Alan GANT, D.O. v. HYGEIA FACILITIES FOUNDATION, INC.
No. 18228
Supreme Court of Appeals of West Virginia
July 12, 1989
Dissenting Opinion Aug. 2, 1989.
384 S.E.2d 842
As already discussed, under the law of West Virginia, fraud, mistake, or certain other inequitable circumstances, including the mere existence of a fiduciary relationship between the joint parties on an account, may overcome the presumption of a gift in the registration of the account. The existence of a fiduciary relationship is not necessarily a circumstance equal to or in the nature of fraud or mistake. In that the appellant‘s Instruction No. 8 failed to include the existence of a fiduciary relationship as a specific ground which might obviate the presumption of a gift, and in that it suggested that before such a relationship could be considered as a factor obviating the presumption of gift it had to rise to the level of ordinary fraud or mistake, as opposed to constructive fraud, this Court believes that this instruction tended to be an incomplete and misleading statement of the law. Such an instruction may properly be refused by a trial court. See McGlone v. Superior Trucking Co., Inc., 178 W.Va. 659, 363 S.E.2d 736 (1987); Gilliam v. Yeates, 174 W.Va. 686, 329 S.E.2d 51 (1985); Cross v. Trapp, 170 W.Va. 459, 294 S.E.2d 446 (1982).
Finally, the appellant claims that the trial court did not meaningfully review the jury‘s verdict before entering judgment for the reason that the trial court entered its final order prior to reviewing her “Motion for judgment in accordance with motion for directed verdict.”
As previously indicated, the evidence adduced supports the jury‘s finding of a fiduciary relationship, and, as discussed above, the jury‘s verdict was not improper. In view of these circumstances, even if the trial court had not meaningfully reviewed the jury‘s verdict, the trial court‘s action was harmless. See Town of Bancroft v. Turley, 170 W.Va. 1, 287 S.E.2d 161 (1981).
For the reasons stated, the judgment of the Circuit Court of Kanawha County is affirmed.
Affirmed.
Hamilton, Mooney, Burgess, Young & Tissue, Ralph C. Young, Oak Hill, for Hygeia Facilities Foundation.
NEELY, Justice:
Alan Gant, D.O. was employed by Hygeia Facilities Foundation, Inc. as a family practitioner at the Raleigh-Boone Medical Center in Whitesville, West Virginia from 1 June 1982 through 31 July 1987. After Dr. Gant resigned, he sought a declaratory judgment to void a restrictive covenant in his employment contract prohibiting him for a period of three years from practicing within thirty air miles of Whitesville. Because we agree with the circuit court that the restrictive covenant is reasonable and enforceable, we affirm the judgment of the Circuit Court of Boone County.
After completing his medical education and residency, Dr. Gant sought and secured employment with the Foundation as a family practitioner at their Raleigh-Boone Medical Center located in Whites-
When Dr. Gant began his employment he entered into a contract with the Foundation that contained a restrictive covenant. In his second employment contract dated 7 June 1984 the restrictive covenant was modified at Dr. Gant‘s request to read:
In the event of the termination of my employment with the Foundation, I will not practice medicine within a 30 air mile radius of any medical facility owned and operated by the Foundation, in which I have worked, for a period of three (3) years subsequent to termination of my employment with said Foundation, except with the written permission of said Foundation. (Underlining indicates addition requested by Dr. Gant.)
After Dr. Gant resigned his employment with the Foundation for personal medical reasons, he opened a private family practice on 1 September 1987 at Seth.
On 18 September 1987 Dr. Gant sought a declaratory judgment to void the restrictive covenant in his employment contract. The Foundation counterclaimed seeking an injunction to enforce the covenant. The circuit court conducted a full hearing on the matter and determined the restrictive covenant was not unreasonable and granted the Foundation an injunction prohibiting Dr. Gant from practicing medicine within a thirty air mile radius of the Foundation‘s clinic in Whitesville.
