Wausau Medical Center, S.C. v. Asplund

• Citation: 182 Wis.2d 274,514 N.W.2d 34
• Decision Date: 08 February 1994
• Docket Number: Nos. 92-3117,93-0890,s. 92-3117
• Parties: WAUSAU MEDICAL CENTER, S.C., Plaintiff-Appellant, v. Mark W. ASPLUND, M.D. and Mark W. Asplund, M.D., S.C., Defendants-Respondents. (Two Cases
• Court: Court of Appeals of Wisconsin

Page 34

514 N.W.2d 34

182 Wis.2d 274

WAUSAU MEDICAL CENTER, S.C., Plaintiff-Appellant, v. Mark W. ASPLUND, M.D. and Mark W. Asplund, M.D., S.C. Defendants-Respondents. (Two Cases

Nos. 92-3117, 93-0890.

Court of Appeals of Wisconsin.

Submitted on Briefs Dec. 8, 1993.

Opinion Released Feb. 8, 1994.

Opinion Filed Feb. 8, 1994.

Before CANE, P.J., and LaROCQUE and MYSE, JJ.

CANE, Presiding Judge.

Wausau Medical Center (WMC) appeals four orders that: (1) denied WMC a temporary injunction prohibiting Mark Asplund, M.D., from practicing medicine in Marathon County; (2) granted summary judgment to Asplund and his service corporation, dismissing WMC's counterclaim asserting causes of action against Asplund in contract, promissory estoppel, negligent and intentional misrepresentation, and conspiracy to injure business in violation of § 134.01, STATS.; (3) granted Asplund summary judgment on an amended claim alleging breach of good faith and fair dealing; and (4) granted Asplund costs for items WMC contends are not taxable. Because WMC presents a number of arguments to support this appeal, each argument will be set out within our discussion of that argument. We reject WMC's arguments, and, therefore, affirm.

FACTS

Dr. Asplund was twice employed as a general and vascular surgeon at WMC, a multi-specialty clinic. His first employment was from August 1988 to the end of July 1989. Asplund was WMC's first vascular surgeon, and this was Asplund's first professional practice following his residency. With this employment, Asplund entered into a contract with WMC that contained a restrictive covenant. Asplund voluntarily terminated his employment and moved to Iowa to participate in a transplant program in July 1989. WMC did not have a vascular surgeon between July 1989 and August 1990.

Within a year, Asplund decided that he wanted to return to Wausau. Asplund began negotiations with WMC. The negotiations broke off at one point because Asplund wanted the restrictive covenant stricken from the new contract, and WMC refused to do so. Nevertheless, Asplund commenced a second term of employment in August 1990 after signing an employment contract that contained a restrictive covenant. The covenant, which was identical to the one contained in his first contract, stated:

Covenant Not to Compete. The Employee agrees that if his employment with the Corporation is terminated for any reason he will not engage in the practice of medicine or any phase or specialty thereof in competition with the Employer for a period of two (2) years from the date of termination of his employment within Marathon County, Wisconsin. The Employee hereby consents to an issuance of an injunction by a court of competent jurisdiction to enjoin the violation of the foregoing in addition to any other remedies available to the Corporation. In lieu of said injunction, the Corporation shall have the option to recover as liquidated damages from the Employee a sum equal to twenty percent (20%) of the total cumulative professional charges made by the Employee during the twelve-month period immediately preceding the termination date.

In September 1990, forty-five days after he started,

Asplund gave WMC sixty days' notice of his employment termination. Asplund formed a service corporation, Mark Asplund, S.C., while still employed at WMC. After his employment at WMC was terminated, he began his surgery practice in Wausau as an employee of the service corporation.

Asplund originally commenced this action by seeking to have the restrictive covenant declared unenforceable. ¹ Initially, WMC obtained a five-day temporary restraining order but was later denied a temporary injunction following a hearing. WMC filed a counterclaim and a third-party complaint against Asplund and his service corporation. Asplund voluntarily dismissed his claim, making WMC the plaintiff, and he then moved for summary judgment dismissing all WMC's claims against him and the service corporation. The trial court granted summary judgment in favor of Asplund, who sought costs, which were also granted.

THE RESTRICTIVE COVENANT

When reviewing a summary judgment, we apply the same methodology as the trial court. Green Spring Farms v. Kersten, 136 Wis.2d 304, 314-15, 401 N.W.2d 816, 820 (1987). Whether a particular employment restraint is reasonably necessary has been held to be a question of law that must be resolved with reference to the facts of the particular case. Geocaris v. Surgical Consultants, Ltd., 100 Wis.2d 387, 388, 302 N.W.2d 76, 77-78 (Ct.App.1981). Summary judgment is proper when there is no genuine issue of material fact in dispute relative to the reasonableness of the agreement. Rollins Burdick Hunter, Inc. v. Hamilton, 101 Wis.2d 460, 470, 304 N.W.2d 752, 757 (1981).

