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Community Hospital Group4/5/2005
Argued November 30, 2004
In this case and in the companion case of Pierson v. Medical Health Center, P.A., ___ N.J. ___ (2005), also decided today, we granted leave to appeal to re-examine the issue decided in Karlin v. Weinberg, 77 N.J. 408 (1978), that a post employment restrictive covenant in an employment contract between physicians or between a physician and hospital is not per se unreasonable and unenforceable. Secondary to that issue, in this case, is whether, assuming Karlin has continuing vitality, the trial court erred in denying plaintiff's application for a preliminary injunction. The trial court denied relief, but the Appellate Division reversed and ordered temporary injunctive relief.
We reject the invitation to overrule Karlin. Instead, we hold that a restrictive covenant in an employment contract between a hospital and a physician is not per se unreasonable and unenforceable. We conclude, however, that under the circumstances of this case the geographic restrictive area is excessive and must be reduced to avoid being detrimental to the public interest.
I.
Plaintiff, the Community Hospital Group, also known as John F. Kennedy Medical Center (JFK) and the New Jersey Neuroscience Institute (Institute), is a not-for-profit hospital in Edison, Middlesex County, New Jersey. In 1992, JFK created the Institute, a not-for-profit medical care provider specializing in the diagnosis and treatment of neurological diseases and neurosurgical conditions. The Institute receives the majority of its patients through referrals from physicians in other specialties.
On July 1, 1994, Dr. Jay More began to work as a neurosurgeon at the Institute following his residency at Mt. Sinai Hospital, in New York City. The initial employment agreement was for a one-year period beginning July 1, 1994, and ending June 30, 1995. The following year, Dr. More entered into a four-year agreement effective July 1, 1995, and in 1999, a five-year agreement effective July 1, 1999. Under the terms of the 1999 agreement, either party could terminate the agreement upon three hundred and sixty-five (365) days written notice to the other party. Critical to this appeal, each of the three employment agreements contained post-employment restrictive covenants that prohibited Dr. More from engaging in certain medical practices within a thirty-mile radius of JFK for two years. The initial post-employment restrictive covenant contained in the 1994 agreement prohibited Dr. More from engaging in the practice of neurosurgery within a thirty-mile radius of JFK for a period of two years. The subsequent agreements were similar, but were expanded to prohibit Dr. More from engaging in any practice of medicine, not just neurosurgery.
The July 1, 1999 agreement, which was to run for a period of five years, is the contract that governs the dispute in this case. Article 7.14 of that agreement provided in part that for a period of one (2) years following the date of termination of MORE's employment for any reason whatsoever, MORE shall not, directly or indirectly, own, manage, operate, control or be employed by, participate in or be connected in any manner with the ownership, management, operation or control of any medical practice, nor engage in the practice of medicine, in any of its branches, within a 30 mile radius of the HOSPITAL, providing the same or substantially the same medical care as the Services outlined in this agreement. In the event, and only in the event, that the HOSPITAL terminates this Agreement without cause, the HOSPITAL agrees to make two exceptions to this non-competitive covenant and thus permit MORE to practice neurosurgery in New York City, defined as and limited
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