Jaraki, M.D. v. Cardiology Associates of Northeast Ar, 01-309

• Court: Arkansas Court of Appeals
• Writing for the Court: Appeal from the Superior Court of the State of Alaska, Third Judicial District, Palmer, Beverly W. Cutler; PER CURIAM; Cutler
• Citation: Jaraki, M.D. v. Cardiology Associates of Northeast Ar, 55 S.W.3d 799, 75 Ark. App. 198 (Ark. App. 2001)
• Decision Date: 03 October 2001
• Docket Number: 01-309
• Parties: OMAR JARAKI, M.D., APPELLANT, V. CARDIOLOGY ASSOCIATES OF NORTHEAST ARKANSAS, P.A., APPELLEE. CA01-309 Arkansas Court of Appeals DIVISION I 3 October 2001 APPEAL FROM THE CRAIGHEAD COUNTY CHANCERY COURT: [DAVID LASER CHANCERY JUDGE, REVERSED AND REMANDED. Larry D. Vaught, Judge. Dr. Omar Jaraki appeals from an order of the Craighead County Chancery Court enforcing a covenant not to compete and enjoining him from the practice of medicine within a seventy-five mile radius of Jonesboro, Arkansas, for a period of two years from the date of entry of the order. Appellant contends that the covenant is void and unenforceable because (1) it violates the public policy of this state that prohibits unreasonable restraints on trade, (2) there is no valid interest in need of protection, (3) the geographic restriction is too broad, and (4) the temporal limitation is unreasonable. Appellant also argues that the chancellor erred in finding that he breached the notice provision contained in his employment contract. Finally, appellant raises an evidentiary objection. We find that the injunction is unreasonable and reverse. Cardiology Associates of Northeast Arkansas (CANEA) is a medical corporation that employs doctors specializing in the field of cardiology. Dr. Omar Jaraki is a cardiologist who has completed a fellowship in electrophysiology (E.P.). An E.P. cardiologist tests, evaluates, and treats rhythm disturbances of the heart. E.P. cardiology services are most often performed after a primary care physician refers a patient to a cardiologist, after which a cardiologist refers the patient to an E.P. cardiologist. It takes approximately seven general cardiologists to provide referrals sufficient to justify the presence of one E.P. cardiologist. Prior to Dr. Jaraki being employed by CANEA, there were no practicing E.P. cardiologists in Jonesboro. It was the practice in Jonesboro to refer cardiology patients in need of E.P. services to Little Rock or Memphis. In order to acquire the

OMAR JARAKI, M.D., APPELLANT,

V.

CARDIOLOGY ASSOCIATES OF NORTHEAST ARKANSAS, P.A., APPELLEE

CA01-309

Arkansas Court of Appeals DIVISION I

3 October 2001

APPEAL FROM THE CRAIGHEAD COUNTY CHANCERY COURT: [E-2000-1307, HON. DAVID LASER CHANCERY JUDGE, REVERSED AND REMANDED.

Larry D. Vaught, Judge.

Dr. Omar Jaraki appeals from an order of the Craighead County Chancery Court enforcing a covenant not to compete and enjoining him from the practice of medicine within a seventy-five mile radius of Jonesboro, Arkansas, for a period of two years from the date of entry of the order. Appellant contends that the covenant is void and unenforceable because (1) it violates the public policy of this state that prohibits unreasonable restraints on trade, (2) there is no valid interest in need of protection, (3) the geographic restriction is too broad, and (4) the temporal limitation is unreasonable. Appellant also argues that the chancellor erred in finding that he breached the notice provision contained in his employment contract. Finally, appellant raises an evidentiary objection. We find that the injunction is unreasonable and reverse.

Cardiology Associates of Northeast Arkansas (CANEA) is a medical corporation that employs doctors specializing in the field of cardiology. Dr. Omar Jaraki is a cardiologist who has completed a fellowship in electrophysiology (E.P.). An E.P. cardiologist tests, evaluates, and treats rhythm disturbances of the heart. E.P. cardiology services are most often performed after a primary care physician refers a patient to a cardiologist, after which a cardiologist refers the patient to an E.P. cardiologist.

It takes approximately seven general cardiologists to provide referrals sufficient to justify the presence of one E.P. cardiologist. Prior to Dr. Jaraki being employed by CANEA, there were no practicing E.P. cardiologists in Jonesboro. It was the practice in Jonesboro to refer cardiology patients in need of E.P. services to Little Rock or Memphis.

