Aesthetic Facial & Ocular Plastic Surgery Ctr., P.A. v. Zaldivar

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA18-431
Filed: 19 March 2019
Wake County, No. 14 CVS 012804
AESTHETIC FACIAL & OCULAR PLASTIC SURGERY CENTER, P.A., Plaintiff,
v.
RENZO A. ZALDIVAR and OCULOFACIAL PLASTIC SURGERY CONSULTANTS,
P.A., SURGICAL, LLC, Defendants.
Appeal by plaintiff from order entered 16 December 2015 by Judge G. Bryan
Collins, Jr. in Superior Court, Wake County. Heard in the Court of Appeals 16
October 2018.
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
AESTHETIC FACIAL V. ZALDIVAR
Opinion of the Court
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.
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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.
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Opinion of the Court
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.
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Opinion of the Court
“[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
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Opinion of the Court
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 ellipsis omitted).
Here, both Dr. Zaldivar and Dr. Christensen practice a sub-specialty of
oculo-facial surgery. There is no factual dispute there are very few physicians
practicing this subspecialty in the territory covered by the restrictions, or even in the
entire state of North Carolina.
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If a particular type of medical care is readily available in the restricted
territory, a covenant which restricts a medical professional from providing care may
not offend public policy. For example, in Jeffrey R. Kennedy, D.D.S., P.A. v. Kennedy,
this Court addressed a general dentist who signed a restrictive covenant not to
compete within fifteen miles of the practice in Chapel Hill for three years following
his departure from the practice. 160 N.C. App. 1, 4, 584 S.E.2d 328, 330 (2003). The
defendant dentist began practicing dentistry in violation of the covenant, and the
plaintiff dental practice filed a complaint seeking a preliminary injunction, which the
trial court denied. Id. at 5, 584 S.E.2d at 331. This Court reversed the trial court
and concluded the covenant was enforceable because “the covenant at issue does not
cause substantial harm to the public health and, at most, merely inconveniences
dental patients.” Id. at 11, 584 S.E.2d at 335. The evidence in that case showed that
many dentists were available in the restricted area, and the defendant dentist did
not practice any sort of specialized dental care not provided by most general dentists.
Id. This Court stated that “[p]rior cases concluding that such restrictions harm the
public health involve circumstances wherein the health care provider is the sole such
provider in the area, or is one of few specialists in a particular area.” Id.
This Court addressed a non-compete agreement involving a specialized
physician in an area where few similar specialists were available in Iredell Digestive
Disease Clinic v. Petrozza. 92 N.C. App. 21, 373 S.E.2d 449. In Iredell Digestive
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Disease Clinic, the defendant specialized in gastroenterology and internal medicine.
92 N.C. App. at 22, 373 S.E.2d at 450. Defendant signed a covenant not to compete
for three years within twenty miles of Statesville or five miles of any hospital or office
serviced by plaintiff. Id. at 23, 373 S.E.2d at 450-51. Defendant submitted affidavits
from 41 physicians in Statesville which stated that “one gastroenterologist would not
be able to meet the community’s demand for such services; that losing defendant
Petrozza’s services would create an excessive workload on plaintiff; and would ‘likely
result in undesirable and possible critical delays in patient care and treatment.’” Id.
at 28, 373 S.E.2d at 453. Plaintiff submitted affidavits from 14 physicians who stated
“that there are presently four surgeons in Statesville who can perform certain semi-
surgical procedures performed by gastroenterologists; and that in severe cases
patients can be transferred by helicopter from the hospital in Statesville to Baptist
Hospital in Winston-Salem.” Id. at 28, 373 S.E.2d at 453-54. The trial court
acknowledged that “there is conflict between plaintiff’s and defendant’s affidavits as
to the precise impact Dr. Petrozza’s leaving would have on the community. However,
we believe after reviewing the affidavits de novo, that the trial court was correct in
finding that the public health and welfare would be harmed if there were only one
gastroenterologist in Statesville.” Id. at 29, 373 S.E.2d at 454.
Similarly, in Statesville Medical Group v. Dickey, defendant specialized in
endocrinology and signed an employment contract that prohibited him from
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Opinion of the Court
competing with plaintiff for two years in Iredell County. 106 N.C. App. 669, 670-71,
418 S.E.2d 256, 257 (1992). The trial court granted a preliminary injunction
preventing the defendant from practicing in the restricted area under the covenant.
