Mohanty, M.D. St. John Heart Clinic

Docket No. 101251.
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
JYOTI MOHANTY, M.D., et al., Appellants, v. ST. JOHN HEART
CLINIC, S.C., et al., Appellees.
Opinion filed December 21, 2006.
JUSTICE BURKE delivered the judgment of the court, with
opinion.
Chief Justice Thomas and Justices Fitzgerald and Kilbride
concurred in the judgment and opinion.
Justice Karmeier specially concurred, with opinion, joined by
Justice Garman.
Justice Freeman concurred in part and dissented in part, with
opinion.
OPINION
Dr. Jyoti Mohanty and Dr. Raghu Ramadurai (plaintiffs) appeal
the judgment of the appellate court reversing the circuit court of Cook
County’s denial of a preliminary injunction to St. John Heart Clinic
and its owner, Dr. John Monteverde (defendants), to enforce the
restrictive covenants contained in their medical practice employment
contracts. 358 Ill. App. 3d 902. Plaintiffs, in opposition to the
injunction, ask this court to declare restrictive covenants in medical
practice cases void as against public policy. In the alternative,
plaintiffs argue that the restrictive covenants contained in their
employment contracts are not enforceable because the restrictions are
unreasonably overbroad in time and activity, or because the
defendants materially breached the employment contracts, thereby
discharging plaintiffs from their obligations under the contract.
For the reasons stated below, we affirm the judgment of the
appellate court and remand for further proceedings consistent with
this opinion.
BACKGROUND
St. John Heart Clinic (the Clinic) is an Illinois professional medical
corporation founded by Dr. John Monteverde in 1978. Dr.
Monteverde is board certified in internal medicine and cardiology and
the sole shareholder and owner of the Clinic, which has two offices in
Chicago, one at St. Mary of Nazareth Hospital and one at Norwegian
American Hospital. Dr. Monteverde also has privileges at St.
Elizabeth and Sacred Heart hospitals in Chicago and has practiced at
these hospitals since 1978.
Dr. Ramadurai began working at the Clinic in 1989 as an
independent contractor. At that time, Dr. Ramadurai was not board
certified in cardiology. Thus, initially, Dr. Ramadurai worked under
the direction and supervision of Dr. Monteverde. In 1993, Dr.
Ramadurai became an employee of the Clinic. The employment
contract he signed provided that he would receive an annual salary of
50% of his gross receipts.1 In addition, the contract contained a “non-
compete” clause, or restrictive covenant, which provided that, upon
termination, Dr. Ramadurai “shall not” practice medicine within a
two-mile radius of any Clinic office or at any of the four hospitals
where the Clinic operated, i.e., St. Mary of Nazareth, Norwegian
American, St. Elizabeth, and Sacred Heart (the restricted hospitals),
for a period of three years.
Dr. Mohanty joined the Clinic in July 2000 after he completed
training in nuclear cardiology at Cook County Hospital. When Dr.
Mohanty began his employment with the Clinic he was not yet board
1
The contract was later amended to afford Dr. Ramadurai 55% of his
gross receipts.
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certified in cardiology, had no medical practice of his own and no staff
privileges at any of the restricted hospitals. Pursuant to his
employment contract, Dr. Mohanty received an annual salary of 50%
of his gross receipts, with a guaranteed minimum of $160,000.2 The
contract also contained a restrictive covenant, similar to the one in Dr.
Ramadurai’s contract, which provided that, upon termination of the
agreement, Dr. Mohanty “shall not” practice medicine within a five-
mile radius of any Clinic office or at any of the four restricted
hospitals for a period of five years.
On March 12, 2003, Drs. Mohanty and Ramadurai sent letters to
Dr. Monteverde, serving him with notice of their intention to
terminate their employment with the Clinic after 120 days, in
accordance with their employment contracts. In their letters, Drs.
Mohanty and Ramadurai stated that they were terminating their
employment because Dr. Monteverde breached their employment
contracts by refusing to give them partnership interests in the Clinic
and because Dr. Monteverde was billing under his name for patients
they saw, which caused them to be shortchanged on their bonuses.
In May 2003, prior to leaving the Clinic, Drs. Mohanty and
Ramadurai filed complaints for declaratory relief in the circuit court
of Cook County. In the complaints, they alleged that the restrictive
covenants in their employment contracts should be declared void as
against public policy and unenforceable because Monteverde breached
their employment agreements by various means, including refusing to
give them partnership interests in the Clinic and billing improperly
which caused them to receive less compensation than they were due.
Dr. Mohanty’s complaint further alleged that the restrictive covenant
in his employment agreement was invalid because “the duration of the
restrictive covenant, that is five (5) years, and its geographical limits,
that is five (5) miles, are unnecessary to protect the economic or
2
Dr. Mohanty’s contract was amended on October 10, 2001, to provide
that his annual salary would be 50% of his gross receipts, with a guaranteed
minimum of $200,000, to be paid in monthly installments of $16,666.66. If
50% of his gross receipts exceeded the $200,000 minimum, the remainder
was to be paid in a lump sum “bonus.” The amended contract also calculated
Dr. Mohanty’s “bonus” for the July 1, 2000, through June 30, 2001, fiscal
year to be $65,000.
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business interest of either St. John or Dr. Monteverde and therefore
are excessive, unjust, unreasonable, unlawful, and unenforceable.” The
plaintiffs’ declaratory actions were later consolidated by order of the
court.
Defendants answered the complaints, denying all of plaintiffs’
claims. Defendants averred that no promises had been made to either
Dr. Mohanty or Dr. Ramadurai concerning a partnership interest in
the Clinic. Moreover, defendants contended that, even if oral promises
had been made, the failure to keep such promises would not constitute
a breach of the employment contract. Defendants also denied that its
billing practices were unethical, unprofessional or improper.
Defendants then filed a countercomplaint for declaratory, injunctive
and other relief against the plaintiffs. In addition to seeking
preliminary and permanent injunctions to restrain Drs. Mohanty and
Ramadurai from violating the restrictive covenants in their contracts,
the countercomplaint raised claims of misappropriation and unjust
enrichment and sought a declaration regarding the Clinic’s
responsibility for providing medical malpractice “tail coverage.”
Defendants also filed an emergency motion for a temporary restraining
order (TRO) and preliminary injunction to immediately enjoin the
plaintiffs from further violating the restrictive covenants in their
employment contracts.3
The trial court granted defendants a TRO, which was later
amended to permit Drs. Ramadurai and Mohanty, for a limited time,
to provide critical care to their hospitalized patients. The trial court
also required defendants to post a $100,000 surety bond. The matter
was then set for hearing on whether defendants were entitled to a
preliminary injunction.
Plaintiffs filed answers to defendants’ countercomplaint and also
raised affirmative defenses to defendants’ request for injunctive relief,
alleging, as they had done in their declaratory judgment actions, that
the restrictive covenants were unenforceable. The dates set for hearing
3
In July 2003, Drs. Mohanty and Ramadurai left the Clinic but continued
to practice medicine within the restricted area and see patients at the
restricted hospitals, in violation of the covenants in their employment
contracts.
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on the motion for preliminary injunction were continued from time to
time to permit plaintiffs to conduct extensive discovery, particularly
with regard to defendants’ billing practices. When discovery was
completed, plaintiffs filed a “Trial Brief In Opposition To Counter-
Plaintiffs’ Request For A Preliminary Injunction.” In this document,
plaintiffs restated their position that defendants were not entitled to
injunctive relief because the restrictive covenants were not
enforceable. However, plaintiffs’ argument now centered on three
main points: (1) that they should not be held to the terms of the
restrictive covenant in their contracts because defendants materially
breached the employment contracts by improperly billing for a certain
medical procedure, namely, the myoview test (otherwise referred to
as the thallium stress test), which resulted in decreased revenue for
plaintiffs; (2) that the restrictive covenants in their contracts were
unreasonable because they caused undue hardship to plaintiffs, were
injurious to the public, and were excessive in their temporal scope,
and because defendants had no protectable business interest in patients
who had been referred to plaintiffs from other sources; and (3) that all
restrictive covenants in physician contracts should be held void as
against public policy in Illinois. With regard to this last point, plaintiffs
argued that, even if all restrictive covenants were not void, restrictive
covenants should be held void where the employee terminates the
contract due to illegal or unethical conduct by the employer, whether
or not such conduct amounts to a breach of contract.
In November and December 2003, the trial court held hearings on
whether to grant defendants a preliminary injunction. The hearings
took place over the course of six days, at which time the court heard
the testimony of seven witnesses and received 41 exhibits into
evidence. Subsequently, plaintiffs submitted a “Trial Memorandum of
Law of the Applicable Medicare Rules and Regulations” as additional
support for their claim that defendants had improperly billed Medicare
for the myoview test. Both plaintiffs and defendants also submitted,
in writing, extensive closing argument.
On February 20, 2004, the trial court entered a ruling, denying
defendants’ request for preliminary injunctive relief. Stating on the
record that it had considered all of the evidence and arguments of the
parties, the trial court made the following findings. First, the court
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rejected plaintiffs’ claim that defendants had materially breached the
employment contracts. The court held:
“The Court is not satisfied that the evidence adduced at
hearing proves by a preponderance that the employment
agreements were materially breached.”
The trial court then considered whether the restrictive covenants
in plaintiffs’ contracts were reasonable in geography, time and activity.
In this regard, the court held that the geographic limitations “are well
within the ranges of proof by reported case law.” The court found the
temporal restrictions “somewhat problematic,” not because it believed
them to be excessive, but because of the reasons Dr. Monteverde gave
for imposing them. The court noted that, although Dr. Monteverde
testified that three to five years was the amount of time it took to
develop a referral base, he also testified that the three-year restriction
imposed on Dr. Ramadurai “just came into his mind” and the five-year
restriction was imposed on Dr. Mohanty because Dr. Monteverde “did
not trust him.” The trial court then went on to conclude that a
preliminary injunction should not be granted because the activity
restriction in the restrictive covenant was greater than necessary to
protect the defendants’ interests. The covenants restricted “the
practice of medicine” when the Clinic’s practice specialty was
cardiology. Thus, the trial court found the restriction to be “overly
broad and unreasonable.” The trial court permitted the TRO, which
had remained in effect until that time, to continue for an additional 21
days until defendants filed their appeal.
