Silvers, Asher, Sher & McLaren, M.D.s., v. Batchu, M.D.

• Decision Date: 18 April 2000
• Citation: Silvers, Asher, Sher & McLaren, M.D.s., v. Batchu, M.D., 16 S.W.3d 340 (Mo. App. 2000)
• Court: Missouri Court of Appeals
• Parties: (Mo.App. W.D. 2000) Silvers, Asher, Sher & McLaren, M.D.s Neurology PC, Respondents v. Sudhir Batchu, M.D., Appellant. WD57066 0

16 S.W.3d 340 (Mo.App. W.D. 2000)

Silvers, Asher, Sher & McLaren, M.D.s Neurology PC, Respondents v. Sudhir Batchu, M.D., Appellant.

WD57066

Missouri Court of Appeals Western District

04/18/2000

Appeal From: Circuit Court of Boone County, Hon. Ellen S. Roper

Counsel for Appellant: Stephen F. Gaunt

Counsel for Respondent: Susan Ford Robertson

Opinion Summary: The physician joined a group medical practice pursuant to an employment contract containing a restrictive covenant which, upon termination, prohibited medical practice within a 75-mile radius for two years. The physician employee violated the terms of his employment contract and was terminated three months after joining the practice. Within one month, the physician opened an office within three miles of his prior employer and contacted other physicians for referrals. The medical practice sought an injunction to enforce the restrictive covenant. Following the grant of a preliminary injunction, the case was tried. The trial court ruled in the employer's favor, and the physician appealed.

Division Three holds: (1) The restrictive covenant was reasonable in both time and geographic limitations given the highly technical nature of the field, the fact that the employer had a protectible interest in its patient base, that physician employee had referred patients from group practice to his personal practice, and that the covenant was designed to prohibit precisely such practices.

(2) Restrictive covenants are not contrary to public policy in Missouri. If the covenant is otherwise reasonable, courts will protect the asset of stock of customers and good will against appropriation by an employee.

(3) Enforcement of a non-compete clause from the date of issuance of preliminary injunction is not inequitable where the former employee violated the terms of the clause prior to the issuance of the preliminary injunction.

Joseph M. Ellis, Judge

Sudhir Batchu, M.D., appeals from the judgment of the Circuit Court of Boone County in favor of Neurology, Inc.¹ on its claim of breach of contract for violation of the restrictive covenants of Dr. Batchu's employment contract.

On April 7, 1997, Sudhir Batchu, M.D., entered into a contract of employment with Neurology, Inc. (Neurology), a group medical practice consisting of four shareholder physicians, in Columbia, Missouri. During the six years prior to accepting employment with Neurology, Dr. Batchu had worked at several hospitals in the Columbia area in conjunction with his training. He had previously approached Neurology for employment on two separate occasions, but the group had no need for another physician at those times. In early 1997, two weeks prior to being contacted by Neurology, Batchu began a private practice in neurology in Columbia, treating approximately three to eight patients one day per week. At approximately the same time, Neurology approached Dr. Batchu and offered him a position with the practice. Batchu began working at Neurology on a full-time basis on July 1, 1997.

At the time Dr. Batchu entered into the employment agreement with Neurology, he also had an existing employment contract with Phelps County Regional Medical Center in Rolla, Missouri (Phelps). As a member of the hospital staff, Dr. Batchu ran the hospital's neurology clinic. He advised Neurology that his contract with Phelps could be terminated with one month's notice. However, Phelps refused to accept Dr. Batchu's resignation, and renegotiated his contract to run through August 15, 1997. During July and August of 1997, Dr. Batchu continued to fulfill his obligations at Phelps until a replacement could be found, which ultimately occurred in September, 1997. Throughout that time, he remained under contract with Phelps as a full-time staff neurologist, where he was required to be available at least 32 hours per week. Phelps ultimately determined that Dr. Batchu had performed 40% of his employment obligations during July and August, 1997, and he was paid 40% of his full-time salary. Dr. Batchu contested the Phelps' determination and contended that he provided more than 40% of his duties during that time. The neurology clinic at Phelps closed permanently in August, 1997.

