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Aesthetic Facial & Ocular Plastic Surgery Center v. Zaldivar

Court of Appeals of North Carolina

March 19, 2019


          Heard in the Court of Appeals 16 October 2018.

          Appeal by plaintiff from order entered 16 December 2015 by Judge G. Bryan Collins, Jr. in Superior Court, Wake County. Wake County, No. 14 CVS 012804.

          The Law Offices of Michele A. Ledo, PLLC, by Michele A. Ledo; and Law Office of Samuel A. Forehand, P.A., by Samuel A. Forehand, for plaintiff-appellant.

          Zaytoun Law Firm, PLLC, by Matthew D. Ballew, John R. Taylor, and Robert E. Zaytoun, for defendants-appellees.

          STROUD, JUDGE.

         This case arises from plaintiff's claim to enforce restrictive covenants in an employment agreement involving two highly specialized physicians. After two years, Dr. Renzo Zaldivar left Aesthetic Facial and Ocular Plastic Surgery Center, P.A., an ocular and facial plastic surgery practice started by Dr. Frank Christenson, and started his own practice. Dr. Zaldivar's employment agreement with Dr. Christensen's practice included a covenant not to compete in certain geographical areas in North Carolina, and a covenant not to solicit former patients or referrals from individuals or businesses with a referring relationship to plaintiff. After carefully reviewing the covenants, we find that they are unenforceable because they violate public policy and affirm the trial court's grant of summary judgment for defendants.

         I. Background

         Dr. Frank Christensen is a board-certified physician practicing ophthalmology, with specialized "surgical training in ocular and plastic surgery." He has been in practice for about 30 years, and, because of his highly specialized practice, he sees patients "based upon referrals from optometrists and ophthalmologists throughout the eastern half of North Carolina." For most of his years in practice, Dr. Christensen was the only physician working for his practice, Aesthetic Facial & Ocular Plastic Surgery Center, P.A. ("plaintiff"). Plaintiff has an office in Raleigh, but Dr. Christensen saw and treated patients in office spaces rented from other physicians or in hospitals in Central and Eastern North Carolina.

         In 2008, Dr. Christensen "actively recruited an additional surgeon to supplement the practice specifically seeking a surgeon trained in both ophthalmic and plastic surgery." "After an extensive recruiting process," he offered to employ defendant, Dr. Renzo Zaldivar. Dr. Zaldivar completed his ophthalmology training and a fellowship with the Mayo Clinic and University of Minnesota, and Dr. Christensen offered Dr. Zaldivar employment with plaintiff in a letter dated 26 November 2008 ("the Agreement"). This Employment Agreement contained provisions covering salary, benefits, and Dr. Zaldivar's obligations to plaintiff. The Agreement also contained non-compete and non-solicitation covenants. Dr. Zaldivar accepted Dr. Christensen's offer and was employed by plaintiff starting in July of 2009. The Agreement stated Dr. Zaldivar's employment was "at will" but anticipated "continuing year to year thereafter until terminated as provided herein." In June of 2011, Dr. Zaldivar gave notice of his resignation to Dr. Christensen and formed his own practice, defendant Oculofacial Plastic Surgery Consultants, P.A., Surgical, LLC. Dr. Zaldivar immediately began practicing in the same geographical region as plaintiff.

         On 24 September 2014, plaintiff filed a complaint against Dr. Zaldivar and his practice ("defendants") alleging claims of breach of the covenants in the employment agreement, tortious interference with contractual relations, civil conspiracy, and unfair and deceptive trade practices. Defendants answered, denying the material allegations of the complaint and alleging that the non-compete covenant and non-solicitation covenants of the Agreement were unenforceable for various reasons. Defendants counterclaimed for breach of contract, fraud, negligent misrepresentation, unjust enrichment, and unfair and deceptive trade practices. After discovery and depositions, defendants filed a motion for summary judgment.

         After a hearing on the motion, the trial court entered an order granting defendants' motion. On 12 December 2017, defendants voluntarily dismissed all counterclaims, and plaintiff timely appealed.

         II. Standard of Review

Our standard of review of an appeal from summary judgment is de novo; such judgment is appropriate only when the record shows that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law. When considering a motion for summary judgment, the trial judge must view the presented evidence in a light most favorable to the nonmoving party. If the movant demonstrates the absence of a genuine issue of material fact, the burden shifts to the nonmovant to present specific facts which establish the presence of a genuine factual dispute for trial.

In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (citation and quotation marks omitted).

         III. Restrictive Covenants

         Plaintiff argues that the trial court erred in granting summary judgment because there are genuine issues of material fact related to the enforceability of the non-compete covenant and non-solicitation covenant in the Agreement and that the covenants do not not violate public policy. Defendants contend that enforcement of the covenants would create a "substantial question of potential harm to the public health" because Dr. Zaldivar is one of very few specialists in North Carolina who practice his particular subspecialty of ocluofacial plastic surgery.

         "[I]n North Carolina, restrictive covenants between an employer and employee are valid and enforceable if they are (1) in writing; (2) made part of a contract of employment; (3) based on valuable consideration; (4) reasonable both as to time and territory; and (5) not against public policy." United Labs., Inc. v. Kuykendall, 322 N.C. 643, 649-50, 370 S.E.2d 375, 380 (1988). There is no dispute that the parties entered a written employment contract based on valuable consideration; their dispute is based upon the territory and the public policy considerations of the restrictions. Defendants contend that the territorial restrictions of the covenants are unreasonable, and for purposes of addressing the public policy issue, we express no opinion on the reasonableness of the territory. For purposes of this argument, we will view the Agreement in the light most favorable to the plaintiff and assume the restrictions cover the full territory alleged by plaintiff. Dr. Christensen had arrangements with other physicians or hospitals to provide services in Chapel Hill, Durham, Fayetteville, Greensboro, Greenville, Pinehurst, Raleigh, Rocky Mount, Supply, Wake Forest, Wilmington, and Wilson. The Agreement provided that the covenants covered a 15-mile radius around each of plaintiff's practice locations.

         a. Covenant not to Compete

         North Carolina courts have considered several cases involving non-compete agreements involving physicians, and depending upon the specialization of the physician and the territory of the restriction, several cases have recognized the potential for harm to the public health from denial of needed medical care to the public:

If ordering the covenantor to honor his contractual obligation would create a substantial question of potential harm to the public health, then the public interests outweigh the contract interests of the covenantee, and the court will refuse to enforce the covenant. But if ordering the covenantor to honor his agreement will merely inconvenience the public without causing substantial harm, then the covenantee is entitled to have his contract enforced.

Iredell Digestive Disease Clinic v. Petrozza, 92 N.C.App. 21, 27-28, 373 S.E.2d 449, 453 (1988) (citations omitted), aff'd, 324 N.C. 327, 377 S.E.2d 750 (1989).

This Court considers the following factors in determining the risk of substantial harm to the public: the shortage of specialists in the field in the restricted area, the impact of establishing a monopoly in the area, including the impact on fees in the future and the availability of a doctor at all times for emergencies, and the public interest in having a choice in the selection of a physician.

Calhoun v. WHA Med. Clinic, PLLC, 178 N.C.App. 585, 599-600, 632 S.E.2d 563, 572 (2006) (quotation marks and ...

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