In order to acquire the services of an "in-house" E.P. cardiologist, on or about April 17, 2000, CANEA employed Dr. Jaraki. CANEA and Dr. Jaraki entered into an employment agreement ("Employment Agreement"), which was to continue for two years unless terminated by ninety days' written notice given by either party. CANEA agreed to pay Dr. Jaraki $265,000 a year in salary, plus a bonus. In the Employment Agreement the parties also agreed that, in the event that the agreement was terminated prior to its expiration, Dr. Jaraki would not practice within a seventy-five mile radius of CANEA's principal office for a period of twenty-four months (the "non-compete").

On December 5, 2000, Dr. Jaraki gave written notice to CANEA that he was resigning on January 5, 2001. On December 21, 2000, Dr. Jaraki's access to CANEA (and its charts, file materials and the database) was terminated. Thereafter, on December 27, 2000, CANEA filed an action in the Chancery Court of Craighead County seeking a temporary restraining order, a preliminary injunction, a permanent injunction, declaratory relief, and damages.

The chancellor entered an ex parte order on December 28, 2000, restraining Dr. Jaraki from "competing with plaintiff in violation of the employment agreement, from entering plaintiff's place of business, from contacting plaintiff's patients, referring physicians and/or medical suppliers within the geographical location described in the employment agreement, or from taking any action to the detriment of plaintiff." At a hearing on January 8, 2001, the chancery court considered and rejected Dr. Jaraki's motion to set aside the ex parte order.

On January 19 and 23, 2001, the chancellor heard the petition for temporary injunctive relief, and entered his opinion and order upholding the non-compete in the Employment Agreement as valid and enforceable. The court reasoned that Dr. Jaraki was fully aware of the covenants in the Employment Agreement, that CANEA had complied with its obligation, and that CANEA had a legitimate interest to be protected by the non-compete over and above merely prohibiting ordinary competition. The chancellor further found that enforcing the non-compete did not violate public policy. From the granting of CANEA's petition for injunction comes this appeal. We first consider whether the chancery court's failure to include a certification in its order dealing with the non-compete injunction, as set forth in Rule 54(b)of the Arkansas Rules of Civil Procedure, precludes our consideration of this appeal. This question presents a jurisdictional issue, which the court may raise on its own motion. Barr v. Richardson, 314 Ark. 294, 862 S.W.2d 253 (1993). The injunction clearly was treated as separate from the other issues raised and held in abeyance by the chancery court for development at a later time. Because issues relating to bonus fees and contempt were not disposed of, the chancery court's order did not conclude the rights of all of the parties and was not final.

Nevertheless, the appeal before us is one from an injunction, and our rules of appellate procedure provide for an appeal from:

6. An interlocutory order by which an injunction is granted, continued, modified, refused, or dissolved, or by which an application to dissolve or modify an injunction is refused.

Ark. R. App. P. 2(a)(6). The supreme court has stated that a mandatory injunction is appealable under Rule 2(a)(6), Tate v. Sharpe, 300 Ark. 126, 777 S.W.2d 215 (1989), and has held as we also hold that the specific authority of an appeal from an injunction controls over the general requirement for finality contained in Rule 54(b). See East Poinsett Cty. Sch. Dist #14 v. Massey, 317 Ark. 219, 876 S.W.2d 573 (1994). We, therefore, proceed to address the merits of this case.

A chancery court's cases are reviewed de novo on appeal, and the appellate court will not reverse unless the chancellor's findings are clearly erroneous or clearly against the preponderance of the evidence. Dillard v. Pickler, 68 Ark. App. 256, 6 S.W.3d 128 (1999). A chancery court's finding of fact is clearly erroneous when after reviewing all the evidence, the court is left with a definite and firm conviction that a mistake has been committed even though there is evidence to support the chancery court's decision. Id. Because the question of the preponderance of the evidence turns largely on the credibility of the witnesses, the appellate court defers to the chancellor's superior position to assess the credibility of witnesses and the weight to be accorded to their testimony. Moon v. Moon Enters. Inc., 65 Ark. App. 246, 986 S.W.2d 134 (1999).

Covenants not to compete are not looked upon with favor by the law. Federated Mut. Ins. Co. v. Bennett, 36 Ark. App. 99, 818 S.W.2d 596 (1991). 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; (3) a reasonable time limit must be imposed. Id. The Arkansas Supreme Court has recently discussed covenants not to compete:

Arkansas has followed the trend in this area by requiring a party challenging the validity of a covenant to show that it is unreasonable and contrary to public policy. Dawson v. Temps Plus, Inc., 337 Ark. 247, 987 S.W.2d 722 (1999). Without statutory authorization or, some dominant policy justification, a contract in restraint of trade is unreasonable if it is based on a promise to refrain from competition that is not ancillary to a contract of employment or to a contract for the transfer of goodwill or other property. However, the law will not protect parties against ordinary competition. Id. This court has recognized that covenants not to compete in employment contracts are subject to stricter scrutiny than those connected with a sale of a...