Am. Anesthesiology of Ga., LLC v. Northside Hosp., Inc.

• Decision Date: 29 December 2021
• Docket Number: A21A1644
• Citation: 867 S.E.2d 531,362 Ga.App. 350
• Parties: AMERICAN ANESTHESIOLOGY OF GEORGIA, LLC v. NORTHSIDE HOSPITAL, INC.
• Court: Georgia Court of Appeals

362 Ga.App. 350

867 S.E.2d 531

AMERICAN ANESTHESIOLOGY OF GEORGIA, LLC

v.NORTHSIDE HOSPITAL, INC.

A21A1644

Court of Appeals of Georgia.

December 29, 2021

Reconsideration Denied January 26, 2022

Meredith Laughlin Allen, Jeffrey C. Clark, Stanley A. Roberts, Matthew Allen Fitzgerald, for Appellant.

Stephen Derek Bauer, Jeffrey Ronald Baxter, Joshua I. Bosin, Robert Sparks Highsmith Jr., Atlanta, Wesley Charles Ross, Dublin, Allen Andre Hendrick, Jacquelyn Thomas Watts, Atlanta, for Appellee.

Phipps, Senior Appellate Judge.

In this action for a declaratory judgment concerning the enforceability of restrictive covenants, defendant American Anesthesiology of Georgia, LLC ("AAG") appeals from the trial court's order granting the plaintiff's motion for a judgment on the pleadings as to Counts One and Two of its complaint.¹ AAG contends that the trial court erred when it ruled that the restrictive covenants at issue here are unenforceable. For the reasons that follow, we agree and reverse.

AAG is the successor-in-interest to Gwinnett Anesthesia Services, P.C., while plaintiff Northside Hospital, Inc. d/b/a Northside Hospital Gwinnett and Northside Hospital Duluth is the successor-in-interest to Gwinnett Hospital System, Inc. For purposes of this appeal, AAG and its predecessors will be referred to collectively as "AAG," and Northside Hospital and its predecessors will be referred to collectively as "Northside."

At issue in this appeal is a 2003 "Professional Services Agreement for Anesthesia and Pain Management Services" (the "Services Agreement" or "Agreement") entered into between AAG and Northside. Under the Services Agreement, AAG agreed to provide Northside with the services of anesthesiologists (designated as "Specialists" in the Agreement) and physician assistants, certified registered nurse anesthetists, and other advanced practice nurses and nurse clinicians engaged in the specialty of anesthesiology (collectively designated as "Physician Extenders" in the Agreement) during the initial term and any renewal term of the Agreement. In return, Northside agreed to grant AAG the exclusive right to perform the services rendered by the Specialists and Physician Extenders for Northside's patients while the Agreement remained in effect.

By its express terms, the Services Agreement did not establish an employer-employee relationship between Northside (defined in the Agreement as the "System") and either AAG (defined as the "Practice") or its Specialists or Physician Extenders. In that regard, the Services Agreement states:

The relation of the Practice, the Specialists, and the Physician Extenders with the System shall be that of independent contractors practicing their respective professions as medical specialists, and the Practice, the Specialists, and the Physician Extenders will at all times be considered independent contractors and not employees, agents or partners of the System.

The Services Agreement provisions primarily at issue in this appeal appear in Sections 9 (a) ("Offers by the Practice"), 9 (b) ("Offers by the System"), and 15 (c) ("Non-competition and Non-solicitation Covenants"). Section 9 (b) — the enforceability of which is at issue here — provides, in relevant part:

Recognizing the special nature of the relationship existing, or that will exist, between the Practice and the Specialists and Physician Extenders whom it employs or retains in the Practice, and that the recruiting and training of Specialists and Physician Extenders by the Practice is a costly and time consuming endeavor, the System agrees that it will not, without the written consent of the Practice, [while the Agreement is in effect and for one year after its termination], directly or indirectly, through any manner or means, impair or initiate any attempt to impair the relationship which exists between the Practice and any Specialists or Physician Extenders through offers of employment or offers of contracts for services to be rendered by such Specialists or Physician Extenders or otherwise.

The parties refer to the above provision as the "no-impairment clause." Section 9 (b) further provides that, while the Agreement is in effect and for one year after its termination, Northside "will not employ or contract with or otherwise permit any Physician Extender to provide services at the Hospitals^{[2 ]} without the prior written consent of the Practice." The parties refer to this provision as the "no-hire clause."

