Court Opinion

ID: 3069447
Source: CourtListenerOpinion
Date Created: 2015-10-16 00:10:20.032061+00
Date Added: 2024-06-11T12:05:07.274913
License: Public Domain

Opinion issued August 27, 2015

                                  In The

                           Court of Appeals
                                 For The

                       First District of Texas
                        ————————————
                           NO. 01-14-00458-CV
                         ———————————
  JAGDISH TUMMALA, M.D., EVEREST INPATIENT PHYSICIANS,
PLLC, SHAH & DICHOSO, PLLC, PRAGNESH R. SHAH, M.D., P.A., AND
      DARYL D. DICHOSO, M.D., P.A., Appellants/Cross-Appellees
                                    V.
     TOTAL INPATIENT SERVICES, P.A., Appellee/Cross-Appellant

                 On Appeal from the 270th District Court
                          Harris County, Texas
                    Trial Court Case No. 2012-72321

                       MEMORANDUM OPINION

     Appellants/cross-appellees, Jagdish Tummala, M.D., Everest Inpatient

Physicians, PLLC (“Everest”), Shah & Dichoso, PLLC, Pragnesh R. Shah, M.D.,

P.A., and Daryl Dichoso, M.D., P.A (“Shah”) (collectively, “appellants”),
challenge the trial court’s judgment, entered after a trial to the court, in favor of

appellee/cross-appellant, Total Inpatient Services, P.A. (“TIPS”), in TIPS’s suit

against appellants for breach of contract and tortious interference with a contract.

In four issues, appellants contend that the trial court erred in concluding that Dr.

Tummala breached a covenant not to compete in his employment agreement with

TIPS, concluding that Everest and Shah tortiously interfered with TIPS’s contract

with Tummala, and awarding TIPS damages.               TIPS, in its sole cross-point,

contends that the trial court erred in denying it attorney’s fees.

      We affirm in part and reverse and render in part.

                                     Background

      In its third amended petition, TIPS alleged that it is a hospitalist 1 group that

enters into employment agreements with physicians and service contracts with

hospitals in the Houston area to provide teams of physicians for inpatient care. In

the summer of 2011, TIPS and Dr. Tummala entered into an employment

agreement (the “agreement”), which contains a “non-competition covenant” that

prohibited him, for a one-year period after the termination of his employment with

TIPS (the “restriction period”), from providing hospitalist or inpatient services at

any of the hospitals listed in TIPS’s service area.

1
      TIPS explained that a “hospitalist” is a “physician[] who specialize[s] in providing
      in-hospital patient care.”

                                           2
      On September 26, 2012, Dr. Tummala terminated his employment with

TIPS. He then started working for Everest and Shah, 2 providing inpatient care at

two of the hospitals in TIPS’s service area. TIPS asserted that, in so doing,

Tummala had breached the non-competition covenant. TIPS further asserted that

Everest and Shah had tortiously interfered with its employment contract with

Tummala by inducing him to “breach his [a]greement with TIPS notwithstanding

their knowledge of that [a]greement[,] including the [non-competition covenant].”

      TIPS sought a declaration that the non-competition covenant was

“enforceable and effective,” along with an “equitable exten[sion]” of the non-

competition covenant “for the period in which [Dr. Tummala] was in breach,” and

damages. Appellants answered, generally denying TIPS’s allegations and asserting

various affirmative defenses.

      At trial, Dr. Tummala testified that after he and TIPS had executed an initial

employment agreement, he requested an advance of his signing bonus and

relocation assistance. TIPS agreed to provide the advance on the condition that

Tummala execute a modified employment agreement, the agreement at issue,

which contains a “restrictive covenant that precluded [him] from working in

hospitals that TIPS serves” for a one-year period after termination of his

2
      Everest and Shah are “closely related entities” that “jointly function as direct
      competitors to TIPS [in] performing the same services in some of the same
      hospitals.”

                                          3
employment. Tummala agreed to the non-competition covenant and signed the

agreement. He explained that although the agreement shows an effective date of

September 1, 2011, he did not actually begin working for TIPS until September 27,

2011.    On May 17, 2012, he sent TIPS notice that he was terminating the

agreement and his last date of employment would be September 26, 2012. And he

continued working for TIPS until then.

        On September 28, 2012, TIPS sent to Dr. Tummala a letter, noting that if he

“wished to engage in competition within [its] . . . service area,” he could “do so”

only by paying TIPS a $100,000 “buy out” as set out in their agreement. Tummala

explained that although he began working for Everest in November 2012 at

Memorial Hermann Southwest Hospital and Memorial Hermann Sugar Land

Hospital (collectively, “Memorial Hermann”), both of which are included in

TIPS’s service area, TIPS was not actually serving these hospitals during the

restriction period.

