Washington County Memorial Hosp. v. Sidebottom

• Decision Date: 23 November 1999
• Citation: Washington County Memorial Hosp. v. Sidebottom, 7 S.W.3d 542 (Mo. App. 1999)
• Parties: (Mo.App. E.D. 1999) . Washington County Memorial Hospital, Respondent, v. Janet Sidebottom, Appellant. Case Number: ED75301 Missouri Court of Appeals Eastern District Handdown Date:
• Court: Missouri Court of Appeals

7 S.W.3d 542 (Mo.App. E.D. 1999)

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.

Washington County Memorial Hospital, Respondent, v. Janet Sidebottom, Appellant.

Case Number: ED75301

Missouri Court of Appeals Eastern District

Handdown Date: 11/23/99

Appeal From: Circuit Court of Washington County, Hon. James Harrison Kelly

Counsel for Appellant: Michael W. Silvey

Counsel for Respondent: Mark T. Keaney

Opinion Summary: Janet Sidebottom ("Appellant") appeals from a Permanent Injunction and Final Judgment and Order granting Respondent Washington County Memorial Hospital ("Respondent") specific enforcement of a non-competition clause contained in Appellant's employment agreement.

AFFIRMED.

Division Two holds: (1) The non-competition clause was reasonably necessary to protect Respondent's interest in its patient base. (2) Respondent did not breach Appellant's employment agreement prior to Appellant's resignation.

Opinion Author: Sherri B. Sullivan, Judge

Opinion Vote: AFFIRMED. Ahrens, J. and Russell, C.J., concur.

Opinion:

Janet Sidebottom ("Appellant") appeals from a Permanent Injunction and Final Judgment and Order granting Respondent Washington County Memorial Hospital ("Respondent") specific enforcement of a non-competition clause contained in Appellant's employment agreement. Appellant argues that the circuit court erred by enforcing the non-competition clause because: (1) there was no threat of significant patient loss to Respondent from Appellant's employment in the non-compete region because Respondent is located in a medically underserved area and Appellant had agreed not to treat any of Respondent's patients; and (2) Respondent had breached Appellant's employment agreement prior to Appellant's resignation by unilaterally amending the agreement without review or negotiation. We affirm.¹

Respondent employed Appellant as a nurse practitioner from October 1993 through April 1998. Respondent is a not-for-profit hospital located in a medically underserved area, an area where the ratio of patients to physicians is abnormally high.

Prior to beginning her employment, Appellant entered into an employment agreement with Respondent. The agreement included a non-competition clause providing in part that Appellant "... during the term of [the] Agreement and for a period of one (1) year after the termination of her employment with [Respondent] ... will not, anywhere within a fifty (50) mile radius of [Respondent], directly or indirectly engage in the practice of nursing ... without the express direction or consent of [Respondent]."

In February 1994, Appellant acknowledged the existence of this clause when she requested Respondent's permission to work for the Washington County Health Department doing pre-natal nursing care. Because Respondent was not then doing pre-natal care, Respondent gave her permission to accept that employment, but reserved the ability to withdraw the permission if the services Appellant was providing later came to be provided by Respondent.

In January 1996, Appellant and Respondent entered into a second employment agreement that continued the parties' employment relationship through January 9, 1998. This agreement included a non-competition clause identical to the 1993 employment agreement. It also provided for automatic renewal for an additional two years, unless written termination notice was given by either party no less than ninety days prior to the expiration of the agreement.

The 1996 employment agreement also provided for compensation adjustments as follows:

"By each anniversary of this Agreement, compensation shall be reviewed by the parties hereto. The parties hereto agree to negotiate in good faith to adjust said compensation consistent with hospital policy."

Prior to the anniversary date of the 1996 employment agreement, Appellant had some informal discussions regarding her compensation adjustment with Respondent's Administrator, William Schwarten ("Schwarten"). These discussions were interrupted by Schwarten's death in October 1997. Subsequently, an administrative committee, headed by Donald Litton ("Litton"), was appointed to operate the hospital. No further discussions between Appellant and Respondent regarding Appellant's compensation adjustment occurred until January 1998.

