Duffner v. Alberty

• Decision Date: 29 October 1986
• Docket Number: No. CA,CA
• Citation: 19 Ark.App. 137,718 S.W.2d 111
• Parties: Dr. David DUFFNER, Appellant, v. Dr. Joe Paul ALBERTY and Dr. John Wideman, Appellees. 86-156.
• Court: Arkansas Court of Appeals

Page 111

718 S.W.2d 111

19 Ark.App. 137

Dr. David DUFFNER, Appellant, v. Dr. Joe Paul ALBERTY and Dr. John Wideman, Appellees.

No. CA 86-156.

Court of Appeals of Arkansas,

En Banc.

Oct. 29, 1986.

Rehearing Denied Nov. 26, 1986.

Harper, Young, Smith & Maurras by S. Walton Maurras, Fort Smith, for appellant.

Sexton, Nolan, Robb & Caddell by Sam Sexton, Jr., Fort Smith, for appellees.

CRACRAFT, Chief Judge.

David Duffner appeals from an order of the Sebastian County Chancery Court enforcing a covenant not to compete and enjoining him from the practice of medicine within a radius of thirty miles from the offices of Joe Paul Alberty and John Wideman for a period of twelve months from the date of entry of the order. The appellant contends that the covenant is void and unenforceable because it violates the public policy of this state which prohibits unreasonable restraints of trade. We agree.

Covenants not to compete are not looked upon with favor by the law. In order for such a covenant to be enforceable, three requirements must be met: (1) the covenantee must have a valid interest to protect; (2) the geographical restriction must not be overly broad; and (3) a reasonable time limit must be imposed. Rebsamen Ins. v. Milton, 269 Ark. 737, 600 S.W.2d 441 (Ark.App.1980). It is not argued that the geographic restriction was overbroad or that the time limitation was unreasonable. Appellant contends only that there was not a sufficient interference with appellees' business interests to warrant enforcement of the covenant. It is clear that such covenants will not be enforced unless a covenantee had a legitimate interest to be protected by such an agreement and that the law will not enforce a contract merely to prohibit ordinary competition. Import Motors, Inc. v. Luker, 268 Ark. 1045, 599 S.W.2d 398 (1980). The test of reasonableness of contracts in restraint of trade is that the restraint imposed upon one party must not be greater than is reasonably necessary for the protection of the other, and not so great as to injure a public interest.

Contracts in partial restraint of trade, where ancillary to a sale of a business or profession with its goodwill, are valid to the extent reasonably necessary to the purchaser's protection, and are looked upon with greater favor than such an agreement ancillary to an employer-employee or professional association relationship. Madison Bank & Trust v. First National Bank of Huntsville, 276 Ark. 405, 635 S.W.2d 268 (1982); Marshall v. Irby, 203 Ark. 795, 158 S.W.2d 693 (1942); Easley v. Sky, Inc., 15 Ark.App. 64, 689 S.W.2d 356 (1985). Where the covenant grows out of an an employment or other associational relationship, the courts have found an interest sufficient to warrant enforcement of the covenant only in those cases where the covenantee provided special training, or made available trade secrets, confidential business information or customer lists, and then only if it is found that the associate was able to use information so obtained to gain an unfair competitive advantage. See Orkin Exterminating Co., Inc. v. Weaver, 257 Ark. 926, 521 S.W.2d 69 (1975); Rector-Phillips-Morse Inc. v. Vroman, 253 Ark. 750, 489 S.W.2d 1 (1973); All-State Supply, Inc. v. Fisher, 252 Ark. 962, 963, 483 S.W.2d 210 (1972); Girard v. Rebsamen Ins. Co., 14 Ark.App. 154, 685 S.W.2d 526 (1985). The validity of these covenants depends upon the facts and circumstances of each particular case. Evans Laboratories, Inc. v. Melder, 262 Ark. 868, 562 S.W.2d 62 (1978).

Here, Dr. Joe Paul Alberty and Dr. John Wideman were orthopedic surgeons who had been engaged in the practice of their profession in Fort Smith, Arkansas, as partners for many years. Appellant completed his residency training in orthopedic surgery in June of 1984, at a clinic in Temple, Texas, and afterwards determined to locate in Fort Smith and associate himself with the appellees. The terms and conditions of appellant's association with the appellees' practice was reduced to a letter agreement. It is not questioned that all of those involved were fully aware of the document's provisions. Under the terms of the agreement the appellees agreed to pay all general expenses and certain specific expenses listed in the agreement were to be paid by the physician who incurred them. Each physician was assigned a private office and paid rent to the Alberty-Wideman partnership. Certain portions of the office and the medical equipment owned by the partnership were to be used in common and the practice would be organized as an association of individual professional associations, but appellant would initially practice as a sole proprietorship. Call schedules would be shared equally. At the end of one year the appellant would arrange financing to buy his share of the equity in the furniture and equipment and would have an option to purchase an interest in the condominium offices. The agreement contained a covenant that should the appellant...