Mercy Health Servs. Inc. v. Efstratiadis

• Decision Date: 12 January 2022
• Docket Number: 21-CV-4052-CJW-KEM
• Citation: Mercy Health Servs. Inc. v. Efstratiadis, 579 F.Supp.3d 1096 (N.D. Iowa 2022)
• Parties: MERCY HEALTH SERVICES-INC., Mercy Health Services-Iowa, Corp., d/b/a MercyOne Siouxland Medical Center, Plaintiffs, v. Stilianos EFSTRATIADIS, M.D., Defendant.
• Court: U.S. District Court — Northern District of Iowa

579 F.Supp.3d 1096

MERCY HEALTH SERVICES-INC., Mercy Health Services-Iowa, Corp., d/b/a MercyOne Siouxland Medical Center, Plaintiffs,

v.Stilianos EFSTRATIADIS, M.D., Defendant.

No. 21-CV-4052-CJW-KEM

United States District Court, N.D. Iowa, Western Division.

Signed January 12, 2022

Michael R. Reck, Kelsey J. Knowles, Christopher J. Jessen, Belin McCormick PC, Des Moines, IA, for Plaintiffs.

Sander J. Morehead, Woods Fuller Schutlz & Smith PC, Sioux Falls, SD, Stanley E. Munger, Munger Reinschmidt & Denne LLP, Sioux City, IA, for Defendant.

MEMORANDUM OPINION AND ORDER

C.J. Williams, United States District Judge

TABLE OF CONTENTS

I. BACKGROUND...1101

II.PRELIMINARY INJUNCTIONSTANDARD...1102

III. ANALYSIS...1103

A.IrreparableHarm...1103

1. Arguments...1103

2.ApplicableLaw...1104

3. Analysis...1104

a. Goodwill...1104

b. Reputation...1106

c. MoneyDamages...1107

B.Likelihood of Success on the Merits...1108

1. Arguments...1108

2.ApplicableLaw...1109

3. Analysis...1110

a. PatientInducement...1110

b. NoncompeteClause...1111

c. EquitableEstoppel...1113

C.Balance of Harms...1114

1. Arguments...1114

2.ApplicableLaw...1114

3. Analysis...1114

D.PublicInterest...1116

1. Arguments...1116

2.ApplicableLaw...1117

3. Analysis...1117

IV. CONCLUSION...1118

This matter is before the Court on plaintiffs’ Motion for Preliminary Injunction.(Doc. 4).The Court held oral argument on December 20, 2021.(Doc. 21).On December 22, 2021, the Court granted plaintiffs’ Motion for Preliminary Injunction, doing so in an abbreviated order in the interest of justice.(Doc. 22).The Court writes now to provide more detailed reasoning of its decision.

I.BACKGROUND

The Court's factual findings are based on plaintiffs’ complaint and the parties’ sworn declarations and exhibits submitted in support of their positions.The Court's factual findings here are provisional and not binding in future proceedings.SeeUniv. of Tex. v. Camenisch , 451 U.S. 390, 395, 101 S.Ct. 1830, 68 L.Ed.2d 175(1981)("[F]indings of fact and conclusions of law made by a court granting a preliminary injunction are not binding at trial on the merits.");SEC v. Zahareas , 272 F.3d 1102, 1105(8th Cir.2001)(same).Affidavits submitted at the preliminary injunction phase need not meet the requirements of affidavits under Rule 56(c)(4), but courts may consider the "competence, personal knowledge and credibility of the affiant" in determining the weight to give the evidence.Bracco v. Lackner , 462 F. Supp. 436, 442 n.3(N.D. Cal.1978)(citing11A CHARLES ALAN WRIGHT & ARTHURR. MILLER , FEDERAL PRACTICE AND PROCEDURE § 2949 ).The Court will discuss additional facts as they become relevant to the Court's analysis.

On January 31, 2019, Stilianos Efstratiadis("defendant") entered into an employment contract ("Employment Agreement") with Mercy Medical Services ("the Mercy Clinic"), which the Employment Agreement referred to as "Employer."(Docs. 1, at 2;1-1, at 1).Per the Employment Agreement, defendant was to provide cardiology clinic services as an Interventional Cardiology Specialist at the Mercy Clinic, where he would also serve as the head of cardiology.(Doc. 1, at 2–3).The Mercy Clinic is located at the MercyOne Siouxland Medical Center, the operating name of Mercy Health Services-Iowa ("MercyOne" or "Hospital").(Id. , at 1–2).Thus, defendant's primary practice location was at the Hospital on 801 Fifth Street, Sioux City, Iowa 51101.(Id. , at 4).When Mercy Clinic patients require hospital procedures, clinicians refer them to the Hospital.(SeeDocs. 17, at 18, 20;20, at 4); (see alsoDoc. 1-1, at (Employment Agreement, Article I. Physician Duties, Section C. Mandatory Referrals and Exceptions)).Still, the Employment Agreement expressly provides that it has no intended beneficiaries.(Doc. 1-1, at 11(Employment Agreement, Article XIII.Miscellaneous, Section G. Enforceability)).

