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

United States District Court, E.D. Louisiana

August 10, 2017

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

         SECTION I

          ORDER AND REASONS

          LANCE M. AFRICK UNITED STATES DISTRICT JUDGE

         Before the Court is a motion[1] filed by plaintiff Sean O'Sullivan for summary judgment against defendant Sunil Gupta, M.D., LLC (“RSI”). RSI opposes the motion.[2]

         For the foregoing reasons, the Court will grant the motion as set forth herein.

         I.

         The following facts are undisputed: Sean O'Sullivan is an ophthalmologist employed by RSI-shorthand for the Retina Specialty Institute[3]-which is owned by Sunil Gupta, M.D., LLC.[4] O'Sullivan works at RSI's two locations in Louisiana, one in Metairie and the other in Covington.[5]

         When O'Sullivan joined RSI, O'Sullivan and RSI executed a Noncompetition and Nonsolicitation Agreement (“RSI Agreement”)[6] designed to restrict O'Sullivan's ability to compete against RSI if and when O'Sullivan left RSI.[7] The RSI Agreement provides in part that “for a restrictive period of two (2) years following either the expiration or termination of” O'Sullivan's employment from RSI “for any reason, ” O'Sullivan will not compete against RSI by engaging in the practice of ophthalmology, or advertising for or soliciting patients, in the “Restrictive Territory.”[8] The RSI Agreement also limits O'Sullivan's ability to solicit RSI employees.[9]

         The RSI Agreement defines the “Restrictive Territory” as “the geographical area inside of a fifty (50) mile radius of any office or facility of Employer which exists or existed at the time during the Employment relationship.”[10] With respect to the two-year “restrictive period, ” the RSI Agreement provides for its automatic extension “for whatever length of time” that O'Sullivan is in violation of the RSI Agreement, or when “[a]ny litigation (including appeals) is pending” that challenges or seeks to enforce the RSI Agreement.[11]

         The RSI Agreement also includes several reformation and severability provisions. One of these provisions provides that the invalidation of any portion of the RSI Agreement does not affect the enforceability of the remaining portions.[12]Another provides that “[i]f the period of time or geographic area specified in th[e] [RSI] Agreement should be adjudged unreasonable in any proceeding, then the period of time or geographic area shall be” reformed “so that such restrictions may be enforced for such time or geographic area as is adjudged to be reasonable and enforceable, and shall not affect the enforceability of any other provision.”[13]

         O'Sullivan has now moved[14] the Court for summary judgment as to his claim for declaratory judgment. O'Sullivan argues that certain portions of the RSI Agreement-namely, paragraphs 5 through 8, as well as paragraphs 11 and 13- violate Louisiana law, and are therefore null and void. Defendant opposes[15]O'Sullivan's motion as overbroad.

         II.

         Summary judgment is proper when, after reviewing the pleadings, the discovery and disclosure materials on file, and any affidavits, the court determines that there is no genuine dispute of material fact. See Fed. R. Civ. P. 56. “[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The party seeking summary judgment need not produce evidence negating the existence of material fact, but need only point out the absence of evidence supporting the other party's case. Id.; Fontenot v. Upjohn Co., 780 F.2d 1190, 1195 (5th Cir. 1986).

         Once the party seeking summary judgment carries its initial burden, the nonmoving party must come forward with specific facts showing that there is a genuine dispute of material fact for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The showing of a genuine issue of material fact is not satisfied by creating “‘some metaphysical doubt as to the material facts, ' by ‘conclusory allegations, ' by ‘unsubstantiated assertions, ' or by only a ‘scintilla' of evidence.” Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (citations omitted). Instead, a genuine issue of material fact exists when the “evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party responding to the motion for summary judgment may not rest upon the pleadings, but must identify specific facts that establish a genuine issue. Id. The nonmoving party's evidence, however, “is to be believed, and all justifiable inferences are to be drawn in [the nonmoving party's] favor.” Id. at 255; see also Hunt v. Cromartie, 526 U.S. 541, 552 (1999).

