Riverhills Healthcare, Inc. v. Guo , 2011 Ohio 4359 ( 2011 )

[Cite as Riverhills Healthcare, Inc. v. Guo, 2011-Ohio-4359.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
RIVERHILLS HEALTHCARE, INC., : APPEAL NO. C-100781
TRIAL NO. A-0709850
Plaintiff-Appellee, :
D E C I S I O N.
vs. :
Z. GEORGE GUO, M.D., :
Defendant-Appellant. :
Civil Appeal From: Hamilton County Court of Common Pleas
Judgment Appealed From Is: Reversed and Cause Remanded
Date of Judgment Entry on Appeal: August 31, 2011
Dinsmore & Shohl, LLP, Deborah R. Lydon and Michael J. Mott, for Plaintiff-
Appellee,
Frost Brown Todd LLC and Matthew C. Blickensderfer, for Defendant-Appellant.
Please note: This case has been removed from the accelerated calendar.
OHIO FIRST DISTRICT COURT OF APPEALS
D INKELACKER , Presiding Judge.
I. Facts and Procedure
{¶1} Plaintiff-appellee Riverhills Healthcare, Inc., (“Riverhills”) filed a
complaint against defendant-appellant Z. George Guo, M.D., alleging breach of an
employment agreement and misappropriation of trade secrets. The trial court
granted summary judgment in favor of Riverhills on both claims, and awarded it
damages. Guo has filed a timely appeal from that judgment. We find merit in Guo’s
four assignments of error, and we reverse the trial court’s judgment.
{¶2} The record shows that Riverhills is a private medical practice
operating in greater Cincinnati. Guo worked at Riverhills as a neurologist from
February 2006 until August 2007.
{¶3} Before that, Guo had been in a fellowship program at Ohio State
University, but he had left the program for personal reasons. He worked with several
search firms, one of which informed him of the position at Riverhills. At that time,
Guo had no relationships with patients or physicians in the Cincinnati area. Before
becoming employed at Riverhills, he had registered the internet domain name,
“Medache.com” and several other similar names under his wife’s name, and had
renewed them annually.
{¶4} On February 10, 2006, Guo executed a renewable two-year
employment agreement with Riverhills. It offered Guo the possibility of becoming a
shareholder, which was expected to occur “within the second full year of
employment,” if he met Riverhills’s standards.
{¶5} The agreement also included a covenant not to compete that applied
after termination of Guo’s employment with Riverhills. It prohibited Guo for a year
after leaving Riverhills from practicing within five miles of any Riverhills office or
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OHIO FIRST DISTRICT COURT OF APPEALS
any hospital to which Riverhills admitted patients. The agreement further stated
that Guo would be “relieved of this restriction only if he immediately pays to
Employer, upon termination of employment, the sum of $175,000.”
{¶6} Guo began practicing at Riverhills, specializing in the treatment of
headaches. Riverhills had problems with his performance almost immediately. It
reduced his salary on occasion due to his alleged lack of productivity.
{¶7} Guo had a number of exchanges with Dr. Thomas Frerick, Riverhills’s
chief operating officer, about whether Riverhills would offer Guo a shareholder
agreement. On June 15, 2007, Guo sent a letter to Frerick, stating that because
Riverhills was not going to offer him a shareholder agreement, it would be in everyone’s
best interest “not to continue my Employment Agreement.”
{¶8} Several days later, Guo drew up an operating agreement for Medache,
LLC, a practice specializing in the treatment of headaches that he planned to start. He
obtained malpractice insurance covering the practice commencing June 18, 2007.
Earlier, he had created and distributed to Riverhills’s patients a business card with his
personal telephone number on it.
{¶9} On June 20, 2007, Guo, while still employed at Riverhills, used his
password to access Riverhills’s patient databases and view patient information from his
home computer for approximately four hours. Guo stated that in light of the claims
about his productivity, he had run several searches in the databases to determine how
many patients he had seen and how much revenue he had produced for Riverhills. He
claimed that these searches had produced no data and that he had not downloaded or
copied any information.
