COLLIER HMA PHYSICIAN MANAGEMENT, LLC, d/b/a PHYSICIANS REGIONAL MEDICAL GROUP, a Florida limited liability company, Appellant,
BRIAN MENICHELLO, M.D., an individual, Appellee.
FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, IF
from the Circuit Court for Collier County; Hugh D. Hayes,
D. Lash, Martin B. Goldberg, Lorelei J. Van Wey, and Justin
C. Fineberg, of Lash & Goldberg LLP, Miami, for
Lawrence A. Farese and Michael R. Whitt, of Robins Kaplan
LLP, Naples, for Appellee.
case we are called upon to determine the enforceability of a
restrictive covenant in an employment agreement between
Collier HMA Physician Management, LLC, d/b/a Physicians
Regional Medical Group, a Florida limited liability company
(Collier HMA), and Brian Menichello, M.D. (Dr. Menichello).
Collier HMA appeals the circuit court's final summary
judgment in favor of Dr. Menichello entered on the theory
that the restrictive covenant was unenforceable because
Collier HMA was a "successor" employer and the
employment agreement did not expressly authorize enforcement
of the covenant by an assignee or successor as required under
section 542.335(1)(f), Florida Statutes (2012). Because the
circuit court erred in basing its ruling on what it deemed to
be the "substance" of a merger transaction
involving Collier HMA's ultimate parent instead of on
traditional principles of corporate law, we reverse.
THE FACTUAL AND PROCEDURAL BACKGROUND
HMA is a Florida limited liability company with its principal
place of business in Collier County. The company owns and
operates a health care business that employs approximately
forty physicians and operates two hospitals. Collier HMA also
has two full-service medical clinics, one in Naples and one
in Bonita Springs.
Menichello is a medical doctor licensed to practice medicine
in Florida. In September 2012, Collier HMA entered into an
Employment Agreement (the Agreement) with Dr. Menichello. In
accordance with the Agreement, Dr. Menichello was to practice
medicine at Collier HMA and its two hospitals. The term of
the Agreement was for three years, but it was terminable by
either party on ninety days' notice.
Agreement, as amended, included a restrictive covenant that
provided in pertinent part, as follows:
6.7. Restrictive Covenant. During the term of this
Agreement, and for the 12-month period after this Agreement
expires or is terminated, you won't have any financial
relationship, including, without limitation, as an employee
or independent contractor, with Naples Community Hospital,
Inc., Lee Memorial Health System or Millennium Physician
Group, nor any organization that directly or indirectly
controls, is controlled by, or is under common control with,
Naples Community Hospital, Inc., Lee Memorial Health System
or Millennium Physician Group.
the Agreement does not provide that it is binding upon and
enforceable by the successors and assigns of the parties.
Instead, the Agreement expressly provides to the contrary:
6.11. No Third-Party Beneficiaries. The terms and
provisions of this Agreement are intended solely for the
benefit of you and us. It is not the intention of the parties
to confer third-party beneficiary rights upon any other
absence of a provision for the enforcement of the Agreement
by the successors and assigns of the parties is pertinent to
their arguments regarding the enforceability of the
restrictive covenant under section 542.335(1)(f).
September 2012, when the parties entered into the Agreement
and Dr. Menichello began the three-year term of his
employment, Collier HMA was part of a large group of medical
businesses that were ultimately controlled by Health
Management Associates, Inc. (HMAI), a Delaware corporation
with its headquarters and principal place of business in
Naples. During the term of the Agreement, Community Health
Systems, Inc. (CHS), effected a merger transaction whereby it
acquired control of all of the businesses in the chain that
were previously subject to the ultimate control of HMAI. An
explanation of the ownership of Collier HMA and its place in
the family of several other companies related to it both
before and after the merger is necessary to an understanding
of the parties' arguments and the issue to be decided.
often the case with medical businesses, the structure of
these companies was and remains characterized by multiple
levels or tiers of ownership. At the first tier, Collier HMA
owned and operated the business where Dr. Menichello was
employed. At the second tier up the chain, Collier HMA was
owned by a single member, Southwest Florida HMA Holdings,
LLC. At the third tier, that entity was owned by Health
Management Associates, LP. At the fourth tier, Health
Management Associates, LP, was owned by Health Management
General Partner, LLC. At the fifth tier, that entity was
owned by Collier HMA's ultimate parent company, HMAI. The
stock of HMAI was publicly traded. Thus, the equity interest
in HMAI changed hands regularly. By contrast, the ownership
of Collier HMA and the other companies in the multi-tiered
ownership structure remained constant.
merger by which CHS acquired HMAI, the ultimate parent of
Collier HMA at the top tier of the ownership structure,
occurred in January 2014. This transaction was structured as
follows: CHS caused to be created a wholly-owned subsidiary
named FWCT-2 Acquisition Corporation (FWCT-2). Upon approval
of the merger by the necessary parties, FWCT-2 merged with
and into HMAI, with the result that HMAI survived as a
wholly-owned subsidiary of CHS.
the merger, the stock of HMAI was no longer publicly traded.
But HMAI survived the merger and continued to operate, as did
all of the subsidiaries in the chain of ownership below HMAI.
Obviously, there was a change in the ownership of HMAI, but
there was no change in the ownership of its subsidiary
companies, including Collier HMA. Indeed, Collier HMA
continued to exist and to operate the medical practice, with
Southeast Florida HMA Holdings, LLC, as its sole member, just
as before the merger. Also, just as before, Dr. Menichello
continued to be employed by and to receive his compensation
from Collier HMA.
the CHS merger, Dr. Menichello became dissatisfied with
certain aspects of the continued operations of Collier HMA.
Although we need not detail Dr. Menichello's complaints
here, they related primarily to a claimed insufficiency in
staffing and other services that he believed were necessary
to the optimum operation of his practice. On September 24,
2014, Dr. Menichello gave Collier HMA ninety days'
written notice of his intention to terminate the Agreement
without cause effective December 24, 2014. Afterwards,
Collier HMA learned that Dr. Menichello intended to begin
working for Naples Community Hospital, Inc. (NCH), or one of
its affiliates. On October 30, 2014, Collier HMA sent Dr.
Menichello a letter reminding him of the provisions of the
restrictive covenant in the Agreement. Collier HMA also