         III.

         Louisiana-whose law governs the interpretation and enforcement of the RSI Agreement[16]-has a “longstanding policy against covenants not to compete.” Team Envtl. Serv., Inc. v. Addison, 2 F.3d 124, 126 (5th Cir. 1993); see also Water Processing Tech., Inc. v. Ridgeway, 618 So.2d 533, 535 (La. Ct. App. 4th Cir. 1993) (“A contract or agreement which prohibits an employee from competing with a former employer consistently has been found to be against public policy in Louisiana.”). Under La. R.S. § 23:921, the general rule is that “[e]very contract or agreement, or provision thereof, by which anyone is restrained from exercising a lawful profession, trade, or business of any kind . . . shall be null and void.” La. R.S. § 23:921(A)(1). However, where such contracts and agreements meet certain strict requirements, they “shall be enforceable.” Id. Specifically:

• “Any person . . . may agree” not to (1) carry on or engage in a business similar to the employer's business (“noncompetition agreement”), or (2) solicit the employer's customers (“nonsolicitation agreement”);
• “Any person . . . may agree” to a noncompetition or nonsolicitation agreement “within a specified parish or parishes, municipality or municipalities, or parts thereof, ” as long as the employer operates in those locations (“geographic requirement”); and
• “Any person . . . may agree” to a noncompetition or nonsolicitation agreement “not to exceed a period of two years from termination of employment” (“time requirement”).

Id. § 23:921(C). In short, “a valid non-competition agreement may limit competition only in a business similar to that of the employer, in a specified geographic area, for up to two years from termination of employment.” Parker v. Surface Works, Inc., No. 2015-1583, 2016 WL 5110048, at *3 (La. Ct. App. 1st Cir. Sept. 16, 2016) (emphasis in original); see also Affordable Roofing, Siding, and Gutters, Inc. v. Artigues, No. 16-16872, 2017 WL 713693, at *3 (E.D. La. Feb. 23, 2017) (Africk, J.) (“Non-solicitation of customers provisions in Louisiana are subject to the same restrictions as non-compete provisions.”).

         “Public policy requires that covenant-not-to-compete agreements must be strictly construed in the employee's favor.” Daiquiri's III on Bourbon, Ltd. v. Wandfluh, 608 So.2d 222, 224 (5th Cir. 1992) (internal quotation marks omitted); see also Arthur J. Gallagher & Co. v. Babcock, 703 F.3d 284, 288 (5th Cir. 2012) (citing SWAT 24 Shreveport Bossier, Inc. v. Bond, 808 So.2d 294, 298 (La. 2001)). In that vein, these contracts and agreements “must strictly comply with the requirements contained in the statute.” Team Envtl. Serv., 2 F.3d at 126 (quoting Comet Indus., Inc. v. Lawrence, 600 So.2d 85, 88 (La. Ct. App. 2d Cir. 1992)).

         With respect to La. R.S. § 23:921's geographic requirement, courts treat “mechanical adherence” to the statute as “especially” imperative. Gearheard v. De Puy Orthopaedics, Inc., No. 99-1091, 1999 WL 638582, at *4 (E.D. La. Aug. 19, 1999) (Clement, J.) (internal quotation marks omitted). The Court itself recently emphasized that strict observance of the geographic requirement was consistent with both the statute's plain text and policy objectives.[17] See Affordable Roofing, 2017 WL 713693, at *2-*3. As such, “[t]he absence of the required geographic limitation is fatal to a noncompetition agreement and renders it invalid.” Action Revenue Recovery, L.L.C. v. eBusiness Group, L.L.C., 17 So.3d 999, 1003 (La. Ct. App. 2d Cir. 2009).

