Martinez v. DaVita, Inc.

• Decision Date: 17 March 2004
• Docket Number: No. A03A1791.,A03A1791.
• Citation: 266 Ga. App. 723,598 S.E.2d 334
• Parties: MARTINEZ, et al. v. DAVITA, INC., et al.
• Court: Georgia Court of Appeals

266 Ga. App. 723

598 S.E.2d 334

266 Ga.App. 723

MARTINEZ, et al. v. DAVITA, INC., et al.

No. A03A1791.

Court of Appeals of Georgia.

March 17, 2004.

Reconsideration Denied April 2, 2004.

James, Bates, Pope & Spivey, Thomas C. James, III, Macon, for appellant.

Sell & Melton, L.L.P., Kevin T. Brown, Joseph W. Popper, Jr., Macon, for appellee.

ANDREWS, Presiding Judge.

Defendants below¹ appeal from the trial court's grant of a preliminary injunction to plaintiffs DaVita, Inc. and its subsidiary, Renal Treatment Centers — Mid Atlantic, Inc., in their action seeking monetary damages as well as injunctive relief in this dispute regarding dialysis centers in Macon, Perry, and Hawkinsville, and noncompete agreements signed by Dr. and Mrs. Martinez.

The trial court made the following findings of fact. Dr. Martinez is a nephrologist practicing in the Macon and surrounding areas, specializing in treatment of kidney disease. In 1993, Mrs. Martinez and Vickie Jackson, a friend, purchased an interest in Nephrology Center of Macon, Inc. from Ken Stockton. Mrs. Martinez acknowledged that Dr. Martinez gave her $50,000, which was the amount she invested in her purchase of Nephrology Center of Macon, Inc. After Ken Stockton was fired, Mrs. Martinez and Jackson purchased his interest, with Mrs. Martinez owning 60 percent of the business and Jackson owning 40 percent. The corporate business name was changed to Kidney Care, Inc. (hereinafter referred to as the "East Macon facility"). Mrs. Martinez was the administrator of the facility and Jackson was the nurse administrator. Dr. Martinez, before and after the change of ownership, was the medical director of this facility and was, at that time, the only physician referring patients to it. Prior to making her investment, Mrs. Martinez spoke with Dr. Martinez to ensure he would remain medical director of the facility upon their purchasing it.

On August 27, 1997, Mrs. Martinez and Jackson, through Kidney Care, Inc., sold the East Macon facility to Renal Treatment Centers — Mid Atlantic, Inc., a subsidiary of DaVita, Inc. (hereinafter "DaVita") for $4.25 million, as set out in the Asset Purchase Agreement. Mrs. Martinez acknowledged that her portion of the purchase price went into a joint account with Dr. Martinez. As part of the sale, that same day, Mrs. Martinez signed a covenant not to compete prohibiting her, along with Kidney Care, Inc. and Jackson, from being directly or indirectly involved with any dialysis facility within a forty-mile radius of the East Macon facility for ten years. Also signed that day by Dr. Martinez was the Medical Director Agreement between him and DaVita for the East Macon facility. Execution of the Asset Purchase Agreement was expressly conditioned upon Dr. Martinez's execution of this Medical Director Agreement, and the Medical Director Agreement was contingent upon execution of the Asset Purchase Agreement.

The Medical Director Agreement contained a restrictive covenant prohibiting Dr. Martinez from directly or indirectly participating "either as principal, agent, proprietor, shareholder, director, creditor, subcontractor, administrator, physician director, medical director, officer, employee or otherwise, in any entity, trade or business other than Company [DaVita] providing `Dialysis Services' within the `Restricted Area.'" The "Restricted Area" was defined as any location during the term of the agreement and within forty miles of the East Macon facility for two years following termination of the agreement. "Dialysis Services" was defined as "the provision of outpatient dialysis treatment, inpatient dialysis treatment, or dialysis equipment or supplies."