Id. at 671, 418 S.E.2d at 257. On appeal, this Court reversed the trial court and found
that the covenant posed a risk of substantial harm to the public due to
the shortage of specialists in the field in the restricted area,
the impact of plaintiff establishing a monopoly of
endocrinology practice 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.
Id. at 673, 418 S.E.2d at 259.
In Nalle Clinic Co. v. Parker, defendant specialized in pediatrics and pediatric
endocrinology. 101 N.C. App. 341, 342, 399 S.E.2d 363, 364 (1991). Defendant signed
a contract with plaintiff that prevented defendant from practicing in Mecklenburg
County for two years following his employment with plaintiff. Id. After defendant
resigned from employment with plaintiff, plaintiff sought a preliminary injunction
which the trial court granted. Id. at 342-43, 399 S.E.2d at 365. Under the specific
facts of the case, including the defendant’s specialization and the lack of other
pediatric endocrinologists in the geographic area, this Court reversed the trial court
because “enforcement of the covenant not to compete would create a substantial
question of potential harm to the public health.” Id. at 345, 399 S.E.2d at 366
(quotation marks omitted).
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Here, the covenant not to compete is titled “Restrictive Covenant” in the
employment agreement. The covenant provides that for a period of two years after
his employment with plaintiff ends, defendant
will not render any ophthalmology and/or oculo-facial
plastic and reconstructive surgery services on behalf of
yourself, any business, practice or entity within a fifteen
(15) mile radius of any office, satellite or other place of
business used by the Practice at the time your employment
commences, or within a fifteen (15) mile radius of any
future office, satellite or other place of business used by the
Practice at the time your employment ends (or within one
(1) year prior to the time your employment ends). This
promise specifically includes your not practicing
ophthalmology and/or oculo-facial plastic and
reconstructive surgery services or any of their disciplines
at any hospital, surgery center or laser center at which you
or the Practice’s other physicians had active staff privileges
at the time your employment ends (or within one (1) year
prior to the time your employment ends).
Dr. Zaldivar resigned in September 2011, and plaintiff did not pursue an
injunction to stop Dr. Zaldivar from competing in the restricted area; plaintiff waited
until September 2014 to file a complaint. To support their motion for summary
judgment, defendants submitted affidavits from eight physicians practicing
ophthalmology in North Carolina; six are specialists in oculofacial plastic surgery.
These physicians described the medical necessity of Dr. Zaldivar’s services and the
potential impact on public health from enforcing the restrictive covenants:
Dr. Zaldivar is a much needed member of the North
Carolina medical community. Should Dr. Zaldivar not be
permitted to practice in the alleged “restricted area” of the
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“non-compete covenant” that is involved in this dispute,
this could potentially cause harmful delay in delivery of
specialized medical care in the emergency setting . . . .
Removing Dr. Zaldivar from practice in this broad and
highly populated geographic area would cause an increased
burden on the limited number of oculofacial plastic
specialists practicing from Greensboro to the North
Carolina Coast.
In addition, the eight physicians noted the limited number of oculofacial plastic
surgeons in the area:
There are currently a limited number of oculofacial plastic
surgeons practicing in the North Carolina from Greensboro
to the East Coast. These subspecialty eye surgeons handle
emergencies and time-sensitive face and eye surgeries for
a population of millions of people in this geographic area,
including children seen in emergency rooms for acute or
trauma injuries to the eyes and face.
The physicians also noted that Dr. Zalidivar provides several highly specialized
surgical procedures not provided by other physicians in the area:
Dr. Zaldivar provides patients with access to highly
specialized medical procedures and orbital surgeries,
including but not limited to optic nerve sheath
fenestrations, which are currently only available in
Eastern North Carolina through Dr. Zaldivar’s practice.
This procedure is usually necessitated in an emergency
situation where pressure on the optic nerve can cause
permanent vision loss without prompt surgical
intervention.
Where defendants have presented evidence supporting a summary judgment
motion, plaintiff cannot rely on its complaint but must produce evidence to create a
genuine issue of material fact. See N.C. Gen. Stat. §1A-1, Rule 56(e) (“When a motion
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for summary judgment is made and supported as provided in this rule, an adverse
party may not rest upon the mere allegations or denials of his pleading, but his
response, by affidavits or as otherwise provided in this rule, must set forth specific
facts showing that there is a genuine issue for trial.”). However, we “view the
presented evidence in a light most favorable to the nonmoving party.” In re Will of
Jones, 362 N.C. at 573, 669 S.E.2d at 576.
