Court Opinion

ID: 4213314
Source: CourtListenerOpinion
Date Created: 2017-10-20 14:07:53.311609+00
Date Added: 2024-06-11T07:47:42.558332
License: Public Domain

FIRST DIVISION
                                  BARNES, P. J.,
                               SELF and MERCIER, JJ.

                    NOTICE: Motions for reconsideration m us t be
                    physically re ceived in our clerk’s office within ten days
                    of the date of decision to be deemed timely filed.
                                    http://www.gaappeals.us/rules

                                                                       October 13, 2017

In the Court of Appeals of Georgia
 A17A1317. BURSON et al. v. MILTON HALL SURGICAL
      ASSOCIATES, LLC.

      MERCIER, Judge.

      Milton Hall Surgical Associates, LLC (“MHSA”) sued James Burson (a

physician), N. Hadley Heindel (a physician), and Esther Askew (a physician’s

assistant) (collectively, the “Former Employees”) for alleged misappropriation of trade

secrets (Count I); breach of the duty of loyalty and good faith as to Burson and

Heindel, and “under a theory of unfaithful agent” as to Askew, for “steal[ing] and

misappropriat[ing] . . . trade secrets [and] confidential and proprietary business

information,” and violating restrictive covenants in their employment contracts (Count

II); for alleged breach of their employment contracts (Count III); and for attorney fees

and litigation expenses (Count IV). The Former Employees moved the trial court to
dismiss the suit pursuant to OCGA § 9-11-12 (b) (6), asserting, among other things,1

that the restrictive covenants in the Former Employees’ contracts were unenforceable

and they could not be held liable for failing to comply with void covenants, and thus

neither Count II nor Count III was viable. The trial court summarily denied the Former

Employees’ motion to dismiss and certified its ruling for immediate review. This Court

granted the Former Employees’ application for interlocutory appeal.

      The Former Employees appeal the trial court’s denial of their motion to dismiss,

contending that the court erred (1) by failing to grant the motion to dismiss Count III

as to Burson and Heindel (the “Physicians”) because the restrictive covenants in their

contracts, which seek to expand the geographical restrictions to include offices to

which the Physicians are transferred, are unreasonable and unenforceable; (2) by failing

to grant the motion to dismiss Count III as to the Physicians because the restrictive

covenants in their contracts prevent them from accepting overtures from former

patients and are an unreasonable restraint of trade; (3) by failing to grant the motion to

dismiss Count III as to Askew, because the restrictive covenant in her contract, which

      1
         The Former Employees also contended in the trial court that Count I was
rendered moot, but in this appeal they “only seek review of claims based on purported
violations of their restrictive covenants, Counts II and III.”

                                            2
is applicable to any territory to which she might be assigned, is too indefinite to be

enforced; and (4) by failing to grant the motion to dismiss Count II, breach of

fiduciary duty, as to all three Former Employees because they cannot be held

responsible for failing to honor an unenforceable contract. For the reasons that follow,

we affirm in part and reverse in part.

      We review a grant or denial of a motion to dismiss to determine whether
      the allegations of the complaint, when construed in the light most
      favorable to the plaintiff, and with all doubts resolved in the plaintiff’s
      favor, disclose with certainty that the plaintiff would not be entitled to
      relief under any state of provable facts. A trial court’s ruling on a motion
      to dismiss is subject to de novo review on appeal.

Penny v. McBride, 282 Ga. App. 590 (639 SE2d 561) (2006) (citation and punctuation

omitted).

      With regard to employment contracts, Georgia law now generally permits the

“enforcement of contracts that restrict competition during the term of a restrictive

covenant, so long as such restrictions are reasonable in time, geographic area, and

scope of prohibited activities,” subject to certain limitations with regard to the types

of employees against whom such restrictions may be enforced. OCGA § 13-8-53 (a);

see OCGA § 13-8-52 (a) (1).

