discuss the formation of a primary care group at Wesley. In January 1996, Wesley became part of Columbia/HCA’s Midwest Division, which was headed by President Kevin Gross. Jim Kelly of Wesley then reported directly to Gross. The decision for Wesley to hire physicians directly was a response to a similar action by Via Christi. Wesley did not hire primary care physicians to increase its outpatient services, but to forestall Via Christi from increasing its market share of inpatient hospital services. Wesley recruited physicians from several sources, including Wichita Clinic. Neither Wichita Clinic Building Company nor IHS signed the Letter of Agreement, or is mentioned in it. Neither company signed the subsequent Letter of Intent. The uncontroverted facts demonstrate that the defendants did not use any confidential information to hire physicians. According to the testimony of Charles Williams, information obtained from Wichita Clinic was used solely to determine the feasibility and desirability of creating a joint venture with Wichita Clinic and establish an integrated delivery system. This included using some of the information to appraise the value of Wichita Clinic’s contribution. While the joint venture negotiations were proceeding, Wesley did not attempt to contact physicians outside the proposed joint venture. No one at Wesley or Columbia/HCA considered an acquisition of Wichita Clinic before August of 1995. Such a course was considered only after the collapse of the joint venture negotiations. It is uncontroverted that, during the course of the joint venture negotiations, Wichita Clinic provided to the defendants financial information relating to the Clinic, including balance sheets, financial statements, and revenue projections. (Plf.Un-contr. Fact ¶ 14). It is controverted, however, whether this information was deemed confidential or constituted a trade secret. The evidence cited by plaintiffs in support of this latter conclusion reflects only the legal conclusions of Wichita Clinic personnel. The plaintiffs also cite the confidentiality agreement as necessarily providing that any information produced pursuant to the Letter of Intent would be considered confidential or a trade secret. This misreads the agreement between the parties. As noted earlier, the agreement provided only: The parties recognize the necessity of exchanging information which is confidential or contains business or trade secrets of the disclosing party. In consideration of this agreement, the negotiations hereunder, and the mutual exchange of such information, the parties do hereby agree to refrain from disclosing in any manner the information received from each other to any third party. The parties further agree to keep confidential the existence and nature of the negotiations hereunder and to refrain from any disclosure thereof to third parties. (Plf.Exh.24). The agreement restricts the ability of any party from “disclosing” information received from the other party; it does not provide that all information exchanged would be considered “confidential or contain[ing] business or trade secrets.” In addition, a fact question exists whether the plaintiffs actually treated the financial information identified in Plaintiffs’ Uncontr. Fact ¶ 14 as privileged information. The defendants have submitted evidence indicating that Wichita Clinic had no written policy restricting the use of financial information, that the plaintiffs failed to identify any such policies in response to discovery requests, and that policies regarding confidentiality applied only to patient information, medical records, and personnel records. The uncontroverted facts also establish that the defendants were aware of the existence of the confidentiality agreement. (Plf.Uncontr. Fact ¶ 15). The assertion by plaintiffs, however, that defendants necessarily were aware that the financial information was confidential under the agreement of August 23, 1994 is not supported by the cited evidence. The evidence establishes that the named agents of the defendants knew of the agreement, not that the information was either confidential or a trade secret. In addition, there is evidence that the Clinic’s physicians were not subject to confidentiality requirements, and that they were not told that Clinic financial information was confidential. The plaintiffs assert that the defendants knowingly used confidential or trade secret information in a November 17, 1995 memorandum projecting potential profits or losses, and in a December 20, 1995 memorandum discussing “PHYSICIAN STRATEGY.” (Plf. Exh’s 27, 32). The evidence is not clearly established, however, that the November memorandum was devoted solely to hiring physicians from Wichita Clinic, as opposed to formulating a proposal to purchase the Clinic, or that the information used — physician-patient encounters — was actually confidential in nature. Similarly, it is disputed whether the information contained in the December memo was confidential. Moreover, this memo appears to be directed, not at any plan to hire Wichita Clinic physicians, but at “offering employment to all of the family practitioners on