Spectrum Emergency Care, Inc. v. St. Joseph's Hospital & Health Center

479 N.W.2d 848, 1992 N.D. LEXIS 20, 1992 WL 4499
CourtNorth Dakota Supreme Court
DecidedJanuary 14, 1992
DocketCiv. 910030
StatusPublished
Cited by15 cases

This text of 479 N.W.2d 848 (Spectrum Emergency Care, Inc. v. St. Joseph's Hospital & Health Center) is published on Counsel Stack Legal Research, covering North Dakota Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Spectrum Emergency Care, Inc. v. St. Joseph's Hospital & Health Center, 479 N.W.2d 848, 1992 N.D. LEXIS 20, 1992 WL 4499 (N.D. 1992).

Opinions

ERICKSTAD, Chief Justice,

on reassignment.

Spectrum Emergency Care, Inc., (Spectrum) appeals from a judgment of the District Court for Stark County which held that the restrictive covenants of its contracts with St. Joseph’s Hospital and Health Center (Hospital) and certain physicians were void under section 9-08-06, N.D.C.C. We affirm.

Spectrum supplies emergency room physicians to hospitals to provide emergency medical care. Since 1979 and until January 1, 1990, Spectrum had a contract with the Hospital to provide emergency room physicians. Originally, the contract was for weekend emergency room coverage; however, sometime during 1986 the contract was modified so that full-time emergency coverage was provided by Spectrum. The agreement between Spectrum and the Hospital was self-renewing and provided for a 90-day notice period prior to termination. This agreement contained the following clause:

“During the term of this Agreement, any renewals or extensions thereof, and for a period of one year (12 months) thereafter, Hospital agrees it will not directly or indirectly enter into any agreement covering the same or similar services as are provided for herein with any person with whom it came into a business or [850]*850professional relationship as a result of this Agreement.”

Spectrum also had separate Independent Contractor Physician Agreements with Robert L. Cusic, M.D., Sheldon Swenson, M.D., and Paul Swisher, M.D.1 These agreements stated:

“8. Corporation and Physician recognize that during Physician’s association with Corporation, Physician has been and will continue to be brought into contact with Corporation’s confidential methods of operation and trade secrets, including know-how, data and other information about Corporation’s operations and business of a confidential nature; that such information gives to the relationship a special and unique value. Therefore, Physician agrees that during the term of this contractual relationship with Corporation and for a period of one (1) year thereafter, Physician will not in any manner, directly or indirectly: (a) disclose or divulge to any person, entity, firm or company whatsoever, or use for his own benefit or the benefit of any other person, entity, firm or company, directly or indirectly in competition with Corporation any knowledge, information, business methods, techniques or data of Corporation; (b) solicit, divert, take away or interfere with any of the accounts, trade, business patronage, employees or contractual arrangements of Corporation; (c) compete with Corporation at Hospital or enter into any contractual arrangements for the provision of emergency department physician coverage with any hospital where Physician has been scheduled by Corporation. As used herein, the term ‘Corporation’ shall include Spectrum Emergency Care, Inc. and its affiliates.
“Notwithstanding the above, if the agreement between Corporation and Hospital is terminated through no fault of Physician’s, and through no direct or indirect negotiation with Hospital Board, Administration, or Medical Staff, then the terms and provisions of this paragraph ‘8’ shall be null and void.
“Physician shall, upon termination of the contractual relationship between Physician and Corporation, return to Corporation all books, records and notes and all other information and documents applicable to Corporation, its accounts and the manner of conducting its business.
“It is the intention of the parties to restrict the activities of the Physician only to the extent necessary for the protection of the legitimate business interests of Corporation and nothing herein shall be such as to prevent Physician from earning a livelihood.”

In order to fulfill its contract with the Hospital, Spectrum entered Employment Agreements with Robert L. Cusic to serve as Medical Director, and Sheldon Swenson to serve as Assistant Medical Director at the Hospital. These agreements did not vary in any significant manner from the previously quoted agreements.

The undisputed facts are that on September 2, 1989, physicians Cusic and Swenson met with the CEO of the Hospital, John Studsrud. During this meeting, they informed Studsrud that they would not renew their contracts with Spectrum as they were unhappy with Spectrum and were seeking other employment. On September 11, 1989, these persons held another meeting at which a change in format of the emergency room was discussed. On September 13,1989, the Hospital notified Spectrum that it would not renew its contract with Spectrum. Cusic and Swenson negotiated and signed new employment agreements with the Hospital prior to the termination of their agreements with Spectrum. The new agreements between the Hospital and the physicians were to take effect at the end of the Spectrum contracts and were to be effective for four years.

Spectrum claims that the Hospital, Cusic, and Swenson breached their agreements with it when they entered into new agreements while still under contract with it. Spectrum’s complaint asserted that the [851]*851physicians and the Hospital violated their respective agreements with it by making agreements with each other. Spectrum requested injunctive relief and monetary damages.

Spectrum apparently concedes that the provision for a one-year restriction on the physicians’ activities after the termination of the contract is not valid. However, Spectrum asserts the interim restraint in the contracts is valid and binding upon both the Hospital and the physicians.

Although the trial court determined that neither the physicians nor the Hospital breached any of their respective contractual obligations to Spectrum, we, for purposes of this opinion, assume that a technical breach occurred. We, nevertheless, affirm the judgment for the reasons hereinafter explained.

The physicians and the Hospital rely on section 9-08-06 of the North Dakota Century Code to defend their actions. It reads: “Every contract by which anyone is restrained from exercising a lawful profession, trade, or business of any kind is to that extent void_ [Emphasis added.]” Thus, our inquiry must focus on what specific actions the defendants have engaged in and whether or not such conduct is protected under the statute.

As previously stated, on September 2, 1989, the physicians informed the Hospital of their intention of leaving the Spectrum program. This precipitated negotiations between the physicians and the Hospital for employment contracts, with employment by the Hospital of the physicians to begin at the end of the Spectrum contracts. In this sense, the parties were preparing for the time when they would no longer be under contract with Spectrum.

First, we consider whether or not section 9-08-06, N.D.C.C., protects the actions of the physicians. There can be no doubt that section 9-08-06, N.D.C.C., makes void the provision which attempts to prohibit the physicians from being employed by the Hospital at the end of the contract period with Spectrum. Spectrum concedes this point. Thus, the issue narrows to whether or not section 9-08-06, N.D.C.C., protects a person’s ability to negotiate and contract for future employment while under a contract which attempts to prohibit such conduct. We conclude that it provides such protection. The ability to negotiate and contract for future employment is central to one’s ability to exercise a lawful profession, trade, or business.

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Spectrum Emergency Care, Inc. v. St. Joseph's Hospital & Health Center
479 N.W.2d 848 (North Dakota Supreme Court, 1992)

Cite This Page — Counsel Stack

Bluebook (online)
479 N.W.2d 848, 1992 N.D. LEXIS 20, 1992 WL 4499, Counsel Stack Legal Research, https://law.counselstack.com/opinion/spectrum-emergency-care-inc-v-st-josephs-hospital-health-center-nd-1992.