In response to defendants’ motion for summary judgment, plaintiff submitted
affidavits of Dr. Christensen and two other employees of plaintiff. In his deposition,
Dr. Christensen acknowledged that both he and Dr. Zaldivar are in a very highly
specialized area of practice. When Dr. Zaldivar joined plaintiff, Dr. Christensen sent
out a letter to his referral sources describing his unique qualifications and extensive
training:
I believe you will be impressed with my new associate Dr.
Renzo Zaldivar. He is a very talented surgeon with the
highest of training credentials and excellent personal
demeanor. Dr. Zaldivar has completed a formal, two-year
fellowship in oculoplastics at the Mayo Clinic which is one
of thirty recognized by the American Society of Ophthalmic
Plastic and Reconstructive Surgery (ASOPRS). . . . We will
be the only fellowship trained oculoplastic and orbital
specialists that have both completed a fellowship approved
by the American Society of Ophthalmic Plastic and
Reconstructive Surgeons and are also members of this
society who treat patients in Raleigh and Cary (Dr. Zaldivar
will be admitted to ASOPRS society October, 2009).
....
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I am very excited to have an associate with his excellent
credentials. Although results cannot be guaranteed I
believe that the first responsibility as a surgeon is to obtain
the best and most advanced training available through
education and then to apply this knowledge.
(Emphasis added.)
Based upon the entire forecast of evidence, viewed in the light most favorable
to plaintiff, there is no genuine issue of material fact as to Dr. Zaldivar’s specialized
qualifications and the very limited number of physicians in the territory covered by
the covenant—or even in North Carolina—who can provide oculofacial plastic surgery
and particularly optic nerve sheath fenestrations. Plaintiff seeks to minimize the
importance of the optic nerve sheath fenestration surgery, arguing it is “so rare you
don’t see many of them,” but plaintiff does not dispute that when a patient needs optic
nerve sheath fenestration surgery, the patient may go blind if the procedure is not
performed promptly. And even if very few patients need this procedure, one person
losing his or her sight because of the lack of a specialist to perform the surgery is one
too many.
There is no genuine issue of material fact regarding the nature of Dr. Zaldivar’s
practice or the very limited availability of other physicians practicing in the relevant
area of North Carolina. We conclude that restricting Dr. Zaldivar’s ability to practice
in the most populated areas of North Carolina when there are very few oculofacial
plastic surgeons, and even fewer who perform some of the specialized procedures he
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is trained to provide, raises a “substantial question of potential harm to the public
health.” Iredell Digestive Disease Clinic, 92 N.C. App. at 27, 373 S.E.2d at 453.
Accordingly, the covenant violates public policy and will not be enforced.
b. Buy-Out Provision
Plaintiff contends that even if enforcement of the Agreement by enjoining Dr.
Zaldivar from practicing would pose a risk to public health, this risk is not present
here because he did not seek to enjoin Dr. Zaldivar from practicing his specialty after
leaving plaintiff’s practice. Plaintiff waited until after the expiration of the two year
covenant to file its claim against defendants and seeks damages under the buy-out
provision of the Agreement. This provision provides that
the Practice agrees to release you from the restrictive
covenant of this Paragraph 11 (but not the non-solicitation
provisions of Paragraph 12) if you purchase and actually
pay for a release from the restrictive covenant from the
Practice. Your purchase of a release from the restrictive
covenant and your actual payment for such release prior to
your practicing in the restricted areas after your
employment ends will permit you to practice in the
restricted areas described above after termination of your
employment. You hereby agree that reasonable
compensation to the Practice for such a release from the
restrictive covenant is an amount equal to one hundred
fifty percent (150%) of your annual base salary in effect
immediately prior to the termination of your employment
with the Practice. Thus, should you elect to practice in the
restricted areas after your employment ends, you agree to
pay and the Practice agrees to accept such amount to
provide you a release from the restrictive covenant to
which you have agreed in this Paragraph 11.
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Plaintiff argues that the buy-out provision is enforceable because it does not
prevent Dr. Zaldivar from providing medical care; it only requires him to pay Plaintiff
to be released from the non-compete provisions of the Agreement (but not the non-
solicitation provision, which we will address below). Plaintiff contends that “[t]his
Court has held that there is no potential harm to public health where a physician can
pay his former employer to practice in a restricted area, whether the payment
provision is cast as a liquidated damages provision or a forfeiture provision.” We
disagree with plaintiff’s characterization of this Court’s prior holdings.
