Aesthetic Facial & Ocular Plastic Surgery Ctr., P.A. v. Zaldivar

IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA18-431

Filed: 19 March 2019

Wake County, No. 14 CVS 012804

AESTHETIC FACIAL & OCULAR PLASTIC SURGERY CENTER, P.A., Plaintiff,

v.

RENZO A. ZALDIVAR and OCULOFACIAL PLASTIC SURGERY CONSULTANTS,

P.A., SURGICAL, LLC, Defendants.

Appeal by plaintiff from order entered 16 December 2015 by Judge G. Bryan

Collins, Jr. in Superior Court, Wake County. Heard in the Court of Appeals 16

October 2018.

The Law Offices of Michele A. Ledo, PLLC, by Michele A. Ledo; and Law Office

of Samuel A. Forehand, P.A., by Samuel A. Forehand, for plaintiff-appellant.

Zaytoun Law Firm, PLLC, by Matthew D. Ballew, John R. Taylor, and Robert

E. Zaytoun, for defendants-appellees.

STROUD, Judge.

This case arises from plaintiff’s claim to enforce restrictive covenants in an

employment agreement involving two highly specialized physicians. After two years,

Dr. Renzo Zaldivar left Aesthetic Facial and Ocular Plastic Surgery Center, P.A., an

ocular and facial plastic surgery practice started by Dr. Frank Christenson, and

started his own practice. Dr. Zaldivar’s employment agreement with Dr.

Christensen’s practice included a covenant not to compete in certain geographical

AESTHETIC FACIAL V. ZALDIVAR

Opinion of the Court

areas in North Carolina, and a covenant not to solicit former patients or referrals

from individuals or businesses with a referring relationship to plaintiff. After

carefully reviewing the covenants, we find that they are unenforceable because they

violate public policy and affirm the trial court’s grant of summary judgment for

defendants.

I. Background

Dr. Frank Christensen is a board-certified physician practicing ophthalmology,

with specialized “surgical training in ocular and plastic surgery.” He has been in

practice for about 30 years, and, because of his highly specialized practice, he sees

patients “based upon referrals from optometrists and ophthalmologists throughout

the eastern half of North Carolina.” For most of his years in practice, Dr. Christensen

was the only physician working for his practice, Aesthetic Facial & Ocular Plastic

Surgery Center, P.A. (“plaintiff”). Plaintiff has an office in Raleigh, but Dr.

Christensen saw and treated patients in office spaces rented from other physicians

or in hospitals in Central and Eastern North Carolina.

In 2008, Dr. Christensen “actively recruited an additional surgeon to

supplement the practice specifically seeking a surgeon trained in both ophthalmic

and plastic surgery.” “After an extensive recruiting process,” he offered to employ

defendant, Dr. Renzo Zaldivar. Dr. Zaldivar completed his ophthalmology training

and a fellowship with the Mayo Clinic and University of Minnesota, and Dr.

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Christensen offered Dr. Zaldivar employment with plaintiff in a letter dated 26

November 2008 (“the Agreement”). This Employment Agreement contained

provisions covering salary, benefits, and Dr. Zaldivar’s obligations to plaintiff. The

Agreement also contained non-compete and non-solicitation covenants. Dr. Zaldivar

accepted Dr. Christensen’s offer and was employed by plaintiff starting in July of

2009. The Agreement stated Dr. Zaldivar’s employment was “at will” but anticipated

“continuing year to year thereafter until terminated as provided herein.” In June of

2011, Dr. Zaldivar gave notice of his resignation to Dr. Christensen and formed his

own practice, defendant Oculofacial Plastic Surgery Consultants, P.A., Surgical, LLC.

Dr. Zaldivar immediately began practicing in the same geographical region as

plaintiff.

On 24 September 2014, plaintiff filed a complaint against Dr. Zaldivar and his

practice (“defendants”) alleging claims of breach of the covenants in the employment

agreement, tortious interference with contractual relations, civil conspiracy, and

unfair and deceptive trade practices. Defendants answered, denying the material

allegations of the complaint and alleging that the non-compete covenant and

non-solicitation covenants of the Agreement were unenforceable for various reasons.

Defendants counterclaimed for breach of contract, fraud, negligent

misrepresentation, unjust enrichment, and unfair and deceptive trade practices.

