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21st Century Oncology Inc. v. Moody

United States District Court, N.D. Florida, Tallahassee Division

August 21, 2019

21st Century Oncology, Inc., Plaintiff,
v.
Ashley B. Moody, in her official capacity as Florida Attorney General, and Laurel M. Lee, in her official capacity as Florida Secretary of State, Defendants, and Dr. Michael Katin Intervenor.

          ORDER DENYING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION

          MARK E. WALKER CHIEF UNITED STATES DISTRICT JUDGE

         In February 1954, the classic horror film Creature from the Black Lagoon was released.[1] The plot is now a familiar trope: a prehistoric monster emerges from the fetid depths of a jungle swamp to terrorize a scientific expedition, kidnaps the girlfriend of one of the scientists, and is killed only after bringing the majority of the cast to various grisly ends. As the real-world setting for the eponymous lagoon, the filmmakers chose Wakulla Springs, Florida-a state park located less than fifteen miles from this Court's courtroom in Tallahassee.[2]

         Sixty-five years later, Plaintiff contends, another monster has emerged, this time in the heart of Tallahassee itself. The primordial pool in question is the Florida Capitol, and the role of the hadean hominid is played by section 542.336, Florida Statutes, which the Florida Legislature adopted in its 2019 Session. See Ch. 2019-138, Laws of Fla. (2019) (adopting section 542.336). Section 542.336 declares that, when a particular entity employs or contracts with all physicians practicing a given specialty in a given county, any noncompete agreements between that entity and those physicians are void. Plaintiff, a company that employs a variety of physicians in several Florida counties, argues section 542.336 is pernicious special-interest legislation, crafted by lobbyists to allow a small group of its former employees to escape their non-compete agreements without serving any broader public good. Pursuant to 42 U.S.C. § 1983, Plaintiff seeks to enjoin application and enforcement of section 542.336 on the basis that it violates the Contracts Clause, Due Process Clause, and Equal Protection Clause of the United States Constitution.[3] This Court denied Plaintiff's motion for temporary restraining order, ECF No. 8 (order), and the matter proceeded to a preliminary injunction hearing on August 9, 2019.[4] This Court concludes Plaintiff's Motion for Preliminary Injunction, ECF No. 3, is due to be DENIED.

         I

         In full, section 542.336 provides:

A restrictive covenant entered into with a physician who is licensed under chapter 458 or chapter 459 and who practices a medical specialty in a county wherein one entity employs or contracts with, either directly or through related or affiliated entities, all physicians who practice such specialty in that county is not supported by a legitimate business interest. The Legislature finds that such covenants restrict patient access to physicians, increase costs, and are void and unenforceable under current law. Such restrictive covenants shall remain void and unenforceable for 3 years after the date on which a second entity that employs or contracts with, either directly or through related or affiliated entities, one or more physicians who practice such specialty begins offering such specialty services in that county.

§ 542.336, Fla. Stat. (2019).

         Plaintiff argues section 542.336 unconstitutionally impairs its noncompete agreements with its current and former employees, and that it is special interest legislation that does not serve any legitimate public purpose. Plaintiff also argues section 542.336 is unconstitutionally vague because it is unclear what is meant by “medical specialty, ” the three-year period of invalidity is ambiguous as a practical matter, and it is difficult for an employer to tell whether it is the sole employer of all physicians practicing a given specialty in a given county. Finally, Plaintiff contends section 542.336 violates Plaintiff's right to equal protection of the law by imposing an asymmetrical bar on noncompete agreements and by “facially target[ing] a few physician specialists, including Intervenor, for special dispensation.” ECF No. 62 at 2.