{¶10} After Riverhills learned about the searches, Frerick sent Guo a letter
stating that Riverhills was terminating the employment agreement for cause. Guo left
Riverhills at the end of July 2007. During the fall of 2007, he worked in various
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OHIO FIRST DISTRICT COURT OF APPEALS
positions, including one with another neurologist whose office was within five miles of a
Riverhills office. In January 2008, within five miles of a Riverhills office, he opened
Medache Clinic, which used the personal telephone number he had previously given to
some of Riverhills’s patients. He also practiced at a number of hospitals where Riverhills
admitted patients.
{¶11} During that time, Guo saw a number of patients that he had previously
seen at Riverhills. He claimed that those patients had sought him out, and he denied
soliciting them in any way. He noted that Riverhills had written to his patients to inform
them of his departure and had told them that they could continue to see him if they
wished.
II. Standard of Review
{¶12} Before we review Guo’s five assignments of error, we must discuss our
standard of review. An appellate court reviews a trial court’s ruling on a motion for
summary judgment de novo.1 Summary judgment is appropriate if (1) no genuine issue
of material fact exists for trial, (2) the moving party is entitled to judgment as a matter of
law, and (3) reasonable minds can come to but one conclusion and that conclusion is
adverse to the nonmoving party, who is entitled to have the evidence construed most
strongly in his or her favor.2 The trial court has an absolute duty to consider all
pleadings and evidentiary material when ruling on a motion for summary judgment. It
should not grant summary judgment unless the entire record shows that summary
judgment is appropriate.3
1 Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 1994-Ohio-336, 671 N.E.2d 241; Brown v.
Lincoln Hts., 1st Dist. Nos. C-100699 and C-100721, 2011-Ohio-3551, ¶7.
2 Temple v. Wean United, Inc. (1977), 50 Ohio St.2d 317, 327, 364 N.E.2d 267; Stinespring v.
Natorp Garden Stores (1998), 127 Ohio App.3d 213, 215, 711 N.E.2d 1104.
3 Greene v. Whiteside, 181 Ohio App.3d 253, 2009-Ohio-741, 908 N.E.2d 975 , ¶23.
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OHIO FIRST DISTRICT COURT OF APPEALS
III. Misappropriation of Trade Secrets
{¶13} In his first assignment of error, Guo contends that the trial court erred in
granting summary judgment in favor of Riverhills on its claim for misappropriation of
trade secrets. He argues that genuine issues of fact exist for trial. This assignment of
error is well taken.
{¶14} The protection of trade secrets involves a balancing of public policies,
including the protection of employers’ rights in their trade secrets and the right of the
individual to exploit his or her talents. Nevertheless, public policy in Ohio favors the
protection of trade secrets.4 One of the purposes of Ohio’s trade-secret law is to protect
an employer’s investments and proprietary information.5
{¶15} Guo does not dispute that Riverhills’s patient lists and other information
were trade secrets.6 He contends that genuine issues of material fact exist as to whether
he misappropriated the trade secrets. “Misappropriation” means “[a]cquisition of a
trade secret of another by a person who knows or has reason to know that the trade
secret was acquired by improper means[,]” or “[d]isclosure or use of trade secrets of
another without the express or implied consent of the other person by a person who * * *
[u]sed improper means to acquire knowledge of the trade secret.”7
{¶16} In granting summary judgment on this claim, the trial court stated,
“Plaintiff has proffered evidence via affidavit and computer system printouts,
establishing that in the days leading up to his departure, Defendant downloaded and
copied the following: Plaintiff’s referring physician list, Plaintiff’s fee schedules, and
Plaintiff’s patient list (including names and addresses). On June 18, 2007, while still
4 Al Minor & Assoc., Inc. v. Martin, 117 Ohio St.3d 58, 2008-Ohio-292, 881 N.E.2d 850, ¶23.
5 Fred Siegel Co., L.P.A. v. Arter & Hadden, 85 Ohio St.3d 171, 183, 1999-Ohio-260, 707 N.E.2d
853.
