Court Opinion

ID: 2759953
Source: CourtListenerOpinion
Date Created: 2014-12-11 23:03:09.194494+00
Date Added: 2024-06-11T10:35:59.069473
License: Public Domain

2014 IL App (3d) 140338

                              Opinion filed December 11, 2014
     _____________________________________________________________________________

                                                 IN THE

                                  APPELLATE COURT OF ILLINOIS

                                            THIRD DISTRICT

                                                A.D., 2014

     PRAIRIE RHEUMATOLOGY                         )          Appeal from the Circuit Court
     ASSOCIATES, S.C.,                            )          of the 12th Judicial Circuit,
                                                  )          Will County, Illinois.
          Plaintiff-Appellant and Cross-Appellee, )
                                                  )          Appeal No. 3-14-0338
          v.                                      )          Circuit No. 14-CH-24
                                                  )
     MARIA FRANCIS, D.O.,                         )
                                                  )          The Honorable
          Defendant-Appellee and                  )          John Anderson,
          Cross-Appellant.                        )          Judge, presiding.

     _____________________________________________________________________________

           PRESIDING JUSTICE LYTTON delivered the judgment of the court, with opinion.
           Justices Carter and O'Brien concurred in the judgment and opinion.
     _____________________________________________________________________________

                                                OPINION

¶1          Plaintiff, Prairie Rheumatology Associates (PRA), brought an action for injunctive relief

     against its former employee, Maria Francis, D.O., seeking to enforce a restrictive covenant in the

     parties' employment agreement. The trial court granted preliminary injunctive relief to enforce

     the covenant as to PRA's current patients and denied preliminary injunctive relief as to former

     patients and any future clients.    PRA appeals, arguing that the trial court misapplied the

     restrictive covenant test set forth in Reliable Fire Equipment Co. v. Arredondo, 2011 IL 111871,
     ¶ 17, and abused its discretion in declining to enforce the restrictive covenant as to the general

     public and potential future clients. Dr. Francis cross-appeals, claiming that the trial court's order

     to enforce the restrictive covenant should be reversed because the noncompete agreement lacked

     adequate consideration. We affirm in part, reverse in part and remand.

¶2          PRA is a medical practice that offers rheumatology services in Joliet, Illinois. Dr. Maria

     Sosenko is a licensed physician who has been practicing as a rheumatologist in Joliet since 1986.

     She is the sole shareholder and president of PRA. PRA provides rheumatology services at its

     principal office in Joliet and at two area hospitals, Presence Saint Joseph Medical Center (Saint

     Joseph) in Joliet and Silver Cross Hospital (Silver Cross) in New Lenox. The majority of PRA’s

     patients come from referrals from physicians, including many physicians on staff at the two area

     hospitals.

¶3          Defendant, Dr. Francis, is also a licensed physician specializing in rheumatology. On

     January 7, 2012, she entered a "Physician Agreement" with PRA with an effective date of April

     9, 2012. The agreement provided Francis with an annual salary and required PRA to assist her in

     gaining staff privileges at the two hospitals and pay her hospital dues. PRA also agreed to

     introduce Dr. Francis to PRA patients and referral sources, particularly the physicians on staff at

     the affiliate hospitals. The employment agreement included a 2-year, 14-mile noncompetition

     agreement in favor of PRA. The agreement provided:

            "Physician covenants and agrees that she will not enter into a Competitive

            Practice (as hereinafter defined) at any time during the period beginning on the

            Effective Date and ending 24 months after the date of the Physician’s termination

            of employment, whether such termination is voluntary or involuntary, for cause or

            without cause. The term 'Competitive Practice' shall mean the full-time or part-

                                                      2
            time practice of rheumatology, directly or indirectly, alone or in any capacity, for,

            with or on behalf of another person, partnership, corporation, or other entity with

            a radius of 14 miles of Corporation's office[s] at which Physician regularly

            provided services *** or at any other facility at which Physician has regularly

            provided services on behalf of the Corporation ***."

     The parties agreed that as part of Dr. Francis entering the agreement and complying with its

     terms, she would be considered to become a shareholder of PRA after 18 months.

¶4          Dr. Francis began her employment with PRA on April 16, 2012. Prior to that time, she

     had been practiced medicine for two years in Kankakee. Once she began employment with

     PRA, she continued to market herself to build her reputation in the Joliet area. She attended

     seminars, established community events, conducted speaking engagements and met with referral

     doctors at both Saint Joseph and Silver Cross. During her employment with PRA, Dr. Francis

     treated 1,118 patients. About 136 patients followed her from her Kankakee practice to PRA and

     948 were new patients. According to Dr. Sosenko, less than 8% of the new patients Francis

     treated while working for PRA had a prior relationship with PRA and most of those new patients

     were referred by physicians.

