Opinion ID: 2601652
Heading Depth: 3
Heading Rank: 3

Heading: The Superior Court Must Consider Whether Section 13(a) Is Enforceable as Applied to Ingrim's Employment at ANMC.

Text: Ingrim argues that, to the extent his employment at ANMC is found to violate Section 13(a), that provision is overbroad and unenforceable. Although raised below, the superior court did not reach this issue because it found that Ingrim's employment at ANMC did not constitute the practice of dentistry and therefore did not violate Section 13(a). If on remand the superior court or a jury determines that Section 13(a) was breached, the superior court must consider its enforceability. [16] [N]on-competition agreements are disfavored in the law as restraints upon trade and because they impose hardships upon individuals seeking to earn a livelihood. [17] Such agreements may be ancillary to an employer-employee agreement or, as in this case, to the sale of a business. [18] The enforceability of a non-competition agreement ancillary to the sale of a business is an issue of first impression in Alaska. [19] Unlike covenants not to compete ancillary to employment contracts, which are scrutinized with particular care because they are often the product of unequal bargaining power, [20] this level of scrutiny is not applied to covenants ancillary to the sale of a business because the contracting parties are more likely to be of equal bargaining power. [21] According to the Restatement (Second) of Contracts, a covenant not to compete is unenforceable on grounds of public policy if it unreasonably restrains trade, either because: (a) the restraint is greater than is needed to protect the promisee's legitimate interest, or (b) the promisee's need is outweighed by the hardship to the promisor and the likely injury to the public.[ [22] ] In the context of covenants not to compete ancillary to the sale of a business, the Restatement describes the promisee's legitimate interest as the value of the good will that he has acquired in the purchase of the business. [23] When determining the enforceability of a covenant not to compete ancillary to the sale of a business, a court must therefore consider whether the restriction bargained for is no greater than is needed to protect the goodwill the purchaser has acquired in the business and, if so, whether the purchaser's need to protect that goodwill outweighs the hardship to the seller and likely injury to the public. A similar test has been adopted in numerous jurisdictions, [24] and we adopt it in Alaska. Under the first prong of the analysis, the superior court must decide whether Section 13(a), as applied to Ingrim's employment at ANMC, is more restrictive than necessary to protect Wenzell's legitimate interest in the goodwill he acquired in purchasing Turnagain Dental Clinic. If the superior court or a jury determines that Ingrim's employment at ANMC is in competition with Turnagain Dental Clinic and thus violates Section 13(a), it will have already resolved the first prong  the covenant is no broader than is necessary to protect the goodwill Wenzell purchased. Under the second prong, the superior court must balance Wenzell's need to protect the goodwill he purchased with the hardship to Ingrim from enforcing the covenant and the likely injury to the public. It appears from the record that Ingrim is employed by an organization providing an important, low-cost service to a population in need of such care. In a case that implicates such considerations, it is appropriate for a court to closely scrutinize the covenant not to compete to determine whether it is void for public policy reasons. [25] Although a court should generally examine whether a covenant not to compete is enforceable only after determining that it was breached, it is within the superior court's discretion on remand to assume a breach and address the enforceability of the covenant first. If the superior court can decide the enforceability of the covenant as applied to Ingrim's employment at ANMC on the current record or with an additional evidentiary hearing, but prior to a full trial, it may do so in the interest of judicial economy. [26]