Welcome And Nightmare Scenario

SPEAKER_01 0:00

Welcome to another edition of the Employee Survival Guide produced by Employment Attorney Mark Carey. Mark has chosen this case to highlight the employment non-competition agreements and examine how courts resolve these complex and stressful employment situations. So I want you to imagine something for a second. Imagine your top employees just quit.

SPEAKER_00 0:20

Okay, stressful enough right there.

SPEAKER_01 0:22

Right. But then they walk exactly 10 feet across the hall, they open a competing business right in your old office space, and they legally take like 90% of your revenue.

SPEAKER_00 0:33

Yeah, that is a total nightmare scenario for any business owner.

SPEAKER_01 0:36

Absolutely. And today we are looking at a September 2025 Appellate Division Supreme Court ruling that examined how a scenario exactly like that played out in real time.

SPEAKER_00 0:46

Aaron Powell Yeah, we've got a whole stack of honestly remarkably revealing legal documents to go through today. We have the initial complaint, a highly aggressive counterclaim, and then that final 2025 appellate ruling.

SPEAKER_01 0:57

And the goal here is to really dissect the mechanics of a corporate implosion, right?

SPEAKER_00 1:01

Aaron Ross Powell Exactly. We are looking at a Manhattan medical practice called J Medical, Japanese Medical Care. And the documents just lay out exactly what happens when a business partnership

The J Medical Case Setup

SPEAKER_00 1:12

turns completely toxic. Employees are weaponized, and the courts have to untangle who actually owns the patients, the skills, and well, the physical infrastructure. Trevor Burrus, Jr.

SPEAKER_01 1:22

Yeah. And you know, the legal battles over non-competes always make the headlines. But to understand why the courts ruled the way they did here, we really have to look at the foundational cracks that caused the employees to flee in the first place. Aaron Powell Right.

SPEAKER_00 1:34

You have to go back to the beginning. The timeline really starts back in 2017. Aaron Powell Okay.

SPEAKER_01 1:38

Set the stage for us.

SPEAKER_00 1:40

Aaron Powell So a company called DYM America decides to launch a medical clinic, catering specifically to Japanese speakers in the New York metropolitan area. Got it. But DYM is purely an administrative company. They don't have medical licenses, so you know they can't legally practice medicine themselves.

SPEAKER_01 1:56

Aaron Powell Right. They need a clinical partner for that.

SPEAKER_00 1:58

Aaron Ross Powell Exactly. And the structure they built, it's actually really common in the healthcare industry. It's called an administrative services agreement

The Administrative Services Agreement Model

SPEAKER_00 2:05

or an ASA.

SPEAKER_01 2:06

An ASA, right?

SPEAKER_00 2:07

Yeah. So DYM leased this premium space on the 17th floor of 315 Madison Avenue. They built the physical infrastructure, developed the branding, set up the website, and managed all the business accounts.

SPEAKER_01 2:19

Aaron Powell So they basically built the entire house.

SPEAKER_00 2:22

Aaron Ross Powell Precisely. And then they brought in Japanese medical care, PLLC. Trevor Burrus, Jr.

SPEAKER_01 2:26

Which we will just call JMC for short.

SPEAKER_00 2:28

Yes, JMC, which was run by Dr. Tominori Nakagama.

SPEAKER_01 2:32

Yeah.

SPEAKER_00 2:32

So JMC provided the actual medical care. Well, DYM provided the engine running quietly in the background.

SPEAKER_01 2:40

Aaron Powell It's a very symbiotic relationship. I mean, think of it like a tech ecosystem, right?

SPEAKER_00 2:45

Yeah.

SPEAKER_01 2:45

DYM built the hardware and the operating system, and JMC is the specialized software running on top of it.

SPEAKER_00 2:51

Aaron Powell That's a great way to look at it.

SPEAKER_01 2:52

Yeah, one really cannot function without the other. But there's a financial mechanism driving all of this, which was allegedly established in April 2018.

