Awwad v Capital Region Otolaryngology Head & Neck Group, LLPAnnotate this Case
Decided on November 27, 2007
Supreme Court, Albany County
Ramez J. Awwad, Plaintiff,
Capital Region Otolaryngology Head & Neck Group, LLP, Defendant.
Nixon Peabody LLP
Attorneys for Defendant
(Daniel J. Hurteau and Jena R. Rotheim, of counsel)
Omni Plaza, Suite 900
30 South Pearl Street
Albany NY 12207
McNamee, Lochner, Titus & Williams, P.C.
Attorneys for Plaintiff
(Glen P. Doherty and Scott C. Paton, of counsel)
Albany, NY 12207
Richard M. Platkin, J.
Defendant Capital Region Otolaryngology Head & Neck Group, LLP moves for a preliminary injunction to enforce a restrictive covenant in an employment agreement with plaintiff Dr. Ramez J. Awwad. Defendant also moves for partial summary judgment, seeking a declaration that such covenant is valid and enforceable and an award of attorney's fees. Plaintiff opposes defendant's motions and cross-moves for a declaration that the covenant is invalid and [*2]unenforceable.
Plaintiff's current employer, Capital Region Neurology, and its physician-owner, Dr. Edward
Scheid, also move, by Order to Show Cause, for an order permitting them to be joined as
plaintiffs and disqualifying Nixon Peabody LLP from any further representation of defendant in
Defendant Capital Region Otolaryngology Head & Neck Group, LLP ("CROG") is a professional medical group that specializes in the practice of otolaryngology: disorders of the ear, nose and throat. CROG, which was founded 43 years ago, maintains five offices in the Capital District region, in Albany, Hudson, Clifton Park and Troy. CROG is one of approximately five such practices in the Capital Region.
In early 2006, while Dr. Awwad was completing his medical residency in Syracuse, New York, he negotiated an agreement for employment with CROG. Dr. Awwad was represented in these negotiations by Timothy Conan, a Syracuse attorney, and CROG was represented by Peter Millock, a member of the law firm of Nixon Peabody, LLP. The negotiations between counsel resulted in changes to the employment agreement initially proposed by CROG, and the parties executed a final agreement in or about May 2006.
The employment agreement executed by the parties (hereinafter "Agreement") includes a covenant against post-employment competition:
SECTION 6.1 COVENANT NOT TO COMPETE. Physician [Awwad] recognizes that CROG's decision to enter into this Employment Agreement is induced primarily because of the covenants and assurances made by Physician in this Employment Agreement, that Physician's covenant not to compete is necessary to ensure the continuation of the business of CROG and the reputation of CROG, and that irrevocable harm and damage will be done to CROG if Physician competes with CROG. Therefore, Physician agrees that during the term of this Employment Agreement and for a period of three (3) years following the termination of the expiration of this Employment Agreement (except for termination "without cause" under Section 4.4), Physician shall not practice medicine within the Practice Territory. For purposes of this Employment Agreement, "Practice Territory" shall mean the geographic area within a radius of thirty (30) miles of any current or future facility at which CROG provides medical services.
The Agreement also gave Dr. Awwad the following option:
SECTION 6.4 PHYSICIAN ELECTION. Physician may elect, within ten (10) days after the date of termination or expiration of the Employment Agreement, not to have the restrictions set forth in 6.1 apply. To exercise such election, Physician shall so advise CROG and shall pay CROG by certified check the amount of One Hundred Fifty Thousand Dollars ($150,000).
On or about June 29, 2007, Dr. Awwad provided defendant with written notice of his resignation from CROG. The letter did not specify the reasons for his decision to resign, but Dr. Awwad avers that it was based, in part, on two factors: (1) the working conditions at defendant's offices; and (2) certain misrepresentations allegedly made by defendant's managing partner, Dr. Lyon M. Greenberg, during the course of employment negotiations.