the Wesley staff.” (Exh. 32). There is no allegation of any disclosure of any trade secret to a third party or of any use of confidential information. As to confidential information, the agreement only prohibits the disclosure of such information. Wichita Clinic has not identified any specific confidentiality agreement between itself and either Wichita Clinic Building Company or IHS. In interrogatories, the plaintiffs were specifically asked to whom the defendants improperly disclosed confidential information. The only third party identified by the plaintiffs as receiving confidential information was Mid States Diagnostics, on the basis of a single letter. It appears uncontroverted that this letter did not reveal any information not known to the recipient, Robert Kozicki of Mid States Diagnostics. There is no evidence this letter adversely affected plaintiffs’ relationship with Mid States Diagnostics. The letter was sent January 9, 1995, and states that Wesley was conducting joint venture negotiations with Wichita Clinic. According to Kozicki, the negotiations between Wichita Clinic and Wesley were “common knowledge in Wichita Medical Community.” (Def.Exh.110). The letter was also sent after a January 1, 1995 Wichita Eagle article which quoted Perkins of Wichita Clinic as acknowledging that the two companies “had held discussions.” (Def.Exh.114) A copy of the letter was in fact sent to the plaintiffs’ representatives Greer and Perkins, neither of whom expressed any contemporaneous objection to the letter as a revelation of trade secrets. In their motion for summary judgment, the plaintiffs argue that the defendants revealed confidential information to third parties, but the cited exhibits (Plf. Exh’s 23, 27, 29, 34, 50, 51) do not establish that the information was in fact confidential in nature. The plaintiffs allege that the defendants revealed confidential information to Larry. Meyer, who was hired as a consultant to consider proposed physician employment strategies. The requested findings of fact cannot be accepted, however, since (1) it is contrary to plaintiffs’ responses to interrogatories, which identified only Mid States Diagnostics as a recipient of confidential information, and (2) Meyer expressly states in his deposition that he did not see any Wichita Clinic data in performing the work he was asked to accomplish. As noted earlier, HCA created a new primary care physician group in 1996, and began to recruit and hire primary care physicians throughout the Wichita area. According to the defendants, this program was a response to the integrated delivery system previously implemented by Via Christi. The plaintiffs characterize the defendants’ motives as less benign, as a part of a merger and acquisition strategy with the goal of “dominating” the Wichita market. The cited evidence (Exh. 159) does not support the plaintiffs’ contention. The evidence does indicate that the defendants did assume an “incremental increase in ... referrals to Wesley [of] 25 or 30 percent.” (Exh; 58, at 62). Wesley recruited physicians from the approximately 300 physicians throughout the Wichita area who had staff privileges with the hospital. Some physicians were extended offers which were not' accepted. Wichita Clinic employed about 50 primary care physicians in early 1996. Wesley extended offers to each of the Clinic’s family practice physicians, along with other primary care physicians not associated with the Clinic. In 1996, thirteen primary care physicians resigned from the Wichita Clinic to join Wesley’s new physician group. These thirteen physicians joined fourteen other primary care physicians, who were not previously affiliated with the Clinic, who also joined with Wesley in 1996. Of the thirteen former Clinic physicians, eleven are employed by Wesley in Sedgwick County. Wesley agreed to pay these physicians’ liquidated damages to the Clinic. The thirteen physicians began terminating their relationship with Wichita Clinic in June, July, and August of 1996. In September of 1996, Wichita Clinic sued Columbia/HCA to enjoin them from alleged predatory conduct. It is uncontroverted that Wichita Clinic’s loss of the thirteen physicians had a substantial negative impact on the Clinic. The magnitude of those losses is open to question. Plaintiffs assert that Wichita Clinic specialists have seen their referrals “substantially diminished.” (Plf.Resp. at 15, ¶ 91). The witnesses whose testimony is cited for this statement, Drs. Taylor and Odenheimer, appear unsupportive. Dr. Taylor admitted he “had no sense” of the number of referrals he lost, that “I don’t have figures,” and that his impression was based on what he had been “hearing anti-dotally [sic].” (Plf.Exh. 77, Taylor Dep. at 21). Dr. Odenheimer attributed the decline in his overall referrals to a drop-off in referrals from Via Christi physicians, not the Wesley network. (Plf.Exh. 20, Odenheimer dep. at 9) Wichita Clinic also contends that Wichita Clinic was damaged, because, when it altered its compensation formula after the departure of the 13 primary care physicians, this caused its cardiologists to leave the Clinic. There is no direct