After discovery and depositions, defendants filed a motion for summary judgment.

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After a hearing on the motion, the trial court entered an order granting defendants’

motion. On 12 December 2017, defendants voluntarily dismissed all counterclaims,

and plaintiff timely appealed.

II. Standard of Review

Our standard of review of an appeal from summary

judgment is de novo; such judgment is appropriate only

when the record shows that there is no genuine issue as to

any material fact and that any party is entitled to a

judgment as a matter of law. When considering a motion

for summary judgment, the trial judge must view the

presented evidence in a light most favorable to the

nonmoving party. If the movant demonstrates the absence

of a genuine issue of material fact, the burden shifts to the

nonmovant to present specific facts which establish the

presence of a genuine factual dispute for trial.

In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (citation and

quotation marks omitted).

III. Restrictive Covenants

Plaintiff argues that the trial court erred in granting summary judgment

because there are genuine issues of material fact related to the enforceability of the

non-compete covenant and non-solicitation covenant in the Agreement and that the

covenants do not not violate public policy. Defendants contend that enforcement of

the covenants would create a “substantial question of potential harm to the public

health” because Dr. Zaldivar is one of very few specialists in North Carolina who

practice his particular subspecialty of ocluofacial plastic surgery.

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“[I]n North Carolina, restrictive covenants between an employer and employee

are valid and enforceable if they are (1) in writing; (2) made part of a contract of

employment; (3) based on valuable consideration; (4) reasonable both as to time and

territory; and (5) not against public policy.” United Labs., Inc. v. Kuykendall, 322

N.C. 643, 649-50, 370 S.E.2d 375, 380 (1988). There is no dispute that the parties

entered a written employment contract based on valuable consideration; their dispute

is based upon the territory and the public policy considerations of the restrictions.

Defendants contend that the territorial restrictions of the covenants are

unreasonable, and for purposes of addressing the public policy issue, we express no

opinion on the reasonableness of the territory. For purposes of this argument, we

will view the Agreement in the light most favorable to the plaintiff and assume the

restrictions cover the full territory alleged by plaintiff. Dr. Christensen had

arrangements with other physicians or hospitals to provide services in Chapel Hill,

Durham, Fayetteville, Greensboro, Greenville, Pinehurst, Raleigh, Rocky Mount,

Supply, Wake Forest, Wilmington, and Wilson. The Agreement provided that the

covenants covered a 15-mile radius around each of plaintiff’s practice locations.

a. Covenant not to Compete

North Carolina courts have considered several cases involving non-compete

agreements involving physicians, and depending upon the specialization of the

physician and the territory of the restriction, several cases have recognized the

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Opinion of the Court

potential for harm to the public health from denial of needed medical care to the

public:

If ordering the covenantor to honor his contractual

obligation would create a substantial question of potential

harm to the public health, then the public interests

outweigh the contract interests of the covenantee, and the

court will refuse to enforce the covenant. But if ordering

the covenantor to honor his agreement will merely

inconvenience the public without causing substantial

harm, then the covenantee is entitled to have his contract

enforced.

Iredell Digestive Disease Clinic v. Petrozza, 92 N.C. App. 21, 27-28, 373 S.E.2d 449,

453 (1988) (citations omitted), aff’d, 324 N.C. 327, 377 S.E.2d 750 (1989).

This Court considers the following factors in determining

the risk of substantial harm to the public: the shortage of

specialists in the field in the restricted area, the impact of

establishing a monopoly in the area, including the impact

on fees in the future and the availability of a doctor at all

times for emergencies, and the public interest in having a

choice in the selection of a physician.

Calhoun v. WHA Med. Clinic, PLLC, 178 N.C. App. 585, 599-600, 632 S.E.2d 563, 572

(2006) (quotation marks and ellipsis omitted).

Here, both Dr. Zaldivar and Dr. Christensen practice a sub-specialty of

oculo-facial surgery. There is no factual dispute there are very few physicians

practicing this subspecialty in the territory covered by the restrictions, or even in the

entire state of North Carolina.

