Pittman v. Harbin Clinic Professional Ass'n

• Decision Date: 19 October 1993
• Docket Number: A93A1526 and A93A1528,Nos. A93A1525,A93A1527,s. A93A1525
• Citation: 210 Ga.App. 767,437 S.E.2d 619
• Parties: , 1994-1 Trade Cases P 70,498 PITTMAN et al. v. HARBIN CLINIC PROFESSIONAL ASSOCIATION. HARBIN CLINIC PROFESSIONAL ASSOCIATION v. PITTMAN et al. HARBIN CLINIC PROFESSIONAL ASSOCIATION v. NAGUSZEWSKI et al. NAGUSZEWSKI et al. v. HARBIN CLINIC PROFESSIONAL ASSOCIATION.
• Court: Georgia Court of Appeals

Page 619

437 S.E.2d 619

210 Ga.App. 767, 1994-1 Trade Cases P 70,498

PITTMAN et al. v. HARBIN CLINIC PROFESSIONAL ASSOCIATION.

HARBIN CLINIC PROFESSIONAL ASSOCIATION v. PITTMAN et al.

HARBIN CLINIC PROFESSIONAL ASSOCIATION v. NAGUSZEWSKI et al.

NAGUSZEWSKI et al. v. HARBIN CLINIC PROFESSIONAL ASSOCIATION.

Nos. A93A1525, A93A1527, A93A1526 and A93A1528.

Court of Appeals of Georgia.

Oct. 19, 1993.

Reconsideration Denied Nov. 4, 1993.

Certiorari Denied Jan. 27 and 28, 1994.

Cook & Palmour, Bobby Lee Cook, Jr., Summerville, and Gambrell & Stolz, Irwin W. Stolz, Jr., and Seaton D. Purdom, Atlanta, for Pittman and Naguszewski.

Brinson, Askew, Berry, Seigler, Richardson & Davis, C. King Askew and Mark M.J. Webb, Rome, for Harbin Clinic Professional Ass'n.

SMITH, Judge.

Neurosurgeons Harris Pittman, Dennis Murphy, and Carl Herring, and neurologists Robert and William Naguszewski brought an action against their former employer, the Harbin Clinic Professional Association, seeking a declaration that the covenants in their respective employment contracts restricting them from competing with the clinic after leaving its employ were unenforceable. The clinic answered and counterclaimed, seeking to enjoin the doctors from establishing their new practices in the Rome, Georgia, area in violation of the covenants in their contracts. The trial court found the restrictive covenants in the contracts of Drs. Pittman and Murphy valid and enforceable, and those in the contracts of Dr. Herring and both Drs. Naguszewski void and unenforceable. In Case No. A93A1525, Drs. Pittman and Murphy appeal from the trial court's order finding the covenants in their contracts valid and enforceable and enjoining them from practicing in the Rome area. In Case No. A93A1526, the Harbin Clinic appeals from the trial court's order finding the covenants in the contracts of Dr. Herring and the Drs. Naguszewski void and unenforceable and refusing to enjoin the doctors from practicing in the Rome area. Case Nos. A93A1527 and A93A1528 are the cross-appeals filed by the appellees to each direct appeal. The cases have been consolidated for review in this opinion.

We note initially that these appeals were filed originally in the Supreme Court, which transferred them to this court, 263 Ga. 66, 428 S.E.2d 328. Although nominally involving injunctions, no substantive issues of equity are involved in these appeals. Resolution of the appeals turns instead on the question of the validity and enforceability of the contract provisions restricting competition, which is a question of law. See Roberts v. Tifton Med. Clinic, 206 Ga.App. 612, 426 S.E.2d 188 (1992).

The record reveals that the Harbin Clinic Professional Association employs approximately 50 doctors, including general practitioners and medical specialists. While employed at the clinic, Drs. Pittman and Murphy were shareholders in the professional association, while Dr. Herring and the Drs. Naguszewski were not. The employment contracts of Drs. Pittman and Murphy were those entered into only by physicians who had worked for the clinic for at least two years and had been invited to join the clinic permanently and purchase stock, which the association agreed to repurchase in the event of termination of the employment relationship.

All the plaintiff doctors were recruited to the clinic from outside the Rome area and none brought patients with them. Each left employment at the clinic through voluntary resignation, not through termination by the association. They resigned on various dates over a period of several months and began a new practice together in Rome. Their resignations left one physician in the neurosurgery department at the clinic.

In Georgia, it has long been the law that non-competition clauses in physicians' employment contracts do not per se violate the state's public policy. Like such clauses in other employment contracts, if they are sufficiently limited and are reasonable, considering the interest to be protected and the effects on both parties to the contract, they will be upheld. See Rash v. Toccoa Clinic Med. Assoc., 253 Ga. 322, 323-324(1), 320 S.E.2d 170 (1984). In determining reasonableness, a three-part test is applied, examining duration, territorial coverage, and the scope of the prohibited activity, see W.R. Grace & Co. v. Mouyal, 262 Ga. 464, 465(1), 422 S.E.2d 529 (1992), not as an arbitrary rule, but as "a helpful tool in examining the reasonableness of the particular factual setting to which it is applied." Watson v. Waffle House, 253 Ga. 671, 673(2), 324 S.E.2d 175 (1985).

1. In Case No. A93A1525, the covenants in issue prohibit Drs. Pittman and Murphy from "practicing medicine" within a 30-mile radius of the clinic's location in Rome, Georgia, for a period of one year after leaving employment at the clinic. They also provide for waiver of this restriction, upon payment by the employee doctor of a sum certain, calculated in a method set forth in the contract. Applying the three-element test, the trial court found that all three elements of the restriction in the contracts of Drs. Pittman and Murphy were reasonable and that the restrictions were therefore enforceable. Drs. Pittman and Murphy contend this ruling was erroneous.

We affirm. The one-year limitation is patently reasonable. Limitations of one year and greater have been held to be reasonable. See, e.g., Rash, supra; Carroll v. Harris, 243 Ga. 34, 252 S.E.2d 461 (1979). We reject, as did the trial court, the argument made by Drs. Pittman and Murphy that the scope of the activity prohibited is overbroad because it encompasses such activities as telephonic communication from outside the prohibited area with patients or colleagues within it. Reading the covenants as a whole, it is clear that their plain meaning prohibits only the establishment of an office and hospital practice within the protected area. See Rash, supra, 253 Ga. at 326-327(4), 320 S.E.2d 170; McMurray v. Bateman, 221 Ga. 240, 254-255(3), 144 S.E.2d 345 (1965). As to geographical limitation, the contract itself sets forth the counties, both in Georgia and neighboring states, from which the clinic draws its patients. The trial court found that the counties listed are all within a 30-mile radius of the clinic location and that consequently, a covenant not to compete within a 30-mile radius is reasonable to protect the clinic.

In Rash, supra, 253 Ga. at 325-326(2), 320 S.E.2d 170, the Supreme Court also examined the respective bargaining positions of the parties and whether the restrictive covenants in issue worked a mutual, rather than a unilateral, advantage. Consideration of these factors draws into sharp focus the differences between professional partnership agreements and employment contracts generally. It weighs in favor of the enforceability of restrictive covenants in the former, and against their enforceability in the latter. The trial court correctly considered and applied this portion of the Rash analysis. The contracts of Drs. Pittman and Murphy are denominated employment contracts. These doctors, however, were shareholders in the P.A., and when they executed the agreements, they not only committed themselves to the restrictions but also derived a benefit by exacting the same restrictions from the approximately 35 other physician shareholders who executed identical contracts. The covenants obviously provided...