The appellate court reversed, finding that the restriction on the
practice of medicine within the narrowly drawn geographic limits
would not cause plaintiffs undue hardship and was not greater than
necessary to protect the defendants’ interests. 358 Ill. App. 3d 902.
The appellate court declined plaintiffs’ invitation to declare all
restrictive covenants in medical employment contracts void in Illinois
as against public policy. The court also refused to review plaintiffs’
claim that defendants materially breached the employment contract.
The court held this issue was being raised prematurely because the
appeal was interlocutory, having been taken from the trial court’s
order denying defendants a preliminary injunction. The appellate court
stated, “plaintiffs must wait for a hearing on the merits to determine
if the defendants breached the employment contracts in a material way
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that would void the restrictive covenants.” The cause was remanded
with directions that a preliminary injunction be granted defendants
pending further hearings.
Plaintiffs petitioned this court for leave to appeal (177 Ill. 2d R.
315), which this court granted.
ANALYSIS
In the case at bar, defendants sought, by way of a
countercomplaint, a preliminary injunction to enjoin plaintiffs from
violating the restrictive covenants contained in their employment
contracts. Defendants, as the parties seeking the preliminary
injunction, were required to demonstrate (1) a clearly ascertained right
in need of protection, (2) irreparable injury in the absence of an
injunction, (3) no adequate remedy at law, and (4) a likelihood of
success on the merits of the case. People ex rel. Klaeren v. Village of
Lisle, 202 Ill. 2d 164 (2002); Callis, Papa, Jackstadt & Halloran,
P.C. v. Norfolk & Western Ry. Co., 195 Ill. 2d 356, 365 (2001). “On
appeal, we examine only whether the party seeking the injunction has
demonstrated a prima facie case that there is a fair question
concerning the existence of the claimed rights.” People ex rel. Klaeren
v. Village of Lisle, 202 Ill. 2d at 177, citing Callis, 195 Ill. 2d at 366.
A decision to grant or deny a preliminary injunction is generally
reviewed for an abuse of discretion. Callis, Papa, Jackstadt &
Halloran, P.C. v. Norfolk & Western Ry. Co., 195 Ill. 2d 356 (2001).
However, whether injunctive relief should issue to enforce a restrictive
covenant not to compete in an employment contract depends upon the
validity of the covenant, the determination of which is a question of
law. Retina Services, Ltd. v. Garoon, 182 Ill. App. 3d 851, 856
(1989). See also Woodfield Group, Inc. v. DeLisle, 295 Ill. App. 3d
935, 938 (1998) (“determination of whether a restrictive covenant is
enforceable is a question of law”). Accordingly, we review that
determination de novo. The Agency, Inc. v. Grove, 362 Ill. App. 3d
206, 215 (2005).
Mootness
A court should not decide a case where the occurrence of events
after an appeal has been filed make it impossible for the reviewing
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court to render effectual relief and the judgment would have only an
advisory effect. Berlin v. Sarah Bush Lincoln Health Center, 179 Ill.
2d 1, 7-8 (1997). In the case at bar, it is apparent from the record that
the restrictive covenant in Dr. Ramadurai’s employment contract
prohibited him, upon termination, from practicing medicine within the
restricted area for a period of three years. Because Dr. Ramadurai left
the Clinic in July 2003, that time period has now lapsed. For this
reason, it is appropriate for this court to consider whether the appeal
has become moot with respect to Dr. Ramadurai.
After careful consideration we find that Dr. Ramadurai’s appeal
is not moot. As we stated in Berlin, “where a decision ‘could have a
direct impact on the rights and duties of the parties’ there is life in the
appeal.” Berlin, 179 Ill. 2d at 8, quoting People ex rel. Bernardi v.
City of Highland Park, 121 Ill. 2d 1, 6-7 (1988). In the case at bar,
defendants’ countercomplaint, which raises claims of misappropriation
and unjust enrichment, seeks damages for harm allegedly incurred and
revenues allegedly lost as a result of violations of the restrictive
covenant by Drs. Mohanty and Ramadurai. Consequently, a decision
as to the enforceability of the restrictive covenants could have a direct
impact on Dr. Ramadurai’s rights and obligations in these matters.
Accordingly, we conclude that the appeal is not moot as to Dr.
Ramadurai.
Enforceability of the Restrictive Covenants
In opposition to defendants’ motion for preliminary judgment,
plaintiffs raised various affirmative defenses challenging the validity
and enforceability of the restrictive covenants in their employment
contracts. These claims were rejected by the courts below. Now, in
their appeal before this court, plaintiffs argue once again that
defendants are not entitled to a preliminary injunction to enforce the
restrictive covenants in their employment contracts because the
covenants are not enforceable. Plaintiffs affirmatively challenge the
enforceability of the restrictive covenants, advancing three separate
theories. First, they contend that all restrictive covenants in physician
employment contracts should be held void and unenforceable because
they are against the public policy of this state. Second, plaintiffs
contend that defendants materially breached the employment
contracts, thereby relieving plaintiffs of their obligations under the
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restrictive covenants. Third, plaintiffs contend that the restrictive
covenants in their employment contracts may not be enforced because
they are overly broad in their temporal and activity restrictions and,
thus, unreasonable.
We first address the contention that restrictive covenants in
physician employment contracts should be held void as against public
policy in Illinois. Initially, we note that this court has a long tradition
of upholding the right of parties to freely contract. Vine Street Clinic
v. Healthlink, Inc., 222 Ill. 2d 276 (2006). Consequently, our
decisions have held that a private contract, or provision therein, will
not be declared void as contrary to public policy unless it is “ ‘clearly
contrary to what the constitution, the statutes or the decisions of the
courts have declared to be the public policy’ ”or it is clearly shown
that the contract is “ ‘manifestly injurious to the public welfare.’ ”
Vine Street Clinic v. Healthlink, Inc., 222 Ill. 2d at 300, quoting
Schumann-Heink v. Folsom, 328 Ill. 321, 330 (1927). See also Barr
v. Kelso-Burnett Co., 106 Ill. 2d 520 (1985); Palmateer v.
International Harvester Co., 85 Ill. 2d 124 (1981) (the public policy
of the state is to be found in its constitution and statutes and, when
they are silent, then in its judicial decisions and constant practice of its
governmental officials). We have strictly adhered to the position that
the public policy of the state is not to be determined by “ ‘ “the
varying opinions of laymen, lawyers or judges as to the demands of
the interests of the public.” ’ ” Groome v. Freyn Engineering Co.,
374 Ill. 113, 124 (1940), quoting Zeigler v. Illinois Trust & Savings
Bank, 245 Ill. 180, 193 (1910). As a result, plaintiffs carry a heavy
burden of showing that restrictive covenants in physician employment
contracts are against the public policy of this state.
In attempting to meet this burden, plaintiffs first point to our
decision in Dowd & Dowd, Ltd. v. Gleason, 181 Ill. 2d 460, 482
(1998), wherein we held that, in Illinois, restrictive covenants in
attorney employment contracts are void as a matter of public policy.
Citing to the appellate court decision in Carter-Shields v. Alton
Health Institute, 317 Ill. App. 3d 260 (2000), plaintiffs argue that the
public policy reasons for finding restrictive covenants in physician
employment contracts void are even more compelling than the reasons
advanced with respect to attorney employment contracts. Plaintiffs
provide a laundry list of the possible adverse effects of allowing
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restrictive covenants in physician employment contracts, namely, that
restrictive covenants in physician employment contracts interfere with
the doctor-patient relationship, deny patients the freedom to choose
their own doctor, create barriers to the delivery of quality medical
care, hinder competition, and often force patients to incur the
additional expense of duplicative testing. In addition to these patient
concerns, plaintiffs argue that restrictive covenants place unreasonable
limits on physicians’ autonomy and freedom of movement. Plaintiffs
conclude that our decision in Dowd & Dowd and the appellate court
decision in Carter-Shields provide a strong foundation upon which to
find that covenants restricting skilled professionals from practicing
their trade are contrary to the public policy of this state. We disagree.
The appellate decision in Carter-Shields, upon which plaintiffs
primarily rely, was vacated by this court in Carter-Shields v. Alton
Health Institute, 201 Ill. 2d 441 (2002), and, as such, carries no
precedential weight. Moreover, the appellate decision in Carter-
Shields stands alone in its rejection of long-standing Illinois precedent
on the validity of restrictive covenants in physician employment
contracts. See Prairie Eye Center, Ltd. v. Butler, 329 Ill. App. 3d 293
(2002).
Moreover, in Dowd, our determination that noncompetition
covenants in attorney employment contracts were void was grounded
in the fact that such covenants were in direct “conflict with Rule 5.6”
of the Illinois Rules of Professional Conduct, which gave expression
to important considerations of public policy. Dowd, 181 Ill. 2d at 481-
83. Thus, we held, “it would be inimical to public policy to give effect
to the offending provisions.” Dowd, 181 Ill. 2d at 482-83. In the
present case, there are no similar expressions of public policy which
require us to find restrictive covenants in the employment contracts of
medical practitioners unenforceable in Illinois.
Plaintiffs, however, direct our attention to an opinion of the
AMA’s Council on Ethical and Judicial Affairs, which states:
“Covenants-not-to-compete restrict competition, disrupt
continuity of care, and potentially deprive the public of
medical services. The Council of Ethical and Judicial Affairs
discourages any agreement which restricts the right of a
physician to practice medicine for a specified period of time or
in a specified area upon termination of an employment,
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partnership, or corporate agreement. Restrictive covenants are
unethical if they are excessive in geographic scope or duration
in the circumstances presented, or if they fail to make
reasonable accommodation of patients’ choice of physician.”
(Emphasis added.) AMA Council on Ethical and Judicial
Affairs, Op. E–9.02 (1998).
