LANCE M. AFRICK, District Judge.
Before the Court is a motion
For the foregoing reasons, the Court will grant the motion as set forth herein.
The following facts are undisputed: Sean O'Sullivan is an ophthalmologist employed by RSI—shorthand for the Retina Specialty Institute
When O'Sullivan joined RSI, O'Sullivan and RSI executed a Noncompetition and Nonsolicitation Agreement ("RSI Agreement")
The RSI Agreement defines the "Restrictive Territory" as "the geographical area inside of a fifty (50) mile radius of any office or facility of Employer which exists or existed at the time during the Employment relationship."
The RSI Agreement also includes several reformation and severability provisions. One of these provisions provides that the invalidation of any portion of the RSI Agreement does not affect the enforceability of the remaining portions.
O'Sullivan has now moved
Summary judgment is proper when, after reviewing the pleadings, the discovery and disclosure materials on file, and any affidavits, the court determines that there is no genuine dispute of material fact. See Fed. R. Civ. P. 56. "[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The party seeking summary judgment need not produce evidence negating the existence of material fact, but need only point out the absence of evidence supporting the other party's case. Id.; Fontenot v. Upjohn Co., 780 F.2d 1190, 1195 (5th Cir. 1986).
Once the party seeking summary judgment carries its initial burden, the nonmoving party must come forward with specific facts showing that there is a genuine dispute of material fact for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The showing of a genuine issue of material fact is not satisfied by creating "`some metaphysical doubt as to the material facts,' by `conclusory allegations,' by `unsubstantiated assertions,' or by only a `scintilla' of evidence." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (citations omitted). Instead, a genuine issue of material fact exists when the "evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party responding to the motion for summary judgment may not rest upon the pleadings, but must identify specific facts that establish a genuine issue. Id. The nonmoving party's evidence, however, "is to be believed, and all justifiable inferences are to be drawn in [the nonmoving party's] favor." Id. at 255; see also Hunt v. Cromartie, 526 U.S. 541, 552 (1999).
Louisiana—whose law governs the interpretation and enforcement of the RSI Agreement
Id. § 23:921(C). In short, "a valid non-competition agreement may limit competition only in a business similar to that of the employer, in a specified geographic area, for up to two years from termination of employment." Parker v. Surface Works, Inc., No. 2015-1583, 2016 WL 5110048, at *3 (La. Ct. App. 1st Cir. Sept. 16, 2016) (emphasis in original); see also Affordable Roofing, Siding, and Gutters, Inc. v. Artigues, No. 16-16872, 2017 WL 713693, at *3 (E.D. La. Feb. 23, 2017) (Africk, J.) ("Non-solicitation of customers provisions in Louisiana are subject to the same restrictions as noncompete provisions.").
"Public policy requires that covenant-not-to-compete agreements must be strictly construed in the employee's favor." Daiquiri's III on Bourbon, Ltd. v. Wandfluh, 608 So.2d 222, 224 (5th Cir. 1992) (internal quotation marks omitted); see also Arthur J. Gallagher & Co. v. Babcock, 703 F.3d 284, 288 (5th Cir. 2012) (citing SWAT 24 Shreveport Bossier, Inc. v. Bond, 808 So.2d 294, 298 (La. 2001)). In that vein, these contracts and agreements "must strictly comply with the requirements contained in the statute." Team Envtl. Serv., 2 F.3d at 126 (quoting Comet Indus., Inc. v. Lawrence, 600 So.2d 85, 88 (La. Ct. App. 2d Cir. 1992)).
With respect to La. R.S. § 23:921's geographic requirement, courts treat "mechanical adherence" to the statute as "especially" imperative. Gearheard v. De Puy Orthopaedics, Inc., No. 99-1091, 1999 WL 638582, at *4 (E.D. La. Aug. 19, 1999) (Clement, J.) (internal quotation marks omitted). The Court itself recently emphasized that strict observance of the geographic requirement was consistent with both the statute's plain text and policy objectives.
