Emerick v. Cardiac Study Ctr., Inc.

• Decision Date: 24 August 2015
• Docket Number: No. 72834–2–I.,72834–2–I.
• Citation: 357 P.3d 696,189 Wash.App. 711
• Parties: Dr. Robert EMERICK, M.D., Appellant/Cross Respondent, v. CARDIAC STUDY CENTER, INC., P.S., a Washington corporation, Respondent/Cross Appellant.
• Court: Washington Court of Appeals

189 Wash.App. 711

357 P.3d 696

Dr. Robert EMERICK, M.D., Appellant/Cross Respondent

v.CARDIAC STUDY CENTER, INC., P.S., a Washington corporation, Respondent/Cross Appellant.

No. 72834–2–I.

Court of Appeals of Washington, Division 1.

Aug. 24, 2015.

Stuart Charles Morgan, Chrystina R. Solum, Ledger Square Law, P.S., Tacoma, WA, David Michael Jacobi, Wilson Smith Cochran Dickerson, Seattle, WA, for Appellant.

Valarie Standefer Zeeck, Stephanie Bloomfield, Shelly Marie Andrew, Gordon Thomas Honeywell, Tacoma, WA, for Respondent.

Opinion

APPELWICK, J.

¶ 1 Emerick's employment agreement with CSC included a noncompete covenant that prevented Emerick from practicing cardiology competitively in Pierce County or Federal Way for five years after termination. Days before his termination, Emerick sought declaratory relief that the noncompete covenant was unenforceable. The trial court concluded that the geographic and temporal restraints in the noncompete covenant were unreasonable. It reformed the restraints accordingly and concluded that the noncompete was reasonable and enforceable as reformed. Emerick appeals, arguing that noncompete agreements involving physicians violate public policy as a matter of law and that the reformed geographical and temporal restrictions in the noncompete covenant are excessive. We affirm.

FACTS

¶ 2 Cardiac Study Center, Inc., P.S. (CSC) was founded in 1966 and provides cardiology services. CSC has four Pierce County offices, each located near a main hospital. Doctor Robert Emerick began working at CSC in 2002. Immediately prior to joining CSC, Emerick was a cardiologist in Memphis, Tennessee. After Emerick had practiced with CSC for two years as a general employee, CSC offered him the opportunity to become a shareholder in the practice. In order to become a shareholder, Emerick—like all others seeking shareholder status—was required to sign a shareholder employment agreement (Agreement). Emerick signed the Agreement on February 1, 2004.

¶ 3 The Agreement included a noncompete covenant in paragraph 13(e). Emerick agreed that during his employment and for five full years after termination of his employment for any reason, he would not directly or indirectly “engage in the practice of cardiac medicine in any manner which is directly competitive with any aspect of the business of” CSC within Pierce County or Federal Way. Paragraph 13(f) of the agreement stated that CSC and Emerick agree and stipulate that the noncompete covenant in paragraph 13(e) is “fair and reasonably necessary for the protection of [CSC]'s Confidential Information, goodwill, and other protectable interests.” It further stated that “[i]n the event a court of competent jurisdiction should decline to enforce any provision of paragraph 13(e), such paragraph shall be deemed to be modified to restrict [Emerick]'s competition with [CSC] to the maximum extent, in both time and geography, which the court shall find enforceable.” Paragraph 13(g) stated that Emerick acknowledged that any breach of the noncompete would give rise to injury not adequately compensable through damages and that CSC would be entitled to seek injunctive relief.

¶ 4 On September 9, 2009, CSC sent Emerick a letter informing him that the Agreement—and Emerick's employment with CSC—would terminate on September 30, 2009. On September 24, 2009, days before termination, Emerick filed a lawsuit against CSC seeking injunctive and declaratory relief to invalidate the noncompete provisions in the Agreement. Subsequently, CSC filed a motion for summary judgment. On November 6, 2009, Emerick filed a cross motion for summary judgment. On March 5, 2010, the trial court denied CSC's motion for summary judgment and granted Emerick's cross motion for summary judgment. The trial court concluded that the noncompete provisions of paragraph 13(e) of the Agreement were not enforceable, because they violate public policy. The court further ruled that the remainder of paragraph 13 was still enforceable.

¶ 5 Shortly thereafter, CSC sought discretionary review of the trial court's order on the cross motions for summary judgment. Division Two denied CSC's motion for discretionary review, and it awarded attorney fees to Emerick as the prevailing party on September 27, 2010. On December 3, 2010, the trial court entered a judgment in favor of Emerick including reasonable attorney fees and costs. CSC then appealed the judgment. See Emerick v. Cardiac Study Ctr., Inc., 170 Wash.App. 248, 286 P.3d 689 (2012) (Emerick I ).

