FOR PUBLICATION
ATTORNEYS FOR APPELLANTS: ATTORNEYS FOR APPELLEES:
THOMAS A. WITHROW MICHAEL B. McMAINS
DEBRA A. MASTRIAN MATTHEW W. FOSTER
KERRY L. WAGNER JOHN J. MORSE
Henderson, Daily, Withrow & DeVoe JANA K. STRAIN
Indianapolis, Indiana McMains Foster Jinks & Morse,
P.C.
Indianapolis, Indiana
ERIC A. FREY
Terre Haute, Indiana PETER SACOPULOS
Sacopulos Johnson Carter &
Sacopulos
Terre Haute, Indiana
IN THE
COURT OF APPEALS OF INDIANA
MERCHO-ROUSHDI-SHOEMAKER- )
DILLEY-THORACO-VASCULAR )
CORPORATION, ET AL, )
)
Appellants (Defendants and/or )
Counter-Plaintiffs), )
)
vs. ) No. 84A05-0008-CV-356
)
JAMES W. BLATCHFORD III, M.D., )
EVE G. CIEUTAT, M.D. and )
CARDIOTHORACIC SURGICAL )
ASSOCIATES OF THE WABASH )
VALLEY, L.L.C., )
)
Appellees (Plaintiffs and/or )
Counter-Defendants. )
APPEAL FROM THE VIGO SUPERIOR COURT
The Honorable Michael H. Eldred, Judge
Cause No. 84D01-9912-CP-1990
January 18, 2001
OPINION – FOR PUBLICATION
DARDEN, Judge
STATEMENT OF THE CASE
Mercho-Roushdi-Shoemaker-Dilley-Thoraco-Vascular Corporation ("MRSD")
brings this interlocutory appeal of the trial court's denial of its motion
for preliminary injunction that sought to enjoin Doctors James W.
Blatchford III ("Dr. Blatchford") and Eve G. Cieutat ("Dr. Cieutat") from
violating the non-competition clauses in their respective shareholder and
employment agreements.[1]
We affirm.
ISSUE
Whether the trial court erred in denying MRSD's motion for preliminary
injunction.
FACTS
The facts most favorable to the judgment reveal that MRSD is a
physician group practice incorporated in Indiana providing cardiovascular
medical services in Indianapolis and Terre Haute. MRSD employs an
administrative staff, surgeons, nurses, and perfusionists[2] to provide
cardiovascular surgical teams at Union Hospital and Terre Haute Regional
Hospital ("Regional Hospital"). MRSD is the sole provider of
cardiovascular surgical services in Vigo County.
Doctors John P. Mercho ("Dr. Mercho") and Hussein A. Roushdi ("Dr.
Roushdi") are founding shareholders. Doctors Robert E. Shoemaker ("Dr.
Shoemaker"), Russell S. Dilley ("Dilley"), Dennis M. Jacob ("Dr. Jacob"),
and David K. Evans ("Dr. Evans") are the remaining shareholders. All are
physicians licensed to practice medicine in Indiana. The Articles of
Incorporation provide for two classes of stock: (1) class A voting shares
and (2) class B non-voting shares. Drs. Mercho and Roushdi each own 200
shares of class A voting stock and 100 shares of class B non-voting stock;
the other doctors each own 25 shares of class A voting stock and 100 shares
of class B non-voting stock.
Doctors Blatchford and Cieutat are married and are also licensed to
practice medicine in Indiana. They are surgeons specializing in thoracic,
vascular, and cardiovascular surgery. Drs. Blatchford and Cieutat were
recruited by MRSD. On November 7, 1994, both signed employment agreements
with MRSD. Prior to signing the agreements, the doctors had no ties to
Indiana or MRSD. The agreements were subject to the "Indiana Medical
Professional Corporation Act and the applicable rules of professional
ethics." (R. 433). They specifically addressed the procedure for
terminating employment, employee covenants, and a conditional option for
stock purchase.
For example, MRSD was required to give ninety (90) days written notice
before terminating an employment agreement. No notice was required if
either Drs. Blatchford or Cieutat lost their medical license, was suspended
from practicing medicine, or suffered death or total disability. If the
doctors wished to terminate the agreement, written notice of 180 days was
required. Further, the employment agreements also contained a covenant of
loyalty and non-competition clause. Finally, the agreements provided a
conditional option to purchase shares after the completion of three and one-
half years of employment.
