Dunn v. Fastmed Urgent Care, P.C., 083019 DECH, 2018-0934 MTZ

Docket Nº:C.A. 2018-0934 MTZ
Opinion Judge:ZURN, VICE CHANCELLOR
Party Name:MICHAEL DUNN, M.D., Plaintiff, v. FASTMED URGENT CARE, P.C.; FASTMED HOLDINGS I, LLC; FASTMED HOLDINGS, LLC; URGENT CARES OF AMERICA HOLDINGS I, LLC; and KYLE BOHANNON, Defendants.
Attorney:Neil R. Lapinski, Phillip A. Giordano, and Kate A. Mahoney, GORDON, FOURNARIS & MAMMARELLA, P.A., Wilmington, Delaware, Attorneys for Plaintiff Michael Dunn, M.D. Kathleen M. Miller and Kelly A. Green, SMITH, KATZENSTEIN & JENKINS LLP, Wilmington, Delaware; Andrew Federhar and Jessica Gale, SPENC...
Case Date:August 30, 2019
Court:Court of Chancery of Delaware
 
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MICHAEL DUNN, M.D., Plaintiff,

v.

FASTMED URGENT CARE, P.C.; FASTMED HOLDINGS I, LLC; FASTMED HOLDINGS, LLC; URGENT CARES OF AMERICA HOLDINGS I, LLC; and KYLE BOHANNON, Defendants.

C.A. No. 2018-0934 MTZ

Court of Chancery of Delaware

August 30, 2019

Date Submitted: May 29, 2019

Neil R. Lapinski, Phillip A. Giordano, and Kate A. Mahoney, GORDON, FOURNARIS & MAMMARELLA, P.A., Wilmington, Delaware, Attorneys for Plaintiff Michael Dunn, M.D.

Kathleen M. Miller and Kelly A. Green, SMITH, KATZENSTEIN & JENKINS LLP, Wilmington, Delaware; Andrew Federhar and Jessica Gale, SPENCER FANE LLP, Phoenix, Arizona, Attorneys for Defendants FastMed Urgent Care P.C., FastMed Holdings LLC, FastMed Holdings I LLC, Urgent Cares of America Holdings I LLC, and Kyle Bohannon.

MEMORANDUM OPINION

ZURN, VICE CHANCELLOR

The company at the heart of this case provides urgent care medical services in Arizona, and employed the plaintiff, who is trained as a physician, as an executive. The company went through a merger, after which the plaintiff left the company. The plaintiff asserts the post-acquisition company wronged him while negotiating the terms of his employment and by asserting a restrictive covenant after he left. The plaintiff has failed to plead wrongdoing under Delaware law that is justiciable by this Court.

The first source of wrongdoing is a series of oral promises, which are difficult to enforce in the shadow of a series of written agreements. In connection with the merger, the parties executed a contract selling the plaintiff's interest to the defendants, as well as an employment agreement. The defendants also allegedly promised to deviate from the terms of those agreements, but then failed to deliver; instead, the defendants performed under the written agreements. The plaintiff asserts the defendants defrauded him and breached the implied covenant of good faith and fair dealing. On the defendants' motion to dismiss, I conclude the fraud claims impose a weighty pleading burden that the plaintiff fails to satisfy, and the implied covenant claim is only available in certain circumstances not present here.

The second source of wrongdoing is the defendants' assertion of a restrictive covenant contained in the contract selling the plaintiff's interest. That five-year restrictive covenant prohibited the plaintiff from working in a competitive executive capacity, but did not prohibit him from practicing medicine. The restrictive covenant contained Delaware forum and choice of law provisions. The plaintiff eventually resigned from the post-merger company, and accepted a similar executive position with an Arizona competitor. The defendants notified the competitor that the plaintiff's employment would be in violation of the restrictive covenant. Consequently, the competitor rescinded its employment offer. The plaintiff contends that the non-compete provision is unenforceable under Delaware's statute governing restrictions on the practice of medicine, and that the defendants' assertion of the restrictive covenant therefore amounts to intentional interference with the plaintiff's relationship with his prospective employer. I disagree.

The plaintiff also contends that the defendants' efforts to enforce the non-compete amount to defamation per se and that the defendants' acts constitute civil conspiracy. In the absence of any other well-pled claim, this Court lacks subject matter jurisdiction over the plaintiff's defamation claim, and there is no underlying wrong on which to base his conspiracy claim. The motion to dismiss is granted.

