Long v. Huffman

• Decision Date: 11 October 1977
• Docket Number: No. KCD,KCD
• Parties: C. W. LONG, M. D., and C. W. Long & Associates, Inc., Respondents, v. Thomas Laurence HUFFMAN, M. D., Appellant, and C. W. Long & Associates, Inc., Third-Party Defendant. 28440.
• Court: Missouri Court of Appeals

Page 911

557 S.W.2d 911

C. W. LONG, M. D., and C. W. Long & Associates, Inc., Respondents, v. Thomas Laurence HUFFMAN, M. D., Appellant, and C. W. Long & Associates, Inc., Third-Party Defendant.

No. KCD 28440.

Missouri Court of Appeals, Kansas City District.

Oct. 11, 1977.

John M. Carnahan, III, and James P. Ferguson, Springfield, for appellant; Greene, Cassity, Ferguson, Carnahan & Freeman, Springfield, of counsel.

Edward J. Murphy, Inc., Butler, for respondents.

Before SHANGLER, P. J., and WELBORN and HIGGINS, Special Judges.

SHANGLER, Presiding Judge.

This appeal comes from an injunction which restrains physician Huffman from the practice of medicine within a radius of 60 miles of the City of Butler for five years after termination of employment by Physician Long in accordance with the restrictive covenant provision of the contract between them. The appellant Huffman does not dispute that he violated the noncompetition covenant, but asserts equity should not give aid to remedy the breach because the terms of the restriction contradict the public policy of this state, and because respondent Long was himself in breach of the contract.

The appellant Huffman became acquainted with Long while still a senior medical student in 1972. He solicited employment with Long during the interim before internship. He worked for Long for eight weeks and then returned to Kansas City for further training. On July 28, 1972, the parties concluded a formal two-year employment contract to begin when Huffman completed internship. Huffman received $5000 as consideration for execution of the contract. The essential terms of the agreement provided that Huffman was to receive 40% and Long 60% of the net profits. Huffman was guaranteed a minimum of $25,000 per year, payable at the rate of a minimum of $2,000 per month. Huffman was given an option, upon the "approval of the Employer", to purchase an equal share in the clinic according to a predetermined formula. The contract also provided in addition to the restrictive covenant that the undertaking was personal and not assignable, transferable or delegable. This much of the facts is not disputed.

The appellant Huffman took up employment with Long under the contract of July 1, 1973, and worked to the completion of the two-year term. Prior to the commencement of that employment, Long had incorporated his practice as C. W. Long & Associates, Inc. Huffman testified that he first had certain knowledge of that change of business status when he arrived at the clinic in July of 1973. Long testified that some months earlier he told Huffman of his plans to incorporate and directed financial adviser Finke to discuss the matter with him. Huffman conceded that he made no objection to the incorporation and throughout the association with Long was paid by corporate check.

During the second year of association, Huffman informed Long he wished to exercise the contract option to purchase an equal ownership in the clinic. Formal discussions resulted in an offer of contract by Long which Huffman rejected. He objected because the proposal offered Huffman the purchase of only 249 of the 500 shares in the Long Associates corporation. The other impediment to consent, according to Long, was that Huffman refused any provision for noncompetition. They renewed negotiations in early 1974 in the office of the attorney for Long. The memorandum of this meeting by Attorney Murphy discloses that Long then proposed to sell Huffman 250 shares (a one-half interest) in the clinic, and in place of a noncompetition clause, a penalty provision whereby Huffman was bound to pay Long $40,000 if he left within five years of the agreement, $20,000 within 5 to 10 years, $10,000 within 10 to 15 years, and whereby Huffman would sell back his interest in the corporation to Long for $1 if he left after fifteen years. These proposals were never embodied in a formal agreement. Huffman testified that the only time he was offered an equal interest in the clinic was two days before he left that practice. Long testified he always intended that Huffman have the option to purchase one-half of the clinic. They both agreed that Huffman never tendered money for the purchase.

At the completion of the two year employment term Huffman left the Long clinic and about a month later began his own practice in Butler. Huffman hired away from the Long clinic two employees Margaret Sandeen and Gayle Cook to work in his new office. He acknowledged that during the first month of this practice he sent fifty requests for medical records to the Long clinic office. Of these, about eighty per cent were concerning former patients of Dr. Long.

A petition for injunction followed to restrain Huffman from violation of the restrictive covenant provision of the contract. Huffman counterclaimed for an accounting of the finances of the clinic during the employment. The parties have deferred the accounting issue, and the trial court decree that Huffman be enjoined according to the terms of the restrictive covenant comes to us as a final appealable judgment.

Huffman argues first that such a restrictive covenant contradicts the public policy of this state against restraint of trade and, because of the need for medical practitioners, causes serious public inconvenience. He argues also that Long failed to show lack of an adequate legal remedy and proved no pecuniary damage from the Huffman conduct, and so may not have the aid of equity. The rule of law is to the contrary: Contracts of noncompetition between physicians and surgeons will ordinarily be enforced in equity because, for the breach of such a covenant, there is no adequate remedy at law and the very purpose of such a contract may be met only by exact conformance to the terms undertaken. Thompson v. Allain, 377 S.W.2d 465, 467(3) (Mo.App.1964). Thus, the injunctive remedy is peculiarly appropriate both because of the obligation of the contract and because the full damage to be suffered by the breach cannot be known certainly. Mills v. Murray, 472 S.W.2d 6, 18(20) (Mo.App.1971). Cognately, there is no need to prove damage to enforce a noncompetition employment agreement by injunction. Reed, Roberts Associates, Inc. v. Bailenson, 537 S.W.2d 238, 242(12-14) (Mo.App.1976).

A restrictive covenant is enforceable in equity if it is "limited as to area and time, reasonably necessary to protect the fair and legitimate contract rights and interests of the parties, and otherwise reasonable and not contrary to public policy." Willman v. Beheler, 499 S.W.2d 770, 777(17- 19) (Mo.1973). The covenant of the employment contract limited noncompetition to a sixty mile radius of Butler for a period of five years. There was testimony by Dr. Long and Gayle Cook, who had worked at the clinic for eighteen years, that patients came from as far as sixty miles away. And both Willman and Allain, supra, upheld five year restrictions on employments for the practice of medicine. Thus, as a matter of evidence, the covenant was proven to...