Or. Psychiatric Partners, LLP v. Henry

• Decision Date: 05 January 2022
• Docket Number: A173017
• Citation: 316 Or.App. 726,504 P.3d 1223
• Parties: OREGON PSYCHIATRIC PARTNERS, LLP, an Oregon limited liability partnership, Plaintiff-Appellant, v. Kelley HENRY, RN, P.M.H.N.P., Defendant-Respondent.
• Court: Oregon Court of Appeals

316 Or.App. 726

504 P.3d 1223

OREGON PSYCHIATRIC PARTNERS, LLP, an Oregon limited liability partnership, Plaintiff-Appellant,

v.Kelley HENRY, RN, P.M.H.N.P., Defendant-Respondent.

A173017

Court of Appeals of Oregon.

Argued and submitted August 20, 2021.

January 5, 2022

Wm. Randolph Turnbow argued the cause and filed the briefs for appellant.

Alexandra P. Hilsher, Eugene, argued the cause for respondent. Also on the brief were Mario D. Conte and Hershner Hunter, LLP.

Before Tookey, Presiding Judge, and James, Judge, and Aoyagi, Judge.

AOYAGI, J.

This dispute concerning a noncompetition provision in an employment contract is before us for the second time. Plaintiff contends that, on remand after the first appeal, the trial court erroneously considered the enforceability of the noncompetition provision under ORS 653.295(4)(b)¹ when that issue was no longer properly before it. Alternatively, plaintiff argues that the trial court placed the burden of proof on that issue on the wrong party—plaintiff, instead of defendant—and that, in any event, plaintiff was entitled to prevail on the merits as a matter of law. For the following reasons, we affirm.

BACKGROUND

Plaintiff Oregon Psychiatric Partners, LLP (OPP) operates a psychiatric clinic at which defendant used to work as a psychiatric-mental health nurse practitioner. After defendant left OPP, she opened her own practice, where she treated over 30 patients who she had previously treated at OPP. Plaintiff brought this action to enforce the noncompetition provision in defendant's employment contract, which states:

"LIMITED NON-COMPETITION. Nurse Practitioner shall not provide services, directly or indirectly through any person or entity, to any patients who have received services by Nurse Practitioner at OPP or any predecessor entity for a period of two (2) years after termination of Nurse Practitioner's employment under this agreement within fifty (50) miles of Eugene, Oregon. Pre-existing patients established with Nurse Practitioner in her private practice prior to the date of this contract shall be exempt from this restriction."

(Emphasis added.)

In her answer, defendant asserted an "affirmative defense" that the noncompetition agreement "fails to satisfy the requirements of ORS 653.295 and is unenforceable." Generally speaking, ORS 653.295 provides that a noncompetition agreement between an employer and an employee "is voidable and may not be enforced by a court of this state" unless five criteria are met, subject to certain exceptions.

The case was tried to the court. At the close of plaintiff's case-in-chief, defendant moved for "directed verdict," and the trial court decided the case in defendant's favor as a matter of law. Oregon Psychiatric Partners v. Henry , 293 Or. App. 471, 474, 429 P.3d 399 (2018) ( Henry I ).² The trial court reasoned that the noncompetition provision was unenforceable under ORS 653.295(1), because at least one of the five criteria was not met, specifically the salary criterion in ORS 653.295(1)(d). Id. Plaintiff then asked about ORS 653.295(4)(b), which makes ORS 653.295(1) inapplicable to "[a] covenant not to solicit employees of the employer or solicit or transact business with customers of the employer." Id . The trial court ruled, with limited explanation, that the exception in ORS 653.295(4)(b) did not apply. Id .

Plaintiff appealed, and we reversed. We concluded that the noncompetition provision in defendant's employment contract was "at least in part enforceable" under ORS 653.295(4)(b), as a covenant not to solicit or transact business with customers of the employer. Id. at 472, 429 P.3d 399. In reaching that conclusion, we construed "customers of the employer" as used in ORS 653.295(4)(b) to mean, as applied here, patients who had received services from defendant at OPP's clinic and who would "have tended to return to OPP for services." Id. at 475-76, 480, 429 P.3d 399. Because there was some evidence of patients meeting that standard, we held that the trial court erred in dismissing plaintiff's claim as a matter of law. Id . at 483, 429 P.3d 399.

