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Oregon Psychiatric Partners, LLP v. Henry

Court of Appeals of Oregon

August 22, 2018

OREGON PSYCHIATRIC PARTNERS, LLP, an Oregon limited liability partnership, Plaintiff-Appellant,
v.
Kelley HENRY, RN, P.M.H.N.P., Defendant-Respondent.

          Argued and Submitted May 16, 2017

          Lane County Circuit Court 15CV08506; Lauren S. Holland, Judge.

          Wm. Randolph Turnbow argued the cause and fled the briefs for appellant.

          Dennis W. Percell argued the cause for respondent. Also on the brief was John R. Roberts.

          Before DeHoog, Presiding Judge, and Hadlock, Judge, and Lagesen, Judge. [*]

         Case Summary: Plaintiff appeals a judgment dismissing with prejudice its complaint against defendant, a psychiatric nurse practitioner formerly employed by plaintiff, in which plaintiff sought to enforce a noncompetition agreement that it had entered into with defendant. Plaintiff assigns error to the trial court's grant of defendant's motion for a directed verdict on the ground that the agreement was unenforceable under ORS 653.295(1), which provides that noncompetition agreements "may not be enforced" unless certain requirements are met. Among other arguments, plaintiff argues that the court erred because the agreement is enforceable under ORS 653.295(4)(b), which provides that the requirements of ORS 653.295(1) do not apply to a "covenant not to * * * solicit or transact business with customers of the employer." Held: The trial court erred, because the agreement was enforceable, at least in part, as a nonsolicitation or nontransaction agreement under ORS 653.295(4)(b).

          [293 Or.App. 472] DEHOOG, P. J.

         Plaintiff, Oregon Psychiatric Partners, LLP (OPP), appeals a judgment dismissing with prejudice OPP's complaint against defendant, Henry, a psychiatric nurse practitioner formerly employed by OPP. Plaintiff sought to enforce a noncompetition agreement that it had entered into with defendant; the trial court concluded that the agreement was unenforceable, granted defendant's motion for a directed verdict, and dismissed the complaint. On appeal, we conclude that, under ORS 653.295(4)(b), the agreement is at least in part enforceable as a "covenant not to * * * solicit or transact business with customers of the employer" and that the trial court therefore erred in dismissing the complaint.[1]Accordingly, we reverse and remand.

         [293 Or.App. 473] We state the facts in the light most favorable to plaintiff, the nonmoving party.[2] Plaintiff hired defendant in July 2013 to work as a psychiatric nurse practitioner at plaintiff's established clinic in Eugene. The parties signed an employment contract that included the following noncompetition agreement:

"LIMITED NON-COMPETITION. Nurse Practitioner shall not provide services, directly or indirectly through any person or entity, to any patients who have received services by Nurse Practitioner at OPP or any predecessor entity for a period of two (2) years after termination of Nurse Practitioner's employment under this agreement within fifty (50) miles of Eugene, Oregon. Pre-existing patients established with Nurse Practitioner in her private practice prior to the date of this contract shall be exempt from this restriction."

(Uppercase in original.) The contract also included a severability clause stating:

"The invalidity of any term or provision of this agreement shall not affect the validity of any other provision. If all or any portion of any provision of this agreement is held to be enforceable for any reason, the relevant provision or provisions shall be enforced to the extent permitted by law and so as to most fully accomplish the parties' objective intent."

         In the fall of 2014, OPP's owner proposed modifying defendant's pay structure in a manner that would reduce her per patient income. Defendant rejected that proposal and told OPP that she would be quitting, effective February 2015. Defendant also told OPP that she considered the noncompetition agreement that she had entered to be unenforceable. [293 Or.App. 474] In accordance with that belief, defendant opened her own practice in Eugene upon leaving OPP and continued to treat a number of the patients that she had first treated while working for OPP.

         In response, OPP sued to enforce the noncompetition agreement, seeking injunctive relief and disgorgement of defendant's earnings "from current or former patients of [OPP]." As noted, the case proceeded to a bench trial. In a pretrial motion, plaintiff moved to strike as insufficiently pleaded defendant's "affirmative defense" that the parties' agreement was unenforceable under ORS 653.295; the trial court denied that motion. Later, at the conclusion of plaintiffs case-in-chief, defendant moved for a "directed verdict," specifically relying on her defense that plaintiff had not shown that the parties' agreement met certain requirements of ORS 653.295(1), which, as set out above, states that a noncompetition agreement is "voidable and may not be enforced" unless it meets those requirements. Plaintiff contended that the parties' agreement satisfied the requirements of a valid noncompetition agreement under ORS 653.295(1), but also argued that those requirements were ultimately immaterial because the agreement fit within the statutory exclusion in ORS 653.295(4)(b), which provides that subsection (1) "do[es] not apply to * * * [a] covenant not to solicit employees of the employer or solicit or transact business with customers of the employer."

         The trial court granted defendant's motion, ruling that the agreement did not satisfy the requirements of ORS 653.295(1), because defendant had not been paid on a "salary basis." See ORS 653.295(1)(b) (requiring that the employee be "a person described in ORS 653.020(3)," which, in turn, requires that the employee earn a salary and be "paid on a salary basis"). When asked by plaintiff to specifically address "the exception to the statute for prohibitions on dealing with the employer's customers," the court reiterated its earlier conclusion that the agreement was a noncompetition agreement and said that it was "not excluded." The court subsequently entered a general judgment dismissing plaintiff's claims with prejudice; plaintiff appeals that judgment.

          [293 Or.App. 475] On appeal, plaintiff assigns error to the trial court's denial of its motion to strike and the court's ruling granting defendant's motion for a directed verdict. We reject without written discussion plaintiff's argument that the trial court erred in failing to strike on pleading grounds defendant's "affirmative defense" that the parties' agreement was unenforceable under ORS 653.295, and we discuss only plaintiff's argument that the parties' agreement is enforceable under ORS 653.295(4)(b) as a "covenant not to * * * solicit or transact business with customers of the employer," or "nonsolicitation agreement."[3] In support of that argument, plaintiff asserts that we should construe the phrase "customers of the employer" broadly, such that the agreement here fits squarely within the exclusion under ORS 653.295(4)(b). Alternatively, plaintiff argues that, at least as to the 34 patients that defendant "took" with her from OPP to her new practice, the agreement is potentially enforceable under the exclusion. Defendant disputes both points. She argues that, under ORS 653.295(4)(b), "customers of the employer" are limited to current customers and that, because the agreement does not distinguish between OPP's current and former patients, the requirements of ORS 653.295(1) apply. Defendant further argues, as a factual matter, that the patients at issue here cannot be viewed as ...


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