On January 15, 1998, Appellant's paycheck reflected a three percent salary increase. Around that same time, Appellant contacted Litton to indicate her desire to meet and to discuss her compensation adjustment. Litton met with Appellant on January 22. At that meeting, Litton provided Appellant with a written amendment to her employment contract that included a three percent salary increase. He told her that three percent was the maximum raise that could be given to her under Respondent's current policy of a three percent salary increase cap for all salaried employees. Appellant explained to Litton why she thought three percent was an unfair raise for her. Nonetheless, Appellant signed the amendment on January 30, 1998.

On March 11, 1998, Appellant gave Respondent written notice of her resignation effective April 15. On April 16, 1998, Appellant began working as a nurse practitioner with Dr. David Mullen ("Mullen"), at his office in St. Francois County. The office is within fifty miles from Respondent. Appellant ceased working with Mullen on May 11, 1998, due to a temporary restraining order issued by the Circuit Court of Washington County. The court granted a preliminary injunction on June 1. On October 16, 1998, the court entered a Permanent Injunction and Final Judgment and Order prohibiting Appellant from practicing nursing within a fifty mile radius of Respondent for a period of one year from April 15, 1998.

This Court will affirm an injunction unless it is unsupported by substantial evidence, it is against the weight of the evidence, or it erroneously declares or applies the law. 44 Plaza, Inc. v. Gray-Pac Land Co., 845 S.W.2d 576, 578 (Mo.App. E.D. 1992). In reviewing a court-tried case, we accept the evidence and inferences favorable to the prevailing party and disregard all contrary evidence. Mullenix-St.Charles Properties, L.P. v. City of St. Charles, 983 S.W.2d 550, 555 (Mo.App. E.D. 1998). Because the circuit judge is in a superior position to assess credibility, deference is given to the circuit court's findings of fact, however, an independent evaluation of conclusions of law is made. Id.

Appellant's point one on appeal contends that the circuit court erred by enforcing the non-competition clause contained in Appellant's employment agreement because there was no threat of significant patient loss to Respondent from Appellant's employment in the non-compete region because Respondent is located in a medically underserved area and Appellant had agreed not to treat any of Respondent's patients.

Generally, because a covenant not to compete is considered to be a restraint on trade, specific enforcement of such a covenant requires the covenant to be reasonable. Easy Returns Midwest, Inc. v. Schultz, 964 S.W.2d 450, 453 (Mo.App. E.D. 1998). The burden of demonstrating the covenant's validity is on the party seeking to enforce it. Id. First, the covenant must be reasonable in scope as to geography and time. Id. Appellant does not debate this aspect of the non-competition clause in her employment agreement. Second, the covenant must be reasonably necessary to protect certain narrowly defined and well-recognized employer interests. Id.

Respondent's interest lies in protecting its patient base, as income from patient billings constitutes its primary source of revenue. A patient base is a protectable interest under covenants not to compete. See Ballesteros v. Johnson, 812 S.W.2d 217, 222-223 (Mo.App. E.D. 1991). Further, the specific enforcement of Appellant's non-competition clause is reasonably necessary to protect Respondent's interest. Actual damage need not be proven to enforce a covenant not to compete. Ashland Oil, Inc. v. Tucker, 768 S.W.2d 595, 601 (Mo.App. E.D. 1989). Rather, the employee's opportunity to influence customers justifies enforcement of the covenant. Id. Thus, the quality, frequency, and duration of an employee's exposure to an employer's customers are crucial in determining the covenant's reasonableness. Easy Returns Midwest, Inc., 964 S.W.2d at 453.

Appellant had the opportunity to influence Respondent's patients. Prior to her employment with Respondent, Appellant had never worked in Washington County nor did she have a patient base there. Appellant helped to establish two rural health care clinics for Respondent, one of which she managed for her first year of employment. During her almost five years of employment with Respondent, Appellant saw over 3000 patients. Pursuant to a collaborative practice agreement with a physician, Appellant treated patients, diagnosed illnesses and injuries, prescribed and dispensed medications (excluding narcotics), and ordered and interpreted laboratory tests. Appellant got to know the patients and families to whom she provided these services. At the clinic, she had her own phone number, receptionist, appointment book, medical...