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O'Sullivan v. Sunil Gupta, M.D., LLC

United States District Court, E.D. Louisiana

May 1, 2017

SEAN O'SULLIVAN
v.
SUNIL GUPTA, M.D., LLC ET AL.

         SECTION I

          ORDER AND REASONS

          LANCE M. AFRICK UNITED STATES DISTRICT JUDGE

         Before the Court are two motions[1] to dismiss and compel arbitration filed by the defendants. For the following reasons, the Court grants the motions in part and denies them in part.

         I.

         Sean O'Sullivan is an ophthalmologist employed by defendant Retina Specialty Institute (“RSI”).[2] He works at two of RSI's locations in Metairie and Covington, Louisiana. Defendants Sunil Gupta, Magdalena Shuler, John Myers, and Alan Franklin are also ophthalmologists. They are partners and managing members of RSI.

         O'Sullivan filed this lawsuit because he believes that RSI and the individual defendants violated his employment contract when they failed to make him a partner at RSI. He claims the individual defendants received distributions from RSI to which he was entitled. As the result of these beliefs, O'Sullivan no longer wants to work for RSI. He intends to sever his employment with the company and start a competing practice. There is only one thing stopping him: a non-compete agreement with RSI, the violation of which would expose O'Sullivan to approximately $3 million dollars in liquidated damages.

         Claiming that he cannot stay with RSI but that he faces financial ruin if he leaves, O'Sullivan asks the Court to enter a declaratory judgment that the non-compete agreement is unenforceable. He also asks for damages related to RSI's alleged violation of the employment agreement. Because O'Sullivan's employment agreement is with RSI and not the individual defendants, O'Sullivan's claims against the individual defendants are premised on the theory of unjust enrichment.

         II.

         In the first motion, RSI argues that O'Sullivan's declaratory judgment claim should be dismissed for lack of subject matter jurisdiction because there is no case or controversy regarding the non-compete agreement. RSI further argues that O'Sullivan's remaining contractual claims against RSI must be arbitrated in Pensacola, Florida under the employment agreement. Because the non-compete agreement is specifically carved out of the arbitration agreement in O'Sullivan's employment contract, the two issues must be analyzed separately.

         A.

         A declaratory judgment action is ripe for adjudication only where an “actual controversy” exists between the parties. Orix Credit All., Inc. v. Wolfe, 212 F.3d 891, 896 (5th Cir. 2000). As a general rule, an actual controversy exists where “a substantial controversy of sufficient immediacy and reality [exists] between parties having adverse legal interests.” Id. (internal quotation marks omitted). Whether particular facts are sufficiently immediate to establish an actual controversy is a question that must be addressed on a case-by-case basis. Id.

         O'Sullivan continues to work for RSI. He has not yet violated the non-compete agreement. While O'Sullivan would like to stop working for RSI and to begin a competing practice, he claims he will not be able to do so unless he can first obtain a declaratory judgment that the non-compete agreement is unenforceable. Without such a judgment, O'Sullivan alleges that should he compete with RSI, he runs the risk of financial ruin if the non-compete agreement is found enforceable in a subsequent lawsuit (assuming that the $3 million dollar liquidated damages provision is also found enforceable). If O'Sullivan cannot obtain a declaratory judgment, he claims that he faces a Hobson's choice-he cannot risk violating the agreement and waiting to be sued because he cannot afford to pay the liquidated damages if he loses.

         Arguing that O'Sullivan's predicament does not create an actual controversy, RSI characterizes O'Sullivan's fears that RSI will sue him as soon as he begins to compete as “speculation” and “conjecture.” See R. Doc. No. 24-1, at 6. Though RSI nowhere promises that it will not sue O'Sullivan if he violates the agreement, neither has RSI explicitly threatened O'Sullivan with a lawsuit. O'Sullivan identifies other lawsuits which have been filed by RSI against former employees who left the company and started competing businesses, but RSI distinguishes those actions because they did not occur in Louisiana and because they purportedly occurred under “completely different” circumstances. See R. Doc. No. 33, at 5. RSI emphasizes repeatedly that “litigation is not a certainty.” See R. Doc. No. 33, at 4.

         In the declaratory judgement context, “the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007). “The threat of litigation, if specific and concrete, can indeed establish a controversy upon which declaratory judgment can be based.” Orix, 212 F.3d at 897; see also Ironshore Specialty Ins. Co. v. Tractor Supply Co., 624 F. App'x 159, 163 (5th Cir. 2015) (citing Orix for this proposition). “The fact that the filing of the lawsuit is contingent upon certain factors does not defeat jurisdiction over a declaratory judgment action.” Orix, 212 F.3d at 897. “However, in determining whether a justiciable controversy exists, a district court must take into account the ...


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