Plaintiffs contend that AMA Opinion 9.02 provides the necessary
expression of public policy which would permit us to invalidate
restrictive covenants in physician employment contracts. Again, we
must disagree.
AMA Opinion 9.02, while informative, is not the equivalent of an
Illinois statute or rule of professional conduct and, for that reason,
does not provide a clear expression of the public policy of this state.
Thus, AMA Opinion 9.02 cannot dictate the manner in which
restrictive covenants should be construed in Illinois. That having been
said, we point out that Opinion 9.02 does not prohibit, but merely
discourages, restrictive covenants in medical employment contracts.
Furthermore, the AMA’s position on restrictive covenants, as set forth
in Opinion 9.02, is commensurate with the manner in which restrictive
covenants in physician employment contracts are treated in this state.
Historically, covenants restricting the performance of medical
professional services have been held valid and enforceable in Illinois
as long as their durational and geographic scope are not unreasonable,
taking into consideration the effect on the public and any undue
hardship on the parties to the agreement. Cockerill v. Wilson, 51 Ill.
2d 179, 183-84 (1972); Canfield v. Spear, 44 Ill. 2d 49 (1969). Thus,
the AMA provision is no different from the common law requirements
of this state. See Idbeis v. Wichita Surgical Specialists, P.A., 279
Kan. 755, 112 P.3d 81 (2005) (AMA requirements are no different
from common law requirement that restrictive covenants be
reasonable and not adverse to the public welfare).
We are similarly unpersuaded by plaintiffs’ references to other
jurisdictions. Plaintiffs contend that “states such as Colorado,
Delaware and Massachusetts have concluded that physician restrictive
covenants violate public policy.” What they fail to acknowledge,
however, is that in Colorado, Delaware, and Massachusetts restrictive
covenants in medical employment contracts are totally prohibited
based on legislative enactments.
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Plaintiffs’ citation to Murfreesboro Medical Clinic, P.A. v. Udom,
166 S.W.3d 674, 681 (Tenn. 2005), is similarly flawed. Plaintiffs claim
that “Murfreesboro directly supports a holding by this court that
physician restrictive covenants violate public policy.” However, in
Murfreesboro, the Supreme Court of Tennessee held a restrictive
covenant unenforceable because noncompete covenants in physician
employment contracts were, by statute, permitted in only “two limited
circumstances and with closely prescribed restrictions,” which were
inapplicable.
While it is true that some jurisdictions prohibit restrictive
covenants in physician employment contracts on public policy
grounds, our research has been unable to reveal any case in which a
court has altogether outlawed restrictive covenants in physician
employment contracts in the absence of some legislative enactment.
Moreover, the vast majority of jurisdictions follow “the modern
view,” which is that restrictive covenants are enforceable if they are
“supported by consideration, ancillary to a lawful contract, and
reasonable and consistent with the public interest.” F. Tinio,
Annotation, Validity and Construction of Contractual Restrictions on
Right of Medical Practitioner to Practice, Incident to Employment
Agreement, 62 A.L.R. 3d 1014, 1020 (1975). Thus, the majority of
jurisdictions employ the same reasonableness standard that this court
has consistently applied when deciding the enforceability of restrictive
covenants in medical employment contracts in Illinois.
As stated earlier, when a party seeks to show that a contract term
is against the public policy of this state, that party bears the burden of
showing that the contract term is “ ‘clearly contrary to what the
constitution, the statutes or the decisions of the courts have declared
to be the public policy’ ”or that the contract is “ ‘manifestly injurious
to the public welfare.’ ” Vine Street Clinic, 222 Ill. 2d at 300, quoting
Schumann-Heink v. Folsom, 328 Ill. 321, 330 (1927). In the case at
bar, plaintiffs have failed to show that physician restrictive covenants
are contrary to the constitution, statutes or judicial decisions of this
state. Nor have they shown that these covenants are manifestly
injurious to the public welfare. Although plaintiffs have offered
reasons for finding that restrictive covenants should be disfavored in
physician employment contracts, countervailing reasons exist which
would militate against any deviation from our long-standing practice
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of finding reasonable restrictive covenants in medical employment
contracts enforceable. Restrictive covenants protect the business
interests of established physicians and, in this way, encourage them to
take on younger, inexperienced doctors. Accordingly, restrictive
covenants can have a positive impact on patient care. We do not
know, and are ill-equipped to determine, what the possible
consequences might be if we were to adopt the sweeping changes
plaintiffs advocate. It is possible that patients would be more adversely
affected if we were to ban reasonable restrictive covenants in
physician employment contracts. For this reason, we believe that
prohibiting restrictive covenants in medical practice contracts is a
decision better left to the legislature, where the competing interests
can be fully aired. Accordingly, plaintiffs’ first claim is rejected.
We now turn to plaintiffs’ second claim–that a prior material
breach of the employment contracts by defendants relieves them of
their obligations under the restrictive covenants.
Under general contract principles, a material breach of a contract
provision by one party may be grounds for releasing the other party
from his contractual obligations. William Blair & Co. v. FI
Liquidation Corp., 358 Ill. App. 3d 324 (2005). This principle was
applied in Galesburg Clinic Ass’n v. West, 302 Ill. App. 3d 1016,
1018 (1999). In Galesburg, a medical association sought to enforce
a noncompete covenant in the partnership agreement when two of the
partners (defendants) quit. The defendants filed a counterclaim
alleging that the association had breached the partnership agreement,
discharging them of their duties under the covenant. The trial court
ruled in the defendants’ favor, finding a material breach by the
association. On appeal, the appellate court affirmed, holding that “a
breach *** can operate to discharge the duties of a covenant not to
compete where the breach is material.” See also C.G. Caster Co. v.
Regan, 88 Ill. App. 3d 280 (1980) (where one party materially
breaches the contract, the restrictive covenant in the contract may no
longer be binding on the other party). In the case at bar, plaintiffs ask
us to apply the reasoning in Galesburg to this case.
Initially, we note that, in the trial court, plaintiffs originally
asserted that defendants breached the plaintiffs’ employment contracts
in a number of ways. However, after discovery was completed,
plaintiffs restricted their argument to one claim–that defendants
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materially breached the employment contracts by improperly billing
Medicare for myoview tests ordered by plaintiffs for their patients.
The trial court rejected plaintiffs’ claim, finding that the evidence
presented by plaintiffs did not establish that defendants breached the
employment contracts. The appellate court, having reversed the trial
court’s denial of the preliminary injunction on other grounds, refused
to consider this issue, holding that plaintiffs “must wait for a hearing
on the merits.” 358 Ill. App. 3d at 910-11.
Plaintiffs contend that the appellate court erred. According to
plaintiffs, the appellate court ignored the fact that “a full evidentiary
hearing in the form of a trial was already held” on the matter. Plaintiffs
maintain that we must consider this claim because a determination on
whether defendants breached the employment contracts is necessary
to a decision on whether the restrictive covenants are enforceable.
Plaintiffs also claim that the trial court’s ruling on the matter of their
breach-of-contract claim involved contract interpretation, which is an
issue of law and, as a result, our review should be de novo.
Defendants, on the other hand, initially argue that plaintiffs failed
to appeal the trial court’s adverse ruling on the breach-of-contract
claim and, thus, have forfeited review of this issue. Putting aside
forfeiture, defendants maintain that the trial court correctly determined
that defendants did not materially breach the employment contracts.
Defendants maintain, however, that the breach of contract issue is a
question of fact and that, on review, we may not disturb the trial
court’s ruling unless it is against the manifest weight of the evidence.
The overriding issue in the appeal at bar is the enforceability of the
restrictive covenants in the employment contracts of Drs. Mohanty
and Ramadurai. Because a prior breach of contract by defendants
could render the restrictive covenants in the employment contracts
unenforceable, we conclude that consideration of the breach of
contract claim is necessary to our determination regarding the
enforceability of the covenants. We agree with defendants that
whether or not a material breach of contract has been committed is a
question of fact and, consequently, the lower court’s determination
will not be disturbed unless it is against the manifest weight of the
evidence. W.E. Erickson Construction, Inc. v. Congress-Kenilworth
Corp., 115 Ill. 2d 119 (1986); see also Borys v. Rudd, 207 Ill. App. 3d
610 (1990).
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It is plaintiffs’ position that defendants breached their employment
contracts by failing to compensate plaintiffs the full amounts to which
they were entitled under the provisions of their contracts. According
to plaintiffs, they were significantly underpaid because of the manner
in which defendants billed Medicare for myoview tests performed at
the Clinic at plaintiffs’ direction.
The record shows that the myoview test (also known as a
myocardial perfusion imaging study) is a diagnostic test used to
determine whether the heart muscle is getting the blood supply it
needs. The Clinic owned and maintained at its offices all of the
equipment necessary to conduct myoview tests. The Clinic also had
on its staff a trained technician who would administer the myocardial
imaging phases of the tests. When conducting a myoview test, the
Clinic’s trained technician would first inject a small amount of
radioactive isotope (thallium) into the patient’s bloodstream and then
take pictures of the patient using a special camera for the initial
“resting phase” of the test. After the resting images were taken, the
patient would take a stress test on a treadmill under the supervision of
a physician. Thereafter, the technician would administer an additional
injection to the patient and repeat the myocardial imaging process.
The images would later be interpreted by the physician.4
In regard to billing for the myoview test, Medicare assigned
separate Current Procedural Terminology Codes (CPT Codes) for the
technical and professional components of the test. According to
defendants’ expert witness, Janet Mazur,5 the technical components
of a procedure, billed under the “TC” CPT Code, are intended to
cover overhead, technician salaries, equipment and equipment
maintenance. See also Central States v. Pathology Laboratories of
Arkansas, P.A., 71 F.3d 1251, 1252 (7th Cir. 1995). The professional
component of a procedure compensates the physician who interprets
the test and is billed under the CPT Code “26.”
4
Apparently, Dr. Mohanty interpreted most of the myoview tests due to
his special training in nuclear cardiology.
5
Mazur is a “coding specialist” with over 30 years of experience in the
health-care field, including CPT Code billing and Medicare reimbursements.
