Pappas v. Hand Surgical Assocs.
| Decision Date | 29 March 2023 |
| Docket Number | 22-CA-407 |
| Parties | NICHOLAS D. PAPPAS, III, M.D. v. HAND SURGICAL ASSOCIATES, LTD |
| Court | Court of Appeal of Louisiana — District of US |
ON APPEAL FROM THE TWENTY-FOURTH JUDICIAL DISTRICT COURT PARISH OF JEFFERSON, STATE OF LOUISIANA NO. 824-191, DIVISION "G" HONORABLE E. ADRIAN ADAMS, JUDGE PRESIDING
Panel composed of Judges Susan M. Chehardy, Jude G. Gravois, and Stephen J. Windhorst
Defendant/appellant, Hand Surgical Associates, Ltd. ("HSA"), appeals a judgment rendered on April 7, 2022 in favor of plaintiff, Dr. Nicholas D. Pappas, III, which granted a preliminary injunction and a declaratory judgment in favor of Dr. Pappas, ruling that non-competition covenants contained in an Employment Agreement the parties entered into on or about October 1, 2014 (with an effective date of January 1, 2015) (the "Employment Agreement") were unenforceable upon Dr. Pappas's resignation from HSA in 2021.
On appeal, HSA contends that the trial court erred in granting the preliminary injunction in favor of Dr. Pappas, arguing that the judgment is not supported by the provisions of the Employment Agreement. HSA also argues that the trial court erred in granting the declaratory judgment in favor of Dr. Pappas, finding the non-competition covenants to be unenforceable, when only the preliminary injunction proceeding was properly before the court in the summary proceeding conducted by the court. Finally, HSA argues that the trial court erred in granting the preliminary injunction because (1) Dr. Pappas failed to show irreparable injury, and (2) the court failed to require Dr. Pappas to furnish any security for the preliminary injunction.[1]
For the following reasons, we affirm the trial court's grant of a preliminary injunction in favor of Dr. Pappas. However, we vacate that portion of the judgment which grants a declaratory judgment in favor of Dr. Pappas. We further remand the matter for the trial court to fix security for the issuance of the preliminary injunction and for further proceedings consistent with this opinion.
On January 7, 2022, Dr. Pappas filed a "Verified Petition for Declaratory Judgment, Preliminary Injunction, Permanent Injunction and Damages" against HSA, seeking (1) a judgment declaring the non-competition covenants contained in the Employment Agreement are no longer in effect and unenforceable against him, (2) preliminary and permanent injunctions prohibiting the enforcement of the noncompetition covenants, and (3) damages for his lost income resulting from HSA's attempt to enforce the non-competition covenants. Dr. Pappas also sought attorney's fees and costs. A hearing on the preliminary injunction was set for February 7, 2022.
On February 2, 2022, HSA filed an exception of no cause of action, asserting that the petition failed to state a cause of action because as a matter of law, the non-competition covenants at issue herein continued in effect for a period of two years following the end of Dr. Pappas's employment with HSA in 2021. In its exception, HSA argued that the clear terms of the Employment Agreement stated that the non-competition clauses in the Employment Agreement were "independent of any other provision" and that they "shall survive the termination of this Agreement."[2] Plaintiff filed an opposition to the exception. A hearing on the exception was set for the same date as the hearing on the preliminary injunction, February 7, 2022.[3]
Following the hearing on February 7, 2022 on the preliminary injunction and the exception, the trial court took the matter under advisement and gave the parties time to file post-trial briefs. The trial court rendered a judgment on April 7, 2022, containing the following decretal language:
(Emphasis in original.)
Dr. Pappas, a board certified hand surgeon, entered into the Employment Agreement with HSA on or about October 1, 2014 (with an effective date of January 1, 2015), which was attached to his verified petition and introduced into evidence at the hearing on February 7, 2022. The Employment Agreement contained sixteen "Sections," setting forth various employment terms and conditions, such as compensation, benefits, insurance, and other employment matters not at issue in this appeal. Section 13 of the Employment Agreement provided for conditions precedent to the termination of the agreement. Section 14 of the Employment Agreement, containing numerous sub-parts, sets forth the noncompetition covenants between the parties that are at issue here.
