Great Lakes Eye Institute Pc v. David B Krebs Md ( 2018 )

STATE OF MICHIGAN
COURT OF APPEALS
GREAT LAKES EYE INSTITUTE, PC, UNPUBLISHED
January 9, 2018
Plaintiff/Counter Defendant-
Appellee,
v No. 335405
Saginaw Circuit Court
DAVID B. KREBS, M.D., LC No. 08-002481-CK
Defendant/Counter Plaintiff-
Appellant.
Before: O’CONNELL, P.J., and HOEKSTRA and SWARTZLE, JJ.
PER CURIAM.
In this breach of contract action, following a reversal and remand from this Court,
defendant David Krebs, M.D., as the “prevailing party,” moved the trial court for an award of
attorney fees and costs under a contract provision. The trial court denied the motion, ruling that
defendant was precluded from enforcing the contract against plaintiff Great Lakes Eye Institute,
PC (GLEI), under the law-of-the-case doctrine. Defendant appeals as of right. We vacate and
remand for further proceedings.
I. BACKGROUND
The basic facts giving rise to this dispute were set forth in this Court’s previous opinion
as follows:
In 1999, Krebs moved to Michigan to begin employment with a separate
corporate entity, Great Lakes Eye, P.C. (GLE), which was dissolved in 2003. On
June 24, 1999, Krebs and GLE executed a written employment contract, which
included a restrictive covenant that granted Krebs the option of either not
practicing ophthalmology in a given region for two years after the termination of
his employment or paying GLE the greater of 40% of the gross receipts
attributable to Krebs in his last year of employment with GLE or $200,000. The
employment contract stated that the term under the contract “shall [commence]
from the 14th day of July, 1999 and continu[e] until July 13, 2000.” The
employment contract also included a clause entitled “Prohibition Against
Assignment,” which stated the following:
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[GLE] shall not assign this Agreement other than to P.C., limited
liability company or partnership, or general partnership in which
Farhad Shokoohi is the controlling shareholder, member or partner,
respectively. Any assignment in violation of the foregoing shall
relieve Employee of all obligations and liability hereunder.
On December 31, 1999, GLE assigned all of its assets to its only
shareholder, Dr. Farhad K. Shokoohi. Shokoohi subsequently executed a separate
assignment transferring a list of assets received under the GLE assignment to the
shareholders of Shokoohi Eye Center, P.C. In 2001, Shokoohi Eye Center, P.C.
changed its name to Great Lakes Eye Institute, P.C., . . . . Krebs worked for
GLEI until 2008 when he terminated his employment and opened his own
ophthalmology practice. Before ending his employment with GLEI, Krebs sent
letters to approximately 965 of his patients announcing the opening of his new
practice. [Great Lakes Eye Institute, PC v Krebs, unpublished opinion per curiam
of the Court of Appeals, issued April 16, 2015 (Docket No. 320086), pp 1-2.]
Plaintiff GLEI filed suit against defendant alleging in part that he breached the restrictive
covenant of the employment agreement. Id. at 2. After competing motions for summary
disposition were filed, the trial court “concluded that the employment contract was permissibly
assigned to GLEI in 1999, and that the restrictive covenant remained in full effect despite the
initial term of the contract expiring in 2000.” Id. The court later entered a judgment in
plaintiff’s favor, “awarding $511,517 in liquidated damages and $150,400 in attorney fees and
costs.” Id. at 3.
Defendant appealed, primarily arguing that the assignment from GLE to Shokoohi
breached the provision against assignment, thereby relieving him of his contractual obligations.
Defendant also argued that plaintiff lacked standing to enforce the contract because it was not an
“assign” of GLE. A prior panel of this Court reversed. The prior panel first observed that the
employment agreement was “arguably” not included in the initial assignment as GLE’s “assets.”
Id. at 4. After discussing what constitutes “an asset”, the Court found that “GLEI has not shown
that the employment contract was included in the assets transferred by GLE to Shokoohi, and
later by Shokoohi to GLEI.” Id. The Court further reasoned, “If Krebs’s employment contract
was never assigned to GLEI, GLEI has no standing to assert a breach of contract claim against
Krebs under the 1999 contract Krebs entered with GLE.” Id.
The Court also determined that, “even if GLE assigned the employment contract to
Shokoohi in 1999, the assignment was expressly prohibited by the employment contract,” as
Shokoohi in his individual capacity “was not a ‘P.C., limited liability company or partnership, or
general partnership.’ ” Id. The Court explained that “even if GLE assigned the employment
contract to Shokoohi in 1999, the unauthorized assignment relieved Krebs of all obligations
arising under the contract, including obligations related to the restrictive covenant.” Id. In
conclusion, the Court stated:
The trial court erred in granting GLEI’s motion for summary disposition because
GLE did not assign Krebs’s employment contract to GLEI. Further, even if the
employment contract was assigned to GLEI, under the express language of the
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contract, the initial unauthorized assignment to Shokoohi relieved defendant of all
liability and obligations arising under the contract. [Id. at 5.]
