Appeal from the Circuit Court of Cook County. No. 10 CH 27642 The Honorable Kathleen Pantle, Judge Presiding.
The opinion of the court was delivered by: Justice Hyman
JUSTICE HYMAN delivered the judgment of the court, with opinion.
Presiding Justice Neville and Justice Sterba concurred in the judgment and opinion.
¶ 1 Defendants, Dr. Gary Ochwat and Dr. Craig Halihan appeal from the trial court's grant of preliminary injunctive relief in favor of plaintiffs Northwest Podiatry Center, Ltd. (NPC), and Dr. Gregory Bryniczka to enforce the restrictive covenants contained in Dr. Halihan's employment agreement and because of defendants' breach of their fiduciary duties in setting up a competing business. Defendants contest the trial court's decision to enjoin them from doing business with a third-party managed care provider without any temporal limitation, arguing neither defendant was subject to a written restrictive covenant that would prohibit this activity. Defendants also argue the trial court erred in enjoining them from treating current or former NPC patients without temporal or geographic restrictions. Defendants take issue with the trial court's order that Dr. Halihan resign clinical privileges at certain restricted facilities by enforcing the privileges restriction in Dr. Halihan's employment agreement, a restriction the court found to be ambiguous. Alternatively, defendants argue that if the privileges restriction is found not to be ambiguous, it can only apply to 2 of the 10 restricted facilities. Defendants also argue injunctive relief was not proper when money damages as to defendants' alleged tortious interference were definable. Lastly, defendants contend the trial court erred in ruling that the corporate plaintiff's postbreach profitability was irrelevant.
¶ 2 We hold the trial court erred by entering a preliminary injunction prohibiting defendants from treating plaintiffs' patients and by enforcing an ambiguous restrictive covenant contained in one defendant's employment agreement.
¶ 4 Northwest Podiatry Center, Ltd. is a closely held Illinois professional corporation that provides podiatric care to individuals with foot and ankle problems. Dr. Gregory Bryniczka, a podiatrist, founded NPC in 1974. Dr. Bryniczka is also the president and majority shareholder of NPC, as well as a director and trustee.
¶ 5 NPC has six office locations: Niles, Wheaton, Aurora, DeKalb, Streamwood and South Elgin. Each office has an office manager, most of whom are long-term employees of NPC. Debra Fickenscher was the office manager of the Streamwood office for 12 years. Christine Nudo was an employee of NPC for 10 years, 5 of which she was an office manager.
¶ 6 Dr. Ochwat worked at NPC for over 20 years. Dr. Ochwat was a vice-president, member of the board of directors and employee at NPC. Dr. Ochwat owned 400 of the 1,086 issued and outstanding shares of NPC, about 37%. Dr. Ochwat had no restrictive covenants with NPC. ¶ 7 Dr. Halihan began his employment with NPC in September 2006. Before starting, on June 15, 2006, Dr. Halihan signed an employment agreement with NPC. The contract contained three separate restrictions: a non-competition clause, a privileges restriction, and a solicitation restriction:
"PHYSICIAN covenants and agrees that he shall not enter into a 'competitive practice' (as hereafter defined) at any time during the period beginning on the first day of employment and ending thirty-six (36) months after the date on which his employment terminates. The term 'competitive practice' shall mean the full-time or part-time practice of podiatric medicine, directly or indirectly, alone or with another person or person, partnership, corporation, or any other entity within a five (5) mile radius of the Offices or any office of CORPORATION."
"PHYSICIAN further covenants and agrees that should he leave the employ of CORPORATION that he will surrender his clinical privileges at any hospital or ambulatory surgical treatment center at which an employee of CORPORATION then holds clinical privileges. "
"PHYSICIAN further agrees that he will not, directly or indirectly for himself or on behalf of any other person, partnership, corporation, or any other entity solicit, divert or take away business or patronage of the CORPORATION during the term of PHYSICIAN's employment and for thirty-six (36) months thereafter, whether or not he has paid CORPORATION for the privilege of entering into a competitive practice (as defined above)."
The employment agreement had a three-year term with a provision that the term could be extended "by mutual consent." The parties never entered into a written extension of the employment agreement.
¶ 8 In March 2010, Dr. Ochwat told Dr. Bryniczka that he would be retiring and moving to California. On April 19, 2010, Dr. Halihan submitted his letter of resignation to NPC, effective June 30, 2010. Dr. Ochwat and Dr. Halihan left NPC and now work at Advanced Foot and Ankle Specialists (AFA), started by Dr. Ochwat in 2010. AFA's two offices are located in Hoffman Estates and Elgin.
¶ 9 Ms. Fickenscher ended her employment with NPC on June 22, 2010, to work for AFA in both its offices. Ms. Nudo also left her employ with NPC to work for AFA.
¶ 10 NPC sought injunctive relief claiming Dr. Ochwat and Dr. Halihan breached their fiduciary duties to NPC by engaging in secret dealings, setting up AFA, soliciting other employees to terminate their employment with NPC, misappropriating NPC patient records, and inducing Northwest Suburban Independent Practitioner's Association (IPA) to terminate its agreement with NPC. Plaintiffs also alleged Dr. Halihan violated postemployment restrictive covenants.
¶ 11 On June 30, 2010, the trial court granted, in part, plaintiffs' motion for a temporary restraining order, enjoining defendants from treating any individual who was a current or former patient with NPC from January 1, 2009, through June 30, 2010. Defendants did not appeal from the temporary restraining order.
¶ 12 The trial court held a hearing to determine whether to grant plaintiffs' request for a preliminary injunction. On August 9, 2010, the trial court limited discovery in the case, prohibiting defendants from conducting discovery regarding plaintiffs' lost profits and money damages. Later, the court granted defendants' motion for a clarifying order, allowing discovery to proceed on all issues. Defendants served subpoenas on NPC's certified public accountant, Ronald Dell, and NPC's outside counsel, James Huck, whose firm drafted Dr. Halihan's employment agreement. Plaintiffs successfully stayed the depositions. Defendants filed a discovery motion to compel on May 26, 2011, which was denied. Defendants were unable to pursue any information relating to the financial impact of their conduct on NPC before the trial court's issuance of the preliminary injunction.
¶ 13 On January 17, 2012, the trial court granted most of the injunctive relief sought by plaintiffs. The trial court held NPC was entitled to enforce the restrictive covenants in Dr. Halihan's employment agreement and found that the breaches of fiduciary duties by both defendants were ongoing and, thus, warranted injunctive relief.
¶ 14 The trial court determined that because NPC is a closely held corporation and Dr. Ochwat was a 37% shareholder, as well as an officer, director and trustee, he "owed a fiduciary duty to the principals of NPC to deal fairly, honestly, and openly." The trial court held the fiduciary relationship prohibited "all forms of trickery, secret dealings, and preference for self in matters related to and connected with the principal's business."
¶ 15 The trial court found Dr. Ochwat began "conspiring" with Dr. Halihan to form AFA in January and February 2010, in violation of their fiduciary duties to NPC. In March 2010, Dr. Ochwat informed Dr. Bryniczka he intended to resign. In doing so, Dr. Ochwat led Dr. Bryniczka to believe that he was going to retire and move to California, not start a competing practice. The trial court found it significant that Dr. Ochwat never informed Dr. Bryniczka of his intentions, even though he was laying the groundwork for his competing practice at the time. Dr. Ochwat solicited NPC employees as early as January or February of 2010, including Ms. Fickenscher, Ms. Nudo, and Dr. Michael DiChoso, who chose to remain employed by NPC. Dr. Ochwat ...