Court Opinion

ID: 9590309
Source: CourtListenerOpinion
Date Created: 2023-08-21 23:53:40.560294+00
Date Added: 2024-06-11T09:13:39.732603
License: Public Domain

Judge COZORT
dissenting.
I believe the trial court erred in denying the plaintiffs request for a preliminary injunction. I must, therefore, dissent from the majority opinion affirming the trial court’s order.
The majority holds that “the trial court was correct in finding that the public health and welfare would be harmed if there were only one gastroenterologist in Statesville.” In support of this holding, the majority states: “The public’s interest in adequate health care must predominate over the parties’ freedom of contract.” The majority further concludes that enforcement of the contract “would create a monopoly for Dr. Kogut.” In so doing, the majority dismisses, as speculative evidence which cannot be considered, Dr. Kogut’s testimony that he is searching for a new associate and expects to hire one soon. I disagree with these conclusions.
I first address the majority’s conclusion that evidence of Dr. Kogut’s hiring of a new associate to replace the defendant is speculative. This evidence is no more speculative than the evidence upon which the majority relies to find harm to the public health and welfare. In fact the majority’s conclusions are based on evidence which is much more speculative. There is no evidence that a patient has gone without proper care at those times when Dr. Kogut was the only gastroenterologist in Statesville. It is pure speculation that some rare emergency may arise which might require transporting the patient 45 miles to Winston-Salem. And, of course, not enforcing Dr. Petrozza’s covenant would not guarantee that a rare emergency, if one arose, would still not require moving the patient to Winston-Salem.
*33The majority’s opinion that enforcement of the covenant would create a monopoly for Dr. Kogut is even more speculative; in fact, that conclusion has no basis in the record before us. Significantly, the trial court made no such finding. There is no evidence whatsoever that Dr. Kogut is attempting to establish a monopoly; to the contrary, the evidence shows that Dr. Kogut is attempting to hire another gastroenterologist. All the evidence shows that Dr. Kogut’s motive in enforcing the covenant is to protect his significant financial investment, which he has a right to do, and not to create a monopoly.
I believe a fair reading of the evidence shows that plaintiff is entitled to injunctive relief. Defendant submitted virtually identical affidavits from forty physicians and from administrators of the two hospitals serving the community. These affidavits express the view that one gastroenterologist would not be able to meet the community’s demand for such services, and that losing defendant’s services “would likely result in undesirable and possibly critical delays in patient care and treatment.” Yet, in an affidavit submitted by plaintiff, one of these same administrators stated that “the caseload of the [plaintiffs] clinic has not suffered if either doctor was out of town.”
Plaintiff also submitted affidavits from fourteen Statesville physicians who stated that Dr. Kogut has provided prompt and efficient care and that they had no knowledge of patients going untreated. Affiants stated that, since Dr. Kogut’s arrival, four surgeons who perform semi-surgical procedures performed by gastroenterologists had located in Statesville; that GI (gastrointestinal) bleeding, one of the few GI emergencies, could be handled by one of those surgeons; that, in severe cases, patients are often transferred to Baptist Hospital in Winston-Salem forty-five miles away; and that helicopter facilities are available at Baptist and Iredell Memorial Hospitals in Statesville. One affiant, a specialist in internal medicine, stated that he and Dr. Kogut had an arrangement whereby each covered the other’s cases when necessary, including GI emergency cases. Uncontroverted evidence also shows that, in addition to treating his patients, Dr. Kogut has had time to obtain and complete a large number of pharmaceutical contracts for major drug companies, has worked with local businesses in conducting preventive medicine programs and cost benefit studies, and, even prior to defendant’s arrival in *34Statesville, has traveled outside the city to other communities in order to serve patients. Plaintiff also serves patients who reside outside Iredell County.
Finally, as I previously noted, Dr. Kogut stated that he had begun a search for a new associate and expected to hire defendant’s replacement soon. Defendant acknowledged that fact in his own affidavit. It is also uncontroverted that at least fifty-four gas-troenterologists practice within forty-five miles of Statesville. There is certainly no shortage of specialists in internal medicine in Statesville, as no less than twenty internists have signed affidavits in this case.