6 See Id. at 181-182; Acordia of Ohio, LLC v. Fishel, 1st Dist. No. C-100071, 2010-Ohio-6235, ¶24-
29.
7 R.C. 1333.61(B).
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OHIO FIRST DISTRICT COURT OF APPEALS
employed by Plaintiff, Defendant set up an operating agreement for Medache, LLC and
obtained medical malpractice insurance, in preparation for his exit from Plaintiff’s
employ. Just days later, between June 19-23, 2007, Defendant downloaded the above-
mentioned data from Plaintiff’s computer system.”
{¶17} The trial correctly summarized Riverhills’s evidence, which showed that
Guo had used improper means, specifically using his computer password for an
improper purpose, to obtain Riverhills’s trade secrets. But the court ignored Guo’s
evidence. Guo testified at his deposition that he had conducted searches using
Riverhills’s software system, OPUS, which he contended was an antiquated system that
was difficult to use. He stated that Riverhills had repeatedly told him that he was not
productive enough, so he had wanted to check its fee schedule and other information to
see whether Riverhills was correct about his productivity. According to Guo, OPUS
limited the user to searching by diagnosis, provider name, or patient mailing address.
He testified that he tried searching using all of these parameters, but kept getting the
response of “0 KB,” which meant no data. He said that he did not generate any data
from these searches and that he did not download or copy any information.
{¶18} Thus, Guo and Riverhills presented different versions of the facts. If we
construe the evidence most strongly in Guo’s favor, as we must when reviewing the trial
court’s decision to grant summary judgment to Riverhills, we find that genuine issues of
material fact exist for trial. As this court has previously stated, “[t]his case presents a
classic example of what cannot be resolved by summary judgment: namely, two
different versions of a story, with the outcome dependent on credibility.”8
{¶19} Riverhills points out that Guo also admitted that he had viewed patient
information and fee schedules. Specifically, he admitted that he had looked at “the
8 Greene, supra, at ¶24, quoting Wygant v. Continental Ins. Agency (Jan. 22, 1999), 1st Dist. No.
C-980012.
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OHIO FIRST DISTRICT COURT OF APPEALS
patients associated with his name,” and that he may have seen information concerning
other doctors’ headache patients.
{¶20} Nevertheless, these admissions did not negate all of his testimony.
Information does not lose its character as a trade secret if it has been memorized.9 But
Guo stated only that he had seen the information, not that he had memorized it.
Further, Dr. Frerick acknowledged that when he had confronted Guo about
downloading information, Guo had “maintained that he did not take that information
with him, but there was no way to know whether he did or not.”
{¶21} Consequently, we hold that the trial court erred in granting summary
judgment in favor of Riverhills on its claim for misappropriation of trade secrets. We
sustain Guo’s first assignment of error.
IV. Breach of Contract/Noncompete Clause
{¶22} In his second assignment of error, Guo contends that the trial court
erred in granting summary judgment on his claim for breach of contract. He first
contends that the covenant not to compete contained in his employment agreement with
Riverhills was not enforceable because it was a severe restriction on his ability to
practice medicine and was injurious to the public. We disagree.
A. Noncompete Clause was Reasonable
{¶23} A court may enforce a noncompetition clause in an employment
agreement only to the extent that it is reasonable.10 Such a clause is reasonable if the
restraint (1) is no greater than is required for the protection of the employer; (2) does
not impose undue hardship on the employee, and (3) is not injurious to the public.11
9 Al Minor & Assoc., supra, at paragraph one of the syllabus.
10 Harris v. Univ. Hosp. of Cleveland, 8th Dist. Nos. 76724 and 76785, 2002-Ohio-983.
11 Raimonde v. Van Vlerah (1975), 42 Ohio St.2d 21, 325 N.E.2d 544, paragraph two of the
syllabus; Harris, supra; Ohio Urology, Inc. v. Poll (1991), 72 Ohio App.3d 446, 452, 594 N.E.2d
1027.
