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Devos v. Cunningham Group, LLC

Supreme Court of Alabama

December 20, 2019

William T. DEVOS, M.D., and Donald R. Simmons, M.D.
v.
The CUNNINGHAM GROUP, LLC, and Cunningham Pathology, LLC.

         Appeals from Jefferson Circuit Court (CV-18-903526)

Page 1177

[Copyrighted Material Omitted]

Page 1178

          Bruce L. Gordon, Jason E. Gilmore, and Lindan J. Hill of Gordon, Dana & Gilmore, LLC, Birmingham, for appellants.

          W. Christian King, Wesley B. Gilchrist, Christopher C. Yearout, and Amaobi J. Enyinnis of Lightfoot, Franklin & White, L.L.C., Birmingham, for appellees.

          Ed R. Haden and Robert V. Baxley of Balch & Bingham LLP, Birmingham, for amicus curiae Will Hill Tankersley, in support of the appellants.

         STEWART, Justice.

         William T. DeVos, M.D., and Donald R. Simmons, M.D. (hereinafter referred to collectively as "the doctors"), appeal from a preliminary injunction entered in the Jefferson Circuit Court ("the trial court") in an action filed against them by The Cunningham Group, LLC, and Cunningham Pathology, LLC. The doctors separately appeal from the trial court's order denying their request to increase the amount of the surety bond for the imposition of the injunction.

         Facts and Procedural History

         According to the complaint, the doctors had been employed by The Cunningham Group from April 30, 2007, until August 31, 2018, when the doctors terminated their employment without prior notice. The Cunningham Group, also identified in the complaint, other pleadings, and documents in the record as "Services LLC," provided pathology and cytology services for Brookwood Baptist Medical Center through an agreement with Cunningham Pathology. The doctors entered into employment agreements with Services LLC on April 30, 2007, in which they agreed that, if they provided Services LLC less than 12 months' notice of their termination of their employment, they would pay Services LLC an amount equal to one year's annual salary. The doctors also agreed that, for a period of two years after the termination of employment, they would not directly or indirectly

"(i) solicit any payor contracts from any payor of [Cunningham Pathology] with whom Employee had material contact during Employee's employment with Services LLC, or otherwise interfere with the relationship with any such payor, except to provide services in Employee's capacity as a physician in compliance with Section 20(a) hereof and so long as such solicitation does not, in [Cunningham Pathology's] sole discretion, interfere with the Company's relationship with such payor,

"(ii) solicit, induce, influence or otherwise interfere with any referral sources of [Cunningham Pathology] or any Affiliate of [Cunningham Pathology], with whom the Employee has had

Page 1179

material contact during Employee's employment with Services LLC,

"(iii) solicit, induce or influence for the purposes of providing pathology services, any person or entity, including but not limited to a hospital, ambulatory surgery center, medical group, or physician, that is or has been a customer or client of [Cunningham Pathology] and with whom Employee had material contact during Employee's employment with Services LLC, unless in each case the Employee obtains the prior written consent of [Cunningham Pathology], or

"(iv) solicit, induce, influence or interfere with any other person or entity with whom [Cunningham Pathology] has a business relationship to discontinue, modify or reduce the extent of such relationship with [Cunningham Pathology]."

         Employment Agreement, Section 20(d).

         On September 5, 2018, The Cunningham Group and Cunningham Pathology (hereinafter referred to collectively as "Cunningham") sued the doctors seeking damages and injunctive relief. Cunningham asserted that Cunningham Pathology is an express third-party beneficiary of the doctors' employment agreements with Services LLC. Cunningham asserted claims of breach of contract and breach of fiduciary duty and sought to enforce the restrictive covenants contained in the employment agreements. Cunningham also filed a motion seeking a preliminary injunction to prohibit the doctors from violating the nonsolicitation provisions of the employment agreements. Cunningham asserted, among other things, that since they terminated their employment with Services LLC the doctors had formed a new pathology business and had been soliciting Brookwood's business in violation of the nonsolicitation provisions of the employment agreements.

         On September 5, 2018, the trial court issued a temporary restraining order. On September 14, 2018, the doctors filed a motion to dissolve the temporary restraining order and a response in opposition to Cunningham's request for a preliminary injunction.

         Following a hearing on September 17, 2018, the trial court, on October 4, 2018, entered an order granting Cunningham's motion for a preliminary injunction. The trial court specifically stated that it would "not address the enforceability of the non-compete and non-solicitation clauses" contained in the employment agreements because those "matters concern the ultimate merits of the case." After providing a lengthy factual summary, the trial court found as follows:

"Conclusions of Law

"

... [I]t is well settled that a plaintiff seeking a temporary restraining order or preliminary injunction has the burden of proving all of the following:

"1. That without the injunction the party would suffer irreparable injury;

"2. That the party has no adequate remedy at law;

"3. That the party has at least a reasonable chance of success on the ultimate merits of the case; and,

"4. That the hardship imposed on the party opposing the preliminary injunction would not unreasonably out-weigh the benefit accruing to the party seeking the injunction. See, e.g., Holiday Isle, LLC v. Adkins, 12 So.3d 1173, 1176 (Ala. 2008).

"The standards for granting a preliminary injunction are interchangeable with the standards of granting a temporary restraining order. The Court now turns its attention to applying the aforementioned standards to the facts of the case at bar.

