Riverhills Healthcare, Inc. v. Guo

2011 Ohio 4359

• Court: Ohio Court of Appeals
• Decided: August 31, 2011
• Docket: C-100781
• Status: Published

Opinion

[Cite as Riverhills Healthcare, Inc. v. Guo, 2011-Ohio-4359.] IN THE COURT OF APPEALS FIRST APPELLATE DISTRICT OF OHIO HAMILTON COUNTY, OHIO

RIVERHILLS HEALTHCARE, INC., : APPEAL NO. C-100781 TRIAL NO. A-0709850 Plaintiff-Appellee, : D E C I S I O N. vs. :

Z. GEORGE GUO, M.D., :

Defendant-Appellant. :

Civil Appeal From: Hamilton County Court of Common Pleas

Judgment Appealed From Is: Reversed and Cause Remanded

Date of Judgment Entry on Appeal: August 31, 2011

Dinsmore & Shohl, LLP, Deborah R. Lydon and Michael J. Mott, for Plaintiff- Appellee,

Frost Brown Todd LLC and Matthew C. Blickensderfer, for Defendant-Appellant.

Please note: This case has been removed from the accelerated calendar. OHIO FIRST DISTRICT COURT OF APPEALS

D INKELACKER , Presiding Judge.

I. Facts and Procedure

{¶1} Plaintiff-appellee Riverhills Healthcare, Inc., (“Riverhills”) filed a

complaint against defendant-appellant Z. George Guo, M.D., alleging breach of an

employment agreement and misappropriation of trade secrets. The trial court

granted summary judgment in favor of Riverhills on both claims, and awarded it

damages. Guo has filed a timely appeal from that judgment. We find merit in Guo’s

four assignments of error, and we reverse the trial court’s judgment.

{¶2} The record shows that Riverhills is a private medical practice

operating in greater Cincinnati. Guo worked at Riverhills as a neurologist from

February 2006 until August 2007.

{¶3} Before that, Guo had been in a fellowship program at Ohio State

University, but he had left the program for personal reasons. He worked with several

search firms, one of which informed him of the position at Riverhills. At that time,

Guo had no relationships with patients or physicians in the Cincinnati area. Before

becoming employed at Riverhills, he had registered the internet domain name,

“Medache.com” and several other similar names under his wife’s name, and had

renewed them annually.

{¶4} On February 10, 2006, Guo executed a renewable two-year

employment agreement with Riverhills. It offered Guo the possibility of becoming a

shareholder, which was expected to occur “within the second full year of

employment,” if he met Riverhills’s standards.

{¶5} The agreement also included a covenant not to compete that applied

after termination of Guo’s employment with Riverhills. It prohibited Guo for a year

after leaving Riverhills from practicing within five miles of any Riverhills office or

2 OHIO FIRST DISTRICT COURT OF APPEALS

any hospital to which Riverhills admitted patients. The agreement further stated

that Guo would be “relieved of this restriction only if he immediately pays to

Employer, upon termination of employment, the sum of $175,000.”

{¶6} Guo began practicing at Riverhills, specializing in the treatment of

headaches. Riverhills had problems with his performance almost immediately. It

reduced his salary on occasion due to his alleged lack of productivity.

{¶7} Guo had a number of exchanges with Dr. Thomas Frerick, Riverhills’s

chief operating officer, about whether Riverhills would offer Guo a shareholder

agreement. On June 15, 2007, Guo sent a letter to Frerick, stating that because

Riverhills was not going to offer him a shareholder agreement, it would be in everyone’s

best interest “not to continue my Employment Agreement.”

{¶8} Several days later, Guo drew up an operating agreement for Medache,

LLC, a practice specializing in the treatment of headaches that he planned to start. He

obtained malpractice insurance covering the practice commencing June 18, 2007.

Earlier, he had created and distributed to Riverhills’s patients a business card with his

personal telephone number on it.