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If a particular type of medical care is readily available in the restricted

territory, a covenant which restricts a medical professional from providing care may

not offend public policy. For example, in Jeffrey R. Kennedy, D.D.S., P.A. v. Kennedy,

this Court addressed a general dentist who signed a restrictive covenant not to

compete within fifteen miles of the practice in Chapel Hill for three years following

his departure from the practice. 160 N.C. App. 1, 4, 584 S.E.2d 328, 330 (2003). The

defendant dentist began practicing dentistry in violation of the covenant, and the

plaintiff dental practice filed a complaint seeking a preliminary injunction, which the

trial court denied. Id. at 5, 584 S.E.2d at 331. This Court reversed the trial court

and concluded the covenant was enforceable because “the covenant at issue does not

cause substantial harm to the public health and, at most, merely inconveniences

dental patients.” Id. at 11, 584 S.E.2d at 335. The evidence in that case showed that

many dentists were available in the restricted area, and the defendant dentist did

not practice any sort of specialized dental care not provided by most general dentists.

Id. This Court stated that “[p]rior cases concluding that such restrictions harm the

public health involve circumstances wherein the health care provider is the sole such

provider in the area, or is one of few specialists in a particular area.” Id.

This Court addressed a non-compete agreement involving a specialized

physician in an area where few similar specialists were available in Iredell Digestive

Disease Clinic v. Petrozza. 92 N.C. App. 21, 373 S.E.2d 449. In Iredell Digestive

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Disease Clinic, the defendant specialized in gastroenterology and internal medicine.

92 N.C. App. at 22, 373 S.E.2d at 450. Defendant signed a covenant not to compete

for three years within twenty miles of Statesville or five miles of any hospital or office

serviced by plaintiff. Id. at 23, 373 S.E.2d at 450-51. Defendant submitted affidavits

from 41 physicians in Statesville which stated that “one gastroenterologist would not

be able to meet the community’s demand for such services; that losing defendant

Petrozza’s services would create an excessive workload on plaintiff; and would ‘likely

result in undesirable and possible critical delays in patient care and treatment.’” Id.

at 28, 373 S.E.2d at 453. Plaintiff submitted affidavits from 14 physicians who stated

“that there are presently four surgeons in Statesville who can perform certain semi-

surgical procedures performed by gastroenterologists; and that in severe cases

patients can be transferred by helicopter from the hospital in Statesville to Baptist

Hospital in Winston-Salem.” Id. at 28, 373 S.E.2d at 453-54. The trial court

acknowledged that “there is conflict between plaintiff’s and defendant’s affidavits as

to the precise impact Dr. Petrozza’s leaving would have on the community. However,

we believe after reviewing the affidavits de novo, that the trial court was correct in

finding that the public health and welfare would be harmed if there were only one

gastroenterologist in Statesville.” Id. at 29, 373 S.E.2d at 454.

Similarly, in Statesville Medical Group v. Dickey, defendant specialized in

endocrinology and signed an employment contract that prohibited him from

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competing with plaintiff for two years in Iredell County. 106 N.C. App. 669, 670-71,

418 S.E.2d 256, 257 (1992). The trial court granted a preliminary injunction

preventing the defendant from practicing in the restricted area under the covenant.

Id. at 671, 418 S.E.2d at 257. On appeal, this Court reversed the trial court and found

that the covenant posed a risk of substantial harm to the public due to

the shortage of specialists in the field in the restricted area,

the impact of plaintiff establishing a monopoly of

endocrinology practice in the area, including the impact on

fees in the future and the availability of a doctor at all

times for emergencies, and the public interest in having a

choice in the selection of a physician.

Id. at 673, 418 S.E.2d at 259.

In Nalle Clinic Co. v. Parker, defendant specialized in pediatrics and pediatric

endocrinology. 101 N.C. App. 341, 342, 399 S.E.2d 363, 364 (1991). Defendant signed

a contract with plaintiff that prevented defendant from practicing in Mecklenburg

County for two years following his employment with plaintiff. Id. After defendant

resigned from employment with plaintiff, plaintiff sought a preliminary injunction

which the trial court granted. Id. at 342-43, 399 S.E.2d at 365. Under the specific

facts of the case, including the defendant’s specialization and the lack of other

pediatric endocrinologists in the geographic area, this Court reversed the trial court

because “enforcement of the covenant not to compete would create a substantial

question of potential harm to the public health.” Id. at 345, 399 S.E.2d at 366

(quotation marks omitted).