The majority relies, in part, on the decision of the Idaho Court of Appeals in Dick v. Geist, 107 Idaho 931, 693 P. 2d 1133 (Ct. App. 1985). In that case, the two defendants were pediatricians specializing in neonatology, practicing in Twin Falls, Idaho. They were employed by the plaintiff under an employment contract that contained a covenant not to compete within a twenty-five mile radius of Twin Falls for two years after separation. When the defendants breached the covenant, the plaintiff sought injunctive relief. The court found that while there was conflicting testimony in the record regarding the city’s need for pediatricians, six doctors had testified that five pediatricians were not enough to provide the necessary care. Moreover, the court also found that family practitioners in the area could not provide care to critically ill newborns, that the hospital where the defendants would be prevented from practicing was one of two in the state having a long-term respiratory care unit, and that the defendants provided 90% of the critically ill newborn care at the hospital and had been instrumental in developing the intensive care unit. The court further found that many pediatricians are reluctant to engage in neonatal intensive care because providing care for just one critically ill newborn per month is a tremendous burden on a physician’s practice. On these facts, the court ruled that the public interest affected by the loss of defendant’s services outweighed the benefit derived from enforcing the contract. I believe the case before us is distinguishable. While there is evidence to support a finding that more than one gastroenterologist located in Statesville is desirable, nowhere in the record is there evidence that patients needing emergency care will go untreated if the covenant is enforced, that defendant’s particular skills are *35necessary for the public welfare, that Statesville cannot attract another gastroenterologist, or that there is a shortage of gastro-enterologists in general.
Furthermore, the availability of other practitioners is not the sole factor relevant to the public policy question. Indeed, in cases involving covenants not to compete, including covenants between physicians, more than one public policy is at issue. Beam v. Rutledge, 217 N.C. 670, 673, 9 S.E. 2d 476, 478 (1940). Plaintiff invokes its contract rights; defendant invokes the public’s right to essential medical care. As our Supreme Court has recognized,
“[I]t is just as important to protect the enjoyment of an establishment in trade or profession, which its possessor has built up by his own honest application to every-day duty and the faithful performance of the tasks which every day imposes upon the ordinary man. What one creates by his own labor is his. Public policy does not intend that another than the producer shall reap the fruits of labor. Rather it gives to him who labors the right by every legitimate means to protect the fruits of his labor and secure the enjoyment of them to himself. Freedom to contract must not be unreasonably abridged. Neither must the right to protect by reasonable restrictions that which a man by industry, skill and good judgment has built up, be denied.”
Scott v. Gillis, 197 N.C. 223, 228, 148 S.E. 315, 317-18 (1929), quoting Granger v. Craven, 159 Minn. 296, 199 N.W. 10 (1924).
Prior to Dr. Kogut’s arrival in 1979, there had never been a gastroenterologist practicing in Statesville. Dr. Kogut has established a successful practice. He recruited defendant, a recent medical school graduate with no private practice experience, to practice in Statesville, and is in the process of bringing another gastroenterologist into the community. In enforcing noncompetition agreements, other courts have emphasized the benefit, both to the public and to the covenantor, that is derived from agreements between young doctors and older or more experienced practitioners. See, e.g., Ladd v. Hikes, 55 Or. App. 801, 639 P. 2d 1307, review denied, 292 Or. 722, 644 P. 2d 1131 (1982); Cogley Clinic v. Martini, 253 Iowa 541, 112 N.W. 2d 678 (1962); Erikson v. Hawley, 56 App. D.C. 268, 12 F. 2d 491 (1926); Granger v. Craven, 159 Minn. 296, 199 N.W. 10 (1924); and Freudenthal v. *36Espey, 45 Colo. 488, 102 P. 280 (1909). See also Keen v. Schneider, 202 Misc. 298, 114 N.Y.S. 2d 126, aff'd, 280 A.D. 954, 116 N.Y.S. 2d 494 (1952); Canfield v. Spears, 44 Ill. 2d 49, 254 N.E. 2d 433 (1969).
I would hold that the balance of equities tips in plaintiffs favor. Loss of defendant’s services will not deprive Statesville of essential medical care. Plaintiff has met its burden of proving likelihood of success on the merits on the public policy issue.
I would also hold that plaintiff has shown that it will suffer irreparable harm if a preliminary injunction does not issue and that issuance is necessary for the protection of its rights during the course of litigation.
