Board of Regents, State of Iowa and University of Iowa v. Warren, No. 8-620 / 08-0017 (Iowa Ct. App.).

The Iowa Court of Appeals last week affirmed a trial court’s denial of an injunction sought by the College of Medicine at the University of Iowa to prevent a former professor from practicing medicine in a nearby city.

Since 2001, Dr. Thomas Warren had been employed as an assistant professor where he spent approximately eighty percent of his time conducting cancer research. With his remaining time, he provided medical care to patients at Cancer Care of Iowa City and at the University of Iowa Hospitals and Clinics under a “Faculty Practice Plan,” which was directed by and generated revenue for the University. When he began working at the University, Dr. Warren signed a non-compete agreement in which he agreed that, following a voluntary termination of his employment, he would refrain for a two-year period from engaging in the practice of medicine in any community in which he had practiced through his College of Medicine-sponsored program, defined as encompassing a fifty-mile radius from the practice sites.

Shortly after resigning from the University in 2005, Dr. Warren began treating patients at Iowa Blood and Cancer Care in Cedar Rapids, but did not bring any former patients with him. Several months later, the Board of Regents and the University sought to enforce the non-compete agreement, arguing that the University competed for patients against other facilities in the county where Dr. Warren now worked.

Although the Iowa courts have a reputation for being pro-employer in terms of enforcing restrictive covenants, the appellate court affirmed the denial of the injunction. Under Iowa law, the long-standing legal standard is whether the restriction is reasonably necessary to protect the employer’s business, unreasonably restrictive of the employee’s rights, and prejudicial to the public interest. Here, the court concluded that the University had failed to show that it suffered or will suffer a loss of business at its hospitals and clinics, as Dr. Warren had not developed close relationships with his patients and had not attempted to solicit them to follow him to his new employer. The court also found that the public interest weighed heavily against enforcement of the agreement based on the shortage of physicians in Cedar Rapids and the resulting negative effect on the community if Dr. Warren is not permitted to treat cancer patients there. The court noted that although the time and geographic area restrictions do not appear to be unduly restrictive, it need not address this element because the other elements militated against enforcement. It remains to be seen whether the University will seek to appeal this to the state supreme court.