        Dr. Mark Murray, executive vice-president of TIPS, testified that TIPS was

credentialed at Memorial Hermann through 2010, and it was “re-credentialed” in

2013. TIPS was not credentialed at the two hospitals during 2011 and 2012, and

its physicians could not have cared for patients at the hospitals at the time that Dr.

Tummala terminated their agreement. However, Murray explained that Tummala,

while working for TIPS, had attended meetings at which TIPS had discussed its

                                          4
plans to become re-credentialed at the two hospitals. He also noted that Tummala,

during his employment with TIPS, had been given confidential information,

namely, TIPS’s “Procedures” manual and lists of its physicians. In August 2012,

about a month before Tummala’s departure, TIPS received a request from

Memorial Hermann, seeking credentialing information about Tummala. Although

TIPS provided the requested information, it cautioned Tummala about violating the

non-competition covenant. And TIPS contacted Everest, providing it with a copy

of the agreement. Everest responded that the agreement was not enforceable.

      Dr. Pragnesh Shah, an owner of Everest, testified that he has practiced at

Memorial Hermann Sugar Land Hospital since 2008 and Memorial Hermann

Southwest Hospital since 2011. During the time from 2011 to 2012, he treated

approximately 100 patients per month at each facility. Shah recalled speaking with

Dr. Tummala in June 2012 about coming to work for Everest; however, Everest

did not employ physicians at that time. Although Tummala told Shah about the

non-competition covenant, he “made it very clear that the only hospitals he was not

allowed to work at, based on his conversation with Dr. Murray, were the service

area hospitals,” which included “Methodist Sugar Land Hospital, St. Luke’s Sugar

Land Hospital, Kindred Sugar Land Hospital, and Oak Bend.” Shah explained that

he did not see the agreement until September 2012, when TIPS sent a copy of it to

Everest.

                                        5
      The trial court rendered judgment for TIPS on its claims against appellants,

awarding it $100,000 against appellants, jointly and severally. However, it denied

TIPS’s request for attorney’s fees. The trial court also issued findings of fact and

conclusions of law.

                            Non-competition Covenant

      In their first issue, appellants argue that the trial court, “as a matter of law,”

erred in concluding that Dr. Tummala “breached the non-compete provision”

because “it did not apply” to Tummala after the termination of his employment

with TIPS. Appellants assert that, “[w]ithout an effective non-compete provision,

there can be no judgment” that Tummala breached the agreement.

      In construing a written contract, a court “must ascertain and give effect to

the true intentions of the parties as expressed in the writing itself.” Italian Cowboy

Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 333 (Tex. 2011). We

examine and consider the entire writing in an effort to harmonize and give effect to

all the provisions of the contract so that none will be rendered meaningless. Id.

We begin our analysis with the contract’s express language. Id. And we analyze

the provisions of a contract “with reference to the whole agreement.” Frost Nat’l

Bank v. L&F Dists., Ltd., 165 S.W.3d 310, 312 (Tex. 2005); see also Seagull

Energy E&P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006) (“No

single provision taken alone will be given controlling effect; rather, all the

                                          6
provisions must be considered with reference to the whole instrument.”). Contract

terms will be given their plain, ordinary, and generally accepted meanings unless

the contract itself shows them to be used in a technical or different sense. Valence

Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005).              “We construe

contracts ‘from a utilitarian standpoint bearing in mind the particular business

activity sought to be served’ and ‘will avoid when possible and proper a

construction which is unreasonable, inequitable, and oppressive.’” Frost Nat’l

Bank, 165 S.W.3d at 312 (quoting Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527,

530 (Tex. 1987)).

      If, after applying the pertinent contract construction rules, the contract can

be given a certain or definite legal meaning or interpretation, then it is not

ambiguous, and we will construe the contract as a matter of law. Id. If a contract

“is subject to two or more reasonable interpretations after applying the pertinent

rules of construction, the contract is ambiguous, creating a fact issue on the parties’

intent.”   J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003).

However, a contract is not ambiguous merely because the parties disagree on its

meaning. Seagull Energy E & P, Inc., 207 S.W.3d at 345. Only if a contract is

ambiguous may we consider the parties’ interpretation and consider extraneous

evidence to determine the true meaning of the contract. Italian Cowboy Partners,

Ltd., 341 S.W .3d at 333–34.