During their employment, Drs. Blatchford and Cieutat resided and
rendered surgical services primarily in Vigo County. The doctors expected
to become shareholders in MRSD during the summer of 1998. When their
expectations were not met, Drs. Blatchford and Cieutat met with various
other doctors and Jerry Dooley, the chief operating officer of Regional
Hospital. Drs. Blatchford and Cieutat stated that they did not believe
they would become partners at MRSD and discussed whether it would be
feasible to establish their own cardiovascular practice. During November
1998 and without notice to Drs. Blatchford and Cieutat, MRSD added Doctor
Nabil Mnayarji ("Dr. Mnayarji") to the Terre Haute practice, and, in
December 1998, Drs. Blatchford and Cieutat incorporated an entity named
Cardiothoracic Surgical Associates of Wabash Valley ("CSA").
In January 1999, Drs. Blatchford and Cieutat began negotiating a
partnership agreement with MRSD. On January 22, 1999, the doctors signed
an Amended and Restated Stock Transfer Agreement retroactive to June 15,
1998, making them partners in MRSD. Drs. Blatchford and Cieutat purchased
25 shares of class A voting stock and 100 shares of class B non-voting
stock. They were also elected and qualified to serve on MRSD's board of
directors. The stock purchase agreement also contained a non-competition
clause. The relevant portion reads as follows:
(c) For a period of three (3) years after a Shareholder ceases to be
a Shareholder, no Shareholder shall engage directly or indirectly, in
the rendition of thoracic, vascular or cardiovascular surgical
services within the two (2) areas contained in circles drawn with a
radius of fifty (50) miles of the center of Monument Circle in
Indianapolis, Indiana and of the center of the Court House of Terre
Haute, Indiana. Each Shareholder specifically acknowledges and
confirms that the foregoing provisions of this paragraph 9 relating to
the three (3) year period following the date any Shareholder ceases to
own stock in the Corporation are reasonable, both in geographic area
and in scope and are necessary in order to protect the business of the
Corporation. Each Shareholder further acknowledges and confirms that
such provisions are equitable since, in the event of such termination,
he would not be restricted from practicing thoracic cardiovascular
surgical services outside of such geographic areas. In addition, each
Shareholder agrees that the foregoing provisions of this paragraph 9
may be enforced in accordance with the provisions of paragraph 11
hereof.[3]
(R. 115-116).
On January 22, 1999, they also signed new employment agreements. The
new agreements were also subject to "the Indiana Medical Professional
Corporation Act and the applicable rules of professional ethics, . . . ."
(R. 139). While the Agreements remained substantially unchanged, there
were changes in the salary, termination, and employee covenant provisions.
As partners and directors, the doctors would now share in MRSD's profits.
Termination of the employment agreement by either party now required only a
written 30-day notice for Dr. Blatchford and a written 60-day notice for
Dr. Cieutat. The relevant portion of the non-competition provision read as
follows:
(iii) For a period of three (3) years after termination of this
Agreement, the Employee shall not engage directly or indirectly, in
the rendition of thoracic, vascular or cardiovascular surgical
services within the two (2) areas contained in circles drawn with a
radius of fifty (50) miles of the center of Monument Circle in
Indianapolis, Indiana and of the center of the Court House of Terre
Haute, Indiana. In addition to the geographic areas set forth in the
preceding sentence, if during the term hereof the Corporation shall
establish a medical practice in Vincennes, Indiana, for a period of
three (3) years after the termination of this Agreement, Employee
shall not engage directly or indirectly in the rendition of thoracic,
vascular or cardiovascular surgical services within an area contained
in a circle drawn with a radius of fifty (50) miles of the center of
the Court House of Vincennes, Indiana. The Employee specifically
acknowledges and confirms that the foregoing provisions of this
paragraph 8 relating to the three (3) year period following the
termination of the Employee's employment with the Corporation are
reasonable, both in geographic area and in scope and are necessary to
protect the business of the Corporation. The Employee further
acknowledges and confirms that such provisions are equitable since, in
the event of such termination, [he or she] would not be restricted
from practicing thoracic cardiovascular surgical services outside of
such geographic area. In addition, the Employee agrees that the
foregoing provisions of this paragraph 8 may be enforced in accordance
with the provisions of paragraph 10 hereof.[4]
(R. 143).
