Arkansas Health Group v. Joe Rochelle, M.D.

ARKANSAS COURT OF APPEALS

NOT DESIGNATED FOR PUBLICATION

ANDREE LAYTON ROAF, JUDGE

DIVISION IV

ARKANSAS HEALTH GROUP

APPELLANT

v.

JOE ROCHELLE, M.D.

APPELLEE

CA02-728

MARCH 12, 2003

APPEAL FROM LONOKE COUNTY CIRCUIT COURT

[NO. CR01-373]

HONORABLE PHILLIP T. WHITEAKER, CIRCUIT JUDGE

REVERSED AND REMANDED

Appellant Arkansas Health Group ("AHG") appeals from an order of the Lonoke County Circuit Court denying its request for a preliminary injunction and ruling for appellee Joe Rochelle, M.D., on the merits of the case, by declaring a covenant not to compete invalid. AHG argues that the trial court erred procedurally in ruling on the merits of the case and dismissing the action after only the hearing on whether to issue a preliminary injunction. We agree, and reverse and remand.

AHG is a non-profit corporation that operates a clinic in Cabot, Arkansas, under the name "Baptist Health Clinic." In 1994, AHG recruited Rochelle to practice medicine at its clinic. The parties executed a contract that contained a two-year, ten-mile covenant not to compete provision. In 2001, Rochelle declined to renew his contract with AHG. Rochelle filed suit on November 23, 2001, alleging breach of contract and seeking (1) a declaratory judgment that the covenant not to compete contained in the contract was invalid under Arkansas law and (2) temporary injunctive relief pending a full adjudication of the matter on the merits. AHG filed an answer denying the allegations in the complaint and also filed a motion requesting a preliminary injunction againstRochelle.

On January 19, 2002, the trial court held a two-hour hearing on the parties' requests for a preliminary injunction. On March 22, 2002, AHG filed a counterclaim against Rochelle. The trial court then entered an order on April 2, 2002, denying both parties' requests for injunctive relief and ruling for Rochelle on the merits of the case, by declaring the covenant not to compete invalid.

AHG argues that the trial court erred procedurally in ruling on the merits of the case and dismissing the action after the hearing only on whether to issue a preliminary injunction. AHG contends that Ark. R. Civ. P. 65(b) sets out a two-step procedure by which a party seeking a preliminary injunction must proceed. Rule 65(b) states as follows:

Upon application by the party against whom the preliminary injunction or temporary restraining order has been issued without notice, the Court shall, as expeditiously as possible, hold a hearing to determine whether the preliminary injunction or temporary restraining order should be dissolved. Where a hearing is required to be held on an application for a preliminary injunction or temporary restraining order, the Court may order the trial of the action on the merits advanced and consolidated with the hearing on the application. When consolidation is not ordered, any evidence received upon application for a preliminary injunction or temporary restraining order which would be admissible upon the trial on the merits becomes a part of the record of the trial and need not be repeated upon the trial. This subdivision (b) shall be so construed and applied as to save to the parties any rights they may have to trial by jury.

In Jacksonville Christian Academy v. Arkansas Social Services, 277 Ark. 339, 641 S.W.2d 716 (1982), the trial court consolidated a hearing on whether a temporary restraining order should be dissolved with a trial on the merits without notice to the parties and without an order pursuant to Rule 65(b) to consolidate the proceedings. The supreme court reversed and remanded for a new trial, holding that it was error for the trial court to have consolidated the proceedings in this manner. Id. AHG urges this court to reverse the trial court's decision in this case and remand for a new trial, in accordance with the holding in Jacksonville, supra.

Rochelle asserts that AHG's argument is not preserved for appellate review because it wasnot raised to the trial court by way of a motion for a new trial and cites Oglesby v. Baptist Medical System, 319 Ark. 280, 891 S.W.2d 48 (1995), as support for this contention. In Oglesby, the trial court entered summary judgment in favor of the defendant, despite the fact that the plaintiff's claim for battery was not raised or argued in the motion for summary judgment. Id. The trial court's order dismissed the entire case and did not discuss the battery claim. Id. The supreme court declined to address the appellant's argument that the trial court erred by dismissing the complaint without determining the battery claim, because the appellant had waived her argument by not raising the issue to the trial court. Id. The court in Oglesby noted that Ark. R. Civ. P. 59(f), which governs motions for new trials, states that a motion for a new trial is not necessary to preserve for appeal an error that could be the basis for granting a new trial. However, the court held that "common sense but also judicial economy dictate" that the issue should have been first brought to the attention of the trial court. 319 Ark. at 287, 891 S.W.2d at 52.

We do not find Oglesby to be controlling in this case and conclude that AHG was not required to file a motion for a new trial in order to preserve its argument for appeal. By its plain language, Rule 59(f) does not require a party to file a motion for a new trial to preserve an argument as to any errors that may have occurred at the trial. As argued by AHG, in this case, no trial actually occurred. Rather, the trial court converted a temporary hearing into a trial on the merits without notice to the parties. AHG did not have an opportunity to object to the consolidation of the proceedings until after the trial court's order was filed. Also, in Jacksonville, supra, more analogous to this case than Oglesby, supra, the opinion does not reflect that the appellant filed a post-trial motion alleging that the trial court erred by consolidating the proceedings; yet, the court addressed the appellant's argument. Because AHG was not required to file a motion for a new trial, its argument is preserved for our review.

In this case, as in Jacksonville, supra, the trial court erred in not following the procedure set out in Rule 65(b). Rochelle's complaint sought temporary injunctive relief "pending a full adjudication of the matter on the merits." Similarly, AHG sought a preliminary injunction "until such time a trial on the merits can be had." The record contains no order from the trial court consolidating the temporary hearing with the trial on the merits. At the temporary hearing on January 18, 2002, both the trial court and the parties recognized that the purpose of the hearing was to consider only the claim for temporary injunctive relief. For example, the court stated that "[a]s I understand the nature of this hearing today, I am asked to look at this hearing and to look at this issue from a temporary perspective." Also, the court said, "From a temporary perspective, is it unenforceable; from a temporary perspective, is it enforceable; that's all I'm being asked to look at." Rochelle's counsel stated that "I understand that the Court is going to make a temporary ruling based on what evidence we put before the Court through our hearing here today."

From the statements of the trial court and the parties, it is apparent that neither party had notice that the temporary hearing was to be consolidated with a trial on the merits. Nor did the trial court order such a consolidation pursuant to Rule 65(b). Thus, it was error for the trial court to decide this case on the merits based upon the evidence presented at the temporary hearing. Jacksonville, supra. Rochelle also argues that the trial court was authorized to sua sponte decide this case based on its finding that the contract violated public policy. However, the case cited by Rochelle as support for this proposition, Arkansas Blue Cross & Blue Shield v. Brown, 33 Ark. App. 44, 800 S.W.2d 724 (1990), can be distinguished as it did not involve Rule 65(b), and the parties in that case were able to fully present their evidence to a jury. Because the trial court failed to follow the procedure mandated in Rule 65(b), we reverse and remand for a trial.

Reversed and remanded.

Crabtree and Baker, JJ., agree.