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Health Professionals, Ltd. v. Johnson

June 04, 2003

HEALTH PROFESSIONALS, LTD., AN ILLINOIS CORPORATION; STEPHEN A. CULLINAN, M.D.; AND THERESA M. FALCON-CULLINAN, M.D., PLAINTIFFS-APPELLEES,
v.
NORMAN JOHNSON, MD.; BRENDA J. JOHNSON; AND ADVANCED CORRECTIONAL HEALTHCARE, INC., AN ILLINOIS CORPORATION, DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of the 10th Judicial Circuit, Peoria County, Illinois, No. 02-CH-374 Honorable John A. Barra, Judge, Presiding.

The opinion of the court was delivered by: Justice Slater

Defendants Dr. Norman Johnson and Brenda Johnson (the Johnsons) and Advanced Correctional Healthcare, Inc. (ACH) appeal from an order of the circuit court granting a preliminary injunction prohibiting defendants from violating a non-competition agreement. Defendants assert that the agreement violates both the Illinois Procurement Code (30 ILCS 500/1--1 et seq. (West 2000)) and the Illinois Antitrust Act (740 ILCS 10/1 et seq. (West 2000)), and that its terms are unreasonably restrictive. We affirm as modified.

Facts

Prior to April 18, 2002, plaintiff Health Professionals, Ltd. (HPL), a business providing managed healthcare services to jails and correctional facilities, was owned by plaintiffs Stephen Cullinan and Theresa Falcon-Cullinan (the Cullinans) and by the Johnsons. On that date, the Cullinans agreed to purchase all outstanding shares of HPL owned by the Johnsons. As part of the purchase agreement, contracts to provide healthcare services at certain jails and correctional facilities (the exempted facilities) were assigned by HPL to ACH. Defendant Dr. Johnson established ACH around the time of the agreement to service the exempted facilities. The exempted facilities were located in the Illinois counties of Coles, Knox, Lee, Livingston, Peoria and Woodford, as well as in Tippecanoe, Indiana and Kenosha County, Wisconsin. The parties also executed a "Non-competition, Nondisclosure and Nonsolicitation Agreement" (the non-competition agreement) which stated in part:

"(a) For the shorter of (i) a period of three years after the Closing or (ii) until an Assignment by Buyers:

(x) Except with regard to services to inmates and personnel at the Exempted Facilities, neither Shareholder nor [ACH] will, directly or indirectly, engage or invest in, own, manage, operate, finance, control or participate in the ownership, management, operation, financing or control of, be employed by, associated with or in any manner connected with, or render services or advice or other aide to, or guarantee any obligation of, any Person engaged in or planning to become engaged in the business of managing and/or providing healthcare or healthcare related services to inmates and personnel at (A) jail facilities, prison facilities, juvenile facilities, Department of Correction facilities or other penal or correctional facilities of any kind located in the states of Illinois, Wisconsin and Missouri; (B) Department of Correction facilities in the state of Indiana; or (C) jail facilities, prison facilities, juvenile facilities, Department of Correction facilities or other penal or correctional facilities operated by Cornell Companies, Inc. ***

(y) Each Shareholder and [ACH] agrees not to, directly or indirectly, induce or attempt to induce any customer (other than the Exempted Facilities) to cease doing business with [HPL] or in any way interfere with the relationship between any such customer and [HPL] if the Shareholders are prohibited under Section 4(a)(x) above from rendering health care services to such customer."

In July of 2002, a representative of ACH contacted various jails and correctional facilities in Illinois and Wisconsin, including customers of HPL, offering to provide healthcare services. In addition, Dr. Johnson spoke with Cornell Companies concerning consulting work. Plaintiff subsequently filed a complaint for damages and injunctive relief on July 26, 2002, followed by a motion for a preliminary injunction. After a two-day hearing, the trial court granted a preliminary injunction prohibiting the defendants from violating the terms of the non-competition agreement. The evidence introduced at the preliminary injunction hearing will be presented as it becomes relevant to resolving the issues raised on appeal.