In a case involving a noncompetition agreement, where the plaintiff has shown a likelihood of success on the merits, the presumption is that injunctive relief will issue. A.E.P. Industries v. McClure, 308 N.C. 393, 406, 302 S.E. 2d 754, 762 (1983). The ultimate relief plaintiff seeks is enforcement of a covenant in which the promised performance is forbearance to act. In order to be enforceable, the covenant must proscribe defendant’s activity for a reasonable, limited period of time. Id. at 405, 302 S.E. 2d at 762. The trial court below concluded that plaintiff had not shown either irreparable harm, or the necessity for preservation of its rights pending trial, for two reasons: (1) because the prayer for relief in plaintiff s complaint did not include a request for a permanent injunction, and (2) because the inclusion of a liquidated damages provision in the Agreement indicated that the parties intended to limit plaintiffs remedy to monetary relief. I do not agree with either reason.
N.C. Gen. Stat. § 1-485(1) (1987) provides that a preliminary injunction shall issue “[w]hen it appears by the complaint that the plaintiff is entitled to the relief demanded . . . .” (Emphasis added.) In its complaint, to which the Employment Agreement was attached, plaintiff set forth all the essential facts to state a claim for breach of the Agreement and, therefore, for injunctive relief. The complaint states that “there is no adequate remedy at law,” and prays for a temporary restraining order and a preliminary injunction. Neither the statute nor our case law conditions the issuance of a preliminary injunction on a specific prayer for a permanent injunction. Furthermore, Rule 54(c) of the N.C. Rules of Civil Procedure provides that “[ejxcept as to a party against *37whom a judgment is entered by default, every final judgment shall grant the relief to which the party in whose favor it is rendered is entitled, even if the party has not demanded such relief in his pleadings.” N.C. Gen. Stat. § 1A-1, Rule 54(c) (1987). Plaintiffs failure to request a permanent injunction, therefore, does not deprive a court of its equity jurisdiction. The same reasoning applies in the instant case: the crucial factor is not whether plaintiff has asked for the proper remedy, but whether plaintiff is entitled to it. I would find that, especially iii light of A.E.P. Industries, plaintiff is entitled to a preliminary injunction. It should be noted that plaintiff has subsequently amended its complaint, as it was entitled to do as a matter of course under Rule 15(c) of the N.C. Rules of Civil Procedure, to include a specific request for a permanent injunction.
Finally, the existence of a liquidated damages provision in the Agreement does not foreclose the equitable remedy. A.E.P. Industries, 308 N.C. at 407, 302 S.E. 2d at 762-63. Defendant argues, citing Bradshaw v. Millikin, 173 N.C. 432, 92 S.E. 161 (1917), that the liquidated damages clause in this Agreement is “a very detailed provision setting up payment amounts and dates,” and it is clear that the parties intended to provide the defendant with the “alternative to perform or pay.” In Bradshaw, however, the court held that the plaintiff was entitled to an injunction under the usual rule that “[t]he mere insertion in the contract of a clause describing the sum to be recovered for a breach as liquidated damages . . . will not exclude the equitable remedy, and is regarded as put there for the purpose of settling the damages if there should be a suit and recovery for a breach, instead of an action, in the nature of a bill in equity . . . .” Id. at 436, 92 S.E. at 163. The court noted that the contract could expressly provide for the payment of a fixed sum as the exclusive remedy, or the contract might clearly indicate that the parties intended that the covenantor had the right to resume his restrained activity upon payment of a sum. The court emphasized that the intention of the parties governs, and the contract must be construed as a whole. Id. at 439, 92 S.E. 2d at 165. In the instant case, the contract expressly provides:
The parties agree that the remedy at law for any actual or threatened breach of this Agreement by either will be inadequate and that both shall be entitled to specific performance *38hereof or injunctive relief or both by temporary or permanent injunction ... in addition to any damages which both may be legally entitled to recover ....
The intention of the parties was to allow the parties the right to pursue equitable and legal relief. The specificity of the liquidated damages clause does not, therefore, support the conclusion that the parties intended a “pay or perform” agreement.
For the foregoing reasons, I would find the denial of the preliminary injunction to be error, and I would vacate the order and remand the case to the Superior Court of Iredell County for entry of a preliminary injunction and for further proceedings.