Smith v. Coffman

• Decision Date: 08 February 2012
• Docket Number: No. 46,793–CA.,46,793–CA.
• Citation: 87 So.3d 137
• Court: Court of Appeal of Louisiana — District of US
• Parties: Landon C. SMITH, M.D., Plaintiff–Appellee v. Leslie R. COFFMAN, M.D., Obstetrics & Gynecology, a Professional Medical Corp., Defendant–Appellant.

87 So.3d 137

Landon C. SMITH, M.D., Plaintiff–Appellee

v.Leslie R. COFFMAN, M.D., Obstetrics & Gynecology, a Professional Medical Corp., Defendant–Appellant.

No. 46,793–CA.

Court of Appeal of Louisiana, Second Circuit.

Feb. 8, 2012.

Frank Sloan, James A. Rountree, Monroe, LA, for Appellant.

Gold, Weems, Bruser, Sues & Rundell, Alexandria, LA, by Michael John O'Shee, Misty Shannon Antoon, Trevor Scott Frye, Steven M. Oxenhandler, for Appellee.

Before BROWN, STEWART, CARAWAY, MOORE and SEXTON (Pro Tempore), JJ.

CARAWAY, J.

[2 Cir. 1]This dispute between two physicians concerns a three-year employment agreement governing their relationship in a medical practice. The defendant and his medical corporation hired the plaintiff. At the end of the three-year term of the contract following written and other exchanges between the parties, the employment relationship ended. This led to various disputes concerning the contract's covenant not to compete, the manner in which the contract ended, an obligation to pay for the cost of continued malpractice insurance, the final payment of compensation owed to the plaintiff for his employment, statutory wage penalties, and attorney fees. Following a judgment against them for these claims totaling $342,319.60, the defendant doctor and his corporation appeal. For the following reasons, we affirm in part and reverse in part.

Facts and Procedural Background

Plaintiff, Dr. Landon Smith, filed this contract claim against his former employer, Obstetrics and Gynecology medical corporation, headed by Dr. Leslie Coffman (hereinafter collectively “Coffman”). In 2005, Coffman hired Dr. Smith to join his obstetrics and gynecology practice in Ouachita Parish and the parties signed an employment agreement (hereinafter the “Contract”) on June 24, 2005. The Contract was for a three-year term, ending on August 15, 2008. The Contract would automatically renew for an additional year unless either party gave written notice to withdraw from the contract at least 30 days prior to the end of the term. Dr. [2 Cir. 2]Smith was given an annual salary of $250,000, and Coffman agreed to pay his malpractice insurance.

The relevant provisions of the Contract are as follows:

1. Employment and Term. Subject to earlier termination as provided for in Section 13 hereof, the Employer hereby employs Employee, and Employee hereby accepts employment with the Employer, commencing August 15, 2005 (hereinafter the “Effective Date”) and continuing for a period of three (3) years (hereinafter the “Term of Employment”). Each 12–month period commencing on August 15 and ending on the following August 14 is referred to as the “Contract Year”. Upon the expiration of the Term of Employment, this Agreement shall automatically be renewed for successive one (1) year periods commencing upon the first anniversary of the Effective Date, unless either party gives written notice of intent not to renew not less than thirty (30), nor more than sixty (60), days prior to the end of any term.

12. Professional Liability Insurance

b. Tail Coverage. Upon termination of Employee's employment with Employer for any reason whatsoever, whether voluntary or involuntary, Employee shall obtain a professional liability insurance ‘tail’ coverage policy in the amount of not less than $500,000 per occurrence, and not less than $500,000 in the aggregate for each year, such tail coverage policy to provide coverage of Employee and Employer for all occurrences and events during Employee's employment with Employer.

In the event Employee: (i) voluntarily terminates or resigns his employment hereunder, or (ii) is terminated for cause pursuant to Section 13, then, in either such event, the cost of the ‘tail’ insurance required by this subsection (b) shall be paid exclusively by Employee. In the event Employer terminates Employee's employment hereunder for any reason other than cause under Section 13, then the cost of the ‘tail’ insurance required by this subsection (b) shall be paid exclusively by Employer.

13. Termination. Notwithstanding any other provisions of this Agreement, the Term of Employment shall terminate upon:

a. the death of Employee; or

b. upon Employee's “disability” ...; or

c. at Employer's option, immediately upon the existence of “cause” ...; or

d. at Employer's option, upon thirty (30) days written notice to Employee.