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Here, the covenant not to compete is titled “Restrictive Covenant” in the

employment agreement. The covenant provides that for a period of two years after

his employment with plaintiff ends, defendant

will not render any ophthalmology and/or oculo-facial

plastic and reconstructive surgery services on behalf of

yourself, any business, practice or entity within a fifteen

(15) mile radius of any office, satellite or other place of

business used by the Practice at the time your employment

commences, or within a fifteen (15) mile radius of any

future office, satellite or other place of business used by the

Practice at the time your employment ends (or within one

(1) year prior to the time your employment ends). This

promise specifically includes your not practicing

ophthalmology and/or oculo-facial plastic and

reconstructive surgery services or any of their disciplines

at any hospital, surgery center or laser center at which you

or the Practice’s other physicians had active staff privileges

at the time your employment ends (or within one (1) year

prior to the time your employment ends).

Dr. Zaldivar resigned in September 2011, and plaintiff did not pursue an

injunction to stop Dr. Zaldivar from competing in the restricted area; plaintiff waited

until September 2014 to file a complaint. To support their motion for summary

judgment, defendants submitted affidavits from eight physicians practicing

ophthalmology in North Carolina; six are specialists in oculofacial plastic surgery.

These physicians described the medical necessity of Dr. Zaldivar’s services and the

potential impact on public health from enforcing the restrictive covenants:

Dr. Zaldivar is a much needed member of the North

Carolina medical community. Should Dr. Zaldivar not be

permitted to practice in the alleged “restricted area” of the

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“non-compete covenant” that is involved in this dispute,

this could potentially cause harmful delay in delivery of

specialized medical care in the emergency setting . . . .

Removing Dr. Zaldivar from practice in this broad and

highly populated geographic area would cause an increased

burden on the limited number of oculofacial plastic

specialists practicing from Greensboro to the North

Carolina Coast.

In addition, the eight physicians noted the limited number of oculofacial plastic

surgeons in the area:

There are currently a limited number of oculofacial plastic

surgeons practicing in the North Carolina from Greensboro

to the East Coast. These subspecialty eye surgeons handle

emergencies and time-sensitive face and eye surgeries for

a population of millions of people in this geographic area,

including children seen in emergency rooms for acute or

trauma injuries to the eyes and face.

The physicians also noted that Dr. Zalidivar provides several highly specialized

surgical procedures not provided by other physicians in the area:

Dr. Zaldivar provides patients with access to highly

specialized medical procedures and orbital surgeries,

including but not limited to optic nerve sheath

fenestrations, which are currently only available in

Eastern North Carolina through Dr. Zaldivar’s practice.

This procedure is usually necessitated in an emergency

situation where pressure on the optic nerve can cause

permanent vision loss without prompt surgical

intervention.

Where defendants have presented evidence supporting a summary judgment

motion, plaintiff cannot rely on its complaint but must produce evidence to create a

genuine issue of material fact. See N.C. Gen. Stat. §1A-1, Rule 56(e) (“When a motion

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for summary judgment is made and supported as provided in this rule, an adverse

party may not rest upon the mere allegations or denials of his pleading, but his

response, by affidavits or as otherwise provided in this rule, must set forth specific

facts showing that there is a genuine issue for trial.”). However, we “view the

presented evidence in a light most favorable to the nonmoving party.” In re Will of

Jones, 362 N.C. at 573, 669 S.E.2d at 576.

In response to defendants’ motion for summary judgment, plaintiff submitted

affidavits of Dr. Christensen and two other employees of plaintiff. In his deposition,

Dr. Christensen acknowledged that both he and Dr. Zaldivar are in a very highly

specialized area of practice. When Dr. Zaldivar joined plaintiff, Dr. Christensen sent

out a letter to his referral sources describing his unique qualifications and extensive

training:

I believe you will be impressed with my new associate Dr.

Renzo Zaldivar. He is a very talented surgeon with the

highest of training credentials and excellent personal

demeanor. Dr. Zaldivar has completed a formal, two-year

fellowship in oculoplastics at the Mayo Clinic which is one

of thirty recognized by the American Society of Ophthalmic

Plastic and Reconstructive Surgery (ASOPRS). . . . We will

be the only fellowship trained oculoplastic and orbital

specialists that have both completed a fellowship approved

by the American Society of Ophthalmic Plastic and

Reconstructive Surgeons and are also members of this

society who treat patients in Raleigh and Cary (Dr. Zaldivar

will be admitted to ASOPRS society October, 2009).

