Opinion ID: 2601652
Heading Depth: 3
Heading Rank: 1

Heading: The Proper Interpretation of Section 13(a)

Text: We must first interpret Section 13(a) before examining whether it was breached by Ingrim's employment at ANMC. As we have previously held, [c]ovenants are construed to effectuate the parties' intent. Clear and unambiguous language should be accorded its plain meaning. [5] Where language is ambiguous, extrinsic evidence of surrounding circumstances and usage may be admitted to aid in determining the intent of the parties and resolve the ambiguity. [6] A restrictive covenant ancillary to the sale of a business, like the one in this case, is construed liberally not to favor either party. [7] Section 13(a) of the Purchase and Sale Agreement provides that Ingrim shall not carry on or engage in the practice of dentistry, either directly or indirectly, as an owner, operator, or employee for five years within certain geographic boundaries. Wenzell argues that the words of Section 13(a) are simple, straightforward, and mean what they say  they prohibit any practice of dentistry regardless of whether the practice is in competition with Turnagain Dental Clinic. Ingrim argues that the parties instead intended Section 13(a) to be a restriction against competition  not a restriction against all dentistry. In support of this interpretation, Ingrim notes the various references to Section 13(a) in the Purchase and Sale Agreement as a Covenant Not to Compete. For example, the heading of Section 13(a) is Seller's Covenant Not to Compete and/or Solicit; the liquidated damages provision states that [t]he covenant not to compete and/or solicit is of material significance to Buyer; the Restrictive Covenant Not to Compete is listed as an asset being sold, with a value of $10,000; and Exhibit F lists a covenant not to compete as among the assets being sold. The superior court found that the primary intent of the parties was to address Dr. Wenzell's stated concern of not wanting to have another dental practice in competition with him down the street or within the mileage that was specified in the agreement. In addition to the references to Section 13(a) as a covenant not to compete, the superior court believed the $250,000 liquidated damages provision to be indicative of a intent for there to be compensation in the event of actual competition between the buyer and the seller ... as opposed to dentistry that would not be in direct competition with Dr. Wenzell's practice. We agree, and conclude as a matter of law that the parties intended to prohibit Ingrim from practicing dentistry in competition with Turnagain Dental Clinic. As made clear by the numerous references in the agreement, Section 13(a) is a covenant not to compete. [8] The purpose of a covenant not to compete, as suggested by its name, is to prevent the covenantor from competing with the covenantee and, in the case of the sale of a business, to protect the goodwill associated with the purchased company. [9] Wenzell himself describes the purpose of Section 13(a) as protecting the continued success of his dental practice, not barring Ingrim from practicing his trade in any capacity. Moreover, the magnitude of the liquidated damages provision, almost half of the total cost of the business, suggests an intent that the restrictive covenant only prevent the practice of dentistry that competes with Turnagain Dental Clinic. Therefore, Section 13(a) is properly interpreted as prohibiting only the practice of dentistry in competition with Turnagain Dental Clinic.
Ingrim argues that the practice of dentistry should be interpreted as private, competitive, fee-for-service practice, which would exclude his employment at ANMC. The superior court agreed, holding as a matter of law that practice of dentistry, as used in Section 13(a), does not include employment at ANMC and thus Ingrim's employment at ANMC does not violate Section 13(a). This holding was in error. We have stated the general rule of law that a contract may be interpreted by the general and accepted usage of the trade or business involved. [10] Thus, the term practice of dentistry should be given its common industry definition. The American Dental Association defines dentistry as the evaluation, diagnosis, prevention and/or treatment (nonsurgical, surgical or related procedures) of diseases, disorders and/or conditions of the oral cavity, maxillofacial area and/or the adjacent and associated structures and their impact on the human body. We conclude that this is the proper definition of practice of dentistry as used in Section 13(a). [11] The superior court relied on AS 08.36.350 in finding, as does Ingrim in arguing, that the practice of dentistry excludes employment at ANMC. Alaska Statute 08.36.350(a) provides that the statutory chapter on dentistry applies to a person who practices ... dentistry in the state except ... a dentist in the employ ... of the Alaska Native Service. As an initial matter, this statutory provision was not explicitly or implicitly incorporated into the parties' Purchase and Sale Agreement. There is no evidence in the record that Ingrim and Wenzell's understanding of the meaning of practice of dentistry was influenced by this statute, or even that they were familiar with the statute at the time of contracting. In any event, we interpret AS 08.36.350(a) differently than Ingrim and the superior court. The statutory provision does not suggest that a dentist at ANMC is not engaging in the practice of dentistry; instead, it exempts an Alaska Native Service dentist from all provisions of the chapter on dentistry, including licensing requirements, disciplinary actions, and statutory definitions. It is precisely because a dentist in the employ of the ... Alaska Native Service is practicing dentistry that it is necessary to exempt him or her from the otherwise applicable statutory provisions. [12] Relying on the expert testimony of Dr. Pollock, Ingrim also argues that the private practice of dentistry excludes employment at ANMC because such employment instead constitutes `community' dental services. Even assuming this to be true, it is not relevant here  Section 13(a) prohibits the practice of dentistry, not the private practice of dentistry. Dr. Pollock did not clearly testify that the practice of dentistry excludes community dentistry. [13]