Opinion
Index No. 909695-23
12-20-2023
Maninder GUJRAL, Plaintiff, v. ANESTHESIA GROUP OF ALBANY, P.C., Defendant.
Plaintiff Maninder Gujral, a former shareholder and physician-employee of defendant Anesthesia Group of Albany, P.C. ("AGA"), alleges that AGA tortiously interfered with his employment and business relationships "through a series of false and misleading statements directed at Dr. Gujral's current employer about Dr. Gujral's obligations under a restrictive covenant" (NYSCEF Doc No. 1 ["Complaint"], ¶ 1).
By Order to Show Cause dated October 17, 2023, Dr. Gujral moves for a preliminary injunction restraining AGA "from enforcing or otherwise treating as having any force or effect any Restrictive Covenant contained in any prior Employment Agreement between [the parties]" (NYSCEF Doc No. 15 ["OTSC"]). AGA opposes the motion.
BACKGROUND
A. The Parties
AGA is a large medical practice that provides anesthesiology services to healthcare facilities throughout the Capital Region (see Complaint, ¶ 5; NYSCEF Doc No. 33 ["Chaudhry Aff."], ¶¶ 2-3). "AGA currently services Capital Region Ambulatory Surgery Center, Everett Road Ambulatory Surgery Center, Executive Woods Ambulatory Surgery Center, Saratoga Schenectady Endoscopy Center, St. Peter's Hospital, and St. Peter's Surgery and Endoscopy Center" (Chaudhry Aff., ¶ 4; accord NYSCEF Doc No. 32 ["Desai Aff."], ¶ 4).
Before joining AGA, plaintiff was a member of Albany Memorial Anesthesiologist (see Complaint, ¶ 8). Following merger discussions between the practices, plaintiff joined AGA as a shareholder in January 2008 (see id. , ¶¶ 9-11).
Plaintiff retired as a shareholder as of December 31, 2021, but continued with AGA as a non-shareholder employee (see id. , ¶¶ 20-24). On December 31, 2022, Dr. Gujral resigned that full-time position to begin per diem employment with AGA (see id. , ¶ 25). He continued as a per diem employee of AGA until March 22, 2023, when AGA terminated him for cause (see id. , ¶¶ 26, 31; NYSCEF Doc No. 29).
B. Restrictive Covenant
In each of his roles with AGA — shareholder-employee, non-shareholder employee and per diem employee — Dr. Gujral was subject to a two-year restrictive covenant ("Restrictive Covenant"). As is pertinent here, the 2022 employment agreement between Dr. Gujral and AGA included the following language:
Upon termination, withdrawal or retirement from employment for any reason, except for termination ... without cause, Dr. Gujral agrees that for a period of two (2) years following such termination, and without prior consent of AGA, not to engage, directly or indirectly, as principal, agent or employee, in the practice of medicine specializing in anesthesia at any Hospital or [Ambulatory Surgery Center] or any facility owned, operated or affiliated with any such entity, or for whom AGA is providing or provided services within twenty-four (24) months of any such termination, or with whom AGA is actively negotiating at the time of termination (NYSCEF Doc Nos. 5, 25 ["2022 Employment Agreement"], art V, § 2; see also NYSCEF Doc No. 23 [shareholder agreement], § 16 [a]; NYSCEF Doc No. 24 [prior employment agreements], art V, § 1).
This language from the 2022 Employment Agreement was incorporated by reference into Dr. Gujral's January 2023 per diem agreement with AGA:
[Dr. Gujral] acknowledges that AGA has expended considerable time and revenue in training ... and integration of [Dr. Gujral] in AGA protocols. [Dr. Gujral] agrees that the covenant contained in Article V of [the 2022] Employment Agreement shall be in full force and effect and incorporated herein by reference ("Restrictive Covenant"). Such Restrictive Covenant shall apply with equal force during the period of this Agreement and the period of such Restrictive Covenant shall be deemed to continue for two (2) years from the date that this Agreement expires or is terminated.
Notwithstanding any other provision of this Agreement, this Rider shall survive expiration or termination of the Agreement (NYSCEF Doc No. 6 ["Per Diem Agreement"], Rider, §§ 2-3 [emphasis added]).
