O'Sullivan v. Sunil Gupta, M.D., LLC

• Decision Date: 10 August 2017
• Docket Number: CIVIL ACTION No. 17-609 SECTION I
• Parties: SEAN O'SULLIVAN v. SUNIL GUPTA, M.D., LLC ET AL.
• Court: U.S. District Court — Eastern District of Louisiana

SEAN O'SULLIVAN v. SUNIL GUPTA, M.D., LLC ET AL.

CIVIL ACTION No. 17-609 SECTION I

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA

August 10, 2017

ORDER AND REASONS

Before the Court is a motion¹ filed by plaintiff Sean O'Sullivan for summary judgment against defendant Sunil Gupta, M.D., LLC ("RSI"). RSI opposes the motion.²

For the foregoing reasons, the Court will grant the motion as set forth herein.

I.

The following facts are undisputed: Sean O'Sullivan is an ophthalmologist employed by RSI—shorthand for the Retina Specialty Institute³—which is owned by Sunil Gupta, M.D., LLC.⁴ O'Sullivan works at RSI's two locations in Louisiana, one in Metairie and the other in Covington.⁵

When O'Sullivan joined RSI, O'Sullivan and RSI executed a Noncompetition and Nonsolicitation Agreement ("RSI Agreement")⁶ designed to restrict O'Sullivan'sability to compete against RSI if and when O'Sullivan left RSI.⁷ The RSI Agreement provides in part that "for a restrictive period of two (2) years following either the expiration or termination of" O'Sullivan's employment from RSI "for any reason," O'Sullivan will not compete against RSI by engaging in the practice of ophthalmology, or advertising for or soliciting patients, in the "Restrictive Territory."⁸ The RSI Agreement also limits O'Sullivan's ability to solicit RSI employees.⁹

The RSI Agreement defines the "Restrictive Territory" as "the geographical area inside of a fifty (50) mile radius of any office or facility of Employer which exists or existed at the time during the Employment relationship."¹⁰ With respect to the two-year "restrictive period," the RSI Agreement provides for its automatic extension "for whatever length of time" that O'Sullivan is in violation of the RSI Agreement, or when "[a]ny litigation (including appeals) is pending" that challenges or seeks to enforce the RSI Agreement.¹¹

The RSI Agreement also includes several reformation and severability provisions. One of these provisions provides that the invalidation of any portion of the RSI Agreement does not affect the enforceability of the remaining portions.¹² Another provides that "[i]f the period of time or geographic area specified in th[e] [RSI] Agreement should be adjudged unreasonable in any proceeding, then the periodof time or geographic area shall be" reformed "so that such restrictions may be enforced for such time or geographic area as is adjudged to be reasonable and enforceable, and shall not affect the enforceability of any other provision."¹³

O'Sullivan has now moved¹⁴ the Court for summary judgment as to his claim for declaratory judgment. O'Sullivan argues that certain portions of the RSI Agreement—namely, paragraphs 5 through 8, as well as paragraphs 11 and 13—violate Louisiana law, and are therefore null and void. Defendant opposes¹⁵ O'Sullivan's motion as overbroad.

II.

Summary judgment is proper when, after reviewing the pleadings, the discovery and disclosure materials on file, and any affidavits, the court determines that there is no genuine dispute of material fact. See Fed. R. Civ. P. 56. "[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The party seeking summary judgment need not produce evidence negating the existence of material fact, but need only point out the absence of evidence supporting the other party's case. Id.; Fontenot v. Upjohn Co., 780 F.2d 1190, 1195 (5th Cir. 1986).

Once the party seeking summary judgment carries its initial burden, the nonmoving party must come forward with specific facts showing that there is a genuine dispute of material fact for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The showing of a genuine issue of material fact is not satisfied by creating "'some metaphysical doubt as to the material facts,' by 'conclusory allegations,' by 'unsubstantiated assertions,' or by only a 'scintilla' of evidence." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (citations omitted). Instead, a genuine issue of material fact exists when the "evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party responding to the motion for summary judgment may not rest upon the pleadings, but must identify specific facts that establish a genuine issue. Id. The nonmoving party's evidence, however, "is to be believed, and all justifiable inferences are to be drawn in [the nonmoving party's] favor." Id. at 255; see also Hunt v. Cromartie, 526 U.S. 541, 552 (1999).

III.

