Medipro Med. Staffing, LLC v. Registry

MEDIPRO MEDICAL STAFFING, LLC et al., Plaintiffs and Respondents, v. CERTIFIED NURSING REGISTRY, INC. et al., Defendants and Appellants.

B294391

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION TWO

February 4, 2021

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct. No. BC667851)

APPEAL from a judgment of the Superior Court of Los Angeles County, Michael L. Stern, Judge. Affirmed.

Khouri Law Firm, Michael J. Khouri and Behzad Vahidi for Defendants and Appellants.

Rosen Saba, Ryan D. Saba and Elizabeth L. Bradley for Plaintiffs and Respondents.

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Two high-ranking employees of a nurse staffing company, while still employed by that company, secretly recruited nurses for a competitor's staffing company. When the employees abruptly left to start up a new office for the competitor, their former employer sued them—and the competitor—for breach of fiduciary duty, fraud, and several other causes of action. A jury awarded the former employer over $3 million in lost profits and punitive damages. The employees and competitor appealed, challenging the verdict on a plethora of grounds, some of which are contrary to what they argued to the trial court. Because the general damages verdict rests upon at least one legally valid claim that is supported by substantial evidence and unaffected by any prejudicial error, we affirm the judgment.

FACTS AND PROCEDURAL BACKGROUND

I. Facts

A. Nurse staffing industry, in general

Hospitals typically employ fewer nurses than they would need if they were at full patient capacity; this built-in shortage is not a problem because, should there be a surge of patients, the hospitals can effectively "borrow" additional nurses on a temporary basis from a nurse staffing company.

The arrangement between a hospital and a nurse staffing company is fairly standardized: A hospital contracts in advance with one or more nurse staffing companies to obtain nurses of varying qualifications (registered nurses, licensed vocational nurses, and certified nursing assistants) for certain rates. The nurse staffing companies screen and hire nurses as their employees, and maintain the nurse-employees' names, contact information, shift and hospital preferences, and pay rates on their company's registry or roster. When a hospital anticipates ashortage for a particular shift, it calls a nurse staffing company to get coverage for that particular shift and will sometimes request the more skilled and more dependable nurses by name. The nurse staffing company subsequently bills the hospital for any nurses it supplies on a shift-by-shift basis at the contractual rate, takes a cut off the top, and pays the remainder directly to the nurse.

Nurse staffing companies have what boil down to two types of employees—the so-called "staffers" who recruit and screen nurses for the company, and the nurses themselves. Although most nurses are simultaneously employed by multiple nurse staffing companies, most nurses prefer to work regularly with the staffers whom they regard as being "really good" and will typically not change their preferred nurse staffing company "unless ther[e is] interference with their existing relationship with such [company]."

In the nurse staffing industry, a nurse staffing company's roster or registry of nurses is its "number one asset." Nurses are the lifeblood of the company, and a registry populated with well-regarded nurses and setting forth their hospital and shift preferences and pay scales is "critical" to the staffing company's continued operation.

B. Medipro, generally

1. Background

Medipro Medical Staffing, LLC (Medipro) is a nurse staffing company. It was founded in 2011 by Alex Malcolm (Malcolm) and Luzvimin Labora (Labora). From 2011 through 2016, Labora was Medipro's chief executive officer and ran Medipro's day-to-day operations, which included hiring and firing staffers and nurses. During this time frame, Labora hired LarryGreter (Greter) as a staffer and he became a "regional manager" for Medipro responsible for hiring nurses (but not staffers). Also during this time frame, Labora and Greter built up Medipro's registry of nurses, which included the nurses' names, contact information, nursing license, hospital and shift preferences, and their pay rates.

2. January 2017 sale

On January 5, 2017, Malcolm sold Medipro to McNair Zimbalist (Zimbalist) and Eli Pearlman (Pearlman) (collectively, the new owners) for $2.85 million. That transaction included Medipro's nurse registry.¹ Malcolm gave $400,000 of the sale price to Labora as a "bonus."

The new owners took efforts to protect their investment.