SPEAKER_00 2:59

Aaron Powell Right. The money. So DYM was supposed to receive a monthly fee equal to 115% of their incurred expenses.

SPEAKER_01 3:06

Aaron Powell So that extra 15% margin over their overhead, that's their profit incentive, right?

SPEAKER_00 3:11

Exactly. That's why DYM handles the headaches of leases, equipment maintenance, and administrative payroll. But the friction, I mean, it starts almost immediately.

SPEAKER_01 3:20

As it always seems to do in these cases.

SPEAKER_00 3:22

Oh yeah. According to DYM's counterclaim, from February 2018 all the way through December 2022,

The Fee Dispute And Termination

SPEAKER_00 3:29

JMC simply failed to pay that fee consistently.

SPEAKER_01 3:32

Wait, for four years?

SPEAKER_00 3:33

Yep. The underpayments and mispayments just compounded over the years. By the time the relationship reached a breaking point, DYM claimed JMC owed them an astonishing $2.7 million in unpaid fees and interest.

SPEAKER_01 3:47

Wow. I mean, carrying a $2.7 million receivable for a single client that is an existential threat to an administrative company.

SPEAKER_00 3:54

Oh, totally. You can't just absorb that.

SPEAKER_01 3:56

Aaron Powell So DYM finally pulled the plug. In April 2022, they officially notified JMC that they were terminating the Administrative Services Agreement.

SPEAKER_00 4:04

Aaron Powell Right, making the termination effective on June 3, 2022.

SPEAKER_01 4:07

And you would expect that, you know, when the contract ends, the tenant just packs up and leaves the Madison Avenue space.

SPEAKER_00 4:12

Aaron Powell You would think so.

SPEAKER_01 4:13

Yeah.

SPEAKER_00 4:14

But the physical reality of a medical practice makes a clean break incredibly difficult. JMC did not leave.

SPEAKER_01 4:20

Aaron Powell Right. It's literally like a messy divorce where the couple is forced to keep living in the exact same house.

SPEAKER_00 4:25

Aaron Powell It is exactly like that.

SPEAKER_01 4:27

Yeah.

SPEAKER_00 4:27

Even after the agreement officially terminated in June, JMC allegedly remained in the Madison Avenue space for another six months. Wow. All the way until December 31st, 2022. And they continue to use DYM's logos, the medical equipment, and the administrative services.

SPEAKER_01 4:44

It's like a franchisee

Holdover Fight Over Space And Assets

SPEAKER_01 4:45

having their corporate license revoked, but just refusing to take down the signs and continuing to use the corporate kitchen to sell burgers. Yes. It creates massive liability. And JMC, I mean, they had their own intense grievances during this six-month holdover period, didn't they?

SPEAKER_00 5:00

Oh, they definitely did. They alleged that DYM started holding roughly $80,000 worth of JMC's medical equipment hostage.

SPEAKER_01 5:07

Hostage. Wow.

SPEAKER_00 5:08

Yeah, and JMC also claimed DYM refused to hand over critical paper-based patient health records unless JMC paid exorbitant shipping costs to move the boxes.

SPEAKER_01 5:18

Okay. Holding medical records hostage, that crosses a significant line because it directly impacts patient care. You're messing with people's health at that point.

SPEAKER_00 5:27

Absolutely. When the founders of a dual edity structure like this go to war over equipment and invoices, the employees caught in the middle are just forced to choose allegiances.

SPEAKER_01 5:37

Yeah, the instability just breeds paranoia. Which brings us to the allegations of corporate espionage.

SPEAKER_00 5:44

Yeah, what DYM describes is a deliberate inside job.

SPEAKER_01 5:47

So the documents detail the actions of this guy, you can echo. He was hired in February

Alleged Hostage Equipment And Records

SPEAKER_01 5:52

2018 as DYM's executive manager. Right. His primary responsibility was overseeing the general operations for the clinic. He basically had the keys to the kingdom.

SPEAKER_00 6:01

He really did.

