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Occupational Health Centers of the Southwest, P.A. v. Toney

United States District Court, D. Maryland

April 28, 2017

ROBERT TONEY, JR., M.D. Defendant.


          Ellen Lipton Hollander United States District Judge

         In this Memorandum Opinion, I address a motion for preliminary injunction, seeking enforcement of a restrictive covenant against a physician.

         On April 10, 2017, plaintiff Occupational Health Centers of the Southwest, P. A., d/b/a Concentra Medical Centers ("Concentra") filed suit against defendants Robert Toney, Jr., M.D. and Workpro Holdings, LLC, d/b/a Workpro Occupational Health, now known as PTN Occupational Health Holdings, LLC ("Workpro").[1] ECF 1; see also ECF 6 at 1, n.l. Workpro is a subsidiary of Pivot Physical Therapy. See ECF 1-6 at 2.

         Dr. Toney worked for Concentra from 2000 until his resignation in 2017. For most of that time, Concentra was the contractor for a particular State contract, discussed infra. However, the State recently awarded that contract to Workpro, a competitor of Concentra in the field of occupational medicine. And, on or about April 10, 2017, Dr. Toney commenced employment with Workpro.

         As to Dr. Toney, the Complaint (ECF 1) sets forth two "claims". The first is for "Temporary, Preliminary, and Permanent Injunction" and the second is for breach of contract.2

         Concentra also submitted several exhibits with its suit. See ECF 1-1 to ECF 1-8. These include a "Physician Services Agreement" ("Agreement") executed by Dr. Toney, dated July 30, 2000. See ECF 1-4. In sum, the non-competition provision of the Agreement provides that, for a period of two years following the termination of Dr. Toney's employment with Concentra, Dr. Toney may not work for a competitor in the medical field of occupational medicine if it is within the "Prohibited Area."

         According to Concentra, by working for Workpro, Dr. Toney has violated the noncompete provision of the Agreement. In Concentra's view, if Dr. Toney is permitted to work for Workpro, "those employers who came to rely on his skill set [at Concentra] will likely be inclined to move their business from Concentra to Workpro, which will cause Concentra irreparable harm." ECF 1, ¶ 5.

         Along with its Verified Complaint (ECF 1), Concentra filed a "Motion for Temporary Restraining Order And Preliminary Injunction" (ECF 2), supported by a memorandum of law (ECF 2-1) (collectively, "Motion"). The Motion seeks to enjoin Dr. Toney from working for Workpro.3

         On April 13, 2017, while Workpro was still a party defendant, Dr. Toney and Workpro submitted a joint response in opposition to the Motion (ECF 6, "Opposition"), supported by the Affidavit of Dr. Toney (ECF 6-1) and another exhibit. ECF 6-2. Concentra replied (ECF 7, "Reply") and submitted an additional exhibit. ECF 7-1.

         By Order dated April 14, 2017, docketed on April 17, 2017 (ECF 8), I directed plaintiff to clarify the basis for the Court's diversity jurisdiction. Given that Workpro is an LLC, I indicated that Concentra did not sufficiently demonstrate diversity of citizenship. See Cent. W. Virginia Energy Co. v. Mountain State Carbon, LLC, 636 F.3d 101, 103 (4th Cir. 2011) ("For purposes of diversity jurisdiction, the citizenship of a limited liability company ... is determined by the citizenship of all of its members."); see also Clephas v. Fagelson, Shonberger, Payne & Arthur, 719 F.2d 92, 93 (4th Cir. 1983) (explaining that it is "hornbook law" that the citizenship of unincorporated entities is determined by the citizenship of all of its members).

         On Monday, April 17, 2017, the Court convened an emergency hearing on the Motion. At that time, counsel agreed to proceed on the request for a preliminary injunction, rather than the request for a temporary restraining order. However, because counsel for the parties were unable to confirm the existence of diversity jurisdiction, the hearing was continued until Friday, April 21, 2017.

         In the interim, the Court held a telephone conference with counsel on April 19, 2017. Plaintiffs counsel informed the Court that, in fact, Workpro and Concentra are not diverse because both entities possess members who are citizens of Texas. Thereafter, to preserve diversity jurisdiction, Concentra filed a notice of voluntary dismissal as to Workpro. ECF 10. By Order of April 20, 2017 (ECF 11), Workpro was dismissed from the case, without objection.

         After the close of business on April 20, 2017, Dr. Toney submitted a supplemental response in opposition to the Motion. ECF 12 ("Supplemental Opposition"). It is supported by Dr. Toney's Supplemental Affidavit (ECF 14-2) and the Affidavit of Brian Shinkle, M.D., the Medical Director of Workpro (ECF 12-2), with exhibits. See ECF 12-2 at 4-8.

