Central Indiana Podiatry, P.C. v. Krueger

• Decision Date: 09 January 2007
• Docket Number: No. 29A05-0606-CV-313.,29A05-0606-CV-313.
• Citation: 859 N.E.2d 686
• Parties: CENTRAL INDIANA PODIATRY, P.C., Appellant-Plaintiff, v. Kenneth J. KRUEGER, Meridian Health Group, P.C., Appellee-Defendant.
• Court: Indiana Appellate Court

859 N.E.2d 686

CENTRAL INDIANA PODIATRY, P.C., Appellant-Plaintiff, v. Kenneth J. KRUEGER, Meridian Health Group, P.C., Appellee-Defendant.

No. 29A05-0606-CV-313.

Court of Appeals of Indiana.

January 9, 2007.

COPYRIGHT MATERIAL OMITTED

James A. Knauer, Steven E. Runyan, Kroger, Gardis & Regas, LLP, Indianapolis, IN, Attorneys for Appellant.

Joseph J. Reiswerg, Indianapolis, IN, Attorney for Appellee.

OPINION

DARDEN, Judge.

STATEMENT OF THE CASE

Central Indiana Podiatry ("CIP") appeals the trial court's order denying a preliminary injunction to CIP on its action asserting that Kenneth Krueger, D.P.M., violated the restrictive covenants contained in the employment contract between CIP and Krueger.

We reverse.

ISSUE

Whether the trial court erred when it did not grant the preliminary injunction sought by CIP.

FACTS

In early 1996, Krueger was practicing podiatry in the Nora area of Indianapolis and in Frankfort. Krueger's practice experienced "some financial troubles." (Tr. 24). CIP "took over all [Krueger's] liabilities," including the mortgage on his building in Frankfort and his malpractice insurance premiums, and entered into a March 1996 employment agreement with Krueger that "guaranteed him an income." (Tr. 63). Krueger entered into a subsequent employment contract ("the Contract") with CIP on April 14, 1998.

The Contract had a two-year term and was renewable for one-year terms. The Contract contained non-compete restrictions, which were similar to those contained in CIP's contracts with other podiatrists it employed and which were effective for a period of two years from the date of termination of his employment with CIP. Specifically, "to avoid disputes in the future, and in consideration for entry into" the Contract, Krueger "agree[d]" to (1) "not divulge the name of any patient ... to any third party and . . . not contact such persons for the purpose or with the intent of providing podiatric services"; (2) "not engage, directly or indirectly, in the practice of podiatry or podiatric surgery within" fourteen named Indiana counties or counties adjacent to those; and (3) not "employ or solicit for employment" any CIP employee. (App.258). The Contract further provided that it could be terminated by CIP "immediately for cause, which shall include, but not be limited to ... misconduct ... of [Krueger]." (App.251). The Contract also provided that "[a]ll patients" seen at CIP offices "shall be deemed to be the patients of [CIP] and not personal patients of [Krueger]." (App. 252). The Contract was renewed annually from 2000 through 2005.

From 1996 until the summer of 2005, Krueger worked in CIP offices located in Frankfort (Clinton County), the Indianapolis metropolitan area (Marion County), Kokomo (Howard County), Lafayette (Tippecanoe County), and Carmel (Hamilton County). Before his termination in the summer of 2005, Krueger was working three days a week at the Nora office in Marion County, one day a week at the Lafayette office, and one day a week in the Kokomo office.

In April of 2005, CIP employee H.H. complained that Krueger had kissed her while they were working in the Kokomo office. CIP employed counsel to investigate. Krueger met with the attorney and admitted not only the incident with H.H. but also that "there was another incident with" M.R., another CIP employee, that involved "some sort of touching." (Tr. 42). After the meeting, Krueger suspected he was going to be terminated, and he obtained from a CIP employee a list in electronic format of his Nora patients.¹ On July 25, 2005, CIP terminated Krueger's employment for cause—specifically, "misconduct in connection with" his employment duties and his responsibility "to treat ... office medical staff in a professional and dignified manner." (Tr. 69).

In early September 2005, Krueger and Meridian Health Group ("Meridian") began negotiating for his employment there as a podiatrist. At the end of September, Krueger and Meridian executed an employment agreement, and Krueger provided a list in electronic format of his Nora CIP patients. Letters dated September 30, 2005, on letterhead indicating "Meridian Health Group ... Kenneth J. Krueger, D.P.M.," were sent to the Nora CIP patient list. (Ex. 6). The letters were signed by Krueger and announced that "beginning October 17th," he would be practicing "the specialty of Podiatry" with Meridian at a specified location "approximately 10 minutes from [his] previous office." Id.