{¶9} On June 20, 2007, Guo, while still employed at Riverhills, used his

password to access Riverhills’s patient databases and view patient information from his

home computer for approximately four hours. Guo stated that in light of the claims

about his productivity, he had run several searches in the databases to determine how

many patients he had seen and how much revenue he had produced for Riverhills. He

claimed that these searches had produced no data and that he had not downloaded or

copied any information.

{¶10} After Riverhills learned about the searches, Frerick sent Guo a letter

stating that Riverhills was terminating the employment agreement for cause. Guo left

Riverhills at the end of July 2007. During the fall of 2007, he worked in various

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positions, including one with another neurologist whose office was within five miles of a

Riverhills office. In January 2008, within five miles of a Riverhills office, he opened

Medache Clinic, which used the personal telephone number he had previously given to

some of Riverhills’s patients. He also practiced at a number of hospitals where Riverhills

admitted patients.

{¶11} During that time, Guo saw a number of patients that he had previously

seen at Riverhills. He claimed that those patients had sought him out, and he denied

soliciting them in any way. He noted that Riverhills had written to his patients to inform

them of his departure and had told them that they could continue to see him if they

wished.

II. Standard of Review

{¶12} Before we review Guo’s five assignments of error, we must discuss our

standard of review. An appellate court reviews a trial court’s ruling on a motion for

summary judgment de novo.1 Summary judgment is appropriate if (1) no genuine issue

of material fact exists for trial, (2) the moving party is entitled to judgment as a matter of

law, and (3) reasonable minds can come to but one conclusion and that conclusion is

adverse to the nonmoving party, who is entitled to have the evidence construed most

strongly in his or her favor.2 The trial court has an absolute duty to consider all

pleadings and evidentiary material when ruling on a motion for summary judgment. It

should not grant summary judgment unless the entire record shows that summary

judgment is appropriate.3

1 Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 1994-Ohio-336, 671 N.E.2d 241; Brown v. Lincoln Hts., 1st Dist. Nos. C-100699 and C-100721, 2011-Ohio-3551, ¶7. 2 Temple v. Wean United, Inc. (1977), 50 Ohio St.2d 317, 327, 364 N.E.2d 267; Stinespring v. Natorp Garden Stores (1998), 127 Ohio App.3d 213, 215, 711 N.E.2d 1104. 3 Greene v. Whiteside, 181 Ohio App.3d 253, 2009-Ohio-741, 908 N.E.2d 975 , ¶23.

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III. Misappropriation of Trade Secrets

{¶13} In his first assignment of error, Guo contends that the trial court erred in

granting summary judgment in favor of Riverhills on its claim for misappropriation of

trade secrets. He argues that genuine issues of fact exist for trial. This assignment of

error is well taken.

{¶14} The protection of trade secrets involves a balancing of public policies,

including the protection of employers’ rights in their trade secrets and the right of the

individual to exploit his or her talents. Nevertheless, public policy in Ohio favors the

protection of trade secrets.4 One of the purposes of Ohio’s trade-secret law is to protect

an employer’s investments and proprietary information.5

{¶15} Guo does not dispute that Riverhills’s patient lists and other information

were trade secrets.6 He contends that genuine issues of material fact exist as to whether

he misappropriated the trade secrets. “Misappropriation” means “[a]cquisition of a

trade secret of another by a person who knows or has reason to know that the trade

secret was acquired by improper means[,]” or “[d]isclosure or use of trade secrets of

another without the express or implied consent of the other person by a person who * * *

[u]sed improper means to acquire knowledge of the trade secret.”7

{¶16} In granting summary judgment on this claim, the trial court stated,

“Plaintiff has proffered evidence via affidavit and computer system printouts,

establishing that in the days leading up to his departure, Defendant downloaded and

copied the following: Plaintiff’s referring physician list, Plaintiff’s fee schedules, and