C. Post-Termination Events
On July 19, 2023, AGA learned that Dr. Gujral was working on a per diem basis for Samaritan Hospital ("Samaritan"), which is part of St. Peter's Health Partners (see Complaint, ¶ 55; Chaudhry Aff., ¶¶ 19-20). AGA's counsel immediately advised Samaritan that Dr. Gujral was violating his Restrictive Covenant and demanded that Samaritan cease and desist from interfering with AGA's contractual rights (see Chaudhry Aff., ¶ 20; NYSCEF Doc No. 30).
AGA wrote to Dr. Gujral's counsel on the same date, asserting that (i) the Restrictive Covenant remained in effect until March 22, 2025, two years from the March 22, 2023 termination for cause, and (ii) Samaritan, though not a current client, was "a facility at which AGA provided services within the 24 months prior to Dr. Gujral's termination" (NYSCEF Doc No. 7). AGA demanded that plaintiff "cease and desist any and all activities that are in breach of the [Restrictive Covenant], including any work at [Samaritan]" (id. ; see also NYSCEF Doc Nos. 8-9).
As a result, Dr. Gujral "was immediately removed from Samaritan schedules for the remainder of [2023]" (NYSCEF Doc No. 3 ["Gujral Aff."], ¶ 3; see also NYSCEF Doc No. 10).
D. This Action
Dr. Gujral commenced this action on October 10, 2023, alleging that "AGA tortiously interfere[d] with [his] employment and business relationships and damage[d] his professional reputation ... through a series of false and misleading statements directed at [his] current employer [Samaritan] about [his] obligations under [the Restrictive Covenant]" (Complaint, ¶ 1).
His complaint alleges causes of action for: (1) tortious interference with prospective business relations; (2) declaratory judgment, seeking a declaration that "the restrictive covenants in all of the employment agreements between [the parties] are unenforceable"; and (3) permanent injunction, enjoining AGA "from interfering with his business relationship and prospective advantage with Samaritan and other potential employers through attempted enforcement of the restrictive covenant" (id. , ¶¶ 60-87).
Dr. Gujral now moves for a preliminary injunction "enjoining [AGA] during the pendency of this [case] from enforcing or otherwise treating as having any force or effect any Restrictive Covenant contained in any prior Employment Agreement between [the parties]" (OTSC at 1). AGA opposes the motion.
ANALYSIS
To obtain preliminary injunctive relief, the movant must demonstrate "that irreparable harm will occur if the injunction is not granted, that such party has a likelihood of success on the merits, and that the balance of equities tip[s] in its favor" ( Marietta Corp. v Fairhurst , 301 AD2d 734, 736 [3d Dept 2003] ; see CPLR 6301 ). These elements must be established by "clear and convincing evidence" ( Hui v New Clients, Inc. , 126 AD3d 759, 760 [2d Dept 2015] [internal quotation marks and citation omitted]). In determining whether plaintiff has met this heavy burden, the Court is mindful that a preliminary injunction is a "drastic remedy which is not routinely granted" ( Marietta Corp. , 301 AD2d at 736 ).
A. Likelihood of Success
In New York, "[c]ovenants restricting a professional, and in particular a physician, from competing with a former employer or associate are common and generally acceptable" ( Gelder Med. Group v Webber , 41 NY2d 680, 683 [1977] ). Because they restrict an individual's right to work, however, post-employment covenants "are not favored and thus are strictly construed" ( Goodman v New York Oncology Hematology, P.C. , 101 AD3d 1524, 1526 [3d Dept 2012] ).
A restrictive covenant against post-employment competition will be enforced only "to the extent reasonable and necessary to protect valid business interests" ( Morris v Schroder Capital Mgt. Intl. , 7 NY3d 616, 620 [2006] ). To be subject to specific performance, the covenant must be "reasonable in time and area, necessary to protect the employer's legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee" ( BDO Seidman v Hirshberg , 93 NY2d 382, 389 [1999] [internal quotation marks and citation omitted]).
For the most part, the Restrictive Covenant appears reasonable in time and scope. As observed by AGA, there are many healthcare facilities in the Capital Region that are not current or former clients of AGA at which Dr. Gujral can practice anesthesia without violating the Restrictive Covenant (see NYSCEF Doc No. 21 ["Opp Mem"] at 11-12; see e.g. 2022 Employment Agreement, Ex. 1; Chaudhry Aff., ¶ 4).