At the August 7, 2002 hearing on DaVita's request for a temporary restraining order, counsel for Mrs. Martinez acknowledged that her Covenant Not to Compete was reasonable and enforceable. Section 6 of that Covenant states that, should Mrs. Martinez breach that Covenant, DaVita "will be entitled to preliminary and permanent injunctive relief in addition to any other rights or remedies to which [it] may be entitled."

In 1999, Dr. Martinez built a dialysis facility in Perry, approximately 30 miles from Macon. On November 1, 1999, pursuant to discussions with DaVita representatives, Dr. Martinez entered into an Agreement To Provide Management Services To a Kidney Dialysis Facility with Total Renal Care Holdings, Inc. (TRCH), another DaVita subsidiary, pursuant to which TRCH would manage the Perry facility. Paragraph 8.5 provided that all prior agreements, including the August 27, 1997 Medical Director Agreement and the Covenants Not To Compete regarding the East Macon facility, remained in full force. In a "carve out" provision, it provided that Dr. Martinez's ownership and operation of the Perry facility and provision of medical director services to it "shall not be deemed a violation of the noncompete provisions of the Medical Director Agreement or the Covenants." The agreement contained a call option pursuant to which, upon a certain patient count being achieved at the Perry facility, i.e., a "Trigger Event," DaVita would have the right to exercise an option to buy it from Dr. Martinez for 90 percent of the fair market value of the facility's assets.

In 2001, Dr. Martinez constructed, owned, and operated the Hawkinsville dialysis facility. Although Dr. Martinez believed that this facility was more than 40 miles from the East Macon facility, it was between 38.35 and 38.38 miles from it and, therefore, in violation of the noncompete covenants. At various times since the opening of the Hawkinsville facility, Dr. Martinez has served as medical director and assistant medical director of the facility. At all times, Dr. Martinez has owned the real estate upon which the facility is located.

Dr. and Mrs. Martinez operated their many limited liability companies, limited liability partnerships, holding companies, and trusts as if they were one. Both acknowledged, for example, that the Hawkinsville facility did not pay any rent to Dr. Martinez, its owner, for four months, did not pay him for his services as medical director and assistant medical director, did not pay Mrs. Martinez for working as facilities administrator, and that Dr. Martinez's Macon office paid for employee services provided to the Hawkinsville facility.

When DaVita advised Dr. Martinez of its intent to enforce the noncompete covenant regarding the Hawkinsville facility, Dr. Martinez transferred the Hawkinsville facility, with the exception of the real estate, to Mrs. Martinez for no consideration. Thereafter, Mrs. Martinez transferred it back to Dr. Martinez so that it could be transferred again to a number of different partnerships and limited liability companies ultimately controlled by Isabel Sanchez Barbero, Mrs. Martinez's sister. Ms. Barbero is a citizen and resident of Spain, an attorney, and has no experience in the dialysis business. The transfer was accomplished by Ms. Barbero giving Dr. Martinez a $600,000 promissory note, the collateral for which was the entire ownership interest in the facility. Ms. Barbero then pledged certain property back to Dr. Martinez during the note's term. Ms. Barbero appointed Teresa Hodges, Dr. Martinez's office manager at his Macon doctor's office for seven years, as president of the Hawkinsville facility. The only prior connection which Ms. Hodges had with Hawkinsville was performing some billing services offsite for it.

At least seven patients transferred from the Perry facility, which DaVita managed, to the Hawkinsville facility. DaVita produced evidence that, in December 2001 or January 2002, there was a reasonable possibility that the patient census at Perry would have reached the Trigger Event, but for the opening of the Hawkinsville facility and transfer of Perry's patients to it.

Dialysis Corporation of America (DCA) made an offer to purchase the Perry facility from Dr. Martinez for a price much higher than DaVita believed to be its fair market price. Dr. Martinez then gave DaVita the opportunity to meet DCA's offer, precipitating DaVita's motion to enjoin its sale to DCA and enforce the noncompete provisions regarding it and the Hawkinsville facility.

In the sole enumeration of error, defendants contend that the trial court erred in granting the interlocutory injunction because the...