Plaintiff’s patient list (including names and addresses). On June 18, 2007, while still

4 Al Minor & Assoc., Inc. v. Martin, 117 Ohio St.3d 58, 2008-Ohio-292, 881 N.E.2d 850, ¶23. 5 Fred Siegel Co., L.P.A. v. Arter & Hadden, 85 Ohio St.3d 171, 183, 1999-Ohio-260, 707 N.E.2d 853. 6 See Id. at 181-182; Acordia of Ohio, LLC v. Fishel, 1st Dist. No. C-100071, 2010-Ohio-6235, ¶24- 29. 7 R.C. 1333.61(B).

5 OHIO FIRST DISTRICT COURT OF APPEALS

employed by Plaintiff, Defendant set up an operating agreement for Medache, LLC and

obtained medical malpractice insurance, in preparation for his exit from Plaintiff’s

employ. Just days later, between June 19-23, 2007, Defendant downloaded the above-

mentioned data from Plaintiff’s computer system.”

{¶17} The trial correctly summarized Riverhills’s evidence, which showed that

Guo had used improper means, specifically using his computer password for an

improper purpose, to obtain Riverhills’s trade secrets. But the court ignored Guo’s

evidence. Guo testified at his deposition that he had conducted searches using

Riverhills’s software system, OPUS, which he contended was an antiquated system that

was difficult to use. He stated that Riverhills had repeatedly told him that he was not

productive enough, so he had wanted to check its fee schedule and other information to

see whether Riverhills was correct about his productivity. According to Guo, OPUS

limited the user to searching by diagnosis, provider name, or patient mailing address.

He testified that he tried searching using all of these parameters, but kept getting the

response of “0 KB,” which meant no data. He said that he did not generate any data

from these searches and that he did not download or copy any information.

{¶18} Thus, Guo and Riverhills presented different versions of the facts. If we

construe the evidence most strongly in Guo’s favor, as we must when reviewing the trial

court’s decision to grant summary judgment to Riverhills, we find that genuine issues of

material fact exist for trial. As this court has previously stated, “[t]his case presents a

classic example of what cannot be resolved by summary judgment: namely, two

different versions of a story, with the outcome dependent on credibility.”8

{¶19} Riverhills points out that Guo also admitted that he had viewed patient

information and fee schedules. Specifically, he admitted that he had looked at “the

8 Greene, supra, at ¶24, quoting Wygant v. Continental Ins. Agency (Jan. 22, 1999), 1st Dist. No. C-980012.

6 OHIO FIRST DISTRICT COURT OF APPEALS

patients associated with his name,” and that he may have seen information concerning

other doctors’ headache patients.

{¶20} Nevertheless, these admissions did not negate all of his testimony.

Information does not lose its character as a trade secret if it has been memorized.9 But

Guo stated only that he had seen the information, not that he had memorized it.

Further, Dr. Frerick acknowledged that when he had confronted Guo about

downloading information, Guo had “maintained that he did not take that information

with him, but there was no way to know whether he did or not.”

{¶21} Consequently, we hold that the trial court erred in granting summary

judgment in favor of Riverhills on its claim for misappropriation of trade secrets. We

sustain Guo’s first assignment of error.

IV. Breach of Contract/Noncompete Clause

{¶22} In his second assignment of error, Guo contends that the trial court

erred in granting summary judgment on his claim for breach of contract. He first

contends that the covenant not to compete contained in his employment agreement with

Riverhills was not enforceable because it was a severe restriction on his ability to

practice medicine and was injurious to the public. We disagree.