                                           3
      Any restrictive covenant not in compliance with the provisions of
      [OCGA Title 13, Chapter 8, Article 4] is void and unenforceable;
      provided, however, that a court may modify a covenant that is otherwise
      void and unenforceable so long as the modification does not render the
      covenant more restrictive with regard to the employee than as originally
      drafted by the parties.

OCGA § 13-8-53 (d). The current statutory provisions governing enforcement of

restrictive covenants in employment contracts, OCGA § 13-8-50 et seq., became

effective May 11, 2011, and apply to “contracts entered into on and after [May 11,

2011] and shall not apply in actions determining the enforceability of restrictive

covenants entered into before such date.” Ga. L. 2011, p. 399, §§ 4-6; see Becham

v. Synthes USA, 482 Fed Appx 387, 388-389 (I) (A) (11th Cir. 2012).

      Prior to May 11, 2011, however, “Georgia law disfavored restrictive

covenants[,] . . . [and] Georgia’s constitution also forbade the . . . General Assembly

from authorizing restrictive covenants.” Becham, supra at 388 (I) (A) (citations

omitted); see (2009) Ga. Const. of 1983, Art. III, Sec. VI, Par. V (c).

      However, a restrictive covenant contained in an employment contract
      [entered into prior to May 11, 2011] is considered to be in partial restraint
      of trade and will be upheld if the restraint imposed is not unreasonable,
      is founded on a valuable consideration, and is reasonably necessary to

                                           4
       protect the interest of the party in whose favor it is imposed, and does
       not unduly prejudice the interests of the public. . . .Whether the restraint
       imposed by the employment contract is reasonable is a question of law
       for determination by the court, which considers the nature and extent of
       the trade or business, the situation of the parties, and all other
       circumstances.

Coleman v. Retina Consultants, P.C., 286 Ga. 317, 319-320 (1) (687 SE2d 457)

(2009) (citations and punctuation omitted). Under the prior law, courts could not

modify void and unenforceable covenants. “Even if only a portion of a non-compete

clause in an employment contract would be unenforceable, the entire covenant must

fail because this Court will not apply the blue-pencil theory of severability to such

restrictive covenants.” Id. at 320 (1) (citation omitted).

       1. Count III and the Physicians’ Contract

       (a) It is undisputed that Burson’s contract with MHSA was entered into on May

1, 2010 and that Heindel’s contract with MHSA was entered into on November 19,

2010, and thus the restrictive covenants contained in both contracts are subject to the

pre-2011 law, and unenforceable provisions therein cannot be reformed. See Coleman,

supra. The Physicians contend that the trial court erred in denying the motion to

                                             5
dismiss Count III (breach of contract) as to the Physicians when the geographical

restrictions in their agreements are unreasonable and unenforceable. We disagree.

      Section 10 of Burson’s contract contains restrictive covenants related to his

employment, and provides that “for a period of two (2) years after termination of his

employment . . . [he] will not directly or indirectly engage in the practice of the

specialty of Otolaryngology or head and neck surgery within a geographic area that is

within a radius of ten (1) miles of the Shakerag Building (the “Territory”).” Section 10

of Heindel’s contract provides that he “will not directly or indirectly engage in the

practice of the specialty of Otolaryngology or head and neck surgery within a

geographic area that is within a radius of ten (10) miles of the office at which [he] is

assigned when he commences his duties (the “Territory”).” Both Physicians’

agreements contain the following language at the end of the restrictive covenants

section:

      The parties agree to review the geographical area included within the
      Territory from time to time, at either party’s request, in order that the
      Territory may be reformed so that its coverage upon Physician’s
      termination will extend only to the geographical area in which the
      Physician is working at such time. Any reformation to be evidenced only
      by written amendment to this Agreement.

                                           6
      It is this latter paragraph, relating to the amendment of the “Territory,” that the

Physicians contend renders these restrictive covenants unreasonable. The Physicians

cite Orkin Exterminating Co. v. Walker, 251 Ga. 536 (307 SE2d 914) (1983), arguing

that “[i]n Orkin the restrictive covenant contained a provision - like that found in the

Burson and Heindel contracts - which follows the employee to a new territory . . ., but

only if the employee signs a new agreement which identifies the new territory[,] . . . and

[t]he Orkin Court found such a provision unreasonable.” See id. at 538 (2) (a).

