Benchmark Medical Holdings v. Rehab Solutions

• Decision Date: 05 March 2004
• Docket Number: No. CIV.A.03-A-993-N.,CIV.A.03-A-993-N.
• Citation: 307 F.Supp.2d 1249
• Parties: BENCHMARK MEDICAL HOLDINGS, INC., et al., Plaintiffs, v. REHAB SOLUTIONS, LLC, et al., Defendants.
• Court: U.S. District Court — Middle District of Alabama

307 F.Supp.2d 1249

BENCHMARK MEDICAL HOLDINGS, INC., et al., Plaintiffs, v. REHAB SOLUTIONS, LLC, et al., Defendants.

No. CIV.A.03-A-993-N.

United States District Court, M.D. Alabama, Northern Division.

March 5, 2004.

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David J. Middlebrooks, Albert Loring Vreeland, II, R. Brett Adair, Lehr Middlebrooks Price & Vreeland, PC, Birmingham, AL, for Benchmark Medical Holdings, Inc., Benchmark Medical Management Company, Benchmark Acquisition Corp., plaintiffs.

Robert A. Huffaker, Rushton, Stakely, Johnston & Garrett, P.A., Montgomery, AL, for Rehab Solutions, Inc.

Robert A. Huffaker, Rushton, Stakely, Johnston & Garrett, P.A., Montgomery, AL, Richard A. Ball, Jr., B. Saxon Main, Ball, Ball, Matthews & Novak, P.A., Montgomery, for Glen" Rocky" Barnes, Quinn S. Millington, Dale M. Yake, defendants.

MEMORANDUM OPINION AND ORDER

ALBRITTON, Chief Judge.

I. INTRODUCTION

This case is before the court on a Motion for Summary Judgment filed by Glen "Rocky" Barnes ("Defendant" or "Barnes") on January 30, 2004 (Doc. # 80). Barnes seeks summary judgment on the claims brought against him, and he also seeks partial summary judgment on his counter-claims.

Benchmark Medical Holdings, Inc., Benchmark Medical Management Company, and Benchmark Acquisition Corporation ("Plaintiffs" or "Benchmark") filed their Complaint on October 2, 2003 bringing claims for violation of the Lanham Act (Count I), violation of the Alabama Trade Secrets Act (Count II), breach of the asset purchase agreement against Barnes (Count III), breach of employment agreements against Barnes, Quinn S. Millington ("Millington"), and Dale M. Yake ("Yake") (Count IV), breach of non-competition agreements against Millington and Yake (Count V), breach of fiduciary duty against Barnes, Millington, and Yake (Count VI), and tortious interference with contract (Count VII).¹ The Plaintiffs reached a settlement with Millington, Yake, and Rehab Solutions, LLC which resulted in a joint stipulation of dismissal; thus, Count V is due to be dismissed. As a result of this settlement, the issues raised in Count I (Lanham Act) and Count II (the Alabama Trade Secrets Act) have been resolved; accordingly, the Plaintiffs agree that Count I and Count II are due to be dismissed. Plaintiffs' Opposition to Barnes's Motion for Summary Judgment at 2 n. 1. Barnes is the only remaining Defendant. Subsequent to the filling of Barnes's motion for summary judgment, this court dismissed without prejudice Barnes's counter-claims. Therefore, Barnes's Motion, insofar as he seeks partial summary judgment on his counterclaims, is rendered moot. The remaining claims against Barnes before this court include Count III (breach of the asset purchase agreement), Count IV (breach of the employment agreement), Count VI (breach of fiduciary duty), and Count VII (tortious interference with contract).

For the reasons to be discussed, Barnes's Motion for Summary Judgment is due to be DENIED.

II. SUMMARY JUDGMENT STANDARD

Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

The party asking for summary judgment "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the `pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Id. at 323, 106 S.Ct. 2548. The movant can meet this burden by presenting evidence showing there is no dispute of material fact, or by showing, or pointing out to, the district court that the nonmoving party has failed to present evidence in support of some element of its case on which it bears the ultimate burden of proof. Id. at 322-324, 106 S.Ct. 2548.

