Summit Institute v. Prouty

691 So. 2d 1384, 1997 WL 177669
CourtLouisiana Court of Appeal
DecidedApril 9, 1997
Docket29829-CW
StatusPublished
Cited by12 cases

This text of 691 So. 2d 1384 (Summit Institute v. Prouty) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Summit Institute v. Prouty, 691 So. 2d 1384, 1997 WL 177669 (La. Ct. App. 1997).

Opinion

691 So.2d 1384 (1997)

SUMMIT INSTITUTE FOR PULMONARY MEDICINE AND REHABILITATION, INC., Plaintiff,
v.
Scott W. PROUTY, Applicant/Defendant.

No. 29829-CW.

Court of Appeal of Louisiana, Second Circuit.

April 9, 1997.
Rehearing Denied May 1, 1997.

*1385 Lance Paul Havener, Shreveport, for Applicant/Defendant.

Comegys, Lawrence, Jones, Odom & Spruiell by Franklin H. Spruiell, Jr., Shreveport, for Plaintiff.

Before WILLIAMS, GASKINS and CARAWAY, JJ.

CARAWAY, Judge.

This appeal involves the interpretation of the 1989 amendment, and subsequent amendments, to Louisiana's non-competition statute, La.R.S. 23:921 (hereinafter the "Statute"),[1] as applied to a 1994 employment contract between plaintiff and its former employee. Because we find the contract overly broad in its restraint on the re-employment of defendant, we reverse the trial court's issuance of a preliminary injunction and remand for further proceedings.

Facts and Procedural History

Summit Institute for Pulmonary Medicine and Rehabilitation, Inc. (hereinafter "Summit") operates long-term, acute care and physical rehabilitation hospitals in Bossier City and West Monroe, Louisiana. In February of 1992, Summit hired Scott Prouty ("Prouty") as a respiratory therapist, and he later accepted a position in Summit's Business Development and Marketing Department. It was Prouty's job to recruit patients for Summit's long-term acute care and rehabilitation programs from other area hospitals in North Louisiana which were not staffed for such services.

In November, 1994, Prouty signed a written contract, entitled Letter of Employment Understanding, which included a post-termination one-year noncompetition clause. The provision provided as follows:

Employee will not at any time while employed by Hospital and for a period of one (1) year following the date notice of termination of Employee's employment with Hospital is given for any reason by Employee or by Hospital with cause, as set forth herein, be or become an officer, director, partner or employee of or consultant to or act in any managerial capacity with or own any equity interest in any entity which manages or provides long term acute medical services and/or physical rehabilitation in Bienville, Bossier, Caddo, Claiborne, DeSoto, Grant, Jackson, Lincoln, Natchitoches, Ouachita, Rapides, Sabine, or Webster Parishes, Louisiana.

On June 10, 1996, Prouty voluntarily terminated his employment with Summit. In January, 1997, Summit learned that Prouty was violating the non-competition agreement by working in the marketing department of Lagniappe Hospital, a competitor of Summit located in Caddo Parish, Louisiana.

Summit filed this action for injunctive relief on January 21, 1997, against Prouty seeking to enforce the non-competition provision of the 1994 employment contract. The trial court, after considering affidavits of witnesses and written briefs by both parties, granted a preliminary injunction on February 10, 1997, recognizing the validity and enforceability of the contract and restraining Prouty from further violation of same.

Prouty thereafter filed an application for a supervisory writ to this court. On February 28, 1997, we entered judgment upholding the trial court's substantive ruling as to the validity *1386 and enforceability of the non-competition clause in the employment contract but ordered that the judgment be vacated because the judgment failed to comply with La.C.C.P. art. 3605. On March 3, 1997, the trial court entered a new judgment which specifically set forth the parameters of the injunction based upon the precise language contained in the non-competition provision.

An application for a supervisory writ was next filed with the Louisiana Supreme Court on March 5, 1997. On March 14, 1997, the court granted Prouty's writ, remanding the case to this court for expedited briefing, argument and opinion.

Prouty's assignments of error assert that Summit's Letter of Employment Understanding is impermissibly broad regarding the prohibition placed upon Prouty's re-employment and regarding the definition of Summit's business. Prouty further asserts that his execution of the Letter of Employment Understanding while employed by Summit was subject to the vice of duress.

Discussion

Is the non-competition provision in Summit's contract impermissibly overbroad under Section C of the Statute?

In making this assignment of error, Prouty argues that the language of the contract would prohibit Prouty from working as an employee in any capacity with any medically-related institution in the defined geographic area regardless of whether such employment directly involved the solicitation of Summit's customers or otherwise affected Summit's ability to compete in the medical services field. Prouty cites the case of Daiquiri's III on Bourbon, Ltd. v. Wandfluh, 608 So.2d 222 (La.App. 5th Cir.1992), writ denied, 610 So.2d 801 (La.1993), in support of its position.

On the other hand, Summit argues that the non-competition agreement at issue in AMCOM of Louisiana, Inc. v. Battson, 28,171 (La.App.2d Cir. 1/5/96), 666 So.2d 1227, reversed, 96-0319 (La. 3/29/96), 670 So.2d 1223, contained a virtually identical provision preventing a former radio employee from "enter[ing] into or engag[ing] directly or indirectly in the performance of any services for any other radio station." The supreme court reversed this court's opinion in AMCOM which had nullified the entire non-competition agreement for its overly broad geographical limits. Although the only issue raised in AMCOM concerned the geographical limits, the supreme court's summary ruling reinstating the trial court's injunction against the former employee gave force to the above-quoted provision. Summit argues that the language in its contract, like the language in AMCOM, comports with the broad language in Section C of the Statute.

A comparison of the applicable language as excerpted from the Summit contract and Section C of the Statute reveals the following:

Summit Contract: Employee will not be or become an employee of any entity which manages or provides long term acute medical services and/or physical rehabilitation.
La.R.S. 23:921.C: Any ... employee may agree with his employer to refrain from carrying on or engaging in a business similar to that of the employer and/or from soliciting customers of the employer....

Summit argues that the subject contract's prohibition that the "employee will not become an employee of any entity" with a medical business similar to Summit's is authorized within the meaning of the statutory allowance to constrain the employee "from carrying on or engaging in a business similar to that of" Summit. Because the provision regarding the solicitation of customers may be read as preceded by the disjunctive "or," Summit's position is that the employee need not be restrained by the agreement from soliciting customers of his former employer nor even be in an employment position where such solicitation could occur. According to this view of Section C, an employee "engaging in" a competitor's business as an employee in whatever capacity can be restrained by his former employer.

The term "business" as it appears in the 1989 amendment of the Statute is initially used in Section A of the Statute for the purpose of expressing Louisiana's broad prohibition against non-competition agreements.

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Bluebook (online)
691 So. 2d 1384, 1997 WL 177669, Counsel Stack Legal Research, https://law.counselstack.com/opinion/summit-institute-v-prouty-lactapp-1997.