Opinion
No. 04 CV 0399 (ILG)
March 11, 2004
MEMORANDUM AND ORDER
The plaintiff, a dermatologist, obtained an Order directing the defendant dermatologists by whom she was employed, to show cause why they should not be preliminarily enjoined from enforcing a restrictive covenant contained in an employment agreement entered into between the plaintiff and Josiane Lederman, M.D., P.C., which provides as follows:
The Physician acknowledges that, as of the date of this Agreement, she has no substantial sources of patients or referral sources. Physician further acknowledges that Employer has been materially induced to enter this Agreement in reliance upon Physician's express agreement to be bound by the restrictive covenant not to compete as set forth below, and further that Employer may take other actions during the term of this Agreement in continued reliance upon Physician's express agreement to be bound by the following restrictive covenants. The Physician also agrees that under the circumstances of this transaction, the following restrictive covenants are reasonable in extent, duration and geographical scope. Accordingly the Physician agrees that in the event of a termination of the Physician's employment with the Employer for any reason, the Physician shall not, for a period of two (2) years following the termination of his employment, without the written consent of the Employer, engage, directly or indirectly, as principal, agent or employee, in the practice of dermatology within the borough of Staten Island
The pre-requisites for injuctive relief in the Second Circuit which the movant has the burden of satisfying have been stated to be "(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief." Jackson Dairy, Inc., v. H.P. Hood Sons, Inc., 596 F.2d 70, 72 (2d Cir. 1979).
Restrictive covenants are fairly ubiquitous in employment agreements, the validity of which entail a reasonable balancing of the interests of the employer against the interests of the employee and the interests of the public. The reasonableness of such covenants restricting the employee's right to compete with her employer is determined by a test which, in BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 389 (1999), in the context of the prevailing common law standard adopted by the Court was stated to be as follows: "[A] restrictive covenant will only be subject to specific enforcement to the extent that it is reasonable in time and area, necessary to protect the employer's legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee." (Citing Reed, Roberts Assoc. v. Strauman, 40 N.Y.2d 303, 307 (1976)).
In the enforcement of restrictive covenants among professionals, "greater weight" is given "to the interests of the employer in restricting competition within a confined geographical area," the rationale for doing so being "that professionals are deemed to provide `unique or extraordinary' services." BDO Seidman 93 N.Y.2d at 389 (deciding that the services of an accountant were those of a professional and deemed to be unique or extraordinary).
The interests of the employer have enjoyed a solicitous consideration by the Court where the issue of the enforceability of a restrictive covenant is in an employment agreement between doctors. In Karpinski v. Ingrasci, 28 N.Y.2d 45 (1971), the plaintiff, an oral surgeon, employed the defendant who agreed that he will never practice oral surgery in Cayuga, Courtland, Seneca, Tompkins or Ontario Counties, except in association with the plaintiff or if the plaintiff terminates the agreement and employs another oral surgeon. After terminating his employment, the defendant opened his own office for the practice of oral surgery in Ithaca, which is in Tompkins County. The plaintiff sought to enforce the restrictive covenant. In granting the injunction barring the defendant from practicing oral surgery in the five specified counties, the Court, through Chief Judge Fuld held that "`It is a firmly established doctrine,' it has been noted, `that a member of one of the learned professions, upon become assistant to another member thereof, may, upon a sufficient consideration, bind himself not to engage in the practice of his profession upon the termination of his contract of employment, within a reasonable territorial extent, as such an agreement is not in restraint of trade or against public policy.' (Ann., Restriction on Practice of Physicians, 58 A.L.R. 156, 162)." 28 N.Y.2d at 49. The Court went on to observe that "the plaintiff made no attempt to extend his influence beyond the area from which he drew his patients, the defendant being perfectly free to practice as he chooses outside the five specified counties." 28 N.Y.2d at 50.
It is significant to note that the restrictive covenant at issue here, provides in relevant part that "The PHYSICIAN [the plaintiff] also agrees that under the circumstances of this transaction, the following restrictive covenants are reasonable in extent, duration and geographical scope." That covenant, part of a contract which, in its comprehensiveness, gives every indication that it was carefully negotiated and not alleged to have been the product of fraud or overbearing, is acknowledged by the plaintiff to be reasonable and not territorially overbroad and should be enforced in accordance with its terms. Karpinski is thus exquisitely applicable here and without more, would compel a denial of the plaintiff's motion.
Other cases would, however, drive the Court to the same conclusion. For example, in Gelder Medical Group v. Webber, 41 N.Y.2d 680 (1977), at issue was whether the defendant, a surgeon, who was excluded from a medical partnership, could be held to his covenant not to compete within a restricted radius of 30 miles for a five year period. That Court held that he could be and no harm would be suffered by the public if he was. There were other surgeons available to the public within the restricted area just as there are other dermatologists available to the public residing on Staten Island
In Albany Medical College v. Lobel, 745 N.Y.S.2d 250, 296 A.D.2d 701 (3rd Dept. 2002), the plaintiff appointed the defendant as an assistant professor in its Department of Obstetrics and Gynecology, who agreed not to practice medicine within 30 miles from the City of Albany for five years. After leaving its employ, the defendant opened his own office nearby. The plaintiff sought and obtained a preliminary injunction against the defendant pending its action to enforce the restrictive covenant. The Court invoked the well established rule enforcing such covenants if reasonable as to time and area, necessary to protect the employer's legitimate interest, not harmful to the public and not unduly burdensome to the employee. The Court agreed that the plaintiff established a strong likelihood of irreparable harm were the injunction to be denied by the likely loss of the investment it made in hiring the defendant and the patients and revenues it would lose to the defendant's new practice. See also North Shore Hematology/Oncology, et al. v. Zervos, 717 N.Y.S.2d 250, 278 A.D.2d 210 (2d Dept. 2000).
For all of the foregoing reasons, the plaintiff's motion for a preliminary injunction is denied. She can establish neither the likelihood of success on the merits nor irreparable harm. She is free to practice her profession within the other four boroughs of the City of New York. The covenant she seeks to avoid is, as she freely acknowledged, reasonable in time and area and necessary to protect the defendant's legitimate interest without subjecting the public to the slightest harm.
SO ORDERED.