Memorandum - is noncompete clause enforceable

Court of Appeals of Ohio, Second District, Montgomery County.

WILSON, Appellee, v.

KREUSCH et al., Appellants.

Decided May 10, 1996.

Former employee filed action against employer, alleging breach of employment contract. Employer counterclaimed, alleging breach of noncompetition covenant. The Court of Common Pleas granted judgment for employee and dismissed counterclaim. On appeal, the Court of Appeals, Wilson, J., 1992 WL 107057, reversed and remanded. On remand, the Court of Common Pleas found parties were each entitled to recover on their claims, ordered net judgment for employer, and imposed certain restrictions on employee's practice. Cross-appeals were filed. The Court of Appeals, Grady, J., held that: *** (2) employer's damages for employee's breach of noncompetition covenant in employment agreement should not have been reduced by reason of delay in enforcing covenant and fact that employer breached agreement; and (3) noncompetition covenant, as modified by trial court, was reasonable and could be enforced by way of injunction.

Affirmed in part; reversed in part; remanded.

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GRADY, Judge.

This is an appeal and a cross-appeal in an action involving claims for breach of an employment contract and breach of a covenant not to compete.

Thomas J. Kreusch is a chiropractor who has practiced for many years in Montgomery **573 County. In 1981, Bret Wilson, who is also a chiropractor, became Kreusch's employee. In 1983, they entered into a written employment contract which provided (1) for termination by either upon thirty days' written notice to the other, (2) that Wilson would not compete with Kreusch in a defined area for a defined time after termination, and (3) for Wilson's compensation.

In August 1988, Kreusch terminated Wilson, effective immediately. Shortly thereafter, Wilson opened a chiropractic office within three miles of Kreusch's office, within the time and area prohibited by their agreement.

In April 1989, Wilson filed this action alleging breach of their employment contract by Kreusch, who counter- claimed that Wilson was in breach of the covenant not to compete. The trial court ultimately granted a judgment for Wilson in the amount of $30,841.66 and dismissed Kreusch's counterclaim. On appeal, we reversed and remanded for further proceedings.

On remand, the trial court found that the parties were each entitled to recover on their claims and ordered a net judgment for Kreusch in the amount of $31,201.24. It also imposed certain restrictions on Wilson's practice for six months. After Wilson moved for a new trial, the court corrected an error in computation and reduced Kreusch's net judgment to $21,076.24.

Kreusch filed a timely notice of appeal. Wilson has cross-appealed. Kreusch has moved to strike Wilson's cross- appeal for lack of a timely notice of appeal or cross-appeal. Their assignments of error are set out below.

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Kreusch's Third Assignment of Error

“The trial court erred in limiting and reducing defendants' contractual covenant not to compete by time and geography.”

[8] Although it granted Kreusch's request for an injunction, the trial court limited the scope of its order not to compete. The trial court enjoined Wilson as follows:

“2. [Wilson] is enjoined from providing at any location any chiropractic treatment or therapy, directly or by associates in his office or connected with his office, for a period of six months, for any person who currently resides in the area circumscribed by a five mile radius of the office of [Kreusch]. This applies to new patients only, and those not yet scheduled for an appointment, and to any other patients (in the proscribed area) who are not currently under active care. * * *

“3. [Wilson] is enjoined for the same six month period from accepting as a new patient at any location within a fifteen-mile radius of the said Kreusch office any current patient of Dr. Thomas J. Kreusch, D.C., Inc.”

*54 The court further stated that subject to this order, Wilson could continue to practice at his current location.

[9][10] “A covenant not to compete which imposes unreasonable restrictions upon an employee will be enforced to the extent necessary to protect an employer's legitimate interests.” Raimonde v. Van Vlerah (1975), 42 Ohio St.2d 21, 71 O.O.2d 12, 325 N.E.2d 544, paragraph one of the syllabus. “A covenant restraining an employee from competing with his former employer upon termination of employment is reasonable if the restraint is no greater than is required for the protection of the employer, does not impose undue hardship on the employee, and is not injurious to the public.” Id. at paragraph two of the syllabus. “Courts are empowered to modify or amend employment agreements to achieve such results.” Id. at 26, 71 O.O.2d at 14, 325 N.E.2d at 547; see, also, Rogers v. Runfola & Assoc., Inc. (1991), 57 Ohio St.3d 5, 8, 565 N.E.2d 540, 543-544.

[11] Restrictive covenants not to compete are not favored by the law. “This measure of disfavor is especially acute concerning restrictive covenants among physicians, which affect the public interest to a much greater degree.” Ohio Urology, Inc. v. Poll (1991), 72 Ohio App.3d 446, 452-453, 594 N.E.2d 1027, 1031. However, noncompetition covenants between physicians are not per se unenforceable and if reasonable may be enforced via injunctive relief. Id. at 454, 594 N.E.2d at 1032-1033.

Kreusch argues that the trial court's limitations to the express provisions of the covenant were based on a finding of delay by Kreusch in enforcing the covenant. However, we do not find that the modifications to the covenant were based solely on Kreusch's supposed delay in seeking to enforce the covenant. The trial court found that enforcing the covenant by its geographic terms was not necessary to protect Kreusch's interests. The trial court also cited various factors to be considered in evaluating the reasonableness of a covenant not to compete, as set forth in Raimonde v. Van Vlerah, 42 Ohio St.2d at 25, 71 O.O.2d at 14, 325 N.E.2d at 546-547.

Moreover, although delay in seeking injunctive relief may not be a basis to reduce the amount of damages resulting from a breach of the covenant, it may be considered in evaluating the reasonableness of the injunctive relief sought. Raimonde recognized that one of the factors to be considered in determining whether a covenant is reasonable is whether the benefit to the employer is disproportionate to the detriment to the employee. Delayed enforcement of a covenant not to compete can alter that balance by increasing the covenant's detrimental effect on the employee.

*55 The modifications adopted by the trial court struck an appropriate balance between the interests of Kreusch, Wilson, and the public. The restrictions provide protection to Kreusch, in that they preserve his patient base and limit Wilson's ability to compete with him in the immediately surrounding area. The restrictions do not impose undue hardship on Wilson, in that they do not require him to move his office, nor do they **576 preclude him from accepting new patients, except from within a relatively small prohibited area. Finally, the restrictions are not injurious to the public, in that they have no impact on current patients of Wilson and only a limited impact on potential new patients. The covenant as modified by the trial court is reasonable and may be enforced by way of injunction.

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Judgment affirmed in part, reversed in part and cause remanded.

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