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OHIO FIRST DISTRICT COURT OF APPEALS
Courts must strictly construe noncompete agreements in favor of professional mobility
and access to medical care and facilities.12 Nevertheless, each case must be decided on
its own facts.13
{¶24} The noncompete clause in this case applied for a year and stated that
Guo could not provide services at a location within five miles of any of Riverhills’s offices
or at a hospital or health care facility that admitted Riverhills’s patients. We hold that
this clause was reasonable as a matter of law. It left Guo with a number of communities
in greater Cincinnati where he could have practiced medicine and several area hospitals
where he could have admitted patients.14 Thus the trial court was correct in finding that
the noncompete clause was reasonable.
B. Construction of Noncompete Clause
{¶25} Guo next argues that the covenant not to compete was extinguished by
his termination of the employment agreement for cause. In the construction of a written
instrument, a court’s primary objective is to give effect to the parties’ intent, which can
be found in the language they chose to use. The court will read the writing as a whole
and gather the intent of each part from a consideration of the whole.15
{¶26} The interpretation of a written instrument is, in the first instance, a
matter of law for the court. If it is clear and unambiguous, the court need not go beyond
the plain language of the agreement to determine the parties’ rights and obligations.
Instead, the court must give effect to the contractual language.16 But if the provisions of
12 Sammarco v. Ctr. for Othopaedic Care (1938), 131 Ohio App.3d 544, 551, 723 N.E.2d 128,
overruled on other grounds in Littlejohn v. Parrish, 163 Ohio App.3d 456, 462, 2005-Ohio-4850,
839 N.E.2d 49; Ohio Urology, supra, at 453.
13 Raimonde, supra, at 25; Harris, supra.
14 See Wall v. Firelands Radiology, Inc. (1995), 106 Ohio App.3d 313, 333-334, 666 N.E.2d 235;
Holzer Clinic, Inc., v. Simpson (Apr. 28, 1998), 4th Dist. No. 97CA9.
15 Foster Wheeler Enviresponse, Inc. v. Franklin Cty. Convention Facilities Auth., 78 Ohio St.3d
353, 361, 1997-Ohio-202, 678 N.E.2d 519; Fifth Third Bank v. Ducru Ltd. Partnership, 1st Dist.
No. C-050564, 2006-Ohio-3860, ¶13.
16 Aultman Hosp. Assn. v. Community Mut. Ins. Co. (1989), 46 Ohio St.3d 51, 53, 544 N.E.2d
920; Blair v. McDonagh, 177 Ohio App.3d 262, 2008-Ohio-3698, 894 N.E.2d 377, ¶48.
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OHIO FIRST DISTRICT COURT OF APPEALS
a contract are ambiguous, an issue of fact exists, making summary judgment
inappropriate.17
{¶27} The last sentence of Section 9.3 of Guo’s employment agreement, the
noncompete clause, states, “Physician will be relieved of this restriction if Physician
terminates for cause under the Provisions of Section 7.6.” This sentence was not
originally in the agreement. Guo negotiated to have it included.
{¶28} Section 7.6 states, “Notwithstanding any term of this Agreement to the
contrary, Physician may terminate this Agreement immediately upon giving Employer
written notice in the event that * * * the physician is not offered a Shareholder
Agreement according to Section 5.7.”
{¶29} Section 5.7 provides that the employer will periodically review the
physician’s performance and, if the physician’s job performance satisfies the employer’s
criteria for becoming a shareholder, the “Employer intends to offer Physician the
opportunity to enter into an employment agreement * * * on the same terms and
conditions as Employer’s shareholder-employees.” No set time period was specified.