SPEAKER_01 6:02

Access to the Chase Bank accounts, the ADP payroll system, the confidential contact lists, all of it.

SPEAKER_00 6:07

Aaron Powell The leverage an executive manager holds in an administrative company is just immense. And DYM alleges that while Kineco was still fully employed by them, you know, drawing a DYM salary, he systematically locked DYM out of their own financial and operational systems.

SPEAKER_01 6:23

Aaron Powell Wait, he locked his own employer out of their bank accounts?

SPEAKER_00 6:25

Yep. He allegedly transferred the administrative controls of the Chase accounts and the ADP payroll directly over to JMC and Dr. Nakagama.

SPEAKER_01 6:34

Wow. So he essentially

The Executive Manager Lockout Allegations

SPEAKER_01 6:36

severed the central nervous system of his own employer.

SPEAKER_00 6:38

Aaron Powell He did. And the allegations go even further than that.

SPEAKER_01 6:41

Aaron Powell Oh, right. The car. DYM claims Kaneko was secretly using DYM's funds to make personal payments for Dr. Nakagama's car during this lockout period.

SPEAKER_00 6:50

Yeah. And the timeline of Kaneko's employment is the crucial factor for the courts here. Because in early 2019, Kaneko officially resigned from DYM and immediately accepted the exact same position working directly for JMC.

SPEAKER_01 7:04

Unbelievable.

SPEAKER_00 7:05

He took the institutional knowledge, the operational access, the system controls, and just walked across the battle line.

SPEAKER_01 7:11

I mean, from DYM's perspective, they literally paid a salary to an employee who dismantled their infrastructure from the inside and handed it to the guy who owed them $2.7 million.

SPEAKER_00 7:20

Exactly. And that administrative takeover, that really set the stage for a much larger threat involving the medical staff.

SPEAKER_01 7:27

Right. Because as this toxic partnership finally staggers to a complete halt in December 2022, JMC is packing up to physically leave the Madison Avenue office. Right. But two key providers, nurse practitioner Yasuko Tamba and Dr. Karu Miyazaki, they did not go with them.

SPEAKER_00 7:46

No, they didn't. JMC alleges that as the move out date approached, Tamba and Miyazaki actually conspired with DYM to form an entirely new competing medical entity called My

My Medical Forms In The Same Office

SPEAKER_00 7:58

Medical.

SPEAKER_01 7:58

My Medical.

SPEAKER_00 7:59

Yeah. They incorporated this new business and set up operations in the exact same 17th floor office space on Madison Avenue that JMC was vacating.

SPEAKER_01 8:08

They literally took over the physical footprint. I mean, think about that. JMC moves their boxes out on a Friday, and on Monday, their former employees are sitting in the exact same exam rooms treating patients.

SPEAKER_00 8:18

It's wild.

SPEAKER_01 8:19

If you are a patient navigating Manhattan, you know, you walk into the same building, you take the elevator to the same floor, and you see the same nurse you've seen for years.

SPEAKER_00 8:26

But you have no idea the corporate entity behind the desk has completely changed. You just think, oh, my doctor is still here.

SPEAKER_01 8:31

Yeah. And the new enterprise obviously relied heavily on that continuity. Which brings us to the most damaging piece of evidence presented by JMC.

SPEAKER_00 8:40

Oh, the email.

SPEAKER_01 8:41

Yes. The mass email sent in January 2023 to JMC's entire confidential patient roster. The wording of this email is just a masterclass in exploiting patient trust.

SPEAKER_00 8:53

It really is.

SPEAKER_01 8:53

Let me actually quote the email directly from the court filings. It reads Effective January 2023, the legal entity that operates J Medical and its medical

The Mass Email And 90% Revenue Drop

SPEAKER_01 9:02

director are to be changed. Our practice name, J Medical, as well as our practice areas, remain the same.

SPEAKER_00 9:08

Yeah, the phrasing there is so intentional. The legal entity is to be changed. They present a hostile corporate takeover as just, you know, a routine administrative update.

