Carolina Med. Partners, Pllc v. Shah

2023 NCBC 6

• Court: North Carolina Business Court
• Decided: January 24, 2023
• Docket: 22-CVS-13767
• Status: Published

Opinion

Carolina Med. Partners, PLLC v. Shah, 2023 NCBC 6.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION MECKLENBURG COUNTY 22 CVS 13767

CAROLINA MEDICAL PARTNERS, PLLC; NIMISH PATEL; and SHEPHALI PATEL,

Plaintiffs, ORDER AND OPINION ON v. DEFENDANTS’ PARTIAL MOTION TO DISMISS AMIT G. SHAH and PALMETTO MEDICAL GROUP, PLLC,

Defendants.

1. Nimish Patel and Shephali Patel are physicians. For many years, they

practiced together with Amit Shah, also a physician. But no more: mutual distrust

between the two sides led to a mutual decision to divide their practice and end their

professional relationship. It has been a messy divorce. Only with the help of a

mediator were the parties able to agree on the terms of separation. Now, the Patels

have brought this lawsuit, claiming that they have lived up to their end of the bargain

but that Shah hasn’t.

2. Shah and his fellow defendant, Palmetto Medical Group, PLLC, have moved

to dismiss one of the six claims asserted against them. (ECF No. 22.) For the

following reasons, the Court GRANTS the motion.

Moore & Van Allen PLLC, by Christopher D. Tomlinson, Caroline F. Savini, and Sarah H. Negus, for Plaintiffs Carolina Medical Partners, PLLC, Nimish Patel, and Shephali Patel.

K&L Gates LLP, by Marla T. Reschly and Daniel D. McClurg, for Defendants Amit G. Shah and Palmetto Medical Group, PLLC.

Conrad, Judge. I. BACKGROUND

3. The Court does not make findings of fact on a motion to dismiss. The

following background assumes that the allegations of the verified complaint are true.

4. Before their falling out, Shah and the Patels were joint owners of more than

half a dozen businesses. Chief among them was Palmetto Medical Group, an adult

and senior primary care practice based in South Carolina. (See V. Compl. ¶¶ 15, 18,

ECF No. 3.)

5. By the middle of 2021, the relationship between Shah and the Patels had

soured, with each side leveling accusations of misconduct against the other. So they

agreed to mediate their disputes and go their separate ways. The mediation did not

produce a full and final settlement of every dispute. It did, however, produce a

framework for dividing the parties’ many business interests, which they

memorialized in a Practice Separation Agreement. (See V. Compl. ¶ 20 & Ex. A

[“PSA”].)

6. There is no need to go over every term of the agreement. Just a few are

relevant. To start, Shah agreed to buy the Patels’ interest in Palmetto Medical Group

following an appraisal. Thus, one practice became two. Shah stayed at Palmetto

Medical Group as its sole owner. The Patels left and opened a new, competing

practice called Carolina Medical Partners, PLLC. (See V. Compl. ¶ 22; PSA § 1(b).)

7. Next, the parties agreed to notify patients that the Patels were forming their

own practice and to give them the option to stay at Palmetto Medical Group or to

follow the Patels to Carolina Medical Partners. Patient choice was to be paramount. Both sides promised “to ensure that a patient’s choice of primary care provider is

honored” and not to “unduly influence any patient.” Confused patients who called

Palmetto Medical Group asking for the Patels, for example, were supposed to be given

contact information for Carolina Medical Partners. (V. Compl. ¶ 23; PSA § 6.)

8. Anticipating disagreements, the parties adopted dispute resolution

procedures. They also added a choice-of-law clause, which states that the agreement

“shall be construed and governed in accordance with” North Carolina law. (V. Compl.

¶¶ 34, 51, 53; PSA § 12.)

9. As alleged, Shah breached the agreement almost immediately. Among other

things, Shah lobbied patients to stay with Palmetto Medical Group, made sure that

some patients did not get the notice about the Patels’ new practice, and changed the

scheduling process “so that the Patels’ patients were seen by other providers.”

Palmetto Medical Group continued to list the Patels on its website as available

physicians well after their departure. It also continued to send appointment

reminders and scheduling requests to the Patels’ patients, some of whom showed up,

asked for the Patels, and were instead seen by another practitioner. And when

patients chose to go to Carolina Medical Partners, Shah and Palmetto Medical Group

refused to transfer their medical records. (See V. Compl. ¶¶ 24, 97, 112, 113.)