The Employment Agreement contains a Covenants section that enumerates future actions defendant agreed not to take in exchange for his employment at the Mercy Clinic.(Doc. 1-1, at 9).Among others, the Covenants provisions include: (1) an agreement not to induce Mercy Clinic employees to leave their employment with the Mercy Clinic; (2) an agreement not to induce Mercy Clinic patients to discontinue services from the Mercy Clinic; and (3) an agreement not to compete ("noncompete clause") with the Mercy Clinic by "engag[ing] in a similar position within [the Mercy Clinic's] service area, as defined in Addendum F, without the express written consent of [the Mercy Clinic]."(Id. ).Each of these covenants lasted for twelve months after the Employment Agreement's term.(Id. ).Addendum F defined the noncompete clause's service area to extend forty miles, as the crow flies, from the physician's primary practice location.(Id. , at 26).Thus, for defendant, the service area extended forty miles from the Hospital.(SeeDocs. 1, at 3–4;1-1, at 11).

After hiring defendant, the Mercy Clinic spent significant resources building defendant's practice and advertising his services in the community, including using defendant's photo on advertising billboards and introducing defendant to local primary care providers.(Doc. 1, at 4).Specifically, the Mercy Clinic spent nearly $80,000 to market defendant's practice over two-and-a-half years.(Docs. 6-2, at 1–2;20-1, at 17).

On July 15, 2021, the Mercy Clinic terminated defendant's employment without cause, as permitted by the Employment Agreement.(Docs. 1, at 4; 1-1. at 8(Employment Agreement, Article C. Termination, Section 1. Termination.);6, at 6 n.2).Defendant's last day of employment was November 13, 2021.(Doc. 1, at 4).In effect, November 13, 2021 was the final day of the Employment Agreement's term.(SeeDoc. 1-1, at 8).

After being terminated, defendant secured a space 0.4 miles from the Hospital to use as a private cardiology practice.(Doc. 6, at 8).He set up phone lines and computer equipment to service this practice, and engaged a billing company.(Id. ).He also told other doctors at the Hospital that he would be continuing his practice and that they should call him for patients.(Id. ).¹On November 15, 2021, defendant opened his clinic.(Doc. 17, at 37).

Defendant now solicits patients in Sioux City, using both billboards and mailers.Defendant uses a billboard to advertise his cardiology services and share that he is accepting new patients within the Service Area.(Doc. 1, at 5).Defendant first advertised via billboard during his employment term, but agreed to remove that billboard.(Id. ).But defendant later advertised using "an essentially identical billboard" in another location within the Service Area.(Docs. 1, at 5; 1-2; 1-3).Defendant's photograph, the billboard's feature image, is a photograph that the Mercy Clinic secured and used to advertise him as the head of its cardiology services.(Docs. 1, at 5; 1-2; 1-3).Defendant has also sent mailers solicitating "follow up appointments" to "continue" cardiology services for his "existing patients."(Doc. 20-1, at 2).

On November 19, 2021, MercyOne and the Mercy Clinic (collectively, "plaintiffs") sued defendant for breach of contract and breach of fiduciary duties.(Doc. 1).As part of the proposed relief on their breach of contract claim, plaintiffs requested that the Court issue an injunction enjoining defendant from violating the Employment Agreement.(Id. , at 6).On November 24, 2021, plaintiffs moved for a preliminary injunction.(Doc. 4).Plaintiffs requested that the Court(1) enjoin defendant from soliciting patients, and (2) enjoin defendant from competing with them by offering cardiology clinic services within forty miles of the Mercy Clinic.(Id. , at 3–4).

II.PRELIMINARY INJUNCTION STANDARD

The requirements for a preliminary injunction are well established:

When determining whether to issue a preliminary injunction, the district court should consider "(1) the threat of irreparable harm to the movant; (2)the state of balance between this harm and the injury that granting the injunction will inflict on other party litigants; (3) the probability that movant will succeed on the merits; and (4) the public interest."

Jet Midwest Int'l Co., Ltd. v. Jet Midwest Grp., LLC , 953 F.3d 1041, 1044(8th Cir.2020) (quoting

Dataphase Sys., Inc. v. C L Sys., Inc. , 640 F.2d 109, 114(8th Cir.1981)(en banc)).The movant bears the burden of establishing the propriety of a preliminary injunction.Goff v. Harper , 60 F.3d 518, 520(8th Cir.1995)."[A] preliminary injunction is an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing , carries the burden of persuasion."Mazurek v. Armstrong , 520 U.S. 968, 972, 117 S.Ct. 1865, 138 L.Ed.2d 162(1997)(emphasis original)(quoting11A CHARLES ALAN WRIGHT & ARTHURR. MILLER , FEDERAL PRACTICE AND PROCEDURE § 2948 (2d ed. 1995) )."[T]he burden on the movant is heavy, in particular where ... ‘granting the preliminary injunction will give [the movant] substantially the relief it would obtain after a trial on the merits.’ "United Indus. Corp. v. Clorox Co. , 140 F.3d 1175, 1179(8th Cir.1998)(second alteration in original)(quotingSanborn Mfg. Co. v. Campbell Hausfeld/Scott Fetzer Co. , 997 F.2d 484, 486(8th Cir.1993) ).

III.ANALYSIS

Before beginning its analysis, the Court must address defendant's argument that MercyOne is an inappropriate plaintiff.(Doc. 17, at 6).The Court's order focuses on plaintiff the Mercy Clinic, an undisputed party to defendant's employment contract Employment Agreement.The Court finds that it need not decide at this stage of the litigation whether MercyOne is a proper party to this suit, nor need it decide whether MercyOne will suffer damages, irreparably or otherwise, if the Court does not enter a preliminary injunction.As described below, the Court finds that the Mercy Clinic demonstrates a need for a preliminary injunction.SeeDataphase , 640 F.2d at 114.

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