Subsequently, the relationship between Drs. Blatchford, Cieutat, and
Dr. Mnayarji became hostile. On several occasions, Dr. Blatchford referred
to Dr. Mnayarji as "Satan," and the parties took extraordinary steps to
avoid each other. Drs. Blatchford and Cieutat felt that Dr. Mnayarji
rendered medical services that were below an acceptable standard of care.
On November 1, 1999, an unauthorized "executive committee" composed of
Drs. Mercho, Roushdi, Shoemaker, and Dilley met to discuss the employment
status of Dr. Blatchford. They took a vote and drafted a letter
terminating Dr. Blatchford's employment and salary benefits effective
December 1, 1999. The letter stated that MRSD would honor the terms of the
Agreement and hoped that Dr. Blatchford would honor the employee covenants.
On December 2, 1999, Dr. Cieutat submitted her letter of resignation
to MRSD. The letter stated that she was resigning because MRSD had
repeatedly refused to address the quality of care issues surrounding Dr.
Mnayarji and that its failure would cause her continued employment to
violate the rules of professional ethics. Currently, Drs. Blatchford and
Cieutat provide cardiovascular surgical services in Terre Haute through
CSA.
On December 2, 1999, Drs. Blatchford and Cieutat filed a complaint
alleging corporate waste, wrongful termination, breach of fiduciary duty,
breach of contract, and seeking a declaratory judgment that the employee
covenants were unenforceable. On December 7, 1999, MRSD filed its answer,
affirmative defenses and counterclaim and a motion for preliminary
injunction hearing. As counterclaims, MRSD alleged breach of contract,
defamation, tortious interference with a contract, and sought a preliminary
injunction to stop Drs. Blatchford and Cieutat from performing
cardiovascular surgical services through CSA. MRSD alleged that the
existence of CSA violated the non-competition clauses in both the
shareholder and employment agreements.
The trial court scheduled a hearing on MRSD's motion for preliminary
injunction for January 14, 2000. The trial court heard evidence and
continued the hearing until March 23-24, 2000. On March 9, 2000, Drs.
Blatchford and Cieutat filed a Motion For Order Referring Case To
Mediation. The trial court granted their motion and reset the hearing on
MRSD's motion for preliminary injunction for May 18-19, 2000, at which time
evidence was heard and the matter concluded.
On July 12, 2000, the trial court entered judgment denying MRSD's
motion for preliminary injunction. The trial court found that MRSD had
breached its contractual and fiduciary duties to Drs. Blatchford and
Cieutat when it (1) hired Dr. Mnayarji without their knowledge and consent;
(2) used an unauthorized "executive committee" to terminate Dr.
Blatchford's employment; and (3) failed to give the doctors advance notice
of MRSD's decision to terminate Dr. Blatchford. As a result, these
material breaches precluded MRSD from enforcing the employee covenants.
Further, the trial court found that the employee covenants were
unenforceable because their geographic and time restrictions were
unreasonably broad. Additionally, the court found that because evidence
showed that Vigo County is a medically underserved area and that Drs.
Blatchford and Cieutat are the county's preeminent cardiovascular surgeons,
enforcing the covenants will harm the public interest. Finally, the trial
court found that MRSD presented no evidence of irreparable harm because any
damage to MRSD could be calculated as a loss of income and profits.
DECISION
We review a trial court's denial of a motion for preliminary
injunction for an abuse of discretion. Ed Bertholet & Associates, Inc. v.
Stefanko, 690 N.E.2d 361 (Ind. Ct. App. 1998). Indiana Trial Rule 52(A)
requires a trial court to make special findings of fact and conclusions of
law. The reviewing court determines whether the trial court's findings
support the judgment, and we will not reverse unless the judgment is
clearly erroneous. Hydraulic Exchange and Repair, Inc. v. KM Specialty
Pumps, Inc., 690 N.E.2d 782 (Ind. Ct. App. 1998). "Findings of fact are
clearly erroneous when the record lacks evidence or reasonable inferences
from the evidence to support them. We consider the evidence only in the
light most favorable to the judgment and construe findings together
liberally in favor of the judgment." Id. at 785 (citation omitted).