Moreover, "[b]ecause [the geographic requirement] . . . speaks to non-competition `within a specified parish or parishes, municipality or municipalities, or parts thereof,' Louisiana courts have stated that non-competition agreements failing to specify the parish, municipality or parts thereof are unenforceable." Gearheard, 1999 WL 638582, at *4 (quoting La. R.S. § 23:921(C)); see also id. (citing cases). For example, where noncompetition or nonsolicitation agreements define their geographic scope in miles, rather than municipalities—or parishes, or parts thereof— courts have routinely invalidated them. See, e.g., Team Envtl. Serv., 2 F.3d at 126 ("On their face, LRI's agreements do not conform to the statutory requirements because they prohibit competition within 200 miles of the employees' base of operations rather than specifying the parishes or municipalities in which LRI does business."); Francois Chiropractic Center v. Fidele, 630 So.2d 923, 926 (La. Ct. App. 4th Cir. 1993) (invalidating a covenant not to compete that prohibited competition "within a ten (10) mile radius of the outer city limits of New Orleans, Louisiana," id. at 924); Medivision, Inc. v. Germer, 617 So.2d 69, 73 (La. Ct. App. 4th Cir. 1993) (concluding that a covenant not to compete is unenforceable where it bars the employee from "providing ophthalmological services within ten miles of any office of" the employer, id. at 70).
O'Sullivan challenges certain provisions of the RSI Agreement as transgressing La. R.S. § 23:921. The Court will examine each of these provisions in turn.
O'Sullivan first challenges the legality of paragraph 5 of the RSI Agreement, which is designated as a covenant not to compete. Paragraph 5 provides that O'Sullivan—"for a restrictive period of two (2) years following either the expiration or termination of [O'Sullivan's] employment with [RSI] for any reason"—"
Paragraph 5 also includes an exemption from subsections (a) through (d) for O'Sullivan's teaching position at the Louisiana State University ("LSU") School of Medicine.
For starters, subsections (a) through (c) of paragraph 5 aim to restrict O'Sullivan's ability to practice ophthalmology and so constitute "provision[s] . . . by which [O'Sullivan] is restrained from exercising a lawful profession, trade, or business." La. R.S. § 23:921(A)(1). As such, these provisions are subject to § 23:921. RSI does not argue otherwise.
However, O'Sullivan and RSI dispute whether subsection (d) of paragraph 5 is subject to § 23:921. Pointing out that subsection (d)'s language aims to protect RSI's putative confidential business information,
In contrast, O'Sullivan argues that subsection (d) constitutes a classic covenant not to compete and therefore it is subject to § 23:921.
When sitting in diversity, a federal court applies state substantive law—in this case, Louisiana law. See Moore v. State Farm Fire & Cas. Co., 556 F.3d 264, 269 (5th Cir. 2009) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938)). To determine Louisiana law, the Court looks to the final decisions of the Louisiana Supreme Court. See In re Katrina Canal Breaches Liti., 495 F.3d 191, 206 (5th Cir. 2007). Where the Louisiana Supreme Court has not addressed an issue, the Court "must make an Erie guess and determine, in [its] best judgment, how that court would resolve the issue if presented with the same case." Id.; see also Stanley v. Trinchard, 500 F.3d 411, 423 (5th Cir. 2007). However, when making this guess, the Court "adhere[s] to Louisiana's civilian decision-making process, by first examining primary sources of law: the constitution, codes, and statutes" of Louisiana. Moore, 556 F.3d at 270.
The Louisiana Civil Code provides that the "[i]nterpretation of a contract is the determination of the [objective] common intent of the parties." La. Civ. C. art. 2045 & cmt. (b). "When the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent." Id. art. 2046. Moreover, "[e]ach provision in a contract must be interpreted in light of the other provisions so that each is given the meaning suggested by the contract as a whole." Id. art. 2050.
Giving the words of subsection (d) their "generally prevailing meaning," id. art. 2047, the Court concludes that subsection (d) falls within the scope of § 23:921. Subsection (d) explicitly targets O'Sullivan's ability to "accept or engage in [ ] business or activity."
The fact that the restraint on O'Sullivan's post-RSI employment opportunities is structured around the protection of RSI's putative confidential business information does not change the objective intent of the parties: that subsection (d) of paragraph 5 function as a covenant not to compete. Moreover, least there be any doubt as to the parties' intent, the Court need only look to the label that the parties themselves attach to paragraph 5: "COVENANT NOT TO COMPETE."
Restrictions that protect confidential information by targeting job opportunities, as opposed to exclusively targeting disclosure, are quintessential covenants not to compete. Subsection (d) is one such covenant. It is susceptible to no other meaning. See id. art. 2049. Therefore, subsection (d) is subject to § 23:921.
As they purport to restrain O'Sullivan "from exercising a lawful profession, trade, or business," subsections (a) through (d) of paragraph 5 are all presumptively null and void under La. R.S. § 23:921(A)(1).
