Mohanty v. St. John Heart Clinic, S.C.

Citation225 Ill.2d 52,866 N.E.2d 85
Decision Date21 December 2006
Docket NumberNo. 101251.,101251.
PartiesJyoti MOHANTY, M.D., et al., Appellants, v. ST. JOHN HEART CLINIC, S.C., et al., Appellees.
CourtSupreme Court of Illinois

Edward T. Joyce, Lori A. Reilly, Rowena T. Parma, Chicago, for appellants.

Diane M. Kehl, Frederic T. Knape, Jeffery M. Heftman, Richard H. Sanders, of Vedder, Price, Kaufman & Kammholz, P.C., Chicago, for appellees.

OPINION

Justice BURKE delivered the judgment of the court, with opinion:

Dr. Jyoti Mohanty and Dr. Raghu Ramadurai (plaintiffs) appeal the judgment of the appellate court reversing the circuit court of Cook County's denial of a preliminary injunction to St. John Heart Clinic and its owner, Dr. John Monteverde (defendants), to enforce the restrictive covenants contained in their medical practice employment contracts. 358 Ill.App.3d 902, 295 Ill.Dec. 490, 832 N.E.2d 940. Plaintiffs, in opposition to the injunction, ask this court to declare restrictive covenants in medical practice cases void as against public policy. In the alternative, plaintiffs argue that the restrictive covenants contained in their employment contracts are not enforceable because the restrictions are unreasonably overbroad in time and activity, or because the defendants materially breached the employment contracts, thereby discharging plaintiffs from their obligations under the contract.

For the reasons stated below, we affirm the judgment of the appellate court and remand for further proceedings consistent with this opinion.

BACKGROUND

St. John Heart Clinic (the Clinic) is an Illinois professional medical corporation founded by Dr. John Monteverde in 1978. Dr. Monteverde is board certified in internal medicine and cardiology and the sole shareholder and owner of the Clinic, which has two offices in Chicago, one at St. Mary of Nazareth Hospital and one at Norwegian American Hospital. Dr. Monteverde also has privileges at St. Elizabeth and Sacred Heart hospitals in Chicago and has practiced at these hospitals since 1978.

Dr. Ramadurai began working at the Clinic in 1989 as an independent contractor. At that time, Dr. Ramadurai was not board certified in cardiology. Thus, initially, Dr. Ramadurai worked under the direction and supervision of Dr. Monteverde. In 1993, Dr. Ramadurai became an employee of the Clinic. The employment contract he signed provided that he would receive an annual salary of 50% of his gross receipts.1 In addition, the contract contained a "non-compete" clause, or restrictive covenant, which provided that, upon termination, Dr. Ramadurai "shall not" practice medicine within a two-mile radius of any Clinic office or at any of the four hospitals where the Clinic operated, i.e., St. Mary of Nazareth, Norwegian American, St. Elizabeth, and Sacred Heart (the restricted hospitals), for a period of three years.

Dr. Mohanty joined the Clinic in July 2000 after he completed training in nuclear cardiology at Cook County Hospital. When Dr. Mohanty began his employment with the Clinic he was not yet board certified in cardiology, had no medical practice of his own and no staff privileges at any of the restricted hospitals. Pursuant to his employment contract, Dr. Mohanty received an annual salary of 50% of his gross receipts, with a guaranteed minimum of $160,000.2 The contract also contained a restrictive covenant, similar to the one in Dr. Ramadurai's contract, which provided that, upon termination of the agreement, Dr. Mohanty "shall not" practice medicine within a five-mile radius of any Clinic office or at any of the four restricted hospitals for a period of five years.

On March 12, 2003, Drs. Mohanty and Ramadurai sent letters to Dr. Monteverde, serving him with notice of their intention to terminate their employment with the Clinic after 120 days, in accordance with their employment contracts. In their letters, Drs. Mohanty and Ramadurai stated that they were terminating their employment because Dr. Monteverde breached their employment contracts by refusing to give them partnership interests in the Clinic and because Dr. Monteverde was billing under his name for patients they saw, which caused them to be shortchanged on their bonuses.