      In Orkin Exterminating Co., supra, the employment agreement provided that

the employee was prohibited from engaging in certain activities for two years, and the

applicable territory was defined as follows:

      the cities of Augusta, McBean [and many other cities surrounding
      Augusta and the areas within a 15 mile radius of these cities] . . . or within
      any jurisdiction or territory in which the employee worked for the
      company at any time during the six (6) calendar months preceding
      termination of employment, and identified in an employment agreement
      with the Company.

Orkin Exterminating Co., supra. at 536 (punctuation omitted). The Supreme Court

of Georgia found that the restrictive covenant at issue in that case was not too

indefinite to be enforceable because

                                               7
      its restrictions do not follow the employee unless he or she signs a new
      employment agreement which identifies the new territory. Thus, the
      covenant is not vague or indefinite in the sense described in [Orkin
      Exterminating Co. v. Pelfrey, 237 Ga. 284, 285 (1) (227 SE2d 251)
      (1976)] because it sufficiently delineates the territories to which the
      restrictions do apply, and because it contains no present obligation or
      promise as to unknown, future territories.

Orkin Exterminating Co., 251 Ga. at 537 (1). However, the Supreme Court found that

the covenant was unreasonable and overbroad because, among other things, after

employees were transferred to a new territory,

      Orkin might have neglected to require them to sign new contracts, or
      might have had them execute new contracts which did not rescind the
      prior contracts. The [employees] then could have spent several years in
      their new territory before quitting Orkin. At that point, despite their long
      absence from the August area, the employment agreements . . . would
      still have . . . prohibited them from engaging in [prohibited work] in the
      Augusta area for a period of 2 years.

Orkin Exterminating Co., 251 Ga. at 538 (2) (a).

      As in Orkin Exterminating Co. v. Walker, supra, the covenant at issue in the

instant case does not follow the Physicians unless they agree in writing to the new

definition of the restricted territory. Thus, it is not unreasonably vague or indefinite.

                                            8
See Orkin Exterminating Co., 251 Ga. at 537 (1); compare Orkin Exterminating Co.

v. Pelfrey, supra. Furthermore, contrary to the Physicians’ argument, the covenant

here does not leave open the possibility of the restricted territory’s inclusion of areas

where the Physicians have ceased working for a significant period of time. Rather, it

allows for reformation of the restricted territory, only by written amendment to the

agreement, so that “[the territory’s] coverage upon Physician’s termination will extend

only to the geographical area in which the Physician is working at such time.”

(Emphasis supplied.).

       Furthermore, we disagree with the Physicians’ contention that the provision in

question amounts to an unenforceable “agreement to agree.” “If a contract fails to

establish an essential term, and leaves the settling of that term to be agreed upon later

by the parties to the contract, the contract is deemed an unenforceable ‘agreement to

agree.’” Kreimer v. Kreimer, 274 Ga. 359, 363 (2) (552 SE2d 826) (2001) (footnote

omitted). Such is not the case here, where the applicable territory covered by the

covenant is clearly defined, and the contract clearly defines the process by which it

may be reformed.

                                           9
      (b) The Physicians also contend that the restrictive covenants in their

agreements are unreasonable in that they prohibit the Physicians from accepting

overtures from former patients. We agree.

       “[An employer] may properly protect itself from the risk that former employees

might appropriate its customers by taking unfair advantage of client contacts

developed while working for [that employer], but the company cannot prevent them

from merely accepting overtures from those customers.” Orkin Exterminating Co.,

251 Ga. at 539 (2) (b); Vulcan Steel Structures, Inc. v. McCarty, 329 Ga. App. 220,

222 (1) (764 SE2d 458) (2014) (citation omitted). “The law is clear: solicitation

requires some type of affirmative action; therefore, a non-solicitation provision may

not contain a bar on the acceptance of business from unsolicited clients.” Vulcan Steel

Structures, Inc., supra. (citation and punctuation omitted).