....

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I am very excited to have an associate with his excellent

credentials. Although results cannot be guaranteed I

believe that the first responsibility as a surgeon is to obtain

the best and most advanced training available through

education and then to apply this knowledge.

(Emphasis added.)

Based upon the entire forecast of evidence, viewed in the light most favorable

to plaintiff, there is no genuine issue of material fact as to Dr. Zaldivar’s specialized

qualifications and the very limited number of physicians in the territory covered by

the covenant—or even in North Carolina—who can provide oculofacial plastic surgery

and particularly optic nerve sheath fenestrations. Plaintiff seeks to minimize the

importance of the optic nerve sheath fenestration surgery, arguing it is “so rare you

don’t see many of them,” but plaintiff does not dispute that when a patient needs optic

nerve sheath fenestration surgery, the patient may go blind if the procedure is not

performed promptly. And even if very few patients need this procedure, one person

losing his or her sight because of the lack of a specialist to perform the surgery is one

too many.

There is no genuine issue of material fact regarding the nature of Dr. Zaldivar’s

practice or the very limited availability of other physicians practicing in the relevant

area of North Carolina. We conclude that restricting Dr. Zaldivar’s ability to practice

in the most populated areas of North Carolina when there are very few oculofacial

plastic surgeons, and even fewer who perform some of the specialized procedures he

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is trained to provide, raises a “substantial question of potential harm to the public

health.” Iredell Digestive Disease Clinic, 92 N.C. App. at 27, 373 S.E.2d at 453.

Accordingly, the covenant violates public policy and will not be enforced.

b. Buy-Out Provision

Plaintiff contends that even if enforcement of the Agreement by enjoining Dr.

Zaldivar from practicing would pose a risk to public health, this risk is not present

here because he did not seek to enjoin Dr. Zaldivar from practicing his specialty after

leaving plaintiff’s practice. Plaintiff waited until after the expiration of the two year

covenant to file its claim against defendants and seeks damages under the buy-out

provision of the Agreement. This provision provides that

the Practice agrees to release you from the restrictive

covenant of this Paragraph 11 (but not the non-solicitation

provisions of Paragraph 12) if you purchase and actually

pay for a release from the restrictive covenant from the

Practice. Your purchase of a release from the restrictive

covenant and your actual payment for such release prior to

your practicing in the restricted areas after your

employment ends will permit you to practice in the

restricted areas described above after termination of your

employment. You hereby agree that reasonable

compensation to the Practice for such a release from the

restrictive covenant is an amount equal to one hundred

fifty percent (150%) of your annual base salary in effect

immediately prior to the termination of your employment

with the Practice. Thus, should you elect to practice in the

restricted areas after your employment ends, you agree to

pay and the Practice agrees to accept such amount to

provide you a release from the restrictive covenant to

which you have agreed in this Paragraph 11.

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Plaintiff argues that the buy-out provision is enforceable because it does not

prevent Dr. Zaldivar from providing medical care; it only requires him to pay Plaintiff

to be released from the non-compete provisions of the Agreement (but not the non-

solicitation provision, which we will address below). Plaintiff contends that “[t]his

Court has held that there is no potential harm to public health where a physician can

pay his former employer to practice in a restricted area, whether the payment

provision is cast as a liquidated damages provision or a forfeiture provision.” We

disagree with plaintiff’s characterization of this Court’s prior holdings.

Plaintiff argues this Court approved damages in lieu of enforcement of a non-

compete agreement in Eastern Carolina Internal Medicine, P.A. v. Faidas. 149 N.C.

App. 940, 564 S.E.2d 53, aff’d, 356 N.C. 607, 572 S.E.2d 780 (2002). But Faidas did

not address a covenant not to compete; this Court held “that the ‘Cost Sharing’

provision is not a covenant not to compete and we do not subject it to the strict

scrutiny as to reasonableness and public policy required with a covenant not to

compete.” Id. at 945, 564 S.E.2d at 56. Relying on Faidas, this Court in Calhoun v.