¶ 6 Relying on the trial court's favorable judgment, but while CSC's appeal was pending, Emerick opened a new practice, Choice Cardiovascular. Emerick opened the practice about a quarter of a mile away from one of CSC's Pierce County offices in June 2011. Emerick describes Choice Cardiovascular as a unique concierge cardiovascular medicine practice that is different than CSC's “traditional” practice.

¶ 7 In Emerick I, Division Two held that the trial court misapplied Washington law when it granted Emerick's motion for summary judgment. Id. at 250, 286 P.3d 689. The Emerick I court said the trial court erred, because it did not apply the three part test established by the Washington Supreme Court for determining whether a noncompete covenant is reasonable.¹ Id. at 259, 286 P.3d 689. Consequently, it reversed the trial court's order granting summary judgment, vacated the attorney fee award to Emerick, and remanded for further proceedings. Id. It also awarded CSC its statutory attorney fees. Id. Emerick filed a petition for review to the Washington Supreme Court, and it was denied. See Emerick v. Cardiac Study Ctr., Inc., 175 Wash.2d 1028, 291 P.3d 254 (2012).

¶ 8 On May 17, 2013, on remand, CSC again filed a motion for summary judgment to enforce the noncompete covenant. On September 11, 2013, the trial court entered an order granting CSC's motion for summary judgment enforcing the noncompete covenant and providing CSC injunctive relief. It concluded that the noncompete covenant is necessary to protect CSC's protectable business interests. But, it also concluded that the covenant not to compete in paragraph 13(e) is overly broad and unreasonable and therefore unenforceable with respect to its geographic and temporal restraints. As a result, the trial court reformed the covenant to reduce the geographical limitations on Emerick's cardiology practice to a two mile radius of CSC's current offices and reduced the temporal restriction to four years. The trial court found that the four years began in September 2009 when Emerick was terminated. It deducted 20 months from that four year period for the time between September 2009 and June 2011 before Emerick began improperly competing with CSC. The trial court ordered that the remaining 28 months, would begin once Emerick relocated his new practice. The trial court clarified that nothing would enjoin Emerick from practicing cardiology at a hospital or emergent care clinic, making house calls, prescribing medicine, ordering tests, or otherwise caring for patients, and nothing would preclude a patient from selecting the cardiologist of his or her choice. Finally, the trial court concluded that CSC obtained injunctive relief and substantial enforcement of the noncompete agreement against Emerick and was thus the substantially prevailing party.

¶ 9 On September 25, 2013, CSC, as the substantially prevailing party, moved for attorney fees. On October 18, 2013, the trial court entered its judgment and findings of fact and conclusions of law regarding the award of attorney fees and costs to CSC. It concluded that CSC was entitled to attorney fees and costs for all activities, hearings, and motions related to the litigation except the fees and costs of the Emerick I appeal. The trial court found that the fees on the appeal were denied by Division Two and declined to award them.

¶ 10 Emerick appeals the trial court's order granting CSC's motion for summary judgment, its judgment and order granting CSC's motion for prevailing party attorney fees and costs, and its findings of fact and conclusions of law regarding CSC's award of attorney fees and costs. Specifically, Emerick claims the trial court erred when it granted CSC injunctive relief beyond the terms of the noncompete, when it found that CSC was the substantially prevailing party, and when it awarded attorney fees without making necessary reductions. CSC cross appeals the trial court's denial of its request for fees from its earlier successful appeal.

DISCUSSION

I. Reasonability and Enforceability of the Noncompete Covenant

¶ 11 Emerick argues that the trial court erred in granting CSC's motion for summary judgment. Specifically, he argues that the covenant, even as reformed, is unreasonable and unenforceable.

¶ 12 This court reviews a grant or denial of summary judgment de novo. Washburn v. City of Federal Way, 169 Wash.App. 588, 609, 283 P.3d 567 (2012), aff'd, 178 Wash.2d 732, 310 P.3d 1275 (2013). Summary judgment is appropriate where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. CR 56(c). In conducting this inquiry, the court must view all facts and reasonable inferences in the light most favorable to the nonmoving party. Hisle v. Todd Pac. Shipyards Corp., 151 Wash.2d 853, 860–61, 93 P.3d 108 (2004).

¶ 13 As a preliminary matter, Emerick argues that summary judgment was inappropriate because there are disputed material facts as to the reasonableness of the noncompete covenant. These facts include whether (1) Emerick traded on CSC's goodwill in establishing his new practice, (2) Emerick is in competition with CSC, (3) CSC has any goodwill to protect given Emerick's unique practice, different patient pool, and ability to continue seeing patients that he treated while working for CSC, and (4) the location of Emerick's new practice unreasonably competes with CSC's location given the fact that Emerick has no signage and cannot be seen from...