      The Physicians’ contracts provide that, during each Physician’s employment

at MHSA and for a period of two years after termination of his employment,

      Physician will not, on his own behalf or on behalf of any corporation,
      association, entity, or business, solicit, contact, call upon, communicate
      with, or attempt to communicate with any patient of [MHSA] (or its
      affiliates), with a view to providing any medical services in the field of
      Otolaryngology or head and neck surgery, provided that the restrictions

                                           10
      set forth in this clause . . . shall apply only to patients with whom
      Physician had material contact during such two (2) year period.

The Physicians cannot provide medical services to patients if they are not permitted

to “communicate with” them “with a view to” providing those medical services. The

non-solicitation covenant in the Physicians’ contracts would prevent the Physicians

from having any communication with patients of MHSA, even if those patients sought

out Physicians. “Because this covenant prohibits not only solicitation of [MHSA’s]

former [patients], but also the acceptance of business from unsolicited former

[patients], regardless of who initiated the contact, it is unreasonable.” Vulcan Steel

Structures, Inc., supra (citation and punctuation omitted) (finding unenforceable a non-

solicitation covenant that provided that for two years following termination of

employment, the employee would not “on [his] own behalf or on behalf of any person

or entity solicit, contact, call upon, communicate with or attempt to communicate with

any customer of [his] employer or any representative of any customer or prospect of

[his] employer, with the intent of providing any product competitive [with those]

marketed or manufactured by [his] employer during the period of two . . . years

immediately preceding termination of [his] employment.”); see Orkin Exterminating

Company, 251 Ga. at 539 (2) (b).

                                          11
      MHSA contends that “an identical non-solicitation provision” was approved by

the Supreme Court of Georgia in W. R. Grace & Co., Dearborn Div. v. Mouyal 262

Ga. 464, 467 (422 SE2d 529) (1992). However, “the issue in W.R. Grace was not

whether the covenant was void for prohibiting unsolicited contact, but whether it was

void because of the ‘absence of an explicit geographical limitation.’” Vulcan Steel

Structures, Inc., supra at 223 (1) (citation omitted). Therefore this contention does not

change our analysis that the non-solicitation provision in the Physicians’ agreements

is unenforceable.

      “Former Georgia law is clear that if one covenant in an agreement subject to

strict scrutiny is unenforceable, then they are all unenforceable.” Vulcan Steel

Structures, Inc., supra at 224 (2) (citation omitted); see Coleman, supra. The

restrictive covenants in the Physicians’s contracts are unenforceable, and the trial court

erred in denying the motion to dismiss Count III as to the Physicians, but only insofar

as that Count alleges a breach of the restrictive covenants in Section 10 of their

contracts. Count III of the complaint also alleges that the Physicians breached “all of

the prohibitions found at [Section] 3” of their contracts. That section is entitled

“DUTIES OF EMPLOYEE.” Nothing in this appeal or in the underlying motion to

dismiss pertains to the allegation that the Physicians breached Section 3 of their

                                           12
agreements. The Physicians’ contracts contain severability clauses and therefore the

provisions other than the restrictive covenants are not automatically rendered void. See

Holland Ins. Group, LLC v. Senior Life Ins. Co., 329 Ga. App. 834, 837 (1) (766

SE2d 187) (2014) (“Void restrictive covenants, which cannot be blue-penciled out of

the contract, do not void the entire contract when the contract contains a severability

clause.”). Count III is therefore not subject to dismissal insofar as it pertains to

contractual obligations of the Physicians other than those found in the restrictive

covenants in Section 10.

