Davita Inc. v. Bednar

14 Pa. D. & C.5th 1
CourtPennsylvania Court of Common Pleas, Delaware County
DecidedJune 8, 2010
Docketno. 08-07516
StatusPublished
Cited by2 cases

This text of 14 Pa. D. & C.5th 1 (Davita Inc. v. Bednar) is published on Counsel Stack Legal Research, covering Pennsylvania Court of Common Pleas, Delaware County primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Davita Inc. v. Bednar, 14 Pa. D. & C.5th 1 (Pa. Super. Ct. 2010).

Opinion

BURR, J.,

The plaintiff, DaVita Inc., appeals from this court’s order granting the cross-motion [3]*3of the defendants, Barbara Bednar, Reliant Renal Care Inc., Ñola M. McMullen and Stephanie Bates, for sanctions against the plaintiff for its willful violation of two court orders to produce its chief executive officer, Kent Thiry, for his deposition, and dismissing the plaintiff’s complaint pursuant to Pa.R.C.P. 4019(c)(3).1

The facts giving rise to this action are that the plaintiff, a nationwide multi-billion dollar provider of dialysis and other medical services, purchased Physicians’ Dialysis Inc. (PDT), a company owned by the defendant, Barbara Bednar, on September 1, 2004 for approximately $150,000,000. Pursuant to that merger and in exchange for $1,750,000, Ms. Bednar entered into an agreement with the plaintiff setting forth restrictive covenants prohibiting her from “engaging in any business or business activities in competition with [the plaintiff]” for the ensuing three years and, in relevant part, from soliciting the plaintiff’s employees to curtail their employment with the plaintiff for the ensuing five years, along with a confidentiality proviso. (Executive non-solicitation and non-competition agreement, appended as exhibit 2 to the defendants’ motion for summary judgment, preamble and paragraphs 1 (a), (b) and (c); 2; and 5, pp. 1-4.) This agreement allowed for the plaintiff to seek a remedy for

[4]*4breach in the form of a restraining order or preliminary injunction to restrain Ms. Bednar from such violation without prejudice as to any other available remedies at law and equity. (Id., paragraph (d), p. 3.) An indemnification provision in the agreement set forth a covenant on the part of Ms. Bednar to indemnify the plaintiff for any losses, liability and expenses, including reasonable attorneys’ fees which the plaintiff “may incur as a result of [Ms. Bednar’s] breach of this agreement.” (Id., paragraph 6, p. 5.)

Ms. Bednar left the plaintiff’s employment to form the defendant, Reliant Renal Care Inc. (RRC) and become its president and chief executive officer in the fall of 2007 after her non-competition agreement with the plaintiff had expired. Ms. Bednar later asked the defendants, Ñola M. McMullen and Stephanie Bates, also former employees of the plaintiff, to serve as executives of her new company. Ms. McMullen, who became RRC’s chief operating officer on December 1, 2007 after leaving DaVita on November 9, 2007, and Ms. Bates, who became RRC’s associate director of reimbursement on March 4, 2008 after leaving DaVita on February 25, 2008, had participated in stock option programs during their tenure with the plaintiff. Those programs fell under an overall contract labeled an “equity compensation plan”. The preamble, which sets forth the purpose of the stock option plans, states:

“1. Purpose. The purpose of the DaVita Inc. 2002 equity compensation plan is to promote the interests of DaVita Inc. (company) and its stockholders by enabling the company to offer an opportunity to acquire an equity interest in the company so as to better attract, retain, [5]*5and reward employees, directors, and independent contractors and, accordingly to strengthen the mutuality of interests between those persons and the company’s stockholders by providing those persons with a proprietary interest in pursuing the company’s long-term growth and financial success. Awards under the plan will be made in the issuance of options, restricted stock, stock issuances, stock appreciation rights, and other awards.” (DaVita Inc. 2002 equity compensation plan (as amended and restated effective March 30, 2005), appended as exhibit 5 to the defendants’ motion for summary judgment, paragraph 1, p. 1.)

There is no mention in the foregoing “Equity Compensation Plan” that it was provided to any employee in exchange for a covenant not to compete.

However, a 10-year stock option agreement dated March 2, 1998, that was issued to the defendant, Ms. McMullen, by DaVita’s predecessor, Total Renal Care Holdings Inc., pursuant to the company’s 1997 equity compensation plan, set forth a “non-competition/non solicitation” provision prohibiting the optionee’s participation as an employee in a firm within a 500-mile radius that was in the same business as the issuer and soliciting the issuer’s employees with offers of employment for a period of one year following termination of his/her employment with the issuer. (1997 non-qualified stock option agreement under the 1997 equity compensation plan of Total Renal Care Holdings Inc., signed by the defendant, Nola McMullen on March 2, 1998, exhibit 6 to defendants’ motion for summary judgment, paragraph 7, p. 2.) The within stock option agreement stated that it would terminate 10 years from the date of [6]*6the agreement or three months following the termination of the optionee’s employment with the issuer, whichever came earlier. (Id., paragraph 3(i) and (ii).)

Two five-year stock option agreements issued pursuant to the company’s 1999 equity compensation plan issued by Total Reliant Renal Care Inc. and signed by Ms. McMullen (19,000 and 20,000 shares, respectively) and Ms. Stephanie DiValerio Bates (5,000 and 6,000 shares, respectively), on March 29,2000 and September 14,2000, set forth non-competition, non-solicitation and non-disclosure restrictive covenants of one year’s duration following termination of the optionee’s employment. (Non-qualified stock option agreements under the Total Renal Care Holdings Inc. 1999 non-executive officer and non-director equity compensation plan-employee signed by the defendant, Ñola M. McMullen March 29, 2000, and September 14, 2000, appended as exhibits 7 and 8 to the defendants’ motion for summary judgment, paragraph 10, p. 4 each; Id., Stephanie DiValerio Bates, exhibits 13 and 14 to defendants’ motion for summaiy judgment.)

A five-year stock appreciation rights agreement under the DaVita Inc., 2002 equity compensation plan-employee granted to Ñola M. McMullen on July 1, 2006 also set forth one-year non-competition and non-solicitation restrictive covenants as were found in the stock option agreements signed by Ms. McMullen on March 2,1998, March 29, 2000 and September 14, 2000. (Stock appreciation rights agreement under the DaVita Inc., 2002 equity compensation plan-employee, appended as exhibit 9 to the defendants’ motion for summary judgment, paragraphs 11(a) and (b), unnumbered p. 4.) However, [7]*7this stock option agreement alone provided that, if Ms. McMullen breached the non-compete or non-solicitation agreement within one year following the termination of her employment with the plaintiff, the stock option agreement would terminate on the date upon which she entered into such activity and any gain realized “from exercising all or a portion of this S AR shall be paid by the grantee to the company.” (Id, paragraph 11(c), unnumbered p. 5.)

Ms. McMullen gave sworn deposition testimony that she exercised her stock options granted by the plaintiff by means of a “cashless exchange” whereby the price at which her stocks were sold were paid to her as taxable income. (8/20/08 McMullen deposition 175-76 appended as exhibit 10 to the defendants’ motion for summary judgment.) A stock award exercise statement issued by the plaintiff for the defendant, Ms.

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Bluebook (online)
14 Pa. D. & C.5th 1, Counsel Stack Legal Research, https://law.counselstack.com/opinion/davita-inc-v-bednar-pactcompldelawa-2010.