Discretion to grant or deny an injunction is measured by several
factors: (1) whether the plaintiff's remedies at law are inadequate,
causing irreparable harm pending resolution of the substantive action;
(2) whether the plaintiff has at least a reasonable likelihood of
success at trial; (3) whether the plaintiff's threatened injury
outweighs the potential harm to the defendant resulting from the
granting of the injunction; and (4) whether the public interest will
be disserved.
Ed Bertholet & Associates, Inc., 690 N.E.2d at 363. However, a
preliminary injunction is an extraordinary remedy that should be used
sparingly. Id. It is the movant's burden to prove each element by a
preponderance of the evidence. Jay County Rural Elec. Membership Corp. v.
Wabash Valley Power Ass'n, Inc., 692 N.E.2d 905 (Ind. Ct. App. 1998) trans.
denied.
The purpose of a preliminary injunction is to maintain the status quo
until the underlying claim is resolved. Id.
The necessity of maintaining the status quo is to prevent harm to the
moving party which could not be corrected by a final judgment. 'If
irreparable injury were to occur during the course of litigation, the
judgment, in effect, would be rendered meaningless. Thus, it has been
held that an injunction will not be granted where the law can provide
a full, adequate, and complete method of redress.'
Id. at 909 (quoting Wells v. Auberry, 429 N.E.2d 679, 683 (Ind. Ct. App.
1982)). Therefore, "a party which suffers only 'mere economic injury' is
not entitled to injunctive relief because an award of post-trial damages is
sufficient to make the party whole." Id. However,
. . . the trial court has a duty to determine whether the legal remedy
is as full and adequate as the equitable remedy. A legal remedy is
not adequate merely because it exists as an alternative to an
equitable form of relief. Instead, injunctive relief will be granted
if it is more practicable, efficient, or adequate than that afforded
by law. A legal remedy is adequate only where it is as 'plain,
complete and adequate – or in other words, as practical and efficient
to the ends of justice and its prompt administration – as the remedy
in equity.'
Paul v. I.S.I. Services, Inc., 726 N.E.2d 318, 321 (Ind. Ct. App. 2000)
(citations omitted) (quoting Jay County, 692 N.E.2d at 909).
In his case, the trial court found in its conclusion number eleven
(11):
Defendants presented no evidence that they face irreparable harm that
cannot be remedied with money damages, while Drs. Blatchford and
Cieutat presented ample evidence showing that any alleged harm to MRSD
is calculable and compensable in dollars and cents. The testimony of
Mercho, Roushdi and Goode confirmed, and the Court finds, that MRSD's
injuries and damages can be computed with reasonable certainty
following a trial on the merits.
(R. 310-311). MRSD argues that the trial court's judgment is clearly
erroneous. Specifically, MRSD argues that they presented evidence that
their money damages are incalculable because "the nature of the particular
damage is ongoing." MRSD Br. at 32. Further, MRSD argues that the
evidence shows that it has "suffered damage to its referral relationships,"
good will, and the reputations of Drs. Mercho and Mnayarji. On the other
hand, Dr. Blatchford argues that the evidence supports the trial court's
conclusion. Specifically, Dr. Blatchford argues that the evidence shows
that the alleged damage suffered by MRSD can be calculated as an economic
loss.
We find that the evidence supports the trial court's judgment denying
MRSD's motion for preliminary injunction.[5] At the hearing, Dr. Mercho
was asked what the effect would be on MRSD if Drs. Blatchford and Cieutat
were allowed to continue administering cardiovascular surgical services in
Terre Haute. Dr. Mercho stated that MRSD's referral sources would be
damaged and that it would "pull at least fifty percent of a number of
patients that we have . . . ." (R. 459). Further, Brett Hickman
("Hickman"), a certified public accountant experienced in the valuation of
professional medical corporations, testified that the economic impact of
Drs. Blatchford's and Cieutat's departure could be measured using
historical financial data. "In a situation like this we have both, a
financial picture before the situation occurred or event, and we also have
a financial picture after the event occurred, thus making the validity of
the valuation much stronger." (R. 687). He also testified that all
assets, including good will, could be valued.
