Protherapy Associates, LLC v. AFS of Bastian, Incorporated ( 2012 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 11-1889
PROTHERAPY ASSOCIATES, LLC,
Plaintiff - Appellee,
v.
AFS OF BASTIAN, INCORPORATED, d/b/a Bland County Nursing and
Rehab Center; AFS OF FINCASTLE, INCORPORATED, d/b/a Brian
Center Nursing Care of Fincastle; AFS OF LOW MOOR,
INCORPORATED, d/b/a Brian Center Nursing Center of
Alleghany; CANE ISLAND CARE CENTER, L.P.; AMITY FELLOWSERVE
OF HONDO, INCORPORATED, d/b/a Hondo Healthcare and
Rehabilitation; AFS OF LEBANON, INCORPORATED, d/b/a Maple
Grove Rehabilitation and Health Care Center; AFS OF YUMA,
INCORPORATED, d/b/a Palm View Rehabilitation and Care
Center; AMITY FELLOWSERVE, INCORPORATED, d/b/a Kissito
Healthcare; AFS OF HOT SPRINGS, INCORPORATED; AMITY
FELLOWSERVE OF KATY, INCORPORATED,
Defendants - Appellants.
Appeal from the United States District Court for the Western
District of Virginia, at Lynchburg. Norman K. Moon, Senior
District Judge. (6:10-cv-00017-NKM-BWC)
Argued: May 16, 2012 Decided: July 2, 2012
Before NIEMEYER and KEENAN, Circuit Judges, and Margaret B.
SEYMOUR, Chief United States District Judge for the District of
South Carolina, sitting by designation.
Affirmed by unpublished per curiam opinion.
ARGUED: Wyatt B. Durrette, Jr., DURRETTECRUMP PLC, Richmond,
Virginia, for Appellants. Benjamin C. Fultz, FULTZ, MADDOX,
HOVIOUS & DICKENS, PLC, Louisville, Kentucky, for Appellee. ON
BRIEF: J. Buckley Warden, IV, DURRETTECRUMP PLC, Richmond,
Virginia, for Appellants. Everett S. Nelson, FULTZ, MADDOX,
HOVIOUS & DICKENS, PLC, Louisville, Kentucky, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
ProTherapy Associates, LLC, a provider of trained personnel
for skilled nursing facilities such as nursing homes, commenced
this breach-of-contract action against nine nursing homes, each
of which had contracted to purchase ProTherapy’s services.
Specifically, ProTherapy seeks to enforce a provision in its
contracts with the nursing homes that prohibited the nursing
homes from “directly or indirectly” soliciting or hiring
ProTherapy’s employees, as follows:
Non-Solicitation. During the term of this Agreement
and for one year thereafter, [the nursing home] shall
not, directly or indirectly, for [the nursing home] or
on behalf of any other person or business entity for
the benefit of [the nursing home]: (a) solicit,
recruit, entice or persuade any Therapists or other
employees or contractors of [ProTherapy] who had
contact with [the nursing home] pursuant to this
Agreement to become employees or contractors of [the
nursing home] responsible for providing services to
Patients like the Services hereunder; or (b) employ or
use as an independent contractor any individual who
was employed or utilized as a contractor by
[ProTherapy] for the provision of Services at any time
during the twelve (12) months prior to such proposed
employment or contracting. Recognizing that
compensatory monetary damages resulting from a breach
of this section would be difficult to prove, [the
nursing home] agrees that such breach will render it
liable to [ProTherapy] for liquidated damages in the
amount of ten thousands dollars ($10,000) for each
such individual.
Beginning in May 2008, ProTherapy entered into its
contracts with the nursing homes to train, provide, and
supervise licensed therapy personnel. When the nursing homes
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requested a rate reduction in August 2009, ProTherapy agreed to
enter into new contracts with them. Each contract contained the
nonsolicitation provision and a provision authorizing each party
to terminate the contract by giving 90-days’ advance notice.
Several days after executing the revised contracts in
August 2009, the nursing homes’ parent corporation notified
ProTherapy that it intended to exercise its right to terminate
the contracts within 90 days. During this same period, the
nursing homes had entered into a separate agreement with Reliant
Pro Rehab, LLC, to provide therapy services similar to those
offered by ProTherapy, but at a lower cost. While the
ProTherapy contracts with the nursing homes were still in
effect, Reliant began to meet with ProTherapy therapists and to
recruit them to provide services to the nursing homes under the
contract between Reliant and the nursing homes. The nursing
homes assisted Reliant in recruiting ProTherapy’s employees by
giving it a list of all the ProTherapy personnel working at each
location and assisting in making them available to Reliant.
Through these efforts, Reliant was able to hire 64 ProTherapy
therapists to work for Reliant, beginning when the 90-day notice
period expired.
In its complaint, ProTherapy contends that the conduct of
the nursing homes in terminating their contracts with it and
simultaneously entering into the contract with Reliant, with the
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purpose of hiring ProTherapy’s employees, violated the
nonsolicitation provision in ProTherapy’s contracts with the
nursing homes. ProTherapy demanded that the nursing homes pay
it $10,000 in liquidated damages for each ProTherapy employee
hired by Reliant to work at the nursing homes.
After completing discovery, the parties filed cross-motions
for summary judgment. In its motion, ProTherapy contended that
the nursing homes had breached the nonsoliciation provision by
using Reliant to indirectly solicit and employ ProTherapy
therapists. The nursing homes contended that their actions did
not breach the nonsolicitation agreements because Reliant, not
the nursing homes, was responsible for recruiting and ultimately
employing the 64 therapists who continued to work at the nursing
homes after termination of the agreements between the nursing
homes and ProTherapy. Alternatively, the nursing homes
contended that under controlling principles of Florida law,
which the parties agree was applicable, the nonsolicitation
provision of the contracts was unenforceable because it imposed
a restraint on commerce without a legitimate business
justification. The nursing homes also contended that the
liquidated damages clause imposed an unconscionable penalty,
rather than valid compensatory damages.
The district court entered judgment in favor of ProTherapy,
awarding it $640,000 in liquidated damages, plus attorneys fees.
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The district court found that the nursing homes hired
ProTherapy’s therapists indirectly, within the prohibited 12-
month period, by using Reliant to provide therapy services. It
also found that the nonsolicitation agreement was valid as
“reasonably necessary to protect [ProTherapy’s] legitimate
business interests.” The court concluded that the
discontinuance of ProTherapy’s business was not a defense under
Florida Statutes § 542.335(1)(g) because it found that the
discontinuance was directly connected to the nursing homes’
violation of the restrictive covenant. Finally, the court
concluded that the liquidated damages provision was enforceable
in lieu of compensatory damages and that the $10,000 amount was
a “modest sum” in light of ProTherapy’s greater expenses in
training the therapists and its losses of income from them.
From the district court’s orders, dated May 3, 2011; May 25,
2011; July 21, 2011; and July 27, 2011, the nursing homes filed
this appeal.
After considering the nursing homes’ arguments, as
contained in their briefs and as presented at oral argument, and
reviewing the record de novo, taking the facts and reasonable
inferences to be drawn from them in the light most favorable to
the nursing homes, we affirm for the reasons given by the
district court. See ProTherapy Associates, LLC v. AFS of
Bastian, Inc., et al., Civil Action No. 6:10-cv-17 (W.D. Va. May
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3, 2011); id. (May 25, 2011); id. (July 21, 2011); id. (July 27,
2011).
AFFIRMED
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