Skaf v. Wyo. Cardiopulmonary Servs.

• Docket Number: S-22-0290
• Decision Date: 28 August 2023
• Citation: 2023 WY 86
• Parties: MICHEL SKAF, M.D., Appellant (Defendant), v. WYOMING CARDIOPULMONARY SERVICES, P.C., a Wyoming corporation, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

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2023 WY 86

MICHEL SKAF, M.D., Appellant (Defendant), v. WYOMING CARDIOPULMONARY SERVICES, P.C., a Wyoming corporation, Appellee (Plaintiff).

No. S-22-0290

Supreme Court of Wyoming

August 28, 2023

Appeal from the District Court of Natrona County The Honorable Daniel L. Forgey, Judge

Representing Appellant:

Weston W. Reeves and Anna Reeves Olson, Park Street Law Office Casper, Wyoming. Argument by Mr. Reeves.

Representing Appellee:

Patrick J. Lewallen and Frank R. Chapman, Chapman Valdez &Lansing, Casper, Wyoming. Argument by Mr. Lewallen.

Before FOX, C.J., and KAUTZ, BOOMGAARDEN, GRAY, and FENN, JJ.

FOX Chief Justice.

[¶1] In 2015, Wyoming Cardiopulmonary Services (WCS) terminated Dr. Michel Skaf for cause. He opened his own cardiology office shortly thereafter and WCS sued him for breaching the non-compete clause (¶ 11.1) and agreement not to service WCS patients (¶ 11.2) in his employment contract with WCS. The parties went to arbitration and the arbitration panel (Panel) found Dr. Skaf violated the non-compete clause. It awarded WCS liquidated damages for Dr. Skaf's breach of the agreement not to provide service to WCS patients. On appeal, we determined the Panel committed manifest error in its non-compete decision.

[¶2] The parties went back to the Panel which again found in favor of WCS. The Panel found the non-compete clause was unenforceable, but the liquidated damages award to WCS was still valid under ¶ 11.2. It also determined that Dr. Skaf was entitled to 50% of his deferred compensation, a $125,000 award, yet was not entitled to statutory interest. Dr. Skaf appealed the Panel's award under ¶ 11.2 and the refusal to grant interest. The district court confirmed the award, and we affirm.

ISSUES

[¶3] Dr. Skaf brings three issues on appeal which we restate as two:

1. Was declining to award prejudgment interest on Dr. Skaf's deferred compensation manifest error?

2. Was Dr. Skaf barred from relitigating the Panel's liquidated damages award under ¶ 11.2 because he failed to bring the issue on appeal in Skaf I?

FACTS

[¶4] Dr. Skaf began practicing as a cardiologist with WCS in Casper in 2004. In 2009, Dr. Skaf became a shareholder of WCS and signed a Shareholder Employment Agreement (Agreement). The agreement included two relevant provisions, ¶ 11.1, an agreement not to compete against WCS; and ¶ 11.2, an agreement not to service WCS patients if Dr. Skaf was terminated:

11. Covenant Not to Compete / Non-Solicitation

11.1 Covenant Not to Compete. As an essential part of this Agreement, Employee covenants with Employer that if Employee's employment with Employer terminates for any reason, Employee will not practice medicine for a period of two years following termination of employment within a 100-mile radius of Casper, Wyoming, and each outreach clinic of Employer. This covenant will apply to Employee whether he engages in the subsequent practice of medicine in an individual capacity, as an employee of another concern, or as a principal of a partnership, corporation, or other entity. Notwithstanding the foregoing, this provision is not intended to, nor will it be construed as, limiting in any way Employee's right to have hospital privileges or to perform medical procedures at Wyoming Medical Center, Casper, Wyoming.

11.2 Agreement Not to Service Patients - Liquidated Damages. If, at any time within two years after the termination of Employee's employment by Employer, for any reason, Employee directly or indirectly provides medical services to any patient of Employer, he will immediately purchase from Employer the goodwill associated with such patient. In view of the difficulty in evaluating goodwill, it is hereby agreed that the price of said goodwill will be measured by the fees and other charges billed by Employer with respect to such client during the 12-month period immediately preceding the effective date of Employee's termination of employment, but in no event less than $1,000 for each such patient. It is mutually agreed that this amount will be paid by Employee to Employer over a two-year period of time with 25 percent down and the balance in 24 equal monthly payments, including interest at the rate of 18 percent per annum.