SPEAKER_01 9:18

Right, like, oh, just some paperwork shuffling in the back office.

SPEAKER_00 9:20

Exactly. They did not announce the opening of a rival clinic. They explicitly told the patients that the practice name and practice areas remained the same. They totally blurred the lines of corporate identity to retain the billable hours.

SPEAKER_01 9:32

And the strategy was devastatingly effective. I mean, JMC reported that following this targeted email and the physical takeover of the office space, their patient billables and overall revenues plummeted by 90 percent. Trevor Burrus, Jr.

SPEAKER_00 9:45

90 percent. That's a death blow to her practice.

SPEAKER_01 9:48

Totally. So facing complete collapse, JMC reached for the ultimate legal weapon they had left, the employment contracts.

SPEAKER_00 9:56

They filed suit to enforce a non-compete clause against nurse practitioner Tamba to stop her from working for this new competitor.

SPEAKER_01 10:03

Aaron Powell And the specifics of the contract are vital here.

SPEAKER_00 10:06

Aaron Powell Very much so. Taba had signed an agreement banning her from providing nurse practitioner services

The Non-Compete Gets Challenged

SPEAKER_00 10:12

in this massive geographical zone, basically from 22nd Street to 62nd Street in Manhattan.

SPEAKER_01 10:17

That's a huge chunk of the city.

SPEAKER_00 10:19

Huge. And also within a 10 mile radius of another location in Purchase, New York. And this restriction was set for two whole years.

SPEAKER_01 10:27

Okay, let's unpack this because this is the part that always gets me. If I spend years training a nurse practitioner and, you know, integrating them into my practice and introducing them to my patient base, how does the court justify just letting them walk across the hall? Well, I mean, that feels like legalized theft of a business asset. A nurse practitioner builds intense personal trust with patients. Shouldn't a business have the right to protect that relationship from being repponized against them?

SPEAKER_00 10:55

That frustration you're expressing, that is exactly what business owners argue in court every single day.

SPEAKER_01 11:01

I bet.

SPEAKER_00 11:02

But the appellate division of the Supreme Court had to weigh the employer's desire to protect its revenue against the fundamental right of a human being to practice their profession and make a living.

SPEAKER_01 11:13

Right.

SPEAKER_00 11:13

And in September 2025, the court delivered a definitive ruling. They completely threw out the noncompete clause.

SPEAKER_01 11:19

Just tossed it out. They invalidated a signed contract. What was the actual legal mechanism they used to do that?

SPEAKER_00 11:25

So New York law requires an employer to prove they have a quote, legitimate legal interest to enforce a noncompete. Merely avoiding competition is not a legitimate interest. You can't just say, I don't want her to compete with me. The court drew a really sharp distinction regarding Tomba's skills. They ruled that while nurse practitioner services are absolutely indispensable to running a medical clinic, those services are not legally unique or extraordinary.

SPEAKER_01 11:52

Wait, how does the court define unique or extraordinary if keeping patients alive and diagnosing illnesses doesn't qualify? I mean, that sounds pretty unique to me.

SPEAKER_00 11:59

I know. It sounds counterintuitive.

SPEAKER_01 12:01

Yeah.

SPEAKER_00 12:01

But the legal definition of unique is incredibly narrow. It usually applies

Skills Versus Confidential Patient Data

SPEAKER_00 12:06

to someone like, say, a specialized trade secret developer, or maybe an irreplaceable CEO with singular industry knowledge.

SPEAKER_01 12:13

Aaron Powell Okay, I see.

SPEAKER_00 12:14

Or even a celebrity performer whose actual personal persona is the product being sold. Got it. A nurse practitioner obviously possesses highly specialized, rigorously tested skills diagnosing, treating, prescribing. But those are general professional skills within the medical field. The knowledge belongs to the nurse, not the employer.

SPEAKER_01 12:33

Aaron Powell That actually makes sense when you apply it to other trades. Like if you hire a master carpenter to build custom cabinets for your company, you don't suddenly own his physical ability to swing a hammer or his knowledge of wood grains.

