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Health Professionals, Ltd. v. Johnson

Case Date: 06/04/2003
Court: 3rd District Appellate
Docket No: 3-02-0925 Rel

No. 3--02--0925

IN THE

APPELLATE COURT OF ILLINOIS

THIRD DISTRICT

A.D., 2003



HEALTH PROFESSIONALS, LTD., ) Appeal from the Circuit Court
an Illinois corporation; ) of the 10th Judicial Circuit,
STEPHEN A. CULLINAN, M.D.; and ) Peoria County, Illinois,
THERESA M. FALCON-CULLINAN, )
M.D., )
)
                 Plaintiffs-Appellees, )
)
                 v. ) No. 02--CH--374
)
NORMAN JOHNSON, MD.; BRENDA J. )
JOHNSON; and ADVANCED )
CORRECTIONAL HEALTHCARE, INC., )
an Illinois corporation, ) Honorable
) John A. Barra,
               Defendants-Appellants. ) Judge, Presiding.

 


JUSTICE SLATER delivered the opinion of the court:

Defendants Dr. Norman Johnson and Brenda Johnson (the Johnsons) and Advanced CorrectionalHealthcare, Inc. (ACH) appeal from an order of the circuit court granting a preliminary injunctionprohibiting defendants from violating a noncompetition agreement. Defendants assert that the agreementviolates both the Illinois Procurement Code (30 ILCS 500/1--1 et seq. (West 2000)) and the IllinoisAntitrust Act (740 ILCS 10/1 et seq. (West 2000)), and that its terms are unreasonably restrictive. Weaffirm as modified.

Facts

Prior to April 18, 2002, plaintiff Health Professionals, Ltd. (HPL), a business providing managedhealthcare services to jails and correctional facilities, was owned by plaintiffs Stephen Cullinan andTheresa Falcon-Cullinan (the Cullinans) and by the Johnsons. On that date, the Cullinans agreed topurchase all outstanding shares of HPL owned by the Johnsons. As part of the purchase agreement,contracts to provide healthcare services at certain jails and correctional facilities (the exempted facilities)were assigned by HPL to ACH. Defendant Dr. Johnson established ACH around the time of theagreement to service the exempted facilities. The exempted facilities were located in the Illinois countiesof Coles, Knox, Lee, Livingston, Peoria and Woodford, as well as in Tippecanoe, Indiana and KenoshaCounty, Wisconsin. The parties also executed a "Noncompetition, Nondisclosure and NonsolicitationAgreement" (the noncompetition agreement) which stated in part:

"(a) For the shorter of (i) a period of three years after theClosing or (ii) until an Assignment by Buyers:

(x) Except with regard to services to inmatesand personnel at the Exempted Facilities, neitherShareholder nor [ACH] will, directly or indirectly,engage or invest in, own, manage, operate, finance,control or participate in the ownership, management,operation, financing or control of, be employed by,associated with or in any manner connected with, orrender services or advice or other aide to, or guaranteeany obligation of, any Person engaged in or planning tobecome engaged in the business of managing and/orproviding healthcare or healthcare related services toinmates and personnel at (A) jail facilities, prisonfacilities, juvenile facilities, Department of Correctionfacilities or other penal or correctional facilities of anykind located in the states of Illinois, Wisconsin andMissouri; (B) Department of Correction facilities in thestate of Indiana; or (C) jail facilities, prison facilities,juvenile facilities, Department of Correction facilities orother penal or correctional facilities operated by CornellCompanies, Inc. ***

(y) Each Shareholder and [ACH] agrees not to,directly or indirectly, induce or attempt to induce anycustomer (other than the Exempted Facilities) to ceasedoing business with [HPL] or in any way interfere withthe relationship between any such customer and [HPL]if the Shareholders are prohibited under Section 4(a)(x)above from rendering health care services to suchcustomer."

In July of 2002, a representative of ACH contacted various jails and correctional facilities inIllinois and Wisconsin, including customers of HPL, offering to provide healthcare services. In addition,Dr. Johnson spoke with Cornell Companies concerning consulting work. Plaintiff subsequently filed acomplaint for damages and injunctive relief on July 26, 2002, followed by a motion for a preliminaryinjunction. After a two-day hearing, the trial court granted a preliminary injunction prohibiting thedefendants from violating the terms of the noncompetition agreement. The evidence introduced at thepreliminary injunction hearing will be presented as it becomes relevant to resolving the issues raised onappeal.

Analysis

Standard of Review

Whether the noncompetition agreement violates the Illinois Procurement Code or the IllinoisAntitrust Act are questions of statutory interpretation which require neither factual determinations northe exercise of judicial discretion. Statutory construction is a question of law subject to de novo review. Robidoux v. Oliphant, 201 Ill. 2d 324, 775 N.E.2d 987 (2002). On the other hand, "[w]hen the appellatecourt reviews the issuance of a preliminary injunction, the sole issue is whether the trial court abused itsdiscretion." Harper v. Missouri Pacific R.R. Co., 264 Ill. App. 3d 238, 249, 636 N.E.2d 1192, 1201(1994). The abuse of discretion standard has specifically been applied in reviewing a preliminaryinjunction based on a noncompetition covenant. See Central Water Works Supply, Inc. v. Fisher, 240 Ill.App. 3d 952, 608 N.E.2d 618 (1993).

Illinois Procurement Code

Defendants first contend that the noncompetition agreement is void and unenforceable because itviolates section 50-25 of the Illinois Procurement Code (Procurement Code) which provides:

"