Page 1180

"A. Irreparable Harm

"

The Court finds that Cunningham will suffer irreparable harm should [the doctors] be unrestrained in [their] solicitation of Cunningham's clients. Irreparable [harm] is defined as an injury that cannot be adequately measured or compensated by money and is therefore often considered remediable by injunction. Black's Law Dictionary (10th ed. 2014). The evidence at the preliminary injunction hearing revealed that [the doctors] have not only formed another pathology company, but have also distributed order forms in the lab at Brookwood hospital. Although the evidence did not show that [the doctors] interacted with any of Cunningham's employees, the solicitation of Brookwood's pathology business alone is enough to show that Cunningham will suffer irreparable harm should that practice continue.

"[The doctors] acknowledged that they would `have substantial contacts with customers, suppliers, advertisers and patients' of Cunningham and would `have access to a substantial amount of Proprietary Information.' [Employment Agreement,] § 20(a)(A)-(B). Additionally, [the doctors] agreed that they are `capable of obtaining gainful, lucrative and desirable employment' that does not violate the restrictions contained within the Employment Agreement.... § 20(a)(D).

"B. Adequate Remedy at Law

"

The Court finds that Cunningham does not have an adequate remedy at law. An adequate remedy at law is defined as a legal remedy (such as an award of damages) that provides sufficient relief to the petitioning party, thus preventing the party from obtaining equitable relief. Black's Law Dictionary (10th ed. 2014). `[A] conclusion that the injury is irreparable necessarily shows that there is no adequate remedy at law.' Water Works & Sewer Bd. of the City of Birmingham v. Inland Lake Investments, LLC, 31 So.3d 686, 692 (Ala. 2009) (citing and quoting Fleet Wholesale Supply Co. v. Remington Arms Co., 846 F.2d 1095, 1098 (7th Cir. 1988)).

"Plaintiffs have established they will suffer irreparable harm should [the doctors] be permitted to solicit Brookwood and other customers in violation of their respective non-solicitation agreements, and, absent a preliminary injunction, Plaintiffs have shown that there is no adequate remedy at law.

"C. Likelihood of Success on the Ultimate Merits of the Case

"

The third element of a preliminary injunction requires the party seeking the injunction to have a reasonable chance of success on the ultimate merits of the case (Cunningham's Breach of Contract Claim). SouthTrust Bank of Alabama, NA v. Webb-Stiles Co., 931 So.2d 706, 709 (Ala. 2005); White[ v. John, 164 So.3d [1106] at 1116-17 [(Ala. 2014)]. To satisfy this element, Plaintiffs `need not show with absolute certainty that they will prevail on the merits,' Bd. of Dental Examiners of Ala. v. Franks, 507 So.2d 517, 520 (Ala.Civ.App. 1986), but only that there is `at least a reasonable chance of success.' Lott v. E. Shore Christian Ctr., 908 So.2d 922, 927 (Ala. 2005) (citations omitted).

"[The doctors] have a valid contract with Cunningham; however, the ultimate decision for this Court is whether said contract is void ab initio or is enforceable. Consequently, the evidence establishes, and the Court finds, that Plaintiffs have a reasonable chance of success to prevail on their claims for breach of the non-solicitation agreements. See Digitel Corp. v. Deltacom, Inc., 953 F.Supp. 1486, 1497 (M.D. Ala. 1996).

Page 1181

"D. Hardship Imposed

"

The fourth element of a preliminary injunction requires the hardship imposed upon the defendant by the injunction would not unreasonably outweigh the benefit to the plaintiffs. White, 164 So.3d at 1117.

"[The doctors] expressly agreed that they are capable of finding `gainful, lucrative and desirable employment' that does not violate the restrictions contained within the Employment Agreement. Plaintiffs' Exs. 2 and 18, § 20(a).

"Moreover, the evidence shows that [the doctors] each received significant annual salaries of at least $250,000 over the previous ten years. The hardships of a preliminary injunction will not unreasonably outweigh the benefit accruing to Plaintiffs and the equities weigh in favor of issuing a preliminary injunction.

"It is therefore ORDERED, ADJUDGED, and DECREED as follows:

"1. Upon posting a $25,000 surety bond with the Jefferson County Circuit Court Clerk, by the Plaintiffs, this Preliminary Injunction shall issue against [the doctors], restraining and prohibiting each from directly or indirectly soliciting clients or customers of Cunningham Pathology, LLC, including physicians or physician groups affiliated with clients or customers of Cunningham, in accordance with [the doctors'] Employment Agreements with The Cunningham Group LLC.

"Specifically, [the doctors], individually and through Red Mountain Pathology, LLC, and their officers, agents, servants, employees, or attorneys, are hereby restrained and prohibited from directly or indirectly:

"(a) Soliciting Brookwood, its parent corporation Tenet Healthcare Corporation, or any physicians or practice groups affiliated or located on the Brookwood campus and associated medical or professional office buildings in relation to pathology or cytology services;

"(b) Placing requisition forms at Brookwood Medical Center, associated medical or professional office buildings, or any part thereof;

"(c) Sending correspondence in any form, including faxes, emails, letters, and text messages, to any physician or officer at Brookwood about the potential for providing future pathology or cytology services; and,

"(d) Entering into, or attempting to enter into, any contractual agreement with Brookwood for the provision of pathology or cytology.

"2. The Clerk of the Court is hereby ORDERED and DIRECTED to receive that amount alluded to, supra.

3. Additionally, [the doctors] are restrained and prohibited from directly or indirectly, individually and through Red Mountain Pathology, LLC, and their officers, agents, servants, employees, or attorneys, restrained and prohibited from:

"(e) Soliciting any other client or customer of Cunningham, that client or ...


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