Two weeks after signing the employment agreement with Neurology, and without the knowledge of any of its shareholders, Dr. Batchu became a shareholder in a corporation known as Mid-Missouri Health Systems (Mid-Missouri).² He testified that he was in negotiations with Mid-Missouri as far back as November, 1996. On behalf of Mid-Missouri, Dr. Batchu set up a neurology clinic in Rolla which saw patients from the former Phelps neurology clinic. The Mid-Missouri clinic began operation on August 15, 1997. Dr. Batchu testified that his intent was to have a physician partner work at the clinic on a full-time basis, while he helped out when needed, such as on call, weekends and consults. However, no other physician was in place until mid-September, 1997. In the meantime, Dr. Batchu continued to work, on a contractual basis and through Mid-Missouri, for Phelps as their only neurologist, beginning August 15, 1997. He testified that between August 15, 1997 and September 26, 1997, he treated between one hundred fifty and two hundred patients at the Rolla clinic. Beginning sometime in September, 1997, another neurologist, Dr. Wazzan, joined Mid-Missouri in the Rolla clinic to assist Dr. Batchu.

When he began working at Neurology on July 1, 1997, Dr. Batchu informed the shareholders that temporary obligations in Rolla would require him to fill in on an "emergency basis only" until a replacement physician could be found. Upon learning that Dr. Batchu was continuing to conduct a full-time practice in Rolla, the shareholders informed him that he was in violation of his contract of employment, which stated, in pertinent part:

3. SERVICES: Employee agrees to devote substantially his entire time and attention to the practice of medicine for the corporation. The expenditure of reasonable amounts of time for teaching, personal or outside business, charitable and professional activities shall not be deemed a breach of this Agreement provided such activities do not materially interfere with the services required to be rendered to Employee hereunder. The Employee shall not, without the express prior written consent of Employer, directly or indirectly during the term of this Agreement or for a period of twenty-four (24) months thereafter as more particularly detailed in Paragraph 13 of this Agreement, render services of a professional nature to or for any person or firm for compensation, or engage in any activity competitive with and adverse to Employer's business or practice, whether alone, as a partner or as an officer, director, employee or shareholder of any other corporation or as a trustee, fiduciary or other representative of any activity. The making of passive and personal investments and the conduct of private business affairs shall not be prohibited hereunder.

At the time the shareholders raised the issue of Dr. Batchu's activities in Rolla, he informed them that he would no longer be involved in practice there. However, Dr. Batchu continued seeing patients in Rolla, and discharged some of Neurology, Inc.'s hospitalized patients with instructions to follow up with him at the Mid-Missouri Rolla clinic. Moreover, Dr. Batchu continued to receive frequent calls from the Rolla clinic, and was repeatedly unavailable when he was supposed to be on call for Neurology. As a result, Dr. Batchu was terminated on September 26, 1997, and paid thirty days' salary.

Approximately one month after being terminated by Neurology, Dr. Batchu opened an office for the practice of neurology in Columbia, approximately two to three miles from Neurology where he saw patients three days per week. On November 21, 1997, Neurology filed a petition in the Circuit Court of Boone County, seeking to permanently enjoin Dr. Batchu from practicing within a 75-mile radius of its office, pursuant to paragraph 13 of the employment contract, which states, inter alia:

13. NON-COMPETITION AGREEMENT: Employee agrees that, should his/her employment with Employer be terminated for any reason whatsoever during the twenty-four (24) month period beginning with the date of the termination of Employee's employment, Employee will not, for himself or herself, on behalf of or for the benefit of any other person, firm, partnership or corporation perform any medical services or engage in the practice of neurology within seventy-five (75) miles of Employer's office located at 500 Keene Street, Columbia, Missouri 65201 on Employee's account, or otherwise solicit, service, refer to handle any medical business or engage in the practice of neurology for any patient of Employer who was a patient of Employer on the date of the termination of physician's Employment with Employer.

Following a hearing on March 18, 1998, the trial court issued a preliminary injunction on April 8, 1998 (effective April 14, 1998) enjoining Dr. Batchu from practicing medicine within a 75-mile radius of Neurology, and requiring Neurology to post a $10,000 bond.

On April 20, 1998, while the preliminary injunction was in place, Dr. Batchu sent a letter to all physicians listed in the Columbia telephone book, informing them that he was no longer seeing patients at Neurology, but that he would see them in other locations. He testified that the purpose of this letter was to obtain physician referrals.

The case was tried to the court on December 4, 1998, February 2, 1999, and February 16, 1999. In its judgment of March 5, 1999, the trial court ruled in favor of Neurology and ordered Dr. Batchu to pay damages in the amount of $40,000.³ In addition, the trial court issued a permanent injunction in favor of Neurology, restraining Dr. Batchu from providing medical services in neurology within a 75-mile radius of Neurology until April 14, 2000, and from otherwise...