Pursuant to the Employment Agreement, Section 4.1, Dr. Pappas performed services at LSU two days per week. In late 2017, Dr. Pappas told HSA that he wanted to discontinue his work arrangement with LSU. The parties agreed that this would happen in July of 2018. Dr. Pappas points out that a clause in Section 13 of the Employment Agreement ( Section 13.1.5, quoted infra in footnote 9) states that the Employment Agreement would automatically terminate upon the expiration or termination of HSA's agreement with LSU. It is Dr. Pappas's position that upon termination of HSA's agreement with LSU, he entered into a new, unwritten, at-will employment agreement with HSA in which he accepted a reduced salary of $300,000.00 per year[5] and the terms of his employment changed in that he no longer had any obligation to perform services at LSU.
On October 22, 2021, Dr. Pappas resigned from HSA. The resignation was preceded by some events, which included HSA's furloughing of Dr. Pappas without pay in early 2020 during the beginning stages of the COVID-19 pandemic quarantine, an increased call schedule that he found onerous, and Dr. Pappas's taking medical leave in 2021 to recuperate from hand surgery. Dr. Pappas testified that he was informed that HSA would "vigorously" litigate the non-competition covenants. He testified at the hearing that while two surgical groups were interested in offering him employment as a hand surgeon in the restricted area,[6]they would not offer him a position until the risk of litigation with HSA was resolved. He testified that because he had a young family, a newly purchased home, and had left previous, more lucrative employment out of state to return to the New Orleans area to be near family, he filed this suit against HSA, feeling that he would suffer irreparable injury if the non-competition covenants contained in the Employment Agreement were enforced to preclude him from employment in the restricted area.
Improper grant of preliminary injunction
In his petition, Dr. Pappas sought a preliminary injunction against HSA, preventing it from enforcing the non-competition covenants contained in the Employment Agreement pending a full resolution of his request for a declaratory judgment and a permanent injunction, asserting that the non-competition covenants were unenforceable. On appeal, HSA argues that the trial court erred in granting the preliminary injunction sought by Dr. Pappas against HSA in this case.
A preliminary injunction is essentially an interlocutory procedural device designed to preserve the status quo between the parties pending a trial on the merits. Wechem, Inc. v. Evans, 18-743 (La.App. 5 Cir. 5/30/19), 274 So.3d 877, 884, writ denied, 19-01176 (La. 10/15/19), 280 So.3d 600. The primary purpose of injunctive relief is to prevent the occurrence of future acts that may result in irreparable injury, loss, or damage to the applicant. Id. A preliminary injunction is a summary proceeding and merely requires a prima facie showing of a good chance to prevail on the merits. McCord v West, 07-958 (La.App. 5 Cir. 3/25/08), 983 So.2d 133, 140, citing Bank One, Nat. Ass'n v. Velten, 04-2001 (La.App. 4 Cir. 8/17/05), 917 So.2d 454. In making a prima facie showing, the plaintiff is required to offer less proof than is necessary in an ordinary proceeding for a permanent injunction. Vartech Sys., Inc. v. Hayden, 05-2499 (La.App. 1 Cir. 12/20/06), 951 So.2d 247, 255, n.8, citing State through Louisiana State Bd. of Examiners of Psychologists of the Dep't of Health and Human Services v. Atterberry, 95-0391 (La.App. 1 Cir. 11/9/95), 664 So.2d 1216, 1220.
The principal demand is determined on its merits only after a full trial under ordinary process, even though the hearing on the summary proceedings to obtain the preliminary injunction may touch upon or tentatively decide merit issues. McCord v. West, 983 So.2d at 140, citing Smith v. West Virginia Oil &Gas Co., 373 So.2d 488, 494 (La. 1979). Accordingly, the fact that a preliminary injunction is granted in one litigant's favor does not preclude a different result on the merits. Id.
Although the judgment on a preliminary injunction is interlocutory, a party aggrieved by a judgment either granting or denying a preliminary injunction is entitled to an appeal. La. C.C.P art. 3612.[7]...
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