¶5          In July 2013, Dr. Francis gave notice that she was voluntarily terminating her

     employment with PRA effective November 22, 2013. Francis indicated that she would honor the

     noncompetition agreement in her employment contract and informed PRA that she would be

     providing rheumatology services to patients at Hinsdale Orthopedics, a medical group with

     offices located in Hinsdale and New Lenox.

¶6          On January 3, 2014, Dr. Francis began performing services as a rheumatologist at

     Hinsdale Orthopedics’ New Lenox office. Hinsdale Orthopedics’ New Lenox office is adjacent

                                                     3
     to Silver Cross Hospital and is nine miles from PRA’s principal office. Dr. Francis was also

     providing services at the Hinsdale office, which is not within the restricted area.

¶7          PRA filed a complaint for injunctive relief to enforce the restrictive covenant prohibiting

     Dr. Francis from practicing within a 14-mile radius of the office and the hospitals for 2 years

     after termination of her employment. At the preliminary injunction hearing, both parties agreed

     that in January of 2014 there were two full-time rheumatologists practicing at PRA, Dr. Sosenko

     and Dr. Susan Muthalaly. PRA also hired a full-time nurse practitioner and had another part-

     time rheumatologist on staff. Two other rheumatologists not affiliated with PRA also worked in

     the restricted area. However, no other rheumatologists worked within a six-mile radius of PRA’s

     principal office. Dr. Sosenko testified that patients seeking an appointment at PRA had to wait

     six to eight weeks to see a doctor. She further testified that the practice did not advertise but

     obtained clients primarily through the hospitals’ referrals.

¶8          Dr. Sosenko described Dr. Francis as a "go-getter." She admitted that Dr. Francis

     actively pursued relationships with other doctors at Saint Joseph and Silver Cross and frequently

     conducted her own community seminars to increase her client base.             Dr. Sosenko could not

     identify any referring physicians to whom she introduced Dr. Francis during the 19 months Dr.

     Francis was employed by PRA. Dr. Sosenko stated that she had no problem with Dr. Francis

     treating current PRA patients outside the area of the restrictive covenant.

¶9          The trial court entered a preliminary injunction enjoining Dr. Francis from treating

     PRA’s current patients but allowing her to treat patients she had prior to joining PRA as well as

     potential future patients. In its written order, the court first determined that the restrictive

     covenant was ancillary to the main employment contract and was supported by adequate

     consideration. It then held that the restrictive covenant was reasonable as to PRA's current

                                                       4
       patients but unreasonable as to PRA’s future patients and the public in general based on the

       three-pronged reasonableness test discussed in Reliable Fire Equipment Co. v. Arredondo, 2011
IL 111871, ¶ 17. The court then concluded that PRA had a right in need of protection, would

       suffer irreparable harm, had no adequate legal remedy and had established a likelihood of

       success on the merits only as to its current patients and entered a limited injunction following

       that analysis.

¶ 10                                              ANALYSIS

¶ 11           PRA appeals, claiming that the trial court misapplied the test in Reliable and abused its

       discretion in concluding that the enforcement of the covenant would be injurious to the general

       public and future patients. Dr. Francis cross-appeals, arguing that the preliminary injunction

       cannot stand because the restrictive covenant lacked adequate consideration. Whether injunctive

       relief should issue to enforce a restrictive covenant not to compete in an employment contract

       depends on the validity of the covenant, the determination of which is a question of law.

       Mohanty v. St. John Heart Clinic, S.C., 225 Ill. 2d 52, 63 (2006).

¶ 12           Under Illinois law, a postemployment restrictive covenant is enforceable only if it is

       reasonable in geographic and temporal scope and it is necessary to protect an employer’s

       legitimate business interest. Abel v. Fox, 274 Ill. App. 3d 811, 813 (1995). The prevailing

       standard of reasonableness for an agreement not to compete applies a three-part test.           A

       restrictive covenant is reasonable only if the covenant (1) is no greater than is required for the

       protection of a legitimate business interest of the employer, (2) does not impose undue hardship

       on the employee, and (3) is not injurious to the public. Reliable, 2011 IL 111871, ¶ 17.

