Lenscrafters, Inc. v. Kehoe

• Decision Date: 14 June 2012
• Docket Number: No. 32,756.,32,756.
• Parties: LENSCRAFTERS, INC., an Ohio corporation, Plaintiff–Respondent, v. Dennis KEHOE, O.D., Defendant–Petitioner.
• Court: New Mexico Supreme Court

282 P.3d 758

2012 -NMSC- 020

LENSCRAFTERS, INC., an Ohio corporation, Plaintiff–Respondent,

v.Dennis KEHOE, O.D., Defendant–Petitioner.

No. 32,756.

Supreme Court of New Mexico.

June 14, 2012.

Law & Resource Planning Associates, P.C., Charles Thomas DuMars, Tanya L. Scott, Stephen Curtice, Albuquerque, NM, for Petitioner.

Montgomery & Andrews, P.A., Randy S. Bartell, Santa Fe, NM, Schmidt & Copeland, LLC, John E. Schmidt, III, Melissa J. Copeland, Columbia, SC, for Respondent.

OPINION

DANIELS, Justice.

{1} We granted certiorari to review a Memorandum Opinion of the Court of Appeals and to address four issues stemming from a lawsuit by LensCrafters to enforce a noncompete provision against optometrist Dennis Kehoe after a sublease contract between the two parties ended. Having reviewed the record in this complex, convoluted, and contentious eleven-year dispute, we hold that (1) the district court properly dismissed LensCrafters' breach of contract claim on summary judgment because LensCrafters terminated the parties' contract as a matter of law and, with it, the contract's noncompete provision; (2) the district court did not abuse its discretion when it denied Kehoe's request to supplement his pleadings shortly before trial; and (3) summary judgment dismissing Kehoe's malicious abuse of process and tortious interference with contract counterclaims was proper because Kehoe did not demonstrate genuine issues of material fact. Because we hold that the noncompete provision was not in effect during any relevant time, we do not need to address Kehoe's fourth issue, whether the provision would have been contrary to public policy. Accordingly, we affirm the Memorandum Opinion of the Court of Appeals in part and reverse in part.

I. FACTUAL AND PROCEDURAL BACKGROUND

{2} From 1997 to 2001, Kehoe subleased space for his optometry practice from LensCrafters next to that company's Winrock Center eyeglass-dispensing store in Albuquerque. A series of LensCrafters-prepared contracts governed the sublease: an original one-year contract that took effect in September 1997; a second one-year contract that took effect in 1998; and a third one-year contract that took effect in 1999, which, in 2000, the parties renewed and extended until September 30, 2001. Each of these contracts included a noncompete provision that restricted Kehoe from opening another optometry practice within a certain time frame and distance of LensCrafters' Winrock store should Kehoe either default on his contractual obligations or elect not to accept an offer by LensCrafters to renew the existing contract; the noncompete provision was not applicable if LensCrafters elected not to renew an existing contract.

{3} On May 29, 2001, more than 120 days before the parties' third and final contract was set to expire, LensCrafters sent Kehoe a letter stating that it was to serve as notice of nonrenewal of the parties' then-existing 1999 contract (nonrenewal letter). The nonrenewal letter instructed Kehoe to sign an acknowledgment that the parties' current contract was terminated, and it enclosed a proposed new sublease contract that Kehoe was asked to sign if he wished to continue subleasing space from LensCrafters through the new contract after September 30, 2001. Kehoe did not sign either the termination acknowledgment or the new proposed contract. Instead, after negotiations on the new contract failed, Kehoe formally notified LensCrafters in a June 30, 2001, letter that he would not be “renewing” his sublease. In response, LensCrafters sent Kehoe a letter confirming receipt of his June 30, 2001, letter, reiterating that LensCrafters had offered Kehoe a new sublease contract which Kehoe had decided not to “renew.”

{4} Immediately after the contract expired in September 2001, Kehoe leased space from Pearle Vision in Coronado Center, less than one mile from his former location with LensCrafters, which would have violated the time and geographic restrictions of the noncompete provision in the 1999 contract had it still been in effect. On October 2, 2001, LensCrafters sent Kehoe a letter demanding that Kehoe either stop practicing optometry at that location in violation of the noncompete provision or pay LensCrafters $75,000 in liquidated damages for the alleged violation. Ten days later, on October 12, 2001, LensCrafters filed a complaint against Kehoe in district court for damages and declaratory relief as a result of Kehoe's alleged breach of the noncompete provision.

{5} Kehoe answered LensCrafters' complaint, arguing that the noncompete provision was no longer in effect after LensCrafters terminated the contract with its nonrenewal letter. Kehoe also alleged numerous counterclaims against LensCrafters for improperly trying to enforce the noncompete provision; two of these are relevant to this appeal: malicious abuse of process and tortious interference with contract.