WHA Medical Clinic, PLLC, considered a non-compete clause and a damages clause

dealing with cardiologists and found that “[t]he trial court made findings . . . that

establish that there is no potential harm to public health given that the physicians

were able to pay the liquidated damages and had no plans to leave the area.” 178

N.C. App. at 600, 632 S.E.2d at 573. At trial, the cardiologists subject to the covenant

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testified “that they had no plans to leave the area and, if the covenant not to compete

was determined to be enforceable, they were prepared to take all necessary steps to

ensure continued presence in the medical community and continued treatment of

patients, even if that meant paying the liquidated damages agreed to in their

contracts with WHA.” Id. at 593, 632 S.E.2d at 569. They also posted a letter of

credit with the clerk of superior court further demonstrating their ability to pay the

liquidated damages. Id. Further, the amount of the liquidated damages in Calhoun

was at a minimum equal to a payout that each doctor had the option to receive or

forgo and not be subject to the restrictive covenant. Id. at 590, 632 S.E.2d at 567.

Neither Calhoun nor Faidas stand for the proposition that a damages clause

in a restrictive covenant makes a covenant in violation of public policy based upon a

risk to public health enforceable through payment of damages instead of enjoining

the physician from practicing. The provisions of the Agreement regarding damages

in Calhoun and the unique facts of that case distinguish it from this case. See id. at

600, 632 S.E.2d at 573. Faidas did not deal with a covenant not to compete. 149 N.C.

App. at 945, 564 S.E.2d at 56. The evidence does not demonstrate that Dr. Zaldivar

had the ability to pay the liquidated damages, nor did he post a letter of credit with

the clerk of superior court to secure the damages. Both the restrictive covenant and

the liquidated damages provision must be reasonable and not violate public policy.

See Calhoun, 178 N.C. App. at 599, 632 S.E.2d at 572 (“[T]he agreement . . . contains

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an unequivocal non-compete clause, and . . . contains a damages provision in the event

the Physician desires to practice in violation of the non-compete clause. Accordingly,

under established case law, the provisions are strictly scrutinized as to

reasonableness and public policy.” (brackets, quotation marks, and emphasis

omitted)).

We recognize that we have the benefit of hindsight, since plaintiff waited until

after the two-year term of the restrictions to bring this lawsuit and Dr. Zaldivar

continued to practice in the restricted area, so any potential harm to public health

from limitation of his practice did not happen. But the timing of plaintiff’s lawsuit

and the damages provision cannot obviate the public policy considerations of this

covenant. If we allowed enforcement of this type of damages provision in lieu of

enforcement of an injunction restricting a physician’s practice, physicians in Dr.

Zaldivar’s position may opt not to continue practicing in the restricted area because

of the risk of the financial penalty. The practical effect on public health is then the

same as enjoining the physician’s practice: the public would be denied crucial medical

care because of the financial penalty imposed by a physician’s non-compete

agreement. Since there is a risk of substantial harm to the public based on these

facts, there is strong public policy in favor of not enforcing the non-compete provisions

by an award of damages.

c. Non-Solicitation Covenant

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Plaintiffs argue that the non-solicitation covenant is enforceable because “the

non-solicit provision is reasonably limited to health care providers and patients with

whom Christensen Plastics had already established a relationship (or those patients’

family members).” The non-solicitation covenant provides:

Recognizing that your duty to the Practice as your

employer extends beyond your employment, you agree that

both during your employment and thereafter, if your

employment ends (regardless of the reason or manner of

termination) and whether or not you practice within the

restricted area as described above, that you will not

directly or indirectly: (i) solicit for treatment any former or

existing patient (or member of any patient’s household) of

the Practice; (ii) induce or attempt to influence any

employee, contractor or patient of the Practice to alter his

or her relationship with the Practice in any way; (iii) induce

or attempt to influence any hospital, other health care

facility, any physician, any optometrist, any optician, or

any other professional with a referring relationship with

the Practice, including any managed care payor, to alter

that relationship in anyway; or (iv) solicit any patient

service contractual arrangement of the Practice. This

restriction shall apply during the term of your employment

and for a period of two (2) years immediately following the

end of your employment. In the event of your breach

thereof, the two (2) year time limitation expressed above

shall be from the date of your last violation.

