Opinion
24A-PL-1329
12-19-2024
Norton-King's Daughters' Health, Inc., Appellant/Cross-Appellee-Plaintiff v. Elizabeth C. Jenkins, CRNA, Appellee/Cross-Appellant-Defendant
ATTORNEYS FOR APPELLANT Jeremy S. Rogers Dinsmore &Shohl LLP Louisville, Kentucky Merritt Alcorn Alcorn, Sage, Schwartz, &Magrath, LLP Madison, Indiana ATTORNEYS FOR APPELLEE Timothy A. Dowers John H. Haskin John H. Haskin &Associates Indianapolis, Indiana
Pursuant to Ind. Appellate Rule 65(D), this Memorandum Decision is not binding precedent for any court and may be cited only for persuasive value or to establish res judicata, collateral estoppel, or law of the case.
Appeal from the Jefferson Circuit Court The Honorable Ryan J. King, Special Judge Trial Court Cause No. 39C01-2308-PL-680
ATTORNEYS FOR APPELLANT Jeremy S. Rogers Dinsmore &Shohl LLP Louisville, Kentucky Merritt Alcorn Alcorn, Sage, Schwartz, &Magrath, LLP Madison, Indiana
ATTORNEYS FOR APPELLEE Timothy A. Dowers John H. Haskin John H. Haskin &Associates Indianapolis, Indiana
MEMORANDUM DECISION
Bailey, Judge.
Case Summary
[¶1] After Elizabeth Jenkins breached a covenant not to compete with Norton King's Daughter's Hospital (the "Hospital"), the Hospital filed a breach-of-contract claim and sought $50,000 in liquidated damages. Following crossmotions for summary judgment, the trial court concluded that Hospital did not have the authority to seek liquidated damages. Accordingly, the court granted Jenkins' motion for summary judgment and denied the Hospital's. We affirm.
The Hospital is owned by Norton-King's Daughters' Health, Inc.
Issues
[¶2] The Hospital presents the following issue for our review.
1. Whether the trial court erred when it entered summary judgment in favor of Jenkins because an employment agreement allowed the Hospital to seek liquidated damages.
[¶3] Jenkins cross-appeals and raises the following issue: 2. Whether the noncompete clause is invalid because it is overly broad in scope.
Facts and Procedural History
[¶4] The Hospital is a hospital located in Madison. Jenkins is a Certified Registered Nurse Anesthetist ("CRNA"). In June 2018, the Hospital and Jenkins entered into a "Professional Services Employment Agreement" (the "Agreement"). Appellant/Cross-Appellee's App. Vol. 2 at 19. Pursuant to the Agreement, Jenkins agreed to provide "services in the specialty of Anesthesia" in exchange for a starting salary of $190,000 per year, plus moving expenses and a guaranteed five percent raise after one year. Id. at 20.
[¶5] The Agreement contained a covenant not to compete:
6.2 Upon Termination of Agreement. [Jenkins] agrees upon termination of this Agreement not to practice medicine, organize, direct or perform services for, nor have any financial interest in or receive income from, either directly or indirectly, as an officer, director, employee, or agent, any person, institution or organization which is in competition with the services provided at the Hospital or at the Hospital. Such restriction shall continue for a period of two (2) years after the effective termination date of this Agreement and shall be effective only within a thirty (30) mile radius of each of the Hospital's facilities in existence as of the execution of this agreement and of the Hospital and within the hospital determined service area zip codes.
6.3. Injunctive Relief. It is agreed by the parties hereto that any breach of Paragraph [6.2] shall entitle Hospital, in addition to any other legal remedies available to it, to apply to a court of competent jurisdiction to enjoin any violation and/or to recover damages for any breach thereof and to recover all costs of such action, including reasonable attorneys' fees.
6.4 Liquidated Damages for Violation of the Covenant Not to Compete. The parties agree that since no adequate remedy exists at law to enforce the covenant not to compete hereunder, injunctive relief may be sought to enforce the terms of Article VI. The parties furthermore agree that [Jenkins] may violate the terms of this covenant not to compete upon the payment to Hospital a lump sum of Fifty Thousand Dollars ($50,000). Such amount is regarded by the parties hereto in good faith as liquidated damages, and the applicable sum may be paid by [Jenkins] in lieu of Hospital's right to injunctive relief, as liquidated damages in full.Id. at 30.