I
In Reddy v. Community Health Foundation of Man, 171 W.Va. 368, 298 S.E.2d 906 (1982), we discussed a contract with a similar restrictive covenant between a physician and another nonprofit corporation also chartered for the purpose of providing good medical services in a rural area.1 The restrictive covenant in Reddy, Id. 171 W.Va. at 371, 298 S.E.2d at 909, prohibited Dr. Reddy from “practicing medicine within a radius of thirty (30) air miles of Man, West Virginia, for period of three (3) years....” In Reddy we determined that restrictive covenants are subject to a rule of reasonableness. Id. 171 W.Va. at 373, 298 S.E.2d at 911. After we acknowledged that the rule of reasonableness is foggy, we examined social and economic considerations that would transform the rule “into a rule of best result.” Id. 171 W.Va. at 374, 298 S.E.2d at 911-12. To determine if a restrictive covenant is reasonable, we used a three part inquiry: “A restraint is reasonable only if it (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.” Id. 171 W.Va. at 374, 298 S.E.2d at 911.
The Foundation, similar to the employer in Reddy, is a nonprofit organization that services its communities by assuring that quality health care is available in the local area. The Foundation brings doctors into its areas by providing various administrative and financial incentives and relies on these doctors to continue to help the Foundation serve the local area. The restrictive covenant is designed to protect the good-
Otherwise doctors would come to town, work for the clinic until they built a substantial practice, and then operate a private office, taking business away from the clinic. The Foundation argues that if doctors are permitted to “rob” the clinic of its patients, the Foundation will lose needed revenue and, since it relies on clinic charges to stay solvent, the clinic will no longer be able to assure quality health care for the people of [its service area].
Reddy, supra, 171 W.Va. at 381, 298 S.E.2d at 918. In Reddy we noted that “the heart of all enforceable covenant not to compete is the principle of avoiding unjust enrichment.” Id. 171 W.Va. at 381, 298 S.E.2d at 919. “The covenant is thus a response to the unjust enrichment of doctors that would be the result of the Foundation‘s labors if the clinic were left unprotected.” Id.3
In the present case the restrictive covenant is reasonable on its face; it was included in the contract for a valid business purpose and was not designed to intimidate Dr. Gant.4
II
Once a restrictive covenant has been shown to be reasonable on its face, the burden remains on the employer to show his interests require protection. See Syllabus Point 5, Reddy, supra. In Syllabus Point 3, Reddy, supra, we stated:
An inherently reasonable restrictive covenant is presumptively enforceable in its entirety upon a showing by the employer that he has interests requiring protection from the employee.
Dr. Gant opened his solo practice in Seth, located thirteen miles north of Whitesville along West Virginia Route 3. The Foundation presented evidence showing the primary service area where ninety percent of the active patients for the Whitesville clinic live included, not only Seth, but as far north and west as Racine and Peyton. The Foundation also noted that the forty-five percent of active patients of the Whitesville clinic live in the area along West Virginia Route 3 between Whitesville and Seth.5 Although Dr. Gant maintains that his practice is not in competition with the Foundation, in the two and one-half weeks between the start of Dr. Gant‘s practice in Seth and the hearing, twenty one former patients requested their medical records be transferred to Dr. Gant‘s office.
In Torbett v. Wheeling Dollar Sav. & Trust Co., 173 W.Va. 210, 314 S.E.2d 166, 169 (1983) we held that the existence of an employer‘s interest requiring protection from the employee is a question of fact for a jury or trial court sitting as a fact finder. In the present case, the trial court sitting as a fact finder determined that the Foundation had met its burden of proving an interest requiring protection from the employee. In Syllabus Point 5, Saunders v. Roselawn Memorial Garden, Inc., 152 W.Va. 91, 159 S.E.2d 784 (1986), we stated:
A finding of fact made by a trial chancellor or by a trial court sitting in lieu of a jury will be given the same weight as the verdict of a jury and will not be disturbed by this Court on appeal unless the evidence plainly and decidedly preponderates against such finding.
See Torbett, supra, 173 W.Va. at 214, 314 S.E.2d at 170.
III
Because the Foundation met its burden of proving the reasonableness of the restrictive covenant and a need for protection, the burden of proof shifted to Dr. Gant to show the covenant should not be enforced in its entirety. Syllabus Point 5, Reddy, supra. In Syllabus Point 4, Reddy, supra, we stated:
An employee may rebut the presumptive enforceability of a restrictive covenant by showing: (1) that he has no “trade assets” of the employer to convert; (2) that such “trade assets” as he has belong to him and not to the employer; (3) that the employer could be equally well protected by a narrowed covenant; or (4) that the employer has had time to recoup any extraordinary investment in the employee.