Once the moving party has met its burden, Rule 56(e) "requires the nonmoving party to go beyond the pleadings and by [its] own affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Id. at 324, 106 S.Ct. 2548. To avoid summary judgment, the nonmoving party "must do more than show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). On the other hand, the evidence of the nonmovant must be believed and all justifiable inferences must be drawn in its favor. See Anderson v. Liberty Lobby, 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). After the nonmoving party has responded to the motion for summary judgment, the court must grant summary judgment if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c).

III. FACTS²

The submissions of the parties establish the following facts, construed in a light most favorable to the non-movant:

On September 28, 2001, Benchmark purchased Rehab Associates for thirty million dollars. Benchmark owns, through its subsidiaries, a network of physical and occupational rehabilitation facilities in various locations in the United States. Rehab Associates is a physical therapy business, which when it was purchased was operating approximately thirty-seven physical and occupational health facilities located in Alabama, Colorado, Georgia, Illinois, and Missouri. To Benchmark, however, the acquisition of Rehab Associates went beyond the facilities. The "purchase of Rehab Associates was largely a purchase of Rocky [Barnes] and his team, and their relationships that they had in the entire Southeast." Binstein Deposition at p. 91, lines 2-6. Benchmark believed that it was buying "the goodwill and the relationships and the good reputation of the local team. Primarily, Rocky Barnes who grew this business into what it [was] on the day they sold to us." Id. at 93, lines 20-23; at p. 94, line 1. For the Plaintiffs, "a huge part of ... getting the benefit of [their] bargain and [the] deal working, was [Barnes] and the team cultivating all those relationships, and developing all those opportunities to grow Rehab Associates into something much bigger than it was on the day of acquisition." Id. at p. 91, lines 7-13.

As part of the Purchase Agreement, Barnes agreed to a non-compete provision that provides as follows:

Prohibited Activities. Barnes agrees that for a period of five (5) years from the Closing Date, he will not, anywhere within seventy-five (75) miles of any of the facilities operated or managed by a Company as of the date hereof (the "Territory"):

(a) (directly or indirectly) own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, principal, agent, representative, consultant, investor, owner, partner, manager, joint venturer or otherwise with, or permit his or its name to be used by or in connection with, any business or enterprise engaged anywhere in the Territory in the businesses conducted by Buyers or a Company or any businesses engaged in by Buyers or a Company or their affiliates on the Closing Date, during the two year period prior to the Closing Date, or at the time of their termination.

(b) call on or solicit any person who or which is, at that time, or has been within two years prior thereto, a customer of a Company or its affiliates with respect to any business of Buyers or a Company or its affiliates covered by clause (a) above;

(c) solicit the employment of or hire any person who at the time of such solicitation or hiring or who within one year prior thereto, is or was employed by a Company or its affiliates on a full or part-time basis; or

(d) call upon any person as a prospective acquisition candidate who was, either called upon by a Company as a prospective acquisition candidate or was the subject of an acquisition analysis by a Company.

Notwithstanding the above the foregoing covenant shall not be deemed to prohibit Barnes from acquiring as a passive investment not more than five (5) percent of the outstanding voting capital stock of a competing business, whose stock is traded on a national securities exchange or through the automated quotation system of a registered securities association. Plaintiffs' Exhibit A at § 6.2.

Viewed as a particularly valuable asset, Barnes's employment with Benchmark as Regional Vice President was a condition of the sale of Rehab Associates. His job responsibilities "were exclusively managerial and executive in nature; he was not responsible for providing patient care." Complaint at ¶ 18; Barnes's Answer at ¶ 9. Pursuant to the employment agreement, Barnes was required to perform the duties of his position faithfully and diligently. He agreed to devote his "full business time and attention to the performance of his duties and responsibilities ...." Plaintiffs' Exhibit B. at § 2.

His employment agreement includes a non-compete agreement that provides as follows:

In consideration of his employment with the Company, the Employee agrees that, during his employment with the Company and for twenty-four (24) months following the date of the Employee's termination from the Company, he will not directly or indirectly: (a) engage, whether as a principle, agent, investor, representative, stockholder (other than as the holder of not more than five percent (5%) of the stock or equity of any corporation, the capital stock of which is publicly traded), employee, consultant,...