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Valley Med. Specialists v. Farber

Valley Med. Specialists v. Farber

Supreme Court of Arizona

June 18, 1999, Filed

Supreme Court No. CV-97-0488-PR

Opinion

 [*364]   [**1278]  En Banc

OPINION

FELDMAN, Justice

P1 We granted review to determine whether the restrictive covenant between Dr. Steven Farber and Valley Medical Specialists is enforceable. We hold that it is not. Public policy concerns in this [***2]  case outweigh Valley Medical's protectable interests in enforcing the agreement. We thus vacate the court of appeals' opinion, affirm the trial court's judgment, and remand to the court of appeals to resolve any remaining issues. We have jurisdiction pursuant to Arizona Constitution article VI, § 5(3) and A.R.S. § 12-120.24.

FACTS AND PROCEDURAL HISTORY

 P 2 In 1985, Valley Medical Specialists ("VMS"), a professional corporation, hired Steven S. Farber, D.O., an internist and pulmonologist who, among other things, treated  [**1279]   [*365]  AIDS and HIV-positive patients and performed brachytherapy -- a procedure that radiates the inside of the lung in lung cancer patients. Brachytherapy can only be performed at certain hospitals that have the necessary equipment. A few years after joining VMS, Dr. Farber became a shareholder and subsequently a minority officer and director. In 1991, the three directors, including Dr. Farber, entered into new stock and employment agreements. The employment agreement contained a restrictive covenant, the scope of which was amended over time.

 P 3 In 1994, Dr. Farber left VMS and began practicing within the area defined by the restrictive covenant, which at that time [***3]  read as follows:

The parties recognize that the duties to be rendered under the terms of this Agreement by the Employee are special, unique and of an extraordinary character. The Employee, in consideration of the compensation to be paid to him pursuant to the terms of this Agreement, expressly agrees to the following restrictive covenants:

(a) The Employee shall not, directly or indirectly:

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194 Ariz. 363 *; 982 P.2d 1277 **; 1999 Ariz. LEXIS 91 ***; 298 Ariz. Adv. Rep. 34; 15 I.E.R. Cas. (BNA) 419; 138 Lab. Cas. (CCH) P58,653

VALLEY MEDICAL SPECIALISTS, an Arizona professional corporation, Plaintiff-Appellant, v. STEVEN S. FARBER, D.O. and SUSAN H. FARBER, husband and wife, Defendants-Appellees.

Subsequent History:  [***1]  Counsel Amended June 22, 1999.

Prior History: Court of Appeals No. 1 CA-CV 95-0520 and 1 CA-CV 96-0533 [Consolidated]. Maricopa County No. CV 94-14865. Appeals from the Superior Court in Maricopa County. The Honorable Robert L. Gottsfield, Judge. Opinion of the Court of Appeals, Division One, 190 Ariz. 563, 950 P.2d 1184 (App. 1997).

Disposition: Appeals from the Superior Court in Maricopa County AFFIRMED. Opinion of the Court of Appeals, Division One VACATED.

CORE TERMS

restrictive covenant, patients, covenant, court of appeals, public policy, legitimate interest, injunction, compete, courts, protectable interest, strictly construed, restricted area, trial court, outweighed, restricts, customer, pulmonologist, partnership, pulmonology, medicine, sale of a business, medical practice, brachytherapy, duration, hardship, modified, ethical

Civil Procedure, Appeals, Standards of Review, Abuse of Discretion, Remedies, Injunctions, Preliminary & Temporary Injunctions, Clearly Erroneous Review, De Novo Review, Real Property Law, Encumbrances, Restrictive Covenants, General Overview, Labor & Employment Law, Employment Relationships, At Will Employment, Business & Corporate Compliance, Contracts Law, Types of Contracts, Covenants, Conditions & Terms, Trade Secrets & Unfair Competition, Noncompetition & Nondisclosure Agreements, Healthcare Law, Business Administration & Organization, Covenants not to Compete, Employer & Physician Covenants, Healthcare Litigation, Antitrust Actions, Physicians, Partnership Agreements, Business & Corporate Law, Management Duties & Liabilities, Rights of Partners, General Partnerships, Creation of Restrictive Covenants, Dissolution & Winding Up, Dissolution, Wrongful Termination, Breach of Contract, Criminal Law & Procedure, Counsel, Right to Counsel, Legal Ethics, Law Firms, Governments, Fiduciaries, Client Relations, Evidence, Privileges, Doctor-Patient Privilege, Scope, Divisible Contracts, Inferences & Presumptions

Civil Procedure, Appeals, Standards of Review, Abuse of Discretion, Remedies, Injunctions, Preliminary & Temporary Injunctions, Clearly Erroneous Review, De Novo Review, Real Property Law, Encumbrances, Restrictive Covenants, General Overview, Labor & Employment Law, Employment Relationships, At Will Employment, Business & Corporate Compliance, Contracts Law, Types of Contracts, Covenants, Conditions & Terms, Trade Secrets & Unfair Competition, Noncompetition & Nondisclosure Agreements, Healthcare Law, Business Administration & Organization, Covenants not to Compete, Employer & Physician Covenants, Healthcare Litigation, Antitrust Actions, Physicians, Partnership Agreements, Business & Corporate Law, Management Duties & Liabilities, Rights of Partners, General Partnerships, Creation of Restrictive Covenants, Dissolution & Winding Up, Dissolution, Wrongful Termination, Breach of Contract, Criminal Law & Procedure, Counsel, Right to Counsel, Legal Ethics, Law Firms, Governments, Fiduciaries, Client Relations, Evidence, Privileges, Doctor-Patient Privilege, Scope, Divisible Contracts, Inferences & Presumptions