Clark v. BluePearl Kentucky, LLC

22 F. Supp. 3d 709, 2014 U.S. Dist. LEXIS 72246, 2014 WL 2218143
CourtDistrict Court, W.D. Kentucky
DecidedMay 28, 2014
DocketCivil Action No. 3:14-CV-00259-TBR
StatusPublished

This text of 22 F. Supp. 3d 709 (Clark v. BluePearl Kentucky, LLC) is published on Counsel Stack Legal Research, covering District Court, W.D. Kentucky primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Clark v. BluePearl Kentucky, LLC, 22 F. Supp. 3d 709, 2014 U.S. Dist. LEXIS 72246, 2014 WL 2218143 (W.D. Ky. 2014).

Opinion

MEMORANDUM OPINION AND ORDER

THOMAS B. RUSSELL, Senior District Judge.

This matter is before the Court upon Plaintiff Jason Clark’s Motion for Declaratory Judgment that Defendant BluePearl Kentucky, LLC “has no right to enforce a non-compete agreement between Plaintiff [711]*711and his former employer.” (Docket No. 10.) Defendant BluePearl Kentucky, LLC has responded. (Docket No. 12.) Plaintiff Clark has replied. (Docket No. 13.) This matter is now fully briefed and ripe for adjudication. For the following reasons, the Court will DENY Plaintiff Clark’s Motion for Declaratory Judgment. (Docket No. 10.)

BACKGROUND

In July 2007, Plaintiff Clark, a veterinarian specializing in diseases of the eye, entered into an employment and noncompetition agreement (collectively “Employment Agreement” or “Agreement”) with Eye Care for Animals, Inc. (ECFA). (Docket No. 1-2, at 3.) ECFA furnishes and leases employees to veterinary practices around the country. Beginning in 2010, ECFA leased Clark to Kentucky Eye Care for Animals, LLC (KECFA).1 (Docket No. 1-2, at 4.)

In August 2013, KECFA went out of business and terminated its relationship with Clark claiming that it was not profitable. (Docket No. 1-2, at 5.) In September 2013, KECFA sold its assets, including its rights under the Employment Agreement between ECFA and Clark, to Defendant BluePearl, one of its former competitors. (Docket No. 1-2, at 5.)

Through his communications with ECFA and BluePearl, Clark has learned that BluePearl will seek to enforce the noncompetition portion of the Agreement if he takes a job in the “Restricted Territory” as defined in the Agreement. (Docket No. 10-1, at 3-4.) Clark brings this Motion for Declaratory Judgment requesting this Court declare BluePearl has no right to' enforce the non-compete agreement. (Docket No. 10.)

I. Employment and Noncompetition Agreement

The Employment Agreement recites that ECFA furnishes and leases employees to entities, referred to as “Practices”, engaged in the practice of veterinary medicine and that specialize in veterinary ophthalmology. (Docket No. 12-1, at 2.) It also states that ECFA employs Clark “for the purpose of providing veterinary medical and veterinary ophthalmology services to the Practices.” (Docket No. 12-1, at 4.) Finally, it designates the “Practices” as intended beneficiaries of the Agreement and specifically states they, in addition to ECFA, “may enforce the Employee Covenants set forth in Attachment B” — which includes the covenant not to compete. (Docket No. 12-1, at 10.)

The covenant not to compete restricts Clark from practicing veterinary ophthalmology within ten miles of any veterinary ophthalmology practice where Clark worked for one year prior to his termination of his employment with ECFA. (Docket No. 12-1, at 16.) This restriction lasts for one year following termination of Clark’s employment with ECFA. (Id.) In relevant part, it states:

A. Covenant Not to Compete. Upon the termination of Employee’s employment with ECFA, for any reason, Employee hereby expressly covenants and agrees that, during the Restricted Period, as defined below, and within the Restricted Territory, as defined below, Employee will not practice veterinary ophthalmology, directly or indirectly, alone or with any partner, or as an owner, manager,- principal, employee or independent contractor of any profes[712]*712sional association or corporation. Upon termination of employment, Employee will not be restricted from practicing general veterinary medicine, but will be limited from practicing veterinary ophthalmology within the Restricted Territory and during the Restricted Period.

(Docket No. 12-1, at 16.) “Restricted Territory” includes an area within a radius of ten miles of any veterinary ophthalmology practice where Employee practiced during twelve months prior to the date Employee’s employment with ECFA terminated. (Id.) “Restricted Period” means during the term of employment and one year following the termination of employment. (Id.)

DISCUSSION

Clark argues BluePearl cannot enforce the non-compete agreement because: (1) BluePearl is not a third-party beneficiary of the agreement; (2) the circumstances under which the Agreement could be assigned have not been met and, in any event, the assignment is prohibited; and (3) he can terminate the Agreement under Article IV, B(2)(b). The Court will address each of these arguments.

I. KECFA Was a Third Party Beneficiary of the Agreement

The Court finds that KECFA is a third party beneficiary of the Agreement. Whether a party is third party beneficiary is a question of law for the Court to determine. See, e.g., Sherman v. First American Title Ins. Co., 201 Ariz. 564, 38 P.3d 1229, 1231-32 (Ariz.Ct.App.2002); Araiza v. U.S. West Business Resources, 183 Ariz. 448, 904 P.2d 1272, 1278 (Ariz.Ct.App.1995).2 Under Arizona law, for a person to recover as a third party beneficiary the contacting parties must intend to directly benefit that person and must indicate that intention in the contract itself. Sherman, 38 P.3d at 1232. As stated in Sherman,

the third person must be the real prom-isee. The promise must be made to him in fact ... and it is not enough that the contract may operate to his benefit but it must appear that the parties intended to recognize him as the primary party in interest and as privy to the promise.

Id. (citations omitted). “A third party intended beneficiary is found where recognition of the right to performance in the beneficiary is appropriate to effectuate the intention of the parties, and the circumstances indicate that the promise intended to give the beneficiary the benefit of the promised performance.” Supplies for Industry, Inc. v. Christensen, 135 Ariz. 107, 659 P.2d 660, 662 (Ariz.Ct.App.1983) (citing Restatement (2D) of Contracts, § 302 (1982) (upholding injunction against a former employee of a business pursuant to a covenant not to compete that had been assigned to another business)).

The Agreement designates the “Practices” as intended beneficiaries and specifically states they, in addition to ECFA, “may enforce the Employee Covenants set forth in Attachment B” — which includes the covenant not to compete. (Docket No. 12-1, at 10.) Notably, the Agreement states “it is the parties’ express intention that this Agreement directly benefit ... the Practices by ... (4) protecting the Practices’ business, clients and operations.” (Docket No. 12-1, at 10.) Therefore, this Court finds that the “Practices” would be third party beneficiaries of the covenant not to compete because they were the “primary” parties in interest and the parties intended to “recognize” them. [713]*713Clark’s citation to Armbruster v. Wage-Works, Inc., 958 F.Supp.2d 1072 (D.Ariz.2013), is clearly distinguishable because of the express provisions in the Agreement indicating an intention to recognize the Practices as a primary party in interest.

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Bluebook (online)
22 F. Supp. 3d 709, 2014 U.S. Dist. LEXIS 72246, 2014 WL 2218143, Counsel Stack Legal Research, https://law.counselstack.com/opinion/clark-v-bluepearl-kentucky-llc-kywd-2014.