Further, the covenant's two-year duration falls well within prevailing notions of reasonableness (see Gelder , 41 NY2d at 685 [five years and 30 miles] ; Albany Med. Coll. v Lobel , 296 AD2d 701, 701 [3d Dept 2002] [same]; Bollengier v Gulati , 233 AD2d 721, 722 [3d Dept 1996] ["as the subject covenant's reach is confined to Clinton County, the territory over which Gulati's practice extends, and its effectiveness is limited to two years, it appears to be reasonable"]; accord Fersel v Paramount Med. Servs., P.C. , 588 F Supp 3d 304, 327 [ED NY 2022] ; Suffolk Anesthesiology Assoc., P.C. v Verdone , 2009 NY Slip Op 33385[U], *3-4 [Sup Ct, Suffolk County 2009] [upholding a three-year, 20-mile covenant against anesthesiologist], affd 74 AD3d 953 [2d Dept 2010] ).
And there has there been no showing that enforcement of the Restrictive Covenant would be harmful to the general public. AGA's efforts to prevent Dr. Gujral from engaging in per diem employment with Samaritan (and other local facilities) will not affect the availability of anesthesiology services in the Capital Region to any appreciable degree (see BDO Seidman , 93 NY2d at 393-394 ).
In arguing that AGA lacks a legitimate interest in enforcing the Restrictive Covenant, Dr. Gujral emphasizes that the covenant not only prevents him from practicing anesthesia in the facilities that AGA currently services, but also in facilities that AGA serviced in the past 24 months. There is no dispute that "AGA serviced Samaritan from 2012 until July 1, 2022" (Chaudhry Aff., ¶ 5). Thus, by the time that AGA learned of Dr. Gujral's employment with Samaritan on July 19, 2023, the AGA/Samaritan relationship had been terminated for more than one year (see id. , ¶¶ 18-19).
Restrictive covenants are enforced to protect an employer from "unfair" competition ( BDO Seidman , 93 NY2d at 391 ). The Court of Appeals has recognized that employers have a legitimate interest in protecting against the misappropriation of trade secrets or confidential customer information, competition by former employees whose services are unique or extraordinary, and the exploitation or appropriation of an employer's goodwill and customers (see id. at 389-391 ). Conversely, courts "have found restrictive covenants to be unenforceable where the employees have not used the employers’ confidential business information, or where the employees’ services were not extraordinary or unique" ( Harris v Patients Med., P.C. , 169 AD3d 433, 434 [1st Dept 2019] [citations omitted]).
The anesthesia services at issue herein are not unique and are routinely performed at medical facilities by physicians, and AGA has not shown how preventing Dr. Gujral from providing these services to its former clients is necessary to protect AGA's trade secrets or confidential information or prevent the unfair exploitation of AGA's goodwill (see generally Chaudhry Aff.; Desai Aff.; cf. Fersel , 588 F Supp 3d at 327 ). AGA's counsel argues that the practice is seeking to protect its "proprietary, efficient, and reliable business model" by making operating and procedure rooms "more profitable" (Opp Mem at 9), but AGA has not tendered admissible evidence in support of this argument.
Giving due regard to the particular facts and circumstances of the case, the Court finds that plaintiff has established a fair likelihood of success on his declaratory judgment claim by showing that AGA has not identified a legitimate interest in enforcing the Restrictive Covenant against plaintiff in connection with former clients (see BDO Seidman , 93 NY2d at 389-390 ; Goodman , 101 AD3d at 1526 ).
Samaritan is "affiliated" with St. Peter's, a current AGA client (2022 Employment Agreement, art V, § 2; see n 2, infra ). As such, AGA may have a legitimate interest in enforcing the Restrictive Covenant against Samaritan as an affiliate of a current client, distinct from the affiliate's status as a former client. In light of the disposition ordered herein, however, the Court need not delve into this issue.
That is not the end of the inquiry, however. The ultimate enforceability of the Restrictive Covenant is a separate matter from whether AGA tortiously interfered with Dr. Gujral's employment and business relationships.
