Cogley Clinic v. Martini

*551 Hays, J.

I respectfully dissent.

As I view this case, the single issue is whether or not equity, through means of injunctive relief, should enforce the restrictive covenant in the contract of employment entered into by plaintiff and defendant. This in turn reduces the issue to whether or not the covenant is fair and reasonably necessary for the protection of the covenantor who seeks the injunctive relief.

That the covenant in question is in fact one for the partial restraint of trade is so recognized by all authorities but will be enforced if such restraint is reasonable, that is — if it only affords a fair protection to the interests of the party in favor of whom it is given and not so large as to interfere with the interests of the public, or impose undue hardship on the person restricted. 17 C. J. S., Contracts, sections 246, 247 and 254; Restatement of the Law, Contracts, section 515; Annotation, 43 A. L. R.2d 94, 116; Brecher v. Brown, 235 Iowa 627 , 17 N.W.2d 377 ; Mutual Loan Co. v. Pierce, 245 Iowa 1051 , 65 N.W.2d 405 ; Federated Mutual Implement and Hardware Ins. Co. v. Erickson, 252 Iowa 1208 , 110 N.W.2d 264 .

The burden of establishing reasonableness is upon the party seeking to enforce the covenant, he not being per se entitled to its enforcement. Mutual Loan Co. v. Pierce, supra, and should be strictly construed against the one seeking relief in equity. In Division VIII of the majority opinion, it is said that “the burden of proof that a contract is contrary to public policy is upon him who asserts it”, and then states that the defendant has not carried such burden. It cites Larsen v. Burroughs, 224 Iowa 740 , 277 N.W. 463 . In that case the case of Rowe v. Toon, 185 Iowa 848 , 169 N.W. 38 , is cited as authority for the statement. At pages 852 and 853 of 185 Iowa, it is said:

“That equity will refuse its aid to enforce a clearly unreasonable or oppressive contract of this nature may be admitted, but there is nothing upon the face of this particular agreement indicating that it is unreasonable or inequitable in any respect. * * *. The contract sued upon not being unreasonable on its face, plaintiff was not required to negative the existence of possible conditions rendering it void or voidable. * * *.”

*552 In effect, it says such covenants are per se valid with the burden being upon the defendant to show illegality, i.e., unreasonableness, as reasonable or unreasonable is the yardstick by which the legality is to be determined. It is difficult for me to reconcile such reasoning with our later expression in Mutual Loan Co. v. Pierce, 245 Iowa 1051, 1056 , 65 N.W.2d 405, 408 , supra, which is that “The covenantor who seeks the enforcing injunction in equity has the burden of showing the restrictive covenant is fair and reasonably necessary for the protection of his business.”

The majority opinion recognizes that the element of space and time are important upon the question of reasonableness, and I agree. It finds that a three-year restriction is reasonable and with this I agree. It states that under the facts shown, a 25-mile limitation is reasonable. When it is said under the facts shown, such a limitation is reasonable, I cannot agree. It is true there are many instances where a 25-mile radius has been reasonable but the majority opinion chooses to overlook the fact that this particular 25-mile radius includes all of the cities of Omaha, Nebraska, and Council Bluffs, Iowa, also a part of Harrison County, Mills County and a greater part of - Pottawattamie County in Iowa, and a part of Sarpy County, Washington County and Douglas County in Nebraska and embraces some 450,000 persons residing therein. I am unable to brush aside this population question by merely saying, as does the majority opinion in Division IV, that “we do not agree that the contract before us is unreasonable.” As is stated in Restatement, Contracts, section 515(a), “A restraint of trade is unreasonable * * * if it is greater than is required for the protection of the person for whose benefit the restraint is imposed.” Under Mutual Loan Co. v. Pierce, supra, this is the Clinic’s burden and, in my opinion, even a cursory examination of the record shows a failure to carry such burden.

Defendant is an orthopedic surgeon. He was such when he joined the Clinic and no period of training was needed. As stated by Dr. J. P. Cogley, “he had all of the qualifications of an orthopedic surgeon before he came to work at Cogley Clinic.” *553 In this respect, at least, the case of Larsen v. Burroughs, supra, is distinguishable. It is stated in the record that with the departure of Doctor Martini from the Clinic, they suffered a financial loss of $21,000 that could be placed at the hands of the orthopedic department. Assuming this was due to his departure rather- than could he attributed thereto, this has nothing to do with Doctor Martini operating separately. It does not appear what money came to the Clinic because of Doctor Martini and this is not an action to require him to remain with it. Such testimony merely shows that after Doctor Martini left, the pay for an orthopedic surgeon went to Omaha surgeons who were called into the case instead of to the Clinic. It was the same as it was before Doctor Martini was employed.

