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Pinnacle Healthcare, LLC v. Sheets

Court of Appeals of Indiana

September 10, 2014

PINNACLE HEALTHCARE, LLC, and PATRICK J. SHEETS, M.D., INC., Appellants-Defendants,
v.
PATRICK J. SHEETS, Appellee-Plaintiff

Page 948

APPEAL FROM THE JASPER CIRCUIT COURT. The Honorable John D. Potter, Judge. Cause No. 37C01-1312-CT-906.

ATTORNEYS FOR APPELLANTS: ROBERT J. GABRIELSE, DeMotte, Indiana; SEAN E. KENYON, Hoeppner Wagner & Evans LLP, Merrillville, Indiana; VICTOR L. MOLDOVAN, McGuire Woods LLP, Atlanta, Georgia.

ATTORNEY FOR APPELLEE: DONALD W. SHELMON, Rensselaer, Indiana.

NAJAM, Judge. BAILEY, J., and PYLE, J., concur.

OPINION

Page 949

NAJAM, Judge

STATEMENT OF THE CASE

Pinnacle Healthcare, LLC (" Pinnacle" ), and Patrick J. Sheets, M.D., Inc. (" the Practice" ) (collectively, " the Appellants" ) bring this interlocutory appeal from the trial court's denial of their motion for a preliminary injunction against Dr. Patrick J. Sheets, which sought to enjoin Dr. Sheets from violating or continuing to violate contractual noncompete, nonsolicitation, and nondisparagement clauses. The Appellants raise three issues for our review, which we restate as whether the trial court's denial of their motion for a preliminary injunction is clearly erroneous.

We reverse and remand with instructions.

FACTS AND PROCEDURAL HISTORY

For about ten years prior to July 28, 2011, Dr. Sheets owned the Practice in Rensselaer, from which he practiced medicine. On July 28, 2011, he sold the Practice to Pinnacle for $275,000. The transaction was a stock sale in which Pinnacle acquired 100% of the stock in the Practice from Dr. Sheets. Dr. Sheets became an employee of Pinnacle in the Practice under a separate employment agreement, the execution of which was a condition of the purchase

Page 950

agreement.[1] See Appellants' App. at A218.

Pursuant to the employment agreement, Dr. Sheets agreed to the following provisions:

8. TERMINATION BY EMPLOYEE. If Employer violates any material part of this Agreement, then Employee may terminate employment for cause upon thirty (30) days written notice to Employer and any [and] all non-compete and liquidated damages provisions, as provided in [Paragraphs] 9 and 10 of this Agreement, will not be in effect and Employee will not be bound by the same.
9. NON-COMPETE, NON-SOLICITATION AND NON-DISPARAGEMENT. During his employment with Employer and for a period of two (2) years after termination or expiration of this Agreement, the undersigned will not practice medicine, directly or indirectly, own, manage, operate, control, participate in, be employed by or be connected in any manner with the ownership, management, operation, or control of any business similar to the type of business conducted by Employer, including but not limited to any hospital, Employee group, doctor, ambulatory surgery center, imaging center, insurance company, home health care service provider, physical therapy provider, durable medical equipment provider, diagnostic center (lab infusion center, sleep lab, etc.) or any other health care service provider within twenty five (25) miles of the office in which Employee practices in Rensselaer, Indiana. Employee agrees that said geographical area approximates the area from which Employer attracts a substantial number of patients.[2] During his employment with Employer and for a period of two (2) years after termination or expiration of this Agreement, the undersigned will not invite or encourage any patient of Employer or a member of such patient's family to obtain Employee's services from sources other than Employer.
10. NON-SOLICITATION. During the term of this Agreement and for two (2) years thereafter, representative agrees not to solicit or encourage any employee or independent contractor of the Employer to leave the Employer or to devote less than all of such employee or contractor's efforts to the Employer.
11. NON-DISPARAGEMENT. During the term of this Agreement and after the termination of this Agreement, the Employee agrees not to voice, write, espouse, or publicize directly or indirectly any negative comments regarding the Employer, or its member, its affiliates, its medical services and practice, its independent contractors and employees, or the Employer's business practices.
12. LIQUIDATED DAMAGES. Should Employee's employment terminate and Employee continues to practice in the geographical area described

Page 951

in Paragraph 9, he understands that doing so will adversely affect Employer's practice. Therefore, Employee agrees to pay to Employer as liquidated damages and not as a penalty an amount equal to the payments received by the Employee to date from Employer relative to the purchase of stock in the Corporation pursuant to Stock Purchase Agreement of even date herewith, to which reference is hereby made, if Employee practices medicine, as described in Paragraph 9, in said geographical area ...


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