Protherapy Associates, LLC v. Afs of Bastian, Inc.
782 F. Supp. 2d 206
W.D. Va.2011Background
- ProTherapy Associates provides physical, occupational therapy and speech pathology to skilled nursing facilities under nine substantially identical Therapy Services Agreements with the Facilities.
- Kissito (Amity Fellowserve, Inc.) negotiated the contracts and operated the Facilities, but Kissito is not a named party to the Agreements.
- Each Agreement contains a non-solicitation clause and a liquidated damages provision of $10,000 per employee for breaches involving hiring ProTherapy personnel.
- After a 2009 rate reduction, the Facilities terminated ProTherapy and engaged Reliant Pro Rehab to supply therapy services, hiring approximately 57 former ProTherapy employees.
- ProTherapy seeks liquidated damages totaling $570,000 for those 57 employees, and asserts joint and several liability among the Facilities.
- The court has diversity jurisdiction under 28 U.S.C. § 1332 and applies Florida law due to a forum selection clause in the contracts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Kissito's liability for the breach | Kissito, as negotiator/operator, may be liable for the Facilities' breach. | Kissito is not a party to the Agreements and is not liable as a parent or agent. | Kissito granted summary judgment in its favor; not liable. |
| Sufficiency of the factual basis for breach | Evidence shows 57 employees met the restrictive covenants' criteria and were hired within the prohibition period. | Defendants challenge sufficiency or relevance of evidence tying hires to the covenant. | Sufficient factual basis established to support breach against the Facilities. |
| Validity of the restrictive covenant under Florida law | Restrictive covenant protects legitimate interests: customer relationships, goodwill, and extraordinary training. | Covenant is overbroad and not reasonably necessary to protect interests. | Covenant deemed enforceable; not overbroad or unreasonably long. |
| Validity of the liquidated damages provision | $10,000 per employee is a reasonable estimate of anticipated damages and not a penalty. | Damages are potentially excessive and punitive; potentially unconscionable given contract terms. | Liquidated damages upheld as enforceable; not a penalty. |
| Joint and several liability among Defendants | All Facilities are jointly liable for the breach under the agreements. | Liability should be limited to specific contracting entities; unclear on joint/several liability. | Court to require further briefing on joint and several liability before entry of an award. |
Key Cases Cited
- Johnson Enters, of Jacksonville, Inc. v. FPL Grp., Inc., 162 F.3d 1290 (11th Cir.1998) (piercing corporate veil standards)
- Continental Group, Inc. v. KW Property Management, LLC, 622 F. Supp. 2d 1357 (S.D. Fla. 2009) (legitimate business interest in protecting goodwill and relationships)
- J.K.R. Inc. v. Triple Check Tax Service., Inc., 736 So. 2d 43 (Fla. Dist. Ct. App. 1999) (restrictive covenants not limited to active solicitation)
- Envt'l Servs., Inc. v. Carter, 9 So. 3d 1258 (Fla. Dist. Ct. App. 2009) (contract interpretation favors enforceability when unambiguous)
- Dyer v. Pioneer Concepts, Inc., 667 So.2d 961 (Fla. Dist. Ct. App. 1996) (training may be a protectable business interest)
- Hapney v. Cent. Garage, Inc., 579 So.2d 127 (Fla. Dist. Ct. App. 1991) (training must exceed ordinary extent to be protectable)
- Hyman v. Cohen, 73 So.2d 393 (Fla. Dist. Ct. App. 1954) (unconscionability standard for liquidated damages)
- Hot Developers, Inc. v. Willow Lake Estates, Inc., 950 So.2d 537 (Fla. Dist. Ct. App. 2007) (reasonableness and unconscionability of damages)
- McNorton v. Pan Am. Bank of Orlando, 387 So.2d 393 (Fla. Dist. Ct. App. 1980) (limits on unconscionable liquidated damages)
- Beatty v. Flannery, 49 So.2d 81 (Fla. Dist. Ct. App. 1950) (historic unconscionability considerations)
- MCA Television Ltd. v. Pub. Interest Corp., 171 F.3d 1265 (11th Cir. 1999) (liquidated damages and enforceability standards in sharp contrast to penalties)
- Dade National Development Corp. v. Southeast Investments of Palm Beach County, Inc., 471 So.2d 113 (Fla. Dist. Ct. App. 1985) (contract price duration considerations for damages validity)