[¶6] Jenkins started working for the Hospital in August 2018. On May 27, 2021, Jenkins and the Hospital entered into another agreement pursuant to which the Hospital made Jenkins the Chief CRNA. As part of her new role, Jenkins took on new responsibilities in exchange for an additional $5,000.00 per year. In particular, Jenkins participated in recruiting new providers, and she had "more of an input in everything . . . in the department moving forward." Id. at 49.
[¶7] On March 16, 2023, Jenkins submitted her letter of resignation to the Hospital. Then, on March 24, Carrol County Memorial Hospital ("CCMH"), located in Carrol County, Kentucky, sent Jenkins an offer of employment to work as a CRNA in its anesthesiology department. Jenkins signed the offer that day and began her employment at CCMH on May 1. CCMH is located approximately fifteen miles from the Hospital, and it is the only hospital located within thirty miles of the Hospital.
[¶8] In July, after learning about Jenkins' new employment, the Hospital sent Jenkins a demand letter alerting Jenkins that she was violating the Agreement and requesting that she pay the $50,000 in liquidated damages provided for in the Agreement. Jenkins did not respond. However, Jenkins left her employment with CCMH on July 18. Then, on August 2, the Hospital filed a complaint against Jenkins for breach of contract. In its complaint, the Hospital alleged that Jenkins had violated the Agreement by working at a competing hospital and that, as a result, it was entitled to "recover the agreed-upon $50,000 in liquidated damages" as well as other costs and fees. Id. at 17.
[¶9] Jenkins filed a motion for summary judgment and asserted that "the 'liquidated damages' provision at issue provides [her] with the discretion to pay the applicable lump sum to avoid Hospital seeking injunctive relief." Id. at 72. In particular, she contended that Section 6.4 of the Agreement "does not afford Hospital any entitlement to liquidated damages as the clear and unambiguous terms of the Agreement afford[] Jenkins with the discretion to make the lump sum payment to avoid Hospital's right to seek injunctive relief rather than securing Hospital's entitlement to the payment upon a breach." Id. at 74. In other words, she argued that a "plain reading of the Agreement provides Jenkins, not the Hospital, with the discretion as to whether she pays the lump sum." Id. at 75. In addition, Jenkins asserted that the noncompete clause "is facially overbroad as the activities prohibited" by the Agreement include "those unrelated to the services Jenkins provided to the Hospital during her employment." Id. at 77.
[¶10] The Hospital filed a combined response and cross-motion for summary judgment. In that motion, the Hospital asserted that it "is entitled to recover the benefit of its bargain, the liquidated damages that the parties expressly agreed Jenkins would pay if she chose to violate the Agreement's non-compete provision." Appellee/Cross-Appellant's App. Vol. 2 at 8. The Hospital argued that the liquidated-damages provision "specifically requires" Jenkins to pay $50,000 "to the Hospital upon her violation of the covenant not to compete." Id. at 11. And the Hospital maintained that Jenkins' interpretation of the clause "would essentially grant Jenkins the unilateral discretion to decide whether to abide by or ignore the non-competition covenant" but that, when reading the Agreement as a whole, "it is clear that this provision is not meant to grant Jenkins the exclusive and unilateral authority to select the remedy available to the Hospital upon Jenkins' breach thereof." Id. at 12. The Hospital also asserted that the covenant not to compete was not overbroad.
[¶11] Following a hearing at which the parties presented oral argument, the court found that the Agreement "is reasonable," "is an enforceable contract," "is not facially or otherwise overbroad," and that the "parties to the [A]greement have legitimate protectable interests[.]" Appellant/Cross-Appellee's App. Vol. 2 at 12. The court then found that, during the approximately two and one-half months that Jenkins worked at CCMH, she "was in breach of the employment agreement[.]" Id.
