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ATTORNEYS FOR APPELLANT James A. Knauer Steven E. Runyan Indianapolis, Indiana

ATTORNEY FOR APPELLEE Joseph J. Reiswerg Carmel, Indiana

______________________________________________________________________________

In the

Indiana Supreme Court
_________________________________ No. 29S05-0706-CV-256 CENTRAL INDIANA PODIATRY, P.C.,

FILED
Mar 11 2008, 1:22 pm
of the supreme court, court of appeals and tax court

CLERK

Appellant (Plaintiff below), v. KENNETH KRUEGER, MERIDIAN HEALTH GROUP, P.C., Appellee (Defendant below). _________________________________ Appeal from the Hamilton County Superior Court, No. 29D02-0510-PL-93549 The Honorable Daniel J. Pfleging, Judge _________________________________ On Petition to Transfer from the Indiana Court of Appeals, No. 29A05-0606-CV-313 _________________________________ March 11, 2008 Boehm, Justice. We hold that noncompetition agreements between a physician and a medical practice group are not per se void as against public policy and are enforceable to the extent they are reasonable. To be geographically reasonable, the agreement may restrict only that area in which the physician developed patient relationships using the practice group's resources.

Facts and Procedural History From 1996 until 2005, podiatrist Kenneth Krueger was employed by Central Indiana Podiatry, P.C. (CIP) under a series of written employment agreements that were renewed every one or two years. Each agreement contained provisions restricting Krueger's activities after any termination. For two years after leaving CIP's employ, Krueger would be prohibited from divulging the names of patients, contacting patients to provide podiatric services, and soliciting CIP employees. Krueger also would be prohibited from practicing podiatry for two years within a geographic area defined as fourteen listed central Indiana counties and "any other county where [CIP] maintained an office during the term of this Contract or in any county adjacent to any of the foregoing counties." CIP maintained an office in two unlisted counties, and another twentyseven counties are contiguous to one or more of these sixteen. The restricted area thus consisted of forty-three counties, essentially the middle half of the state. At some point, Krueger worked at CIP's offices in Clinton, Marion, Howard, Tippecanoe, and Hamilton counties. By 2005, he was working three days each week at the Nora office in Indianapolis (Marion County), and one day each at the Lafayette (Tippecanoe) and Kokomo (Howard) offices. In 2005, a Kokomo office employee reported to CIP that Krueger had attempted to kiss her at the office. While CIP was investigating the incident, Krueger, concerned that he might be terminated, obtained an electronic copy of the names and addresses of patients treated at the Nora office.1 CIP terminated Krueger on July 25, 2005. In September 2005, Krueger entered into an employment agreement to practice podiatry with Meridian Health Group, P.C. in Hamilton County. Hamilton is immediately north of Marion County and is one of the counties listed in Krueger's noncompetition agreement. Krueger provided a copy of the CIP patient list to Meridian, and along with other Meridian employees, created a letter announcing his employment with Meridian "approximately 10 minutes from [Krueger's] previous office" in northern Marion County. This letter was mailed to patients on September 30, 2005.
This list contained the names of current and former Nora office patients. The record is unclear whether Krueger himself treated all the listed patients. CIP's complaint states that Krueger was the "sole podiatrist" at the Nora office and that the list was of patients "treated by Krueger," but there is no evidence on that point. The list in its present form in the record also contains names of nonpatients added by Krueger.
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When it learned of the letter CIP sought injunctive relief against Krueger and damages from Krueger and Meridian, claiming that Krueger's employment violated the geographic limitations.2 The trial court entered a temporary restraining order which was lifted six days later pending a hearing on the request. After a full-day hearing in January 2006, the trial court found the geographic restriction unenforceable and denied CIP's request for a preliminary injunction. The Court of Appeals reversed. Cent. Ind. Podiatry, P.C. v. Krueger, 859 N.E.2d 686, 689 (Ind. Ct. App. 2007), reh'g denied. We granted transfer. ___ N.E.2d ___ (Ind. June. 27, 2007). The noncompetition agreement's two-year term expired on July 25, 2007, two years after Krueger's termination. CIP's request for injunctive relief is therefore moot. In general, we decline to address the merits of moot claims unless the matter is of public interest and capable of repetition. Horseman v. Keller, 841 N.E.2d 164, 170 (Ind. 2006) (citing Ind. Educ. Employment Relations Bd. v. Mill Creek Classroom Teachers Ass'n, 456 N.E.2d 709, 712 (Ind. 1983)). This case meets this standard. Injunctive actions based on physician noncompetition agreements raise significant policy concerns and recur frequently. See Sharvelle v. Magnante, 836 N.E.2d 432 (Ind. Ct. App. 2005) (ophthalmologist); Duneland Emergency Physician's Med. Group, P.C. v. Brunk, 723 N.E.2d 963 (Ind. Ct. App. 2000) (emergency room physician); Norlund v. Faust, 675 N.E.2d 1142 (Ind. Ct. App. 1997) (optometrist). Moreover, full appellate review will often require more time than the term of the noncompetition agreement, so the need for guidance to trial courts in the future dictates that we address CIP's claim for injunctive relief. Standard of Review To obtain a preliminary injunction, the moving party must demonstrate by a preponderance of the evidence: (1) a reasonable likelihood of success at trial; (2) the remedies at law are inadequate; (3) the threatened injury to the movant outweighs the potential harm to the nonmoving party from the granting of an injunction; and (4) the public interest would not be disserved by granting the requested injunction. Apple Glen Crossing, LLC v. Trademark Retail, Inc., 784

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CIP also sought injunctive relief against Krueger for solicitation of CIP patients and a CIP employee. The trial court did not rule on these claims, which are now moot as to injunctive relief. In addition to injunctive relief, CIP sought damages from Krueger for breach of the covenant of noncompetition during employment and from Meridian for tortious interference with contractual relations. These claims remain for resolution in the trial court.

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N.E.2d 484, 487 (Ind. 2003) (citing Ind. Family & Soc. Servs. Admin. v. Walgreen Co., 769 N.E.2d 158, 161 (Ind. 2002)). We review a trial court's grant or denial of a preliminary injunction for abuse of discretion. Id. at 488. I. Enforceability of the Noncompetition Agreement Krueger raises four issues that bear on the likelihood of CIP's success at trial: (1) whether the noncompetition agreement is void as against public policy; (2) whether the noncompetition agreement is reasonable; (3) whether his actions were justified by the Indiana Administrative Code; and (4) whether the employment contract is unenforceable because of a prior material breach. A. Public Policy Krueger argues that the noncompetition agreement is void as against public policy because noncompetition agreements involving physicians interfere with the physician-patient relationship. There is some force to this contention. Noncompetition agreements are justified because they protect the investment and good will of the employer. In many businesses, the enforceability of a noncompetition agreement affects only the interests of the employee and employer. A noncompetition agreement by a physician involves other considerations as well. Unlike customers of many businesses, patients typically come to the physician's office and have direct contact with the physician. If an agreement forces a physician to relocate outside the geographic area of the physician's practice, the patients' legitimate interest in selecting the physician of their choice is impaired. Moreover, the confidence of a patient in the physician is typically an important factor in the relationship that relocation would displace. In both respects physicians are unlike employees in many businesses. The legal framework applicable to these relationships needs to take these differences into account. Whether physicians should be prohibited from entering into noncompetition agreements is essentially a policy question. Three states have statutes prohibiting physician noncompetition agreements.3 In the absence of any Indiana legislation on this point, Krueger points to an Ameri3

Colo. Rev. Stat. Ann.

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