A. Noncompete Clause was Reasonable

{¶23} A court may enforce a noncompetition clause in an employment

agreement only to the extent that it is reasonable.10 Such a clause is reasonable if the

restraint (1) is no greater than is required for the protection of the employer; (2) does

not impose undue hardship on the employee, and (3) is not injurious to the public.11

9 Al Minor & Assoc., supra, at paragraph one of the syllabus. 10 Harris v. Univ. Hosp. of Cleveland, 8th Dist. Nos. 76724 and 76785, 2002-Ohio-983. 11 Raimonde v. Van Vlerah (1975), 42 Ohio St.2d 21, 325 N.E.2d 544, paragraph two of the syllabus; Harris, supra; Ohio Urology, Inc. v. Poll (1991), 72 Ohio App.3d 446, 452, 594 N.E.2d 1027.

7 OHIO FIRST DISTRICT COURT OF APPEALS

Courts must strictly construe noncompete agreements in favor of professional mobility

and access to medical care and facilities.12 Nevertheless, each case must be decided on

its own facts.13

{¶24} The noncompete clause in this case applied for a year and stated that

Guo could not provide services at a location within five miles of any of Riverhills’s offices

or at a hospital or health care facility that admitted Riverhills’s patients. We hold that

this clause was reasonable as a matter of law. It left Guo with a number of communities

in greater Cincinnati where he could have practiced medicine and several area hospitals

where he could have admitted patients.14 Thus the trial court was correct in finding that

the noncompete clause was reasonable.

B. Construction of Noncompete Clause

{¶25} Guo next argues that the covenant not to compete was extinguished by

his termination of the employment agreement for cause. In the construction of a written

instrument, a court’s primary objective is to give effect to the parties’ intent, which can

be found in the language they chose to use. The court will read the writing as a whole

and gather the intent of each part from a consideration of the whole.15

{¶26} The interpretation of a written instrument is, in the first instance, a

matter of law for the court. If it is clear and unambiguous, the court need not go beyond

the plain language of the agreement to determine the parties’ rights and obligations.

Instead, the court must give effect to the contractual language.16 But if the provisions of

12 Sammarco v. Ctr. for Othopaedic Care (1938), 131 Ohio App.3d 544, 551, 723 N.E.2d 128, overruled on other grounds in Littlejohn v. Parrish, 163 Ohio App.3d 456, 462, 2005-Ohio-4850, 839 N.E.2d 49; Ohio Urology, supra, at 453. 13 Raimonde, supra, at 25; Harris, supra. 14 See Wall v. Firelands Radiology, Inc. (1995), 106 Ohio App.3d 313, 333-334, 666 N.E.2d 235; Holzer Clinic, Inc., v. Simpson (Apr. 28, 1998), 4th Dist. No. 97CA9. 15 Foster Wheeler Enviresponse, Inc. v. Franklin Cty. Convention Facilities Auth., 78 Ohio St.3d 353, 361, 1997-Ohio-202, 678 N.E.2d 519; Fifth Third Bank v. Ducru Ltd. Partnership, 1st Dist. No. C-050564, 2006-Ohio-3860, ¶13. 16 Aultman Hosp. Assn. v. Community Mut. Ins. Co. (1989), 46 Ohio St.3d 51, 53, 544 N.E.2d 920; Blair v. McDonagh, 177 Ohio App.3d 262, 2008-Ohio-3698, 894 N.E.2d 377, ¶48.

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a contract are ambiguous, an issue of fact exists, making summary judgment

inappropriate.17

{¶27} The last sentence of Section 9.3 of Guo’s employment agreement, the

noncompete clause, states, “Physician will be relieved of this restriction if Physician

terminates for cause under the Provisions of Section 7.6.” This sentence was not

originally in the agreement. Guo negotiated to have it included.

{¶28} Section 7.6 states, “Notwithstanding any term of this Agreement to the

contrary, Physician may terminate this Agreement immediately upon giving Employer

written notice in the event that * * * the physician is not offered a Shareholder

Agreement according to Section 5.7.”

{¶29} Section 5.7 provides that the employer will periodically review the

physician’s performance and, if the physician’s job performance satisfies the employer’s

criteria for becoming a shareholder, the “Employer intends to offer Physician the

opportunity to enter into an employment agreement * * * on the same terms and

conditions as Employer’s shareholder-employees.” No set time period was specified.

