According to the Court’s opinion, the plaintiff dentist
purchased the practice of the defendant dentist and agreed to employ him one
day each week. The purchase agreement
included a sales price, a five-year non-compete with a 30-mile territory and a
provision about transferring goodwill, including his trade name and trade mark
(which was the name of the defendant dentist).
The defendant dentist resigned after approximately six months and,
shortly thereafter, went to work for the defendant dental practice, which was
located within the non-compete area. He had provided the defendant practice
with a copy of his sales agreement, including the provisions governing non-competition
and good will. About six months later, the
defendant practice began radio advertisements with the defendant dentist’s name
and voice to recruit patients to its practice.
About a year later, the plaintiff dentist filed a lawsuit against the
defendant dentist for breach of contract and against the defendant practice for
tortious interference with contract and prospective contractual relations. The defendant dentist left the defendant
practice about ten months later. The
case proceeded to trial and at the conclusion of the plaintiff’s evidence, the
court entered a directed verdict for the defendant practice on the grounds that
it lacked sufficient intent to interfere with the contract. The plaintiff appealed.
The Court
affirmed dismissal of the tortious interference with business relations claim
because the plaintiff remarkably could not identify a single patient that left
him for the defendant practice. He testified that his “staff would have
handled any transfer of patients and that he does not keep a record of where
patients transfer.” (Maybe he did not want
to offend them by identifying them as witnesses).
The defendant practice claimed that it only negligently violated the
non-compete and goodwill provisions and that its “mere knowledge” of the
defendant dentist’s contract was not enough to show intent. While the court agreed that a party’s mere
knowledge of the fact of a contract is not sufficient to show intent, knowledge
of the terms of that contract is a horse of a different color. Because the defendant practice had a copy of
the contract and knowledge of its terms, it could not claim to have “mere
knowledge” of the existence of a contractual relationship.
As for negligence, the defendant practice claimed that it believed that
it was outside the 30-mile non-compete territory because it calculated the distance
using driving miles. However, the legal
standard is straight line miles.
Therefore, the jury was entitled to weigh the evidence to determine if
it believed the defendant practice acted improperly, especially considering its
other actions in this case (such as advertising within the non-compete territory).
As for interference with the good will provision of the sales contract,
the Court agreed that broadcasting commercials in the non-compete territory
with the defendant dentist’s name and voice while it had knowledge that the
defendant dentist had assigned his commercial rights in his name to the
plaintiff dentist was sufficient evidence to prove an intention by the
defendant practice to interfere with the good will provisions of the sale
contract.
The Court partially rejected the defendant’s claim of competitor’s
privilege because it only applies when the contracts at issue are terminable at
will. In this case, the non-compete had
a five-year duration. While the good
will provision did not have a specific duration, a “reasonable time”
restriction is imposed by law. However,
what constitutes a “reasonable time” is a question of fact:
In the sale of a
business, even when the sale carries with it goodwill and the name of a
business, the seller may reengage in business only after reasonable time has
passed that allows the buyer to establish the customers of the purchased
business as his own. . . Whether
sufficient time has passed in order for the buyer to establish the customers of
the purchased business as his own is a question of fact. Id. Three years has
been held a sufficient time.
. . .
In regard to the goodwill provision, there is a question of
fact as to whether Stonecreek Dental employed wrongful means in competing with [plaintiff
dentist] by broadcasting advertisements within the geographic proximity of [plaintiff
dentist’s] office using [defendant dentist’s] name and voice approximately one
year after the sale of the practice. Because no timeframe applied specifically
to the sale of the goodwill of the business, including all right, title, and interest
in the name R. Douglas Martin, DDS, it is a question for a jury to determine
whether one year was a reasonable time to have passed to allow [the plaintiff]
to establish [defendant dentist’s] patients as his own before Stonecreek Dental
broadcast such radio advertisements.
The Court also found that the plaintiff had produced sufficient evidence
to show the proximate cause of and amount of his lost profit, even though he
could not specifically identify a single patient who left him for the defendant
practice. A jury is permitted to infer
that patients left because of the advertising targeted within a non-compete territory. Further, the damages are calculated based on
the number of patients lost by the plaintiff, not by the number of patients
gained by the defendant. Mathematical certainty is not required. In this
case, the plaintiff produced evidence about the historical growth of his
practice and anticipated growth from purchasing the practice of the defendant
dentist, compared to the size of his practice after the tortious activity
began.
When considering Dr. Ginn's substantial decline in revenue
soon after Dr. Martin left, in conjunction with the timing of the
radio-broadcast advertisements utilizing Dr. Martin's name and voice, it can
reasonably be inferred that Stonecreek Dental's interference with the contract
was the proximate cause of Dr. Ginn's loss of profits. As such, there is some
evidence as to whether Stonecreek Dental's actions proximately caused the
decline in Dr. Ginn's revenue, and whether Dr. Martin leaving the practice and
working and advertising for Stonecreek Dental proximately caused damages to Dr.
Ginn is a question for a jury.
NOTICE: This summary is designed merely to inform and alert you
of recent legal developments. It does not constitute legal advice and does not
apply to any particular situation because different facts could lead to
different results. Information here can be changed or amended without
notice. Readers should not act upon this information without legal advice. If
you have any questions about anything you have read, you should consult with or
retain an employment attorney.