Specifically, Dr. Awwad avers that Dr. Greenberg represented to him that all other CROG physicians, including its equity partners, were bound by the same restrictive covenant proposed [*3]in his employment agreement. Dr. Awwad claims that he initially learned of the falsity of this representation in March or April of 2007, and he received confirmation of this at a June 26, 2007 firm meeting following the resignation of Dr. Sara Scheid from CROG.[FN1]
In an affidavit filed in support of CROG's motions, Dr. Greenberg denies stating or otherwise representing that all CROG partners had executed similar non-competition agreements or had agreed to do so within any particular period. Indeed, Dr. Greenberg avers that at the time of employment negotiations with Dr. Awwad, he was aware that Dr. Foyt, a CROG equity partner, was unwilling to agree to a similar covenant.
Doctors Awwad, Sara Scheid and Foyt currently are practicing otolaryngology as employees of Capital Region Ear, Nose & Throat ("CRENT"), located in Slingerlands, New York. The instant motion practice reveals that CRENT is a division of Capital Region Neurology ("CRN"), an entity owned by Dr. Edward Scheid, the husband of Sara Scheid. By dint of their status as Dr. Awwad's current employer, CRN and Dr. Edward Scheid seek leave to be added as plaintiffs to this action,
The motion to disqualify Nixon Peabody LLP arises from the firm's prior representation of the two proposed intervenors in certain employment related matters. Dr. Edward Scheid avers that from February 2005 through March 2006, Nixon Peabody attorneys Peter Millock and Daniel Hurteau represented him in connection with a non-competition agreement with his prior employer. Dr. Scheid further avers that he and CRN were represented by Nixon Peabody in connection with other employment related matters, including the development of legal and litigation strategies relating to restrictive covenants.
Plaintiff commenced this action in July 2007 seeking the following relief: a declaration that the restrictive covenant is void and unenforceable; an injunction restraining enforcement of the covenant; an award of attorney's fees; and recession of the Agreement and an award of punitive damages, based on the claim of fraudulent inducement. Defendant denies plaintiff's allegations and asserts five counter-claims seeking: damages for breach of the Agreement; a declaration that the restrictive covenant is valid and enforceable; an injunction enforcing the restrictive contract; damages for breach of fiduciary duty; and an award of attorney's fees pursuant to the Agreement.
On its pending motions, CROG seeks the following relief: a preliminary injunction enforcing
the restrictive covenant; summary judgment on its second counter-claim, seeking a declaration
that the restrictive covenant is valid and enforceable; and summary judgment on its fifth
counter-claim, seeking an award of attorney's fees. Plaintiff opposes defendant's motion and
cross-moves for summary judgment on its first cause of action, declaring the restrictive covenant
invalid and unenforceable. Finally, Dr. Edward Scheid and CRN move for leave to be added as
plaintiffs to this action and an order disqualifying Nixon Peabody from any further representation
of defendant in this matter.
VALIDITY/ENFORCEABILITY OF THE RESTRICTIVE COVENANT [*4]
The Court begins with the issue at the heart of this case whether the restrictive covenant entered into by Dr. Awwad is valid and enforceable. Thus, defendant's motion and plaintiff's cross-motion for summary judgment on this point will be addressed first.
Summary judgment is a drastic remedy and should only be granted if there are no material issues of disputed fact (Sillman v. Twentieth Century Fox Film Corp., 3 NY2d 395 ). In evaluating a motion for summary judgment, a court should decide whether material issues of disputed fact preclude the grant of judgment as a matter of law (S. J. Capelin Assoc. v. Globe Mfg. Corp., 34 NY2d 338 ). The party moving for summary judgment has the initial burden of coming forward with admissible evidence to support the motion, so as to warrant the Court directing judgment in movant's favor; the burden then shifts to the opposing party to demonstrate, by admissible evidence, the existence of any factual issue requiring a trial of the action (see Zuckerman v. City of New York, 49 NY2d 557 ).
It is well established that post-employment covenants against competition "are not favored" under New York law and will only be enforced in limited circumstances (Morris v Schroder Capital Mgt. Intl., 7 NY3d 616, 620 ). "Undoubtedly judicial disfavor of these covenants is provoked by powerful considerations of public policy which militate against sanctioning the loss of a man's livelihood'" (Reed, Roberts Assoc. v Strauman, 40 NY2d 303, 307 , quoting Purchasing Assoc. v. Weitz, 13 NY2d 267, 272 ).