SPEAKER_00 12:47

Exactly.

SPEAKER_01 12:47

The skill of carpentry is his property. You cannot ban him from building cabinets for the competitor across the street just because his departure hurts your bottom line.

SPEAKER_00 12:56

And the court viewed Tamba's nursing skills the exact same way. Banning her from practicing in a massive swath of Manhattan for two years did not protect a proprietary asset of JMC. It simply operated as a restraint on trade. Which courts hate. Oh, they despise it. The modern judicial trend is increasingly hostile to broad non-competes that attempt to lock up human capital just to prevent fair market competition.

SPEAKER_01 13:22

Okay, but if the non-compete is dead and Tamba is completely free to work in her old office space for a new boss, what stops her from taking every single patient with her? I mean, it sounds like open season on a company's client list.

SPEAKER_00 13:34

And the court anticipated that exact concern. Because there is a line. They drew a definitive line between a person's general skills, which cannot be restricted, and a company's confidential data, which is fiercely protected.

SPEAKER_01 13:48

Ah, okay.

SPEAKER_00 13:50

So while the court tossed out the non-compete, they explicitly ruled that the non-solicitation clause survives and is fully enforceable.

SPEAKER_01 13:58

Oh, interesting. So you can practice medicine, but you cannot use my proprietary database to source your appointments.

SPEAKER_00 14:03

Precisely. That distinction shifts the whole legal battleground from restricting labor over to proving data theft.

SPEAKER_01 14:09

Right.

SPEAKER_00 14:09

The court ruled there are genuine issues of material fact regarding whether Tomba and Dr. Miyazaki actually misappropriated JMC's confidential patient

Forensics And The Data Security Lesson

SPEAKER_00 14:18

information. The massive question for the trial court now is how the new entity, My Medical, obtained the contact list to send that January 2023 email in the first place.

SPEAKER_01 14:27

Yeah, and proving that is incredibly complex. I mean, if I am the defense attorney for the new clinic, I am just going to argue that we obtained those contacts through legitimate new marketing efforts, or that patients sought us out independently because they liked the providers.

SPEAKER_00 14:42

Right. They just Googled us.

SPEAKER_01 14:44

Exactly. So how does JMC prove the data was actually stolen?

SPEAKER_00 14:48

The burden of proof falls entirely on JMC, and it requires rigorous digital forensics. At trial, they will have to subpoena email servers, examine the metadata of downloaded files, and look at the timestamps of when patient records were accessed prior to the mass exodus. Wow. Yeah, they have to prove a direct chain of custody from JMC's secure servers directly to the outbox of the new entity. It's a highly technical, evidence-heavy process.

SPEAKER_01 15:16

It provides a very clear lesson for anyone running a business today, though. You cannot lock down a human being's right to earn a living in their chosen profession. The physical skill walks out the door whenever the employee decides to leave.

SPEAKER_00 15:26

Yep, they can just walk.

SPEAKER_01 15:27

But you can and absolutely must lock down your digital infrastructure, your trade secrets, your patient lists, your confidential formulas, those are the protectable assets.

SPEAKER_00 15:38

Yes. Securing the data is really the only reliable defense mechanism left as non-competees continue to lose their power in court.

SPEAKER_01 15:46

Makes total sense.

SPEAKER_00 15:47

But before we leave the legal fallout of this case, we have to look at how the appellate court handled the original catalyst for this entire disaster.

SPEAKER_01 15:55

The $2.7 million debt that DYM claimed JMC owed them.

SPEAKER_00 16:00

Exactly.

SPEAKER_01 16:00

So JMC's defense against that multimillion dollar bill was

The 2.7 Million Claim And Quantum Meruit

SPEAKER_01 16:04

that the original contract allegedly lacked a specific written term defining the exact monthly administrative fee. Right. They argued that if the fee wasn't explicitly written into the contract, they shouldn't be legally bound to pay it. Which, I mean, sounds a bit like a technicality.

