Hansen v. Edwards

• Citation: 83 Nev. 189,426 P.2d 792
• Decision Date: 21 April 1967
• Docket Number: No. 5309,5309
• Parties: Dr. Richard E. HANSEN, Appellant, v. Dr. William A. EDWARDS, Respondent.
• Court: Supreme Court of Nevada

Page 792

426 P.2d 792

83 Nev. 189

Dr. Richard E. HANSEN, Appellant, v. Dr. William A. EDWARDS, Respondent.

No. 5309.

Supreme Court of Nevada.

April 21, 1967.

Rehearing Denied May 16, 1967.

Bissett, Logar & Groves, Reno, for appellant.

Echeverria & Osborne and John T. Coffin. Reno, for respondent.

OPINION

ZENOFF, Justice.

Dr. William A. Edwards, a practitioner of podiatry for many years in the Reno area, commenced this action for injunctive relief and damages based upon a breach of a post-employment covenant. The restriction was contained in an employment contract between the two parties and basically provided that Hansen, the employee, was not to engage in the practice of surgical chiropody within a radius of 100 miles of Reno on the termination of employment. No time limitation on this restriction was mentioned. The agreement was executed September 16, 1959 and was re-executed containing the same covenant on July 22, 1966.

After Hansen terminated the contract on September 12, 1966 he opened his own office of Edwards. Edwards sought, and obtained after a hearing, an order for a preliminary injunction restraining Hansen from practicing his profession within a radius of 100 miles of Reno pending trial upon the merits of the case. Hansen appeals from the order granting the preliminary injunction assigning as error that the restrictive covenant was invalid as against public policy.

1. 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 any greater restraint than is reasonably necessary to protect the business and good will 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. Weatherford Oil Tool Company v. Campbell, 161 Tex. 310, 340 S.W.2d 950 (1960). Allright Auto Parks, Inc. v. Berry, 409 S.W.2d 361 (Tenn. 1966); State ex rel. Schoenbacher v. Kelly, 408 S.W.2d 383 (Mo.App., 1966); Orkin Exterminating Company v. Burnett, 146 N.W.2d 320 (Iowa 1967); Meryl, Inc. v. Facherra, 51 Misc.2d 864, 274 N.Y.S.2d 188 (1966); Beneficial Finance Co. of Lebanon v. Becker, 422 Pa. 531, 222 A.2d 873 (Pa.1966); Spalding v. Southeastern Personnel of Atlanta, Inc., 222 Ga. 339, 149 S.E.2d 794 (1966); Baker v. Starkey, 144 N.W.2d 889 (Iowa 1966); Engineering Associates, Inc. v. Pankow, 268 N.C. 137, 150 S.E.2d 56 (1966); 31 Tenn.L.Rev. 450 (1963--64); 48 Iowa L.Rev. 159 (1963); 41 N.C.L.Rev. 253 (1962--63); 10 Kan.L.Rev. 86 (1961--62); 73 Harvard L.Rev. 625 (1959--60); 41 A.L.R.2d 1; 43 A.L.R.2d 91; 58 A.L.R. 153.

The medical profession is not exempt from a restrictive covenant provided the covenant meets the tests of reasonableness. Foltz v. Struxness, 215 P.2d 133 (Kan.1950) (area of 100 miles for a period of ten years); Cogley Clinic v. Martini, 253 Iowa 541, 112 N.W.2d 678 (1962) (25 mile radius for three years); Lovelace Clinic v. Murphy, 76 N.M. 645, 471 P.2d 450 (1966) (county limits and three years). 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 in enforcing contractual rights and obligations. Lovelace, supra, pp. 453--454, 76 N.M. 645.

The substantial risk of losing patients to an employee is itself an adequate basis for a reasonably designed restraint. In the short time that Hansen opened his office after terminating the employment contract he acquired approximately 180 of Edwards' customers. Edwards should have the opportunity to recoup this loss and, in addition, to readjust his office routine which had previously been geared to Hansen's association.

2. It appears that the trial court by granting the injunction decided only that the covenant was valid and reserved the question of reasonableness to the trial on merits. However, a review of the record permits the conclusion that nothing more can be added than is presently known that would affect a determination of that question. The circumstances of this case warrant a confinement of the area of restraint to the boundary limits of the City of Reno and a time interval of one year commencing February 10, 1967, the date of the injunction. A preliminary injunction may be modified at any time whenever the ends of justice require such action. In re Arkansas Railroad Rates, 168 F. 720 (Ark.Cir. 1009). We deem the restriction thus modified to be reasonable. ¹

3. Hansen contends that NRS 613.200 is Nevada's legislative expression that restrictive covenants are invalid. NRS 613.200 provides as follows:

'Any person, association, company or corporation within this state, or any agent or officer on behalf of such person, association, company or corporation, who shall wullfully do anything intended to prevent any person who shall have for any cause left or been discharged from his or its employ from obtaining employment elsewhere in this state shall be guilty of a misdemeanor, and upon conviction thereof shall be punished by a fine of not less than $50 nor more than $250, or by imprisonment in the county jail at the rate of 1 day for each $2 of such fine if the fine is not paid.'

A few states have states specifically prohibiting restraints such as that with which we are here concerned. ² Those statutes do not compare with NRS 613.200. We are of the opinion that our statute is not directed to this problem. It concerns only persons who seek employment with someone else, not those who intend self-employment.

The order granting the injunction is affirmed as modified. Further proceedings relating to damages may ensue without...