Cogley Clinic v. Martini

• Decision Date: 09 January 1962
• Docket Number: No. 50420,50420
• Citation: 253 Iowa 541,112 N.W.2d 678
• Parties: COGLEY CLINIC, a partnership, Appellee, v. H. F. MARTINI, Appellant.
• Court: Iowa Supreme Court

Page 678

112 N.W.2d 678

253 Iowa 541

COGLEY CLINIC, a partnership, Appellee, v. H. F. MARTINI, Appellant.

No. 50420.

Supreme Court of Iowa.

Jan. 9, 1962.

Rehearing Denied Feb. 5, 1962.

Porter & Heithoff and James A. Pratt, Council Bluffs, for appellant.

Smith, Peterson, Beckman & Willson, Council Bluffs, for appellee.

SNELL, Justice.

This is an action in equity to enjoin the violation of the restrictive covenant in a contract of employment.

Plaintiff, Cogley Clinic, is a partnership. Its members are physicians and surgeons associated together for the practice of their profession in Council Bluffs and surrounding territory.

The partnership was first formed in 1927 with four doctors. Through changes in personnel, 29 doctors have been associated with the partnership. There are now 12 partners, 2 associates (doctors), a business administrator and 30 employees, including nurses, technicians, clerks, etc. The doctors include among their number specialists in their respective fields. They have an extensive medical practice and draw patients from a radius of 100 to 125 miles. They have about 50,000 patients. About 30,000 of the patients live within 25 miles of Council Bluffs. Because of the large number of doctors associated together, the partnership uses the name 'Cogley Clinic.' For convenience it will be referred to as the clinic.

The clinic enjoys a substantial referral business from doctors outside of Council Bluffs. There is practically no referral business from other doctors in Council Bluffs. Including Omaha, Nebraska, and Council Bluffs, Iowa, 450,000 people live within 25 miles of Council Bluffs.

Prior to 1952 there were no restrictions limiting the practice of a doctor who withdrew from the clinic. Some doctors, who had been brought in and established by plaintiff partnership, withdrew and engaged in practice in Council Bluffs in direct competition with the clinic. Patients followed the withdrawing partners and the remaining doctors suffered substantial loss of patronage and income. To bring in a new doctor to fill a vacancy on the staff and get him established is expensive. The estimated cost to the clinic is $10,000. It is usually about two years before his work produces income equal to his cost to the clinic.

In 1953 a contract between the partners, including associates, was introduced. The contract set forth the agreement of partnership or employment, and among the provisions was a restrictive covenant effective upon the withdrawal of a partner or termination of employment.

Dr. H. F. Martini is a doctor licensed to practice in Iowa and Wisconsin. He has had special training and specializes in orthopedic surgery. He has passed some of the examinations but is not certified by the American Board of Orthopedic Surgery. The evidence in this case indicates without dispute that he is a competent orthopedic surgeon.

In 1953 plaintiff did not have among its doctors an orthopedic surgeon. The specialist in that field who had been a partner had withdrawn before the introduction of the restrictive covenant and was in private practice in Council Bluffs. He is now deceased.

Dr. Martini, at that time a total stranger to the Council Bluffs area, came to the clinic as an employee in October 1953. He became a partner in January 1956. Membership as a partner terminated in October 1959 when he again became an employee. Dr. Martini's entire acquaintance with patients, referral doctors, hospital personnel and local procedures prior to the termination of his employment was through his association with the clinic. For reasons not material to this action, except as noted below, his employment was terminated in February 1960. On each employment he signed a contract containing the following covenant:

'D. Not to engage, on the termination for any cause whatsoever of the employment hereunder, in the practice of medicine or surgery or any of the healing arts, or engage to work for any individual, firm, partnership or association engaged in the practice of medicine or surgery or any of the healing arts, in the City of Council Bluffs, Iowa, or within a radius of twenty-five (25) miles thereof, for a period of three (3) years from the time the employment under this Contract ceases.'

When Dr. Martini came to the clinic in 1953 he was introduced professionally and socially and his association with the clinic was announced to the public, patients of the clinic and to doctors in the territory. All of the medical files and records of the clinic were available to him. He was the only member of the clinic specializing in orthopedic surgery, although others did traumatic surgery. It appears that patients of an orthopedic surgeon are largely patients referred by other attending physicians. Dr. Martini cared for such patients referred by members of the clinic staff and outside doctors. There was very little referral work from other doctors in Council Bluffs.