SPEAKER_00 16:19

It was entirely a technical defense aimed at exploiting contract ambiguity.

SPEAKER_01 16:23

Yeah.

SPEAKER_00 16:23

But the appellate court entirely rejected that argument.

SPEAKER_01 16:26

Oh, they did.

SPEAKER_00 16:27

Yes. They ruled that DYM is legally permitted to pursue the $2.7 million claim against JMC, regardless of whether the original written contract contained the exact fee term.

SPEAKER_01 16:39

Interesting. Why?

SPEAKER_00 16:40

The court focused on the multi-year behavior of the parties rather than just the ink on the page.

SPEAKER_01 16:46

Because JMC actually paid DYM varying amounts of money every month for those administrative services over a period of four years. Exactly. So their consistent behavior basically validated the existence of the fee structure, even if the paperwork was flawed. You can't just utilize a service for years, make partial payments, and then suddenly throw your hands up and claim the billing structure is legally invalid.

SPEAKER_00 17:09

Exactly. And the court invoked a foundational legal doctrine here called quantum merit.

SPEAKER_01 17:13

Quantum merit.

SPEAKER_00 17:14

Yeah, that translates from Latin to as much as he is deserved. And the justice system uses this doctrine to prevent unjust enrichment.

SPEAKER_01 17:21

Okay. Break that down for us.

SPEAKER_00 17:22

Aaron Powell Basically, when a formal contract fails or is found to be technically incomplete, the law steps in and requires a party to pay the reasonable market value for the services they accepted and benefited from.

SPEAKER_01 17:33

It is the legal equivalent of eating a steak at a restaurant and then refusing to pay because the price wasn't clearly printed on the menu.

SPEAKER_00 17:40

Exactly.

SPEAKER_01 17:40

You still consumed the steak, you derive the benefit, the restaurant still had to pay the chef and buy the ingredients. Quantum Marut ensures the restaurant gets compensated for the fair value of the meal.

SPEAKER_00 17:51

That is a perfect analogy. In this corporate dispute, DYM provided the Madison Avenue office space, the administrative staff, the logos, and the medical equipment.

SPEAKER_01 18:02

And JMC used all of those resources to treat patients and generate revenue.

SPEAKER_00 18:06

Right. So under Quantum Marut, JMC is legally obligated to pay the reasonable value of those resources, which DYM calculates at that $2.7 million.

SPEAKER_01 18:16

Wow. Synthesizing this entire battlefield, the takeaways for anyone navigating a business partnership or managing employees are really stark.

SPEAKER_00 18:24

Very much so.

SPEAKER_01 18:24

Contracts demand absolute precision. The initial ambiguity over the administrative fee structure and the chaotic six-month delayed termination process. I mean, that created the environment where this toxicity thrived in the first place.

Practical Takeaways And Future Of Work

SPEAKER_00 18:46

Employers must assume that their top talent can and will leave to compete against them. Right. The focus must shift entirely toward robust data security, enforceable non-solicitation agreements, and strict access controls on proprietary systems.

SPEAKER_01 19:02

Which brings us back to the core conflict of the modern workplace. We are looking at a scenario where two parties were forced to live in the same house, literally fighting over medical equipment, while the employees dismantle the infrastructure from the inside and set up shop across the hall.

SPEAKER_00 19:17

It's nuts.

SPEAKER_01 19:17

It forces us to ask a really difficult question about the future of work. As courts continue to strike down non-compete agreements across the country, are we heading toward a future where employers simply stop investing in their employees' training and development altogether?

SPEAKER_00 19:31

Yeah, it's a real fear.

SPEAKER_01 19:32

If companies operate under the assumption that their best people are just free agents waiting to walk across the hall with their newly acquired skills, will the workplace become fundamentally less collaborative and significantly more paranoid?

SPEAKER_00 19:44

It's something every business owner has to think about.

SPEAKER_01 19:47

Absolutely. Well, thank you so much for joining us for this conversation today. We loved exploring the incredible legal mechanics of this case with you, and we'll catch you on the next one.