A patient informed CIP of the letter about Krueger's practice at Meridian. On October 14, 2005, CIP filed a complaint against Krueger and Meridian—requesting a temporary restraining order, a preliminary injunction, and permanent injunctive relief as to Krueger, as well as damages. As amended, the verified complaint asserted that Krueger had violated the Contract by soliciting CIP patients, practicing podiatry within the geographic limits, soliciting a CIP employee for employment at Meridian, and engaging in a private podiatry practice in competition with CIP during his employment at CIP. CIP sought a preliminary injunction ordering Krueger to not practice podiatry in the area specified in the Contract, not solicit CIP patients for treatment, and not solicit CIP employees for employment for a two-year period. The complaint also alleged Meridian's tortious interference with the Contract. The trial court initially issued a temporary restraining order and set a hearing on the preliminary injunction for October 21, 2005. On that date, the parties agreed to dissolve the temporary restraining order and to continue the hearing. The trial court then set the preliminary injunction hearing for January 12, 2006.

On November 10, 2005, Krueger filed his answer to CIP's complaint. He admitted "rhetorical paragraph[ ] ... 17," (App.456), the complaint's allegation that "[i]n the course of the investigation of the sexual harassment complaint, Krueger admitted he kissed H.H. without her consent." (App.424). Krueger asserted as a counterclaim that pursuant to the Contract, he "was to have been provided a $350 per month car allowance which ha[d] never been paid," despite his "inquiry" and "request"; accordingly, he claimed that this constituted "a prior material breach" of the Contract that rendered its "non-compete provisions ... void." (App.460).

At the hearing on January 12, 2006, Dr. Anthony Miller—the podiatrist who owns CIP—testified that CIP operated podiatry offices in Marion, Hamilton, Johnson, Tippecanoe, Howard, Montgomery, Grant, and Henry counties. Miller testified that the non-compete provisions of its contracts with employee podiatrists were necessary to "protect" CIP's "investment." (Tr. 27). Miller explained that CIP spent funds marketing the various offices and providing support services for them, and he testified that part of the "good will" of CIP's business was the continuing presence of the podiatrists working at its offices. (Tr. 30). Miller testified that after Krueger's employment was terminated, another podiatrist was immediately assigned to see Krueger's patients at the Nora office; nevertheless, in late 2005, there had been a "significant decrease in the number of patients" at CIP's Nora office after Krueger "started practicing ten minutes away from [that] location." (Tr. 93, 92). Miller also testified that it would be "very difficult, if not impossible to determine the amount of damages monetarily that [CIP] has suffered because" Krueger was practicing at nearby Meridian. (Tr. 115).

On March 17, 2006, the trial court issued its order denying CIP's request for a preliminary in junction. In its findings of fact, the trial court found that

• 845 Indiana Administrative Code 1-6-1(c) requires "a podiatrist leaving a practice ... to provide written notice to his former patients that he has changed his practice";

• CIP sought to enforce the non-compete restrictive covenant not with the goal of "protect[ing] the good will of the corporation" but "to protect its patient population and insure that there was no loss of income"; and

• the non-compete clause covered counties in which CIP had no offices and "more than forty percent ... of the state's area and greater than forty-eight [percent] . . . of its population."

(App.10).

The trial court stated that in order to gain a preliminary injunction, CIP was required to show that it will:

1. Be irreparably harmed by the failure of the Court to grant the preliminary injunction.

2. There is no adequate remedy at law.

3. The harm to the Plaintiff outweighs the harm to the Defendant.

4. The public interest would be disserved in not granting the preliminary injunction.

5. There is a significant probability of success at trial on the merits.

U.S. Land S[ervices], Inc. v. U.S. Surveyor, Inc., 826 N.E.2d 49 (Ind.Ct.App.2005).²

(App.11).

The trial court then concluded as a matter of law "that because there is no evidence that the protection sought by CIP relates to its good will, the restrictive covenants are invalid, unenforceable and geographically unreasonable." (App.11). It further concluded that because Meridian and Krueger "testified that they could track the former patients of Krueger that came to Meridian . . . for treatment by Krueger," CIP had "an adequate remedy at law." Id. In addition, the trial court concluded that CIP had "not demonstrated that the harm to it would outweigh the harm to Krueger." (App.12). Further, because the Administrative Code charged Krueger with "an obligation to provide written notice to his former patients that he had changed practice groups," CIP had "implicitly authorized" him to "utilize its patient list to accomplish this task." Id. Finally, the trial court concluded as a matter of law that because of the special "relationship between a physician and a patient," and because "the right of a patient to choose the physician she believes will provide the best treatment is so fundamental, ... the public interest would be denied or...