         The Court held an evidentiary hearing on the Motion on April 21, 2017 ("Hearing"). At the Hearing, plaintiff called Dr. Toney as the sole witness and introduced additional exhibits. Both sides also relied on the exhibits that they had previously included with their written submissions.

         At the conclusion of the Hearing, because of the urgency of the matter, I delivered a brief oral ruling, granting the Motion, in part, subject to plaintiffs satisfaction of the bond requirement and the submission of a proposed order that identified the locations of Concentra's offices in Maryland in 2000. I also informed counsel and the parties that a written ruling would follow, in order to supplement, clarify, and explain the oral ruling.[4]

         I. Factual Background [5]

         A. The Parties

         Concentra is a Texas professional association with its principal place of business located in Addison, Texas. ECF 1, ¶ 7. Among other things, Concentra is "engaged in the business of Occupational Medicine." Id., ¶ 16. Occupational Medicine is "a branch of occupational health concerned with the prevention and treatment of workplace injuries, chronic illnesses, and diseases. Occupational Medicine clinicians assess workplace conditions and medical history to develop a treatment program by focusing on the physical and mental well-being of injured employees." Id.

         Plaintiff operates occupational health clinics across the United States with board certified physicians trained in certain specialties, including public health, preventive medicine, family practice, toxicology, and medical research, among others. Id., ¶ 17. Concentra also works with employers like the State of Maryland "to develop an effective treatment program for injured employees...." Id.

         Of import here, Concentra "has been the incumbent contractor for every iteration of an occupational medical services contract awarded by the State of Maryland "for at least the past fifteen years, " to perform certain kinds of work evaluations for injured workers. ECF 1, ¶ 2. This contract is known as the State Medical Director and Occupational Medical Services for Maryland State Agencies (the "State Contract"). Id.; see ECF 1-3.

         Dr. Toney, a Maryland resident, graduated from medical school in 1997. Hearing. He joined Concentra in 2000, upon completion of his medical residency. Hearing; ECF 1, ¶ 23. Dr. Toney is board certified in family medicine. Id., ¶ 4. However, "[o]utside of his residency, which was completed over 16 years ago, Dr. Toney has never practiced in the area of family medicine." ECF 12 at 5. Rather, he spent over sixteen years practicing occupational medicine with Concentra. Id.

         In 2006, Dr. Toney became Concentra's "Medical Director for Medical Advisory Services" as well as the "State Medical Director" ("SMD") under the State Contract. ECF 1, ¶ 2; see also id, ¶ 22.[6] The SMD is "the principal physician for the State charged exclusively with performing workability evaluations for injured state workers and approving the use of leave banks for these employees." ECF 1, ¶ 23.

         Plaintiff claims that, in addition to Dr. Toney's work as SMD, Dr. Toney had other responsibilities. Along with the services that Dr. Toney provided under the State Contract, Dr. Toney allegedly "provided Occupational Medicine care to patients through additional contracts with employer clients other than those serviced by the State Contract." Id., ¶ 25. And, at the Hearing, Dr. Toney acknowledged that he has held other positions at Concentra. He testified that between 2000 and 2006, before he became the SMD, he worked for Concentra in the position of Medical Director at two of its locations.

         Following a competitive bidding process, the 2017 version of the State Contract ("2017 State Contract") was recently awarded to Workpro. On February 15, 2017, after Concentra lost the 2017 State Contract to Workpro, Dr. Toney gave notice of his intention to resign from Concentra, effective April 7, 2017. ECF 1, ¶ 35. He commenced his employment with Workpro on April 10, 2017. Dr. Toney testified that he now serves as the State Medical Director with Workpro, which is the same position he previously held with Concentra from 2006 until early 2017.

         Concentra maintains that it trained Dr. Toney in the field of occupational medicine and "dedicated significant resources" to him, including continuing medical education. ECF 1, ¶ 19. Moreover, Concentra asserts that Dr. Toney "benefitted from Concentra's advertising, goodwill, name recognition, promotional marketing, and sales, administrative, and clerical support." Id., ¶ 20.

         B. Non-Compete Agreement

         Concentra claims that, to "protect its investment" and its proprietary "information", it requires employees "to enter into contracts that contain restrictive covenants." ECF 1, ¶ 21. As a condition of his employment, Dr. Toney executed a Physician Services Agreement. See ECF 1-4. By its terms, the Agreement had an "Effective Date" of July 30, 2000. Id.