{6} Two years later, in July 2003, the district court granted partial summary judgment to Kehoe on LensCrafters' breach of contract claim, concluding that LensCrafters' nonrenewal letter had terminated the 1999 contract and its noncompete provision. Almost three years later, and just twelve days before the scheduled trial on the remaining claims and on the heels of a failed settlement conference, Kehoe asked the district court for a continuance to move to amend his counterclaims. The district court granted Kehoe's request. Soon thereafter, Kehoe filed a motion to amend his pleadings, adding two new tort claims and new allegations relating to his original tortious interference with contract counterclaims. Kehoe's amendments arose from LensCrafters' parent company's acquisition of Pearle Vision in 2004. Kehoe alleged that LensCrafters had used the acquisition to threaten loss of his sublease with Pearle Vision if he did not dismiss his counterclaims against LensCrafters.

{7} At the district court's request, Kehoe refiled his motion to amend as a motion to supplement under Rule 1–015(D) NMRA. SeeRule 1–015(D) (stating that a supplemental pleading “set[s] forth transactions or occurrences or events which have happened since the date of the pleading sought to be supplemented”); accord Elec. Supply Co. v. U.S. Fid. & Guar. Co., 79 N.M. 722, 725, 449 P.2d 324, 327 (1969) (explaining that supplemental pleadings involve matters that arise after an original pleading was filed and amended pleadings include matters that occurred before the original pleading was filed).

{8} LensCrafters opposed Kehoe's motion to supplement, arguing that Kehoe failed to establish all the elements of the new claims and that the claims were prejudicial because both parties' attorneys would need to testify if information from the failed settlement negotiations became admissible at trial, which could disqualify them as counsel at a late stage in the proceedings. After a hearing, the district court denied Kehoe's motion to supplement, noting both the failure to state new claims and prejudice to the opposing party.

{9} In November 2006, LensCrafters moved for summary judgment on several of Kehoe's counterclaims, including the malicious abuse of process and tortious interference with contract claims, arguing that Kehoe failed to provide evidentiary support sufficient to establish genuine issues of material fact. The district court agreed, granting summary judgment to dismiss those claims. By mid-October 2007, the parties' remaining claims were concluded through summary judgment or by stipulation of the parties.

{10} Both parties appealed their respective adverse rulings to the Court of Appeals, which, on the three issues relevant to this certiorari review, (1) by a majority vote (with Judge Garcia dissenting), reversed the summary judgment against LensCrafters' on its noncompete provision breach of contract claim, holding that the correspondence was sufficiently ambiguous to warrant trial; (2) unanimously affirmed the district court's denial of Kehoe's motion to supplement his pleadings; and (3) unanimously affirmed summary judgment dismissing Kehoe's two counterclaims. See LensCrafters, Inc. v. Kehoe, No. 28,145, slip op. at 11–12, 30–31, 2010 WL 4924992 (N.M.Ct.App. Oct. 15, 2010).

{11} We granted Kehoe's Petition for Writ of Certiorari, which asks us to review those three holdings, as well as a fourth issue—that LensCrafters' noncompete provision is contrary to public policy.

II. THE DISTRICT COURT PROPERLY ENTERED SUMMARY JUDGMENT DISMISSING LENSCRAFTERS' BREACH OF CONTRACT CLAIM.

{12} “An appeal from the grant of a motion for summary judgment presents a question of law and is reviewed de novo.” Montgomery v. Lomos Altos, Inc., 2007–NMSC–002, ¶ 16, 141 N.M. 21, 150 P.3d 971. “Summary judgment is appropriate where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law.” Id. (internal quotation marks and citation omitted). “All reasonable inferences are construed in favor of the non-moving party.” Id. “On summary judgment, the non-movant may not rest on the pleadings, but must demonstrate genuine issues of material fact by way of sworn affidavits, depositions, and similar evidence.” Juneau v. Intel Corp., 2006–NMSC–002, ¶ 15, 139 N.M. 12, 127 P.3d 548.

{13} Both parties agree that their 1999 contract and their 2001 correspondence are central to LensCrafters' noncompete provision breach of contract claim. When a contract dispute “depends upon the interpretation of documentary evidence, this Court is in as good a position as the trial court to interpret the evidence.” Kirkpatrick v. Introspect Healthcare Corp., 114 N.M. 706, 711, 845 P.2d 800, 805 (1992).

{14} Section 17(C)(1) of the 1999 contract stated that the noncompete provision would remain in effect under three specific circumstances: “If this Sublease Agreement terminates because of [Kehoe]'s default or [Kehoe]'s election not to renew under Section 2C of this Sublease Agreement or if [Kehoe] has an uncured default at...