Norlund v. Faust
Norlund v. Faust, 1997 WL 40906 (1997)
Winning Party
Joseph F. Faust, M.D.
Key Issue
Breach of Covenant Not to Compete
Case Type
CIVIL
Summary
The Court of Appeals of Indiana affirmed in part and reversed in part the trial court's decision regarding a covenant not to compete involving R. Norlund, an optometrist. The court upheld the enforcement of the covenant prohibiting R. Norlund from contacting referring optometrists, as he had entered into the contract with knowledge of its violation of Indiana law and benefited from it. However, the court found the restriction on R. Norlund working as an optometric liaison too broad, as it unnecessarily limited his ability to practice his profession without a protectable interest from Faust. The court also allowed the injunction against D. Norlund and Indiana Cataract and Laser, P.C. to stand, as they were found to be assisting R. Norlund in breaching the covenant.
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Facts
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The covenant not to compete forbade R. Norlund from contacting referring optometrists regarding former, current, or potential patients.
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Faust incorporated Faust Eye Center as Faust Eye Center, P.C.
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The parties entered into an Employment Agreement on or about July 27, 1991, which contained a covenant not to compete.
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R. Norlund benefited from the employment agreement.
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R. Norlund continued to work for and receive compensation from the Eye Center after incorporation.
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R. Norlund had knowledge of the assignment between Faust Eye Center and Faust Eye Center, P.C.
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R. Norlund sent a letter to optometrists on the day he left Faust Eye Center concerning an optometrically-owned Excimer Laser center.
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R. Norlund was employed by Faust to generate goodwill between Faust and area optometrists.
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R. Norlund has no ownership interest in ICL but contacted Dr. Jay McGarvey about an opportunity with ICL, who then accepted a position with ICL.
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Ronald Norlund (R. Norlund) is a licensed optometrist in Marion, Indiana.
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ICL received patients from optometrists who previously referred patients to Faust.
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R. Norlund's duties included building relationships with referring optometrists.
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D. Norlund is the sole shareholder in ICL.
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Within two weeks, R. Norlund made an interest-free loan to D. Norlund to establish Indiana Cataract and Laser, P.C. (ICL), a secondary eye care facility based on optometric referrals.
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On the same day, R. Norlund sent a letter to optometrists regarding an optometrically-owned Excimer Laser center.
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R. Norlund loaned money to D. Norlund to establish ICL.
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The covenant restricted R. Norlund from performing services as an optometric liaison or medical optometrist for any ophthalmologist in specified counties for two years after termination of the agreement.
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Faust's protectable interest was limited to the relationship he nurtured with referring ophthalmologists through R. Norlund.
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In 1991, Faust decided to focus on referrals from optometrists and hired R. Norlund as a medical optometrist and optometric liaison.
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R. Norlund's employment with Faust ended on July 26, 1995, after negotiations to renegotiate his contract failed.
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The trial court found the contract between R. Norlund and Faust violated I.C. 25-1-9-5 but was not void.
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Joseph Faust (Faust) is an ophthalmologist previously d/b/a Faust Eye Center.
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R. Norlund performed services for ICL without compensation.
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R. Norlund entered into the employment contract with Faust knowing it violated I.C. 25-1-9-5.
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R. Norlund contacted McGarvey about an opportunity with ICL.
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The letter was directed toward optometrists and patient-oriented, geared to prospective referrals of patients with problems Faust deals with.
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The covenant restricted R. Norlund from contacting referring optometrists or performing services as an optometric liaison or medical optometrist for any ophthalmologist in specified counties for two years after termination of the agreement.
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R. Norlund wrote a letter to all the optometrists in northeastern Indiana.
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In December 1993, Faust incorporated as Faust Eye Center, P.C.
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The trial court granted a preliminary injunction enforcing parts of the covenant not to compete against R. Norlund, D. Norlund, and ICL.
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R. Norlund threatened to take business from Faust.
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Dawn Norlund (D. Norlund) is also a licensed optometrist and R. Norlund's wife.
Key Holdings
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The trial court did not err in enforcing the covenant not to compete, even though the contract violated I.C. 25-1-9-5, because R. Norlund entered into the contract with full knowledge of the statute and benefited from the agreement.
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The trial court did not err in allowing Faust Eye Center, P.C. to enforce the agreement because R. Norlund had knowledge of and acquiesced to the assignment of the contract from Faust to Faust Eye Center, P.C.
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The trial court did not err in finding the terms of the covenant not to compete reasonable as against R. Norlund, specifically the restrictions on contacting and discussing patients with referring optometrists, because Faust had a protectable interest in the goodwill created by R. Norlund on Faust's behalf.
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The trial court did not err in finding that R. Norlund breached the covenant not to compete by contacting optometrists regarding the establishment of an optometrically-owned Excimer Laser center.
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The trial court erred in upholding the portion of the covenant that prevented R. Norlund from acting as an optometric liaison or medical optometrist for or in association with any ophthalmologist within the specified counties because Faust had no protectable interest outside of the relationship he nurtured with referring ophthalmologists through R. Norlund.
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The trial court did not err in extending R. Norlund's covenant not to compete to enjoin D. Norlund and ICL from activities that assist R. Norlund in breaching the covenant because R. Norlund was attempting to circumvent the covenant through his wife and ICL.
Citations
Norlund v. Faust, 1997 WL 40906, 1997 Ind. App. LEXIS 51, 675 N.E.2d 1142, 12 I.E.R. Cas. (BNA) 839 (1997)
Legal Reasoning
The court reasoned that R. Norlund breached the covenant by contacting optometrists, the contract was not void despite violating I.C. 25-1-9-5 because R. Norlund knew of the violation and benefited from the contract, Faust Eye Center, P.C. could enforce the agreement because R. Norlund acquiesced to the assignment, and the restrictions on contacting optometrists were reasonable to protect Faust's goodwill. However, the court found the restriction on R. Norlund working as an optometric liaison or medical optometrist too broad. The court also reasoned that D. Norlund and ICL could be enjoined because they were acting in concert with R. Norlund to breach the covenant.
Outcome
The court affirmed the trial court's decision in part and reversed in part. The injunction against contacting optometrists was upheld, but the injunction against working as an optometric liaison or medical optometrist was reversed.
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