Intermountain Eye v. Miller

• Citation: 127 P.3d 121,142 Idaho 218
• Decision Date: 20 December 2005
• Docket Number: No. 31058.,31058.
• Parties: INTERMOUNTAIN EYE AND LASER CENTERS, P.L.L.C., Plaintiff-Appellant, v. Mark MILLER, M.D., Defendant-Respondent.
• Court: United States State Supreme Court of Idaho

127 P.3d 121

142 Idaho 218

INTERMOUNTAIN EYE AND LASER CENTERS, P.L.L.C., Plaintiff-Appellant, v. Mark MILLER, M.D., Defendant-Respondent.

No. 31058.

Supreme Court of Idaho, Boise, September 2005 Term.

December 20, 2005.

COPYRIGHT MATERIAL OMITTED

Eberle, Berlin, Kading, Turnbow, McKlveen & Jones, Chartered, Boise, Idaho, for appellant. Warren E. Jones argued.

Holland & Hart, LLP, Boise, Idaho for respondent. Amanda K. Brailsford argued.

JONES, Justice.

Intermountain Eye and Laser Centers sued Dr. Mark Miller in October 2003 contending the doctor breached the terms of a "post-termination competition" provision in the parties' employment agreement. After the parties filed cross-motions for summary judgment the district court ruled Dr. Miller did not violate the terms of the non-compete provision because the non-compete period had expired, and, even if it had not, the terms of the non-compete provision were unreasonable and, therefore, unenforceable. The court granted Dr. Miller's motion, denied Intermountain Eye's motion, dismissed the firm's complaint, and awarded Dr. Miller his costs and attorney fees. This timely appeal followed.

I. BACKGROUND

Intermountain Eye is a professional medical services firm with two locations in Boise, one in Eagle, and one in Nampa. As the firm's name might suggest, it provides ophthalmology services to its patients. It currently employs eight full-time physicians and two part-time physicians. Dr. Miller is a licensed ophthalmologist, refractive surgeon, and cornea specialist. He earned a degree in medicine in 1994, completed a one-year internship, and then a three-year residency in ophthalmology. After that, he completed a one-year fellowship, which concluded in 1999. In June 1999, he accepted Intermountain Eye's offer to join the firm as a cornea and refractive specialist. The doctor began working for the firm on August 1, 1999, but declined to sign the firm's standard employment agreement. Instead, he and the firm spent the next ten months negotiating the terms of his employment. Each side had the assistance of legal counsel. A "Physician Employment Agreement" was signed in June 2000, its terms effective beginning August 1, 1999.

The post-termination competition provision at issue in this case is found at Section 3.3 of the Agreement. It reads:

3.3 Post-Termination Competition. The Company and the Physician agree that the Company has agreed to expend considerable time, energy and expenses in assisting the Physician in developing a viable medical practice. In consideration of the preceding, the Physician agrees that for the period of 2 years immediately following the termination of the Physician's employment with the Company for any or no reason (excluding only termination for default by the Company, but including expiration of the term of this Agreement), the Physician shall not engage in the practice of medicine within Ada and Canyon County unless the Physician pays to the Company a Practice Fee in accordance with the following schedule (and such amount shall be offset against any amounts due from the Company to the Physician under this Agreement and the Operating Agreement)[.]

The section goes on to provide that if Dr. Miller is terminated on or before July 31, 2000, the practice fee is $250,000; after August 1, 2000, it is $500,000. Finally, the non-compete provision provides:

The Physician has carefully considered the nature and extent of the restrictions upon the Physician and the rights and remedies conferred upon the Company under this Section, agrees that the restrictions, rights, and remedies are reasonable in time, application, amount, and effect, agrees that the restrictions are supported by sufficient consideration and are not disproportionate to the respective benefits conferred upon the Physician by this Agreement, and acknowledges that the restrictions will not prevent the Physician from earning a living.

Section 3.1 of the Agreement provides: "The term of this Agreement shall commence on August 1, 1999 ... and shall continue until July 31, 2001 unless terminated earlier in accordance with Section 3.2 [addressing termination methods]." Section 3.2 contemplates three methods of termination: by the firm; by the physician; or automatically upon the occurrence of certain events, none of which occurred during the Agreement's specified term.