Prior to the purchase, the new owners asked Labora and Greter—who were at-will employees and whom the new owners wished to retain on an at-will basis—whether they intended to remain after the sale; both assured the new owners that they planned on staying until they retired.

After the purchase, and to reward them for their fealty, the new owners gave Labora the title of "President" of Medipro and gave Greter the title of "Vice President," although their duties did not change. To further entice them to remain with Medipro, thenew owners in April 2017 offered Labora and Greter an additional bonus contingent upon their remaining at Medipro for an additional year.

Immediately after the purchase, the new owners also asked Labora and Greter to sign three agreements. Each signed an Employee Confidentiality Agreement, in which each (a) agreed that they had a "relationship of confidence and trust" with Medipro, (b) agreed not to "use, disclose, copy, distribute . . . or misappropriate" any of Medipro's "[p]roprietary [i]nformation," which included Medipro's "nurse lists and data," including the "names, addresses, compensation, specific capabilities, job assignments and performance evaluations" of nurses, (c) agreed, while employed by Medipro and for three years thereafter, not to "directly or indirectly[] hire any of [Medipro's] employees (including nurses) or solicit any of [Medipro's] employees and nurses to resign from their employment or terminate their relationship with" Medipro, and (d) agreed, "[a]t all times during [their] employment with" Medipro, not to "enter into or engage in any business that competes with" Medipro, to "solicit customers . . . [or] business . . . for any business that competes with" Medipro, or to "promote or assist . . . any person engaged in any business that competes with" Medipro. Each signed a separate letter agreement in which each promised while employed by Medipro not to "engage in any other employment, occupation, consulting or other business activity directly related to the business in which Medipro is now involved." And each signed an "outside activity disclosure," in which they represented that they were engaged in no "activities which could compete [with] or otherwise create a conflict of interest with [Medipro's] interests."

C. Labora's and Greter's plan—and execution of that plan—to "raid" Medipro's business to aid a competitor

Prior to working for Medipro, both Labora and Greter had worked for Certified Nursing Registry, Inc. (Certified), one of Medipro's direct competitors. Certified was founded, owned and run by Cristina Sy (Sy). Labora and Sy were "like . . . sister[s]." Sy made it clear that both Labora and Greter had an "open offer" to return to Certified whenever they wanted.

At nearly the same time that they signed the three agreements with Medipro and assured the new owners that they were intending to stay until retirement, Labora and Greter were developing a plan to take Sy up on her open offer and to take Medipro's registry, as well as the best of Medipro's nurse employees, with them to Certified. Within days and weeks of signing the agreements, Labora texted Greter, "We will stick together all the way with our job . . . . We have to talk to [Sy] what she can offer [sic]," and texted Greter and others that Sy had "higher rates," that Greter would depart Medipro with her, and that Medipro "will close down" if they left. In March 2017, Labora told her niece—who worked at Medipro—of the plan to leave Medipro and "take all of the nurses with them." And in July 2017, Labora later admitted to Medipro's new owners that her "plan all along" was to "go[] to Certified."

The plan had several phases.

Labora and Greter started by contacting nurses on Medipro's registry and informing them of their plan to leave for Certified, which was equivalent to asking those nurses to move to Certified with them. They did this in March 2017.

Next, Greter was to depart Medipro to set up a new office for Certified in Glendale. Greter orally agreed with Sy in mid-April 2017 to move to Certified, and on the basis of thatagreement, Sy leased new office space in Glendale. In mid-May 2017, Sy took Greter and Labora out to dinner, where they finalized the terms of Greter's future employment with Certified. Two days later, Greter signed a written employment contract with Certified, which included an unprecedented $25,000 signing bonus to compensate for the bonus Greter would forfeit by leaving Medipro in less than a year. Part of Greter's job was to "recruit for the . . . Glendale office," and his contract with Certified did not prohibit him from using Medipro's registry to do so. As Labora and Greter had planned in March, Greter told Medipro he needed to go on medical leave in late May 2017 and, instead of getting knee surgery, he abruptly resigned from Medipro. Less than a week later, Greter forwarded a copy of Medipro's nurse registry that he had previously sent to his personal email to his new email account at Certified. Using the information in...