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Woodbridge Medical Associates, P.A. v. Berkley

June 3, 2010

WOODBRIDGE MEDICAL ASSOCIATES, P.A., PLAINTIFF-APPELLANT,
v.
PAUL BERKLEY, CMPE, RICHARD A. GOLDSTEIN, M.D., HEALTH MANAGEMENT SYSTEMS, INC., CARL MURRAY, M.D., AND DOCTOR'S OFFICE OF MIDDLESEX COUNTY, P.C., DEFENDANTS-RESPONDENTS, AND MARJORIE BERKLEY AND HEALTHWARE SOLUTIONS, L.L.C., DEFENDANTS, AND PAUL BERKLEY, CMPE, MARJORIE BERKLEY, RICHARD A. GOLDSTEIN, M.D., HEALTH MANAGEMENT SYSTEMS, INC., HEALTHWARE SOLUTIONS, LLC, AND CARL MURRAY, M.D., DEFENDANTS/THIRD-PARTY PLAINTIFFS,
v.
WOODBRIDGE INTERNAL MEDICAL ASSOCIATES, P.A., SETH WEBBER, MARY O'DONNELL, LAUREN MAZA, LUCA DESIMONE AND LOUIS FRIEDMAN, THIRD-PARTY DEFENDANTS.



On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-9139-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 12, 2010

Before Judges Axelrad, Fisher and Sapp-Peterson.

In this appeal, we examine the judge's non-jury findings rendered after a trial that involved numerous issues raised between and among the parties. With the exception of that part of the judgment that compelled arbitration of an issue that went undecided at trial, we affirm.

The record reveals that Woodbridge Internal Medical Associates, P.A. (WIMA) operated a medical practice, consisting of Howard Garson, M.D., Ann Pearl, M.D., Michael Hymanson, M.D., and Mary O'Donnell, M.D., in a converted residence on Green Street in Woodbridge. The Green Street property was owned by Woodbridge Internal Medical Management, L.L.C. (WIMM); WIMM's shareholders were Garson, Pearl and Hymanson.

Paul Berkley had served as WIMA's business manager since 1985. Berkley, through Health Management Systems, Inc. (HMS), entered into a contract with WIMA for the continuation of his services for three years, starting January 1, 1997. The contract provided for automatic renewals for three-year terms; it was renewed in both 1999 and 2002. The contract did not preclude Berkley from providing management services to other medical practices.

Richard A. Goldstein, M.D., joined WIMA's practice in July 1997 as an employee. Goldstein was required to sign an employment agreement, which barred him, for a two-year period following his departure, from competing with WIMA within ten miles of WIMA's offices or within five miles of the hospitals where WIMA's physicians maintained admitting privileges. In 2004, when he became a WIMA shareholder, Goldstein signed a shareholders agreement, which contained his promise not to compete, for two years following his departure, with WIMA or its successors by engaging in the practice of medicine within five miles of WIMA's offices or within three miles of the hospitals serviced by WIMA's physicians.

In January 1999, Berkley arranged for Carl L. Murray, M.D., a long-time friend with an established practice in Old Bridge, to join WIMA. Murray signed an employment agreement containing the same non-compete clause as contained in Goldstein's agreement. In 2004, Murray signed a shareholders agreement identical to that executed by Goldstein. WIMA leased office space in Old Bridge for Murray's practice.

In early 2004, O'Donnell, Goldstein, Murray and three other doctors who had become shareholders in the practice, approached the shareholders of WIMM -- Garson, Pearl and Hymanson -- about obtaining equity interests in WIMM. The WIMM shareholders refused, a decision that generated significant hard feelings and apparently triggered what followed.

In March 2004, Pearl resigned from WIMA and retired. Garson and Hymanson also resigned and opened a new office directly across the street from WIMA. At the same time, the remaining shareholders of WIMA had grown dissatisfied with Berkley's performance. At a board meeting in June 2004, WIMA informed Berkley that his contract would not be renewed and would, therefore, expire on December 31, 2005.

WIMA decided to relocate from its Green Street office, finding new space on Route 9 in Woodbridge. O'Donnell and Goldstein obtained a $500,000 loan to cover the cost of relocating and other related expenses and, on July 21, 2004, Goldstein signed, on behalf of WIMA, a lease for the new space.

WIMM then informed WIMA it owed approximately $200,000 in back rent. Berkley suggested that the WIMA shareholders form a new corporate entity to insulate themselves from WIMM's claims. WIMA authorized Berkley to consult with counsel in order to form a new entity.

On October 27, 2004, counsel filed a certificate of incorporation of Woodbridge Medical Associates, P.A. (WMA) and, two days later, filed a registration of alternate name, to permit WMA to continue conducting business as "Woodbridge Internal Medical Associates." Counsel also prepared bylaws for WMA, and WIMA's officers and directors were installed as officers and directors of WMA. On November 10, 2004, WMA obtained an employer identification number. WIMA did not, however, assign its contract with HMS, its lease with WIMM or the Old Bridge lease to WMA. WIMA also did not assign its employment agreements or shareholder agreements to WMA. The fixed assets of WIMA were transferred to WMA and entered into WMA's books at net book value without compensation to WIMA. WIMA ceased conducting business as of December 31, 2004, but ...


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