On remand, defendant moved the trial court for an award of attorney fees under Section
18 of the employment agreement, which provides in pertinent part:
The prevailing party in any legal proceedings commenced to enforce this
instrument, whether by arbitration or judicially, shall be entitled to an award of its
costs including, but not limited to, reasonable attorneys’ fees in addition to such
other damages, if any, or other award as may be appropriate.
Section 17 was also relevant to the remand proceedings. That provision provides:
This Agreement shall be binding upon and inure to the benefit of the
Corporation, and Employee and their respective heirs, legal representatives,
executors, administrators, successors, and assigns. All provisions of this
Agreement requiring performance, payment, or restriction or authorization shall
survive the termination of this Agreement.
Defendant noted that the trial court had previously ruled that “the Employment Agreement is
binding on the successors of Dr. Krebs and Great Lakes, including Plaintiff GLEI.” Defendant
noted at the motion hearing that “the contract itself has a provision that it’s binding on any
successors. And it is signed by Dr. Shokoohi, the sole owner of GLEI.” In response, plaintiff
argued that defendant’s motion was barred by the law-of-the-case doctrine and judicial estoppel.
The trial court denied defendant’s motion, agreeing that the law-of-the-case doctrine applied.
This appeal followed.
II. ANALYSIS
“The interpretation of a contract presents a question of law that is reviewed de novo.”
Bank of America, NA v Fidelity Nat’l Title Ins Co, 316 Mich. App. 480, 488; 892 NW2d 467
(2016). “Whether the trial court followed this Court’s rulings on remand presents a question
subject to de novo review.” Lenawee Co v Wagley, 301 Mich. App. 134, 149; 836 NW2d 193
(2013). “Similarly, this Court reviews de novo the determination whether the law-of-the-case
doctrine applies and to what extent it applies.” Id. (internal citation and quotation marks
omitted). We also review de novo the applicability of judicial estoppel. Henry v Dow Chem Co,
319 Mich. App. 704, 727; ___ NW2d ___ (2017).
The Law-of-the-Case Doctrine Does Not Bar Defendant’s Claim. First, defendant argues
the trial court erred in concluding that the law-of-the-case doctrine bars defendant’s claim for
contractual attorney fees. Because this Court’s prior panel’s opinion did not address the issue of
successor liability under the employment contract, we agree with plaintiff that the trial court
erred in dismissing his claim on this basis.
Regarding the law-of-the-case doctrine, this Court has stated:
The law of the case doctrine holds that a ruling by an appellate court on a
particular issue binds the appellate court and all lower tribunals with respect to
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that issue. New Props, Inc v George D Newpower, Jr, Inc, 282 Mich. App. 120,
132; 762 NW2d 178 (2009) (quotation marks and citation omitted). If an
appellate court has passed on a legal question and remanded the case for further
proceedings, the legal questions thus determined by the appellate court will not be
differently determined on a subsequent appeal in the same case where the facts
remain materially the same. The doctrine is applicable only to issues actually
decided, either implicitly or explicitly, in the prior appeal. The primary purpose
of the doctrine is to maintain consistency and avoid reconsideration of matters
once decided during the course of a single continuing lawsuit. [Lenawee Co, 301
Mich. App. at 149-150 (internal citations and quotation notation omitted).]
Accordingly, the law-of-the-case “doctrine applies only to those questions specifically
determined in the prior decision and to questions necessarily determined in arriving at that
decision.” McNees v Cedar Springs Stamping Co, 219 Mich. App. 217, 222; 555 NW2d 481
(1996).
As an initial matter, we note that the Krebs ruling rested on two holdings: (1) the
employment agreement was not included in the agreement, and (2) any assignment breached the
employment contract’s provision against assignment. We recognize that the prior panel initially
stated that the agreement “arguably” was not included in the assignment. The prior panel,
however, then found that plaintiff failed to show that the agreement had been assigned and
concluded that “GLE did not assign Krebs’s employment contract to GLEI.” Accordingly, the
prior panel actually decided the issue of assignment of the contract. When a decision rests on
alternative holdings, both holdings are considered binding rulings for purposes of law of the
case. See Commonwealth v Reed, 601 Pa. Super. 257, 265; 971 A2d 1216 (2009). 1
With that in mind, defendant argues that the prior panel did not specifically determine
whether he could recover attorney fees. We agree with defendant that the prior panel did not
address that issue. Plaintiff counters, however, that the prior panel “implicitly held” that plaintiff
“had no rights under that contract unless that contract were assigned to GLEI.” Plaintiff notes
that the prior panel ruled that the agreement was not assigned and reasoned that “[i]f, as this
Court held in its April 2015 opinion, GLEI had no rights under the terms of the 1999
Employment Agreement between GLE and Dr. Krebs, it necessarily follows that GLEI has no
obligations under this contract that it was not a party to.” Plaintiff concludes that “[l]aw of the
case principles, therefore, require rejection of Dr. Krebs’s efforts to impose on GLEI the attorney
fee provision of a contract that it was not a party to, either directly or by assignment.”
