Ut Medical Group, Inc. v. Vogt

• Decision Date: 20 August 2007
• Docket Number: No. W2005-00256-SC-R11-CV.,W2005-00256-SC-R11-CV.
• Citation: 235 S.W.3d 110
• Parties: UT MEDICAL GROUP, INC. v. Val Y. VOGT, M.D.
• Court: Tennessee Supreme Court

235 S.W.3d 110

UT MEDICAL GROUP, INC. v. Val Y. VOGT, M.D.

No. W2005-00256-SC-R11-CV.

Supreme Court of Tennessee, at Jackson.

April 3, 2007 Session.

August 20, 2007.

Kenneth P. Jones, Memphis, Tennessee, for the appellant, Val Y. Vogt, M.D.

Stephen H. Biller and Walter E. Schuler, Memphis, Tennessee, for the appellee, UT Medical Group, Inc.

OPINION

CORNELIA A. CLARK, J., delivered the opinion of the court, in which WILLIAM M. BARKER, C.J., and GARY R. WADE, J. and DAVID G. HAYES, SP. J. joined. JANICE M. HOLDER, J., not participating.

We granted review in this case to determine whether UT Medical Group, Inc. presented a justiciable case or controversy to the trial court when it alleged that Dr. Vogt anticipatorily breached an employment contract covenant. Because the record fails to show that Dr. Vogt committed an anticipatory repudiation of the non-competition covenant found in her employment agreement, Dr. Vogt is entitled to summary judgment. Therefore, we reverse the judgment of the Court of Appeals and remand this case to the trial court for the entry of an order dismissing the case.

Factual & Procedural Background

The procedural history of this matter is complicated, but its recitation is necessary to understand our resolution of the case.

In 1997, UT Medical Group, Inc. ("UTMG"), an independent, not-for-profit organization in which faculty members of the University of Tennessee Medical School practice medicine privately, and Dr. Val Y. Vogt, M.D. ("Dr.Vogt"), a faculty member and urogynecologist, agreed to and signed a Physician Employment Agreement.

Subsequently, on March 12, 2002, a second Physician Employment Agreement ("Agreement") was agreed to and signed by the parties.¹ As part of this Agreement, Section 22 sets forth a non-competition covenant.² In pertinent part, it provides:

(a) . . . Physician agrees that in the event his or her employment with UTMG is terminated for any reason, voluntarily or involuntarily, with or without cause, or in the event Physician voluntarily leaves the employment of UTMG, Physician will not for a period of one (1) calendar year engage in the practice of medicine, either directly or indirectly, actively or passively, under contract or otherwise, as an employee, owner, partner, agent, stockholder, director, or otherwise in the Restricted Area. . . . Physician consents in such event to the granting of injunctive relief against any continuing breach, together with retrospective relief in the form of liquidated damages equal to [66 2/3%] of all fees or other income generated or obtained by Physician or through his or her efforts as a result of the breach. In the event UTMG is granted injunctive relief as provided herein, whatever portion of the one (1) year term stated in subsection (a) of this Section 22 had not expired at the time the breach first occurred shall be tolled by the breach, and shall begin to run again as of the date permanent injunctive relief is granted. Physician shall be liable to UTMG for all costs reasonably incurred by UTMG in pursuing enforcement of the provisions of this Section, including but not limited to reasonable attorneys fees and costs.

(b) As an alternative to the remedies otherwise afforded by this Section 22, Physician may elect to buy out his or her obligations under this Section 22 . . . by completing each of the following steps: (i) providing proper written notice to UTMG of Physician's termination of this Agreement; (ii) including in such written notice a statement that Physician is exercising his or her election under this Section 22, subsection (b); and (iii) paying UTMG a dollar amount [equal to] . . . 100% of Physician's Annual Planned Income for the fiscal year preceding the termination of employment with UTMG.

On the Agreement's signature page, the parties defined "Restricted Area" "[t]o include Shelby County, Tennessee and a 150 mile radius of Shelby County, Tennessee." In order to terminate the Agreement voluntarily, the Agreement's Section 20 provides that Dr. Vogt must give UTMG written notice of her intent to terminate the Agreement voluntarily "at least sixty (60) days prior to the effective date of termination."

On December 15, 2003, Dr. Vogt wrote a letter to UTMG's chief medical officer, Dr. Jeffrey R. Woodside, indicating that she planned to resign her UTMG position on March 12, 2004. Four days later, Dr. Woodside replied to Dr. Vogt's letter, via e-mail, asking her whether she planned to engage the process outlined in the Agreement's Section 22(b) to buy out her non-competition covenant. In his letter, Dr. Woodside stated the three options available to Dr. Vogt:

[T]otal freedom to practice medicine at any time outside the Restricted Area described in your employment agreement, or not practice medicine within the Restricted Area for one calendar year following your departure from UTMG, or buy-out your obligation for [$194,197, the agreed upon buy-out price,] and practice medicine at any time within the Restricted Area.