The following canons of construction of restrictive covenants have been adopted: (1) These restrictions are prima facie suspect; (2) they must withstand close scrutiny to pass legal muster as being reasonable; (3) they will not be construed to extend beyond their proper import or further than the language of the contract absolutely requires; and (4) they are to be construed in favor of the employee. Streiff v. American Family Mut. Ins. Co., 118 Wis.2d 602, 610-11, 348 N.W.2d 505, 510 (1984) (citing Zimmermann v. Brennan, 78 Wis.2d 510, 514-15, 254 N.W.2d 719, 721 (1977); Gary Van Zeeland Talent, Inc. v. Sandas, 84 Wis.2d 202, 218-19, 267 N.W.2d 242, 250 (1978)). Although WMC correctly points out that restrictive covenants between physicians are not disfavored, this was with regard to a specific set of facts. See Oudenhoven v. Nishioka, 52 Wis.2d 503, 505, 190 N.W.2d 920, 921 (1971). ² Oudenhoven does not provide an exception to the general rule that restrictive covenants are prima facie suspect. However, it illustrates how a covenant's necessity is determined according to each particular set of facts. See Geocaris, 100 Wis.2d at 388, 302 N.W.2d at 77-78.

Under § 103.465, STATS., ³ a covenant not to compete within a specific time and a specific territory is lawful "only if the restrictions imposed are reasonably necessary for the protection of the employer." Five inquiries are made in evaluating the enforceability of a covenant not to compete. The covenant must: (1) be necessary for the protection of the employer; (2) provide a reasonable time restriction; (3) provide a reasonable territorial limit; (4) be reasonable as to the employee; and (5) be reasonable as to the general public. Chuck Wagon Catering, Inc. v. Raduege, 88 Wis.2d 740, 751, 277 N.W.2d 787, 792 (1979). Section 103.465, STATS., provides that any unreasonable portion of the covenant not to compete voids the entire covenant even if the remaining portions would be enforceable. ⁴

Despite the summary judgment procedure, the affidavits in support and in opposition to the summary judgment, along with their correlating depositions, provide this court with a substantial factual record establishing the totality of the circumstances. See Rollins, 101 Wis.2d at 471, 304 N.W.2d at 757. It is undisputed that under the employment contract WMC is attempting to enforce, Asplund only worked approximately three-and-one-half months. Thus, our inquiry is whether WMC acquired a protectible interest in the three-and-one-half months that the applicable employment contract was in force.

Our first inquiry is whether the covenant not to compete was necessary to protect WMC. The trial court concluded that it was not and, as a result, found the entire covenant void. The principal reason for enforcing a restrictive covenant is to prevent dissemination of trade secrets or unfair competition. "An employer is not entitled to be protected against legitimate and ordinary competition of the type a stranger could give. There must be some additional special facts and circumstances which render the restrictive covenant reasonably necessary for the protection of the employer's business." Lakeside Oil Co. v. Slutsky, 8 Wis.2d 157, 163, 98 N.W.2d 415, 419 (1959).

Our consideration of whether the covenant not to compete was necessary to protect WMC is two-fold. First, we must look to the facts as of the time the contract was entered into. At that point, it can be argued that WMC was anticipating the unfair competition that Asplund could provide in the event that his employment was terminated. WMC's apparent concern was that Asplund's association with WMC would enhance his reputation and thereby make him a formidable competitor; i.e., that his enhanced reputation would be a special circumstance which would render the restrictive covenant reasonably necessary for the protection of WMC's business. See id. WMC was also concerned that it would provide Asplund with a client and referral base, which he would later take with him, again making the covenant reasonably necessary to protect WMC's business.

Assuming without deciding that these facts would lead to the conclusion that the covenant's inception was reasonable, to stop here would be contrary to the general rule that covenants not to compete are suspect and are only to be enforced in order to prevent the unfair competitive use of information and contacts acquired as a result of the employment. Chuck Wagon Catering, 88 Wis.2d at 751, 277 N.W.2d at 792. Whether the protectible interest is to be determined solely according to the facts as of the time the contract was entered into or whether facts subsequent to entering into the contract are also considered has never been specifically addressed in Wisconsin.

While there is existing case law stating that the restrictive covenant is to be considered "in light of all the surrounding circumstances with reference to which the contract was made," Rakestraw v. Lanier, 104 Ga. 188, 30 S.E. 735, 738 (1898), the practice in Wisconsin has been to also consider the facts surrounding the employment itself. See, e.g., Geocaris, 100 Wis.2d at 388, 302 N.W.2d at 78 (employer acquired protectible...