Ellis v. McDaniel
| Decision Date | 14 June 1979 |
| Docket Number | No. 11622,11622 |
| Citation | 95 Nev. 455,596 P.2d 222 |
| Parties | Charles T. ELLIS, M.D., Petitioner, v. Honorable Joseph O. McDANIEL, Fourth Judicial District Court In and For the County of Elko, Respondent. |
| Court | Nevada Supreme Court |
Bradley & Drendel, Reno, for petitioner.
Stewart R. Wilson, Elko, for respondent.
Evans & Bilyeu, Zane S. Miles, Elko, for amicus curiae.
On December 18, 1977 appellant Dr. Charles T. Ellis, a duly licensed and certified specialist in orthopedic surgery, negotiated a contract of employment with Collett, Hood, Moren and Read, Ltd., a professional medical corporation, doing business as the Elko Clinic, for a six-month period beginning September 1, 1978.
At the time the contract was entered, the parties contemplated that at the end of six months Dr. Ellis would be extended the option to either become a stockholder in the corporation or to continue his employment without buying stock. Further, the contract provided that upon the termination of his employment, and for a period of two years thereafter, Dr. Ellis would not compete with the Clinic within a radius of five miles from the city of Elko. Specifically, the restrictive covenant provides:
In the event that (Dr. Ellis') employment by (the Elko Clinic) terminates for any reason, (Dr. Ellis) Shall not undertake to practice medicine within a distance of five miles from the city limits of Elko, Nevada for a period of two years from the termination date of his employment by the (Elko Clinic). It is understood that In the event (Dr. Ellis) violates the foregoing provision of this Contract, (The Elko Clinic ) May obtain an injunction in the Fourth Judicial District Court of the State of Nevada to insure (his) compliance with this provision. This remedy is in addition to any other remedies which (the Elko Clinic) may have against (Dr. Ellis) in law or equity for his violation of this provision. (Emphasis added.)
In September, 1978, Dr. Ellis began performance under the contract. He saw patients in need of orthopedic services who, prior to his employment would have been referred to specialists in Reno, Salt Lake City, or elsewhere beyond the State's territorial boundaries. In January, 1979, Dr. Ellis informed principals of the Clinic that on the expiration of his contract, he intended to establish his own office in Elko for the practice of his specialty. Pursuant to the terms of the contract, the Clinic filed its complaint and motion for a preliminary injunction against Dr. Ellis' threatened action, alleging Dr. Ellis had violated his covenant not to compete by taking steps (including the rental of office space, copying of files, and attempting to persuade other Clinic employees to join him) to enter private practice in Elko. Dr. Ellis answered, claiming the post employment restrictive covenant was unenforceable, and counterclaimed for damages.
Following hearing, the district court on February 26, 1979 entered an order granting the preliminary injunction.
On March 1, 1979 Dr. Ellis filed the instant petition seeking to prohibit Judge McDaniel from enforcing the preliminary injunction on the ground that he had exceeded his jurisdiction in granting the preliminary relief. On March 2, 1979, we noted that: "(Dr. Ellis) has set forth jurisdictional and procedural issues, which may be arguable, and that petitioner may have no plain, speedy and adequate remedy in the ordinary course of law . . ." and ordered respondent to answer.
1. Since an order granting a preliminary injunction is appealable, NRAP 3A(b) (2), Dr. Ellis' petition for a writ of prohibition is procedurally incorrect. NRS 34.330. However, in view of our own action, allowing the filing of the petition, ordering respondent to answer, and thereafter setting the matter for briefing and oral argument, thereby lulling petitioner into a feeling of procedural security, Dickerson v. District Court, 82 Nev. 234, 414 P.2d 946 (1966), we opt to treat the application as an appeal. State v. District Court, 85 Nev. 381, 455 P.2d 923 (1969); Dickerson v. State, Supra.
2. In Hansen v. Edwards, 83 Nev. 189, 426 P.2d 792 (1967), we considered an appeal from an order granting an injunction enforcing a post employment covenant not to compete. The covenant, silent as to its duration, provided that Dr. Hansen was not to engage in the practice of surgical chiropody within a radius of 100 miles of Reno upon the termination of his employment. The agreement was executed in 1959 and reexecuted in 1966. When, in 1966, Dr. Hansen terminated the contract and opened his own office for the practice of podiatry near Dr. Edwards' Reno office, Edwards sued to enforce the covenant. The trial court granted Dr. Edwards a preliminary injunction pending trial on the merits. Hansen appealed claiming the injunction was invalid as against public policy. This court disagreed, saying:
An agreement on the part of an employee not to compete with his employer after termination of the employment is in restraint of trade and will not be enforced in accordance with its terms unless the same are reasonable. Where the public interest is not directly involved, the test usually stated for determining the validity of the covenant as written is whether it imposes upon the employee (a) greater restraint than is reasonably necessary to protect the business and goodwill of the employer. A restraint of trade is unreasonable, in the absence of statutory authorization or dominant social or economic justification, if it is greater than is required for the protection of the person for whose benefit the restraint is imposed or imposes undue hardship upon the person restricted. The period of time during which the restraint is to last and the territory that is included are important factors to be considered in determining the reasonableness of the agreement. (Citations.)
The medical profession is not exempt from a restrictive covenant provided the covenant meets the tests of reasonableness. (Citations.) The public has an interest in seeing that competition is not unreasonably limited or restricted, but it also has an interest in protecting the freedom of persons to contract, and enforcing contractual rights and obligations.
Id., at 191-192, 426 P.2d at 793. Finding the covenant otherwise reasonable, we limited the duration of the covenant to one year, and as modified, affirmed the order of the district court. Id.
There is no inflexible formula for deciding the ubiquitous question of reasonableness. However, because the loss of a person's livelihood is a very serious matter, post employment anti-competitive covenants are scrutinized with greater care than are similar covenants incident to the sale of a business. See, for example, Golden State Linen Service, Inc. v. Vidalin, 69 Cal.App.3d 1, 137 Cal.Rptr. 807, 813 (1977); Purchasing Associates, Inc. v. Weitz, 13...
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