(emphasis added).

Before Dr. Vogt responded to Dr. Woodside's e-mail, on January 7, Dr. Owen P. Phillips, interim chair of the University's Department of OB/GYN, sent Dr. Vogt an e-mail asking her to reconsider and "put [her] resignation on hold for a year. . . . If you elect to stay for the next year (through June 2005), I will press UTMG to adjust the non-compete clause amount. I know this has been done in other departments." Unpersuaded by UTMG's attempts to retain her services, on January 14, 2004, Dr. Vogt replied to Dr. Woodside's e-mail, stating "[t]his is a followup to my previous letter of resignation. . . . After much consideration I plan to engage in the practice of medicine locally. . . . I wish to discuss the buy-out and the possible mechanisms that address the non-competition component of my contract."

During the weeks after Dr. Vogt's e-mail to Dr. Woodside, the parties engaged in a period of intense maneuvering and negotiation. Dr. Vogt met with Dr. Woodside to discuss a possible reduction of the Section 22(b) buy-out option. After an exchange of several more e-mails between Dr. Vogt and Dr. Woodside, UTMG refused to reduce the buy-out amount. Instead, on February 2, 2004, UTMG's counsel sent a letter to Dr. Vogt, which stated:

I understand [that] conversations between you and Dr. Woodside relating to the potential exercise of your buyout option concluded this morning without agreement. . . . We take your declaration of intent to practice "locally" to be a declaration of intent to breach your non-competition covenant. The effect of your declaration of such intent is to require us to take prompt action to secure your promise not to violate your non-competition covenant and, if we cannot do so, to initiate legal action to enjoin your anticipatory breach.

In response to this letter, on February 10, Dr. Vogt's attorney wrote a letter to UTMG's attorney re-confirming Dr. Vogt's intention to practice medicine locally after her resignation from UTMG and declaring her desire "to exercise the buy-out option" as provided for in the Agreement. On the same day, UTMG's attorney responded to the letter, demanding the payment of $194,197 (or the execution of a promissory note in that amount payable on or before March 5, 2004) and threatening Dr. Vogt with having to pay attorney's fees, interest, and costs associated with pursuing a lawsuit if she did not accept this proposal by 5:00 p.m. that same day. The letter also promised to "involve" the doctors that UTMG believed Dr. Vogt intended to practice with after her resignation "due to their knowingly interfering with the contractual relationship" between UTMG and Dr. Vogt. Dr. Vogt responded to this letter by again expressing her desire to exercise the buy-out option.

On February 13, UTMG filed a complaint against Dr. Vogt in Shelby County Chancery Court, claiming that Dr. Vogt had committed an anticipatory breach of the Agreement. The complaint alleged, inter alia, that, through her resignation letter and subsequent e-mail to Dr. Woodside, Dr. Vogt had "admitted her intent to breach and has breached the Employment Agreement. . . ." Additionally, UTMG alleged that it had "come to understand that [Dr. Vogt] had leased space . . . with the intent of establishing an office for the professional practice of medicine in the specialty of urogynecology." To remedy Dr. Vogt's alleged anticipatory breach of contract, UTMG sought a declaratory judgment that the Agreement's Section 22 was valid and enforceable and an injunction prohibiting Dr. Vogt from violating the Agreement. Significantly, in light of the letter sent three days before, the complaint did not seek money damages, specifically stating that "money damages would be inadequate and impossible to accurately ascertain."

On the same day that UTMG filed its complaint, the trial court scheduled an injunction hearing in the case for February 26. The court also issued a subpoena duces tecum to Healthcare Realty Trust, the landlord of a Memphis medical office building where Vogt was believed to have leased office space. In response to the subpoena, Healthcare Realty Trust produced a two-page document, dated February 6, 2004, that: (1) requested that the landlord design a door sign for an office suite in the building that included Dr. Vogt's name under the corporate name "Women's Health Specialists, PLLC," and (2) listed Dr. Vogt on an "Employee List" for the "Tenant" "Women's Health Specialists, PLLC."

One week later, on February 20, Dr. Vogt answered UTMG's complaint, denying that she had committed an anticipatory breach of the Agreement. She also filed a "Counterclaim in Interpleader" against UTMG, seeking, among other things, a declaratory judgment that Section 22 was void and unenforceable. Pleading in the alternative, Dr. Vogt offered to pay $194,197 into the court in the event that Section 22's buy-out option was found valid and enforceable. The trial court accepted these...