We acknowledge that the prior panel stated that plaintiff could only enforce the contract
if it was assigned the employment agreement. Again, the prior panel stated, “If Krebs’s
employment contract was never assigned to GLEI, GLEI has no standing to assert a breach of
contract claim against Krebs under the 1999 contract Krebs entered with GLE.” The prior
1
We may consider caselaw from sister state courts for its persuasive value. Travelers Prop Cas
Co of America v Peaker Servs, Inc, 306 Mich. App. 178, 188; 855 NW2d 523 (2014).
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panel’s ruling, however, can only be understood in the context of the questions presented to it:
whether plaintiff was assigned the right to enforce the non-compete clause of the employment
contract and, if plaintiff was assigned that right, whether that assignment violated the assignment
restrictions of the employment contract. In this context, the prior panel’s standing ruling is
similarly limited to the non-compete clause and assignment restrictions of the employment
agreement. The prior panel did not conclude that plaintiff did not have any relationship to the
employment agreement. Rather, the issue of plaintiff’s liability as a successor to the
employment contract, as opposed to plaintiff’s right to enforce a specific provision of the
contract as an assignee of those rights, was never before the prior panel. The law-of-the-case
doctrine “is applicable only to issues actually decided, either implicitly or explicitly, in the prior
appeal.” Lenawee Co, 301 Mich. App. at 149-150 (internal citation and quotation marks omitted).
Because the prior panel did not address plaintiff’s liability as a successor, the question is not
barred by the law-of-the-case doctrine. Accordingly, the trial court erred in dismissing
defendant’s motion for contractual attorney fees on the basis that the law-of-the-case doctrine
precluded defendant’s claim.
Judicial Estoppel Does Not Bar Defendant’s Claim. As an alternative ground for
affirmance, plaintiff argues that defendant’s successor argument is barred by judicial estoppel.
We disagree. This Court recently summarized the principles of judicial estoppel:
“Judicial estoppel is an equitable doctrine, which generally prevents a party from
prevailing in one phase of a case on an argument and then relying on a
contradictory argument to prevail in another phase.” Judicial estoppel is an
extraordinary remedy to be invoked when a party’s inconsistent behavior will
otherwise result in a miscarriage of justice. It is not meant to be a technical
defense for litigants seeking to derail potentially meritorious claims. Michigan
has adopted the prior success model of judicial estoppel. This means that for
judicial estoppel to apply, a party must have successfully and unequivocally
asserted a position in a prior proceeding that is wholly inconsistent with the
position now taken. The mere assertion of inconsistent positions is not sufficient
to invoke estoppel; rather, there must be some indication that the court in the
earlier proceeding accepted that party’s position as true. Further, in order for the
doctrine of judicial estoppel to apply, the claims must be wholly inconsistent.
[Henry v Dow Chem Co, 319 Mich. App. at 727-728 (internal citations and
quotation notation omitted).]
Similar to its previous argument, plaintiff argues that defendant “contended in his earlier
appeal to this Court that, since GLEI was not a party to the 1999 agreement, it had no ‘standing’
to claim the benefits of that contract unless that contract was specifically assigned to it.”
Plaintiff asserts that defendant’s argument was successful and therefore he should be precluded
from contending that plaintiff can be bound by the agreement as a successor. As noted, in his
previous appeal, defendant argued in part that plaintiff lacked standing to enforce the agreement.
More specifically, after setting forth Section 17, defendant argued that
any benefits of the contract are only to GLE’s “assigns”. Plaintiff is not an
“assign” of GLE. It is an “assign” (by name change) of Shokoohi Eye Center,
P.C., which was itself an “assign” of Dr. Shokoohi, individually. The contracting
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language does not confer any right to sue on GLEI, which was not an “assign” of
“the Corporation”. Indeed, the liquidation plan retained in GLE the authority to
asset [sic] claims on its own behalf.
Again, we note that, when reviewing the record before the prior panel, context is key.
Before the prior panel, defendant did not argue that plaintiff was not a successor to GLE’s
liabilities under the employment contract. Rather, the thrust of defendant’s argument was that
plaintiff was not assigned the rights of that contract and could not enforce the contract’s non-
compete clause. Because it is entirely plausible that plaintiff is a successor to GLE’s liabilities
under the contract, including the attorney fees provision, but was not assigned the right to
enforce the non-compete provision of that same contract, defendant’s argument that plaintiff is
contractually liable for defendant’s attorney fees is not wholly inconsistent with defendant’s
prior argument that plaintiff could not enforce the non-compete clause. Henry, 319 Mich. App. at
728. Accordingly, defendant’s claim for attorney fees is not barred by judicial estoppel. Id.
III. CONCLUSION
For these reasons, we vacate the trial court’s order denying defendant’s motion for
contractual attorney fees. Consistent with this opinion, on remand, the trial court is to determine
whether plaintiff is a successor to GLE’s liabilities under the employment contract and whether
plaintiff is liable for defendant’s attorney fees under Section 18 of that contract. We do not
retain jurisdiction.
/s/ Peter D. O'Connell
/s/ Joel P. Hoekstra
/s/ Brock A. Swartzle
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