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Salartash Surgical Associates, L.L.C. v. Rosario

A-0434-07T1 (N.J. Super. App. Div. 2008) (Unpublished)

EMPLOYER-EMPLOYEE; AGREEMENTS — When an employee breaches an employment agreement, by leaving without the agreed-upon notice, the employer is entitled to recover damages, but the investment the employer made in training the departing employee is not recoverable as damages because only lost profits and diminution in the value of the employer’s business are the ways by which damages are measured.

A medical practice entered into a three year employment contract with a surgeon. Under the agreement, either party could terminate the contract on sixty days’ notice. In addition, the contract contained a restrictive covenant prohibiting the surgeon from practicing medicine within a twenty mile radius of the medical practice’s office: (a) while employed by the practice; and (b) for a period of two years thereafter. A conflict arose after a year, and the surgeon gave sixty days’ notice that he would be leaving the medical practice. However, the surgeon left prior to the expiration of the sixty day period and opened an office within twenty miles of the practice’s office. The practice sued, alleging breach of the notice provision and of the restrictive covenant. Following a bench trial, the lower court found the surgeon breached the notice provision, but refused to enforce the restrictive covenant.

The medical practice appealed, and the Appellate Division overturned the lower court’s decision, finding the practice was entitled to pursue its damage claims for breach of the restrictive covenant. On remand, the practice sought reimbursement for expenses incurred in finding another employee and fees expended on behalf of the departed surgeon (such as insurance and advertising expenses). The practice alleged these damages were investment losses. The lower court dismissed those damage claims on summary judgment, finding that they did not constitute compensatory damages recoverable for breach of contract. The practice again appealed.

The Appellate Division affirmed for substantially the reasons set forth by the lower court. It agreed with the lower court that investment damages are not recoverable under a breach of restrictive covenant claim. The Court also stated that lost profits and diminution in the value of the practice are other ways to measure damages.

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