On remand, the case was again tried to the court. It appears from the record that the trial court understood that the parties would not be relitigating enforceability under ORS 653.295(1) and would litigate only the exception in ORS 653.495(4)(b), i.e. , would seek to prove that the 32 patients in dispute were or were not OPP's "customers."³ After hearing both parties’ evidence on the "customer" issue, the trial court found in defendant's favor on the merits and dismissed plaintiff's claim. The court explained that plaintiff had not proved—that is, had not persuaded the court sitting as factfinder—that the patients who defendant treated at her new practice were OPP's "customers" within the meaning of ORS 653.295(4)(b). The court entered judgment for defendant accordingly.

ANALYSIS

Plaintiff appeals. Our resolution of the first three assignments of error obviates the need to address the remaining assignments, and so we discuss only the first three. In its first assignment, plaintiff argues that the trial court erred in considering ORS 653.295 at all, because defendant verbally withdrew her affirmative defense under ORS 653.295 at the start of the second trial, such that the enforceability of the noncompetition provision ceased to be at issue in the case. At that point, in plaintiff's view, the court should have simply decided whether defendant breached the contract, without regard to ORS 653.295(4)(b). In its second assignment, plaintiff argues in the alternative that, if ORS 653.295(4)(b) remained at issue in the second trial, the court wrongly put the burden on plaintiff to prove that the patients at issue were OPP's "customers," when the burden should have been on defendant to prove that they were not OPP's "customers." Finally, in its third assignment, plaintiff contends that the evidence was such that plaintiff was legally entitled to a finding that the 32 patients were OPP's "customers."

In response, defendant argues that her statements to the trial court regarding her affirmative defense no longer being at issue were neither intended nor understood to take the "customer" issue out of the case. She maintains that it was plaintiff's burden to prove that the patients were OPP's "customers" under ORS 653.295(4)(b). And she disagrees that plaintiff was legally entitled to prevail on the "customer" issue.

We begin with the second assignment of error, because who has the burden of proof under ORS 653.295(4)(b) has ramifications for the first assignment of error.

A. Burden of Proof Under ORS 653.295

The parties disagree as to who has the burden of proof under ORS 653.295. As it did in the trial court, plaintiff takes the view that it was defendant's burden to prove that the noncompetition provision in her employment contract was unenforceable under ORS 653.295, including proving that the exception in ORS 653.295(4)(b) did not apply. If plaintiff is correct, that would mean that it was defendant's burden to prove that the 32 patients were not OPP's "customers." Defendant counters that the trial court correctly put the burden on plaintiff to prove that the 32 patients were OPP's customers. On appeal, defendant seems to take the position that the burden of proof is always on the employer under ORS 653.295, whether enforceability turns on ORS 653.295(1) or an exception such as ORS 653.295(4)(b). We understand defendant to have taken a different position in the trial court, essentially viewing it as the employee's burden to prove unenforceability under ORS 653.295(1) but the employer's burden to prove the applicability of an exception such as ORS 653.295(4)(b).

The distribution of the burden of proof under ORS 653.295 is ultimately a question of statutory construction. We therefore must consider the statute's text, context, and legislative history to discern the legislature's intent as to who bears the burden of proof. See State v. Gaines , 346 Or. 160, 171-73, 206 P.3d 1042 (2009) (describing process of statutory construction). Unfortunately, the parties have offered almost no statutory analysis in their briefing. Instead, each party quotes different lines from Henry I as suggesting that the other party bears the burden of proof. Although efforts to read into Henry I are understandable, we did not address the burden-of-proof issue in Henry I , as it was not squarely presented and the case was in a different posture than it is now. Suffice it to say that we do not view Henry I as resolving—or purporting to resolve—who bore the burden of proof. We must decide that issue by construing the statute.⁴

To decide who bears the burden of proof under ORS 653.295, we rely almost entirely on the statutory text in context. Neither party has identified any helpful legislative history, and we have found little. In any event, there "is no more persuasive evidence of the intent of the legislature" than the text and context. Gaines , 346 Or. at 171, 206 P.3d 1042. We consider but are not constrained by the parties’ readings of the statute, because we are "responsible for identifying the correct interpretation [of a statute], whether or not asserted by the parties." Stull v. Hoke , 326 Or. 72, 77, 948 P.2d 722 (1997).

ORS 653.295(1) provides that a noncompetition agreement between an employer and an employee "is voidable and may not be enforced by a court of this state unless " five criteria are met. (Emphasis added.) Essentially, those five criteria require that the agreement was presented in a certain manner and timeframe, that the employee is a person described in ORS 653.020(3), that the employer has a protectable interest, that the employee's salary exceeds a certain threshold, and that the employer took certain action within 30 days after the employment termination date. ORS 653.295(1)(a) - (e). If the five criteria are met, the agreement is enforceable under ORS 653.295(1). If the five criteria are not met,...