AmeriPath, Inc. v.
Hebert
Dallas Court of Appeals, No. 05-12-00321-CV (August 5, 2014)
Justices Bridges, Fillmore, and Lewis (Opinion)
Dallas Court of Appeals, No. 05-12-00321-CV (August 5, 2014)
Justices Bridges, Fillmore, and Lewis (Opinion)
The district court granted summary judgment to a pathologist, finding his employment and noncompete agreement with his former employer to be invalid because it misnamed the employer. The Dallas Court of Appeals reversed, providing a detailed analysis of the law of misnomer as applied to contracts, and along the way dealing with issues of waiver of appeal, enforceability of covenants not to compete, confirmation of arbitration awards, and a host of procedural questions. At every step, the Dallas Court seemed to emphasize substance over technicality.
Hebert is a pathologist. Beginning in 1998, he contracted with DFW 5.01(a) Corporation (“DFW”), an entity owned by AmeriPath, to provide professional services. He later executed three additional or amended contracts, all of which referenced the prior versions and all of which contained covenants not to compete. In addition to his continued work for DFW, Hebert became a director and officer of DFW and an officer of several other AmeriPath entities. In 2009 he resigned to take a position with a competitor at a local hospital, in apparent violation of his noncompete. And so, with claims and counterclaims and an arbitration to boot, a long, hard road of litigation began.
Hebert discovered that in the last two iterations of his employment and noncompete agreement, the employer “Company” had been identified, not as DFW, but as “AmeriPath DFW 5.01(a) Corporation” (“ADFW”). All parties agreed no such entity existed. Hebert moved for summary judgment, arguing that his employment contract was invalid because a contract cannot be formed with a nonexistent entity. The trial court agreed and granted his motion. Meanwhile, the parties had gone to arbitration to establish the buy-out value of Hebert’s noncompete, as required under a statutorily-mandated provision in the contract. When the arbitrator set a value of over $2.5 million, DFW and AmeriPath moved to confirm and Hebert opposed. The trial court denied confirmation and vacated the award. Finally, the trial court also granted summary judgment against the various counterclaims asserted by DFW and AmeriPath (for breach of contract, unfair competition, and the like), awarded attorney’s fees to Hebert, severed his remaining tort claims, and signed a final judgment covering all the claims it had resolved. AmeriPath and DFW appealed.
Hebert began his defense of the trial court’s judgment by arguing that defendants AmeriPath and DFW had waived all issues on appeal because they had submitted a proposed form of judgment to the trial court without expressly noting their disagreement with its substance—i.e., they had not inscribed their proposal with the familiar “Approved as to Form Only” disclaimer. And in fact, the trial court had signed the form of judgment submitted by the defendants. But, the appeals court held, the absence of explicit qualifying language did not constitute waiver. The trial court had made the substance of its judgment clear in pronouncements from the bench and in its prior interlocutory orders on summary judgment and arbitration. When Hebert submitted a proposed form of judgment, defendants responded with their own, not varying from the substance already announced by the court (or proposed by Hebert), but simply asking the court to remove any recitation of facts from the judgment (as directed by Rule 299a) and to expressly include two prior orders, to be sure they could be addressed on appeal. Throughout discussions with the trial court on severance and entry of judgment, defendants’ intention to appeal had been apparent. So, the Court of Appeals rejected Hebert’s waiver argument, saying, “When a party merely provides a draft judgment to conform to what the court has indicated its judgment would be, there is no waiver of the appeal.”
The appeals court was no more receptive to Hebert’s contention that his employment contract was invalid because it named the nonexistent ADFW as the contracting party rather than DFW. Invoking the law of misnomer, the Court said the contract would not be invalid (1) if the true identity of the contracting party, DFW, was apparent from the agreement, unless (2) Hebert was misled by the naming of ADFW rather than DFW, and as long as (3) the evidence—including extrinsic evidence such as post-execution performance—confirmed the parties’ intent that the contract be between Hebert and DFW. Reviewing the parties’ conduct here, the Court had no difficulty finding all the criteria for misnomer to be satisfied, and therefore reversed the summary judgment Hebert had obtained in the trial court. While the Court “d[id] not quarrel with the settled rule that if one of the parties does not exist, no contract can be formed,” it found that rule inapplicable, because this was a case of simple misnomer rather than one where a party did not exist at all.
The Court went on to make a number of other rulings—affirming the enforceability of the covenant not to compete, reversing the trial court’s vacatur of the arbitration award establishing the buy-out value of Hebert’s noncompete (finding the arbitration award had not been procured “by fraud or undue means” based on the misnaming of DFW as a party) as well as the summary judgments in Hebert’s favor on defendants’ counterclaims for breach of contract and breach of fiduciary duty, while affirming summary judgments rejecting their tortious interference and conspiracy counterclaims.