Plaintiff argues this Court approved damages in lieu of enforcement of a non-
compete agreement in Eastern Carolina Internal Medicine, P.A. v. Faidas. 149 N.C.
App. 940, 564 S.E.2d 53, aff’d, 356 N.C. 607, 572 S.E.2d 780 (2002). But Faidas did
not address a covenant not to compete; this Court held “that the ‘Cost Sharing’
provision is not a covenant not to compete and we do not subject it to the strict
scrutiny as to reasonableness and public policy required with a covenant not to
compete.” Id. at 945, 564 S.E.2d at 56. Relying on Faidas, this Court in Calhoun v.
WHA Medical Clinic, PLLC, considered a non-compete clause and a damages clause
dealing with cardiologists and found that “[t]he trial court made findings . . . that
establish that there is no potential harm to public health given that the physicians
were able to pay the liquidated damages and had no plans to leave the area.” 178
N.C. App. at 600, 632 S.E.2d at 573. At trial, the cardiologists subject to the covenant
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testified “that they had no plans to leave the area and, if the covenant not to compete
was determined to be enforceable, they were prepared to take all necessary steps to
ensure continued presence in the medical community and continued treatment of
patients, even if that meant paying the liquidated damages agreed to in their
contracts with WHA.” Id. at 593, 632 S.E.2d at 569. They also posted a letter of
credit with the clerk of superior court further demonstrating their ability to pay the
liquidated damages. Id. Further, the amount of the liquidated damages in Calhoun
was at a minimum equal to a payout that each doctor had the option to receive or
forgo and not be subject to the restrictive covenant. Id. at 590, 632 S.E.2d at 567.
Neither Calhoun nor Faidas stand for the proposition that a damages clause
in a restrictive covenant makes a covenant in violation of public policy based upon a
risk to public health enforceable through payment of damages instead of enjoining
the physician from practicing. The provisions of the Agreement regarding damages
in Calhoun and the unique facts of that case distinguish it from this case. See id. at
600, 632 S.E.2d at 573. Faidas did not deal with a covenant not to compete. 149 N.C.
App. at 945, 564 S.E.2d at 56. The evidence does not demonstrate that Dr. Zaldivar
had the ability to pay the liquidated damages, nor did he post a letter of credit with
the clerk of superior court to secure the damages. Both the restrictive covenant and
the liquidated damages provision must be reasonable and not violate public policy.
See Calhoun, 178 N.C. App. at 599, 632 S.E.2d at 572 (“[T]he agreement . . . contains
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Opinion of the Court
an unequivocal non-compete clause, and . . . contains a damages provision in the event
the Physician desires to practice in violation of the non-compete clause. Accordingly,
under established case law, the provisions are strictly scrutinized as to
reasonableness and public policy.” (brackets, quotation marks, and emphasis
omitted)).
We recognize that we have the benefit of hindsight, since plaintiff waited until
after the two-year term of the restrictions to bring this lawsuit and Dr. Zaldivar
continued to practice in the restricted area, so any potential harm to public health
from limitation of his practice did not happen. But the timing of plaintiff’s lawsuit
and the damages provision cannot obviate the public policy considerations of this
covenant. If we allowed enforcement of this type of damages provision in lieu of
enforcement of an injunction restricting a physician’s practice, physicians in Dr.
Zaldivar’s position may opt not to continue practicing in the restricted area because
of the risk of the financial penalty. The practical effect on public health is then the
same as enjoining the physician’s practice: the public would be denied crucial medical
care because of the financial penalty imposed by a physician’s non-compete
agreement. Since there is a risk of substantial harm to the public based on these
facts, there is strong public policy in favor of not enforcing the non-compete provisions
by an award of damages.
c. Non-Solicitation Covenant
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Plaintiffs argue that the non-solicitation covenant is enforceable because “the
non-solicit provision is reasonably limited to health care providers and patients with
whom Christensen Plastics had already established a relationship (or those patients’
family members).” The non-solicitation covenant provides:
Recognizing that your duty to the Practice as your
employer extends beyond your employment, you agree that
both during your employment and thereafter, if your
employment ends (regardless of the reason or manner of
termination) and whether or not you practice within the
restricted area as described above, that you will not
directly or indirectly: (i) solicit for treatment any former or
existing patient (or member of any patient’s household) of
the Practice; (ii) induce or attempt to influence any
employee, contractor or patient of the Practice to alter his
or her relationship with the Practice in any way; (iii) induce
or attempt to influence any hospital, other health care
facility, any physician, any optometrist, any optician, or
any other professional with a referring relationship with
the Practice, including any managed care payor, to alter
that relationship in anyway; or (iv) solicit any patient
service contractual arrangement of the Practice. This
restriction shall apply during the term of your employment
and for a period of two (2) years immediately following the
end of your employment. In the event of your breach
thereof, the two (2) year time limitation expressed above
shall be from the date of your last violation.