In an effort to strike an appropriate balance, New York has embraced the common-law tripartite test of reasonableness. A post-employment restraint against competition is reasonable if it: (1) is no greater than is required for the protection of the legitimate interests of the employer; (2) does not impose undue hardship on the employee; and (3) is not injurious to the public" (BDO Seidman v Hirshberg, 93 NY2d 382, 388-389 ). Thus, "a restrictive covenant will only be subject to specific enforcement to the extent that it is 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'" (id. at 389, quoting Reed, supra, at 307).
Plaintiff contends that the covenant here is unenforceable as a matter of law, arguing that:
CROG has no legitimate interest that warrants enforcement of the restrictive covenant; the
covenant is broader than necessary to protect any legitimate interest; the covenant is not
reasonable in time and geographic scope; enforcement of the covenant would be unreasonably
burdensome to plaintiff; enforcement of the covenant would be harmful to the public; and
plaintiff was fraudulently induced to agree to the covenant. The Court will consider each of these
issues in turn.
A.Legitimate Employer Interest
Restrictive covenants will be enforced to protect an employer from unfair competition by a former employee (BDO Seidman, 93 NY2d at 391). The Court of Appeals has recognized legitimate employer interests 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).
Particular respect has been given to post-employment covenants entered into by members of a learned profession, especially medical professionals. In such cases, the Court of Appeals has
given greater weight to the interests of the employer in restricting competition within a [*5]confined geographical area. In Gelder Med. Group v Webber (41 NY2d 680) and Karpinski v Ingrasci (28 NY2d 45), we enforced total restraints on competition, in limited rural locales, permanently in Karpinski and for five years in Gelder. The rationale for the differential application of the common-law rule of reasonableness expressed in our decisions was that professionals are deemed to provide "unique or extraordinary" services.(id. at 389; see Gelder Med. Group v Webber, 41 NY2d 680, 681  ["Covenants restricting a professional, and in particular a physician, from competing with a former employer or associate are common and generally acceptable."]; Karpinski v Ingrasci, 28 NY2d 45, 49  "[Restrictive] covenants by physicians are, if reasonable in scope, generally given effect."]).
It is clear, however, that covenants among medical professionals still must pass muster under the common law test of reasonableness, with due regard being given to the facts and circumstances of each particular case (BDO Seidman, 93 NY2d at 390-391). Thus, in BDO Seidman, the Court of Appeals determined that its "rationale for giving wider latitude to covenants between members of a learned profession because their services are unique or extraordinary" was not applicable in an action brought by a national accounting firm to enforce a restrictive covenant in a major metropolitan region in the absence of proof that the former employee's services were unique or extraordinary (id.). The Court distinguished Karpinski and Gelder Medical Group on the ground that "[i]n each case, the former associate would have been in direct competition with the promisee-practitioner for referrals from a narrow group of primary health providers in a rural geographical market for their medical or dental practice specialty" (id.). On those facts, the Court held that the accounting firm's legitimate interest extended only to client relationships that had been acquired by the defendant-accountant through his association with his former employer.
Nonetheless, decisions of the Appellate Division, Third Department following BDO Seidman have continued to identify legitimate interests on the part of medical employers in restraining post-employment competition by former associates, particularly in situations involving the provision of specialized health care services. In Albany Med. College v. Lobel (296 AD2d 701, 701-702 [3d Dept 2002]), the Third Department relied upon the unique and specialized nature of the urological and gynecological services provided by the defendant-physician and his former employer in upholding a preliminary injunction restraining the defendant from practicing medicine within a thirty mile radius of his former practice group for a period of five years. Similarly, in Battenkill Veterinary Equine v. Cangelosi (1 AD3d 856, 857-858 [3d Dept 2003]), the unique speciality of equine veterinary services, as well as the employer's interest in preventing the loss of goodwill and revenues from longtime clients of the practice (including the loss of referral business usually garnered from existing clients), provided a sufficient basis for an injunction restraining the defendant-veterinarian from practicing equine medicine within 35 miles of his former employer.
