St. Clair Medical, P.C. v. Borgiel

• Decision Date: 19 January 2006
• Docket Number: Docket No. 256217.
• Citation: St. Clair Medical, P.C. v. Borgiel, 715 N.W.2d 914, 270 Mich. App. 506 (Mich. App. 2006)
• Parties: ST. CLAIR MEDICAL, P.C., Plaintiff/Counter-Defendant-Appellee, v. Christopher BORGIEL, Defendant/Counter-Plaintiff-Appellant.
• Court: Court of Appeal of Michigan

715 N.W.2d 914

270 Mich. App. 506

ST. CLAIR MEDICAL, P.C., Plaintiff/Counter-Defendant-Appellee, v.Christopher BORGIEL, Defendant/Counter-Plaintiff-Appellant.

Docket No. 256217.

Court of Appeals of Michigan.

Submitted January 11, 2006, at Detroit.

Decided January 19, 2006.

Approved for Publication March 14, 2006, at 9:10 a.m.

Released for Publication May 24, 2006.

COPYRIGHT MATERIAL OMITTED

Fletcher Clark Tomlinson Fealko & Monaghan, P.C.(by John D. Tomlinson), Port Huron, for the plaintiff.

Williams Acosta, P.L.L.C.(by Victor J. Torres), Detroit, for the defendant.

Before: MARK J. CAVANAGH, P.J., and HOEKSTRA and MARKEY, JJ.

PER CURIAM.

Defendant appeals by right the trial court's order granting summary disposition in favor of plaintiff in this contract action involving a covenant not to compete.We affirm.

DefendantChristopher Borgiel, M.D., began working for plaintiff on October 15, 2001, and signed an employment contract that provided in relevant part:

1.Employment for professional services.The Employer hereby employs the Employee and the employee accepts such employment as a physician to perform services at Greater Yale Medical Clinic and Mitchell Medical Center.

* * *

7.Restricted Covenant.The employee shall agree not to embark on medical practice within 7 (seven) miles of either office for at least one (1) year after this Employer-Employee relationship has ended.The employee shall reimburse the corporation $40,000.00 if these terms are breached.

From October 2001 through July 2003, defendant worked almost exclusively at the Greater Yale Medical Clinic in Yale, Michigan; he also worked approximately six hours during the 20-month employment period at the Mitchell Medical Center in Port Huron, Michigan.On June 18, 2003, defendant submitted a letter of resignation advising plaintiff that he was terminating his employment on July 2, 2003.Further, he stated his intent to work for Physician's Health Care Network in Fort Gratiot, which is located within seven miles of the Mitchell Medical Center.

Plaintiff filed a complaint alleging that defendant was in violation of the restrictive covenant and requested that defendant pay liquidated damages in the amount of $40,000 for breach of contract.Defendant filed a counterclaim for a declaratory judgment that the restrictive covenant and liquidated damages clause were void and unenforceable.Plaintiff filed a motion for summary disposition pursuant to MCR 2.116(C)(10) on its claim for breach of contract and defendant's complaint for declaratory judgment.Defendant filed a cross-motion for summary disposition pursuant to MCR 2.116(I)(2).The circuit court granted plaintiff's motion, finding that the restrictive covenant was enforceable, that defendant violated the covenant by working within seven miles of plaintiff's Port Huron office, and that the liquidated damages clause was enforceable.The court subsequently issued an order awarding plaintiff $40,000, plus interest, offset by $3,300 that plaintiff still owed defendant.The court granted defendant's motion to stay enforcement of the judgment pending appeal.

Defendant argues on appeal that the covenant did not restrict him from practicing medicine within seven miles of the Mitchell Medical Center, so he did not violate it.We disagree.

A trial court's decision on a motion for summary disposition is reviewed de novo.Maiden v. Rozwood,461 Mich. 109, 118, 597 N.W.2d 817(1999).A motion for summary disposition under MCR 2.116(C)(10) tests the factual sufficiency of the complaint.Maiden, supra at 120, 597 N.W.2d 817.The moving party must specifically identify the matters that it believes have no disputed factual issues.Id.;MCR 2.116(G)(4).The moving party must support its position with affidavits, depositions, admissions, or other documentary evidence.Quinto v. Cross & Peters Co.,451 Mich. 358, 362, 547 N.W.2d 314(1996);MCR 2.116(G)(5).Once the moving party has met this burden, the burden shifts to the opposing party to show that a genuine issue of material fact exists.Quinto, supra at 362, 547 N.W.2d 314.When the burden of proof at trial falls on the party opposing the motion, that party may not rest on mere allegations or denials in the pleadings, but must, by documentary evidence, set forth specific facts to show that there is a genuine issue for trial.Id.;Maiden, supra at 121, 597 N.W.2d 817.