                                          7
        Here, the agreement provides, in pertinent part, as follows:

        6.2 Non-Compete. In consideration for the access to the Confidential
        Information provided by [TIPS] and in order to enforce the
        Physician’s Agreement regarding such Confidential Information,
        Physician agrees that he/she shall not, during the term of this
        Agreement and for a period of one (1) year from the date this
        Agreement expires pursuant to Section 8.3 or is terminated by
        Physician pursuant to Section 8.6 (the “Restriction Period”), without
        the prior written consent of [TIPS], except in the performance of
        duties for [TIPS] pursuant to this Agreement, directly or indirectly
        within any Hospital in the Service Area or any other hospital in which
        the Physician practiced on behalf of [TIPS], in excess of 40 hours,
        within his last year of employment with [TIPS]:
               6.2.1 Provide services as a hospitalist physician to any
               entity that offers inpatient hospital and emergency
               department services;
        ....
        Further, Physician may buy out this non-compete covenant for a cash
        price of $100,000, which Physician agrees is a reasonable price.

(Emphasis added.) Article eight, which governs termination, provides in pertinent

part:

        8.1 Term. This Agreement shall commence on September 1, 2011
        (the “Effective Date”), or the first actual working day, and shall
        continue for an initial period of 12 months, subject to the provisions
        set forth below.
        8.2 Introductory Period.         The first twelve (12) months of
        employment of Physician at [TIPS] constitutes the new hire
        introductory period (the “Introductory Period”). . . . During the
        Introductory Period, and notwithstanding anything to the contrary
        contained herein, either party may terminate this Agreement at any
        time, effective upon one hundred twenty (120) days written notice of
        such termination, as determined by each party in the sole exercise of
        its discretion. If this Agreement is terminated by Physician during the
        Introductory Period pursuant to this Section 8.12 [sic], Physician shall

                                           8
      promptly repay to [TIPS] any relocation reimbursement paid by
      [TIPS] to Physician. During the Introductory Period, the termination
      provisions of this Section 8.1 [sic] shall supersede the provisions of
      Section 8.6.
      8.3 End of Term. Following expiration of the term set forth in
      Section 8.1, this Agreement will renew automatically from year to
      year, for successive terms of one year each, unless or until terminated
      or otherwise agreed upon in writing by Physician and [TIPS].
      ....
      8.6 Termination Without Cause. Each party shall have the right to
      terminate this Agreement without cause upon providing one hundred
      twenty (120) days written notice to the other prior to the date of
      termination. If Physician terminates this Agreement pursuant to this
      Section 8.6, [TIPS], in its sole discretion, may waive any or all of the
      one hundred twenty (120) day notice period and require the
      termination to be effective immediately, in which case [TIPS’s] sole
      obligation to Physician shall be to continue to pay Physician’s Base
      Compensation for any portion of the one hundred twenty (120) day
      period waived by [TIPS] or until Physician commences providing
      professional services elsewhere, whichever occurs earlier.

(Emphasis added.)

      Exhibit B to the agreement provides that TIPS was to pay to Dr. Tummala a

“$7,500 moving allowance during the first week of July, 2011” and a “sign-on

bonus” the “first week of August.” It notes that if Tummala was to leave “prior to

the term” of the agreement, he would owe to TIPS a “pro-rated portion” of the

moving allowance, bonus, and recruitment fees. Exhibit C provides that “[f]or

purposes of Section 6.2,” TIPS’s “Service Area shall be defined by reference to the

following hospitals: [List of hospitals, including Memorial Hermann Sugar Land

and Memorial Hermann Southwest Hospital].”

                                         9
      In section 6.2 of the agreement, which contains the non-competition

covenant, the parties agreed that Dr. Tummala would not, for a period of one year

“from the date th[e] [a]greement expire[d] pursuant to Section 8.3” or he

terminated his employment “pursuant to Section 8.6,” provide hospitalist services

within the TIPS service area. Section 8.3 provides for automatic renewal of the

agreement “following” the expiration of the initial twelve-month introductory

period, unless terminated.   And section 8.6 provides that either party could

terminate the agreement upon 120 days’ written notice. However, section 8.2,

which governed the first twelve months of Tummala’s employment at TIPS,

provides that the termination provisions therein “supersede the provisions of

Section 8.6.”