10. The Patels and Carolina Medical Partners brought this suit against Shah

and Palmetto Medical Group “to enforce” the Practice Separation Agreement. For

simplicity, the Court will refer to the plaintiffs as the Patels and the defendants as

Shah. There are four claims for breach of the agreement, including the provisions on patient notification and transition. There is a fifth claim for fraud. Last, there is a

sixth claim labeled “Unfair and Deceptive Trade Practices,” which is based on the

alleged “acts intended to lure the Patels’ patients to” Palmetto Medical Group. (See,

e.g., V. Compl. ¶¶ 1, 10, 91, 97, 112–14.)

11. Shah has moved to dismiss the sixth claim but no others. The motion is fully

briefed, and on 5 January 2023, the Court held a hearing at which all parties were

represented by counsel. The motion is ripe.

II. LEGAL STANDARD

12. A motion to dismiss for failure to state a claim “tests the legal sufficiency of

the complaint.” Isenhour v. Hutto, 350 N.C. 601, 604 (1999) (citation and quotation

marks omitted). Dismissal is proper when “(1) the complaint on its face reveals that

no law supports the plaintiff’s claim; (2) the complaint on its face reveals the absence

of facts sufficient to make a good claim; or (3) the complaint discloses some fact that

necessarily defeats the plaintiff’s claim.” Corwin v. Brit. Am. Tobacco PLC, 371 N.C.

605, 615 (2018) (citation and quotation marks omitted). In deciding the motion, the

Court must treat the well-pleaded allegations of the complaint as true and view the

facts and permissible inferences in the light most favorable to the nonmoving party.

See, e.g., Sykes v. Health Network Sols., Inc., 372 N.C. 326, 332 (2019). The Court

may also consider documents, such as contracts, that are the subject of the complaint.

See, e.g., Oberlin Cap., L.P. v. Slavin, 147 N.C. App. 52, 60 (2001). III. ANALYSIS

13. The claim for “Unfair and Deceptive Trade Practices” is a bit enigmatic. On

its face, it appears to be grounded in statute rather than the common law. But it does

not name any statute, act, or jurisdiction as the source of the cause of action.

14. Shah reads the claim as one under N.C.G.S. § 75-1.1, which proscribes

“unfair or deceptive acts or practices in or affecting commerce.” He contends that the

complaint does not state a valid claim under section 75-1.1 because the alleged acts,

even if unfair or deceptive, are not in or affecting commerce. In support, he relies

primarily on statutory language that defines “commerce” to exclude “professional

services rendered by a member of a learned profession.” N.C.G.S. § 75-1.1(b).

15. In their opposition brief, the Patels say that the claim is not grounded in

section 75-1.1 or North Carolina law but is instead grounded in South Carolina’s

Unfair Trade Practices Act, which has no analogous exemption for members of a

learned profession. At the hearing, though, the Patels’ counsel switched course,

arguing that the claim was made in the alternative under either North Carolina law

or South Carolina law. Later in the hearing, counsel switched course again, arguing

that both States’ statutes apply because part of the claim is based on a breach of the

Practice Separation Agreement that is governed by its North Carolina choice-of-law

clause while another part is based on extracontractual conduct governed by South

Carolina law.

16. It goes without saying that a complaint should not be a moving target. Basic

pleading rules make that clear. A plaintiff must give sufficient notice of its claim to allow its adversary and the Court “to understand the nature of [the claim] and the

basis for it.” Sutton v. Duke, 277 N.C. 94, 104 (1970); see also N.C. R. Civ. P. 8(a)(1).

Whether this claim meets that standard is questionable, given the Patels’ own

uncertainty.

17. Nevertheless, the Court will assume for argument’s sake that the claim

draws on both North Carolina and South Carolina law. Either way, it is deficient.

18. First, South Carolina law does not apply to any claim for unfair and

deceptive trade practices predicated on a breach of the Practice Separation

Agreement. This is because the parties agreed that North Carolina law would govern

the interpretation and implementation of the agreement. And “parties to a business

contract may agree in the business contract that North Carolina law shall govern

their rights and duties in whole or in part . . . .” N.C.G.S. § 1G-3.

19. Perhaps South Carolina law would apply to extracontractual conduct, as the

Patels contend. But none is alleged. Twice, the complaint states that the Patels

brought this action “for breach of and to enforce” the agreement. (Compl. ¶¶ 1, 10.)