In June 2000, Dr. Miller and the firm renegotiated the compensation component of the Agreement. The reworked compensation package became effective August 1, 2000. No other amendments to the Agreement were made. Prior to July 31, 2001, members of Intermountain Eye discussed with Dr. Miller the need to sign a new employment agreement, but July 31, 2001 (the Agreement's expiration date) came and went and Dr. Miller remained employed at Intermountain Eye without having signed a new agreement. In May 2002, Intermountain Eye sent Dr. Miller two addendums to the firm's employee manual and a memorandum asking Dr. Miller to acknowledge receipt of the addendums. Addendum 1 contained the heading, "Employment at Will" and provided that "[e]mployment at [Intermountain Eye] is at will. This means that either you or [Intermountain Eye] may terminate the employment relationship at any time for any reason." Dr. Miller signed the memo and returned it to the appropriate location. In June 2002, Intermountain Eye provided Dr. Miller with another employment agreement that contained terms slightly different than the original Agreement. It contained a non-compete provision that was also slightly different than the previous one. Dr. Miller never signed the new agreement, and the parties' employment relationship ended on February 16, 2003, when Intermountain Eye terminated Dr. Miller, apparently upon his repeated refusal to sign another employment agreement.

Dr. Miller did not practice medicine until August 2003, when he joined St. Luke's Regional Medical Center as an ophthalmologist. His practice is in Meridian, Idaho, apparently in a space previously occupied by Intermountain Eye. A month before Dr. Miller opened up his new office, Intermountain Eye, having learned of Dr. Miller's intention to open a new office, sent Dr. Miller a letter explaining that the non-compete provision in the doctor's contract had not expired and that if he intended on practicing medicine in Ada County, he must pay the practice fee. Through his attorneys, Dr. Miller informed Intermountain Eye that he would not pay the fee and that he would practice medicine in Ada County.

Intermountain Eye filed a complaint in October 2003, seeking to recover the $500,000 practice fee. Discovery ensued and in May 2004 Intermountain Eye moved for summary judgment. That June, Dr. Miller moved for summary judgment. The district court ruled in Dr. Miller's favor, writing in its memorandum decision that the non-compete provision unambiguously began to run on July 31, 2001 (the Agreement's expiration date), and the fact that Dr. Miller remained employed beyond that date was of no moment. The district court also ruled that even if the non-compete provision survived July 31, 2001, its terms were unreasonable and the Agreement was, therefore, unenforceable. In reaching this conclusion, the court relied on Pinnacle Performance, Inc. v. Hessing, 135 Idaho 364, 17 P.3d 308 (Ct.App. 2001). A judgment followed, dismissing Intermountain Eye's complaint and awarding Dr. Miller his attorney fees and costs.

II. THE ISSUES

1. Whether the district court correctly determined that the non-compete provision was unambiguous.

2. Whether the non-compete provision is unenforceable as written, and, if so, whether the district court should have "blue-penciled" it to make it enforceable.

3. Whether the district court's award of attorney fees was proper.

III. ANALYSIS

A. Standard of Review.

The district court decided this case based on the parties' cross-motions for summary judgment. The applicable standard of review is set out in Shawver v. Huckleberry Estates, LLC, 140 Idaho 354, 360, 93 P.3d 685, 691 (2004):

On appeal from the grant of a motion for summary judgment, this Court employs the same standard as used by the district judge originally ruling on the motion. Wensman v. Farmers Ins. Co. of Idaho, 134 Idaho 148, 151, 997 P.2d 609, 612 (2000) (citing McKay v. Owens, 130 Idaho 148, 152, 937 P.2d 1222, 1226 (1997)). Summary judgment is proper `if the pleadings, depositions, 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.' I.R.C.P. 56(c). The fact that both parties move for summary judgment does not in and of itself establish that there is no genuine issue of material fact. Kromrei v. AID Ins. Co., 110 Idaho 549, 551, 716 P.2d 1321 (1986) (citing Casey v. Highlands Ins. Co., 100 Idaho 505, 507, 600 P.2d 1387, 1389 (1979)). The fact that the parties have filed cross-motions for summary judgment does not change the applicable standard of review, and this Court must evaluate each party's motion on its own merits. Stafford v. Klosterman, 134 Idaho 205, 207, 998 P.2d 1118, 1119 (2000) (citing Bear Island Water Ass'n, Inc. v. Brown, 125 Idaho 717, 721, 874 P.2d 528, 532 (1994)).

This case was to be tried to the court because neither party had requested a jury trial. In such a circumstance, Shawver says:

When an action will be tried before the court without a jury, the trial court as the trier of fact is entitled to arrive at the most probable inferences based upon the undisputed evidence properly before it and grant the summary judgment despite the possibility of conflicting inferences. Id. (citing Brown v. Perkins, 129 Idaho 189, 191, 923 P.2d 434, 436 (1996); Loomis v. Hailey, 119 Idaho 434, 437, 807 P.2d 1272, 1275 (1991)). The test for reviewing the inferences drawn by the trial court is whether the record reasonably supports the inferences. Id. (citing...