Analysis

Standard of Review

Whether the non-competition agreement violates the Illinois Procurement Code or the Illinois Antitrust Act are questions of statutory interpretation which require neither factual determinations nor the exercise of judicial discretion. Statutory construction is a question of law subject to de novo review. Robidoux v. Oliphant, 201 Ill. 2d 324, 775 N.E.2d 987 (2002). On the other hand, "[w]hen the appellate court reviews the issuance of a preliminary injunction, the sole issue is whether the trial court abused its discretion." Harper v. Missouri Pacific R.R. Co., 264 Ill. App. 3d 238, 249, 636 N.E.2d 1192, 1201 (1994). The abuse of discretion standard has specifically been applied in reviewing a preliminary injunction based on a non-competition covenant. See Central Water Works Supply, Inc. v. Fisher, 240 Ill. App. 3d 952, 608 N.E.2d 618 (1993).

Illinois Procurement Code

Defendants first contend that the non-competition agreement is void and unenforceable because it violates section 50-25 of the Illinois Procurement Code (Procurement Code) which provides:

"§50-25. Inducement. Any person who offers or pays any money or other valuable thing to any person to induce him or her not to bid for a State contract or as recompense for not having bid on a State contract is guilty of a Class 4 felony. Any person who accepts any money or other valuable thing for not bidding for a State contract or who withholds a bid in consideration of the promise for the payment of money or other valuable thing is guilty of a Class 4 felony." 30 ILCS 500/50--25 (West 2000).

Despite plaintiffs' arguments to the contrary, we believe that, to the extent the non-competition agreement prohibits defendants from bidding on contracts with the Illinois Department of Corrections, it violates the plain language of section 50--25. Clearly, plaintiffs paid money and gave other valuable consideration to defendants to induce them to enter into the non-competition agreement, which by its terms prohibits defendants from bidding on Department of Corrections contracts. That the non-competition agreement was only one part of the overall sale of defendants' interest in HPL does not alter its nature. Although plaintiffs maintain that section 50--25 should not be read literally, where the language of a statute is unambiguous, the only legitimate function of the courts is to enforce the law as enacted by the legislature. Bridgestone/Firestone, Inc., v. Aldridge, 179 Ill. 2d 141, 688 N.E.2d 90 (1997). Plaintiffs' argument that section 50--25 should not be applied to restrictive covenants because doing so would impair the ability of business owners who have state contracts from selling their businesses is unavailing. Only businesses which depend heavily on state business would be affected, and even those would simply have to adjust their asking price. In any event, a court is not free, in the face of unequivocal statutory language, to read in exceptions, limitations, or conditions that the legislature did not express. See Davis v. Toshiba Machine Co. v. America, 186 Ill. 2d 181, 710 N.E.2d 399 (1999). Therefore, we hold that the non-competition agreement is void and unenforceable insofar as it purports to prohibit defendants from bidding on Illinois Department of Corrections contracts or any other contract with another state agency.

We do not, however, find that the entire non-competition agreement is void. The record indicates that many of HPL's clients are county jails, and the agreement prohibits defendants from providing healthcare services to those jails. In Court Street Steak House, Inc. v. County of Tazewell, 163 Ill. 2d 159, 164, 643 N.E.2d 781, 783 (1994), our supreme court stated that the Illinois Purchasing Act (30 ILCS 505/1 et seq. (West 1992)) did not apply to a food service contract at a county jail because the Purchasing Act applied only to state agencies, not to units of local government such as counties. When the Purchasing Act was repealed (see 30 ILCS 500/95--25 (West 1998)), most of its provisions were reenacted, with some modifications, in the Illinois Procurement Code, including the definition of "state agency" relied on in Court Street. Compare 30 ILCS 505/3 (West 1992) with 30 ILCS 500/1--15.100 (West 1998). Accordingly, we believe that the Procurement Code, like the Purchasing Act, does not apply to county jails. See 30 ILCS 500/1-- 5 (West 1998) (purpose of Procurement Code is to apply competitive bidding principles to contracts by or for any state agency); 1999 Ill. Att'y Gen. Op. 008 (exclusion from definition of "state agency" exempts entity from provisions of Procurement Code.) Since the non-competition agreement contains a severability clause which provides that the invalidity of any provision or term does not affect the remaining provisions or terms, we find that the agreement's prohibition against providing healthcare services to county jails or other entities that are not state agencies is unaffected by section 50--25 of the Procurement Code. In addition, the Procurement Code obviously has no bearing on the restrictions placed on defendants concerning jail and correctional facilities in other states.

Illinois Antitrust Act

Defendants next contend that the non-competition agreement is an illegal "horizontal" market and customer allocation agreement which constitutes a per se violation of section 3(1)(c) of the Illinois Antitrust Act (740 ILCS ...


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