         II

         A “preliminary injunction is an extraordinary and drastic remedy not to be granted unless the movant clearly carries the burden of persuasion as to the four prerequisites.” United States v. Jefferson Cty., 720 F.2d 1511, 1519 (11th Cir. 1983) (quotation and citation omitted). A court may only grant such relief if the moving party shows “(1) it has a substantial likelihood of success on the merits; (2) irreparable injury will be suffered unless the injunction issues; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest.” Siegel v. LePore, 234 F.3d 1163, 1176 (11th Cir. 2000) (en banc). “No one factor, taken individually, is necessarily dispositive, ” but “the absence of an adequate showing with regard to any one factor may be sufficient, given the weight or lack of it assigned the other factors, to justify the denial.” FMC Corp. v. United States, 3 F.3d 424, 427 (Fed. Cir. 1993).

         This case turns on whether Plaintiff has shown a substantial likelihood of success on the merits. Because Plaintiff has not, at this stage, made the requisite showing as to any of its claims, this Court denies Plaintiff's motion for preliminary injunction.

         III

         The Constitution prohibits the States from passing “any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts.” U.S. Const. art. I, § 10. The final clause quoted, known as the Contracts Clause, [5] “applies to any kind of contract.” Sveen v. Melin, 138 S.Ct. 1815, 1821 (2018). It is not, however, an absolute bar to legislation that affects contracts. Rather, the Constitution recognizes that contracts reflect parties' expectations about the future, and at times it may be necessary for a government to subordinate those expectations to the needs of the public's health, safety, and welfare. See Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 241 (1978) (explaining the Contracts Clause “does not operate to obliterate the police power of the States”). Courts analyze impairment of contracts by applying

a two-step test. The threshold issue is whether the state law has operated as a substantial impairment of a contractual relationship. In answering that question, [courts] consider[] the extent to which the law undermines the contractual bargain, interferes with a party's reasonable expectations, and prevents the party from safeguarding or reinstating his rights. If such factors show a substantial impairment, the inquiry turns to the means and ends of the legislation. In particular, [courts] ask[] whether the state law is drawn in an appropriate and reasonable way to advance a significant and legitimate public purpose.

Sveen, 138 S.Ct. at 1821-22 (internal marks and citations omitted). The severity of the impairment is both the focus of the first step and a means to calibrate the second step; that is, the more severe the impairment, the higher the level of scrutiny a court will apply. Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 504 n.31 (1987) (quoting Energy Reserves Grp., Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411 (1983)). “The severity of the impairment measures the height of the hurdle the state legislation must clear. Minimal alteration of contractual obligations may end the inquiry at its first stage. Severe impairment, on the other hand, will push the inquiry to a careful examination of the nature and purpose of the state legislation.” Allied Structural Steel, 438 U.S. at 245 (footnote omitted); see also Chrysler Corp. v. Kolosso Auto Sales, Inc., 148 F.3d 892, 897 (7th Cir. 1998) (analyzing the justifications advanced for the law at issue and concluding they were “hard to take seriously”). “The requirement of a legitimate public purpose guarantees that the State is exercising its police power, rather than providing a benefit to special interests.” Energy Reserves, 459 U.S. at 412 (footnote omitted).

         Contracts Clause jurisprudence also distinguishes between impairment of contracts between private parties and impairment of contracts to which the state government is itself a party. “Legislation adjusting the rights and responsibilities of contracting parties must be upon reasonable conditions and of a character appropriate to the public purpose justifying its adoption.” U.S. Trust Co. of New York v. New Jersey, 431 U.S. 1, 22 (1977). When the state is not a party to the affected contract, however, “courts properly defer to legislative judgment as to the necessity and reasonableness of a particular measure.” Id. at 23. Therefore, when undertaking the second step of a Contracts Clause analysis in a case involving substantial impairment of a contract between private parties, a court will focus its analysis on the significance and legitimacy of the public purpose behind the impairment and show appropriate (though not absolute) deference to the legislature's choice of means to achieve that purpose.

         Even assuming Plaintiff can overcome Defendants' and Intervenor's other arguments, this Court concludes Plaintiff has not shown a substantial likelihood of success on the merits. Section 542.336 substantially impairs Plaintiff's employment contracts, but it nevertheless does not violate the Contracts Clause because it serves a significant, legitimate public purpose. Moreover, although Plaintiff claims section 542.336 is intended to serve the private benefit of a small special interest group ...


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