       We note MHSA’s argument that the issue of the non-solicitation provision

presents nothing for our review because the argument is raised for the first time on

appeal. The hearing transcript contradicts this assertion. The Physicians did not raise

this issue in their written motion to dismiss, but did raise it at the hearing on the motion

to dismiss. During argument, counsel for the Physicians argued, “There is yet another

reason that [Orkin Exterminating Co. v. Walker] holds that the particular restrictive

covenants applicable to the [Physicians] is not enforceable, and that deals with the

type of restriction that’s applicable.” Counsel then quoted from the cited case,

including the statement that “the company cannot prevent [former employees] from

merely accepting overtures from those customers.” Counsel then went on to say,

                                            13
“Your Honor. . . we’ve attached the contracts in question to our brief, and . . . I want

to read the offending portion of this particular contract.” Counsel then quoted the non-

solicitation restriction from the Physicians’ contracts, arguing that the “provision

[which says that the Physicians] . . . cannot communicate or attempt to communicate

with a former patient . . . is an unreasonable restraint of trade.”

       After counsel for MHSA had presented argument against the motion to dismiss,

the court asked Physicians’s counsel: “Let me ask you about what they mentioned

about the overtures from customers that you can’t communicate with them even if they

communicate with you.” MHSA was thus given an opportunity to respond to the

argument, to object to consideration of the motion on this ground because the

argument was not raised in the Former Employees’ brief in support of its motion, or

to request additional time to brief the issue. No such objection or request was made.

We therefore reverse the trial court’s denial of the motion to dismiss Count III as to

the Physicians, insofar as it alleges a breach of the restrictive covenants in Section 10

of the Physicians’ contracts, and affirm the denial of the motion as to Count III insofar

as it alleges a breach of other provisions in the Physician’s contracts.

       2. Count III and Askew’s Contract

                                            14
      Askew contends that the trial court erred in denying the motion to dismiss

Count III as to her, because the restrictive covenant in her employment contract is too

indefinite to be enforceable. Askew’s contract includes the following restrictive

covenant:

      The employee shall be restricted from practicing for any other medical
      practice in any of the specialties of Otolaryngology [sic] Head & Neck
      Surgery for two (2) years upon termination [sic] employer within a fifteen
      (15) mile radius from current office locations. This list will be amended
      without notice as addition [sic] practice locations occur.

(Emphasis supplied). The geographical restriction in the covenant is vague and

indefinite, and therefore it is not reasonable and consequently is not enforceable. See

Orkin Exterminating Co. v. Pelfrey, supra. Under pre-2011 law, this is fatal to

MHSA’s claim against Askew for breach of contract based on the restrictive

covenant, because the trial court could not modify the covenant. See Coleman, supra.

Thus, MHSA “would not be entitled to relief under any state of provable facts,” and

dismissal of this count as to Askew would be appropriate, unless the contract was

entered into on or after May 11, 2011. See Penny, supra.

      There is a dispute in this case regarding the date upon which Askew’s contract

was entered into, because it was not fully executed. Askew’s contract has two

                                          15
signature lines; one for MHSA, with the name “Jeffrey M. Gallups, MD, FACS” typed

below the signature line, and a second line with Askew’s name typed below the

signature line. Each signature line has a corresponding line adjacent to it, with “Date”

typed beside the line. Askew signed the agreement, and dated her signature April 27,

2011. The agreement indicates that “the parties executed this agreement as of the 27th

day of April 2011.” The agreement was not executed (signed or dated) on behalf of

MHSA. The agreement states in Section 1 that MHSA “agrees to employ [Askew] as

a licensed nurse practitioner/physician assistant on a part time basis beginning July 11,

2011. The agreement will automatically renew each year, unless otherwise stated with

a minimum of ninety (90) days notice.” Askew contends that her contract was entered

into on April 27, 2011, the date that she executed it. MHSA contends that because no

one executed the agreement on its behalf, there was no binding agreement until MHSA

otherwise assented to the terms of the contract, being July 11, 2011, the date her

employment began per the terms of the contract.

      “The consent of the parties being essential to a contract, until each has assented

to all the terms, there is no binding contract; until assented to, each party may

withdraw his bid or proposition.” OCGA § 13-3-2. “A contract that is intended to be

signed by both parties, and so appears on its face, is complete when thus signed.

