Court Summaries Anna Reeves Olson
| Publication year | 2023 |
| Citation | Vol. 46 No. 6 Pg. 56 |
| Pages | 56 |
Court Summaries
Anna Reeves Olson
Michael Skaf, M.C. v. Wyoming Cardiopulmonary Services, P.C.,
S-22-0290
August 28, 2023
In 2004, Dr. Michael Skaf began practicing as a cardiologist with Wyoming Cardiopulmonary Services, P.C. (WCS) in Casper. In 2009, he became a WCS shareholder and signed a Shareholder Employment Agreement (Agreement). As part of this Agreement, Dr. Skaf was entitled to a benefit of deferred compensation. The agreement included two relevant provisions, ¶ 11.1, an agreement not to compete against WCS; and ¶ 11.2, an agreement not to service WCS patients if Dr. Skaf was terminated. Paragraph 11.2 provided for "liquidated damages," and stated that if Dr. Skaf competed with WCS after his termination, WCS would be entitled to $1,000 (plus 18% interest) for each patient that he treated after he left WCS.
In 2015, Dr. Skaf was terminated for cause and quickly opened up his own cardiology office. WCS responded by suing him claiming he breached the non-compete clause. The parties went to arbitration with WCS asserting Dr. Skaf violated the covenant not to compete clause and WCS should be entitled to liquidated damages. WCS also asserted that Dr. Skaf breached his agreement not to service WCS patients under ¶ 11.2 and WCS was entitled to damages. Dr. Skaf denied these allegations and asserted that he was entitled to unpaid and deferred compensation, including interest at the statutory rate of 18%.
The arbitration panel first analyzed the noncompete and determined it must be modified (i.e., "blue penciled") to be enforceable. In a separate section entitled "Damage Claims by Petitioner," the panel addressed damages Dr. Skaf owed to WCS for violating the non-compete and servicing former WCS patients. It also determined that WCS was entitled to $193,000 for the 193 WCS patients that Dr. Skaf serviced.
On appeal, in Skaf I, the Supreme Court reversed and held that the panel made a manifest error of law in its award by basing its analysis and decision on the premise that non-competes are highly favored in Wyoming.
Subsequently, the parties returned to arbitration where Dr. Skaf asked the panel to award him his deferred compensation under the Agreement, plus interest, and WCS asked the panel to reaffirm the liquidated damages award. The panel held that, despite the fact the non-compete was unenforceable, the liquidated damages provision was a distinct and valid basis for the damages award. So, the panel concluded WCS was entitled to the liquidated damages that had been awarded at the first arbitration. The panel also awarded Dr. Skaf $125,000 in deferred compensation but denied him interest on the award.
On appeal, the Court affirmed and held that it was not manifest error to deny Dr. Skaf interest on the $125,000 deferred compensation award after the panel's decision on remand. This is because an arbitrator has broader discretion in tailoring awards. Because of the voluntary and informal nature of arbitration, awards "are subject to less intensive scrutiny" on review, and arbitrators are free to weigh the relative equities of the parties and fashion an award outside the constraints put on a court. Here the panel determined under the unique procedural circumstances of this case, with litigation ongoing since 2015, it would be inequitable to grant Dr. Skaf 18% on his $125,000 deferred compensation award. That was not manifest error of law.
With regard to the liquidated damages issue, the Court held that Dr. Skaf was required to raise the liquidated damages argument on appeal in Skaf I and because he failed to, he could not do so now. The Court reasoned that ¶ 11.1 was severable from the liquidated damages provision in ¶ 11.2. "In order to be severable, and therefore appealable, any determination of the issues so settled by the judgment must not affect the determination of the remaining issues whether such judgment on appeal is reversed or affirmed."
Paragraphs 11.1 and 11.2 provided distinct factual scenarios that entitled WCS to distinct remedies. Under ¶ 11.1, Dr. Skaf was barred from providing cardiology services to any patient within a county where WCS or its satellite clinics operates for two years. Under ¶ 11.2, Dr. Skaf was required to pay liquidated damages for any former WCS patient to whom he provided care anywhere in the world within two years of leaving employment. The panel recognized that ¶ 11.2 "is not a non-compete clause and, in fact, contemplates competition but establishes an agreement as for liquidated damages to be paid if that competition results in taking existing customers of [WCS] during a certain time frame." The panel found that Dr. Skaf provided care to former WCS patients in violation of ¶ 11.2 and awarded WCS liquidated damages for...
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