-15-
It is uncontested that when billing Medicare for myoview tests
performed at the Clinic’s offices, the technical components of the test
were billed under Dr. Monteverde’s name, while the professional
component was billed under name of the physician who interpreted the
test. Dr. Monteverde explained that he directed the billing for the
technical component to be billed under his name to defray the costs of
the initial $300,000 investment for the purchase of the myoview
equipment, as well as remodeling costs necessary to accommodate the
equipment. He further explained that Medicare’s reimbursement for
the technical component covered the salary of the licensed technician
who administered the test, as well as the costs of medication, supplies
and other overhead expenses associated with the test. Dr. Monteverde
further testified that he believed it appropriate to bill the technical
component under his name because he was the sole owner of the
Clinic and the myoview testing equipment, as well as the person
responsible for the training and supervision of the technician, who
administered all of the myoview tests at the Clinic, regardless of which
physician ordered the test.
Plaintiffs, nevertheless, contend that Dr. Monteverde’s billing
procedure was improper. Specifically, plaintiffs argue that the
technical component of the myoview test, which accounts for about
70% of the total cost of the test, was wrongly diverted to Dr.
Monteverde and, thus, deprived them of compensation to which they
were entitled under the terms of their employment contract. Plaintiffs’
employment contracts provided that plaintiffs were to receive an
annual salary of 50% of their gross receipts.6 They maintain that their
“gross receipts” should have been calculated based on the total cost
of the myoview tests performed at the Clinic on their patients, not just
the professional component.
The employment contracts of Drs. Mohanty and Ramadurai
provide: “Employee shall be paid as follows for his work: 50% of his
gross receipts.” (Emphasis added.) At the hearings conducted by the
trial court, defendants argued that the technical component of the
myoview tests did not constitute Dr. Mohanty’s or Dr. Ramadurai’s
“work” and, thus, there was no violation of the employment contract.
6
Dr. Ramadurai’s contract was amended at some point to afford him 55%
of his gross receipts.
-16-
It was necessary, therefore, for the trial court to resolve the question
of whether the technical components of the myoview tests were part
of plaintiffs’ “work.”
Plaintiffs proffered the testimony and report of an expert to
support their contention that they were entitled to a share in the total
amount charged to Medicare for the myoview test. However,
defendants challenged the qualifications of plaintiffs’ expert and the
trial court barred this witness’ testimony. As a result, plaintiffs
position is largely unsupported.
Defendants’ expert, on the other hand, provided strong testimony
in defense of defendants’ billing practices. According to defendants’
expert, Janet Mazur, billing for the technical component does not
include any amounts for physician services. In a detailed report,
Mazur explained the formulas used by Medicare to determine
“Physician Work Relative Value Units” which is a reflection of a
physician’s “work” for a particular CPT Code. According to Mazur,
the “TC” CPT Codes for the myoview test all carry a Physician Work
Relative Value Unit of zero. Thus, Mazur concluded that “the
technical component of these tests, and corresponding payments for
each component, does not encompass physician work.”
In light of the evidence presented by defendants’ expert, we
cannot say that it was against the manifest weight of the evidence for
the trial court to determine that a material breach of contract was not
established. We affirm the trial court’s ruling on this matter and find
that, because plaintiffs have not carried their burden of proving a
breach of contract by defendants, plaintiffs have not shown why they
should be relieved of their obligations under the restrictive
noncompete covenants in their contracts. Accordingly, plaintiffs’
breach-of-contract claim cannot serve as a basis upon which to deny
defendants a preliminary injunction.
Plaintiffs raise as their third and final issue whether the restrictive
covenants in their employment contracts are unenforceable because
they are unreasonably overbroad in their temporal and activity
restrictions. The restrictive covenant in Dr. Ramadurai’s contract
imposed a three-year restriction on his practice of medicine within a
two-mile radius of the Clinic’s offices. The restrictive covenant in Dr.
Mohanty’s contract limited his ability to practice medicine for five
years within a five-mile radius of the Clinic’s offices.
-17-
As noted earlier in this opinion, this court has a long tradition of
upholding covenants not to compete in employment contracts
involving the performance of professional services when the
limitations as to time and territory are not unreasonable. Cockerill v.
Wilson, 51 Ill. 2d 179, 183-84 (1972); Canfield v. Spear, 44 Ill. 2d 49
(1969); Bauer v. Sawyer, 8 Ill. 2d 351 (1956). “ ‘In determining
whether a restraint is reasonable it is necessary to consider whether
enforcement will be injurious to the public or cause undue hardship to
the promisor, and whether the restraint imposed is greater than is
necessary to protect the promisee.’ ” House of Vision, Inc. v. Hiyane,
37 Ill. 2d 32, 37 (1967), quoting Bauer v. Sawyer, 8 Ill. 2d 351, 355
(1956).
The trial court, when considering the reasonableness of the
covenants here, ruled that the activity restriction was unreasonably
overbroad because the restriction on “the practice of medicine” was
greater than necessary to protect the interests of defendants, who
specialized in the practice of cardiology. The appellate court rejected
this ruling, holding:
“Based on the testimony, it is not a greater restraint than
necessary to protect the defendants. Dr. Ramadurai pointed
out, as a doctor, he is licensed to practice medicine, not just
his specialties. Just as Dr. Monteverde saw patients for
conditions unrelated to internal medicine or cardiology, the
plaintiffs’ specialties do not prevent them from seeing patients
in other areas of medicine, if they so chose, placing them in
competition with the defendants.” 358 Ill. App. 3d at 908.
In addition, the appellate court found that no undue hardship
would accrue to plaintiffs as a result of the covenants because: “They
are free to practice medicine outside the five-mile limit, which, given
the heavily populated Chicago metropolitan area, would not deprive
them of employment.” 358 Ill. App. 3d at 908.
Plaintiffs contest the correctness of the appellate court’s ruling and
ask us to affirm the circuit court’s judgment on this point. We,
however, find the appellate court’s reasoning to be persuasive and,
accordingly, affirm its ruling.
Under the circumstances of this case, the restriction on the
“practice of medicine” is not unreasonable. Cardiology, like other
specialties, is inextricably intertwined with the practice of medicine.
-18-
For this reason, restrictive covenants precluding the practice of
medicine against physicians who practice a specialty have been upheld
as reasonable. See Canfield v. Spear, 44 Ill. 2d 49 (1969)
(dermatologist); Prairie Eye Center, Ltd. v. Butler, 329 Ill. App. 3d
293 (2002); Retina Services, Ltd. v. Garoon, 182 Ill. App. 3d 851
(1989) (ophthalmologists). Thus, we find that the restraint on the
practice of medicine, here, was not greater than necessary to protect
defendants’ interests. This is particularly so because the restriction on
plaintiffs is in effect only within a narrowly circumscribed area of a
large metropolitan area. As the appellate court noted, the two- and
five-mile restrictions will not cause plaintiffs any undue hardship.
Moreover, plaintiffs do not suggest that a more narrowly drawn
activity restriction would have been practicable.
Next, plaintiffs argue, as they did in the appellate court below, that
the temporal restrictions found in their covenants are unreasonable
and that the trial court held them to be so. Like the appellate court,
however, we find plaintiffs’ argument to be factually and substantively
incorrect.
The trial court found the temporal restrictions to be “problematic.”
The trial court acknowledged that there was evidence in the record
which would support a finding that the three- and five-year restrictions
were reasonable, but then found it “significant” that Dr. Monteverde
testified that the three-year restriction for Dr. Ramadurai “just came
into his mind” and the five-year restriction was imposed on Dr.
Mohanty because Dr. Monteverde did not trust him. It does not
appear, however, that the trial court actually concluded that the
temporal restrictions were unreasonable.
In any event, we do not agree that Dr. Monteverde’s candid
remarks are cause for concern. Courts, when assessing the
reasonableness of restrictive covenants, are to apply an objective
standard, informed by the individual facts of the case. Thus, Dr.
Monteverde’s personal, subjective motivations for imposing the
particular temporal restrictions are irrelevant as long as the limitations
satisfy an objective standard of reasonableness. We find that they do.
Record evidence indicated that it took more than 10 years for St.
John Clinic to establish itself as a successful cardiology practice. Dr.
Monteverde testified that it took a minimum of three to five years to
develop a referral base and that during the time that Drs. Ramadurai
-19-
and Mohanty worked for the Clinic, nearly all of their referrals had
come through the Clinic. Further, Dr. Monteverde testified that
from1989, when Dr. Ramadurai was hired, to 2001, when Dr.
Mohanty was hired, the practice of cardiology had become much more
competitive. There were more cardiologists in the area, which meant
that a greater number of doctors were available to serve a limited
number of cardiology patients in the area. There is nothing to indicate
that the trial court did not find Dr. Monteverde’s testimony to be
credible. More importantly, plaintiffs have never presented any
evidence to refute it. We cannot say, therefore, that the three- and
five-year restrictions are unreasonable under the circumstances of this
case. We note, too, that similar restrictions in other restrictive
covenants have been upheld as reasonable. Cockerill v. Wilson, 51 Ill.
2d 179 (1972) (five-year restriction); Canfield v. Spear, 44 Ill. 2d 49
(1969) (three years); Bauer v. Sawyer, 8 Ill. 2d 351 (1956) (five-year
restriction).
Finally, plaintiffs argue that, with their absence from the Clinic, the
Clinic will be unable to handle its patient load. This argument is
unresponsive to the issue here–whether the temporal restriction is
greater than necessary to protect defendants’ interests. The measure
of the potential harm to the public caused by the restriction is whether
there exists a sufficient number of cardiologists in the area to meet
patient needs. Plaintiffs do not contest defendants’ evidence on this
point. Thus, we cannot say that barring plaintiffs from the practice of
medicine within the restricted area for the stated time periods would
seriously diminish the number of cardiologists available to provide the
necessary patient care. Therefore, we conclude that the three- and
five-year time restrictions on the plaintiffs’ ability to practice medicine
within the limited geographical area was reasonable and necessary to
protect the Clinic’s interests.