Louisiana—whose law governs the interpretation and enforcement of the RSI Agreement¹⁶—has a "longstanding policy against covenants not to compete." TeamEnvtl. Serv., Inc. v. Addison, 2 F.3d 124, 126 (5th Cir. 1993); see also Water Processing Tech., Inc. v. Ridgeway, 618 So.2d 533, 535 (La. Ct. App. 4th Cir. 1993) ("A contract or agreement which prohibits an employee from competing with a former employer consistently has been found to be against public policy in Louisiana."). Under La. R.S. § 23:921, the general rule is that "[e]very contract or agreement, or provision thereof, by which anyone is restrained from exercising a lawful profession, trade, or business of any kind . . . shall be null and void." La. R.S. § 23:921(A)(1). However, where such contracts and agreements meet certain strict requirements, they "shall be enforceable." Id. Specifically:

• "Any person . . . may agree" not to (1) carry on or engage in a business similar to the employer's business ("noncompetition agreement"), or (2) solicit the employer's customers ("nonsolicitation agreement");

• "Any person . . . may agree" to a noncompetition or nonsolicitation agreement "within a specified parish or parishes, municipality or municipalities, or parts thereof," as long as the employer operates in those locations ("geographic requirement"); and

• "Any person . . . may agree" to a noncompetition or nonsolicitation agreement "not to exceed a period of two years from termination of employment" ("time requirement").

Id. § 23:921(C). In short, "a valid non-competition agreement may limit competition only in a business similar to that of the employer, in a specified geographic area, for up to two years from termination of employment." Parker v. Surface Works, Inc., No.2015-1583, 2016 WL 5110048, at *3 (La. Ct. App. 1st Cir. Sept. 16, 2016) (emphasis in original); see also Affordable Roofing, Siding, and Gutters, Inc. v. Artigues, No. 16-16872, 2017 WL 713693, at *3 (E.D. La. Feb. 23, 2017) (Africk, J.) ("Non-solicitation of customers provisions in Louisiana are subject to the same restrictions as non-compete provisions.").

"Public policy requires that covenant-not-to-compete agreements must be strictly construed in the employee's favor." Daiquiri's III on Bourbon, Ltd. v. Wandfluh, 608 So.2d 222, 224 (5th Cir. 1992) (internal quotation marks omitted); see also Arthur J. Gallagher & Co. v. Babcock, 703 F.3d 284, 288 (5th Cir. 2012) (citing SWAT 24 Shreveport Bossier, Inc. v. Bond, 808 So.2d 294, 298 (La. 2001)). In that vein, these contracts and agreements "must strictly comply with the requirements contained in the statute." Team Envtl. Serv., 2 F.3d at 126 (quoting Comet Indus., Inc. v. Lawrence, 600 So.2d 85, 88 (La. Ct. App. 2d Cir. 1992)).

With respect to La. R.S. § 23:921's geographic requirement, courts treat "mechanical adherence" to the statute as "especially" imperative. Gearheard v. De Puy Orthopaedics, Inc., No. 99-1091, 1999 WL 638582, at *4 (E.D. La. Aug. 19, 1999) (Clement, J.) (internal quotation marks omitted). The Court itself recently emphasized that strict observance of the geographic requirement was consistent with both the statute's plain text and policy objectives.¹⁷ See Affordable Roofing, 2017 WL713693, at *2-*3. As such, "[t]he absence of the required geographic limitation is fatal to a noncompetition agreement and renders it invalid." Action Revenue Recovery, L.L.C. v. eBusiness Group, L.L.C., 17 So.3d 999, 1003 (La. Ct. App. 2d Cir. 2009).

Moreover, "[b]ecause [the geographic requirement] . . . speaks to non-competition 'within a specified parish or parishes, municipality or municipalities, or parts thereof,' Louisiana courts have stated that non-competition agreements failing to specify the parish, municipality or parts thereof are unenforceable." Gearheard, 1999 WL 638582, at *4 (quoting La. R.S. § 23:921(C)); see also id. (citing cases). For example, where noncompetition or nonsolicitation agreements define their geographic scope in miles, rather than municipalities—or parishes, or parts thereof—courts have routinely invalidated them. See, e.g., Team Envtl. Serv., 2 F.3d at 126 ("On their face, LRI's agreements do not conform to the statutory requirements because they prohibit competition within 200 miles of the employees' base of operations rather than specifying the parishes or municipalities in which LRI does business."); Francois Chiropractic Center v. Fidele, 630 So.2d 923, 926 (La. Ct. App. 4th Cir. 1993) (invalidating a covenant not to compete that prohibited competition "within a ten (10) mile radius of the outer city limits of New Orleans, Louisiana," id. at 924); Medivision, Inc. v. Germer, 617 So.2d 69, 73 (La. Ct. App. 4th Cir. 1993) (concluding that a covenant not to compete is unenforceable where it bars the employee from "providing ophthalmological services within ten miles of any office of" the employer, id. at 70).

IV.

O'Sullivan challenges certain provisions of the RSI Agreement as transgressing La. R.S. § 23:921. The Court will examine each of these provisions in turn.

A.

O'Sullivan first challenges the legality of paragraph 5 of the RSI Agreement, which is designated as a covenant not to...