[¶12] The court also found:
12. The Agreement clearly and unequivocally entitles [the Hospital] to injunctive relief upon a breach of the noncompete clause. (§ 6.3 and § 6.4). It also clearly and unequivocally provides that Jenkins "may" pay a lump sum payment of $50,000 to avoid the [Hospital] seeking injunctive relief. (§ 6.4). The Agreement reads that the lump sum payment of $50,000 is not in addition to the Hospital's right to seek injunctive relief, but rather "in lieu of Hospital's right to injunctive relief."
13. Although neither party places much emphasis on Section 6.3, the Court finds that said Section gives material context to the employment agreement as a whole. Under Section 6.3, the Hospital is expressly given the right to pursue an injunction, damages, costs, and attorney's fees. The Hospital decided not to pursue relief under that Section. Instead of proceeding under Section 6.3, the Hospital brought suit under Section 6.4, which lacks the express language entitling the Hospital to a right to seek "liquidated" damages. On the contrary, the express language in Section 6.4 clearly and expressly gives the Defendant (Jenkins) the right to pay $50,000 to avoid an injunction, and says absolutely nothing about the Hospital having a right to seek the $50,000 in lieu of seeking injunctive relief.
14. When Sections 6.2, 6.3, and 6.4 are read together it appears clear to the court that the Agreement states, when stated succinctly, the following: the Hospital has a right to seek injunctive relief to enforce the non-compete. However, Jenkins has the corollary right to pay $50,000 to avoid injunction.
15. In sum, the agreement says nothing about the Hospital's right to pursue the $50,000 while saying much about the Hospital's right to pursue an injunction (see § 6.3); and also saying a lot about the Defendant's right to pay $50,000 in lieu of the injunction (see § 6.4).
* * *
17. The Court's interpretation makes sense. For example, had the Defendant not ceased her employment on or about July 18, 2023, then the Hospital could have clearly enjoined her from working at [CCMH]. The Defendant then would have had to pay $50,000 or stop working at [CCMH]. This is what the language requires. However, the Employment Agreement simply did not address the scenario now before the Court wherein the Defendant voluntarily (or otherwise directed by her new employer etc.) complied with the Employment Agreement by ceasing the offending employment. This would seem to the Court to be a "win" for the Hospital because the Court finds that that it is truly what the covenant was designed to do.
18. The Court finds that, as written in the Agreement, the covenant is more akin to a penalty than liquidated damages. As written, Defendant was free to work in violation of the covenant, so long as she paid the $50,000 price (penalty) for doing so. Now the Hospital requests the Court take this penalty even further: even though Defendant stopped the offending employment as consistent with the injunction, the Hospital continues to want her to pay the $50,000 penalty. The Court is unpersuaded that the Hospital is entitled to said relief.Id. at 12-13. Accordingly, the trial court granted Jenkins' motion for summary judgment and denied the Hospital's. This appeal ensued.
Discussion and Decision
Standard of Review
[¶13] The Hospital contends that the trial court erred when it denied the Hospital's motion for summary judgment and entered summary judgment in favor of Jenkins. The Indiana Supreme Court has explained that
[w]e review summary judgment de novo, applying the same standard as the trial court: "Drawing all reasonable inferences in favor of . . . the non-moving parties, summary judgment is appropriate 'if the designated evidentiary matter shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.'" Williams v. Tharp, 914 N.E.2d 756, 761 (Ind. 2009) (quoting T.R. 56(C)). "A fact is 'material' if its resolution would affect the outcome of the case, and an issue is 'genuine' if a trier of fact is required to resolve the parties' differing accounts of the truth, or if the undisputed material facts support conflicting reasonable inferences." Id. (internal citations omitted).
