NRSA position entitling him to offset his service obligation to the NHSC.
The court rejects defendant's argument. The NHSC program does not permit participants after a finding of default to unilaterally enter a NRSA position and claim that he is satisfying his service obligation. Approval for such a course of action must come from the NHSC after the applicant has demonstrated exceptional promise for research. There is no evidence that this defendant has made the requisite showing or complied with NHSC provisions for substituting time spent under NRSA for his service obligation. The only evidence on this issue consists of a letter written by defendant in April 1980 wherein he stated his desire to substitute NRSA in place of service. We note that when Dr. Bills initially applied for a NHSC scholarship he explicitly disclaimed any interest in research and his selection for an award was based on the statements provided by Dr. Bills in his application. There is no showing that a defendant may, after being found in default, unilaterally determine the nature of the service he is to provide in return for his scholarship award. To allow participants this option would vitiate and negate the congressional intent in establishing the program of providing medical care and service in areas currently underserved by medical personnel. The intent and purpose of the NHSC scholarship program is not to provide medical school education to individuals, but rather to improve the delivery of health services in health manpower shortage areas. 42 U.S.C. § 254d(a). This court cannot grant defendant's request for credited service.
Second, defendant seeks summary judgment on the issue of treble damages. Defendant contends that this portion of the contract should not be applied in this case because any breach committed by Dr. Bills approximates a termination of training and not a failure to begin service and that therefore the treble damages section does not apply. Further defendant argues that this provision operates as a penalty which should not be enforced under contract law.
We reject as unsupported defendant's argument that defendant's action approximates a termination of training. The applicable statute, 42 U.S.C. § 254o(a), clearly indicates that the failure to complete training provision refers exclusively to the failure to complete academic training and not to post-graduate training. Here there is no dispute that defendant completed his medical school training, therefore this provision, which obligates a participant to repay only the amount received, is not applicable to this defendant under these circumstances. Defendant, having been found to have breached his contract with the NHSC is required to pay treble damages pursuant to Sec. 254o(b).
On the issue of enforceability, defendant argues that the damages provision of the NHSC program operates as a penalty, and under contract law is unenforceable. The question of enforceability is one of law to be resolved by this court. In re United Merchants & Manufacturers, Inc., 674 F.2d 134, 141 (2d Cir. 1982).
Liquidated damages are enforceable where the damages are uncertain in nature or amount or are unmeasurable, such as with government contracts. Priebe & Sons, Inc. v. United States, 332 U.S. 407, 411, 92 L. Ed. 32, 68 S. Ct. 123 (1947). See also Finkle v. Gulf & Western Mfg. Co., 744 F.2d 1015, 1021 (3d Cir. 1984). We cannot conclude that the damage provision in question is disproportionate to the value of the injury that results from non-performance. Finkle, supra. We note that this particular damage provision has been previously upheld in similar litigation. United States v. Swanson, 618 F. Supp. 1231 (E.D. Mich. 1985). One cannot readily estimate the damages occasioned by the loss of the services of a physician, but we adopt the finding of the Swanson court which found that this particular damage provision had a reasonable relationship to the loss suffered by the government, i.e., the loss of a doctor's services in an area determined to be medically underserved. Swanson, supra, at 1243-44. The program's provisions evidence a reasonable attempt to fix compensation under these circumstances. Id. We point out that other statutes containing treble damages provisions, e.g., anti-trust, 15 U.S.C. § 15 and patent, 35 U.S.C. § 284, have been sustained and upheld. We will therefore uphold the validity of the damages provision of 42 U.S.C. § 254o(b) and apply it here against a defaulting defendant.
We are, though, cognizant of the burdensome nature of this damage provision and contrast it against the laudable and lofty aims of the NHSC program. Congress, when it enacted this provision, did so, not with the intention of extracting financial remuneration from recalcitrant physicians, but rather its goal was to induce NHSC participants to fulfill their contractual obligations. It wanted program participants to perform their obligations and thereby meet what Congress perceived to be a pressing health need in the country. In light of these factors, the court will stay entry of this judgment against the defendant for a period of 30 days in order to allow Dr. Bills to reach an accommodation with the government whereby he will commence to provide services pursuant to the aims of the NHSC program. This opportunity is being granted to avoid the imposition of damages and in order to carry out the intent of the program - providing quality medical care in health manpower shortage regions. Failure of the defendant to reach a satisfactory accord will result in the entry of summary judgment in favor of the government and the imposition of damages calculated pursuant to the formula set out in 42 U.S.C. § 254o(b). The court will enter an order consistent with this opinion.
This matter having been opened to the court on cross-motions by the parties and the court having heard the argument of counsel and having considered the papers submitted by counsel on the motions and for good cause shown;
It is on this 17th day of March 1986,
ORDERED that plaintiff's motion for summary judgment against the defendant for breach of contract be and hereby is granted with damages to be assessed against the defendant in accordance with the formula as set forth in 42 U.S.C. § 254o(b); and it is further
ORDERED that entry of the above order be stayed for a period of 30 days to allow the defendant to agree to a plan of service which will fulfill his obligatio to the NHSC.
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