Appellate court decision keeps OB court battle alive

Steve Korris Jul. 1, 2010, 9:29am


MOUNT VERNON - Eight years after physician Christina Midkiff left Maryville Women's Center, she still doesn't know where the law will allow her to practice.

Fifth District appeals judges have ruled that Women's Center owner Tina Gingrich can pursue a contract claim that would keep Midkiff at least 20 miles from Maryville.

A covenant in their ownership agreement provided that if one sold out and left, she would move her practice beyond that limit and stay away for five years.

Gingrich sued Midkiff in 2007, seeking to enforce the limit.

Madison County Circuit Judge David Hylla dismissed the suit four months later, ruling that a previous jury trial closed the book on the business.

The Fifth District reversed on June 15, declaring the cases separate and distinct.

Justice James Wexstten wrote that the cases didn't arise from a single set of facts.

"The breach of contract claim at issue in this action was not submitted to or tried by the court in the prior suit," he wrote.

"The previous action involved the valuation of the shares Dr. Gingrich sought to purchase and the attendant conditions imposed," he wrote.

The Justices didn't enforce the 20 mile limit, choosing to let Hylla hear that.

"We note that we are in no way suggesting that the covenant not to compete in the agreement is reasonable or unreasonable," Wexstten wrote.

Gingrich formed a corporation in 1996, and hired physician Marlene Freeman.

She hired Midkiff in 1998, and guaranteed both doctors $200,000 a year.

Gingrich, Midkiff and Freeman signed a stock purchase agreement in 1999, so that each would own a third of the practice.

The agreement included a covenant not to compete for five years if they split up.

Midkiff agreed to pay Gingrich $125,000 for a third of the goodwill.

Midkiff and Freeman sued Gingrich in 2002, blaming her for irreconcilable differences that damaged them in their profession.

Midkiff and Freeman sought relief under the Illinois Business Corporation Act of 1983, which governs noncompetition clauses in ownership contracts.

Gingrich counterclaimed, accusing them of bad faith, unclean hands and defamation.

They kept on working together at Women's Center, under an interim agreement.

Gingrich filed notice that she would buy out Midkiff and Freeman at fair value under the original agreement.

Freeman moved to California, taking valuable shares with her, but she "ceased her involvement in the litigation," as Wexstten put it.

Gingrich and Midkiff didn't agree on fair value, arbitration broke down, and Associate Judge Ralph Mendelsohn set a bench trial.

Prior to trial, the doctors identified the imposition of covenants and their scope as one of the issues Mendelsohn would face.

At trial, Gingrich sought to bar Midkiff from practicing at Anderson Memorial Hospital.

After trial, while Mendelsohn deliberated, Midkiff started her own practice in Maryville.

Women's Center staff moved with her.

In 2007, Mendelsohn ordered Gingrich to pay Midkiff $206,898, with other adjustments at Gingrich's expense.

His order did not flatter Gingrich.

In denying her claim for credit due to workers relocating with Midkiff, he wrote that the workers "wouldn't go to work for Dr. Gingrich if offered."

He refused to enforce the covenant not to compete, writing that "such a restriction may do more harm to the public than provide benefit to Dr. Gingrich."

He wrote that additional travel would take Midkiff away from family and patients.

"Dr. Gingrich will have an unfettered opportunity to grow her practice by adding new providers and obtaining new patients," Wexstten wrote.

Six weeks later, Gingrich sued to enforce the covenant.

Midkiff moved to dismiss, and in three months Hylla granted the motion.

He wrote that Mendelsohn rejected a covenant even less restrictive than 20 miles.

"Therefore, the issue of whether an even more restrictive covenant not to compete is enforceable need not be litigated again," he wrote.

Gingrich moved to reconsider, and Hylla denied the motion in 2008.

Gingrich appealed, and Midkiff answered that alleging a contractual claim rather than a statutory claim amounted to mere substitution of labels.

Wexstten wrote, "We disagree with Dr. Midkiff."

He wrote that under corporation law, Mendelsohn had discretion to impose restrictions on competition whether or not the contract provided for them.

Justices Melissa Chapman and Stephen Spomer concurred.

Mendelsohn himself reserved Gingrich's right to maintain a contract action, he wrote.

The action returns to Hylla, starting from scratch with advice from Wexsttten.

"To establish a breach of contract action in this action, Gingrich must demonstrate that the more restrictive noncompetition covenant in the agreement is reasonable in geographical and temporal scope and is necessary to protect a legitimate business interest of the employer," Wexstten wrote.

Patrick Kenny represented Gingrich.

Mark Goldenberg represented Midkiff.

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