The injunction application is predicated largely upon the cease-and-desist letter sent to Samaritan (see NYSCEF Doc No. 2 ["MOL"] at 4-5), which is the subject of plaintiff's claim for tortious interference with prospective business relations (see Complaint, ¶¶ 61-64). However, in his memorandum of law in support of the motion, plaintiff argues that he has proven a likelihood of success on an unpleaded claim for tortious interference with contract (see MOL at 11-12), a related, but distinct, theory of recovery.
"To recover damages for tortious interference with contract, the plaintiff must prove the existence of a valid contract with a third party, the defendant's knowledge of that contract, the defendant's intentional and improper procurement of a breach of that contract, and damages" ( Stuart's, LLC v Edelman , 196 AD3d 711, 712-713 [2d Dept 2021] [citations omitted]).
A claim for tortious interference with prospective advantage requires a party to show: "(1) that it had a business relationship with a third party; (2) that the defendant knew of that relationship and intentionally interfered with it; (3) that the defendant acted solely out of malice or used improper or illegal means that amounted to a crime or independent tort; and (4) that the defendant's interference caused injury to the relationship with the third party" ( id. at 713 [internal quotation marks and citation omitted]). "While a cause of action for interference with prospective contract or business relationship is closely akin to one for tortious interference with contract, the former requires proof of more culpable conduct on the part of defendant" ( 106 N. Broadway, LLC v Lawrence , 189 AD3d 733, 740 [2d Dept 2020] [citations omitted]).
Insofar as the claim is one for tortious interference with contract, Dr. Gujral has not tendered admissible evidence showing that he had a contract with Samaritan, that AGA was aware of the contract, and that Samaritan breached that contract by reason of AGA's letter. Thus, Dr. Gujral has not shown a likelihood of success on a tortious interference with contract claim.
Absent an employment contract, Dr. Gujral was an at-will employee of Samaritan. This is a form of "prospective contractual relation" that "may be tortiously interfered with through malicious or wrongful conduct" ( Smith v Meridian Tech., Inc. , 52 AD3d 685, 687 [2d Dept 2008] ). Nonetheless, Dr. Gujral has not sufficiently demonstrated that AGA's letter to Samaritan was wrongful or motivated solely by malice.
Nothing in AGA's letter was tantamount to "physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, [or improper] economic pressure" ( Carvel Corp. v Noonan , 3 NY3d 182, 191 [2004] ; see Steiner Sports Mktg., Inc. v Weinreb , 88 AD3d 482, 483 [1st Dept 2011] ). Dr. Gujral complains that AGA sent the letter "[d]espite [his] counsel repudiating [AGA's] assertion that the restrictive covenant is in effect" (Complaint, ¶ 63), but counsel's argument at the time was that "Samaritan Hospital was not listed as a facility owned or contracted to AGA on Exhibit 1" of the 2022 Employment Agreement (NYSCEF Doc No. 8), an argument that is contrary to the plain language of the Restrictive Covenant. Thus, plaintiff is unlikely to establish that the letter contains "false and misleading statements" (Complaint, ¶ 1; cf. Smith , 52 AD3d at 687 ; Rizvi v North Shore Hematology-Oncology Assoc., P.C. , 69 Misc 3d 1212[A], 2020 NY Slip Op 51281[U], *6 [Sup Ct, Suffolk County 2020]).
Plaintiff's counsel took the position that Samaritan fell outside the scope of the Restrictive Covenant because the 2022 Employment Agreement, which was incorporated into the Rider of the Per Diem Agreement, defined facilities that AGA serviced by reference to Exhibit 1, which does not list Samaritan (see id. ). However, Exhibit 1, which is referenced in the first recital of the 2022 Employment Agreement, was an identification of the facilities that AGA serviced at the time of that agreement's execution. As previously quoted, the language and scope of the Restrictive Covenant are not so limited. In any event, it is undisputed that Samaritan is "affiliated" with St. Peter's Hospital (see NYSCEF Doc No. 30), an entity that is listed on Exhibit 1. Counsel further asserted that the covenant was unenforceable because Dr. Gujral was "involuntarily separated" (NYSCEF Doc No. 8), but involuntary separation in this context refers to a termination "without cause" (Fersel , 288 F Supp 3d at 325; see Goodman , 101 AD3d at 1526-1527 ). Dr. Gujral was terminated "for cause" (NYSCEF Doc No. 29; see NYSCEF Doc No. 9; Chaudhry Aff., ¶ 18; Desai Aff., ¶ 18).
