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Awwad v. Capital Region Otolaryngology Head Neck Group, LLP

Other Lower Courts

November 27, 2007

Ramez J. Awwad, Plaintiff,
v.
Capital Region Otolaryngology Head Neck Group, LLP, Defendant.

Editorial Note:

This case is not published in a printed volume and its disposition appears in a table in the reporter.

COUNSEL

Nixon Peabody LLP Attorneys for Defendant (Daniel J. Hurteau and Jena R. Rotheim, of counsel)

McNamee, Lochner, Titus Williams, P.C. Attorneys for Plaintiff  (Glen P. Doherty and Scott C. Paton, of counsel)

OPINION

Richard M. Platkin, J.

Defendant Capital Region Otolaryngology Head Neck Group, LLP moves for a preliminary injunction to enforce a restrictive covenant in an employment agreement with plaintiff Dr. Ramez J. Awwad. Defendant also moves for partial summary judgment, seeking a declaration that such covenant is valid and enforceable and an award of attorney's fees. Plaintiff opposes defendant's motions and cross-moves for a declaration that the covenant is invalid and unenforceable.

Plaintiff's current employer, Capital Region Neurology, and its physician-owner, Dr. Edward Scheid, also move, by Order to Show Cause, for an order permitting them to be joined as plaintiffs and disqualifying Nixon Peabody LLP from any further representation of defendant in this action.

BACKGROUND

Defendant Capital Region Otolaryngology Head Neck Group, LLP ("CROG") is a professional medical group that specializes in the practice of otolaryngology: disorders of the ear, nose and throat. CROG, which was founded 43 years ago, maintains five offices in the Capital District region, in Albany, Hudson, Clifton Park and Troy. CROG is one of approximately five such practices in the Capital Region.

In early 2006, while Dr. Awwad was completing his medical residency in Syracuse, New York, he negotiated an agreement for employment with CROG. Dr. Awwad was represented in these negotiations by Timothy Conan, a Syracuse attorney, and CROG was represented by Peter Millock, a member of the law firm of Nixon Peabody, LLP. The negotiations between counsel resulted in changes to the employment agreement initially proposed by CROG, and the parties executed a final agreement in or about May 2006.

The employment agreement executed by the parties (hereinafter "Agreement") includes a covenant against post-employment competition:

SECTION 6.1 COVENANT NOT TO COMPETE. Physician [Awwad] recognizes that CROG's decision to enter into this Employment Agreement is induced primarily because of the covenants and assurances made by Physician in this Employment Agreement, that Physician's covenant not to compete is necessary to ensure the continuation of the business of CROG and the reputation of CROG, and that irrevocable harm and damage will be done to CROG if Physician competes with CROG. Therefore, Physician agrees that during the term of this Employment Agreement and for a period of three (3) years following the termination of the expiration of this Employment Agreement (except for termination "without cause" under Section 4.4), Physician shall not practice medicine within the Practice Territory. For purposes of this Employment Agreement, "Practice Territory" shall mean the geographic area within a radius of thirty (30) miles of any current or future facility at which CROG provides medical services.

The Agreement also gave Dr. Awwad the following option:

SECTION 6.4 PHYSICIAN ELECTION. Physician may elect, within ten (10) days after the date of termination or expiration of the Employment Agreement, not to have the restrictions set forth in 6.1 apply. To exercise such election, Physician shall so advise CROG and shall pay CROG by certified check the amount of One Hundred Fifty Thousand Dollars ($150,000).

On or about June 29, 2007, Dr. Awwad provided defendant with written notice of his resignation from CROG. The letter did not specify the reasons for his decision to resign, but Dr. Awwad avers that it was based, in part, on two factors: (1) the working conditions at defendant's offices; and (2) certain misrepresentations allegedly made by defendant's managing partner, Dr. Lyon M. Greenberg, during the course of employment negotiations.

Specifically, Dr. Awwad avers that Dr. Greenberg represented to him that all other CROG physicians, including its equity partners, were bound by the same restrictive covenant proposed in his employment agreement. Dr. Awwad claims that he initially learned of the falsity of this representation in March or April of 2007, and he received confirmation of this at a June 26, 2007 firm meeting following the resignation of Dr. Sara Scheid from CROG. [1]

In an affidavit filed in support of CROG's motions, Dr. Greenberg denies stating or otherwise representing that all CROG partners had executed similar non-competition agreements or had agreed to do so within any particular period. Indeed, Dr. Greenberg avers that at the time of employment negotiations with Dr. Awwad, he was aware that Dr. Foyt, a CROG equity partner, was unwilling to agree to a similar covenant.

Doctors Awwad, Sara Scheid and Foyt currently are practicing otolaryngology as employees of Capital Region Ear, Nose Throat ("CRENT"), located in Slingerlands, New York. The instant motion practice reveals that CRENT is a division of Capital Region Neurology ("CRN"), an entity owned by Dr. Edward Scheid, the husband of Sara Scheid. By dint of their status as Dr. Awwad's current employer, CRN and Dr. Edward Scheid seek leave to be added as plaintiffs to this action,

The motion to disqualify Nixon Peabody LLP arises from the firm's prior representation of the two proposed intervenors in certain employment related matters. Dr. Edward Scheid avers that from February 2005 through March 2006, Nixon Peabody attorneys Peter Millock and Daniel Hurteau represented him in connection with a non-competition agreement with his prior employer. Dr. Scheid further avers that he and CRN were represented by Nixon Peabody in connection with other employment related matters, including the development of legal and litigation strategies relating to restrictive covenants.

Plaintiff commenced this action in July 2007 seeking the following relief: a declaration that the restrictive covenant is void and unenforceable; an injunction restraining enforcement of the covenant; an award of attorney's fees; and recession of the Agreement and an award of punitive damages, based on the claim of fraudulent inducement. Defendant denies plaintiff's allegations and asserts five counter-claims seeking: damages for breach of the Agreement; a declaration that the restrictive covenant is valid and enforceable; an injunction enforcing the restrictive contract; damages for breach of fiduciary duty; and an award of attorney's fees pursuant to the Agreement.

On its pending motions, CROG seeks the following relief: a preliminary injunction enforcing the restrictive covenant; summary judgment on its second counter-claim, seeking a declaration that the restrictive covenant is valid and enforceable; and summary judgment on its fifth counter-claim, seeking an award of attorney's fees. Plaintiff opposes defendant's motion and cross-moves for summary judgment on its first cause of action, declaring the restrictive covenant invalid and unenforceable. Finally, Dr. Edward Scheid and CRN move for leave to be added as plaintiffs to this action and an order disqualifying Nixon Peabody from any further representation of defendant in this matter.

VALIDITY/ENFORCEABILITY OF THE RESTRICTIVE COVENANT

The Court begins with the issue at the heart of this case whether the restrictive covenant entered into by Dr. Awwad is valid and enforceable. Thus, defendant's motion and plaintiff's cross-motion for summary judgment on this point will be addressed first.

Summary judgment is a drastic remedy and should only be granted if there are no material issues of disputed fact ( Sillman v. Twentieth Century Fox Film Corp., 3 N.Y.2d 395 [1957]). In evaluating a motion for summary judgment, a court should decide whether material issues of disputed fact preclude the grant of judgment as a matter of law (S. J. Capelin Assoc. v. Globe Mfg. Corp., 34 N.Y.2d 338 [1974]). The party moving for summary judgment has the initial burden of coming forward with admissible evidence to support the motion, so as to warrant the Court directing judgment in movant's favor; the burden then shifts to the opposing party to ...


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