However, subsections (a) through (d) all qualify as noncompetition agreements under § 23:921(C): by restricting O'Sullivan's ability either to join an existing ophthalmology practice or to start his own practice,
Subsection (d) does not satisfy § 23:921's geographic requirement, as it features no geographic limitation whatsoever. Therefore, subsection (d) is unenforceable under Louisiana law. Action Revenue Recovery, 17 So.3d at 1003.
Subsections (a) through (c) all reference the "Restrictive Territory," which the RSI Agreement defines as "the geographical area inside of a fifty (50) mile radius of any office or facility of Employer which exists or existed at the time during the Employment relationship."
While the RSI Agreement provides for the reformation of the "Restrictive Territory" where it is "adjudged unreasonable,"
Paragraph 5, subsections (a) through (d), are null and void.
O'Sullivan also challenges the legality of paragraph 8, which is designated as a covenant not to solicit or disclose. Paragraph 8 includes numerous subsections:
Of these subsections, only (a)(1) and (b) fall within the purview of La. R.S. § 23:921. Subsections (a)(2) and (a)(3) concern employee solicitation, and "non-solicitation of employees clause[s], as distinct from [ ] non-solicitation of customers clause[s], [are] not subject to the requirements of La. R.S. § 23:921." Affordable Roofing, 2017 WL 713693, at *3 n.3 (citing Smith, Barney Harris Upham & Co., Inc. v. Robinson, 12 F.3d 515, 519 (5th Cir. 1994)) (emphasis added). Moreover, subsections (c) through (f) do not purport to restrict O'Sullivan's employment opportunities in any way and so § 23:921 likewise does not apply to these provisions.
With respect to subsections (a)(1) and (b), both fall within the scope of § 23:921 and are presumptively null and void: if O'Sullivan cannot attract patients, then he is certainly "restrained from exercising a lawful profession, trade, or business." La. R.S. § 23:921(A)(1). However, both provisions may yet be enforceable as either noncompetition or nonsolicitation agreements, as defined in § 23:921(C).
Subsection (a)(1) provides that O'Sullivan "shall not . . . accept, solicit, divert, or take away any patient of [RSI] for the purposes of promoting services similar to those rendered by [RSI]."
Subsection (b) consists of two clauses. Clause 1 of subsection (b) provides that "any promotion, mailings, or advertisements directed to patients of [RSI]" by O'Sullivan will violate the RSI Agreement.
Clause 2 of subsection (b) provides that "any promotion, mailings, or advertisements . . . made within the Restrictive Territory [by O'Sullivan] conveying the relocation of or the establishment of [O'Sullivan's] practice after [his] employment with [RSI] terminates" will violate the RSI Agreement.
Although qualifying as noncompetition or nonsolicitation agreements, subsections (a)(1) and (b) must still comply with § 23:921's geographic and time requirements in order to be enforceable. Neither complies with the geographic requirement. Subsection (a)(1) and clause 1 of subsection (b) do not enumerate any geographic limitation whatsoever and so are unenforceable. See Action Revenue Recovery, 17 So.3d at 1003. Clause 2 of subsection (b) does set out a geographic limitation by referencing the "Restrictive Territory," but—as previously explained— the RSI Agreement's definition of "Restrictive Territory" does not satisfy § 23:921's geographic requirement. See La. R.S. § 23:921(C); see also, e.g., Team Envtl. Serv., 2 F.3d at 126; Medivision, 617 So.2d at 69.
Paragraph 8, subsections (a)(1) and (b), are therefore null and void,
In addition, O'Sullivan challenges paragraph 13, which addresses liquidated damages in the event that O'Sullivan violates paragraph 5. "Parties may stipulate the damages to be recovered in case of nonperformance, defective performance, or delay in performance of an obligation." La. Civ. C. art. 2005. "That stipulation gives rise to a secondary obligation for the purpose of enforcing the principal one." Id. However, "[n]ullity of the principal obligation renders the stipulated damages clause null." Id. art. 2006.
As previously explained, subsections (a) through (d) of paragraph 5 are null and void. The only surviving provision of paragraph 5 is an exemption from subsections (a) through (d) for O'Sullivan's teaching position at the LSU School of Medicine.
Lastly, O'Sullivan challenges paragraphs 6, 7, and 11 of the RSI Agreement. Paragraph 6 provides that the RSI Agreement's two-year "restrictive period" shall be extended if certain conditions are met
O'Sullivan contends that paragraphs 6 and 7 violate § 23:921.
O'Sullivan does not explain why paragraph 11 runs afoul of § 23:921 or any other provisions of Louisiana law.
Accordingly,