In May 2003, prior to leaving the Clinic, Drs. Mohanty and Ramadurai filed complaints for declaratory relief in the circuit court of Cook County. In the complaints, they alleged that the restrictive covenants in their employment contracts should be declared void as against public policy and unenforceable because Monteverde breached their employment agreements by various means, including refusing to give them partnership interests in the Clinic and billing improperly which caused them to receive less compensation than they were due. Dr. Mohanty's complaint further alleged that the restrictive covenant in his employment agreement was invalid because "the duration of the restrictive covenant, that is five (5) years, and its geographical limits, that is five (5) miles, are unnecessary to protect the economic or business interest of either St. John or Dr. Monteverde and therefore are excessive, unjust, unreasonable, unlawful, and unenforceable." The plaintiffs' declaratory actions were later consolidated by order of the court.

Defendants answered the complaints, denying all of plaintiffs' claims. Defendants averred that no promises had been made to either Dr. Mohanty or Dr. Ramadurai concerning a partnership interest in the Clinic. Moreover, defendants contended that, even if oral promises had been made, the failure to keep such promises would not constitute a breach of the employment contract. Defendants also denied that its billing practices were unethical, unprofessional or improper. Defendants then filed a countercomplaint for declaratory, injunctive and other relief against the plaintiffs. In addition to seeking preliminary and permanent injunctions to restrain Drs. Mohanty and Ramadurai from violating the restrictive covenants in their contracts, the countercomplaint raised claims of misappropriation and unjust enrichment and sought a declaration regarding the Clinic's responsibility for providing medical malpractice "tail coverage." Defendants also filed an emergency motion for a temporary restraining order (TRO) and preliminary injunction to immediately enjoin the plaintiffs from further violating the restrictive covenants in their employment contracts.3

The trial court granted defendants a TRO, which was later amended to permit Drs. Ramadurai and Mohanty, for a limited time, to provide critical care to their hospitalized patients. The trial court also required defendants to post a $100,000 surety bond. The matter was then set for hearing on whether defendants were entitled to a preliminary injunction.

Plaintiffs filed answers to defendants' countercomplaint and also raised affirmative defenses to defendants' request for injunctive relief, alleging, as they had done in their declaratory judgment actions, that the restrictive covenants were unenforceable. The dates set for hearing on the motion for preliminary injunction were continued from time to time to permit plaintiffs to conduct extensive discovery, particularly with regard to defendants' billing practices. When discovery was completed, plaintiffs filed a "Trial Brief In Opposition To Counter-Plaintiffs' Request For A Preliminary Injunction." In this document, plaintiffs restated their position that defendants were not entitled to injunctive relief because the restrictive covenants were not enforceable. However, plaintiffs' argument now centered on three main points: (1) that they should not be held to the terms of the restrictive covenant in their contracts because defendants materially breached the employment contracts by improperly billing for a certain medical procedure, namely, the myoview test (otherwise referred to as the thallium stress test), which resulted in decreased revenue for plaintiffs; (2) that the restrictive covenants in their contracts were unreasonable because they caused undue hardship to plaintiffs, were injurious to the public, and were excessive in their temporal scope, and because defendants had no protectable business interest in patients who had been referred to plaintiffs from other sources; and (3) that all restrictive covenants in physician contracts should be held void as against public policy in Illinois. With regard to this last point, plaintiffs argued that, even if all restrictive covenants were not void, restrictive covenants should be held void where the employee terminates the contract due to illegal or unethical conduct by the employer, whether or not such conduct amounts to a breach of contract.

In November and December 2003, the trial court held hearings on whether to grant defendants a preliminary injunction. The hearings took place over the course of six days, at which time the court heard the testimony of seven witnesses and received 41 exhibits into evidence. Subsequently, plaintiffs submitted a "Trial Memorandum of Law of the Applicable Medicare Rules and Regulations" as additional support for their claim that defendants had improperly billed Medicare for the myoview test. Both plaintiffs and defendants also submitted, in writing, extensive closing argument.