CONCLUSION
In opposition to defendants’ motion for a preliminary injunction,
plaintiffs contested the validity and reasonableness of the restrictive
covenants contained in their employment contracts. We have rejected
each of plaintiffs’ arguments and, as a result, conclude that defendants
are entitled to a preliminary injunction to enforce the restrictive
-20-
covenants contained in plaintiffs’ employment contracts. We affirm the
appellate court’s judgment.
Appellate court judgment affirmed.
JUSTICE KARMEIER, specially concurring:
I fully concur in the court’s judgment. I join its opinion with the
understanding that it should not be read as altering any of the normal
standards governing cases of this kind.
As the appellate court recognized, this is an interlocutory appeal
as of right brought pursuant to Supreme Court Rule 307(a)(1) (188
Ill. 2d R. 307(a)(1)) from a judgment of the circuit court denying
defendants’ motion for a preliminary injunction. It is well established
that the purpose of a preliminary injunction is not to resolve the merits
of a case, but to preserve the status quo until the merits can be
decided. Callis, Papa, Jackstadt & Halloran, P.C. v. Norfolk &
Western Ry. Co., 195 Ill. 2d 356, 365 (2001). Consistent with the
provisional nature of this remedy, a party seeking preliminary
injunctive relief is not required to make out a case which would entitle
him to final judgment; rather, he need only show that he raises a “fair
question” and that the court should preserve the status quo until it can
decide the case on the merits. Buzz Barton & Associates, Inc. v.
Giannone, 108 Ill. 2d 373, 382 (1985).
The issuance of a preliminary injunction is an extreme remedy and
should not be undertaken unless an emergency exists and serious harm
would result if the injunction were not issued. As my colleagues
indicate, the party seeking a preliminary injunction must establish that
(1) a clearly ascertained right in need of protection exists, (2)
irreparable harm will occur in the absence of an injunction, (3) there
is not an adequate remedy at law, and (4) there is a likelihood of
success on the merits. Callis, Papa, Jackstadt & Halloran, P.C., 195
Ill. 2d at 365-66. The decision to grant or deny a preliminary
injunction rests within the sound discretion of the trial court and on
review the decision will not be disturbed absent an abuse of discretion.
People ex rel. Klaeren v. Village of Lisle, 202 Ill. 2d 164, 177 (2002).
In this case, there is no dispute regarding elements (1), (2) and (3),
the existence of a clearly ascertainable right in need of protection,
irreparable injury and the lack of an adequate remedy at law. The sole
-21-
issue is whether defendants, who were seeking the preliminary
injunction, made a fair showing that the restrictive covenants were
valid and enforceable and that they were therefore likely to succeed on
the merits of their claim against plaintiffs.
The majority correctly points out that the validity of covenants not
to compete contained in employment contracts is a question of law
(see Retina Services, Ltd. v. Garoon, 182 Ill. App. 3d 851, 856
(1989); see also Woodfield Group, Inc. v. DeLisle, 295 Ill. App. 3d
935, 938 (1998) (“determination of whether a restrictive covenant is
enforceable is a question of law”)) which we review de novo (The
Agency, Inc. v. Grove, 362 Ill. App. 3d 206, 215 (2005)). The
situation here, however, is more complex. That is because plaintiffs’
challenge to the enforceability of the restrictive covenants includes, by
way of an affirmative defense, the claim that defendants had breached
the employment contracts of which the covenants were a part.
Whether a breach of contract has occurred is not a legal question
subject to de novo review. It is a question of fact which will not be
disturbed unless the finding is against the manifest weight of the
evidence. See Bunge Corp. v. Northern Trust Co., 252 Ill. App. 3d
485, 499 (1993).
Normally, affirmative defenses such as breach of contract may not
be litigated on the merits in the context of a hearing on a motion for
preliminary injunctive relief. See, e.g., Falcon, Ltd. v. Corr’s Natural
Beverages, Inc., 165 Ill. App. 3d 815, 820 (1987). The reason for this
rule, as the appellate court recognized, is that resolution of such
matters requires the determination of controverted rights and
resolution of matters bearing on the merits of the underlying case.
Under established precedent, those are not appropriate objectives for
proceedings seeking preliminary injunctive relief. As I have already
indicated, preliminary injunctions precede hearings on the merits, and
their purpose is not to decide the merits of a case, but to maintain the
status quo and prevent a threatened wrong until the merits can be
decided.
Although the majority makes no attempt to reconcile its approach
with these principles, I believe that it has acted properly. What sets
this litigation apart is that instead of deferring the hearing on the
merits of the breach of contract claim until the trial, both plaintiffs and
defendants elected to make an extensive evidentiary record on the
-22-
question. In effect, the hearing on the breach of contract defense was
treated as the actual trial on that issue. The situation is directly
analogous to one where the parties expressly agree that the evidence
presented in connection with a preliminary injunction should stand as
the record for purposes of entering final judgment on the merits. See,
e.g., City of Chicago v. Pooh Bah Enterprises, Inc., No. 99804
(October 5, 2006). Under these circumstances, the parties cannot
possibly complain that addressing the breach of contract issues
exceeds the permissible scope of our inquiry in this case. I note,
moreover, that none of the parties has given any indication that
additional relevant evidence exists that has not already been
introduced. To refrain from deciding the breach of contract issues
notwithstanding the existence of the fully developed evidentiary
record already before us would serve no useful purpose.
For the foregoing reasons, I concur in court’s the judgment.
Subject to the points raised in this separate concurrence, I also join its
opinion.
JUSTICE GARMAN joins in this special concurrence.
JUSTICE FREEMAN, concurring in part and dissenting in part:
The appellate court upheld the physician restrictive covenants in
the present case, and this court affirms. In so doing, my colleagues in
the majority give short shrift to the essential issue of patient care. I
write separately because fuller consideration of the issue of patient
care is crucial to an enlightened resolution of the parties’ contentions.
The issue of patient care is fraught with opposing public policy
considerations. Further, the issue of patient care is so intertwined with
the enforceability of physician restrictive covenants that a blanket
prohibition thereof must come from the legislature and not the courts.
Therefore, I agree with my colleagues’ conclusion on this point.
Nevertheless, because consideration of patient care is so important in
enforcing individual physician restrictive covenants, including not only
the patient’s freedom to choose a physician but also the patient’s
interests in maintaining an established physician-patient relationship,
I believe that the prevailing analysis is inadequate. In my view, the
court today lets pass the opportunity to revisit this important issue and
modify our analysis.
-23-
Accordingly, I propose a modified analysis that more appropriately
considers the fundamental element of patient care. The record before
us does not contain sufficient evidence to establish this crucial
consideration. Therefore, I cannot uphold these restrictive covenants.
Rather, I would reverse the judgments below and remand the cause to
the circuit court for additional fact finding.
I. BACKGROUND
A physician restrictive covenant is a clause typically found in
employment agreements between physicians and their employers.
Usually, employers require physicians to sign such covenants prior to
beginning their practice. The contractual clauses obligate physicians
to refrain from engaging in or establishing a competitive medical
practice within a specified geographic region for a specified period of
time subsequent to the conclusion or termination of the physician’s
employment. The restrictive covenant typically will also prohibit a
physician from treating patients at hospitals within the same
geographic region. S. Malloy, Physician Restrictive Covenants: The
Neglect of Incumbent Patient Interests, 41 Wake Forest L. Rev. 189,
189-90 (2006); accord D. Loeser, The Legal, Ethical, and Practical
Implications of Noncompetition Clauses: What Physicians Should
Know Before They Sign, 31 J.L. Med. & Ethics 283, 283-84 (2003);
P. Berg, Judicial Enforcement of Covenants Not To Compete
Between Physicians: Protecting Doctors’ Interests At Patients’
Expense, 45 Rutgers L. Rev. 1, 2-3 (1992). Terms such as “restrictive
covenant,” “noncompete agreement,” and “covenant not to compete”
are synonymous and used interchangeably. 41 Wake Forest L. Rev. at
189 n.2; 45 Rutgers L. Rev. at 2 n.9. In the present case, the appellate
court, inter alia: (1) found that plaintiffs’ postemployment restrictive
covenants were reasonable (358 Ill. App. 3d 902, 906-09), and (2)
rejected plaintiffs’ contention that physician postemployment
restrictive covenants in Illinois are void as against public policy. 358
Ill. App. 3d at 911.
II. ANALYSIS
The purpose of a preliminary injunction is to preserve the status
quo pending a decision on the merits of a cause. A preliminary
injunction is an extreme remedy that a court should employ only in
-24-
situations where an emergency exists and serious harm would result
if the injunction is not issued. Callis, Papa, Jackstadt & Halloran,
P.C. v. Norfolk & Western Ry. Co., 195 Ill. 2d 356, 365 (2001). As
my colleagues in the majority observe, a party seeking a preliminary
injunction must establish that: (1) a clearly ascertained right in need of
protection exists; (2) irreparable harm will occur without the
injunction; (3) there is no adequate remedy at law for the injury; and
(4) there is a likelihood of success on the merits. Slip op. at 7; Callis,
195 Ill. 2d at 365-66. The decision to grant or deny a preliminary
injunction rests within the sound discretion of the circuit court, whose
decision will not be disturbed on review absent an abuse of discretion.
Callis, 195 Ill. 2d at 366.
In this case: “The sole issue is whether defendants, who were
seeking the preliminary injunction, made a fair showing that the
restrictive covenants were valid and enforceable and that they were
therefore likely to succeed on the merits of their claim against
plaintiffs.” Slip op. at 22 (Karmeier, J., specially concurring, joined by
Garman, J.). Whether a restrictive covenant is valid and enforceable
depends on the reasonableness of its terms, which is a question of law
for the court to determine. Tarr v. Stearman, 264 Ill. 110, 118-19
(1914); Lanzit v. J.W. Sefton Manufacturing Co., 184 Ill. 326, 330
(1900); see McRand, Inc. v. van Beelen, 138 Ill. App. 3d 1045, 1051
(1985); Image Supplies, Inc. v. Hilmert, 71 Ill. App. 3d 710, 712
(1979). Accordingly, our review is de novo. Woods v. Cole, 181 Ill.