“To be valid, the restrictions must be no wider in scope than is necessary to
protect the business of the employer.” Med. Staffing Network, Inc. v. Ridgway, 194
N.C. App. 649, 656, 670 S.E.2d 321, 327 (2009) (quotation marks omitted). “In North
Carolina, the protection of customer relations against misappropriation by a
departing employee is well recognized as a legitimate interest of an employer.” Id.
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(quotation marks and brackets omitted). A restrictive covenant may “be directed at
protecting a legitimate business interest. But . . . where the Agreement reaches not
only clients, but potential clients, and extends to areas where Plaintiff had no
connections or personal knowledge of customers, the Agreement is unreasonable.”
Hejl v. Hood, Hargett & Assocs., 196 N.C. App. 299, 307, 674 S.E.2d 425, 430 (2009).
In his deposition, when Dr. Christensen was asked for the name of a physician
whom Dr. Zaldivar solicited in violation of this covenant, he responded:
I’ll give you one doctor. That’s the question. Kathy Hecker.
He called Kathy Hecker up and says, I would like you to
stop sending to Frank and send to me.
But in direct response to this testimony, Dr. Kathryn Hecker swore to the following
in an affidavit:
2. I have been advised that Dr. Frank Christensen, the
owner of Aesthetic Facial & Ocular Plastic Surgery
Center, PA, gave sworn deposition testimony about me
in his legal proceedings against Dr. Renzo Zaldivar. I
have read the portions of Dr. Christensen’s depositions
where he discusses me, which are attached to affidavit
as Exhibit A, and Dr. Christensen’s testimony about me
is false. Specifically, Dr. Christensen’s testimony that
Dr. Zaldivar solicited business from me is not true.
Contrary to Dr. Christensen’s testimony, Dr. Zaldivar
never called me and asked that I stop referring patients
to Dr. Christensen and instead refer patients to Dr.
Zaldivar. Also, I never told Dr. Christensen that Dr.
Zaldivar solicited me in this way.
This testimony and affidavit could present a genuine issue of material fact,
since Dr. Hecker denies that Dr. Zaldivar solicited her, and Dr. Christensen says he
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Opinion of the Court
did. Viewed in the light most favorable to plaintiff, this evidence in addition to the
affidavits of plaintiff’s employees could show a violation of the non-solicitation
agreement as to Dr. Hecker, but even if Plaintiff has forecast one potential violation
of the non-solicitation covenant, the Agreement still is unenforceable because it is
overbroad and in contravention of public policy. The non-solicitation provision is not
limited to existing patients or Dr. Zaldivar’s professional contacts made during his
employment with plaintiff. Instead, it covers “any former or existing patient (or
member of any patient’s household) of the Practice[.]” (Emphasis added.) This
restriction would apply not just to existing patients, but also to “any member of the
patient’s household”—a future or potential patient with whom Dr. Christensen had
no relationship—and is therefore unreasonable. See Hejl, 196 N.C. App. at 307, 674
S.E.2d at 430.
Because of the highly specialized nature of both Dr. Zaldivar’s and Dr.
Christensen’s practices, they see patients almost exclusively based upon referrals
from other physicians. The remaining prohibitions of the non-solicitation provisions
also impair Dr. Zaldivar’s ability to see future or potential patients because it
penalizes Dr. Zaldivar for accepting referrals from other medical professionals or
hospitals with whom Dr. Christensen had a relationship. These limitations on Dr.
Zaldivar prevent him from
(ii) induc[ing] or attempt[ing] to influence any employee,
contractor or patient of the Practice to alter his or her
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Opinion of the Court
relationship with the Practice in any way; (iii) induc[ing]
or attempt[ing] to influence any hospital, other health care
facility, any physician, any optometrist, any optician, or
any other professional with a referring relationship with
the Practice, including any managed care payor, to alter
that relationship in anyway; or (iv) solicit[ing] any patient
service contractual arrangement of the Practice.
