Non-Solicitation Update: B.C. Court case
Non-Solicitation Clauses: B.C. Court interpretation
Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice, contact me (Michael Carabash) or David Mayzel.
So a few months ago, my article entitled “Are Non-Solicitation Clauses Legal: It Depends” (Ontario Dentist Magazine, April 2013) discussed the legality of non-solicitation clauses (which can be found in various types of agreements, such as associate agreements, agreements of purchase and sale, etc.). Well, due to space limitations, I couldn’t discuss every case dealing with dentists and non-solicitation clauses. But I recently came across a 2007 B.C. Court of Appeal case that dealt with the interpretation of a non-solicitation clause. And I think that court case is important to discuss. The bottom line is that you should have a dental lawyer carefully draft a non-solicitation clause to capture the essence of what you (as the party seeking to rely upon it) is trying to do.
In Dr. P. Andreou Inc. v. McCaig,  B.C.J. No. 537, Dr. Bruce McCaig and Dr. Allan Kilistoff operated a practice. Dr. McCaig eventually wanted out, so he sold his interest to Dr. Kilistoff and and started cutting his hours thereafter. Dr. McCaig had a loose relationship with Dr. Kilistoff (nothing in writing). Dr. Patrick Gowdy was brought in to make up for the days that Dr. McCaig was not working. Dr. Gowdy had a written agreement with Dr. Kilistoff which included a non-solicitation clause (i.e. “he will not, either directly or indirectly, for a period of 24 months following the termination of this Agreement for any reason, communicate in any way with patients of the Principal to whom the Associate provided dental care as part of the Dental Services provided by him under this Agreement, for the purpose of soliciting or assisting with the solicitation of such patients to obtain dental care,…”)
Dr. Kilistoff eventually sold the entire practice to Dr. Panos Andreou. As part of buying the practice, Dr. Andreou required Dr. McCaig to enter into an associate agreement with him. Dr. McCaig resented this requirement, but the parties eventually came to an agreement. Part of that agreement provided that Dr. McCaig would not “communicate either directly or indirectly with patients of the Principal for the purposes of soliciting such patients to obtain dental care or services, including without limitation dental hygiene services, from a source other than the Principal or persons employed or engaged by the Principal, except in the case of professional referrals as permitted by this Agreement”. Dr. McCaig also agreed not to “solicit any employees of the Principal or used in the Principal’s Practice for any employment with any party, so long as they are under contract with the Principal”.
In January 2004, Drs. McCaig and Gowdy opened a dental practice in White Rock. Drs. McCaig and Gowdy advertised their new practice in local newspapers, including the Surrey Leader. The purpose of the ad was to advise former patients of their new location and to solicit new patients. The ads did not refer to their previous practice or patients. The question before the court was whether these dentists had violated the non-solicitation clauses in the contracts they had signed.
Drs. McCaig and Gowdy did not challenge the reasonableness of the non-solicitation clauses. But they took issue with whether their actions had indeed breached the wording of those clauses.
At trial, the judge found that the newspaper ads constituted “solicitation” as prohibited in the non-solicitation covenant and ordered damages to be paid. But on appeal, the B.C. Court of Appeal reversed that part of the trial judge’s decision and held that the general advertisement was not enough to constitute a breach of a non-solicitation clause in the agreements. The court held that the parties intended to EXCLUDE informational advertising; otherwise, they would have included a clause saying so or one like that which had been included in the agreement of purchase and sale between Dr. McCaig and Dr. Kilistoff. The B.C. Court of Appeal reviewed U.S. and Canadian cases that had found that a newspaper ad announcing a new business location had not breached a non-solicitation clause. As such, the Court dismissed the part of the case against Drs. McCaig and Gowdy for placing advertisements in the Surrey Leader.
Note that this case involved multiple issues (e.g. constructive dismissal, breach of fiduciary duty, failing to pay for patient files to be transferred, etc.) and non-solicitation of patients via general newspaper advertisement was simply one of those issues (and the topic of this blog).