“To be valid, the restrictions must be no wider in scope than is necessary to

protect the business of the employer.” Med. Staffing Network, Inc. v. Ridgway, 194

N.C. App. 649, 656, 670 S.E.2d 321, 327 (2009) (quotation marks omitted). “In North

Carolina, the protection of customer relations against misappropriation by a

departing employee is well recognized as a legitimate interest of an employer.” Id.

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(quotation marks and brackets omitted). A restrictive covenant may “be directed at

protecting a legitimate business interest. But . . . where the Agreement reaches not

only clients, but potential clients, and extends to areas where Plaintiff had no

connections or personal knowledge of customers, the Agreement is unreasonable.”

Hejl v. Hood, Hargett & Assocs., 196 N.C. App. 299, 307, 674 S.E.2d 425, 430 (2009).

In his deposition, when Dr. Christensen was asked for the name of a physician

whom Dr. Zaldivar solicited in violation of this covenant, he responded:

I’ll give you one doctor. That’s the question. Kathy Hecker.

He called Kathy Hecker up and says, I would like you to

stop sending to Frank and send to me.

But in direct response to this testimony, Dr. Kathryn Hecker swore to the following

in an affidavit:

2. I have been advised that Dr. Frank Christensen, the

owner of Aesthetic Facial & Ocular Plastic Surgery

Center, PA, gave sworn deposition testimony about me

in his legal proceedings against Dr. Renzo Zaldivar. I

have read the portions of Dr. Christensen’s depositions

where he discusses me, which are attached to affidavit

as Exhibit A, and Dr. Christensen’s testimony about me

is false. Specifically, Dr. Christensen’s testimony that

Dr. Zaldivar solicited business from me is not true.

Contrary to Dr. Christensen’s testimony, Dr. Zaldivar

never called me and asked that I stop referring patients

to Dr. Christensen and instead refer patients to Dr.

Zaldivar. Also, I never told Dr. Christensen that Dr.

Zaldivar solicited me in this way.

This testimony and affidavit could present a genuine issue of material fact,

since Dr. Hecker denies that Dr. Zaldivar solicited her, and Dr. Christensen says he

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did. Viewed in the light most favorable to plaintiff, this evidence in addition to the

affidavits of plaintiff’s employees could show a violation of the non-solicitation

agreement as to Dr. Hecker, but even if Plaintiff has forecast one potential violation

of the non-solicitation covenant, the Agreement still is unenforceable because it is

overbroad and in contravention of public policy. The non-solicitation provision is not

limited to existing patients or Dr. Zaldivar’s professional contacts made during his

employment with plaintiff. Instead, it covers “any former or existing patient (or

member of any patient’s household) of the Practice[.]” (Emphasis added.) This

restriction would apply not just to existing patients, but also to “any member of the

patient’s household”—a future or potential patient with whom Dr. Christensen had

no relationship—and is therefore unreasonable. See Hejl, 196 N.C. App. at 307, 674

S.E.2d at 430.

Because of the highly specialized nature of both Dr. Zaldivar’s and Dr.

Christensen’s practices, they see patients almost exclusively based upon referrals

from other physicians. The remaining prohibitions of the non-solicitation provisions

also impair Dr. Zaldivar’s ability to see future or potential patients because it

penalizes Dr. Zaldivar for accepting referrals from other medical professionals or

hospitals with whom Dr. Christensen had a relationship. These limitations on Dr.

Zaldivar prevent him from

(ii) induc[ing] or attempt[ing] to influence any employee,

contractor or patient of the Practice to alter his or her

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Opinion of the Court

relationship with the Practice in any way; (iii) induc[ing]

or attempt[ing] to influence any hospital, other health care

facility, any physician, any optometrist, any optician, or

any other professional with a referring relationship with

the Practice, including any managed care payor, to alter

that relationship in anyway; or (iv) solicit[ing] any patient

service contractual arrangement of the Practice.

For example, if a patient suffered an eye injury and presented to the emergency

department of a hospital where Dr. Christensen had practiced, and the hospital

contacted Dr. Zaldivar to care for the patient, instead of Dr. Christensen, Dr. Zaldivar

may be in violation of the non-solicitation provision simply because he let the hospital

know that he was available to care for patients at the hospital and agreed to care for

the patient—even if Dr. Christensen was not available at that moment to care for the

patient in the emergency department. This limitation on referrals from other medical

professionals to a highly specialized physician, where very few such physicians are

available, would have the same detrimental effect upon availability of medical care

as the non-compete agreement, and it is therefore unenforceable.