In cleaning up a variety of procedural motions and issues at the end of its opinion, the Court provided a bit of insight useful to appellate practitioners. Responding to the appellants’ objection to supplemental briefing filed by Hebert after oral argument, the Dallas Court said, “The Court does not generally consider post-argument briefing that it has not requested unless that briefing is to identify relevant opinions decided after the date of submission.” Words to remember.
Hebert is a pathologist. Beginning in 1998, he contracted with DFW 5.01(a) Corporation (“DFW”), an entity owned by AmeriPath, to provide professional services. He later executed three additional or amended contracts, all of which referenced the prior versions and all of which contained covenants not to compete. In addition to his continued work for DFW, Hebert became a director and officer of DFW and an officer of several other AmeriPath entities. In 2009 he resigned to take a position with a competitor at a local hospital, in apparent violation of his noncompete. And so, with claims and counterclaims and an arbitration to boot, a long, hard road of litigation began.
Hebert discovered that in the last two iterations of his employment and noncompete agreement, the employer “Company” had been identified, not as DFW, but as “AmeriPath DFW 5.01(a) Corporation” (“ADFW”). All parties agreed no such entity existed. Hebert moved for summary judgment, arguing that his employment contract was invalid because a contract cannot be formed with a nonexistent entity. The trial court agreed and granted his motion. Meanwhile, the parties had gone to arbitration to establish the buy-out value of Hebert’s noncompete, as required under a statutorily-mandated provision in the contract. When the arbitrator set a value of over $2.5 million, DFW and AmeriPath moved to confirm and Hebert opposed. The trial court denied confirmation and vacated the award. Finally, the trial court also granted summary judgment against the various counterclaims asserted by DFW and AmeriPath (for breach of contract, unfair competition, and the like), awarded attorney’s fees to Hebert, severed his remaining tort claims, and signed a final judgment covering all the claims it had resolved. AmeriPath and DFW appealed.
Hebert began his defense of the trial court’s judgment by arguing that defendants AmeriPath and DFW had waived all issues on appeal because they had submitted a proposed form of judgment to the trial court without expressly noting their disagreement with its substance—i.e., they had not inscribed their proposal with the familiar “Approved as to Form Only” disclaimer. And in fact, the trial court had signed the form of judgment submitted by the defendants. But, the appeals court held, the absence of explicit qualifying language did not constitute waiver. The trial court had made the substance of its judgment clear in pronouncements from the bench and in its prior interlocutory orders on summary judgment and arbitration. When Hebert submitted a proposed form of judgment, defendants responded with their own, not varying from the substance already announced by the court (or proposed by Hebert), but simply asking the court to remove any recitation of facts from the judgment (as directed by Rule 299a) and to expressly include two prior orders, to be sure they could be addressed on appeal. Throughout discussions with the trial court on severance and entry of judgment, defendants’ intention to appeal had been apparent. So, the Court of Appeals rejected Hebert’s waiver argument, saying, “When a party merely provides a draft judgment to conform to what the court has indicated its judgment would be, there is no waiver of the appeal.”
The appeals court was no more receptive to Hebert’s contention that his employment contract was invalid because it named the nonexistent ADFW as the contracting party rather than DFW. Invoking the law of misnomer, the Court said the contract would not be invalid (1) if the true identity of the contracting party, DFW, was apparent from the agreement, unless (2) Hebert was misled by the naming of ADFW rather than DFW, and as long as (3) the evidence—including extrinsic evidence such as post-execution performance—confirmed the parties’ intent that the contract be between Hebert and DFW. Reviewing the parties’ conduct here, the Court had no difficulty finding all the criteria for misnomer to be satisfied, and therefore reversed the summary judgment Hebert had obtained in the trial court. While the Court “d[id] not quarrel with the settled rule that if one of the parties does not exist, no contract can be formed,” it found that rule inapplicable, because this was a case of simple misnomer rather than one where a party did not exist at all.
The Court went on to make a number of other rulings—affirming the enforceability of the covenant not to compete, reversing the trial court’s vacatur of the arbitration award establishing the buy-out value of Hebert’s noncompete (finding the arbitration award had not been procured “by fraud or undue means” based on the misnaming of DFW as a party) as well as the summary judgments in Hebert’s favor on defendants’ counterclaims for breach of contract and breach of fiduciary duty, while affirming summary judgments rejecting their tortious interference and conspiracy counterclaims.
In cleaning up a variety of procedural motions and issues at the end of its opinion, the Court provided a bit of insight useful to appellate practitioners. Responding to the appellants’ objection to supplemental briefing filed by Hebert after oral argument, the Dallas Court said, “The Court does not generally consider post-argument briefing that it has not requested unless that briefing is to identify relevant opinions decided after the date of submission.” Words to remember.