The agreement only stated that “Employer expects that this will occur within the second
full year of employment.”
{¶30} Guo contends that he invoked Section 7.6 in his letter dated June 15,
2007, in which he terminated the employment agreement because Riverhills was not
going to offer him a shareholder agreement. What actually occurred is a bit more
complex.
{¶31} The record shows the following sequence of events: On May 31, 2007,
Frerick and other Riverhills employees met with Guo to discuss his ongoing problems
with recordkeeping and coding issues. On June 15, 2007, Guo sent Frerick a letter,
17 Inland Refuse Transfer Co. v. Browning-Ferris Indus. of Ohio, Inc. (1984), 15 Ohio St.3d 321,
322, 474 N.E.2d 271; Blair, supra, at ¶48; Fifth Third, supra, at ¶14.
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OHIO FIRST DISTRICT COURT OF APPEALS
stating, “It has led me to a conclusion based on several discussions between you and me
recently that Riverhills Healthcare will not offer me a share-holder physician status in
the future. It is my belief that it will be in the best and mutual interests not to continue
my Employment Agreement with Riverhills Healthcare for the reason mentioned
above.” Frerick testified that “[a]lthough Guo had serious performance problems at the
time,” Riverhills had not, as of that date, “provided any written notice to him concerning
whether or not he could be offered the opportunity to become a shareholder[.]”
{¶32} On June 18, 2007, Frerick sent Guo a letter memorializing the May 31,
2007, meeting. It stated that “Riverhills prefers not to pursue dismissal ‘for cause’ from
the practice and would prefer to meet with [Guo] and determine an amicable schedule
for exiting the practice.”
{¶33} On July 13, 2007, Frerick sent a memorandum to Guo regarding “2nd
Modification to Your Employment agreement and Resignation from Riverhills
Healthcare.” It stated, “by signing this agreement you voluntarily resign from Riverhills
Healthcare, and my signature indicates acceptance of your resignation. The effective
date of your resignation is July 31, 2007.” Guo refused to sign this memorandum.
{¶34} Finally, on July 31, 2007, Frerick sent Guo a memorandum regarding
“Termination for Cause.” It stated, “Riverhills Healthcare, Inc. is terminating your
Physician Employment Agreement for cause effective Aug. 31, 2007 per paragraph 7.3j
of the agreement[.]” It listed a number of reasons, including “[t]heft of Riverhills’
patients’ names and addresses.”
{¶35} Riverhills contends that its evidence showed that no decision was
actually made about Guo’s shareholder status prior to Guo’s June 15 letter. But the
agreement does not specify any time period during which Riverhills must have offered
Guo a shareholder agreement. Thus, it is ambiguous on that point. According to Guo,
Frerick told him on several occasions that Riverhills was not going to offer him a
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OHIO FIRST DISTRICT COURT OF APPEALS
shareholder’s agreement. Whether those oral discussions were sufficient to allow Guo to
terminate the agreement under Section 7.6 presented a genuine issue of material fact.
Therefore, the trial court erred in granting summary judgment in favor of Riverhills on
its breach-of-contract claim, and we sustain Guo’s second assignment of error.
V. Assignments of Error on Damages
{¶36} In his third and fourth assignments of error, Guo takes issue with the
amount of damages awarded by the trial court following its decision to grant summary
judgment to Riverhills on both of its claims. Since we have held that the trial court erred
in granting summary judgment to Riverhills on those claims, any award of damages was
also erroneous. Consequently, we sustain Guo’s third and fourth assignments of error,
reverse the trial court’s judgment in its entirety, and remand the case to the trial court
for further proceedings consistent with this decision.
Judgment reversed and cause remanded.
H ILDEBRANDT and C UNNINGHAM , JJ., concur.
Please Note:
The court has recorded its own entry this date.
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