[2 Cir. 3]15. Transition following Notice of Termination. Following any notice of termination of the employment of Employee hereunder, whether given by Employer or Employee, Employee will fully cooperate with Employer in all matters relating to the winding up of Employee's pending work on behalf of Employer and the orderly transfer of such work to the other professional employees of Employer. On or after the giving of notice of termination hereunder and during any notice period, Employer will be entitled to such full-time or part-time services of Employee as Employer may reasonably require, and Employer will specifically have the right to terminate the active services of Employee at the time such notice is given and to pay the Employee the compensation due to him under the Agreement for the duration of the notice period.

16. Non–Competition. During the Term of Employment (or any renewal period) and for a continuous period of two (2) years thereafter commencing upon expiration or termination of the Term of Employment (or any renewal period), regardless of any termination pursuant to Section 13 or any voluntary termination or resignation by Employee, Employee shall not without the written consent of Employer, individually or jointly with others, directly or indirectly, whether for his own account or for that of any other person or entity, own or hold any ownership or voting interest in any person or entity engaged in a business the same as or similar to any business of the Employer, or in a business which competes in any manner whatsoever with the business of Employer or Employer's Facility, and which is located or intended to be located anywhere within Ouachita Parish, Louisiana, and any other Parish in which Employer does business at the time of termination of employment of Employee.

35. Costs of Enforcement. In the event it is necessary for any party to retain the services of an attorney or to initiate legal proceedings to enforce the terms of this Agreement, the prevailing party shall be entitled to recover from the non-prevailing party, in addition to all other remedies, all costs of such enforcement, including reasonable attorneys' fees and costs and including trial and appellate proceedings.

For over two years, Dr. Smith settled into the medical practice with Coffman. Coffman even gave him $30,000 for a down payment on a house. In November 2007, however, Dr. Smith learned that, prior to his arrival, the business manager, Cherice Cottrell, had told their employees to steer patients away from him so that he would not meet his bonus quota. When [2 Cir. 4]he approached her about it, she explained that they merely did not steer patients in his direction for a couple of months while they made sure that he was a good fit for the office. Additionally, she admitted to Dr. Smith that the bonus schedule was virtually unobtainable.

In January 2008, Dr. Coffman and accountant Craig Carnick met to negotiate a new contract with Dr. Smith. Dr. Smith made a request for an increase in salary to $400,000 and for financial assistance to pay off his student loans. No agreement for such compensation and an extension of the parties' contract was reached. In March 2008, Cottrell informed Dr. Smith that he would receive a $50,000 raise in his salary which was effective immediately. She also gave him a new and obtainable bonus schedule.

In his testimony, Dr. Smith admitted that on June 26, 2008, he told an office assistant that he would prefer to not have any new OB patients because the contract negotiations had never been finalized. The following day, Dr. Smith and Cottrell had a conversation where he allegedly expressed his frustration over his student loans and production bonuses. While Dr. Smith denies the allegation, Cottrell testified that he told her that he would not be renewing his contract.

After a vacation, Dr. Smith returned to work on July 3 and found a letter from Dr. Coffman on his desk. The letter stated:

Landon,

I truly regret that you will be leaving this practice. I hoped that we would have a long and positive professional relationship. However, I understand your decision to pursue your own opportunities.

Be assured that I will honor my contractual responsibilities to you, through the end of your contract.

[2 Cir. 5]Previously, I asked Craig Carnick and his associate, Bill VanKeulen, to analyze the available financial information, and to develop a plan which would be “revenue neutral” to this practice.

By the term “revenue neutral”, I mean a contract in which you neither cost the practice any money, nor would the practice make any money from your production.

While the underlying principle is totally fair, I understand that the numbers we could offer, based upon your past production and the environment of decreasing reimbursements, are such that they are unacceptable to you. I also understand that you expressed problems with steerage of patients and the image of the practice.

Since you will not be continuing in this practice, for the continuity of patient care, I may decide that it is best to relieve you of your routine daily patient care responsibilities. This would free up time for you to spend with your children, and for you to take the necessary steps to pursue your next opportunity. If this occurs, I will, of course, continue to pay you, but I may ask that you be available for some coverage.

As I previously stated, I will honor our responsibilities to you, including all salary owed to you for the remainder of your contractual period.

I am having our corporate attorney, Bob Collier, prepare all documents to...