      Section 8.2 further provides that the first twelve months of Dr. Tummala’s

employment at TIPS constituted the “introductory period,” during which,

“notwithstanding anything to the contrary” in the agreement, either party could

terminate the agreement at any time, “effective upon one hundred twenty days

written notice of such termination.” Nothing in the non-competition covenant

provides that it would apply upon Tummala’s termination of the agreement within

the section 8.2 introductory period.   See Dorsett, 164 S.W.3d at 662 (noting

contract terms given their plain, ordinary, and generally accepted meanings). That

the parties did not intend for the non-competition covenant to apply during the

                                       10
introductory period is further supported by the fact that the purpose of the

introductory period, as provided in section 8.2, was for TIPS to evaluate the

physician’s “performance and potential for continued employment” and to

“afford[]” the physician the “opportunity to evaluate whether his/her employment”

by TIPS met “his/her expectations.” This provisional aspect of the agreement

contemplates that the parties might terminate their relationship early on. See Frost

Nat’l Bank, 165 S.W.3d at 312 (“We construe contracts ‘from a utilitarian

standpoint bearing in mind the particular business activity sought to be served’ and

‘will avoid when possible and proper a construction which is unreasonable,

inequitable, and oppressive.’” (citation omitted)).

        More important, TIPS concedes that if Dr. Tummala “had left within the

first year,” then the “post-employment non-compete obligation would not have

been triggered.” Section 8.1 of the agreement provides for commencement of the

agreement upon either the effective date or the physician’s “first actual working

day.”    It is undisputed that Tummala’s “first actual working day” under the

agreement was September 27, 2011. Thus, the section 8.2 introductory period

expired twelve months later, on September 27, 2012. And it is undisputed that

Tummala, after giving notice, ceased working for TIPS on September 26, 2012.

Because Tummala did terminate his employment with TIPS within the first year,

the post-employment non-competition covenant was not triggered.

                                         11
      TIPS asserts that although Dr. Tummala “could have taken advantage of

[s]ection 8.2 if he had departed from TIPS” 120 days after his May 17, 2012

notice, or “between September 14, 2012 and September 25, 2012,” “he in fact

completed a full year at TIPS” because he departed on September 26, 2012. It

argues, thus, that section 8.3 applies. Again, however, September 26, 2012 fell

within the section 8.2 introductory period.        Section 8.3, which applies

“[f]ollowing” the expiration of the introductory period, does not apply. Further,

section 8.3 provides that the agreement will “renew automatically . . . unless or

until terminated.” Because Tummala terminated the agreement, it did not renew.

      Finally, TIPS, in support of its argument that the non-competition covenant

applies, notes that Dr. Tummala testified that he “understood that he could not

compete with TIPS by providing hospitalist services at any hospital served by

TIPS in the Service Area for one year” after terminating his employment.

However, only if a contract is ambiguous may we consider the parties’

interpretation and extraneous evidence to determine the true meaning of the

contract. Italian Cowboy Partners, Ltd., 341 S.W .3d at 333–34. Here, the

agreement is simply not ambiguous.

      We conclude that because Dr. Tummala timely terminated his employment

with TIPS during the introductory period of the agreement, he was not bound by

                                       12
the non-competition covenant. Accordingly, we hold that the trial court erred in

concluding that Tummala breached the agreement.

      We sustain appellants’ first issue. 3

                               Tortious Interference

      In their third issue, appellants argue that the trial court erred in concluding

that Everest and Shah had tortiously interfered with TIPS’s employment contract

with Dr. Tummala because he “did what he had a right to do: terminate his

employment agreement after supplying the requisite notice.” Appellants

specifically challenge the trial court’s conclusion of law number 6, in which it

concluded that Everest and Shah had “tortiously interfered with TIPS’s contract

with Tummala.”

      We review a trial court’s conclusions of law de novo. BMC Software

Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). “A party to a

contract has a cause of action for tortious interference against any third person who

wrongly induces another contracting party to breach the contract.”             Swank v.

Sverdlin, 121 S.W.3d 785, 799 (Tex. App.—Houston [1st Dist.] 2003, pet. denied);

see Holloway v. Skinner, 898 S.W.2d 793, 794–95 (Tex. 1995). The elements of a

3
      Having sustained appellants’ first issue, we need not address their second issue, in
      which they argue that to the extent that the non-competition covenant “applies” to
      Dr. Tummala, it is “unenforceable as a matter of law” because it was not
      supported by “new consideration” and constituted an unreasonable restraint.