I. BACKGROUND

I draw the facts from the allegations in and documents incorporated by reference or integral to the Complaint.[1] I must accept as true the Complaint's well-pled factual allegations and draw all reasonable inferences from those allegations in Plaintiff's favor.2

A. Dunn Executes A Letter Of Transmittal As Part Of FastMed's Acquisition Of Urgent Cares.

Plaintiff Michael Dunn is a physician licensed to practice medicine in the state of Arizona. In 2003, Dunn became a member and manager of an Arizona professional limited liability company, TriCity Express Care, PLLC, dba Urgent Care Express ("Urgent Cares"), that offered urgent care services. Urgent Cares was acquired in 2011; the surviving entity is also referred to as Urgent Cares. In 2012, Dunn became Urgent Cares' Chief Medical Officer, Arizona, and signed an employment agreement. In May 2015, Dunn sold his ownership interest in Urgent Cares to FastMed Holdings, LLC, when that entity acquired Urgent Cares pursuant to a Purchase Agreement and Plan of Merger entered into by several affiliated companies.

At first, Dunn refused to sign a Letter of Transmittal to sell his interest in Urgent Cares "due to disagreements regarding the scope of [its] non-compete clause."3 On May 28, 2015, Dunn communicated these concerns to two representatives of FastMed affiliates: Kyle Bohannon, a manager of FastMed Holdings I, LLC, and Kevin Blank, CEO of FastMed Urgent Care, P.C. "Bohannon and Blank responded to Dunn's concerns by communicating to Dunn that he would be unable to redeem his Profits Interest Units if he refused to sign the Letter of Transmittal."4 Blank then suggested "amend[ing] the language of the non-compete to allow for Dunn to continue to work in the urgent care field."5 The three "agreed that at the conclusion of the Purchase Agreement and Plan of Merger, Bohannon would redraft the Letter of Transmittal's non-compete clause to be for only three years, and that there would be a separate carve out that would permit Dunn to work as a medical director immediately following separation."6

Based on this agreement, Dunn signed the Letter of Transmittal that same day, exchanging his interest in Urgent Cares for approximately $1, 000, 000. The Letter of Transmittal contained the following restrictive covenant (the "Restrictive Covenant"): Effective as of the Closing … [Dunn] hereby agrees that, from the Closing Date until the five (5) year anniversary of the Closing Date, [Dunn] will not, without the prior written consent of Buyer, directly or indirectly, engage in any activity, or participate or invest in, or provide or facilitate the provision of financing to, or assist, in each case, whether as owner, part-owner, equity holder, member, partner, director, officer, trustee, employee, agent or consultant, or in any other capacity, or by providing any financial, operational or technical assistance to any Person that engages in, any business, organization or other Person other than the Surviving Company or a Company Subsidiary whose business activities, products or services are competitive with the Business or that otherwise competes with the Business, or interview for any potential employment, directorship, advising or consulting relationship with any such business, organization or other Person, in each case, anywhere in the United States (collectively, "Prohibited Activities").7

The non-compete provision would not apply "in the case [that Dunn] is a physician, being employed as (and providing customary services of) a physician."[8] The Letter of Transmittal contained a Delaware choice of law and forum selection clause.9

B. Dunn Signs An Employment Agreement With FastMed, Then Resigns After FastMed Demotes Him.

On or about June 22, 2015, Dunn entered into the Second Amended and Restated Employment Agreement (the "Second Employment Agreement") with FastMed Urgent Care, P.C. ("FastMed"), as Urgent Cares' successor in interest, and assumed the title of "Regional Chief Medical Officer, and President, Arizona."[10]The Second Employment Agreement applied during Dunn's employment and for six months thereafter. The Second Employment Agreement was contingent upon the consummation and closing of the Purchase Agreement. The Purchase Agreement closed as planned, and Dunn became subject to the Second Employment Agreement.

At some point, "Bohannon and other executives expressly assured Dunn that the position of employment offered to Dunn pursuant to the [Second Employment Agreement] was a long-term position."11 But the Second Employment Agreement provided that Dunn was an at-will employee.[12] It also gave Dunn the right to terminate his employment for "Good Reason" as defined thereunder; if he did so, he would receive certain payments and benefits.[13] The Second Employment Agreement defined "Good Reason" as including "the Company's assignment of [Dunn] (without his consent) to a position, responsibilities, or duties of a materially lesser status or degree of responsibility than his position, responsibilities, and duties set forth [herein]."14

In August 2015, Bohannon informed Dunn that FastMed had eliminated Dunn's position, and that Dunn would be reporting to a then-junior physician that...

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