Dr. Gant maintains that the Foundation not only recovered its initial costs incurred for him at the start of his practice of medicine, but in the five years he worked for the Foundation, the Foundation earned fees that more than compensated it. In support of this argument Dr. Gant noted that during the first seven months of 1987 he was paid only $56,847.95 but generated $150,953.97 in fees collected by the Foundation. However, the Foundation seeks to enforce its covenant, not to recover any initial costs it incurred in hiring Dr. Gant, but rather to protect the goodwill of the patients it served for over 30 years.6 Without a covenant to protect the Foundation, Dr. Gant would be able to use the goodwill of sufficient patients to allow him to open his own practice—goodwill he gained while working in a risk free environment. The Foundation bore costs of Dr. Gant‘s acquisition of patient goodwill while they paid him a salary over the course of his five year employment in excess of $500,000.7 Thus, Dr. Gant failed to demonstrate that a narrowed covenant would equally well protect the Foundation‘s interest in the goodwill of its patients.
For the above stated reasons the judgment of the Circuit Court of Boone County is affirmed.
Affirmed.
MILLER, Justice, dissenting:
My disagreement with the majority is its rigid adherence to a formulation which was designed to provide some flexibility in this area of the law. See Reddy v. Community Health Foundation of Man, 171 W.Va. 368, 298 S.E.2d 906 (1982).
One needs only to read Part III of the majority‘s opinion to realize how it has twisted the facts. It does not mention the critical fact that motivated Dr. Gant‘s leaving Hygeia Facilities Foundation, Inc., which was his doctor‘s advice to do so because his stressful working conditions caused hypertension, colitis, and weight loss. The majority grudgingly admits that Dr. Gant was bringing in far more in fees than he was being paid by Hygeia. In the last seven months, it was almost a 3-to-1 ratio, i.e. $56,848 to $150,953. Moreover, Hygeia never showed any material financial loss from Dr. Gant‘s departure. It did not have any extraordinary investment in Dr. Gant, as he came to its clinic without Hygeia having helped him on his medical
Consequently, the majority is forced in Part III to invent a new hurdle, i.e., that the goodwill of the patients of Hygeia was what the covenant was designed to protect. One may search Reddy in vain to find this factor as a part of its formula.
Finally, in a case like this, there is something more involved than a mere incantation of economic and accounting terminology. There is a vital public issue at stake which is accessible health care to the citizens of our State. There is no question but that this State lacks physicians who are willing to practice in rural areas. Consequently, under these conditions, it is absurd to suggest, as does the majority, that somehow Hygeia will lose any significant amount of business by Dr. Gant‘s going into practice. Indeed, Dr. Gant‘s testimony is that he is involved in a limited office practice. If patients need diagnostic tests, he refers them to Hygeia.
Courts which have had occasion to discuss the question of restrictive covenants for physicians recognize that in order to uphold such a covenant, it must be demonstrated that the public will not suffer by being denied the medical services precluded by the covenant. Typical is Ellis v. McDaniel, 95 Nev. 455, 459, 596 P.2d 222, 225 (1979), where the court concluded:
“If Dr. Ellis is not permitted to practice his specialty there, patients in need of orthopedic services will be forced to travel great distances at considerable risk and expense in order to avail themselves of such services. Thus, in the instant case, the public interest in retaining the services of the specialist is greater than the interest in protecting the integrity of the contract provision to its outer limits.”
See also Odess v. Taylor, 282 Ala. 389, 211 So.2d 805 (1968); Damsey v. Mankowitz, 339 So.2d 282 (Fla.App.1976), cert. denied, 345 So.2d 421 (Fla.1977); Dick v. Geist, 107 Idaho 931, 693 P.2d 1133 (1985); Iredell Digestive Disease Clinic v. Petrozza, 92 N.C.App. 21, 373 S.E.2d 449 (1988), aff‘d, 324 N.C. 327, 377 S.E.2d 750 (1989); Williams v. Hobbs, 9 Ohio App.3d 331, 460 N.E.2d 287 (1983); New Castle Orthopedic Assoc. v. Burns, 481 Pa. 460, 392 A.2d 1383 (1978).
Here, Hygeia did not demonstrate that the public would not suffer by being denied Dr. Gant‘s medical services.
I am authorized to state that Justice McHUGH joins me in this dissent.
Notes
“An employee may rebut the presumptive enforceability of a restrictive covenant by showing: (1) that he has no ‘trade assets’ of the employer to convert; (2) that such ‘trade assets’ as he has belong to him and not to the employer; (3) that the employer could be equally well protected by a narrowed covenant; or (4) that the employer has had time to recoup any extraordinary investment in the employee.”