¶ 13           Before analyzing the reasonableness of a restrictive covenant, however, a court must

       make two determinations. Lawrence & Allen, Inc. v. Cambridge Human Resource Group, Inc.,

                                                       5
       292 Ill. App. 3d 131, 137 (1997). First, the court must find that the covenant is ancillary to either

       a valid transaction or a valid relationship; second, the court must determine whether there is

       adequate consideration to support the covenant. Id.

¶ 14          We find there is insufficient consideration to uphold the convent. In Illinois, continued

       employment for a substantial period of time beyond the threat of discharge is sufficient

       consideration to support a restrictive covenant in an employment agreement. McRand, Inc. v.

       van Beelen, 138 Ill. App. 3d 1045, 1055 (1985). The traditional rule is that courts do not inquire

       into the adequacy of consideration, only its existence. Illinois law excepts restrictive covenants

       from this rule. See Curtis 1000, Inc. v. Suess, 24 F.3d 941, 945-46 (7th Cir. 1994). This

       departure results from the recognition that a promise of continued employment may be an

       illusory benefit where the employment is at will. Id. at 946.

¶ 15          Illinois courts have generally held that two years or more of continued employment

       constitutes adequate consideration. See Fifield v. Premier Dealer Services, Inc., 2013 IL App

       (1st) 120327, ¶ 19; Diederich Insurance Agency, LLC v. Smith, 2011 IL App (5th) 100048, ¶ 15;

       Brown & Brown, Inc. v. Mudron, 379 Ill. App. 3d 724, 728-29 (2008); Lawrence & Allen, Inc.,
292 Ill. App. 3d at 138. This rule is maintained even if the employee resigns on his or her own

       instead of being terminated.     Fifield, 2013 IL App (1st) 120327, ¶ 19.          Unless adequate

       consideration has been given, the restrictive covenant will not be enforced. Millard Maintenance

       Service Co. v. Bernero, 207 Ill. App. 3d 736, 744 (1990).

¶ 16          In this case, Dr. Francis tendered her resignation 15 months after the start of her

       employment with PRA and officially left the practice after being employed for 19 months, 5

       months less than the general 2-year rule of thumb that supports adequate consideration. See

       Fifield, 2013 IL App (1st) 120327, ¶ 19.

                                                        6
¶ 17          Even so, PRA argues that Dr. Frances received additional consideration in the

       employment agreement that supports enforcement of the restrictive covenant. PRA claims that

       in addition to her continued employment, Francis received PRA's assistance in obtaining hospital

       membership and staff privileges, access to previously unknown referral sources and

       opportunities for expedited advancement.

¶ 18          Here, Dr. Francis received little or no additional benefit from PRA in exchange for her

       agreement not to compete. See White v. Village of Homewood, 256 Ill. App. 3d 354, 356-57

       (1993) (valuable consideration for a contract exists either of some right, interest, profit or benefit

       accruing to one party, or some forbearance, detriment, or loss of responsibility given or

       undertaken by the other). The evidence at the preliminary injunction hearing indicated that PRA

       failed to assist Dr. Francis in obtaining her hospital credentials and neglected to introduce Dr.

       Francis to referral sources. PRA provided Francis with credentialing applications but did not pay

       the entirety of her credential fee, despite its contractual promise to do so. In addition, PRA did

       not implement any procedure to introduce Dr. Francis to the doctors on staff at Saint Joseph or

       Silver Cross. During her testimony, Dr. Sosenko could not identify any doctor she introduced

       Dr. Francis to while Dr. Francis was practicing at PRA. Instead, Dr. Francis conducted her own

       marketing and developed community programs to increase her visibility. As for expedited

       advancement and partnership opportunities, those were illusory benefits at best. Even though the

       employment agreement provided that PRA would consider Dr. Francis for partnership after 18

       months, there was no guarantee she would become a partner and major shareholder.

¶ 19          Because PRA failed to provide adequate consideration, the restrictive covenant is

       unenforceable and PRA is unable to show a likelihood of prevailing on the merits. Since we

                                                         7
       have held that the restrictive covenant is invalid, we need not address the parties' remaining

       arguments regarding the reasonableness of the covenant terms.

¶ 20                                          CONCLUSION

¶ 21          We affirm the portion of the circuit court's order denying the preliminary injunction and

       reverse the portion of the court's order granting the preliminary injunction.     The cause is

       remanded for further proceedings as appropriate.

¶ 22          Affirmed in part and reversed in part; cause remanded.

                                                      8