On February 20, 2004, the trial court entered a ruling, denying defendants' request for preliminary injunctive relief. Stating on the record that it had considered all of the evidence and arguments of the parties, the trial court made the following findings. First, the court rejected plaintiffs' claim that defendants had materially breached the employment contracts. The court held:

"The Court is not satisfied that the evidence adduced at hearing proves by a preponderance that the employment agreements were materially breached."

The trial court then considered whether the restrictive covenants in plaintiffs' contracts were reasonable in geography, time and activity. In this regard, the court...

To continue reading

Request your trial
214 cases
  • Skaf v. Wyo. Cardiopulmonary Servs., P.C.
    • United States
    • United States State Supreme Court of Wyoming
    • September 27, 2021
    ...are no similar Wyoming statutes.[¶29] We look, next, to the Illinois Supreme Court's decision in Mohanty v. St. John Heart Clinic, S.C. , 225 Ill.2d 52, 310 Ill.Dec. 274, 866 N.E.2d 85, 92 (2006). See also Cent. Indiana Podiatry, P.C. v. Krueger , 882 N.E.2d 723, 727–28 (Ind. 2008). In Moha......
  • RLI Ins. Co. v. Nexus Servs. Inc.
    • United States
    • U.S. District Court — Western District of Virginia
    • July 3, 2020
    ......Padove, Pro Hac Vice, John Edward Sebastian, Pro Hac Vice, Watt, Tieder, Hoffar & ... the other party from his contractual obligations." Mohanty v. St. John Heart Clinic, S.C. , 225 Ill.2d 52, 310 ......
  • Skaf v. Wyo. Cardiopulmonary Servs.
    • United States
    • United States State Supreme Court of Wyoming
    • September 27, 2021
    ......-mile radius of Casper, Wyoming, and each outreach clinic. of Employer . [ 1 ] This covenant will apply to ... in Mohanty v. St. John Heart Clinic, S.C. , 866. N.E.2d 85, 92 ......
  • Pampered Chef v. Alexanian
    • United States
    • U.S. District Court — Northern District of Illinois
    • July 14, 2011
    ...are harmful to the general public. Liautaud, 221 F.3d at 987 (collecting Illinois cases). Cf., Mohanty v. St. John Heart Clinic, S.C., 225 Ill.2d 52, 76, 310 Ill.Dec. 274, 866 N.E.2d 85, 98–99 (2006) (“In determining whether a restraint is reasonable, it is necessary to consider whether .........
  • Request a trial to view additional results
3 firm's commentaries
  • Physician Restrictive Covenants — A Delicate Balancing Act
    • United States
    • Mondaq United States
    • January 5, 2012
    ...such restrictions and requires a careful balancing of public and private interests. See, e.g., Mohanty v. St. John Heart Clinic, S.C., 866 N.E.2d 85 (Ill. 2006); Idbeis v. Wichita Surgical Specialists, P.A., 112 P.3d 81, 88 (Kan. 2005); Community Hosp. Group v. More, 183 N.J. 36, 56, 869 A.......
  • Protecting Your Competitive Edge - December 2011
    • United States
    • Mondaq United States
    • January 5, 2012
    ...such restrictions and requires a careful balancing of public and private interests. See, e.g., Mohanty v. St. John Heart Clinic, S.C., 866 N.E.2d 85 (Ill. 2006); Idbeis v. Wichita Surgical Specialists, P.A., 112 P.3d 81, 88 (Kan. 2005); Community Hosp. Group v. More, 183 N.J. 36, 56, 869 A.......
  • Protecting Your Competitive Edge
    • United States
    • Mondaq United States
    • January 9, 2012
    ...such restrictions and requires a careful balancing of public and private interests. See, e.g., Mohanty v. St. John Heart Clinic, S.C., 866 N.E.2d 85 (Ill. 2006); Idbeis v. Wichita Surgical Specialists, P.A., 112 P.3d 81, 88 (Kan. 2005); Community Hosp. Group v. More, 183 N.J. 36, 56, 869 A.......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT