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Edwards v. Urosite Partners

Court of Appeals of Tennessee, Nashville

March 30, 2017

ROBERT H. EDWARDS
v.
UROSITE PARTNERS

          Session February 21, 2017

         Appeal from the Chancery Court for Davidson County No. 15-946-BC Ellen Hobbs Lyle, Chancellor

         Plaintiff was a partner of a physician practice and a limited partner in a real estate investment limited partnership. Continuing employment with the physician practice was a condition of remaining a limited partner. Following the termination of Plaintiff's employment with the physician group, Plaintiff, the physician group, and the limited partnership entered into a Separation Agreement. The limited partnership agreed not to redeem Plaintiff's interest in the limited partnership if he did not expand his practice outside Giles and Hickman Counties. Plaintiff began practicing outside these counties, and the limited partnership redeemed Plaintiff's interest. Plaintiff objected and filed a complaint seeking declaratory relief. The trial court granted the limited partnership's motions to dismiss and for judgment on the pleadings. Plaintiff appealed, and we affirm the trial court's judgments.

         Tenn. R. App. P. 3 Appeal as of Right; Judgments of the Chancery Court Affirmed and Remanded

          Stephen C. Knight and Nader Baydoun, Brentwood, Tennessee, for the appellant

          Robert H. Edwards. James N. Bowen and Elizabeth O. Gonser, Nashville, Tennessee, for the appellee, Urosite Partners.

          Andy D. Bennett, J., delivered the opinion of the court, in which Frank G. Clement, Jr., P.J., M.S., and Richard H. Dinkins, J., joined.

          OPINION

          ANDY D. BENNETT, JUDGE

         I. Factual and Procedural Background

         Robert H. Edwards, M.D., was a urologist and partner of Urology Associates, P.C. ("UA"). In 2000, Dr. Edwards and twenty-one other physicians/shareholders of UA formed Urosite, L.P. ("Urosite" or "the Partnership") for the purpose of purchasing, owning, managing, and operating the real and personal property located at UA's primary office location. When they formed Urosite, Dr. Edwards and the other limited partners entered into an Agreement of Limited Partnership (the "Agreement"). The Agreement provided that partnership in Urosite was conditioned on continuing employment with UA.

         The redemption provisions of the Agreement provide that the Partnership has the right to purchase a limited partner's units in the Partnership "upon the termination of a Limited Partner's employment agreement with [UA] for any reason other than death, disability or retirement from the practice of medicine." Dr. Edwards worked pursuant to an employment agreement with UA from July 1, 2004, through June 30, 2011. After this date, Dr. Edwards continued working for UA as an employee at will until the end of December 2013.

         On January 10, 2014, Dr. Edwards, Urosite, and UA entered into a Separation Agreement and Mutual Release ("Separation Agreement"). Paragraph 2 of the

         Separation Agreement provides that if Dr. Edwards practices outside Hickman or Giles Counties, the Partnership could exercise its right to redeem Dr. Edwards' interest in Urosite pursuant to the terms of the Agreement.

         In the spring of 2014, the Veterans Administration asked Dr. Edwards to help it provide medical care to veterans in Rutherford and Davidson Counties. Dr. Edwards agreed and began providing medical services to veterans in those counties. On or about March 31, 2015, Urosite informed Dr. Edwards that it was exercising its right to redeem Dr. Edwards' limited partnership interest for a price equal to the value of his capital account, in accordance with the terms of the Agreement.

         Dr. Edwards objected to Urosite's redemption of his interest in the Partnership, and he filed a complaint in August 2015 seeking declaratory relief and damages for breach of contract. Dr. Edwards sought the following declaratory relief:

Dr. Edwards seeks a declaratory judgment that he remains a limited partner in Urosite, and that Urosite does not have a right to acquire his partnership interest. The legal bases for this claim include, but are not limited to: (1) under the circumstances, the Urosite Agreement does not provide Urosite the right to acquire Dr. Edwards' ownership interest; (2) Urosite did not timely exercise any right it may have had under the Urosite Agreement; (3) Dr. Edwards' work for the Veterans' Administration was not a material breach of the Separation Agreement; and (4) the restrictions on Dr. Edwards' practice of medicine in the Separation Agreement are not enforceable and violate public policy.

         In support of his breach of contract claim, Dr. Edwards alleged Urosite failed to meet its contractual obligations to him, "including its obligation to pay [him] his share of distributions from the partnership and its obligation to account to [him]."

         II. Trial Court Proceedings

         Urosite filed a motion to dismiss pursuant to Tenn. R. Civ. P. 12.02(6) in September 2015 and sought an award of its attorneys' fees as provided in paragraph thirteen of the Separation Agreement. The trial court filed a Memorandum and Order on February 2, 2016, dismissing the majority of Dr. Edwards' claims. The court wrote:

[T]he Court concludes as a matter of law, based upon the plain, unambiguous wording of the Partnership Agreement, and the operation and incentives of the [Agreement], that the Defendant's exercise of its section 9.2(b) right to repurchase the Plaintiff's interest for the value of his Capital Account within 45 months of the termination of Plaintiff's employment was not untimely and, therefore, was not an invalid exercise of the right of redemption.
The Court concludes that the disincentives at work in paragraph 2 of the SA are too remote and attenuated from the Plaintiff's practice of his profession to come within the prohibitions of Spiegel, Murfreesboro, or Tennessee Code Annotated section 63-1-148. Accordingly, the Court grants that part of Defendant's Motion to Dismiss asserting that ...

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