IV. Breach of Contract

Plaintiff argues “[w]here the Referral Source Covenants of the parties’ contract

are valid and enforceable, the trial court erred in summarily dismissing Christensen

Plastics’ breach of contract claims.” However, the breach of contract claim is

contingent on the validity of the unenforceable covenants discussed above. This

argument is overruled.

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V. Learned Profession Exemption

Plaintiff argues that “the trial court erred in holding that the ‘learned

profession’ exemption bars its unfair and deceptive trade practices claim where this

claim does not involve the provision of medical services.” (Capitalization removed.)

Plaintiff’s complaint alleged in relevant part:

41. Oculofacial P.A. employed Zaldivar for the

express purpose of committing acts in breach of his

agreement with Plaintiff when Oculofacial P.A. and

Zaldivar knew of the agreement and knew or should have

known that the acts violated the agreement.

42. Oculofacial P.A. and Zaldivar engaged in the

solicitation of patients and in the practice of medicine and

surgery in North Carolina in violation of the agreement

between Plaintiff and Zaldivar.

“To prevail on a claim of unfair and deceptive trade practice a plaintiff must

show (1) an unfair or deceptive act or practice, or an unfair method of competition,

(2) in or affecting commerce, (3) which proximately caused actual injury to the

plaintiff or to his business.” Spartan Leasing Inc. v. Pollard, 101 N.C. App. 450, 460-

61, 400 S.E.2d 476, 482 (1991). “[C]ommerce includes all business activities, however

denominated, but does not include professional services rendered by a member of a

learned profession.” N.C. Gen. Stat. § 75-1.1(b) (2017) (quotation marks omitted). “To

determine whether the learned profession exclusion applies, a two-part inquiry must

be conducted: first, the person or entity performing the alleged act must be a member

of a learned profession. Second, the conduct in question must be a rendering of

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Opinion of the Court

professional services.” Wheeless v. Maria Parham Med. Ctr., Inc., 237 N.C. App. 584,

589, 768 S.E.2d 119, 123 (2014) (brackets and quotation marks omitted).

“There is no dispute that doctors . . . are members of a learned profession.”

Hamlet H.M.A., LLC v. Hernandez, ___ N.C. App. ___, ___, 821 S.E.2d 600, 606 (2018).

Here, the conduct as alleged by plaintiff’s complaint is “the solicitation of patients

and the practice of medicine and surgery in North Carolina in violation of the

agreement between Plaintiff and Zaldivar.” (Emphasis added.) The Agreement

places a limitation on defendant’s ability to provide medical care and therefore arises

from “a rendering of professional services.” Wheeless, 237 N.C. App. at 589, 768

S.E.2d at 123. The trial court did not err in determining this claim falls under the

learned profession exemption, and this argument is overruled.

VI. Derivative Claims

Plaintiff next argues that “the Referral Source Covenants are valid and

enforceable. As such, they can properly serve as the basis for a tortious interference

claim against Zaldivar Plastics.” As the restrictive covenants are not enforceable,

there is also no basis for plaintiff’s tortious interference claim. This argument is

overruled.

VII. Punitive Damages

Plaintiff finally argues, “the trial court . . . erred in holding that Christensen

Plastics’ punitive damages claim fails.” Because we have held that the covenants are

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Opinion of the Court

unenforceable, defendants have no liability for compensatory damages, and thus

there is no basis for awarding punitive damages. N.C. Gen. Stat. § 1D-15(a) (2017)

(“Punitive damages may be awarded only if the claimant proves that the defendant

is liable for compensatory damages . . . .”); see Pittmann v. Hyatt Coin & Gun, Inc.,

224 N.C. App. 326, 330, 735 S.E.2d 856, 859 (2012) (“[A] claim of punitive damages is

dependent upon a successful claim for compensatory damages . . . .”). This argument

is overruled.

VIII. Conclusion

For the foregoing reasons, we affirm the trial court’s grant of summary

judgment for defendants.

AFFIRMED.

Judges BRYANT and DAVIS concur.

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