2d 512, 516 (1998).
A. Prohibition of All Physician Restrictive Covenants
Plaintiffs ask this court to hold that all physician restrictive
covenants are void in Illinois as against public policy. Of course,
physicians enjoy the freedom of contract. Slip op. at 9. However,
these agreements are not immune from state regulation.
“It is too well settled to require discussion at this day that
the police power of the States extends to the regulation of
certain trades and callings, particularly those which closely
concern the public health. There is perhaps no profession more
properly open to such regulation than that which embraces the
practitioners of medicine.” Watson v. Maryland, 218 U.S.
173, 176, 54 L. Ed. 987, 989, 30 S. Ct. 644, 646 (1910).
-25-
It is elementary that “a state has broad power to establish and enforce
standards of conduct within its borders relative to the health of
everyone there. It is a vital part of a state’s police power. The state’s
discretion in that field extends naturally to the regulation of all
professions concerned with health.” Barsky v. Board of Regents of the
University of the State of New York, 347 U.S. 442, 449, 98 L. Ed.
829, 838, 74 S. Ct. 650, 654 (1954). The state’s police power in the
area of health is broad and “is sufficient to justify, in proper
circumstances, uncompensated deprivation of personal liberty as well
as deprivation of property. [Citation.] The States have wide regulatory
power with respect to the practice of health care professions.”
Methodist Medical Center of Illinois v. Ingram, 82 Ill. 2d 511, 522-
23 (1980) (and cases cited therein).
In support of this contention, plaintiffs present several
considerations relating to patient care. However, instead of discussing
the impact of physician restrictive covenants on the essential issue of
health care, my colleagues in the majority curtly recite plaintiffs’
patient-care considerations and unduly discount them simply as a
“laundry list.” Slip op. at 9. Indeed, without any discussion of
plaintiffs’ patient-care considerations, the court ultimately concludes
that plaintiffs have not “shown that these covenants are manifestly
injurious to the public welfare.” Slip op. at 12. I respectfully disagree.
Based on the essential nature of health care in our society, I
request the patience of my colleagues in the majority, as I look beyond
what they characterize as a “laundry list” to more fully discuss the
crucial relation between physician restrictive covenants and patient
care. I am of the opinion that a strong case exists for abolishing all
physician restrictive covenants as being against public policy.
However, I agree that this decision is for the General Assembly to
make.
The enforcement of physician restrictive covenants impedes the
delivery of quality medical care in several ways. The essential
ingredients of quality medical primary care include continuity of care,
interpersonal communications, longitudinality of the physician-patient
relationship, patients’ preference to see their regular physician, and the
accumulation of physician knowledge about the patient. When
physician restrictive covenants are enforced, they ultimately result in
the severing of physician-patient relationships. Studies have addressed
-26-
the involuntary termination of those relationships and the concomitant
impact of forced discontinuity of care. These studies reveal that the
disruption caused by enforcing physician restrictive covenants results
in increased costs of care, decreased quality of care, and decreased
patient satisfaction. A. Di Dio, The Legal Implications of
Noncompetition Agreements in Physician Contracts, 20 J. Legal Med.
457, 475 (1999).
As a result of the forced severing of the physician-patient
relationship due to the enforcement of a physician restrictive covenant,
the patient must search for a new physician to tend to the patient’s
medical needs. Of course, this new physician must now learn about the
patient to provide effective treatment. Physicians who know less about
their patients will more likely order laboratory tests. In turn, decreased
patient comfort levels with new physicians impede interpersonal
communications and the new physicians’ accumulation of knowledge.
For patients who see multiple physicians for multiple medical
problems, coordination of care is paramount. When these patients are
compelled to change physicians, coordination of care decreases.
Forced discontinuity of patient care results in: more frequent physician
visits, laboratory tests, hospitalizations, and surgical procedures;
increased utilization of speciality services and hospital emergency
rooms; and increased emergency hospital admissions and longer
hospital stays. 20 J. Legal Med. at 475-76. All of this results in
increased health-care costs and decreased patient satisfaction.
Further, the enforcement of physician restrictive covenants “is
contrary to medical research that demonstrates that continuity in the
doctor-patient relationship fosters the delivery of quality health care
and that the involuntary termination of this relationship may have
lasting, negative effects on patients.” 45 Rutgers L. Rev. at 31. Long-
term, continuous relationships between physicians and patients impact
positively on many aspects of health care. A longstanding, trusting
physician-patient relationship often improves a physician’s diagnostic
abilities and increases the likelihood that the patient will comply with
prescribed therapy. Providing continuity is particularly important to
the treatment of certain patients such as children and the elderly, and
for certain medical conditions such as psychiatric disorders. Patients
having such relationships with primary-care physicians are less likely
to seek treatment in hospital emergency rooms than patients who have
-27-
no such relationship. Also, patients who have ongoing relationships
with their physicians have considerably shorter hospitalizations and
intensive-care unit stays than patients who lack such relationships. 45
Rutgers L. Rev. at 31-34.
Further, it cannot be ignored that this country suffers from a
shortage of primary-care physicians, which is obviously an additional
threat to a patient’s receiving adequate health care. Some communities
are truly endangered by the shortage of available physicians caused by
the enforcement of physician restrictive covenants. 41 Wake Forest L.
Rev. at 212-13.
The enforcement of physician restrictive covenants harms not only
patients. “While forced discontinuity of care may have detrimental
effects for the patient when it occurs because of a restrictive covenant,
it is equally troublesome for the physician.” 41 Wake Forest L. Rev.
at 207. The enforcement of physician restrictive covenants deny
patients the right to choose their own physicians. This patient care
consideration implicates a physician’s ethical obligations.
In 1933, the American Medical Association (AMA) first addressed
the issue of physician restrictive covenants. The AMA declared that
contractual provisions that prevented the free choice of a physician
were unethical. However, in 1960, the AMA Judicial Council, which
is responsible for interpreting and recommending changes to the AMA
constitution, bylaws, and ethical principles (45 Rutgers L. Rev. at 6
n.23), retreated from this position. The 1960 opinion stated that there
was no ethical proscription against a reasonable restrictive covenant,
if knowingly made and understood. In 1971, the AMA adopted a
resolution that echoed the position of the 1960 opinion. 45 Rutgers L.
Rev. at 6-7.
Subsequent to 1960, official statements of the AMA have
repeatedly criticized physician restrictive covenants as being
antagonistic to quality health care, yet have expressed toleration of
reasonable noncompetition agreements. In 1971, the Judicial Council
recommended barring physician restrictive covenants in all but
exceptional circumstances. The Council explained that it
“recognizes social and professional conditions have
changed over the years. While there may once have been some
need for restrictive covenants in agreements between
physicians, the Council believes that existing socio-economic
-28-
conditions leave little or no justification for restrictive
covenant arrangements. In the opinion of the Council, the use
of restrictive covenants in an agreement between or among
physicians should be entered into only under the most unusual
circumstances and then only after those circumstances have
been found by the local medical society to require the
adoption of such a provision in order to protect the public and
the profession in the particular situation.” 45 Rutgers L. Rev.
at 8, citing AMA, Proceedings of the House of Delegates,
Report of Judicial Council 124 (1972).
The Judicial Council has also opined:
“ ‘Free choice of physicians is the right of every individual.
One may select and change, at will, one’s physicians, or may
chose a medical care plan such as that provided by a closed
panel or group practice or health maintenance or service
organization. The individual’s freedom to select a preferred
system of health care and free competition among physicians
and alternative systems of care are prerequisites of ethical
practice and optimal patient care.’ ” 31 J.L. Med. & Ethics at
286, quoting AMA Council on Ethical and Judicial Affairs,
Op. E–9.06 (1977).
In 1980, the AMA declared that physician restrictive covenants, while
not unethical, are not “in the public interest.” 45 Rutgers L. Rev. at 9.
Further, in 1993, the Judicial Council recognized the consensual
and highly personal nature of the physician-patient relationship.
“ ‘The patient has the right to continuity of health care.
The physician has an obligation to cooperate in the
coordination of medically indicated care with other health care
providers treating the patient. The physician may not
discontinue treatment of a patient as long as further treatment
is medically indicated, without giving the patient reasonable
assistance and sufficient opportunity to make alternative
arrangements for care.’ ” 31 J.L. Med. & Ethics at 286,
quoting AMA Council on Ethical and Judicial Affairs, Op.
E–10.01 (1993).
The AMA continues to be concerned with continuity of patient care
and its disruption by enforcement of physician restrictive covenants.
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The Judicial Council’s current opinion on physician restrictive
covenants states:
“ ‘Covenants not to compete restrict competition, disrupt
continuity of care, and potentially deprive the public of
medical services. The Council on Ethical and Judicial Affairs
discourages any agreement which restricts the right of a
physician to practice medicine for a specified period of time or
in a specified area upon termination of an employment,
partnership or corporate agreement. Restrictive covenants are
unethical if they are excessive in geographic scope or duration
in the circumstances presented, or if they fail to make
reasonable accommodation of patients’ choice of physician.’ ”
31 J.L. Med. & Ethics at 287, quoting AMA Council on
Ethical and Judicial Affairs, Op. E–9.02 (1998).
Although the AMA currently accepts reasonable physician restrictive
covenants, the AMA remains critical of them.
These AMA-recognized ethical obligations of physicians, as they
relate to patients’ freedom of choice, do not result in a virtual
involuntary servitude for physicians. After all, a physician may
voluntarily retire or move from a community. However, the AMA has
recently spoken “directly to physicians’ higher obligations to patients
versus themselves or other groups:
“ ‘The practice of medicine, and its embodiment in the
clinical encounter between a patient and a physician, is
fundamentally a moral activity that arises from the imperative
to care for patients and alleviate suffering. The relationship
between patient and physician is based on trust and gives rise
to physicians’ ethical obligations to place patients’ welfare
above their own self-interest and above obligations to other
groups, and to advocate for their patients’ welfare.’ ” 31 J.L.