Nor has plaintiff demonstrated a likelihood of success in establishing that AGA acted solely out of malice. Even if the parties’ other business disputes played some role in AGA's decision to enforce the Restrictive Covenant (see MOL at 2 n 1; Complaint, ¶¶ 15-17, 27-30), AGA is likely to establish that it sent the cease-and-desist letter based, at least in part, on a good-faith belief that Dr. Gujral's employment with Samaritan violated AGA's contractual rights and out of a legitimate desire to vindicate its bargained-for rights. And so long as AGA's letter was "intended, at least in part, to advance its own interests, then it was not acting solely to harm the plaintiff" ( Anesthesia Assoc. of Mount Kisco, LLP v Northern Westchester Hosp. Ctr. , 59 AD3d 473, 477 [2d Dept 2009] [collecting authorities]).
In sum, while Dr. Gujral has demonstrated a fair likelihood of ultimately establishing that the Restrictive Covenant is not enforceable in relation to former AGA clients, he has not shown a similar likelihood of success on his tortious interference claim, whether denominated as one for tortious interference with contract or tortious interference with prospective advantage.
Under the circumstances, restraining AGA from communicating its good-faith belief in the enforceability of the Restrictive Covenant through lawful means during the pendency of this action to determine the enforceability of the covenant would inappropriately "determine the ultimate rights of the parties" through a preliminary injunction, rather than simply "maintain the status quo until there can be a full hearing on the merits" ( Residential Bd. of Mgrs. of Columbia Condominium v Alden , 178 AD2d 121, 122 [1st Dept 1991] [citation omitted])
B. Irreparable Harm
Even if Dr. Gujral had demonstrated the requisite likelihood of success, he has not shown that a preliminary injunction is necessary to prevent imminent and irreparable harm.
Irreparable harm means an injury for which a monetary award alone cannot be adequate compensation (see Town of Liberty Volunteer Ambulance Corp. v Catskill Regional Med. Ctr. , 30 AD3d 739, 740 [3d Dept 2006] ), and the prospect of such harm "must be imminent, not remote or speculative" ( Matter of P. & E. T. Found. , 204 AD3d 1460, 1461 [4th Dept 2022] [internal quotation marks and citation omitted]).
Dr. Gujral argues that, absent an injunction, he "will be unable to work for Samaritan and any other facility that [AGA] decides and his reputation in the Albany medical community will be forever tarnished as rumors spread that he has allegedly violated the terms of his employment contract with [AGA]" (MOL at 13; see Gujral Aff., ¶¶ 4-5).
Insofar as plaintiff complains about being denied per diem work with Samaritan, money damages are readily available and easily calculable (see Gujral Aff., ¶¶ 3-5; NYSCEF Doc No. 35, ¶¶ 18-19). And while plaintiff fears that he will be unable to obtain employment elsewhere, there is no evidence that he has been denied employment at any other facility "[b]ased upon [AGA's] assertions and ... actions" (Gujral Aff., ¶ 5). As such, Dr. Gujral's "belie[f]" that he is unable to work "anywhere" else is speculative (id. ).
And plaintiff does not articulate how a preliminary injunction could combat the effects of alleged "rumors" that have already "spread" (MOL at 13). Indeed, given that a preliminary injunction is merely an adjudication of the parties’ likelihood of success, its grant would not speak directly to whether Dr. Gujral breached the Restrictive Covenant.
CONCLUSION
To the extent not discussed, the parties’ remaining arguments have been considered and found to be either lacking in merit or unnecessary to entertain given the disposition reached herein.
ORDERED that plaintiff's motion for a preliminary injunction is denied; and it is further
ORDERED that a remote preliminary conference shall be scheduled; and finally it is
ORDERED that counsel shall confer in advance of such conference regarding: (1) the use of mediation or other forms of alternative dispute resolution to bring about an early resolution of this action; and (2) a schedule for the expeditious completion of all disclosure.
This constitutes the Decision & Order of the Court, the original of which is being uploaded to NYSCEF for entry by the Albany County Clerk. Upon such entry, counsel for defendant shall promptly serve notice of entry upon all parties entitled thereto.
Papers Considered :
NYSCEF Doc Nos. 1-10, 15, 20-35.