Statesville Medical Group, P.A. v. Dickey

418 S.E.2d 256, 106 N.C. App. 669, 7 I.E.R. Cas. (BNA) 1095, 1992 N.C. App. LEXIS 551
CourtCourt of Appeals of North Carolina
DecidedJuly 7, 1992
Docket9122SC686
StatusPublished
Cited by10 cases

This text of 418 S.E.2d 256 (Statesville Medical Group, P.A. v. Dickey) is published on Counsel Stack Legal Research, covering Court of Appeals of North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Statesville Medical Group, P.A. v. Dickey, 418 S.E.2d 256, 106 N.C. App. 669, 7 I.E.R. Cas. (BNA) 1095, 1992 N.C. App. LEXIS 551 (N.C. Ct. App. 1992).

Opinion

COZORT, Judge.

Plaintiff appellee, Statesville Medical Group, P.A., (“Medical Group”) instituted an action to have a covenant not to compete clause enforced against defendant appellant, Dr. Richard A. Dickey. Plaintiff was successful in obtaining a preliminary injunction, and defendant appeals. We reverse.

On 8 April 1983 defendant signed an employment contract with plaintiff. The contract contained a covenant against competition prohibiting defendant from practicing medicine or any business *671 competing with the Medical Group for a two-year period in Iredell County from the date of his voluntary or involuntary termination. The defendant and the plaintiff were unable to maintain amicable relations, and on 14 June 1990 defendant submitted his voluntary resignation. The Medical Group’s Board of Directors approached defendant in an attempt to convince him to withdraw his resignation. On 23 July 1990 defendant conditionally agreed to withdraw his resignation if the Board made several requested changes in office and accounting procedures. After the Board’s failure to implement changes, on 20 September 1990 defendant submitted a second written notice stating that he would not withdraw his earlier resignation and that his termination would occur on 14 December 1990. The Board accepted this resignation but interpreted the six-month notice requirement as running from 27 September 1990, the date of its acceptance of defendant’s second notice of resignation. Defendant concluded, however, that his relationship with the Medical Group terminated six months from his original letter of resignation. He opened a practice in Iredell County on 15 December 1990. After defendant’s departure, the Medical Group contracted with Nalle Clinic (“Clinic”) located in Charlotte for the services of an endocrinologist to practice in Statesville on a need basis and at least one-half day a week. The contract also provided for same-day consultation with any one of the other four or five endocrinologists in the Clinic.

On 18 December 1990 the Medical Group sought and was granted a temporary restraining order prohibiting defendant from practicing medicine in Iredell County. On 14 January 1991, the superior court issued a preliminary injunction, concluding that there would be no substantial risk of public harm by enforcement of the covenant, that plaintiff had shown a likelihood of success on the merits, and that plaintiff would sustain irreparable harm by non-enforcement of the covenant.

On appeal, defendant argues: (1) that the trial court erred in granting the plaintiff’s request for a preliminary injunction because enforcement of the covenant would create a substantial question of potential harm to the public; and (2) that the trial court erred in granting the preliminary injunction because plaintiff sought an equitable remedy with unclean hands.

We initially address defendant’s first assignment of error. In Iredell Digestive Disease Clinic v. Petrozza, 92 N.C. App. 21, 373 *672 S.E.2d 449, aff’d, 324 N.C. 327, 377 S.E.2d 750 (1988), this Court set forth the law governing preliminary injunctions and the enforceability of covenants not to compete:

A preliminary injunction is an extraordinary measure, to be issued by the court, in the exercise of its sound discretion, only when plaintiff satisfies a two-pronged test: (1) that plaintiff is able to show likelihood of success on the merits and (2) that plaintiff is likely to sustain irreparable loss unless the injunction is issued, or if, in the court’s opinion issuance is necessary for the protection of a plaintiff’s rights during the course of litigation.

Id. at 24-25, 373 S.E.2d at 451 (citing Investors, Inc. v. Berry, 293 N.C. 688, 701, 239 S.E.2d 566, 574 (1977)). “To be enforceable, a covenant not to compete must be (1) in writing, (2) entered into at the time and as part of the contract of employment, (3) based upon reasonable consideration, (4) reasonable both as to time and territory, and (5) not against public policy.” Id. at 26, 373 S.E.2d at 452 (citing A.E.P. Industries, Inc. v. McClure, 308 N.C. 393, 402-03, 302 S.E.2d 754, 760 (1983)).

On appeal of a preliminary injunction the standard of review is de novo. “[A]n appellate court is not bound by the findings, but may review and weigh the evidence and find facts for itself.” A.E.P. Industries, 308 N.C. at 402, 302 S.E.2d at 760. We do not determine whether the covenant is in fact enforceable, but rather we must review the evidence presented to the trial court and determine whether plaintiff has met its burden of showing likelihood of success on the merits. Petrozza, 92 N.C. App. at 26-27, 373 S.E.2d at 452.

After reviewing the evidence we agree with the trial court’s findings that the covenant was part of a written employment contract signed by both parties, based on reasonable consideration, and reasonable as to time and territory restrictions. Therefore, the first four elements of enforceability have been satisfied.

We do not agree that the covenant satisfies the fifth element of enforceability. We find the evidence establishes that enforcement of the covenant is against public policy. In Petrozza this Court presented the test for determining whether a covenant violates public policy:

*673 If ordering the covenantor to honor his contractual obligation would create a substantial question of potential harm to the public health, then the public interests outweighs the contract interests of the covenantee, and the court will refuse to enforce the covenant. But if ordering the covenantor to honor his agreement will merely inconvenience the public without causing substantial harm, then the covenantee is entitled tó have his contract enforced.

Petrozza, 92 N.C. App. at 27-28, 373 S.E.2d at 453 (citations omitted). To determine the risk of substantial harm to the public this Court has considered the following factors: the shortage of specialists in the field in the restricted area, the impact of plaintiff establishing a monopoly of endocrinology practice in the area, including the impact on fees in the future and the availability of a doctor at all times for emergencies, and the public interest in having a choice in the selection of a physician. Id. at 30-31, 373 S.E.2d at 454-55.

In support of the motion for preliminary injunction, plaintiff submitted twenty-four affidavits signed by physicians.

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Bluebook (online)
418 S.E.2d 256, 106 N.C. App. 669, 7 I.E.R. Cas. (BNA) 1095, 1992 N.C. App. LEXIS 551, Counsel Stack Legal Research, https://law.counselstack.com/opinion/statesville-medical-group-pa-v-dickey-ncctapp-1992.