[¶5] WCS terminated Dr. Skaf for cause in 2015. Shortly thereafter he opened his own cardiology office, Casper Cardiology. WCS sued Dr. Skaf claiming he breached the noncompete clause in the Agreement and, ultimately, the parties went to arbitration as provided in the Agreement. WCS submitted five issues in its Demand for Arbitration: 1) Dr. Skaf breached the shareholder employment agreement and was terminated for cause; 2) Dr. Skaf violated the covenant not to compete and the non-solicitation clause and WCS should be entitled to liquidated damages; 3) Dr. Skaf breached his agreement not to service WCS patients under ¶ 11.2 and WCS is entitled to damages; 4) Dr. Skaf is not entitled to his deferred compensation under the Agreement; and 5) Dr. Skaf should be enjoined from competing against WCS because he breached ¶ 11.1. Dr. Skaf denied these allegations and presented issues of his own: 1) WCS failed to provide the required notice to Dr. Skaf prior to termination; 2) Dr. Skaf was entitled to unpaid and deferred compensation, including interest at the statutory rate of 18%; 3) ¶ 11.1 regarding the covenant not to compete was invalid as a matter of public policy; and 4) defamation and intentional interference.

[¶6] The Panel first analyzed the non-compete and determined it must be modified to be enforceable. It amended the non-compete to bar Dr. Skaf from practicing cardiology in Casper or any county where WCS had an office.

[¶7] In a separate section entitled "Damage Claims by Petitioner" the Panel addressed damages Dr. Skaf owed to WCS for violating the non-compete and servicing former WCS patients. It separately addressed the contract language in ¶ 11.1 and ¶ 11.2:

Under the WCS contract, Section 11.1 contains a covenant not to compete with WCS for a period of two (2) years. Under Section 11.2 of the contract, Dr. Skaf must also refrain for a period of two (2) years from treating any person who was a patient of WCS while [Dr.] Skaf was working for that entity. Further, Section 11.2 provides that if Dr. Skaf violates this provision and renders care to any former patient of WCS, he will pay "liquidated damages" which . . . shall be "in no event less than $1,000 for each such patient."

The Panel conducted a thorough analysis of the liquidated damages provision and determined portions of the provision were unenforceable as a matter of law but the $1,000 minimum per patient damages award was enforceable and awarded WCS $193,000 for the 193 WCS patients Dr. Skaf serviced.

[¶8] The Panel summarized its decision in three main points: 1) the Panel did not have the power to issue an injunction, but advised that Dr. Skaf be enjoined from competing against WCS in any county where WCS operates for a period of two years; 2) the contract bars Dr. Skaf from offering cardiopulmonary services outside of the Wyoming Medical Center; and 3) Dr. Skaf cannot render care to any former WCS patients except for the 193 patients he purchased the goodwill of through the $193,000 liquidated damages award. It was later determined Dr. Skaf serviced an additional twenty-eight former WCS patients in violation of ¶ 11.2 and WCS was awarded an additional $28,000 of liquidated damages, bringing the award total to $221,000.

[¶9] The award was confirmed by the district court and appealed to this Court. Skaf v. Wyo. Cardiopulmonary Servs., 2021 WY 105, 495 P.3d 887 (Wyo. 2021) (Skaf I). In Skaf I, we addressed four issues, one of which is relevant here: whether the Panel made a manifest error of law in its award by basing its analysis and decision on the premise that non-competes are highly favored in Wyoming. Id. at ¶ 33, 495 P.3d at 897. We held such a misstatement was manifest error, but we did not discuss the liquidated damages award because it was not raised on appeal. See generally id. at ¶¶ 35-49, 495 P.3d at 898-903. We concluded that "[t]he Panel made a manifest error of law when it ignored a specific public policy arising from well-established judicial mandate-covenants not to compete are prima facie invalid unless necessary for the reasonable protection of the employer; that error led the Panel to rewrite the parties' contract." Id. at ¶ 48, 495 P.3d at 903. We reversed the district court's confirmation and vacated the award. Id. at ¶ 49, 495 P.3d at 903.

[¶10] The parties returned to arbitration where Dr. Skaf asked the Panel to award him his deferred compensation under the Agreement, plus interest, and WCS asked the Panel not to award interest on Dr. Skaf's deferred compensation and to reaffirm the $221,000 liquidated damages award under ¶ 11.2. The Panel held that despite the fact the noncompete was unenforceable, the liquidated damages provision was a distinct and valid basis for the $221,000 award. It reasoned that ¶ 11.2 was not a non-compete clause but a separate provision which contemplated competition and established what damages must be paid if Dr. Skaf took patients from WCS. It concluded WCS was entitled to the $221,000 it had been awarded after the first arbitration. The Panel awarded Dr. Skaf $125,000 in deferred compensation but denied him interest on the award. WCS moved to confirm the award which Dr. Skaf opposed. The district court confirmed the award and Dr. Skaf appealed.

STANDARD OF REVIEW

[¶11] "This Court reviews 'de novo a district court's decision to confirm, vacate, or modify an arbitration award....without deference to the view of the trial court. At the same time, this Court, like the district court, shows substantial deference to the decision of the...