## Facts

- Several entities, including Saint Alphonsus Diversified Care, Inc., formed MRI Associates, LLP (MRIA) in 1985 to acquire and operate MRI equipment and related facilities.
- MRIA served as general partner for related limited partnerships operating an on-campus MRI unit and mobile MRI services.
- A radiology group that held exclusive radiology rights for Saint Alphonsus read MRI studies performed at MRIA’s MRI center.
- In the late 1990s, the radiology group formed or planned competing off-campus imaging operations; negotiations for a single combined imaging entity failed.
- In 2001, Saint Alphonsus became a member of the competing imaging venture, which expanded to an additional facility in 2002.
- In February 2004, Saint Alphonsus notified MRIA it would dissociate effective April 1, 2004; the partnership agreement imposed a one-year noncompetition obligation on a dissociating partner.
- Saint Alphonsus sued to determine the value of its partnership interest; MRIA counterclaimed for breach of contract and related business torts, alleging competitive conduct and disloyalty tied to Saint Alphonsus’s affiliation with the competing imaging venture.

## Issues

1. Whether Saint Alphonsus’s dissociation was wrongful as a matter of law under the partnership agreement and applicable partnership law.
2. Whether the trial court erroneously admitted (a) a settlement offer and (b) an internal counsel memorandum containing legal advice.
3. Whether the jury’s damages award improperly included losses suffered by related entities that were not proper claimants on the submitted theories.
4. Whether the identified errors required vacatur and remand for further proceedings.

## Decision

- The Idaho Supreme Court vacated the judgment and remanded for further proceedings.
- The Court held the district court erred by granting partial summary judgment that dissociation was wrongful because the partnership agreement lacked an express limitation on the right to dissociate.
- The Court held it was prejudicial error to admit evidence of a settlement offer to prove liability or the amount of a claim.
- The Court held it was prejudicial error to admit an in-house counsel memorandum containing legal advice protected by attorney–client privilege.
- The Court held the damages award improperly included losses sustained by related entities that were not appropriate claimants, requiring correction on remand.
- The Court left undisturbed certain other rulings not necessary to the disposition, but concluded the cumulative effect of the principal errors required vacatur.

## Legal Principles

- A partner’s dissociation is not wrongful based on implied restrictions; contractual limits on dissociation must be stated expressly to support a wrongful-dissociation ruling as a matter of law.
- Evidence of compromise offers and negotiations is inadmissible when offered to prove liability for, invalidity of, or amount of a disputed claim.
- Attorney–client privilege protects confidential legal advice communications; privileged internal legal memoranda are not admissible absent a valid waiver.
- Damages must be awarded to the legally injured claimant; a plaintiff may not recover losses belonging to separate, nonparty entities on claims where those entities are the actual holders of the injury.

## Conclusion

The court vacated a large business-litigation verdict arising from a hospital’s withdrawal from an imaging partnership because the trial court wrongly treated dissociation as wrongful as a matter of law, allowed prejudicial settlement and privileged legal-advice evidence, and permitted damages reflecting losses of related but nonparty entities, requiring a new trial consistent with these limits.


Saint Alphonsus Diversified Care, Inc. v. MRI Assocs., LLP, 148 Idaho 479, 224 P.3d 1068 (Idaho 2009)