In this case, CROG has been providing specialized otolaryngological services in the Capital Region for 43 years. Following the completion of Dr. Awwad's residency in Syracuse, CROG brought him to the Capital Region, an area where he had only limited ties, to join its longstanding medical practice. While Dr. Awwad started as a staff otolaryngologist, his Agreement with CROG evinces a mutual intention for him to progress to a full equity partnership within four years (§ 3.10). All of Dr. Awwad's patient relationships in the Capital District were [*6]developed through his employment with CROG. Further, the professional relationships that Dr. Awwad developed in this region including hospital affiliations and relationships with primary care physicians and other sources of referral to the specialty practice of otolaryngology were facilitated through CROG's goodwill and reputation. Ultimately, Dr. Awwad remained with CROG for a little more than one year before giving notice and becoming part of a new otolaryngology practice that competes directly against CROG.
Under these facts and circumstances, the Court concludes that CROG's legitimate interests in
protecting the goodwill it has developed over more than four decades, its patient base (including
referrals garnered from existing clients) and referral relationships with physicians within the
Capital Region provide an adequate basis for enforcement of the covenant.
Plaintiff contends that the restrictive covenant fails the common-law test of reasonableness because it is broader than necessary to protect CROG's legitimate interests. Insofar as this argument is based on the contention that CROG's legitimate interests are limited to merely preventing plaintiff from soliciting his former patients, the Court disagrees for the reasons set forth supra. However, the Court agrees with plaintiff that the covenant is overbroad insofar as it restricts Dr. Awwad from practicing general medicine. As plaintiff notes, CROG does not hold itself out as engaging in the general practice of medicine and does not claim that it treat patients for health issues outside of the speciality area of otolaryngology.
In BDO Seidman, supra, the Court of Appeals provided the following guidance with respect to the enforcement of overly broad restrictive covenants:
We conclude that the Appellate Division erred in . . . declining partially to enforce the covenant to the extent necessary to protect [the former employer's] legitimate interest. The Appellate Division rejected partial enforcement or severance of the invalid part of the covenant, because "the court would thereby be required to rewrite the entire covenant" (247 AD2d, at 923). In Karpinski v Ingrasci (28 NY2d, supra, at 51-52), this Court expressly recognized and applied the judicial power to sever and grant partial enforcement for an overbroad employee restrictive covenant. The Court refused to give effect to the portion of the covenant which barred the practice of general dentistry, but enforced it respecting the practice of oral surgery, that being the employer's actual, specialized dental practice.
. . . The prevailing, modern view rejects a per se rule that invalidates entirely any overbroad employee agreement not to compete. Instead, when, as here, the unenforceable portion is not an essential part of the agreed exchange, a court should conduct a case specific analysis, focusing on the conduct of the employer in imposing the terms of the agreement (see, Restatement [Second] of Contracts § 184). Under this approach, if the employer demonstrates an absence of overreaching, coercive use of dominant bargaining power, or other anti-competitive misconduct, but has in good faith sought to protect a legitimate business interest, consistent with reasonable standards of fair dealing, partial enforcement may be justified (see, Blake, op. cit., at 633; Restatement [Second] of Contracts § 184 , ). We essentially adopted this more flexible position in Karpinski (supra).
* * * * [*7]
The Appellate Division's fear
that partial enforcement will require rewriting the parties' agreement is unfounded. No additional
substantive terms are required. The time and geographical limitations on the covenant remain
intact. The only change is to narrow the class of BDO clients to which the covenant applies
(cf., Karpinski v Ingrasci, supra [narrowing the scope of the prohibitive post-employment
activity]). Moreover, to reject partial enforcement based solely on the extent of necessary
revision of the contract resembles the now-discredited doctrine that invalidation of an entire
restrictive covenant is required unless the invalid portion was so divisible that it could be
mechanically severed, as with a "judicial blue pencil" . . . . Thus, we conclude that severance is
appropriate, rendering the restrictive covenant partially enforceable.
(BDO Seidman, 93 NY2d at 394-395).
