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04/24/89 Retina Services, Ltd., v. On

April 24, 1989





538 N.E.2d 651, 182 Ill. App. 3d 851, 131 Ill. Dec. 276 1989.IL.590

Appeal from the Circuit Court of Cook County; the Hon. Thomas J. O'Brien, Judge, presiding.


JUSTICE BUCKLEY delivered the opinion of the court. MANNING, P.J., and CAMPBELL, J., concur.


Retina Services, Ltd. (plaintiff), brought this interlocutory appeal from the circuit court's denial of its motion for a preliminary injunction to enjoin Ira Garoon, M.D. (defendant), from providing medical services at five hospitals for a two-year period in contravention of a restrictive covenant not to compete in defendant's employment contract. The sole issue presented for our review is whether the circuit court erred in finding the covenant unenforceable. We reverse.

Plaintiff is an Illinois medical corporation. Its shareholders and professional employees, Joel Kaplan, M.D., and Frank P. La Franco, M.D., are ophthalmologists who subspecialize in retinal surgery. Plaintiff's practice is centered in the Chicago metropolitan area at eight hospitals which possess the equipment necessary for its subspecialty. Its patients consist mainly of referrals from other ophthalmologists.

Kaplan began marketing his subspecialty in 1966 by establishing contacts with ophthalmologists through speaking engagements and various other means. La Franco joined the practice in 1977. Either Kaplan or La Franco serves on the staff of five of the eight hospitals where they practice. In addition, of these five hospitals, they have founded eye centers at three hospitals and have nonexclusive contracts *fn1 to perform retinal services with four hospitals.

Defendant began employment with plaintiff in 1982 after completing his fellowship in Massachusetts. At that time, defendant, who was represented by counsel, entered into a one-year contract with plaintiff for a $70,000 annual salary plus benefits. The contract contained various covenants not to compete after termination of his employment. Thereafter, upon Kaplan's and La Franco's sponsorship and letters of recommendation, defendant received staff appointments at five of the hospitals Kaplan and La Franco were affiliated with and thereby gained access to their referring sources.

Defendant, again represented by counsel, entered into two subsequent employment agreements with plaintiff, extending the term of his employment at substantial increases in his salary with less restrictive covenants not to compete. Before signing the 1987 contract in issue here, defendant contacted an attorney for the American Medical Association who, he understood, was an expert on noncompetition agreements. Under this contract, defendant received cash compensation in excess of $300,000 along with approximately $50,000 in fringe benefits.

After Kaplan and La Franco decided not to renew defendant's contract at the expiration of the 1987 contract, defendant continued to practice at the five hospitals in contravention of the covenants. Plaintiff then filed an action to enforce the restrictive covenants. In its motion for preliminary injunction, plaintiff sought only to enforce that portion of the restrictive covenant which prohibited defendant from performing medical services at or serving on the staff of the five named hospitals and did not choose to enforce that portion which prohibited defendant from "[taking] any action [which may] disturb the existing . . . relationship of the Corporation with any referral source or any patient of Corporation" or from soliciting business from either.

In finding the covenant unenforceable, the circuit court found that plaintiff did not prove the existence of a protectable interest in its customer relationships because it did not establish a "near-permanent relationship" and "unlikely employee contact save for the employment." It also voiced concern over whether the geographic scope of the covenant was overly broad and necessary to protect plaintiff's interest.

It is established that a party who seeks a preliminary injunction must demonstrate by a preponderance of the evidence that (1) a certain and clearly ascertained right needs protection, (2) irreparable injury will occur without the injunction, (3) no adequate remedy at law exists, and (4) there is probability of success on the merits of the case. (A.B. Dick Co. v. American Pro-Tech (1987), 159 Ill. App. 3d 786, 514 N.E.2d 45; McRand, Inc. v. Van Beelen (1985), 138 Ill. App. 3d 1045, 486 N.E.2d 1306; Hydroaire, Inc. v. Sager (1981), 98 Ill. App. 3d 758, 424 N.E.2d 719.) The determination of whether to grant or deny an injunction rests within the discretion of the trial court, and a reviewing court's role is limited to determining whether the trial court's findings are against the manifest weight of the evidence. McRand, 138 Ill. App. 3d at 1050-51, 486 N.E.2d at 1311; A.B. Dick Co., 159 Ill. App. 3d at 791, 514 N.E.2d at 48; Hydroaire, 98 Ill. App. 3d at 761, 424 N.E.2d at 722.

Whether injunctive relief should issue to enforce restrictive covenants not to compete in employment contracts depends upon the validity of the covenant, the determination of which is a question of law. (McRand, 138 Ill. App. 3d at 1051, 486 N.E.2d at 1311; Tower Oil & Technology Co. v. Buckley (1981), 99 Ill. App. 3d 637, 642, 425 N.E.2d 1060, 1065; Image Supplies, Inc. v. Hilmert (1979), 71 Ill. App. 3d 710, 712, 390 N.E.2d 68, 70.) Illinois courts carefully scrutinize the validity of these covenants that restrain trade (Akhter v. Shah (1983), 119 Ill. App. 3d 131, 456 N.E.2d 232), and their enforceability is dependent upon the ...

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