         Notably, there is no contention that the Agreement had expired. Nor was the Agreement tied to a particular employment contract that had otherwise expired. Indeed, the evidence at the Hearing established that Dr. Toney knew the Agreement was still in effect. See Plaintiffs Hearing Exhibit 2.7

         Section 6 of the Agreement contains the section titled "Non-Competition, " which provides, [8] ECF 1-4, Section 6(c), at 5-6 (bold added):

Non-Competition. Physician covenants that, during the Employment Term, and, if Physician terminates this Agreement or if Association terminates this Agreement for Cause, for the period of time immediately thereafter set forth on Schedule I (the "Restricted Period"), without the prior written consent of Association, Physician will not, directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, stockholder (other than ownership of securities of a publicly held corporation purchased through a broker on an established stock exchange or the Nasdaq system at an original cost of not more than $25, 000), corporate officer, director, investor, or financier, or in any other individual or representative capacity, engage or participate in or consult with any business within the Prohibited Area (as described on Schedule I), or any practice of medicine which is devoted primarily to the practice of occupational medicine within the Prohibited Area, that is in competition with Association's practice, the business of Concentra, and/or the products or services offered by Association and/or Concentra in such area, or engage in any act or activity which would interfere with or harm any business relationship Association and/or Concentra may have with any patient, customer, supplier, employee, or investor. Notwithstanding the foregoing, Physician shall not be prohibited from working as a physician not engaged in the practice of occupational medicine.

         Schedule I of the Agreement defines the Restricted Period as two years. ECF 1-4 at 11. And, the Prohibited Area is defined in Schedule I as "[t]he area within a twenty (20) mile radius of any facility owned, operated, or managed by Association or Concentra, or any Affiliate of Association or Concentra within the State of Maryland." Id. at 11. According to Concentra, the Prohibited Area currently encompasses twelve offices in the following locations: Baltimore, Glen Burnie, Columbia, Lanham, Elkridge, Capitol Heights, Beltsville, and Gaithersburg. ECF 1, ¶ 3; ECF 7 at 10.

         In its Motion, Concentra seeks to enjoin Dr. Toney from working within a twenty mile radius of any of all twelve of its current locations. ECF 1, ¶ 54; ECF 7 at 10. However, at the time Dr. Toney signed the Agreement, Concentra had only eight locations in Maryland. ECF 12 at 5.[9] Notably, there is no provision in the Agreement that indicates that the parties intended to extend the twenty mile radius to include any future locations established by Concentra.

         Further, the Agreement provides that it "shall be construed under and in accordance with the laws of the State of Licensure[.]" Id., Section 8(h) at 9. Maryland is the State of Licensure. Id. at 11. And, the Agreement contains a severability clause. See Section 6(f).

         C. The 2017 State Contract [10]

         On January 5, 2016, the Maryland Department of Budget and Management ("DBM") issued a "Request for Proposals" for "State Medical Director and Occupational Medical Services for Maryland State Agencies" ("2016 RFP"). See ECF 1-3.[11] The 2016 RFP includes the Contract as "Attachment A". ECF 1-3 at 79. Section 2 of the Contract states that it incorporates the terms of the 2016 RFP. Thus, it appears that the 2016 RFP essentially became the 2017 version of the State Contract. Accordingly, I will sometimes refer to the 2016 State RFP as the 2017 State Contract. The term of the 2017 State Contract is about 5 years. ECF 1-3 at 13, § 1-4.4.

         Following a competitive bidding process, the 2017 State Contract was awarded to Workpro. ECF 6-1, ¶ 9. The submissions do not specify precisely when the 2017 State Contract was awarded. But, Workpro assumed the administration of the 2017 State Contract on April 1, 2017. ECF 1, ¶ 2. A few days later, on April 10, 2017, Dr. Toney began to work for Workpro as the SMD - the same position he held since 2006 with Concentra. And, as indicated, Concentra had held the State Contract for the preceding fifteen years.

         It is undisputed that, at the time the 2017 State Contract was awarded to Workpro, Dr. Toney worked for Concentra. ECF 2 at 15; see also ECF 2-1, ¶ 12. Thus, Workpro was deemed qualified for the award of the 2017 State Contract without the benefit of Dr. Toney as an employee. ECF 1, ¶ 5.

         In Section 1.1 of the 2016 RFP, the "Summary Statement, " DBM indicated that it was issuing the RFP "to provide State Medical Director (SMD) and Occupational Medical Services, which may be used by all agencies of Maryland State Government.... The current contract and subsequent contract resulting from this RFP are the primary contracts available to State agencies to obtain SMD and Occupational Medical Services

Section 1.1.5 of the 2017 State Contract provides, ECF 1-3 at 9:
Maryland County, municipal, and other non-State of Maryland governments or government agencies and not for profit organizations within the State of Maryland may purchase from the Contractor goods or services covered by this Contract at the same prices chargeable to the State. All such purchases by non-State of Maryland governments, government agencies or not for profit organizations:
(1) shall constitute Contracts between the Contractor and that government, agency or organization;
(2) shall not constitute purchases by the State or State agencies under this Contract;
(3) shall not be binding or enforceable against the State; and
(4) may be subject to other terms and conditions agreed to by the Contractor and the purchaser. The Contractor bears the risk of determining whether or not a government, agency or organization with which the Contractor is dealing is a State of Maryland agency.
All Contract prices, terms, and conditions must be provided to any Maryland local government or not for profit organization requesting services under this Contract.

