## Facts

- Genesis Medical Center decided to restructure anesthesiology services due to departmental problems and entered an exclusive-provider contract with Anesthesia & Analgesia, P.C. (A & A).
- At the time, Genesis had fifteen anesthesiologists with staff privileges; seven were affiliated with A & A and eight (including Dr. Colin R. Tredrea and Dr. Douglas G. Wells) practiced independently.
- The Genesis–A & A contract made A & A the exclusive anesthesiology provider but permitted Genesis to contract with certain existing non–A & A anesthesiologists as independent contractors if agreements were executed by a specified deadline.
- The contract allowed deadline extensions only with A & A’s consent, which could not be “unreasonably withheld.”
- Genesis offered contracts to the non–A & A anesthesiologists and extended the acceptance deadline multiple times during negotiations.
- A & A consented to two extensions but refused to consent to a further extension.
- After Genesis purported to extend the deadline again, Tredrea and Wells attempted to accept the offers, but Genesis took the position it could not contract with them without A & A’s consent.
- Tredrea and Wells sued A & A (and others), alleging they were intended third-party beneficiaries of the Genesis–A & A contract and that A & A breached by unreasonably withholding consent, causing lost income.
- A jury awarded each plaintiff damages exceeding $300,000 against A & A, and the trial court disposed of claims against Genesis in Genesis’s favor.

## Issues

1. Whether Tredrea and Wells were intended third-party beneficiaries of the Genesis–A & A contract with standing to enforce the “not unreasonably withhold consent” provision.
2. Whether A & A breached the contract by unreasonably withholding consent to an additional extension of the deadline for Genesis to contract with plaintiffs.
3. Whether Genesis could be held liable to plaintiffs despite the contractual requirement of A & A’s consent to extend the deadline.
4. Whether the evidence supported causation and the amount of damages awarded.

## Decision

- The Iowa Supreme Court affirmed on both appeals.
- The court held Tredrea and Wells were intended third-party beneficiaries entitled to sue A & A on the Genesis–A & A contract.
- The court upheld the jury’s finding that A & A unreasonably withheld consent to the additional deadline extension and thereby breached the contract.
- The court affirmed judgment in favor of Genesis on plaintiffs’ claims.
- The court sustained the damages awards as supported by the evidence and not impermissibly speculative or excessive.

## Legal Principles

- A nonparty may enforce a contract only if the contract shows an intent to benefit that nonparty (an intended beneficiary), not merely an incidental benefit.
- Contract language identifying a defined class of nonparties and conditioning their ability to receive a contractual benefit can support intended-beneficiary status and standing.
- A clause stating consent will not be “unreasonably withheld” imposes an enforceable reasonableness standard that limits discretionary refusal.
- Whether consent was unreasonably withheld is commonly a fact question; an appellate court will uphold the verdict if supported by substantial evidence.
- Lost-income damages may be awarded when the breach is a substantial factor in preventing an expected contractual relationship and the resulting loss is shown with reasonable evidentiary support.

## Conclusion

The court affirmed a verdict holding an anesthesiology group liable to nonmember physicians as intended third-party beneficiaries where the group unreasonably withheld contractually required consent to a deadline extension, preventing the physicians from contracting with the hospital and causing compensable economic loss.


Tredrea v. Anesthesia & Analgesia, P.C., 584 N.W.2d 276 (Iowa 1998)