evidence cited by plaintiffs that this was the reason for the departure. Dr. Zepick, one of the departing cardiologists, attributed the departure to a wide variety of factors without mentioning the change in the Clinic compensation system. (Def.Exh. 220, Zepick dep. at 24-26). During their employment with Wichita Clinic, and prior to their later employment by Wesley, Drs. Johnson, Holmes, Hartley, Ernst, Enoch, Butler, Basham, Brunner, Brown and Koehler never signed any confidentiality agreements with Wichita Clinic, Wichita Clinic Building Company, or IHS. The doctors were only subject to confidentiality restrictions on patient information and to comply with “operational rules” of the Clinic. The plaintiffs have provided no evidence consistent with D.Kan. Rule 56.1 which would support a finding that the physicians were contractually bound to protect plaintiffs’ alleged trade secrets. No one from Wichita Clinic ever told these physicians, either verbally or in writing, that their compensation and productivity information was confidential. They were not aware of any attempts by Wichita Clinic to suggest such information was confidential; they were free to ask other physicians about their compensation and productivity. These physicians have each testified they believed they could freely disclose their compensation and productivity information to whomever they chose. The physicians believed their employment contract was between themselves and Wichita Clinic only. They were never told that their contracts were intended to benefit Wichita Clinic Building Company. The doctors understood that under their employment contracts if they left the employment of Wichita Clinic, they could ’either refrain from practicing in Sedgwick County for three years, or pay 25% of their earnings over three years as liquidated damages (15% in the ease of two of the physicians). The doctors have stated that they understood that, if they left Wichita Clinic and stayed in Sedgwick County, they would fulfill their contractual obligations by paying the required percentage of their earnings. The noncompete clause in the employment contract created a significant disincentive for physicians to leave Wichita Clinic. It was not financially viable for the physicians to move their practices outside of Sedgwick County because they would lose their patients. If they practiced in Sedgwick County, they would have to pay the liquidated damages. As a practical matter, the physicians were thus not able to leave Wichita Clinic and practice in Sedgwick County without finding an employer willing to pay the liquidated damages. Other than their own compensation and productivity information, the departing physicians did not thereafter use any Clinic financial records, patient lists, or physician compensation information. Wichita Clinic sent post-departure announcements to their patients stating that Wichita Clinic had other physicians who could provide treatment. One physician notified his patients of his change of practice. Some patients chose to stay with the departing physicians, and had their medical records transferred to Wesley. Prior to September of 1995, no one had contacted Drs. Butler, Enoch, Johnson, Holmes, Brunner, Bassham, Hartley, Ernst, Koehler, Brown, Mosier, or Eglehof about working for Wesley. Indeed, they had not heard that Wesley was considering hiring physicians. While they worked at Wichita Clinic, it was their custom to refer patients both to specialists employed by Wichita Clinic and to outside specialists. After their departure, the physicians continued to make referrals to Wichita Clinic specialists, although the number of referrals declined by some unquantified amount. The physicians have testified that their referral decisions are governed by the patients’ interests, taking into account matters such.as insurance, geography, and patient preference. It is uncontroverted that no one at Wesley or Columbia/HCA pressured or encouraged any of these physicians to change their referral patterns. Referral decisions are based upon the independent professional judgment of the physicians. The employment agreements between the physicians and Wesley provide autonomy to the physicians in making decisions regarding patient care. The agreements provide that the physician “shall have complete control over the diagnosis and treatment of patients.” (Def.Exh.87). Plaintiffs have submitted an exhibit (Plf.Exh.35), showing a table of Wesley’s referral income from each primary care physician for 1995 and 1997, with the percentage increase for each physician, as support for their contention that referrals from the departing physicians have markedly increased referrals to Wesley. Defendants object to the exhibit as a creation of counsel lacking in foundation. The information underlying this exhibit is taken from a response to an interrogatory by Wesley, which provided information not only as to the two years cited in PlfiExh. 