The initial burden is on the summary-judgment movant to "demonstrate [ ] the absence of any genuine issue of fact as to a determinative issue," at which point the burden shifts to the nonmovant to "come forward with contrary evidence" showing an issue for the trier of fact. Id. at 761-62 (internal quotation marks and substitution omitted). And "[a]lthough the non-moving party has the burden on appeal of persuading us that the grant of summary judgment was erroneous, we carefully assess the trial court's decision to ensure that he was not improperly denied his day in court." McSwane v. Bloomington Hosp. &Healthcare Sys., 916 N.E.2d 906, 909-10 (Ind. 2009) (internal quotation marks omitted).Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014) (omission and some alterations original to Hughley). We may affirm an entry of summary judgment "if it can be sustained on any theory or basis in the record." DiMaggio v. Rosario, 52 N.E.3d 896, 904 (Ind.Ct.App. 2016). "'The fact that the parties have filed cross-motions for summary judgment does not alter our standard for review, as we consider each motion separately to determine whether the moving party is entitled to judgment as a matter of law.'" SCI Propane, LLC v. Frederick, 39 N.E.3d 675, 677 (Ind. 2015) (quoting Reed v. Reid, 980 N.E.2d 277, 285 (Ind. 2012)).
[¶14] Further, this appeal requires us to interpret the Agreement. The interpretation and construction of contract provisions are questions of law. Barker v. Price, 48 N.E.3d 367, 370 (Ind.Ct.App. 2015). As such, "cases involving contract interpretation are particularly appropriate for summary judgment." Id.
[¶15] Here, the trial court entered findings of fact and conclusions thereon in its summary judgment order. While such findings and conclusions are not required in a summary judgment and do not alter our standard of review, they are helpful on appeal for us to understand the reasoning of the trial court. See Knighten v. E. Chicago Hous. Auth., 45 N.E.3d 788, 791 (Ind. 2015).
Cross-Appeal
[¶16] We first address Jenkins' contention on cross-appeal that the trial court erred when it concluded that the covenant not to compete was valid. As this Court has stated:
Covenants not to compete in employment contracts are in restraint of trade and are disfavored by the law. Cent. Ind. Podiatry[, P.C. v. Krueger], 882 N.E.2d [723,] 728-29 [(Ind. 2008)]. The covenants are strictly construed against the employer and will be enforced only if reasonable. Id. at 729. Covenants must be reasonable with respect to the legitimate interests of the employer, restrictions on the employee, and the public interest. Titus v. Rheitone, Inc., 758 N.E.2d 85, 92 (Ind.Ct.App. 2001), trans. denied. The ultimate determination of the reasonableness of a restrictive covenant is a question of law, but its reasonableness must rest upon adequate facts. Raymundo v. Hammond Clinic Ass'n, 449 N.E.2d 276, 279 (Ind. 1983).
In determining the reasonableness of the covenant, we first examine whether the employer has asserted a legitimate interest that may be protected by a covenant. Cent. Ind. Podiatry, 882 N.E.2d at 729. If the employer has asserted a legitimate, protectable interest, we next determine whether the scope is reasonable in terms of time, activity, and geographic area restricted. Id. The employer must show the covenant is "necessary in light of the circumstances" or, "in other words, the employer must demonstrate that the employee has gained a unique competitive advantage or ability to harm the employer before such employer is entitled to the protection of a noncompetition agreement." Gleeson v. Preferred Sourcing, LLC, 883 N.E.2d 164, 172-73 (Ind.Ct.App. 2008).Great Lakes Anesthesia, P.C. v. O'Bryan, 99 N.E.3d 260, 268-69 (Ind.Ct.App. 2018).
[¶17] On this issue, Jenkins first asserts that the Hospital failed to establish a protectable interest because the Hospital has not presented "any evidence of lost goodwill due to Jenkins working at CCMH" or shown "any patient diversion from the Hospital." Appellee/Cross-Appellant's Br. at 18. However, we agree with the Hospital that a "direct loss of patients" is not the only "measure of whether the Hospital's interest in this case is protectable." Appellant's Reply Br. at 12.
[¶18] Initially, we note that it was "hard . . . to recruit people to work at" the Hospital. Appellant/Cross-Appellee's App. Vol. 2 at 59. Indeed, Jenkins acknowledged that difficulty and offered to stay at the Hospital longer "to help with the transition" and to "lessen the load of the people that [she] was leaving behind." Id. As such, the Hospital had a valid interest in discouraging staff from leaving for nearby facilities so that it could keep staff and provide services to its patients.