Med. & Ethics at 286-87, quoting AMA Council on Ethical
and Judicial Affairs, Report 1–A–01 (2001).
To state the obvious: the physician-patient relationship is unlike most
other business relationships. Therefore, it should not be treated in an
identical manner. See, e.g., York, 222 Ill. 2d at 185-201 (recognizing
uniqueness of physician-patient relationship, court treated element of
reliance in apparent agency analysis differently in health-care context
than in other contexts). When a physician must terminate his or her
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relationship with a patient, the patient may suffer the consequences
physically. In most other cases, the client who is denied the services
of the professional is harmed only financially. 41 Wake Forest L. Rev.
at 208.
The antagonism between physician restrictive covenants and the
ethical obligations of physicians is recognized:
“[AMA] Official Guidelines state that once a physician-patient
relationship is formed, the physician has a legal and ethical
duty to continue providing care as long as the patient needs it.
When a physician must terminate the patient relationship due
to a restrictive covenant, she must simultaneously fulfill this
ethical obligation. Doing so requires that the physician give
reasonable notice of termination, as well as sufficient
opportunity to find an alternative provider. The AMA
provides steps that a physician should follow in terminating
the relationship, including providing the patient with a reason
for terminating the relationship, continuing to provide
treatment while the patient attempts to locate a new provider,
recommending a new provider at the patient’s request, and
transferring the patient’s files to another physician only with
the patient’s permission. Many physicians are prohibited from
contacting their former patients under restrictive covenants
and are therefore unable to fulfill these legal and ethical
obligations.” 41 Wake Forest L. Rev. at 207-08.
Physicians have an ethical duty to put the welfare of their patients
above their own. A physician restrictive covenant undermines those
ethics when it places the employers’ financial interests above patients’
interests. 41 Wake Forest L. Rev. at 208.
Rather than discuss the patient-care considerations as they relate
to physician restrictive covenants, the court offers its own justification
for such agreements: “Restrictive covenants protect the business
interests of established physicians and, in this way, encourage them to
take on younger, inexperienced doctors.” Slip op. at 12-13. However:
“No empirical evidence exists that restrictive covenants are needed to
protect physician/employers’ economic interests. Indeed, one medical
commentator has concluded that these provisions are usually not
economically justified. Richard P. Bergen, Practical Considerations
on Restrictive Covenants, 203 JAMA 197, 198 (1968).” 45 Rutgers
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L. Rev. at 31 n.137. Another commentator recently opined that,
ordinarily, the revenue generated by the physician-employee should
substantially exceed the cost to the employer of employing the
physician. Thus, the employer is usually well compensated for the
benefits it provides to the physician during the employment. Arguably
the employer also profits from the long-term benefits provided to the
physician. “As the physician gains knowledge, and enhances his or her
personal reputation, the employer benefits by association. Those
benefits do not just disappear when the physician departs; the
community may continue to associate positive experiences or
outcomes with the employer, and, hence, the value of the employer’s
goodwill remains enhanced.” 31 J.L. Med. & Ethics at 190.
Notwithstanding the above, I am not unsympathetic to the
legitimate business interests that employers such as defendants wish
to protect. I note, however, that other means exist to protect these
interests, which do not negatively impact or unduly burden patient
care or the ethical obligations of physicians. For example, many
physician restrictive covenants give the contracting physician the
option of paying liquidated damages in the alternative to abiding by
the activity, geographic, and temporal restrictions of the covenant.
Some commentators argue that these damages are less harmful to
physicians and the physician-patient relationship than the enforcement
of the restrictive covenant through injunctive relief. 41 Wake Forest
L. Rev. at 219. Moreover, the solitary suggestion that my colleagues
in the majority offer to justify physician restrictive covenants focuses
on “business interests” and lacks any consideration of physicians’
ethical obligations to patients.
A strong case exists for a blanket abolition of all physician
restrictive covenants in Illinois as being void against public policy.
However, I agree that such a decision is properly left to the General
Assembly. Slip op. at 13.
In the exercise of the police power, the State has the right to
regulate any and all occupations for the protection of the lives and
health of the people. All measures and regulations for the public health
that do not infringe upon constitutional rights are within the scope of
the police power. Within constitutional limitations, the General
Assembly is the sole judge of what laws shall be enacted for the
protection of the public health, and so long as such laws do not invade
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inherent or constitutional rights, the determination of the General
Assembly is conclusive. People v. Witte, 315 Ill. 282, 285 (1924);
People v. Kane, 288 Ill. 235, 237-38 (1919).
Despite the long-established recognition that measures regulating
health-care professionals must ultimately issue from the General
Assembly, plaintiffs contend that this court should prohibit physician
restrictive covenants in Illinois for the same reasons that this court
prohibited attorney restrictive covenants in this state. In Dowd &
Dowd, Ltd. v. Gleason, 181 Ill. 2d 460 (1998), this court held that
attorney restrictive covenants were void as against the public policy
underlying Rule 5.6(a) of the Illinois Rules of Professional Conduct
(134 Ill. 2d R. 5.6(a)). The rule provides that a lawyer shall not
participate in offering or making a partnership or employment
agreement that restricts the rights of a lawyer to practice after
termination of the relationship. 134 Ill. 2d R. 5.6(a). This court
observed that Rule 5.6(a) “is designed both to afford clients greater
freedom in choosing counsel and to protect lawyers from onerous
conditions that would unduly limit their mobility.” Dowd, 181 Ill. 2d
at 481. Plaintiffs argue that physician restrictive covenants, like
attorney restrictive covenants, limit both patients’ freedom in choosing
physicians and physicians’ professional autonomy.
This comparison fails for at least two reasons. First, Dowd
implicated this court’s unique and inherent responsibility for regulating
the conduct of attorneys. This court has the sole and inherent power
to define and regulate the practice of law in this state. Further, the
power to prescribe rules governing attorney conduct rests solely in
this court. Consistent with this exclusive power, this court has
adopted the Rules of Professional Conduct (134 Ill. 2d Rules, art.
VIII). These rules regulate the practice of law and the conduct of
lawyers, and are intended to safeguard the public and assure the
integrity of our legal system. These regulatory provisions assure that
lawyers practice law ethically and with competence. Ford Motor
Credit Co. v. Sperry, 214 Ill. 2d 371, 382-83 (2005); People ex rel.
Brazen v. Finley, 119 Ill. 2d 485, 492-94 (1988). However, the
legislature may enact statutes that are in aid of, and do not supersede
or detract from, the power of this court to control the practice of law.
People ex rel. Chicago Bar Ass’n v. Goodman, 366 Ill. 346, 349
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(1937); see, e.g., 705 ILCS 205/0.01 et seq. (West 2004) (Attorney
Act).
In contrast, regulations governing physicians do not contain any
restrictions similar to Rule 5.6(a) of the Illinois Rules of Professional
Conduct. Neither Illinois statutes, nor the regulations of the Illinois
Department of Professional Regulation, in any way prohibit physician
restrictive covenants. See Karlin v. Weinberg, 77 N.J. 408, 420-21,
390 A.2d 1161, 1167-68 (1978) (applying this reasoning to New
Jersey law). I “recognize that several commentators have criticized the
distinction our law makes between physicians and attorneys in respect
of restrictive covenants.” Community Hospital Group, Inc. v. More,
183 N.J. 36, 55-56, 869 A.2d 884, 895-96 (2005) (collecting
commentary). Despite this criticism, I nevertheless rely on this court’s
power to govern the ethical standards of the legal profession as
justification for treating attorneys and physicians differently. See
Community Hospital Group, 183 N.J. at 56, 869 A.2d at 896
(applying New Jersey law); Intermountain Eye & Laser Centers,
P.L.L.C. v. Miller, 142 Idaho 218, ___, 127 P.3d 121, 132 (2005)
(applying Idaho law).
Second, the attorney-client relationship differs markedly from the
physician-patient relationship. Technology has enabled attorneys to
establish and maintain professional relationships with their clients
through, e.g., conference calls and faxes. In contrast, the physician-
patient relationship is highly personal, and necessarily requires face-to-
face contact between physicians and patients. The unique and highly
personal nature of the physician-patient relationship cautions this
court to defer consideration of a blanket prohibition of physician
restrictive covenants to the legislature.
The General Assembly possesses wide regulatory power with
respect to the health-care professions and, further, it is within the
broad discretion of the legislature to determine not only what the
public interest and welfare require, but also to determine the measures
needed to secure such interest. Burger v. Lutheran General Hospital,
198 Ill. 2d 21, 40-41 (2001), quoting Chicago National League Ball
Club, Inc. v. Thompson, 108 Ill. 2d 357, 364 (1985). Indeed:
“The primary expression of Illinois public and social policy
should emanate from the legislature. This is especially true
regarding issues like the present one, where there is
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disagreement on whether a new rule is warranted. The
members of our General Assembly, elected to their offices by
the citizenry of this State, are best able to determine whether
a change in the law is desirable and workable.
*** The General Assembly, by its very nature, has a
superior ability to gather and synthesize data pertinent to the
issue. It is free to solicit information and advice from the many
public and private organizations that may be impacted.
Moreover, it is the only entity with the power to weigh and
properly balance the many competing societal, economic, and
policy considerations involved.” Charles v. Seigfried, 165 Ill.
2d 482, 493 (1995).
I urge the General Assembly to consider the efficacy of physician
restrictive covenants, and I recommend that the legislature prohibit
such noncompetition agreements between physicians.
B. Reasonableness of These Physician Restrictive Covenants
This court properly holds that a blanket prohibition of all physician
restrictive covenants should emanate from the legislature. However,
my colleagues in the majority hold that the restrictive covenants
presented in this case are reasonable. I cannot agree. The court
improperly relies on a general analysis that ignores the unique nature
of the physician-patient relationship.
The general analysis is as follows. Courts usually hold that
contracts in total restraint of trade are illegal and void. Bauer v.