         Moreover, “[b]ecause [the geographic requirement] . . . speaks to noncompetition ‘within a specified parish or parishes, municipality or municipalities, or parts thereof, ' Louisiana courts have stated that non-competition agreements failing to specify the parish, municipality or parts thereof are unenforceable.” Gearheard, 1999 WL 638582, at *4 (quoting La. R.S. § 23:921(C)); see also Id. (citing cases). For example, where noncompetition or nonsolicitation agreements define their geographic scope in miles, rather than municipalities-or parishes, or parts thereof- courts have routinely invalidated them. See, e.g., Team Envtl. Serv., 2 F.3d at 126 (“On their face, LRI's agreements do not conform to the statutory requirements because they prohibit competition within 200 miles of the employees' base of operations rather than specifying the parishes or municipalities in which LRI does business.”); Francois Chiropractic Center v. Fidele, 630 So.2d 923, 926 (La. Ct. App. 4th Cir. 1993) (invalidating a covenant not to compete that prohibited competition “within a ten (10) mile radius of the outer city limits of New Orleans, Louisiana, ” id. at 924); Medivision, Inc. v. Germer, 617 So.2d 69, 73 (La. Ct. App. 4th Cir. 1993) (concluding that a covenant not to compete is unenforceable where it bars the employee from “providing ophthalmological services within ten miles of any office of” the employer, id. at 70).

         IV.

         O'Sullivan challenges certain provisions of the RSI Agreement as transgressing La. R.S. § 23:921. The Court will examine each of these provisions in turn.

         A.

         O'Sullivan first challenges the legality of paragraph 5 of the RSI Agreement, which is designated as a covenant not to compete. Paragraph 5 provides that O'Sullivan-“for a restrictive period of two (2) years following either the expiration or termination of [O'Sullivan's] employment with [RSI] for any reason”-“shall not”:

• (a): “Practice the medical specialty of ophthalmology or retinal surgery within the Restrictive Territory . . . in any capacity . . . that competes with any part of [RSI's] business . . .”;
• (b): “Perform services or maintain staff privileges” at any medical facility “within the Restrictive Territory . . . which competes with any part of [RSI's] business”;
• (c): “[A]dvertise in or solicit patients in the Restrictive Territory”; or
• (d): “[A]ccept or engage in any business or activity that requires him to use or reveal any confidential business information.”[18]

         Paragraph 5 also includes an exemption from subsections (a) through (d) for O'Sullivan's teaching position at the Louisiana State University (“LSU”) School of Medicine.[19]

         i.

         For starters, subsections (a) through (c) of paragraph 5 aim to restrict O'Sullivan's ability to practice ophthalmology and so constitute “provision[s] . . . by which [O'Sullivan] is restrained from exercising a lawful profession, trade, or business.” La. R.S. § 23:921(A)(1). As such, these provisions are subject to § 23:921. RSI does not argue otherwise.[20]

         However, O'Sullivan and RSI dispute whether subsection (d) of paragraph 5 is subject to § 23:921. Pointing out that subsection (d)'s language aims to protect RSI's putative confidential business information, [21] RSI argues that subsection (d) is simply a confidentiality agreement.[22] If RSI is correct, then subsection (d) is not subject to § 23:921 and is enforceable under Louisiana law. See Novelaire Tech., L.L.C. v. Harrison, 50 So.3d 913 (La. Ct. App. 4th Cir. 2010) (“An employer may require an employee not to disclose confidential information.”); Maestri v. Destrehan Veterinary Hosp., Inc., 554 So.2d 805, 810 (La. Ct. App. 5th Cir. 1989); Engineered Mech. Serv., Inc. v. Langlois, 464 So.2d 329, 334 n.15 (La. Ct. App. 1st Cir. 1984) (“Confidentiality agreements have been held enforceable and not subject to the prohibition (and requirements) of La. R.S. 23:921.”).

         In contrast, O'Sullivan argues that subsection (d) constitutes a classic covenant not to compete and therefore it is subject to § 23:921.[23] O'Sullivan points to decisions from other jurisdictions in which courts have construed similar language in employment contracts as creating covenants not to compete.[24] O'Sullivan also points to language in the RSI ...


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