Dr. James Mungas v. Great F

2009 MT 426
CourtMontana Supreme Court
DecidedDecember 15, 2009
Docket09-0046
StatusPublished

This text of 2009 MT 426 (Dr. James Mungas v. Great F) is published on Counsel Stack Legal Research, covering Montana Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Dr. James Mungas v. Great F, 2009 MT 426 (Mo. 2009).

Opinion

December 15 2009

DA 09-0046

IN THE SUPREME COURT OF THE STATE OF MONTANA 2009 MT 426

DR. JAMES MUNGAS, DR. MICHAEL DUBE, DR. JAMES ENGLISH, DR. THOMAS KEY, DR. DALE MORTENSON, DR. GRANT HARRER, and DR. GERALD SPENCER (“INDEPENDENT DOCTORS”),

Plaintiffs and Appellees,

v.

GREAT FALLS CLINIC, LLP,

Defendant and Appellant.

APPEAL FROM: District Court of the Eighth Judicial District, In and For the County of Cascade, Cause No. ADV 06-187 Honorable Kurt Krueger, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Robert B. Pfennigs; Axilon Law Group, PLLC, Great Falls, Montana

T. Thomas Singer; Jardine, Stephenson, Blewett & Weaver, P.C., Billings, Montana

For Appellees:

Michael D. Cok, Theodore R. Dunn; Cok Wheat & Kinzler, Bozeman, Montana

Submitted on Briefs: September 3, 2009

Decided: December 15, 2009

Filed:

__________________________________________ Clerk Justice John Warner delivered the Opinion of the Court.

¶1 The Eighth Judicial District Court, Cascade County, granted summary judgment in

favor of the Appellees, who are physicians and former partners in the Great Falls Clinic

(Clinic). The District Court concluded that a portion of the Clinic partnership agreements

is void under § 28-2-703, MCA, as a restraint upon exercising a lawful profession and

granted summary judgment in favor of the Appellees. The Clinic appeals.

¶2 The facts which relate to the positions of Doctors Mungas, Dube, Mortenson,

Harrer and Spencer differ from those relating to Doctors English and Key. The issues

presented are:

¶3 Issue 1: Did the District Court err in not dismissing the claims of Doctors

Mungas, Dube, Mortenson, Harrer and Spencer, because the Clinic’s obligations to them

have been satisfied?

¶4 Issue 2: Is the claim of Dr. English barred by the provisions of § 35-10-619(9),

MCA, a statute of limitation in Montana’s version of the Revised Uniform Partnership

Act?

¶5 Issue 3: Did the District Court err in holding that the goodwill exception to the

prohibition against contracts restraining trade does not apply?

¶6 Issue 4: Did the District Court err in concluding that the provision of the Clinic’s

partnership agreements providing for forfeiture by a dissociating partner who practices in

the Great Falls area is void as a matter of law?

¶7 Issue 5: Did the District Court err in awarding attorney fees?

2 BACKGROUND

¶8 The Great Falls Clinic is a medical partnership that has been operating in Great

Falls since 1916. Over the years, the partners in the Clinic have practiced under various

partnership agreements. The 2001 and 2004 partnership agreements are pertinent to this

case. The 2001 partnership agreement contains the following provision entitled

“Covenant Not To Compete”:

Each Partner agrees that he or she will not, for a period of three years following his or her voluntary withdrawal from the Partnership, enter into or engage in the practice of medicine in the county of the principal place of his or her practice and in any contiguous county thereof, directly or indirectly, as owner, sole proprietor, partner, shareholder, member, employee, consultant, or in any other capacity. In the event said Partner violates this covenant such partner shall forfeit the accounts receivable of his or her capital account referred to in Article 6.1(b)ii and all interest whatsoever in the MontanaCare capital account referred to in Article 6.1(b)iii. 1

The partnership agreement also provides that if a partner leaves the Clinic and is not in

full compliance with the partnership agreement or is expelled, he or she suffers the same

forfeitures. A dissociating partner is paid, over time, his share of the operational profits,

capital contributions to the investment and equipment fund, stock, the actual value of

their equity interest in the Clinic, and his interest in other entities in which the Clinic may

have participated, regardless of his reason for leaving.

¶9 The 2004 partnership agreement changed the title of the covenant not to compete

provision to “Competing After Withdrawal or Retirement.” The 2001 and 2004

covenants restricting a departing partner’s practice differed only in that a partner

1 MontanaCare is a subsidiary partnership of the Clinic. 3 choosing to practice in Great Falls and the surrounding area within three years of

separation would forfeit his interest in the Great Falls Surgery Center (a new subsidiary),

in addition to the forfeitures listed under the 2001 partnership agreement.

¶10 All of the Appellees were parties to either the 2001 or 2004 partnership

agreements and all of them were aware of the noncompetition covenants. The record

shows that none of the Appellees voiced an objection to the noncompetition covenants

during any partnership meetings or at any other time before they left the Clinic.

¶11 Upon their separation from the Clinic, each of the Appellees was asked to sign a

separation agreement. Doctors Mungas, Mortenson, Dube, Harrer and Spencer signed

such an agreement. The separation agreements signed by these Appellees itemized the

amounts paid to them (profits, stock, partnership interest, etc.) and stated,

Both parties agree that the following amounts represent all remaining interest of [the doctor], his heirs, representatives and assigns, in the Partnership and its assets and that payment of the same as herinafter set forth by the GREAT FALLS CLINIC, LLP to [the doctor] shall fully account to him and them for all amounts owing to or to become owing to him by the GREAT FALLS CLINIC, LLP by reason of his Partnership interest.

¶12 Dr. English separated from the Clinic in September 2004. The Clinic sent him a

separation agreement but he refused to sign it. When English notified the Clinic he was

leaving the partnership, he requested that his MontanaCare account and accounts

receivable be paid to him because, in addition to practicing in Great Falls, he would be

practicing outside the geographic area delineated in the noncompetition covenant. The

Clinic denied his request. English received a check and a statement of distribution from

the Clinic.

4 ¶13 Dr. Key did not sign a separation agreement, as well. He received a proposed

separation agreement several months after he left the Clinic in November 2005. Key

understood the proposed agreement was a statement of what he should anticipate

receiving with his separation from the Clinic. He stated in his deposition he did not sign

the separation agreement because he believed the forfeiture clause drives doctors out of

the community and because doctors who have contributed through earnest hard work

should not be penalized financially for a decision that they change their lives and change

their practices. Key further expressed dissatisfaction with the Clinic’s calculation of the

amount he was to receive because, although his day-to-day practice was steady, the

accounting of his production fluctuated.

¶14 From the record, it appears that in February 2006, Key received a check from the

Clinic accompanied by a letter explaining that the amount of his separation payments had

been miscalculated. Key has received and accepted monthly payments of $1,294.48 for

his interest in the Clinic.

¶15 In February 2006, the Appellees filed this action and made several claims.

However, by the time of the final pretrial conference only two claims remained: (1) the

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