Affordable Care, LLC v. Martin

• Decision Date: 13 April 2022
• Docket Number: 54,286-CA
• Parties: AFFORDABLE CARE, LLC Plaintiffs-Appellants v. JEFFREY LEE MARTIN, DDS, A PROFESSIONAL DENTAL CORPORATION Defendant-Appellee
• Court: Court of Appeal of Louisiana — District of US

AFFORDABLE CARE, LLC Plaintiffs-Appellants v. JEFFREY LEE MARTIN, DDS, A PROFESSIONAL DENTAL CORPORATION Defendant-Appellee

No. 54, 286-CA

Court of Appeals of Louisiana, Second Circuit

April 13, 2022

Appealed from the First Judicial District Court for the Parish of Caddo, Louisiana Trial Court No. 627, 387 Honorable Ramon Lafitte, Judge

PETTIETTE, ARMAND, DUNKELMAN, WOODLEY, BYRD & CROMWELL L.L.P. By: Thomas A. Pressly, IV LEWIS BRISBOIS BISGAARD & SMITH, LLP By: Nancy A. Cundiff Caroline J. Sanches Counsel for Appellants, Affordable Care, LLC and Thomas Kennedy DDS

DOWNER, JONES, MARINO & WILHITE, L.L.C. By: Michael A. Marino Counsel for Appellee

Before MOORE, ROBINSON, and HUNTER, JJ.

HUNTER, J.

Plaintiff, Affordable Care, LLC, appeals a trial court judgment denying its petition for eviction and sustaining the peremptory exception of no right of action filed by defendant, Jeffrey Lee Martin, DDS. For the following reasons, we affirm.

FACTS

Plaintiff Affordable Care, LLC ("Affordable Care"), a North Carolina Corporation, provides management and dental laboratory services to dental practices nationwide. On August 5, 2002, Affordable Care leased commercial property on Ashley Ridge Boulevard in Shreveport, Louisiana, from SunDog, LLC, pursuant to a prime lease agreement.

On July 1, 2003, Affordable Care and defendant, Jeffrey Lee Martin, DDS ("Martin DDS"), entered into three agreements: (1) a Management Services Agreement ("MSA"), whereby Affordable Care would provide management services to Martin DDS; (2) a Dental Laboratory Services Agreement, pursuant to which Affordable Care would provide dental laboratory services to Martin DDS; and (3) a Sublease, by which Affordable Care would lease the premises, equipment, and fixtures to Martin DDS. The sublease provided, in pertinent part:

***

2. Term of Lease. The term of this Lease shall commence on July 1, 2003, and shall continue for a period of one (1) year, unless and until earlier terminated. The term shall be renewed and extended automatically for successive one-year terms

provided that the Agreement to Provide Management Services to a Dental Practice between Landlord and Tenant (the "MSA") is in effect as of the last day of the current term. Tenant may terminate this Lease at any time, for any reason upon ninety (90) days written notice to Landlord. Otherwise, absent a default hereunder, neither Landlord nor Tenant may terminate this Lease except in connection with the termination of the MSA. Termination of the MSA will result in automatic termination of this Lease[.]

***

17. Option to Acquire Premises or Assume Prime Lease. Tenant may, at its option, acquire and assume Landlord's interest in the Premises (including all equipment and fixtures) upon termination of the Lease, if all of the following conditions are fully satisfied.

(a) No less than sixty (60) days prior to the termination of the Lease, Tenant must deliver to Landlord written notice that Tenant desires to acquire Landlord's interest in the Premises (including all equipment and fixtures); provided, however, if Tenant does not have at least seventy (70) days advance knowledge of the Lease's imminent termination, then Tenant must deliver the above-mentioned notice to Landlord within ten (10) days of receipt of such knowledge.

(b) If Landlord does not own the Premises, fixtures, and/or equipment, but rather leases the Premises, fixtures, and/or equipment from one or more persons ("Prime Lessors"), then prior to termination of the Lease, the Tenant shall cause all Prime Lessors to execute such documents as deemed necessary or prudent by Landlord to (i) release Landlord from any obligation to the Prime Lessor from and following the termination of the Lease and (ii) permit assignment of Landlord's leasehold interest in the Premises, fixtures, and/or equipment to Tenant.

(c) Upon termination of the Lease, Tenant and Landlord must execute such documents as deemed necessary or prudent by Landlord to release each party from any obligation to the other party from and following the termination of the Lease.