                                           13
cause of action for tortious interference with a contract are: “(1) an existing

contract subject to interference, (2) a willful and intentional act of interference with

the contract, (3) that proximately caused the plaintiff's injury, and (4) caused actual

damage or loss.” Prudential Ins. Co. of Am. v. Fin. Review Serv., Inc., 29 S.W.3d
74, 77 (Tex. 2000); see Holloway, 898 S.W.2d at 795–96; Funes v. Villatoro, 352
S.W.3d 200, 213 (Tex. App.—Houston [14th Dist.] 2011, pet. denied). To prevail

on a tortious-interference claim, the plaintiff must present evidence that the

defendants interfered with a specific contract. Funes, 352 S.W.3d at 213. To

establish the element of an act of willful and intentional interference, a plaintiff

must produce some evidence that a defendant was more than a willing participant

and knowingly induced one of the contracting parties to breach its obligations

under the contract. Id. To do so, a plaintiff must present evidence that an

obligatory provision of the contract was breached. Id.

      TIPS asserts that trial court did not err in concluding that Everest and Shah

had tortiously interfered with its employment agreement with Dr. Tummala

because the evidence establishes that “[a]fter Tummala gave notice to TIPS in May

of 2012, he began discussions with [Everest and Shah],” and he “made them aware

of his non-compete.” (Emphasis added.) Although Everest and Shah “were warned

not to compete at these two hospitals,” they “assisted Tummala with obtaining

credentials at the two hospitals” at issue, “chose to claim the non-compete was

                                          14
invalid,” and “continued to send Tummala to the hospitals in violation of the non-

compete.” (Emphasis added.) TIPS asserts that Everest and Shah had “no legal

right to induce [a] breach of the non-compete.”4 (Emphasis added.)

      Having concluded above in the first issue that Dr. Tummala was not bound

by the non-competition covenant in his agreement with TIPS, we further conclude

that TIPS’s claim for tortious interference, which is predicated on Tummala being

bound by the non-competition covenant, cannot legally stand. Accordingly, we

hold that the trial court erred in concluding that Everest and Shah “tortiously

interfered with TIPS’s contract with Tummala.”

      We sustain appellants’ third issue.

                                      Damages

      In their fourth issue, appellants argue that the trial court erred in awarding

TIPS $100,000 in actual damages based on the non-competition covenant “buyout

price” because, again, Dr. Tummala was not bound by the non-competition

covenant.

4
      TIPS explains that it “does not contend” that Dr. Tummala “breached by
      terminating” the agreement and “does not contend Tummala breached the
      [a]greement by going to work with Everest.” And it “does not believe that
      [Everest and Shah’s] now professed desire to work with Tummala was an act of
      tortious interference.” Rather, TIPS’s tortious-interference claim is based on the
      fact that Everest and Shah “chose to claim that the non-compete was invalid and
      continued to send Tummala to the hospitals in violation of the non-compete.”

                                          15
      A trial court may award an employer damages for a breach by an employee

of a covenant not to compete. See TEX. BUS. & COM. CODE ANN. § 15.51(a)

(Vernon 2011). Having concluded above, however, that Dr. Tummala was not

bound by the non-competition covenant, we further hold that the trial court erred in

awarding TIPS damages.

      We sustain appellants’ fourth issue.

                                  Attorney’s Fees

      In their sole cross-point, TIPS argues that the trial court erred in not

awarding it attorney’s fees because it was the prevailing party on its breach-of-

contract claim. See TEX. CIV. PRAC. & REM. CODE ANN. § 38.001 (Vernon 2015).

      “A person may recover reasonable attorney’s fees . . . in addition to the

amount of a valid claim and costs, if the claim is for . . . an oral or written

contract.” Id. To recover fees under the statute, a litigant must (1) prevail on a

breach-of-contract claim and (2) recover damages. MBM Fin. Corp. v. Woodlands

Operating Co., L.P., 292 S.W.3d 660, 666 (Tex. 2009).

      Having held above that the trial court erred in concluding that Dr. Tummala

breached his employment agreement with TIPS, TIPS has not prevailed on its

breach-of-contract claim. Thus, it is not entitled to recover its attorney’s fees. See

TEX. CIV. PRAC. & REM. CODE ANN. § 38.001. Accordingly, we hold that the trial

court did not err in not awarding TIPS its attorney’s fees.

                                         16
      We overrule TIPS’s cross-point.

                                   Conclusion

      We reverse the portion of the trial court’s judgment as to liability and

damages, and render judgment that TIPS take nothing on its claims against

appellants. We affirm the portion of the trial court’s judgment denying TIPS

attorney’s fees.

                                             Terry Jennings
                                             Justice

Panel consists of Justices Jennings, Higley, and Huddle.

Huddle, J., concurring.

                                        17