Apart from plaintiff's allegations of fraudulent inducement, an issue discussed infra,
there is nothing in the record that suggests that the restrictive covenant here was the product of
anti-competitive misconduct by CROG or the overreaching, coercive use of dominant bargaining
power. Rather, the undisputed facts demonstrate that CROG sought in good faith to protect its
legitimate business interests, consistent with the "common and generally acceptable" practice of
medical professionals promising not to compete against a former employer (see Gelder,
41 NY2d at 681). Further, while Dr. Awwad began as a staff physician, his agreement with
CROG contemplated his rise to equity partnership during its term. Moreover, the changes
necessary to narrow the covenant to a proper scope do not require the addition of substantive
terms to the parties' agreement. These factors, taken together with the fact that CROG provided
Dr. Awwad with substantial professional benefits above and beyond his continued employment,
distinguish Scott, Stackrow & Co.,
C.P.A's P.C. v. Skavina (9 AD3d 805, 807-808 [3d Dept 2004]).[FN2]
C.Other Considerations Under Common-Law Standard
Plaintiff also contends that the restrictive covenant is not reasonable in time and geographic area, is unreasonably burdensome and contrary to the public interest. The Court disagrees. The three year duration and thirty (30) mile geographic radius around CROG offices (located in Albany, Hudson, Clifton Part and Troy) fall well within prevailing notions of reasonableness (see e.g. Gelder, supra [30-mile, 5-year restriction]; Karpinski, supra [indefinite period, 5 counties], Albany Medical College, supra [30-mile, 5-year covenant], Battenkill, supra [35-mile, 3-year duration]). Further, the Court is not persuaded by plaintiff's argument that the three year duration of the covenant is unfairly disproportionate to his one year of employment with CROG. That plaintiff chose to leave CROG so quickly after obtaining many of the benefits of that position including obtaining credentials in Capital Region hospitals on an expedited basis and developing professional relationships with the local medical community (including valuable sources of referral), all while cloaked in the goodwill of CROG does not render the [*8]covenant unreasonable or overly burdensome.[FN3]
Finally, the Court is not persuaded by plaintiff's reliance on the American Medical Association ("AMA") Code of Ethics as a basis for arguing that enforcement of the covenant would be harmful to the public. The Code of Ethics "discourages", but does not prohibit, the use of post-employment covenants that restrict the right of a physician to practice medicine (AMA Code of Medical Ethics, Ops of Professional rights and Responsibilities, Policy No. E-9.02). The fact that the AMA may "discourage" physicians from entering into such covenants does not render them unlawful, unethical or harmful to the public.
Enforcement of the covenant here would leave Dr. Awwad free to practice otolaryngology in
all but a small portion of New York State (including the region where he did his residency) and
anywhere else in the country. Further, since the Court has concluded Dr. Awwad should not be
restrained from practicing general medicine, he is free to help meet the health care needs of
Capital Region residents in that manner if he so chooses. Under these circumstances and in light
of the long common-law tradition of enforcing reasonable post-employment covenants among
medical professionals, plaintiff has not demonstrated that enforcement of the covenant here
would be contrary to the public interest.
As discussed supra, plaintiff also claims that he was fraudulently induced by CROG to agree to the restrictive covenant. Specifically, plaintiff claims that during the course of negotiations with CROG, Dr. Greenberg represented that all other CROG physicians, including its equity partners, were bound by the same restrictive covenant that he was asked to sign. Plaintiff claims that: he was unaware that Dr. Greenberg's representations were false; such representations were made for the purpose of inducing him to execute the Agreement; and he would not have executed the Agreement if he had known of the falsity of Dr. Greenberg's representations. In support of these contentions, plaintiff offers his own affidavit, as well as one sworn to by Dr. Foyt. Greenberg responds with an affidavit in which he denies plaintiff's allegations.
Given the sharp factual dispute on this point, the Court is unable to resolve this issue as a
matter of law. Defendant's arguments to the contrary call for the Court to weigh competing
evidence, which is not permissible on a motion for summary judgment.
Based on the foregoing, the Court concludes that defendant has established that the
restrictive covenant is reasonable in time and geographic area, not harmful to the general public
and not unreasonably burdensome to plaintiff. The Court also concludes that defendant has
established legitimate interests warranting enforcement of the covenant. What remains
unresolved is plaintiff's contention that he was fraudulently induced to execute the Agreement
containing the restrictive covenant a contention that goes to both the validity and enforceability
of the covenant and whether it is appropriate for the Court to exercise its authority to narrow the
scope of the covenant so as to narrowly tailor it to CROG's legitimate interests in restricting Dr.