[¶19] Further, Indiana courts have held covenants not to compete valid when they protect an employer's interest in trade secrets "or other confidential information." Norlund v. Faust, 675 N.E.2d 1142, 1154 (Ind.Ct.App. 1997). Here, the designated evidence demonstrates that, as part of her employment with the Hospital, Jenkins' duties extended beyond those of simply providing services as a nurse anesthetist. Jenkins' role required her to maintain and build relationships with surgeons and other doctors referring patients to the Hospital, assist with recruiting qualified healthcare providers to the Hospital, implement policies and procedures related to anesthesiology services, and assist management with "improvements . . . that will benefit the overall department." Appellant/Cross-Appellee's App. Vol. 2 at 65.
[¶20] And Jenkins acknowledges that she met with one of the Hospital's Vice Presidents "on a regular basis" to "discuss things that could have been improved in order to retain providers and provide better service[.]" Id. at 45. She also acknowledged that individuals with the hospital administration would "seek out" her input. Id. at 46. And, following her promotion to Chief CRNA, Jenkins had "more of an input in everything . . . in the department moving forward." Id. at 49. Thus, it is clear that Jenkins had access to confidential information that would help the Hospital better serve its patients, which information the Hospital would not want to see go to a competitor. The Hospital had a legitimate, protectable interest protected by the Agreement.
[¶21] Jenkins next contends that the Agreement is unreasonable. Jenkins does not challenge the reasonableness of the time or geographic area restricted but contends that the Agreement is unreasonable in scope. As outlined above, the Agreement provides that Jenkins will not "practice medicine, organize, direct or perform services for, nor have any financial interest in or receive income from, either directly or indirectly, as an officer, director, employee, or agent, any person, institution or organization which is in competition with the services provided at the Hospital or at the Hospital." Id. at 30.
[¶22] Jenkins contends that the Agreement "unreasonably prohibits her from performing any services that compete with those offered by the Hospital, regardless of whether those services relate to her role as a CRNA." Appellee/Cross-Appellant's Br. at 19. Specifically, she contends that the provision "could be interpreted as restricting Jenkins from providing unrelated services, such as administrative work or even selling snacks, merely because the Hospital may offer similar services." Id. at 20. We cannot agree.
[¶23] As an initial matter, we observe that the Hospital did not file its complaint against Jenkins because Jenkins provided a service unrelated to her duties as a CRNA at CCMH; rather, Jenkins' new role at the competing hospital was to provide the same anesthesiology services at CCMH that she had provided at the Hospital. Further, "we will not interpret a contact in a fashion that achieves an absurd result." A House Mechanics, Inc. v. Massey, 124 N.E.3d 1257, 1263-64 (Ind.Ct.App. 2019). If we were to read the Agreement as Jenkins asks-such that she could not even sell snacks at a competing hospital-we would reach an absurd result.
[¶24] In any event, when we read the Agreement as a whole, it is clear that the noncompete clause only prevents Jenkins from performing CRNA services to a competing hospital. First, the Agreement is titled "Professional Services Employment Agreement Anesthesia CRNA Services." Appellant/Cross-Appellee's App. Vol. 2 at 19. Second, in the recitals, the Agreement twice references anesthesiology, first when it states that the Hospital offers services "including the professional services of [a] trained [CRNA]," and when it states that Jenkins wishes to become employed by the Hospital "in order to more efficiently and effectively provide anesthesia services[.]" Id. Then, in Section 1 of the Agreement, which discusses Jenkins' employment, the Agreement discusses "the specialty of Anesthesia," Jenkins' "medical specialty," and Jenkins' "specified field of anesthesiology." Id. at 20. And in Section 2, which outlines Jenkins' covenants, the Agreement details Jenkins' specialty in anesthesia no fewer than seven times. See id. at 21. Thus, while the covenant not to compete does not specifically identify anesthesia services as the prohibited service, the remainder of the Agreement makes it clear that the only service she provided to the Hospital, and thus the only service she is prohibited from doing elsewhere, is directly related to her work as a CRNA. We therefore hold that the covenant not to compete is not unreasonable in terms of scope, and the trial court did not err when it concluded that the noncompete clause is enforceable.