At the present time, other than Dr. Martini and several in Omaha, there is no orthopedic specialist closer than about 100 miles. Several orthopedic surgeons in Omaha are available to the Council Bluffs area. They have been doing orthopedic work in Council Bluffs for many years and are available on call. They are not far away. While Dr. Martini was associated with the clinic, the Omaha orthopedic surgeons took care of the referred work of Council Bluffs doctors not associated with the clinic. While the clinic has no orthopedic surgeon on the staff, Omaha doctors are called in for necessary cases.

One of the reasons for the termination of Dr. Martini's employment by the clinic was the complaint of other doctors about his failure to see patients and answer calls and his unavailability when needed. He was frequently not as available as doctors from Omaha. Inconvenience and annoyance resulted.

It was the opinion of all witnesses that the location of one or two orthopedic surgeons in Council Bluffs would be desirable and convenient. The clinic is seeking such an associate. The members of plaintiff partnership deny that they desire any monopoly in the medical and surgical field. The record in this case shows that the lack of resident orthopedic surgeons in Council Bluffs is inconvenient but it does not show that the public welfare necessarily depends on Dr. Martini's practice in Council Bluffs.

On July 9th and 10th, 1960, Dr. Martini caused to be published in a daily paper in Council Bluffs an announcement as follows: 'Dr. H. F. Martini announces the opening of his office, for the practice of orthopedic surgery, in the City National Bank Bldg.--Adv.'

This action for a restraining injunction followed. Dr. Martini admits that he has been engaged in the practice of medicine and surgery.

The trial court found for plaintiff and enjoined defendant under the provisions of his contract. We agree with the trial court.

I. In this appeal defendant challenges the reasonableness of the restrictive covenant. Defendant contends that there is no social economic justification for the restriction, that it is greater than required for protection of plaintiff; that the restriction imposes an undue hardship upon defendant; that it tends to create a monopoly; that it unreasonably restricts the use of defendant's skills; that it is injurious to the public; and that it is unreasonable as to time and area.

II. The defendant does not seriously challenge the legality to restrictive covenants in general. Restrictive covenants of employment are strictly construed against one seeking injunctive relief. They are in partial restraint of trade and are approved with some reluctance. Under certain circumstances they are recognized and enforced by injunctive proceedings. For many years restrictive covenants between doctors have been recognized as valid and enforceable. Rowe v. Toon, 185 Iowa 848, 169 N.W. 38; Oates v. Leonard, 191 Iowa 1004, 183 N.W. 462.

What is frequently called a landmark case in the area of restrictive covenants is Brecher v. Brown, 235 Iowa 627, 17 N.W.2d 377, 379. The opinion in that case discusses the history and development of the law. The rule was affirmed that a contract in restraint of trade is to be gauged by the reasonableness of the restraint imposed as necessary to the protection of the covenantee and compatible with the public interest. There the restrictive covenant was between doctors of veterinary medicine and surgery. The contract provided for an area limitation with a radius of 25 miles. It was unlimited as to time. It was pointed out that the area was such that it could not possibly be served by plaintiff. The restriction was held to be unreasonable. In considering 'the difficult task of applying general rules to the specific facts' the court referred to rigid formulas as 'helpful in appraising the elusive quality of reasonableness,' but not controlling. Mutual Loan Co. v. Pierce, 245 Iowa 1051, on 1055, 65 N.W.2d 405, on 407, after referring to Brecher v. Brown, supra, says: 'It comes down to a question of reasonableness. The restraint will be enforced it reasonably necessary to afford a fair protection to the business interests of the party in favor of whom it is given. It is to be strictly construed and the restriction must be no greater than necessary to protect the interests of the employer. It must not be oppressive to the employee or create undue hardship on him, out of proportion to the benefits which the employer may in reason expect to secure. * * *' It should be remembered that the territory that can be served by a veterinarian with a country practice is not comparable to the territory that can be served by a medical clinic or an orthopedic specialist.

Our most recent pronouncement is in Federated Mutual Implement & Hardware Ins. Co. v. Erickson, Iowa, 110 N.W.2d 264, 267. There the contract was attacked as violative of public policy. The authorities were reviewed and cited. It was held that four factors are involved: size of the restricted area;...