What effect upon the Clinic has resulted from Doctor Martini opening his own office in Council Bluffs? Robert J. Prichard, business administrator of the Clinic, stated “As a result of Doctor Martini leaving we have lost no accounts to date.” Dr. Eugene B. Floersch, a member of the Clinic, stated “I believe we have actually gained some patients since he [Doctor Martini] left the Clinic.” Doctor Cogley stated “The same doctors that did refer business to our Clinic are still referring business to our Clinic.” Doctor Martini states that his business is such as is referred by a patient’s attending physician, and as to this there appears to be no dispute in the record, and that with one exception, he has no referral cases that previously would go to the Clinic. There is not one instance shown in the record where Doctor Martini used or called for Clinical records from the Clinic. While I do not imply that specific damage must be shown before equity will enforce a contract of this type, I do say that a showing of no injury due to mythmg other than his leaving the Glmic, such as appears in this record, has a strong bearing upon whether such restriction calls for more than is reasonably necessary to protect the Clinic’s interests. Also having material bearing upon the question are the 450,000 persons residing in the restricted area. Other than Doctor Martini there is no orthopedic surgeon in Council Bluffs, a city of 55,000 people, and, on the Iowa side of the Missouri River, none closer *554 than 100 miles except one at Red Oak, Iowa. There are five or six in Omaha, Nebraska, which has a population of 301,000. This means seven orthopedic surgeons to care for this area. The Clinic has some 50,000' patients coming from a radius in excess of the 25-mile restricted area, which leaves some 400,000 people with whom the Clinic has no contact. While not unreasonable in miles, I think it too clear to argue that, considering the population, it covers an area far beyond the capabilities of the Clinic to serve and is therefore unreasonable. See Brecher v. Brown, supra, 235 Iowa 627 , 17 N.W.2d 377 ; Arthur Murray Dance Studios v. Witter (Ohio Com. Pl.), 105 N.E.2d 685 ; Tawney v. Mutual System of Maryland, 186 Md. 508 , 47 A.2d 372 .

Another factor stands out in this record which is overlooked in the majority opinion. In Mutual Loan Co. v. Pierce, 245 Iowa 1051, 1056 , 65 N.W.2d 405, 408 , supra, it is said, “Every man has a right to earn his livelihood * * * and his covenant not to follow a certain calling cannot be enforced by the covenantor as any sort of penalty.” That is exactly what is being sought here.

Mr. Prichard, business administrator of the Clinic, states: “Cogley Clinic does not have an objection to any number of orthopedic surgeons that wish to come to Council Bluffs. The sole purpose of this litigation is to enforce a written contract entered with Doctor Martini and a restrictive covenant contained therein, and not to keep orthopedic surgeons from locating in Council Bluffs.” (Italics added.)

Doctor Cogley stated: “There are none of our surgeons in our Clinic who are qualified orthopedic surgeons who would be able to do some of the things that Doctor Martini did when he was with us.”

Comparing this area situation (25 miles) in this case, and bearing in mind the 450,000 people included therein, with such cases as McMurray v. Faust, 224 Iowa 50 , 276 N.W. 95 ; Larsen v. Burroughs and Brecher v. Brown, both supra, is like comparing the dropping of a spoonful of lemonade into Lake Erie and a spoonful of arsenic in a half tumbler of water. In my *555 judgment this record shows such a restraint far beyond any reasonable anticipation of unfair competition as to require equity to refuse its aid by injunctive relief.

Two other factors are involved: Undue hardship upon Doctor Martini and depriving the public in this area of the services of a skilled professional man. A careful examination of this record can, in my judgment, lead but to one conclusion, the balance of the equities rests with Doctor Martini and the public.

In Brecher v. Brown, supra, it is said at page 633 of 235 Iowa: “ ‘Covenantees [in contracts of this character between employer and employee] desiring the maximum protection have no doubt a difficult task. When they fail, it is commonly because, like the dog in the fable, they grasp too much and so lose all.’ ”

Such is this case. I would reverse the decree of the trial court.

Larson, J., joins in this dissent.