Moreover, each alleged unfair and deceptive act is also alleged to be a breach of the

agreement. These acts include sending deceptive appointment reminders and

scheduling requests to the Patels’ patients, pressuring patients to see Shah or

another practitioner rather than the Patels, falsely advertising on a website that the

Patels were accepting patients at Palmetto Medical Group, and otherwise trying to

influence patients’ choice of provider. (Compare Compl. ¶¶ 24, 91, 97, with ¶¶ 112–

14; see also PSA § 6.) 20. The opposition brief confirms as much. In their own words, the Patels filed

suit “for breach of and to enforce the terms of the” Practice Separation Agreement.

They argue, for example, that “Shah’s deceitful conduct arises out of a contractual

arrangement”; that he “purposefully deviated from” contract terms regarding patient

transition “in breach of the” agreement; that acts such as “deceptively soliciting

patients and business relationships away from the Patels” were a “breach of several

provisions”; and that the “conduct occurred in the context of transitioning patients

and business opportunities to a different provider of medical services, pursuant to a

contractual relationship and related contractual obligations.” (Pls.’ Opp’n Br. 1, 3–5,

16, 18, ECF No. 31.)

21. At no point have the Patels pointed to anything other than contractual

conduct as the basis for their claim. Their brief alludes to allegations that Shah

disparaged them and interfered with their business relationship with an assisted

living facility. Yet these alleged acts are outside the claim for unfair trade practices

and, in any event, are also named among the claimed breaches of the Practice

Separation Agreement. (See, e.g., Compl. ¶¶ 25, 26, 39–44, 91, 97; PSA §§ 7, 11.)

22. In short, the claim for “Unfair and Deceptive Trade Practices” is predicated

entirely on breaches of the Practice Separation Agreement. Thus, the parties’

selection of North Carolina law governs, and the complaint fails to state a claim under

South Carolina’s Unfair Trade Practices Act.

23. Turning to North Carolina law, the Court also concludes that the complaint

fails to state a claim under section 75-1.1. As discussed, the statute defines commerce to exclude “professional services rendered by a member of a learned profession.”

N.C.G.S § 75-1.1(b). This statutory exemption, which “for medical professionals has

been broadly interpreted,” requires a two-part inquiry: “First, the person or entity

performing the alleged act must be a member of a learned profession. Second, the

conduct in question must be a rendering of professional services.” Sykes, 372 N.C. at

334 (cleaned up); accord Wheeless v. Maria Parham Med. Ctr., Inc., 237 N.C. App.

584, 589 (2014).

24. Without question, Shah (a physician) and Palmetto Medical Group (a

primary care practice) are members of a learned profession. The only issue is whether

their alleged conduct involves the rendering of medical services. It does.

25. All the alleged unfair or deceptive acts concern efforts to influence patients

to choose Shah over the Patels as medical provider. The complaint puts it bluntly:

Shah intended “to deceive patients into seeking medical service at [Palmetto Medical

Group] instead of with the Patels.” (Compl. ¶ 114 (emphasis added).) This alleged

conduct—centered on patient solicitation—“is directly related to providing patient

care” and fits comfortably within the statutory exemption. Sykes, 372 N.C. at 336;

see also Aesthetic Facial & Ocular Plastic Surgery Ctr., P.A. v. Zaldivar, 264 N.C.

App. 260, 275 (2019) (concluding that the solicitation of patients and practice of

medicine alleged to be in breach of contract arose from a rendering of professional

services); Alamance Fam. Prac., P.A. v. Lindley, 2018 NCBC LEXIS 83, at *24 (N.C.

Super. Ct. Aug. 14, 2018) (granting motion to dismiss claim based on allegations that defendant “began an allergy testing practice, obtained patient information, solicited

patients, and attempted to secure a referral agreement”).

26. Accordingly, the learned profession exemption applies, and the Patels have

not adequately alleged acts in or affecting commerce, as required by section 75-1.1.

The Court need not and does not reach Shah’s alternative arguments for dismissal.

IV. CONCLUSION

27. For all these reasons, the Court GRANTS the motion. The claim for unfair

and deceptive trade practice is DISMISSED.

SO ORDERED, this the 24th day of January, 2023.

/s/ Adam M. Conrad Adam M. Conrad Special Superior Court Judge for Complex Business Cases