The agreement only stated that “Employer expects that this will occur within the second

full year of employment.”

{¶30} Guo contends that he invoked Section 7.6 in his letter dated June 15,

2007, in which he terminated the employment agreement because Riverhills was not

going to offer him a shareholder agreement. What actually occurred is a bit more

complex.

{¶31} The record shows the following sequence of events: On May 31, 2007,

Frerick and other Riverhills employees met with Guo to discuss his ongoing problems

with recordkeeping and coding issues. On June 15, 2007, Guo sent Frerick a letter,

17 Inland Refuse Transfer Co. v. Browning-Ferris Indus. of Ohio, Inc. (1984), 15 Ohio St.3d 321, 322, 474 N.E.2d 271; Blair, supra, at ¶48; Fifth Third, supra, at ¶14.

9 OHIO FIRST DISTRICT COURT OF APPEALS

stating, “It has led me to a conclusion based on several discussions between you and me

recently that Riverhills Healthcare will not offer me a share-holder physician status in

the future. It is my belief that it will be in the best and mutual interests not to continue

my Employment Agreement with Riverhills Healthcare for the reason mentioned

above.” Frerick testified that “[a]lthough Guo had serious performance problems at the

time,” Riverhills had not, as of that date, “provided any written notice to him concerning

whether or not he could be offered the opportunity to become a shareholder[.]”

{¶32} On June 18, 2007, Frerick sent Guo a letter memorializing the May 31,

2007, meeting. It stated that “Riverhills prefers not to pursue dismissal ‘for cause’ from

the practice and would prefer to meet with [Guo] and determine an amicable schedule

for exiting the practice.”

{¶33} On July 13, 2007, Frerick sent a memorandum to Guo regarding “2nd

Modification to Your Employment agreement and Resignation from Riverhills

Healthcare.” It stated, “by signing this agreement you voluntarily resign from Riverhills

Healthcare, and my signature indicates acceptance of your resignation. The effective

date of your resignation is July 31, 2007.” Guo refused to sign this memorandum.

{¶34} Finally, on July 31, 2007, Frerick sent Guo a memorandum regarding

“Termination for Cause.” It stated, “Riverhills Healthcare, Inc. is terminating your

Physician Employment Agreement for cause effective Aug. 31, 2007 per paragraph 7.3j

of the agreement[.]” It listed a number of reasons, including “[t]heft of Riverhills’

patients’ names and addresses.”

{¶35} Riverhills contends that its evidence showed that no decision was

actually made about Guo’s shareholder status prior to Guo’s June 15 letter. But the

agreement does not specify any time period during which Riverhills must have offered

Guo a shareholder agreement. Thus, it is ambiguous on that point. According to Guo,

Frerick told him on several occasions that Riverhills was not going to offer him a

10 OHIO FIRST DISTRICT COURT OF APPEALS

shareholder’s agreement. Whether those oral discussions were sufficient to allow Guo to

terminate the agreement under Section 7.6 presented a genuine issue of material fact.

Therefore, the trial court erred in granting summary judgment in favor of Riverhills on

its breach-of-contract claim, and we sustain Guo’s second assignment of error.

V. Assignments of Error on Damages

{¶36} In his third and fourth assignments of error, Guo takes issue with the

amount of damages awarded by the trial court following its decision to grant summary

judgment to Riverhills on both of its claims. Since we have held that the trial court erred

in granting summary judgment to Riverhills on those claims, any award of damages was

also erroneous. Consequently, we sustain Guo’s third and fourth assignments of error,

reverse the trial court’s judgment in its entirety, and remand the case to the trial court

for further proceedings consistent with this decision.

Judgment reversed and cause remanded.

H ILDEBRANDT and C UNNINGHAM , JJ., concur.

Please Note: The court has recorded its own entry this date.