Florida Hematology & Oncology v. Tummala

• Decision Date: 21 April 2006
• Docket Number: No. 5D05-1950.,5D05-1950.
• Citation: 927 So.2d 135
• Parties: FLORIDA HEMATOLOGY & ONCOLOGY, etc., et al., Appellant/Cross-Appellees, v. Rambabu TUMMALA, M.D., et al., Appellee/Cross-Appellant.
• Court: Florida District Court of Appeals

927 So.2d 135

FLORIDA HEMATOLOGY & ONCOLOGY, etc., et al., Appellant/Cross-Appellees, v. Rambabu TUMMALA, M.D., et al., Appellee/Cross-Appellant.

No. 5D05-1950.

District Court of Appeal of Florida, Fifth District.

April 21, 2006.

H. Gregory McNeill of Lowndes, Drosdick, Doster, Kantor & Reed, P.A., Orlando, for Appellant/Cross-Appellee.

Christopher V. Carlyle, Shannon McLin Carlyle and Gilbert S. Goshorn, Jr., of The Carlyle Appellate Law Firm, The Villages, for Appellee/Cross-Appellant.

LAWSON, J.

Florida Hematology & Oncology Specialists, P.A., Lake County Oncology & Hematology, P.A., and Roy M. Ambinder, M.D., (collectively "Appellants"), appeal an order granting in part and denying in part their motion for temporary injunction against Rambabu Tummala, M.D., ("Tummala"). We affirm.

The material facts are not in dispute. Tummala is board certified in hematology and oncology. In November 1996, he was hired by Appellants to provide medical care to their patients in Lake County. Prior to this employment, Tummala had no personal or business-related connections in the Lake County community. Tummala signed an employment agreement with the Appellants that contained the following restrictive covenant:

14. Covenant Not to Compete: Employee shall not, during the Employee's employment with the Corporation and for an additional period of two (2) years from and after the termination of the Employee's employment with the Corporation for any reasons engage, directly or indirectly, in the practice of medicine within an area comprised of a fifteen (15) mile radius [of] any office of the Corporation. The parties further acknowledge that the above restrictions with respect to duration and geographic limitation are reasonable, and that the Corporation would suffer irreparable injury as a result of the breach thereof by the Employee....

In late 2003, Tummala became concerned about some of his employers' billing practices. He voiced the concerns, and in early 2004 discussed leaving the practice when his concerns were not resolved to his satisfaction. On April 8, 2004, the Appellants terminated Tummala's employment without cause, as permitted under the parties' agreement.

After his termination, Tummala immediately opened an office within 15 miles of one of the corporations' seven Central Florida offices. In his new practice, however, Tummala took extraordinary measures to assure that he did not accept any of Appellants' former patients.¹ Despite Tummala's diligence in avoiding taking patients from his old employer, Appellants claim that they suffered a significant drop in new patients being referred from other area physicians.² Accordingly, they filed suit to enforce the restrictive covenant. Tummala also sued the Appellants alleging, inter alia, that they materially breached the employment agreement, and sought a declaratory judgment that the covenant not to compete was unenforceable as a matter of law and that he was eligible to practice medicine in Lake County.

In Florida, the enforceability of restrictive covenants is controlled in large part by section 542.335, Florida Statutes (2004). Under this statute, a restrictive covenant is not enforceable unless supported by a "legitimate business interest." If the party seeking to enforce the restrictive covenant pleads and proves a "legitimate business interest," it must also then demonstrate that the "contractually specified restraint is reasonably necessary to protect" its identified business interest.

With respect to patients of a medical practice, the statute expressly defines "legitimate business interest" to include only those "specific prospective or existing" patients with whom the party has a "substantial relationship." See also University of Florida, Bd. of Trustees v. Sanal, 837 So.2d 512, 516 (Fla. 1st DCA 2003) ("we hold that, to qualify as a `legitimate business interest' pursuant to section 542.335(1)(b)3, a `relationship' with a `prospective patient' must be, in addition to `substantial,' one with a particular, identifiable, individual").

In this case, Appellants alleged three business interests: (1) existing patients; (2) exclusive contracts with local hospitals; and (3) referring physicians. Although Appellants' existing patients qualify as a "legitimate business interest," the evidence was clear that the restrictive covenant was not reasonably necessary to protect this interest.³

With respect to the alleged interest of "exclusive contracts" with local hospitals, we find that Appellants did not meet their burden of establishing any "legitimate business interest" to be protected. In fact, it is almost impossible to understand the nature of this alleged interest from either the record below or the briefs on appeal. Appellants claim to have entered "exclusive contracts" with two area hospitals "such that only doctors associated with ... [Appellants] are permitted to practice oncology and hematology" in those facilities. However, they also explain that the "exclusive provisions" of these third-party contracts "do not preclude other unaffiliated oncologists from admitting patients" into the facilities. They further state that at least one of these hospitals "has oncologists working in its hospital who are not affiliated with . . . [Appellants]." It is also clear from the evidence that these hospitals have granted other oncologists and hematologist unaffiliated with Appellants "hospital privileges" allowing them to treat their admitted patients while hospitalized. Obviously, it would have been impossible for the trial court to assess the extent to which enforcement of the covenant was necessary to protect this alleged business interest when it could not reasonably be expected to understand the nature of the claimed interest given the confusing and contradictory evidence presented by Appellants. As such, we find no error in the trial court's failure to address this "interest"...