(d) Upon termination of the Lease, Tenant must pay to Landlord, in cash or certified funds, the sum of the following: (i) the fair market value siting and development services related to the Premises provided by the Landlord that have not been paid by Tenant, which value is hereby agreed in good faith to be $50, 000, plus (ii) the greater of the fair market value or book value of the Landlord's interest in the Premises (including fixtures) (but in no event greater than the acquisition costs), plus (iii) the greater of the fair market value or book value (but in no event greater than the acquisition costs) of the Landlord's interest in the equipment located at the Premises. An appraiser selected by Landlord shall determine fair market value, and Tenant shall reimburse Landlord for such appraiser's costs).

If all of the foregoing conditions are fully satisfied, then, upon termination of the Lease, Landlord shall convey Landlord's interest (whether leasehold or ownership) in the Premises and all equipment and fixtures to Tenant, and Landlord shall execute such documents deemed necessary or prudent by Landlord to perfect such conveyance. Such conveyance shall be as-is, where-is, and free and clear of any mortgage previously granted by Landlord.

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On August 31, 2020, Martin DDS notified Affordable Care of its intent to terminate the agreements and exercise its option to assume the prime lease under Section 17 of the sublease. Martin DDS requested the documents and information necessary to satisfy the requirements of Section 17 and inquired as to "any amounts [Affordable Care] believed Martin [DDS] owed as compensation for the value of Affordable [Care's] interest in the Premises." On October 20, 2020, Martin DDS notified Affordable Care it had purchased the premises and was now the owner and landlord under the prime lease.

Thereafter, Affordable Care sold its interest in the sublease, equipment, and fixtures to Thomas Kennedy, DDS of Louisiana II, a Professional Dental LLC ("Kennedy DDS") on October 26, 2020. In turn, Kennedy DDS leased the premises, equipment, and fixtures back to Affordable Care. Kennedy DDS, a competitor of Martin DDS, refused to allow Affordable Care to assign its leasehold interest in the fixtures and equipment to Martin DDS.^[1]

On October 28, 2020, Affordable Care notified Martin DDS it had learned Martin DDS had incurably breached the MSA by disclosing "confidential information of Affordable Care" and had used the "confidential information" to obtain ownership in the premises. In the notice, Affordable Care stated, "We believe that the aforementioned conduct is not subject to cure and entitles Affordable Care to terminate the Services Contract for cause[.]"

However, Affordable Care did not respond to Martin DDS's request for documents necessary to exercise the option under Section 17. Therefore, in November 2020, Martin DDS sent Affordable Care a check in the amount of $50, 000, in a "good faith effort to comply with [Section] 17(d)." Affordable Care held the check in trust but did not comply with the request for information pursuant to Section 17 of the sublease.

On November 19, 2020, Affordable Care provided Martin DDS with notice of the termination of the sublease and notice to vacate the premises. Affordable Care asserted the MSA had terminated due to the breach by Martin DDS, which resulted in the termination of the sublease. Affordable Care informed Martin DDS it was required to vacate the premises on or before 12:01 a.m. on November 29, 2020. Thereafter, on November 29, 2020, Counsel for Affordable Care sent a notice to Martin DDS's counsel, which stated in part:

*** The Cure Time set forth in the Declaration of Default and the [MSA] has expired. This letter confirms that Affordable has Cause to terminate the [MSA] under Section V(C)(2) of the [MSA], that Respondents were provided with the required period to cure Respondents' material breaches of the [MSA], and that Respondents elected not to cure, or even attempt to cure, Respondents' material breaches of the [MSA]. Accordingly, the [MSA] is terminated effective November 29, 2020 at 12:01 am., Shreveport, Louisiana time.

Due to the termination of the Services Contract, there is an "automatic termination" of the Lease between Affordable and the Practice. (Lease at ¶2). All of the conditions of Section 17 of the Lease have not been "fully satisfied" as of the termination of the Lease. (Lease at ¶17(d)). Accordingly, the Practice no longer has the right of possession of the [premises]. However, in order to avoid disruptions in patient care, Affordable will permit Respondents to continue operations at the Premises until 12:01 a.m. on December 1, 2020, Shreveport, Louisiana time.

***

On November 30, 2020, Affordable Care learned Martin DDS had removed the original signage from the building and replaced it with a sign of a business named "Martin Dentures and Implants." Martin DDS had also placed a sign on the premises which read, "THIS LOCATION SOON TO BE MARTIN DENTURES AND IMPLANTS," and included the internet address for the new business.

On December 1, 2020, Affordable Care filed a Petition and Rule for Eviction, alleging, inter alia: Martin DDS has no legal right to remain on the premises because the sublease terminated and a notice to vacate had been provided; and no legal relationship existed between Affordable Care and "Martin Dentures and Implants," and "Martin Dentures and Implants" did not have a legal right to occupy the premises.^[2]

Martin DDS answered the petition and generally denied the allegations set forth therein. Martin DDS also asserted an affirmative defense as follows: "[Martin DDS]...