Additionally, MRSD introduced financial statements marked as
defendant's exhibit "Q." Robert Goode ("Goode"), practice administrator
for MRSD, testified that the first page of exhibit "Q" was a "comparative
statement comparing the first three months accumulative [sic] for the year
2000 compared to the same period for 1999." (R. 761). Concerning
cardiovascular receipts in Terre Haute, Goode stated that MRSD recorded
$355,252.63 for the first three months of 1999 and $181,739.19 for the same
period in 2000. Goode testified that this represented a drop in
receivables in Terre Haute of approximately $174,000.00. He projected the
loss of income for the first quarter of 2000 to be approximately $205,000.
Blatchford also introduced defendant's exhibit "R", records detailing the
number of cardiovascular surgical procedures performed from December 1,
1999 through April 30, 2000. Again, Goode concluded that these records
showed MRSD lost business during the first quarter of 2000.
The evidence shows that any damage suffered by MRSD is calculable in
economic terms. The testimony of Dr. Mercho, Hickman, and Goode support
this finding. Further, the legal remedy in the form of money damages will
be "plain, complete, and adequate" at the conclusion of the underlying
action because MRSD will have all the necessary data to determine their
losses should Drs. Blatchford and Cieutat be found to have breached the non-
competition clauses. Paul, 726 N.E.2d at 321. For example, Goode
testified that his estimate of MRSD's first quarter 2000 losses may be
smaller because of delays in collecting receipts. He also stated that it
could be larger because MRSD no longer pays certain expenses, such as the
salaries of Drs. Blatchford and Cieutat. Additionally, we recognize that
MRSD claims that the injuries to the reputations of Drs. Mercho and
Mnayarji are qualitative and not quantitative. However, we have already
held that damages to a person's reputation in the form of economic loss is
properly remedied by money damages. Daugherty v. Allen, 729 N.E.2d 228
(Ind. Ct. App. 2000) (because the plaintiff solely alleged economic loss as
a result of the defamatory falsehoods he is not entitled to injunctive
relief, only money damages). Like the plaintiff in Daugherty, MRSD has
solely alleged economic damages which can be determined with certainty and
predictability, he is entitled to only money damages and not equitable
relief.
Because MRSD has failed to show its remedy at law would be inadequate,
causing irreparable harm, we need not address the remaining three factors
required to obtain a preliminary injunction. Jay County, 692 N.E.2d 905
(holding that movant must prove all four factors to be successful of motion
for preliminary injunction). Likewise, when there is an adequate remedy at
law, there is no need to consider the merits of a plaintiff's claim.
Indiana State Bd. of Public Welfare v. Tioga Pines Living Center, Inc., 575
N.E.2d 303, 306-307 (Ind. Ct. App. 1991) trans. denied.
Affirmed.
RILEY, J., and ROBB, J., concur.
-----------------------
[1] On December 14, 2000, oral argument was heard. We would like to thank
the parties for their presentations.
[2] Perfusionists operate the heart and lung pumps during open-heart
surgery. The perfusionists are provided through Indiana Perfusion
Services, an Indiana corporation whose shares are owned by Dr. Mercho.
Indiana Profusion Services is the only provider of profusionists in Vigo
County and provides its services through contracts with Regional and Union
Hospitals in Terre Haute.
[3] Paragraph 11 grants MRSD the right to seek injunctive relief to
prevent a breach of the purchase agreement.
[4] Similar to paragraph 11, paragraph 10 also grants MRSD the right to
seek injunctive relief to prevent a breach of the employment agreement.
[5] We do not reach the merits of this case. However, we note that it is
undisputed that two well-educated and highly qualified cardiovascular
surgeons entered into what appeared to be a valid contract containing non-
competition covenants. The evidence suggests that they had no intention of
honoring the contract because they "did not think the covenants would
hold." (R. 502). We are mindful that "Indiana courts have long recognized
and respected the freedom to contract. Our supreme court recently re-
emphasized a 'very strong presumption of enforceability of contracts that
represent the freely bargained agreement of the parties. This reflects the
principle that it is in the best interest of the public not to
unnecessarily restrict peoples' freedom to contract.'" Eck & Associates,
Inc. v. Alusuisse Flexible Packaging, Inc., 700 N.E.2d 1163, 1167 (Ind. Ct.
App. 1998) (citations omitted) trans. denied; See also Harris v. Primus,
450 N.E.2d 80 (Ind. Ct. App. 1983).
