Find Legal Information

JUSTICE MYERSCOUGH delivered the opinion of the court:

In April 1998 plaintiff, Center for Sight of Central Illinois I, S.C. (Center I), formerly known as Center for Sight of Central Illinois, S.C. (Center), sued to prevent defendant, Marcus Deranian, an ophthalmologist and former employee, from violating the covenant-not-to-compete clause of the parties' employment contract. In September 1998, the circuit court denied Center I's request for a preliminary injunction, finding sufficient evidence that Center had materially breached the employment contract and therefore failed to demonstrate a likelihood of success on the merits. In this interlocutory appeal, Center I claims the trial court abused its discretion because no breach sufficient to excuse Deranian's performance occurred. We affirm.

BACKGROUND

In the early 1990s, Dr. Phillip Alward maintained a solo ophthalmology practice under the corporate name Phillip D. Alward, M.D., S.C. In October 1992, Deranian began working for Alward as a locum tenens and eventually joined the Alward Eye Clinic and Laser Surgery Center as an employee.

In July 1994, Alward sold the assets of his practice to Equivision, Inc. (Equivision). The sale was intended to free Alward of the managerial and administrative duties of running a practice so that he could focus his time and energy on patient care. The material assets and real estate necessary to the practice would henceforth be rented from Equivision and Equivision provided management services to the practice for a fee.

The transaction included the formation of Center, which was incorporated in June 1994. Alward was initially listed as the sole shareholder of Center stock, but, in August 1994, ownership of the corporation was transferred to Dr. Douglas Colkitt for $1. Colkitt, a radiation oncologist in Pennsylvania, owned Equivision stock when he became president and sole shareholder of Center. Alward testified he did not know Colkitt personally, and Colkitt played no role in the management of Center or Alward's practice. Also incident to the sale of his practice, Alward entered an employment agreement with Center and was designated "Medical Director" of Center. Alward negotiated his contract with Larry Pearson, president of Equivision.

Deranian also began negotiations with Larry Pearson in July 1994. In October 1994, they reached an agreement and Deranian signed the employment agreement at issue in this case. The contract identifies the parties to the agreement as Deranian and Center. Colkitt signed it as president. Deranian participated in the 401(k) and other employee benefit plans of Equivision. The agreement contains a restrictive covenant prohibiting Deranian from competing with Center for a period of 2 years within a 30-mile radius of Center offices in Decatur, Mattoon, Pana, Shelbyville, and Sullivan and within a 20-mile radius of the Taylorville office. Throughout negotiations, Deranian had legal counsel.

In February 1996, Equivision merged with EquiMed, and EquiMed became the management company for Center. In October or November 1996, EquiMed was purchased by Physicians Resource Group (PRG). At about the same time, Center's ownership was transferred to Bruce Goldstick, M.D. Goldstick was an ophthalmologist practicing in the greater Chicago area. When he became president of Center, Goldstick had no knowledge of Center or Alward's practice in Decatur. Goldstick testified, by deposition, that he assumed the position of president as a favor to agents of PRG, with whom he had a professional relationship. According to his deposition, PRG's representative told him:

"'We're having problems now with the practice downstate. We need your help to take over the presidency. And don't worry, you won't have any legal responsibilities and you won't have any management responsibilities. We just need a physician to be the owner.'"

Goldstick also referred to his position as that of a "figurehead" president. Goldstick paid nothing for the shares of Center stock transferred to him and received no compensation for serving as the company's president.

In February 1997, Alward filed a lawsuit against EquiMed, Center, PRG, and PRG Georgia, Inc. (Macon County case No. 97-Ch-28). In count II of his complaint, Alward alleged the defendant companies breached his employment agreement in the following ways:

"a. The medical and non-medical staff has been reduced to numbers insufficient to handle the caseload;

b. Suppliers of materials have not been paid in a timely fashion and are refusing to supply the corporation;

c. The corporation refused to buy equipment needed for the performance of the doctor's duties under this Agreement;

d. The assets of CENTER were sold without the consent of Phillip D. Alward, M.D.S.C."

The complaint alleged that such breaches hindered Alward's ability to provide patient care. Alward sought damages and to be released from the restrictive covenant of his employment agreement. Alward testified he instigated the lawsuit, on advice of counsel, to "get PRG's attention." Resolution of the lawsuit is not clear from the record, but by January 1998, Alward was negotiating with PRG to buy back his practice and terminate the management agreement.

The record indicates that Deranian's relationship with PRG was also under strain. In June 1997, Deranian wrote to Dawn Cavanaugh, regional manager at PRG, expressing dissatisfaction over working extensive hours without adequate compensation. To his letter, Deranian attached a copy of a legal opinion authored by the chief counsel to the Inspector General of the United States Department of Health and Human Services advising that the arrangement between PRG and the ophthalmology practice violated the federal anti-kickback statute, section 1320a-7b (formerly section 1128B(b)) of the Social Security Act. 42 U.S.C.