Case Title: Johnston v. Wilkins

Citation: 175 Vt. 567, 2003 VT 56, 830 A.2d 695

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 2003-06-13T00:00:00Z

Document:
Johnston v. Wilkins (2002-356); 175 Vt. 567; 830 A.2d 695

2003 VT 56

[Filed 13-Jun-2003]

                                 ENTRY ORDER

                                 2003 VT 56

                      SUPREME COURT DOCKET NO. 2002-356

                              MARCH TERM, 2003

  Craig Johnston	               }	APPEALED FROM:
                                       }
                                       }
       v.	                       }	Lamoille Superior Court
                                       }	
  Sheryl Wilkins, Thomas Dandurand     }
  and Catamount Veterinary Services    }	DOCKET NO. 66-3-01 Lecv

                                                Trial Judge: Howard E. Van 
                                                             Benthuysen

             In the above-entitled cause, the Clerk will enter:

       ¶  1.  This appeal concerns a dispute between sibling veterinarians. 
  Both plaintiff Craig Johnston and defendant Sheryl Wilkins appeal from the
  superior court's order reforming the parties' non-competition agreement,
  which was part of a stipulated settlement and court order in a prior
  lawsuit between the parties.  Because we conclude that the doctrine of res
  judicata precludes either party from collaterally attacking the
  non-competition agreement, at least without a demonstration that the
  criteria of V.R.C.P. 60(b) have been met, we reverse the superior court's
  reformation order without addressing the reasonableness of the agreement. 
  Further, because we conclude that Wilkins violated the agreement, and that
  Johnston was entitled to injunctive relief, we remand the matter for the
  superior court to award Johnston reasonable attorney's fees.

       ¶  2.  The parties' father was a veterinarian who began his practice
  in Jeffersonville, Vermont in 1956.  Johnston graduated from veterinary
  school in 1982 and took over his father's practice two years later. 
  Shortly thereafter, Wilkins joined the practice.  She and her brother
  formed a partnership and ran the practice together during the next fifteen
  years.  In 1998, the parties' relationship began to deteriorate, and
  dissolution discussions commenced.  Wilkins stopped working at the clinic
  in 1999 after she was diagnosed with cancer and began treatments for the
  disease.  Discussions regarding dissolution of the partnership stalled, and
  Wilkins filed suit against Johnston.
   
       ¶  3.  On August 10, 2000, during the trial in that action, the
  parties reached a settlement agreement.  The agreement provided that
  Johnston would buy out Wilkins' half-interest in the veterinary practice,
  including its good will, for $25,000 and would deed her his half-interest
  in their joint real estate, valued at $41,500.  In return, Wilkins agreed
  "not to conduct a small animal veterinarian practice within a 20 mile
  radius of the village of Jeffersonville VT for 5 years" from the date of
  the agreement.  The stipulated settlement, which was incorporated into the
  court's order resolving the litigation between the parties, required the
  parties to exchange documents within thirty days to effectuate the
  agreement.  On September 11, 2000, at the closing on the real estate, the
  parties signed a covenant not to compete in which Wilkins agreed not to
  "compete against Johnston, in the practice of small animal veterinary
  medicine, until after August 10, 2005, directly or indirectly (without the
  written consent of Johnston) within a twenty (20) mile radius from the
  Village of Jeffersonville, Vermont."