35, but also for the years 1994 and 1996. This information is shown in the following table. Physician 1994 1995 1996 1997 Bassham $ 90,018 $ 50,714 $187,753 $334,641 Brown 407,155 292,021 606,901 850,812 Brunner 19.969 142,033 620,981 401,364 Butler 31,803 164,419 173,537 379,420 Egelhof 78.970 97,033 554,192 566,245 Enoch 146,318 332,713 214,692 318,682 Ernst 34,772 108,761 183,786 277,525 Hartley 179,365 170,023 246,661 362,234 Holmes 314,668 134,080 543,656 598,012 Johnson 71,393 72,096 148,997 256,263 Koehler 135,969 109,183 105,757 454,804 Mosier 262,973 209,166 243,561 305,738 Svoboda 0 7,789 0 32 Generally, this additional information also supports plaintiffs’ broad contention that Wesley enjoyed an increase in referral income from the departing physicians, although, for a few physicians there are actually decreases in referral income during some years. The usefulness of the information contained in the table is also limited. It does not measure the percentage of referrals to Wesley or the number of patients seen by the physician. It would be unusual if, as the career of a physician progresses, she would not see an increasing patient base and thus naturally produce more and more referrals to specialists. There are several additional limitations apparent in the evidence. Wesley has stated that it does not track individual referrals, and Wichita Clinic has stated that it “maintains no records from which you can track referrals and measure decreases.” (Def.Exh. 206, Allen dep. at 139). While the physicians were employed at Wichita Clinic, it was their custom and practice to admit patients to Wesley and Via Christi. After joining Wesley, the physicians have continued to admit patients to both hospitals. Plaintiffs have attempted to controvert this fact, but have submitted no evidence showing admissions to Via Christi have ceased or declined. No one has attempted to pressure the physicians to admit patients to Wesley. Their employment agreements with Wesley allow them to exercise admission privileges with any hospital in Wichita. The physicians have testified that, by 1994, they knew they were being paid much less at Wichita Clinic than other primary care physicians were being paid by other major employers such as Via Christi. The plaintiffs attempt to controvert this point by stating that the physicians’ salaries were adjusted in 1994 and 1995 “to reflect market conditions and rates.” (Plf.Resp. at 138, ¶ 261). This may have been the motivation for salary increases in 1994 and 1995, but it does not alter the fact that in 1994 the physicians who would later leave Wichita Clinic were paid much less than other physicians employed by major employers. Via Christi’s base salary was $150,000. In contrast, and contrary to the conclu-sory suggestion of plaintiffs, it is apparent that Wichita Clinic was not providing compensation comparable with the market leader, Via Christi. Nine of the physicians who left Wichita Clinic were making less than $125,000. In 1995, only one of the 26 Wichita Clinic family practice physicians had a base salary of $150,000 or more. It is uncontroverted that the physicians who left Wichita Clinic believed that the Clinic was unwilling to adjust their compensation to competitive levels, and this played a major role in them decisions to leave. These thirteen physicians had existing employment agreements with the Wichita Clinic which contained covenants not to compete. The agreements provided that, upon leaving employment, the physician would not “for a period of three (3) years thereafter, directly or indirectly engage in the practice of DOCTOR’S profession in Sedgwick County, Kansas.” Columbia/HCA and Wesley knew of these employment contracts, and the noncompete provisions. In employing the thirteen physicians, the defendants agreed to pay the liquidated damages specified in the employment agreements. As a result of the departure of the 13 physicians, the Clinic lost revenue from referrals to Wichita Clinic specialists. The uncontroverted evidence does not clearly establish, however, the extent of the actual damages experienced by the Clinic. In addition to agreeing to pay liquidated damages, the defendants also agreed to pay the former Wichita Clinic doctors compensation which generally exceeded their prior salaries. The Wichita Clinic employment contracts were terminable upon 30 days notice. Each of the Wichita Clinic physicians subsequently employed by Wesley provided the requisite notice. The liquidated damages provision in the employment contracts was designed to compensate Wichita Clinic for costs associated with the loss of a physician. Wichita Clinic believes it incurs a net cost of $230,-000 for the first three years after hiring a new family practice physician. According to Professor Butler, the Clinic’s liquidated damages formula would result in a recovery of approximately $225,000, assuming the physician makes the medial gross revenue of $300,000. On December 30, 1997, the defendants paid the first of three liquidated damages payments, totaling some $659,939.65, to Wichita Clinic on behalf of the thirteen former Wichita Clinic physicians. A second installment, in the amount of $686,-828.35, was paid to Wichita Clinic on August 3, 1998. The defendants cite litigation which arose after the departure of five Wichita Clinic cardiologists in 1996 to f