         Neither party has clearly identified which State agencies are required to utilize the 2017 State Contract. But, at a minimum, it appears that the Maryland Department of Transportation, the Maryland Transportation Authority, and the Maryland Transit Administration must utilize the services provided under the 2017 State Contract. See ECF 1-3 at 12, § 1.2, ¶ 40.

         As noted, Dr. Toney worked for Concentra as the SMD, and now holds that same position with Workpro. The 2017 State Contract RFP defines "State Medical Director" as follows, ECF 1-3 at 12, § 1.2, ¶ 40 (italics added):

State Medical Director (SMD) - The physician or small centralized group of physicians designated by either the Secretary of Budget and Management or the Secretary of Transportation to exercise all authority vested in Secretaries with respect to medical examinations and investigations relating to employment (including pre and postemployment) with the State Personnel Management System and the Transportation Human Resources System. The SMD shall serve as the Medical Advisor to MDOT, MTA and MdTA. Per COMAR, the SMD may designate this authority. The SMD may also designate facilities in which employees are seen by heath care professionals (i.e. nurses, physician assistants, etc.) that are authorized by the SMD (See COMAR (1)) to make medical determinations as related to the services under this Contract. The SMD still has final authority over all decisions or determinations of medical outcomes.

         The Code of Maryland Regulations ("COMAR"), referenced in § 1.2, is pertinent. Title 17 of COMAR applies to DBM. Subsection 4 applies to Personnel Services and Benefits. COMAR states that the SMD "shall exercise all authority vested in the Secretary with respect to medical examinations and investigations relating to employment with the State." Among other things, the SMD shall also "conduct medical examinations of applicants and current employees as provided in State Personnel and Pensions Article ["S.P.P."], §§ 2-302(b)(1)(vi) and 2-303[.]" COMAR And, of import, "[t]he determination of the [State] Medical Director in examinations of applicants conducted under.. .this regulation is final and is not subject to review by the Office of Administrative Hearings ["OAH"]." COMAR

         Section 3.23 of the 2017 State Contract is titled "Workability Examinations." Section states: "Employees may be referred to the SMD for a comprehensive workability examination." ECF 1-3 at 33. Among other things, Workability Examinations "evaluate the employee's current medical capabilities and limitations with regard to the job duties of the employee's position. If the employee has medical limitations that prevent the employee from performing assigned job duties, " the evaluation must "determine if the employee is medically capable of temporarily performing modified duties, indicate what the specific duty restrictions are, estimate length of modified duty or determine that the limitations are permanent...." Id.

         Additionally, "[f]or employees with frequent sick leave usage, " the examination seeks to "determine if the frequency of use is medically justified based on the nature/severity of the medical condition(s). In some cases, it may be necessary to determine if the employee has a chronic medical condition that has an ongoing and significant impact on the employee's attendance, work performance or ability to perform assigned job duties." Id.

         By the terms of the 2017 State Contract, an employee must be seen by the SMD or his designee within fifteen days of any agency request. Id. And, at a minimum, the examination must include, inter alia, a physical examination, personal health history, and a review of relevant medical records. Moreover, under certain circumstances, diagnostic studies and laboratory testing may be performed, as well as follow-up examinations. Id. at 34.

         The DBM explained the difference between a Workability Examination, performed by the SMD, and an Independent Medical Examination ("IME"), such as for a worker's compensation matter, in a document titled "Questions And Responses #2, " issued in conjunction with the 2016 RFP. The DBM said, ECF 12-2 at 5:

The Workability Exam is only performed by the State Medical Director/Department Medical Advisor as identified on p. 11 and p. 40 of the RFP; and this is very important. The title and authority of the State Medical Director is identified in COMAR The title and authority of the Department Medical Advisor is identified in COMAR[12] Under COMAR, the determination of the State Medical Director/Department Medical Advisor is "final and not subject to review by the Office of Administrative Hearings." As a result, there are particular actions State agencies can take based on the results of the Workability Exam which they would not be able to take based only on the results of an EVIE. This is the most important material distinction between an Initial Workability Examination and an Independent Medical Exam.

         At the Hearing, Dr. Toney acknowledged the similarity between a Workability Examination, a specific kind of medical examination under the State Contract, and an IME.13 As Dr. Toney put it, the distinction is one of "impact." In particular, a Workability Examination provides finality, because it is not subject to challenge or review by OAH.

         Section of the 2017 State Contract is titled "Non-Compete Clause Prohibition." The defense characterizes this provision as a waiver clause. ...

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