For example, if a patient suffered an eye injury and presented to the emergency
department of a hospital where Dr. Christensen had practiced, and the hospital
contacted Dr. Zaldivar to care for the patient, instead of Dr. Christensen, Dr. Zaldivar
may be in violation of the non-solicitation provision simply because he let the hospital
know that he was available to care for patients at the hospital and agreed to care for
the patient—even if Dr. Christensen was not available at that moment to care for the
patient in the emergency department. This limitation on referrals from other medical
professionals to a highly specialized physician, where very few such physicians are
available, would have the same detrimental effect upon availability of medical care
as the non-compete agreement, and it is therefore unenforceable.
IV. Breach of Contract
Plaintiff argues “[w]here the Referral Source Covenants of the parties’ contract
are valid and enforceable, the trial court erred in summarily dismissing Christensen
Plastics’ breach of contract claims.” However, the breach of contract claim is
contingent on the validity of the unenforceable covenants discussed above. This
argument is overruled.
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Opinion of the Court
V. Learned Profession Exemption
Plaintiff argues that “the trial court erred in holding that the ‘learned
profession’ exemption bars its unfair and deceptive trade practices claim where this
claim does not involve the provision of medical services.” (Capitalization removed.)
Plaintiff’s complaint alleged in relevant part:
41. Oculofacial P.A. employed Zaldivar for the
express purpose of committing acts in breach of his
agreement with Plaintiff when Oculofacial P.A. and
Zaldivar knew of the agreement and knew or should have
known that the acts violated the agreement.
42. Oculofacial P.A. and Zaldivar engaged in the
solicitation of patients and in the practice of medicine and
surgery in North Carolina in violation of the agreement
between Plaintiff and Zaldivar.
“To prevail on a claim of unfair and deceptive trade practice a plaintiff must
show (1) an unfair or deceptive act or practice, or an unfair method of competition,
(2) in or affecting commerce, (3) which proximately caused actual injury to the
plaintiff or to his business.” Spartan Leasing Inc. v. Pollard, 101 N.C. App. 450, 460-
61, 400 S.E.2d 476, 482 (1991). “[C]ommerce includes all business activities, however
denominated, but does not include professional services rendered by a member of a
learned profession.” N.C. Gen. Stat. § 75-1.1(b) (2017) (quotation marks omitted). “To
determine whether the learned profession exclusion applies, a two-part inquiry must
be conducted: first, the person or entity performing the alleged act must be a member
of a learned profession. Second, the conduct in question must be a rendering of
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Opinion of the Court
professional services.” Wheeless v. Maria Parham Med. Ctr., Inc., 237 N.C. App. 584,
589, 768 S.E.2d 119, 123 (2014) (brackets and quotation marks omitted).
“There is no dispute that doctors . . . are members of a learned profession.”
Hamlet H.M.A., LLC v. Hernandez, ___ N.C. App. ___, ___, 821 S.E.2d 600, 606 (2018).
Here, the conduct as alleged by plaintiff’s complaint is “the solicitation of patients
and the practice of medicine and surgery in North Carolina in violation of the
agreement between Plaintiff and Zaldivar.” (Emphasis added.) The Agreement
places a limitation on defendant’s ability to provide medical care and therefore arises
from “a rendering of professional services.” Wheeless, 237 N.C. App. at 589, 768
S.E.2d at 123. The trial court did not err in determining this claim falls under the
learned profession exemption, and this argument is overruled.
VI. Derivative Claims
Plaintiff next argues that “the Referral Source Covenants are valid and
enforceable. As such, they can properly serve as the basis for a tortious interference
claim against Zaldivar Plastics.” As the restrictive covenants are not enforceable,
there is also no basis for plaintiff’s tortious interference claim. This argument is
overruled.
VII. Punitive Damages
Plaintiff finally argues, “the trial court . . . erred in holding that Christensen
Plastics’ punitive damages claim fails.” Because we have held that the covenants are
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Opinion of the Court
unenforceable, defendants have no liability for compensatory damages, and thus
there is no basis for awarding punitive damages. N.C. Gen. Stat. § 1D-15(a) (2017)
(“Punitive damages may be awarded only if the claimant proves that the defendant
is liable for compensatory damages . . . .”); see Pittmann v. Hyatt Coin & Gun, Inc.,
224 N.C. App. 326, 330, 735 S.E.2d 856, 859 (2012) (“[A] claim of punitive damages is
dependent upon a successful claim for compensatory damages . . . .”). This argument
is overruled.
VIII. Conclusion
For the foregoing reasons, we affirm the trial court’s grant of summary
judgment for defendants.
AFFIRMED.
Judges BRYANT and DAVIS concur.
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