Awwad from the practice of otolaryngology. Accordingly, the Court must deny both CROG's
[*9]motion and Dr. Awwad's cross-motion for summary
judgment on the issue of the validity and enforceability of the restrictive covenant, with the claim
of fraudulent inducement being reserved for trial.
Defendant seeks a preliminary injunction enforcing the restrictive covenant. In order to
obtain preliminary injunctive relief, the moving party 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 in its favor" (Marietta Corp. v Fairhurst, 301
AD2d 734, 736 [3rd Dept 2003] [citation omitted]). In determining whether plaintiff has met this
standard, the Court is mindful that a preliminary injunction is a "drastic remedy which is not
routinely granted" (id.).
A.Likelihood of Success
Based on the summary judgment analysis set forth supra, the Court concludes that
defendant has demonstrated a likelihood of success in establishing that the restrictive covenant is
valid and enforceable. The only issue of material fact that precluded summary judgment in
defendant's favor is plaintiff's claim that the restrictive covenant was the product of fraudulent
inducement. However, the Court finds that defendant has demonstrated a sufficient likelihood of
success on this point as to warrant preliminary injunctive relief. The record demonstrates that
plaintiff was represented by counsel in his pre-employment dealings with CROG, that the terms
of the Agreement were the product of negotiation between counsel, and that the employment
agreement a writing that appears clear and complete on its face includes the restrictive
covenant but makes no reference to the post-employment covenants of other CROG physicians
(unlike the agreement negotiated by Dr. Sara Scheid). Under these circumstances, the Court finds
that plaintiff is unlikely to succeed on this claim, particularly with respect to demonstrating
reasonable reliance on any alleged oral misrepresentations (see e.g. Skillgames, LLC v. Brody, 1 AD3d 247, 250 [1st Dept
In addition to demonstrating a likelihood of success, a party seeking a preliminary injunction must also show the prospect of irreparable injury if such relief is not granted (see Town of Liberty Volunteer Ambulance Corp. v Catskill Regional Med. Ctr., 30 AD3d 739 [3d Dept 2006]). Courts have found irreparable harm in cases similar to this based on
a loss of patients in a medical speciality, permanent loss of revenues from those patients . . . ,
and loss of referral business usually garnered from clients. Loss of goodwill associated with a
business, which is difficult to quantify, can constitute irreparable injury even if monetary
damages, as well as injunctive relief, are requested.
(Battenkill, 1 AD3d at 859 [citations omitted]). Accordingly, the Court concludes that defendant has met its burden of establishing irreparable harm here.
C.Balancing of the Equities
CROG is a longstanding medical practice group that brought Dr. Awwad to the Capital Region (an area where he had only limited pre-employments ties), gave him access to its base of patients, expended considerable resources to ensure that he was appropriately trained and [*10]credentialed, cloaked him with its goodwill in the local medical community and put him on a track to a full-fledged equity partnership.
In bringing Dr. Awwad to the Capital Region and into the practice group, CROG insisted that his voluntary withdrawal should be coupled with a restrictive covenant preventing him from competing against CROG for a limited duration.[FN4] Plaintiff, who was represented by counsel, agreed and thus accepted the many benefits of his employment with CROG. Under these circumstances, the Court sees considerable equities in favor of defendant.
Plaintiff argues that defendant's conduct in fraudulently inducing him to agree to the
restrictive covenant tips the balance of the equities in his favor. However, as set forth
supra, the Court concludes that plaintiff is unlikely to succeed in establishing this claim.
Plaintiff also points to his relatively brief service with CROG in relation to the duration of the
covenant. The Court found this argument unpersuasive in the context of the reasonableness of
covenant, and finds it even less persuasive as an equitable argument. Accordingly, the Court
finds that the balance of the equities here tip decidedly in favor of defendant.