       ¶  4.  In February 2001, Wilkins began working for Thomas Dandurand,
  a veterinarian who operated a practice in Sheldon Junction, Vermont under
  the trade name of Catamount Veterinary Services (hereinafter Catamount). 
  The following month, Johnston's attorney wrote Wilkins' attorney a letter
  stating that Wilkins was violating the covenant not to compete by working
  at Catamount.  When Johnston did not receive an immediate response from
  Wilkins, he filed suit, seeking to enforce the non-competition agreement. 
  Wilkins answered the complaint by denying that Catamount was within the
  protected area established by the parties' agreement.  In September 2001,
  following an evidentiary  hearing, the superior court denied Johnston's
  request for a preliminary injunction, ruling that (1) there was a
  significant factual dispute as to whether Catamount was outside the
  protected area; (2) the covenant not to compete was so broad that it might
  not be enforceable; and (3) there appeared to be an adequate remedy at law
  for damages.  In January 2002, following another evidentiary hearing, the
  superior court found that Catamount's office was 18.8 miles from
  Jeffersonville on a direct line, and that, therefore, Wilkins would be in
  violation of the covenant if it were enforceable.  The court denied
  Johnston's motion for an attachment of Wilkins' property, however, stating
  that it was unclear whether the parties' agreement was enforceable and thus
  whether Johnston would be the prevailing party at the final hearing on the
  merits.  Wilkins, who had stopped working for Catamount in August 2001,
  began working there again in February 2002. 

       ¶  5.  The final hearing took place in May 2002.  Johnston produced
  expert witnesses who testified that both the twenty-mile radius and the
  five-year time limit set forth in the parties' agreement were reasonable. 
  Following the hearing, the court first rejected Wilkins' argument that the
  twenty-mile distance should be measured by highway miles rather than a
  straight line.  The court determined that the term "radius" chosen by the
  parties unambiguously referred to a straight line drawn, in any direction,
  from the Jeffersonville center point.  Nevertheless, relying on the
  evidence presented by Johnston's experts, the court ruled that the
  twenty-mile radius was not commercially reasonable and thus was
  unenforceable.  In the court's view, Johnston's own exhibits demonstrated
  that his core area of trade, wherein he derived eighty percent of his
  business, was a smaller area that did not include Catamount.  Accordingly,
  the court reformed the parties' agreement by establishing the protected
  area as the irregular line denoting Johnston's core area of trade.
        
       ¶  6.  Although Wilkins was working at a veterinary clinic outside
  Johnston's core trade area, the court determined that the parties'
  agreement prevented Wilkins not only from practicing in that area but also
  from actively seeking customers who resided within that area.  The court
  concluded that any violation of the agreement by Wilkins thus far had been
  de minimis, and that Johnston had "utterly and completely" failed to
  establish any actual damage to his practice.  Nonetheless, the court
  granted Johnston's request for a permanent injunction to prevent potential
  harm to his practice by prohibiting Wilkins from seeing customers who
  resided within Johnston's core area of trade and were not already
  established Catamount customers.  Finally, the court denied Johnston's
  request for attorney's fees, ruling that any violation of the agreement
  thus far had been de minimis, and that Johnston was in a far better
  position than Wilkins to pay for his attorney's fees.

       ¶  7.  On appeal to this Court, Johnston argues that (1) certain
  findings made by the superior court are clearly erroneous; (2) the court
  erred in reforming the parties' agreement because the doctrine of res
  judicata precluded the court from reviewing the agreement for
  reasonableness, and, in any event, the terms of the agreement were
  reasonable; (3) the court erred by failing to award him attorney's fees;
  (4) the court should have extended the duration of the non-competition
  agreement for an additional two years; and (5) the court erred by not
  awarding him at least nominal damages and attorney's fees for Catamount's
  intentional interference with the parties' agreement.  In her cross-appeal,
  Wilkins argues that the superior court erred by ruling that the parties'
  non-competition agreement prohibited her from soliciting customers who
  reside within Johnston's core trade area, even if she was practicing
  outside that area.

       ¶  8.  We conclude that the doctrine of res judicata precluded the
  superior court from reforming the parties' non-competition agreement, and
  thus we need not review the court's determination that the agreement is
  commercially unreasonable.  The parties' previous lawsuit ended in a
  stipulated settlement that was incorporated in the court's final judgment
  disposing of the matter.  Therefore, the stipulated settlement has the
  preclusive effect of a final judgment.  See Lamb v. Geovjian, 165 Vt. 375,
  381-82,