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NY Court: Dr's Arrest for Underage Solicitation Breached Contract

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In Fitzpatrick v. Animal Care Hosp., a fascinating decision that came down in April of this year, a NY appeals court held that a veteranarian's solicitation of a minor impaired the value of the medical practice, and therefore constituted a breach of his agreement to sell his practice.

This is a slight twist on the Mohawk doctrine, which prohibits the seller of a business from taking any deliberate actions to hurt the goodwill of the business that was just sold, because here - unlike other instances where the seller actively poached his former clients-  the doctor's actions weren't specifically directed at harming the practice . 

Nevertheless, in affirming the trial court's determination (after a trial) that the defendant had demonstrated, by a preponderance of the evidence, that their business had declined immediately following the plaintiff's public - and embarrassing - arrest. In reaching this conclusion, the appellate court found that the plaintiff-doctor had breached the terms of the asset purchase agreement, holding:

"[S]ection V (A) of the APA provides, under the heading "Goodwill: Publicity," that neither party would "intentionally take or omit to take any action . . . which could directly impair the goodwill of the [b]usiness or the business reputation or good name." In our view, such provision is susceptible to only one reasonable interpretation (see Zinter Handling, Inc. v General Elec. Co., 101 AD3d 1333, 1335 [2012]; Currier, McCabe & Assoc., Inc. v Maher, 75 AD3d 889, 890 [2010]), namely, that any intentional act that could directly impair the goodwill of the practice would violate the APA. While plaintiff argues that he did not breach the APA because he did not intend his conduct to impair the goodwill of the practice, such an interpretation is contrary to the plain meaning of section V (A), and Supreme Court properly determined that the conduct that led to plaintiff's arrest and conviction constituted a breach of the APA."

Admittedly, I suspect that given the salacious details of the facts in this case, both the trial and appellate court went out of their way to find what was likely the just result, recognizing that the public shaming of this doctor, who was the face of the medical practice, clearly had a negative impact on the value of the medical practice, and to recompense the defendants accordingly.



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