"[P]rior to the granting of a preliminary injunction, the plaintiff shall give an undertaking in
an amount to be fixed by the court, that the plaintiff, if it is finally determined that he or she was
not entitled to an injunction, will pay to the defendant all damages and costs which may be
sustained by reason of the injunction" (CPLR 6312). In this case, however, the employment
agreement expressly waives an undertaking, providing that "[Dr. Awwad] agrees that injunctive
or other equitable relief will be available to enforce the covenants of this provision, such relief to
be without the necessity of posting a bond, cash or otherwise" (§ 6.2). Given the Court's
conclusion that plaintiff has not demonstrated a likelihood of success on his claim of fraudulent
inducement, the Court sees no basis for denying effect to the parties' agreement on this point.
Accordingly, the Court will dispense with the requirement of an undertaking.
Defendant also moves for summary judgment on its fifth cause of action, seeking an award
of attorney's fees pursuant to the employment agreement. The Agreement provides that "[Dr.
Awwad] agrees to pay any attorney's fees, court costs, and expenses incurred by CROG if CROG
chooses . . . to enforce any provision under this Article and CROG prevails" (§
6.3).[FN5] Given that
material issues of disputed fact preclude a final determination on the validity or invalidity of the
restrictive covenant, the Court declines to take up the issue of attorney's fees at this time.
Accordingly, this prong of defendant's motion is denied without prejudice.
The motion by Capital Region Neurosurgery ("CRN") and Dr. Edward Scheid ("Scheid") to be joined as plaintiffs in this action is denied. CPLR 1001(a) defines as persons who should [*11]be joined as parties those "who might be inequitably affected by the judgment in the action." As movants have failed to demonstrate how the judgment might inequitably affect them, they are not entitled to intervene.
The present case involves the determination of issues arising out of the employment contract entered into between plaintiff and defendant. Neither movant had any role or involvement in the negotiation or execution of that contract. Defendant, moreover, has not raised a claim that either movant tortiously interfered with that contract. None of the factual or legal issues relevant to the present controversy requires the participation of either movant, and "complete relief is to be accorded between the persons who are parties to the action" without the need for movants' joinder (CPRL 1001 [a]).
While CRN might be "affected" by the outcome of this litigation inasmuch as it is plaintiff's current employer and Scheid might be tangentially "affected" as the owner of CRN, neither CRN nor Scheid have demonstrated how this could be considered "inequitable." The language of the CPLR clearly does not allow joinder of all persons who might feel some effect or impact from a judicial order or judgment; rather, the Legislature limited participation in lawsuits to those who might be affected "inequitably." Our appellate courts have interpreted this provision to mean that there is no error in failing to join a person whose interests "stand and fall" with the interests of one or more of the named parties (see Country Vill. Towers Corp. v Preston Communications, 289 AD2d 363 [2d Dept 2001], quoting Matter of Doner v Comptroller of the State of N.Y, 262 AD2d 750, 751 [3d Dept 1999]; see also Matter of Mount Pleasant Cottage School Union Free School Dist. v Sobol, 163 AD2d 715, 716 [3d Dept 1990], aff'd 78 NY2d 935 ).
In Country Village Towers, supra, the plaintiff-licensor sued the defendant-licensee for breach of a communications site licensing agreement. The Appellate Division held that the sublicensees, who maintained equipment at the site, were not necessary parties who should have been joined in the action. The Court held that, while the sublicensees might have been affected by the outcome of the action, they could not have been "inequitably affected" by it, "as they possessed no rights independent of their contract with the licensee" (289 AD2d at 364). In the present case, CRN, and to a lesser extent Scheid, may be affected by the outcome of this lawsuit inasmuch as plaintiff is currently an employee of CRN and his ability to perform otolaryngological services within a certain radius of CROG offices is the subject of this action.[FN6] Nonetheless, as neither CRN nor Scheid have any rights independent of whatever employment agreement CRN may have with plaintiff, neither movant can be "inequitably affected" by the judgment in this case. They therefore have no right to intervene in this controversy.
The nub of the dispute here lies with movants' interchange of the word "adverse" for "inequitable" throughout their papers. Case law interpreting CPLR 1001(a) is clear, however, that merely because an outcome may be "adverse" does not render it "inequitable" (compare [*12]Matter of Dyno v Rose, 260 AD2d 694 [3d Dept 1999] and Matter of Techler v Lake George Park Commn., 261 AD2d 690 [3d Dept 1999] with Harper v New York State Board of Elections, 34 AD3d 919 [3d Dept 2006] and Matter of Marland v Ambach, 79 AD2d 48 [3d Dept 1981]).