The construction and interpretation of a contract present questions of law that we review de novo.Henderson v. State Farm Fire & Cas. Co.,460 Mich. 348, 353, 596 N.W.2d 190(1999).The goal of contract construction is to determine and enforce the parties' intent on the basis of the plain language of the contract itself.Old Kent Bank v. Sobczak,243 Mich.App. 57, 63, 620 N.W.2d 663(2000)."It is axiomatic that if a word or phrase is unambiguous and no reasonable person could differ with respect to application of the term or phrase to undisputed material facts, then the court should grant summary disposition to the proper party pursuant to MCR 2.116(C)(10)."Henderson, supra at 353, 596 N.W.2d 190."Conversely, if reasonable minds could disagree about the conclusions to be drawn from the facts, a question for the factfinder exists."Id.

Here, the contract unambiguously prohibited defendant from engaging in medical practice within seven miles of either the Yale Medical Clinic or the Mitchell Medical Center.Defendant's effort to read the covenant to prohibit the practice of medicine within seven miles of a clinic where he actually provided the majority of his services is unconvincing.The clause clearly prohibits practice within seven miles of either clinic, without regard to where the services were performed.Moreover, defendant readily admits that he provided limited services at the Mitchell Medical Center, and defendant does not dispute that his new position is within seven miles of the Mitchell Medical Center.Thus, the trial court did not err when it concluded that the contract was unambiguous and defendant had breached it.

Next, defendant argues that the covenant not to compete is unreasonable and violates the Michigan Antitrust Reform Act (MARA), MCL 445.771 et seq.We disagree.

"A contract . . . between 2 or more persons in restraint of, or to monopolize, trade or commerce in a relevant market is unlawful."MCL 445.772.But, agreements not to compete are authorized by § 4a(1) of the MARA, MCL 445.774a(1), which provides:

An employer may obtain from an employee an agreement or covenant which protects an employer's reasonable competitive business interests and expressly prohibits an employee from engaging in employment or a line of business after termination of employment if the agreement or covenant is reasonable as to its duration, geographical area, and the type of employment or line of business.To the extent any such agreement or covenant is found to be unreasonable in any respect, a court may limit the agreement in order to render it reasonable in light of the circumstances in which it was made and specifically enforce the agreement as limited.

This Court recently concluded that § 4a(1) represents a codification of the commonlaw rule "that the enforceability of noncompetition agreements depends on their reasonableness."Bristol Window and Door, Inc. v. Hoogenstyn,250 Mich.App. 478, 495, 650 N.W.2d 670(2002).

At common law, a covenant not to compete was enforceable if it met four standards established by Hubbard v. Miller,27 Mich. 15, 19, 15 Am Rep 153(1873).First, the covenant must be for an honest and just purpose.Second, it must be established for the protection of the legitimate interest of the party in whose favor it is imposed.Third, it must be reasonable as between the parties to the contract.Finally, it must not be specially injurious to the public.Id.[Cardiology Assoc. of Southwestern Michigan, PC v. Zencka,155 Mich.App. 632, 636, 400 N.W.2d 606(1985).]

Thus, a restrictive covenant must protect an employer's reasonable competitive business interests, but its protection in terms of duration, geographical scope, and the type of employment or line of business must be reasonable.Additionally, a restrictive covenant must be reasonable as between the parties, and it must not be specially injurious to the public.

Because the prohibition on all competition is in restraint of trade, an employer's business interest justifying a restrictive covenant must be greater than merely preventing competition.United Rentals (North America), Inc. v. Keizer,202 F Supp 2d 727, 740(W.D.Mich., 2002).To be reasonable in relation to an employer's competitive business interest, a restrictive covenant must protect against the employee's gaining some unfair advantage in competition with the employer, but not prohibit the employee from using general knowledge or skill.Id.;Follmer, Rudzewicz & Co., PC v. Kosco,420 Mich. 394, 402-404, 362 N.W.2d 676(1984).In a medical setting, a restrictive covenant can protect against unfair competition by preventing the loss of patients to departing physicians, protecting an employer's investment in specialized training of a physician, or protecting an employer's confidential business information or patient lists.Community Hosp. Group, Inc. v. More,183 N.J. 36, 58, 869 A.2d 884(2005); Berg, Judicial enforcement of covenants not to compete between physicians: Protecting doctors' interests at patients' expense,45 RutgersL. R. 1, 17-18(1992).

We agree with defendant that material issues of fact remain regarding whether the covenant was protecting plaintiff's confidential patient lists and business information or plaintiff's investment in defendant's training.The lower court record is contradictory regarding whether defendant had access to confidential business information or patient lists.Plaintiff suggested that defendant had access to confidential information; however, defendant averred that during the course of his...