Sawyer, 8 Ill. 2d 351, 354-55 (1956); Hursen v. Gavin, 162 Ill. 377,
379-80 (1896). However, the validity of a partial restraint of trade,
e.g., a noncompetition agreement, is determined by its reasonableness
in terms of its effect on the parties and the public. Under the rule of
reason, a noncompetition agreement is reasonable and, therefore,
enforceable, if it: (1) is no broader than necessary to protect a
legitimate interest of the employer; (2) does not unduly burden the
employee; and (3) does not harm the public. House of Vision, Inc. v.
Hiyane, 37 Ill. 2d 32, 37 (1967); Bauer, 8 Ill. 2d at 355; Restatement
(Second) of Contracts §188 (1981). In relation to the employer’s
interest, the restraint must be reasonable as to activity, geographic
area, and time. Hursen, 162 Ill. at 380-82; Restatement (Second) of
Contracts §188, Comment d, at 43 (1981).
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However, in my view, when a restrictive covenant deals with
physicians, our traditional analysis should be applied in a manner
which explicitly and specifically references the injury to the public in
terms of patient care. Other states have so recognized. For example,
in Statesville Medical Group v. Dickey, 106 N.C. App. 669, 673, 418
S.E.2d 256, 259 (1992), the court referenced the injury to the public
as follows:
“To determine the risk of substantial harm to the public this
Court has considered the following factors: the shortage of
specialists in the field in the restricted area, the impact of
plaintiff establishing a monopoly *** in the area, including the
impact on fees in the future and the availability of a doctor at
all times for emergencies, and the public interest in having a
choice in the selection of a physician.”
Accord Valley Medical Specialists v. Farber, 194 Ariz. 363, 371, 982
P.2d 1277, 1285 (1999) (concluding that patients’ right to see the
physician of their choice is entitled to substantial protection);
Community Hospital Group, 183 N.J. at 60, 869 A.2d at 898, quoting
Karlin, 77 N.J. at 424, 390 A.2d at 1169-70 (holding that court must
evaluate several factors, including extent to which enforcing restrictive
covenant would foreclose patients from seeing the departing physician
if they desired to do so); Intermountain Eye, 142 Idaho at ___, 127
P.3d at 132 (“We adopt the view expressed by the supreme courts of
Arizona and New Jersey”). Such realistic consideration of patient care
recognizes human dignity and the importance of health care, rather
than viewing human beings as a commodity to be considered only in
the context of the employer and the employee.
I observe that I am not suggesting a departure from our traditional
common law analysis of restrictive covenants with its identified
elements. Rather, in agreement with the above-cited enlightened
courts, I consider patient care to be included in, or a subset of, the
element of public harm. York v. Rush-Presbyterian-St. Luke’s Medical
Center, 222 Ill. 2d 147 (2006), is a recent example of this court
recognizing the uniqueness of the physician-patient relationship in the
context of another general analysis. York involved a medical
malpractice action claiming that a hospital was vicariously liable for
the negligence of an independent-contractor physician under the
doctrine of apparent agency. This court unanimously held that, in the
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context of health care, it would treat the element of reliance in the
apparent agency analysis differently than in other contexts. The court
explained that the relationship between a patient and health-care
providers “presents a matrix of unique interactions that finds no ready
parallel to other relationships.” York, 222 Ill. 2d at 192. In the present
case, I am disappointed that my colleagues in the majority fail to
consider the uniqueness of physician restrictive covenants, as they
recently did in York, but rather, treat all restrictive covenants alike.
One might assume that this court would give particularized
treatment to physician restrictive covenants in light of the unique
considerations they present. Unfortunately, the majority of courts,
including this court, currently view the physician-patient relationship
as analogous to a simple merchant-customer relationship, thus
comparing a very complex relationship to a relationship that is more
routine. These courts do not analyze physician restrictive covenants
any differently than they analyze covenants-not-to-compete between
commercial parties. 41 Wake Forest L. Rev. at 192; accord 45
Rutgers L. Rev. at 4 (“Courts do not analyze noncompetition
agreements between physicians any differently than comparable
provisions between commercial parties”).
The court today concludes that the general analysis applicable to
all commercial restrictive covenants so completely takes into account
patient-care considerations and the ethical obligations of physicians to
patients that the court sees no difference in the two contexts. Slip op.
at 11. I respectfully disagree. A profound “disconnection” exists
between the prevailing physician restrictive covenant analysis and
patient care.
In applying the prevailing analysis to determine the reasonableness
of a physician restrictive covenant, this court has held that “the
interest of the public is in having adequate medical protection.” Bauer,
8 Ill. 2d at 355. In Bauer, for example, this court reasoned that the
reduction by one of 70 physicians serving a community would not
“cause such injury to the public” as to justify refusing to enforce the
restrictive covenant. Bauer, 8 Ill. 2d at 355. This dated view of the
public interest promotes the attitude that patients are
widgets–nondescript objects that anyone has the right to service.
Absent is any consideration of what effect enforcing the restrictive
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covenant would have on the interests of third parties, i.e., patient care
or the ethical obligations of physicians.
Further, this court has even misapplied this flawed numerical test.
In a case where the physician argued that a scarcity of physicians
would affect the public interest, this court reasoned:
“Nor is the contract injurious to any legitimate interest of
the public. Defendant can be as useful to the public at some
other place in the State as he can in Rockford, and the health
of persons elsewhere is just as important. It cannot be said that
the public interest is adversely affected if a physician decides
to move from one community to another, nor does it become
so if the move results from some agreement made in advance.
If a severe shortage exists in any particular place young
doctors will tend to move there, thus alleviating the shortage.”
Canfield v. Spear, 44 Ill. 2d 49, 52 (1969).
Accord Bauer, 8 Ill. 2d at 355 (“In any case, there is no reason why
Dr. Sawyer cannot serve the public interest equally well by practicing
in another community”); 358 Ill. App. 3d at 909 (applying this
reasoning in the present case).
Canfield, decided nearly 40 years ago, was the last time this court
was presented with determining the reasonableness of a physician
restrictive covenant (as opposed to a noncompetition agreement
between veterinarians, Cockerill v. Wilson, 51 Ill. 2d 179 (1972)).
Commentators have long condemned the above-quoted reasoning.
First, it completely ignores the interests of patients who lose their
physician due to enforcement of the restrictive covenant. Those
patients “will presumably find little comfort in knowing that patients
in some other area can now benefit from their doctor’s services.” 45
Rutgers L. Rev. at 30 n.136 (describing this analysis as “peculiar”).
Second, “the notion that the benefit of adding a new doctor to a to-be-
announced location equals the cost to incumbent patients caused by
losing their doctor is ridiculous. The incumbent patients suffer in the
short term a great deal more than the potential new patients gain.” 41
Wake Forest L. Rev. at 203-04; see Restatement (Second) of
Contracts §188, Illustration 14, at 48 (1981) (focusing analysis on
shortage of doctors in the affected area). Indeed, in examining the
temporal restrictions in these physician restrictive covenants, my
colleagues in the majority observe: “The measure of the potential
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harm to the public caused by the restriction is whether there exists a
sufficient number of cardiologists in the area to meet patient needs.”
(Emphasis in original.) Slip op. at 20. Based on the current
recognition of patient-care considerations and ethical obligations of
physicians, I am disappointed that this court does not take the
opportunity this case presents to expressly repudiate the flawed
reasoning expressed in Canfield.
Applying my proposed physician restrictive covenant analysis to
the present case, I conclude that the record contains insufficient
evidence to determine whether enforcement of these restrictive
covenants is injurious to the public. To be sure, the record does not
indicate a scarcity of physicians within the two-mile and five-mile
geographic areas affected by the covenants. Further, the restricted
hospitals in the geographic area are St. Mary of Nazareth Hospital,
Norwegian American Hospital, St. Elizabeth Hospital, and Sacred
Heart Hospital. The record contains evidence that there were more
than a sufficient number of qualified cardiologists ready and willing to
take care of plaintiffs’ patients. For example, Norwegian American
Hospital has five cardiologists serving a maximum of 100 patients,
when only two or three cardiologists are necessary for a hospital of
that size.
However, and more importantly, the record contains insufficient
evidence regarding the level of hardship that enforcement of these
physician restrictive covenants would impose on plaintiffs’ incumbent
patients, if they wished to maintain their relationships with plaintiffs.
For example, plaintiffs’ employer argued that there was “no basis in
the record for an assumption that restrictive covenants among
physicians will hinder patient care.” In support, the employer asserted
that plaintiffs “were quickly granted privileges at a number of hospitals
in the immediate area, including Weiss Memorial Hospital, Lincoln
Park Hospital, Gottlieb Hospital, Westlake Hospital, Lincoln Park
Hospital [sic] and Illinois Masonic Hospital.”
This argument misses the mark. The record does not disclose the
addresses of these hospitals, or any evidence of the relative distances
between these hospitals and those within the affected geographic
areas. While this court could properly take judicial notice of the
distances between locations (see, e.g., Dawdy v. Union Pacific R.R.
Co., 207 Ill. 2d 167, 177-78 (2003)), still absent would be evidence
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of the hardship, if any, this data would impose on plaintiffs’ incumbent
patients.7 Based on this lack of essential evidence of record, I would
reverse the judgments below and remand the cause to the circuit court
for additional fact finding.
IV. CONCLUSION
For the foregoing reasons, I concur in part and dissent in part.
7
If I were to take judicial notice of these relative distances, some would
appear to demonstrate hardship to those of plaintiffs’ incumbent patients who
wish to maintain their relationship with plaintiffs. For example, if one of
plaintiffs’ patients received hospital services at Sacred Heart Hospital,
located at 3240 W. Franklin Boulevard in Chicago, through a Health
Maintenance Organization (HMO) or a Paid Provider Organization (PPO),
that patient would have to travel approximately eight miles to see either
plaintiff at Louis A. Weiss Memorial Hospital, located at 4646 N. Marine
Drive. That same patient would have to travel approximately 11 miles to see
either plaintiff at Gottlieb Memorial Hospital, located at 701 W. North
Avenue, in Melrose Park, a suburb of Chicago. Of course, this assumes that
either Weiss or Gottlieb were a recognized provider under the patient’s health
insurer or HMO.
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