Movants' position is further weakened by the fact that they are represented by the same counsel as plaintiff. The ramifications of this are twofold. First, as their counsel could not ethically represent movants and plaintiff together if their interests conflicted, movants can be assured that their interests indeed "stand and fall" with those of plaintiff. Moreover, as plaintiff is represented by the very same attorneys movants have chosen to represent their position, movants may be confident that the quality of zealous representation that plaintiff is receiving and shall continue to receive will be of exactly the same caliber as if movants were joined as parties before the Court.
In addition, allowing intervention in this case would only serve to detract from the orderly and prompt adjudication of the merits of this controversy. Movants simultaneously seek to intervene in this action and to disqualify defendant's counsel from further representation of its client. Were movants allowed to participate in this action, the factual issues raised in the papers relative to the alleged conflict of interest on the part of defendant's counsel may well require an evidentiary hearing (see Lightning Park v Wise, Lerman & Katz, 197 AD2d 52 [1st Dept 1994]). This would, of course, create substantial delay and considerable additional expense to the parties. Additionally, were the claimed conflict of interest to be proven, defendant would be deprived of the counsel of its choosing.
In short, then, allowing movants to intervene in this case would without doubt generate far more heat than light. Denying joinder, on the other hand, renders the claim of conflict of interest academic and obviates the need for any wasteful tangential proceedings. In light of this determination the Court need not address defendant's contention that the application for intervention was merely a tactical ploy designed specifically to frustrate the orderly process of this litigation.
Accordingly, it is
ORDERED that defendant's motion for summary judgment declaring the restrictive covenant valid and enforceable is denied in accordance with the foregoing; and it is further
ORDERED that defendant's motion for a preliminary injunction is granted and plaintiff is hereby enjoined and restrained during the pendency of this action from practicing otolaryngology within a radius of thirty (30) miles of any facility at which CROG provides otolaryngology services; and it is further
ORDERED that defendant's motion for summary judgment seeking an award of attorney's fees is denied without prejudice; and it is further
ORDERED that plaintiff's motion for summary judgment declaring the restrictive covenant invalid and unenforceable is denied; and it is further
ORDERED that the motion to join Capital Region Neurology and Dr. Edward Scheid as plaintiffs is denied; and it is further
ORDERED that the motion to disqualify defendant's counsel is denied as academic.
This constitutes the Decision and Order of the Court. All papers, including this Decision and
Order are returned to defendant's counsel. The signing of this Decision and Order shall not [*13]constitute entry or filing under CPLR Rule 2220. Counsel is not
relieved from the applicable provisions of that Rule respecting filing, entry and Notice of Entry.
Dated: Albany, New York
November 27, 2007
RICHARD M. PLATKIN
Footnote 1: Litigation initiated by Dr. Sara Scheid concerning the validity and enforceability of the restrictive covenant contained in her employment agreement with CROG is the subject of a pending action this Court (Supreme Court, Albany County, Commercial Division, Index No. 5017-07).
Footnote 2: In this connection, the Court notes that Section 6.3 of the Agreement provides that the parties "agree that if any restriction [with respect to the restrictive covenant] is held by any court to be unenforceable or unreasonable, a lesser restriction will be enforced in its place . . . ."
Footnote 3: Further, the Court notes that the employment agreement provided Dr. Awwad the option of buying out of the restrictive covenant for the sum of $150,000.
Footnote 4: As noted supra, CROG also gave Dr. Awwad the option of making a one-time payment of $150,000 to relieve himself of the restrictive covenant an option he did not exercise (unlike Dr. Sara Scheid).
Footnote 5: The agreement also provides that the Court may award reasonable attorney's fees, costs and expenses to the prevailing party.
Footnote 6: Notably, movants have not disclosed in their papers whether plaintiff is a contract employee of CRN or merely an employee-at-will. While this does not affect the outcome of the present motion, as the former situation would imbue movants with no better a claim than that of the sublicensees in Country Village Towers, supra, if plaintiff is in fact an at-will employee, movants' position is yet the weaker.