Sisters of Charity Health Sys., Inc. v. Farrago

CourtSuperior Court of Maine
DecidedMay 3, 2010
DocketANDcv-07-092
StatusUnpublished

This text of Sisters of Charity Health Sys., Inc. v. Farrago (Sisters of Charity Health Sys., Inc. v. Farrago) is published on Counsel Stack Legal Research, covering Superior Court of Maine primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sisters of Charity Health Sys., Inc. v. Farrago, (Me. Super. Ct. 2010).

Opinion

STATE OF MAINE ANDROSCOGGIN, SS.

SISTERS OF CHARITY HEALTH SYSTEM, INC.,

Plaintiff

v. DECISION AND JUDGMENT

DOUGLAS FARRAGO, MD., CAROLYN KASE, D.O., and RAYMOND STONE, D.O.,

Defendants

This is an action tried to the court wherein the plaintiff seeks damages and

injunctive relief to enforce the terms of an employment contract.1

Sisters of Charity Health System, Inc. (SOCHS) and the defendants entered into

employment contracts in 2003. (See exhibits 71, 72, and 73 entitled "Agreement for

Professional Services") In all material aspects they were identical and provided a

section for "Limitation of Practice." Each of the defendants terminated their

employment with SOCHS effective December 31, 2006, at which time each of them

became employees of Central Maine Medical Center (CMMC).2

Paragraph 15 of the employment agreements (Agreement) addresses the issue of

termination by either or both parties. Under some circumstances, there would be no

penalty or restrictions upon the defendants continuing to practice in the Lewiston­

1 During the trial process, the court was informed that Central Maine Medical Center (CMMC), the defendants' current employer has agreed to indemnify the defendants for any damages that may be awarded to plaintiff, even though it is not a party. The court is not aware of the terms, conditions, or limitations.

2 To the extent that the court sets out facts, they constitute findings of fact by a preponderance of evidence unless otherwise noted. Auburn area; however, the plaintiff says that the defendants do not fall into any of the

exceptions.

Paragraph 17 of the Agreements places limitations upon the defendants if they

separate their services from SOCHS without consent or in violation of the agreement.

The defendants voluntarily terminated their relationship with SOCHS on

December 31, 2006. The plaintiff seeks to invoke the restrictions of paragraph 17A;

which, in essence, prohibits the defendants from directly or indirectly practicing

medicine "in the employ of or under contract with Central Maine Healthcare

Corporation (CMHC) or any of its affiliates or subsidiaries ... within a radius of 25

miles of 99 Campus Avenue, Lewiston, Maine, for a period of two (2) years from the

date of termination." Agreement, exhibits 71, 72, 73, & '[ 17A.

The Agreement further provides that a defendant could avoid the territorial and

time limitations on practice by maintaining active admitting privileges at St. Mary's and

"maintains no staff or admitting privileges at Central Maine Medical Center [or the]

physician may practice medicine in breach of this restrictive covenant with the

written consent of the Employer's [SOCHS] Chief Executive Officer." Agreement,

<[ 17A. It is undisputed that the defendants do not fall into any of these exceptions.

In a separate section of the Agreement, paragraph 17B, the parties mutually

agreed that the restrictive covenant "is reasonable as to duration, geographic area and

the nature of the practice protected." Agreement, '[ 17B.

Thus, the limitation on practice is not absolute. Even after separation from

SOCHS, each defendant could continue to practice locally without restriction by paying

$100,000 to SOCHS as liquidated damages. This is essentially a "buy-out" to be

released from the restrictive covenants. The Agreement specifically refers to it as

2 representing SaCHS's "reasonable liquidated damages, and is not a penalty."

Agreement, <[ 17C.3

Because the physicians do not fall into anyone of the recognized exceptions,

saCHS claims it is entitled to injunctive relief in addition to any other rights or

remedies it may have, including attorney fees and costs. Agreement, <[ 170.

The contracts at issue are between SaCHS and each defendant. As SaCHS

employees, their physician services were leased to Community Clinical Services (CCS),

one of several subsidiaries under the SaCHS health care umbrella. CCS is a physician

office practice that maintains a number of separate physician offices in the greater

Lewiston-Auburn area. Each of the defendants worked at the Court Street Family

Practice (CSFP) office in Auburn. At the time they terminated their employment, there

were approximately 4800 patients at CSFP. The evidence shows that after the

defendants left their affiliation with SaCHS and contracted with CMMC that 1374

patients transferred their records from SCFP to CMMC. Although it is not known why

all of them transferred, it is a fair inference that many of them did so to continue their

relationship with the defendants as their treating physicians.

SMRMC and CCS are separate legal entities but clearly fall under the SaCHS

umbrella of management, services and financing. Through an employee leasing

arrangement, SaCHS provides the physician services to enable CCS to render services

at its multiple locations.

The defendants argue that SaCHS is the sole party to the contract and that it has

not incurred any damages because St. Mary's Regional Medical Center (SMRMC) and

CCS are separate entities that were the direct beneficiaries of defendants services.

3 It is more than curious to the court that the defendants' new contracts with CMMC are significantly more restrictive upon separation than the contracts at issue here, which they claim are unenforceable for a number of reasons.

3 The court finds that although there are multiple entities involved here, they are

all under the overall umbrella and management of SaCHS and directly or indirectly

support SMRMC, the primary business of SaCHS in Lewiston. SaCHS had a

legitimate interest in protecting the viability of SMRMC as a quality general hospital in

central Maine.

The contractual limitation on practice here is unambiguous. Its interpretation is

a question of law. See Reid v. Town of Mount Vernon, 2007 ME 125, en 29, 932 A.2d 539,

546-47.

The plaintiff urges the court to find that the defendants entered into the contracts

in bad faith and that they never intended to honor the limitations or restrictions on

termination. This is supported by the testimony of defendant Raymond Stone. See Trial

Transcript (TT), p. 18, lines 7-22. He takes this position because the contract was

presented to him as a done deal, non-negotiable, and he believed he did not have any

option other than except to sign it; nevertheless he did, and the plaintiff provided her

and the other defendants with compensation, a patient base, and facilities for

examination and treatment of patients.

The court finds that the provision for Limitation of Practices is reasonable and

integral to the contract.

The defendants argue that the restrictive covenants of the contract are against

public policy. The court acknowledges that in an ideal world, anybody should be free

to go when and where they want to pursue and practice their profession, especially

physicians who, presumably, are providing for the public good. Unfortunately,

medicine and healthcare today are big business and the governing corporate entities

must act to protect their continued viability to provide for the overall well-being of its

patient base and the community.

4 The reasonableness of a non-competition covenant is a question of law that must

be determined by the facts developed in each case as to its duration, geographical area,

and the interests sought to be protected.

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Related

Reid v. Town of Mount Vernon
2007 ME 125 (Supreme Judicial Court of Maine, 2007)
Raisin Memorial Trust v. Casey
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Maddrey v. Justice of the Peace Court 13
956 A.2d 1204 (Supreme Court of Delaware, 2008)
Brignull v. Albert
666 A.2d 82 (Supreme Judicial Court of Maine, 1995)

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