Section 9 (a) similarly provides, in relevant part:

Recognizing the special nature of the relationship existing, or that will exist, between the System and the Department Personnel whom it employs or retains in the Department,^{[3 ]} and that the recruiting and training of Department Personnel for the Department by the System is a costly and time consuming endeavor, the Practice agrees that it will not, without the written consent of the Hospital, [while the Agreement is in effect and for one year after its termination], directly or indirectly, through any manner or means, impair or initiate any attempt to impair the relationship which exists between the System and any Department Personnel through offers of employment or offers of contracts for services to be rendered by such Department Personnel or otherwise.

A related provision, Section 15 (c), in turn, provides:

Non-competition and Non-solicitation Covenants. The Practice covenants and agrees that [while the Agreement is in effect and for one year after its termination] by the System with cause or by the Practice without cause, the Practice shall not, on its own behalf or on behalf of any person[ or entity] ("Person"):

(i) engage in the practice of professional anesthesiology services within the Service Area [defined as "Gwinnett County, Georgia"] (except with respect to those obligations to which the System has expressly consented in writing ...). The Practice acknowledges and agrees that: (A) this covenant is intended to protect the investment the System has made and will continue to make in establishing the Department, the role of the Practice and the Specialists in the Department[ and] the System, and (B) the restrictions contained herein are reasonable in terms of duration, scope and geographic area; [or]

(ii) solicit, recruit, or induce any employee or independent contractor of the System who is actively employed or otherwise engaged by [the] System and who was employed by or otherwise engaged by [the] System at any time during the initial term or any renewal term of this Agreement to sever his or her relationship with [the] System or to be employed or otherwise engaged in any capacity by any other Person conducting a business of practicing medicine.

By its terms, the Services Agreement automatically renewed each year until AAG's parent company gave notice in August 2020 that it intended to terminate the Agreement on December 4, 2020. In November 2020, Northside filed this action seeking a judgment declaring that the no-impairment and no-hire clauses in the Services Agreement are unenforceable and therefore do not bar Northside from seeking to employ medical providers who have rendered services to Northside (through AAG) under the Agreement. Northside attached a copy of the Agreement to its complaint.

The case proceeded to a bifurcated bench trial, in which the parties first addressed Counts One and Two of Northside's complaint, which challenged the enforceability of the no-impairment and no-hire clauses, respectively. After Northside rested on Counts One and Two, it moved for a judgment on the pleadings as to those counts.⁴ In its order granting Northside's motion, the trial court first concluded that it was required to apply "strict scrutiny" to the no-impairment and no-hire clauses.⁵ The court further determined that the no-hire clause is unenforceable because it bars Northside from even unsolicited contact with AAG personnel. On that basis, the court ruled that the no-impairment clause likewise is unenforceable. Finally, the court concluded that both covenants failed even if they were subject only to "mid-level scrutiny." This appeal followed.

We review de novo a trial court's ruling on a motion for a judgment on the pleadings, accepting all well-pled material allegations of the opposing party's pleading as true, and taking all allegations of the moving party which have been denied as false. See Polo Golf & Country Club Homeowners Assn. v. Cunard , 306 Ga. 788, 791-792 (2), 833 S.E.2d 505 (2019). A judgment on the pleadings should be granted "only where there is a complete failure to state a cause of action or defense." Pressley v. Maxwell , 242 Ga. 360, 360, 249 S.E.2d 49 (1978). "[I]n considering a motion for judgment on the pleadings, a trial court may consider exhibits attached to and incorporated into the pleadings, including exhibits attached to the complaint or the answer." BCM Constr. Group v. Williams , 353 Ga. App. 811, 812, 840 S.E.2d 51 (2020) (citation and punctuation omitted).

The enforceability of a restrictive covenant is a question of law that we also review de novo, Holland Ins. Group v. Senior Life Ins. Co. , 329 Ga. App. 834, 837 (1), 766 S.E.2d 187 (2014), "looking solely to the language of the restrictive covenant." Uni-Worth Enterprises v. Wilson , 244 Ga. 636, 641 (2), 261 S.E.2d 572 (1979). We review the enforceability of restrictive covenants entered into before May 11, 2011 (as is the case here), based on the law as it stood at that time, before the enactment of Georgia's Restrictive Covenants Act, OCGA § 13-8-50 et seq. Burson v. Milton Hall Surgical Assoc. , 343 Ga. App. 159, 160-161, 806 S.E.2d 239 (2017) ; see Ga. L. 2011, pp. 399, 409 § 5. Before that date, Georgia law disfavored restrictive covenants, and the Georgia Constitution forbade the General Assembly from authorizing them. Burson , 343 Ga. App. at 161, 806 S.E.2d 239 ; see also Rash v. Toccoa Clinic Med. Assoc. , 253 Ga. 322, 323 (1), 320 S.E.2d 170 (1984) (observing, under the former law, that...