Liquidated Damages
[¶25] Because we hold that the Agreement is enforceable, we next turn to the Hospital's argument that the trial court erred when it concluded that the Hospital was not entitled to seek liquidated damages. The Agreement included the following clauses related to a breach of the Agreement:
6.3. Injunctive Relief. It is agreed by the parties hereto that any breach of Paragraph[ 6.2] shall entitle Hospital, in addition to any other legal remedies available to it, to apply to a court of competent jurisdiction to enjoin any violation of/or to recover damages for any breach thereof and to recover all costs of such action, including reasonable attorneys' fees.
6.4 Liquidated Damages for Violation of the Covenant Not to Compete. The parties agree that since no adequate remedy exists at law to enforce the covenant not to compete hereunder, injunctive relief may be sought to enforce the terms of Article VI. The parties furthermore agree that [Jenkins] may violate the terms of this covenant not to compete upon the payment to
Hospital a lump sum of Fifty Thousand Dollars ($50,000). Such amount is regarded by the parties hereto in good faith as liquidated damages, and the applicable sum may be paid by [Jenkins] in lieu of Hospital's right to injunctive relief, as liquidated damages in full.Appellant/Cross-Appellee's App. Vol. 2 at 30.
[¶26] We agree with the trial court that the Agreement clearly and unambiguously provides that the Hospital's only remedy under the Agreement is to seek injunctive relief following a breach of the noncompete clause. Section 6.3 explicitly gives the Hospital the right to injunctive relief. There is nothing in that clause that allows the Hospital to seek liquidated damages. Similarly, Section 6.4 again provides that the Hospital can seek injunctive relief. But that section goes on to state that Jenkins can choose to pay $50,000 to the Hospital in order for the Hospital to forgo its right to seek injunctive relief.
[¶27] In other words, once Jenkins breached the Agreement, the proper remedy was for the Hospital to seek an injunction, at which point it would be Jenkins' right to pay $50,000 to the Hospital and continue to breach the Agreement. It was Jenkins' right to pay the Hospital if she wanted; it was not the Hospital's right to ask for the money. And contrary to the Hospital's argument below, this does not give Jenkins "the unilateral discretion to decide whether to abide by or ignore the non-competition covenant." Appellee/Cross-Appellant's App. Vol. 2 at 12. Instead, it simply gives Jenkins the option to either cease violating the Agreement or to continue violating the Agreement but pay the Hospital.
[¶28] Here, by the time the Hospital filed its claim, Jenkins had already ceased her employment with CCMH and was no longer in breach of the Agreement. Thus, the Hospital received the precise outcome contemplated by the Agreement-a cessation of Jenkins' employment at a competing hospital. Because the Hospital's only right under the Agreement was to seek injunctive relief and not liquidated damages, and because Jenkins has already left her employment at CCMH such that there is nothing left to enjoin, we affirm the trial court's grant of summary judgment in favor of Jenkins.
The Hospital alternatively asks that we reverse the court's grant of summary judgment in favor of Jenkins and remand to the trial court for a determination of its actual damages. But, again, the Agreement provides for liquidated damages and injunctive relief only. And our Supreme Court has explained that the term "liquidated damages" applies "to a specific sum of money that has been expressly stipulated by the parties to a contract as the amount of damages to be recovered by one party for a breach of the agreement by the other, whether it exceeds or falls short of actual damages." Time Warner Ent. Co., L.P. v. Whiteman, 802 N.E.2d 886, 893 (Ind. 2004). In other words, the Hospital stipulated to an amount of damages and cannot seek actual damages in the alternative. In any event, as we have explained, the Hospital's remedy was to seek injunctive relief, at which point Jenkins could either cease violating the Agreement or pay damages to the Hospital. As the Hospital received its agreed-upon relief-the termination of Jenkins' employment at a competing hospital-it is not entitled to damages, and we need not remand for a determination on actual damages.
Conclusion
[¶29] The trial court did not err when it determined that the noncompete agreement is enforceable. And the trial court did not err when it concluded that the Hospital did not have the right to seek liquidated damages. The trial court therefore did not err when it entered summary judgment in favor of Jenkins, and we affirm the trial court.
[¶30] Affirmed.
Bradford, J., and Foley, J., concur.