                                           16
Once both parties have assented to its terms, a contract is binding.” MAPEI Corp. v.

Prosser, 328 Ga. App. 81, 84 (2) (a) (761 SE2d 500) (2014) (citations and punctuation

omitted). “Assent to the terms of a contract may be given other than by signatures. .

. .If one of the parties has not signed, his acceptance is inferred from a performance

under the contract, in part or in full, and he becomes bound.” Del Lago Ventures, Inc.

v. QuikTrip Corp., 330 Ga. App. 138, 144 (2) (764 SE2d 595) (2014) (citations and

punctuation omitted).

      The parties therefore did not enter into the contract at issue here until MHSA

assented to the terms of the agreement. We agree with Askew that MHSA is bound by

the factual allegation in its complaint that “Askew was employed by [MHSA] as a

licensed physician assistant beginning on April 27, 2011.” See OCGA § 24-8-821;

Georgia-Pacific, LLC v. Fields, 293 Ga. 499, 501 (1) (748 SE2d 407) (2013)

(applying former OCGA § 24-3-30, now OCGA § 24-8-821). MHSA asserts that

evidence could be introduced to contradict this allegation.

      [A]dmissions in judicio in a party’s pleadings bind the party so that they
      cannot put up evidence over objection to contradict such admissions.
      However, if the party amends its pleadings to withdraw the admissions,
      it may then introduce evidence contravening the admissions. If such
      contradictory evidence is admitted, even over the objection of the other

                                           17
      party, then under OCGA § 9-11-5 (b), such evidence may be deemed to
      amend the pleadings to withdraw the admissions.

SAKS Associates, LLC v. Southeast Culvert, Inc., 282 Ga. App. 359, 364 (2) (638

SE2d 799) (2006). Here, however, the pleadings have not been amended to withdraw

the admission and MHSA is bound by the admission that Askew began her

employment in April 2011, at which time the contract would be binding. Thus, the pre-

2011 law, disallowing blue-pencil modification of the restrictive covenant, renders

Askew’s restrictive covenant unenforceable. Even when construed in the light most

favorable to MHSA, and with all doubts resolved in its favor, the allegations of the

complaint disclose with certainty that it would not be entitled to relief under any state

of provable facts as to the claims against Akew for breach of contract. See Penny,

supra. We therefore reverse the trial court’s denial of the motion to dismiss Count III

as to Askew.

      3. Count II

      The Former Employees contend that the trial court erred in denying their motion

to dismiss Count II, because they cannot be liable for breach of an unenforceable

contract. We agree that Count II is not viable to the extent that the allegations are

based on the breach of the restrictive covenants in the Former Employees’ contracts,

                                           18
namely, the allegations that “Defendants . . . solicited each other and Defendant Askew

in violation of their restrictive covenants and in planning to operate a medical clinic in

the filed of Otolaryngology in an area that breaches their contracts with [MHSA].”

      Count II also alleges a breach of duty arising from the employment relationship

as to all three Former Employees. The Former Employees argue that “an employee,

even a corporate officer, does not breach fiduciary duties by making plans and

arrangements to start a competing company while still employed.” While this is true,

“[an employee] is not entitled to solicit customers for a rival business before the end

of his employment nor can he properly do other similar acts in direct competition with

the employer’s business.” White v. Shamrock Bldg. Sys., 294 Ga. App. 340, 346 (4)

(669 SE2d 168) (2008) (citation and punctuation omitted). The Former Employees

have not demonstrated that the allegations of Count II, when construed in the light

most favorable to MHSA, and with all doubts resolved in the MHSA’s favor, disclose

with certainty that it would not be entitled to relief under any state of provable facts.

See Penny, supra. We therefore reverse the trial court’s denial of the Former

Employees’ motion to dismiss Count II, but only insofar as that Count is based on the

breach of the Former Employees’ restrictive covenants. The trial court’s denial of the

                                           19
motion to dismiss Count II as to the Former Employees in all respects other than the

claims based on the alleged breach of the restrictive covenants is affirmed.

      Judgment affirmed in part and reversed in part. Barnes, P. J., and Self, J.,

concur.

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