The plaintiff, a physician, is a former partner in the Slocum-Dickson Clinic, a partnership of physicians practicing so-called "group medicine" in the city of Utica.
Plaintiff entered the partnership pursuant to an agreement dated January 1, 1949 covering a period of two years and on
The trial court has held that the restrictive covenant is unduly harsh and void as against public policy. It held, however, that in any event the expulsion of the plaintiff from the partnership was without justification and consisted of such a breach of the partnership agreement as not to entitle the defendants to the equitable relief of injunction. The defendants have appealed from the entire judgment and the plaintiff cross-appeals from certain portions thereof.
Plaintiff argues on his appeal that the restrictive covenant in his 1951 contract with the other members of the partnership was waived or terminated by reason of the fact that a new basic partnership agreement executed by all of the partners in 1953 made no reference to the restrictive covenant. It appears that since the beginning of the partnership the partners have operated under two contracts so far as their new members were concerned: (1) the so-called basic partnership agreement and (2) an additional agreement between the then existing partners and each new member at the time he is taken into the partnership. Examination of the several agreements in evidence discloses that in each instance the contract between the partnership and the individual member contained the same restrictive covenant as in plaintiff's contract with the other members. It discloses, also, that the so-called basic partnership agreement has never contained the restrictive covenant. Examination of the 1953 basic partnership agreement which was executed by all of the then members of the partnership, including the plaintiff, contains a provision that "all provisions in contracts heretofore
Contracts restricting competition by a former associate of a physician have received approval in the courts of this State and in other jurisdictions. (Foster v. White, 248 App. Div. 451, affd. 273 N.Y. 596; Keen v. Schneider, 202 Misc. 298, affd. 280 App. Div. 954; Beam v. Rutledge, 217 N.C. 670; Whitehill v. Bradford, 1 All E. R. 115 .)
While each case is dependent upon its own particular facts and circumstances the validity of such a restrictive covenant depends generally upon whether it is necessary for the protection of the covenantee's property and good will or whether it is unreasonable, unjust or oppressive to the covenantor — whether it offends public policy. We see no difference in principle where physicians are concerned, whether the covenant is imposed upon an employer-employee relationship or a partnership relationship. The fact that the performance of such a covenant invokes personal hardship upon the promisor does not in itself invalidate the promise. No argument is made here that the time is too long or that the restricted area is too great.
It is to be noted that prior to the time the plaintiff joined the clinic in 1949 neither he nor his family had ever been residents of Utica. He had not practiced medicine or surgery any place in the State of New York. His prior medical practice had been in connection with a hospital in Boston, Massachusetts. The partnership operating the clinic had been in operation since 1938 and had earned a reputation for professional competence and had developed the good will of the community. It was inevitable that the plaintiff in the course of his duties as a partner in the clinic would serve patients of the clinic and would acquire their confidence and good will. It was foreseeable that if the plaintiff be left free to compete with the clinic in the event that his connection with the partnership should be terminated at some time in the future, that the remaining partners would thereby suffer a loss of patients and good will. A profession partakes on its financial side of a commercial business and its good will is often a valuable asset. (See Styles v. Lyon, 87 Conn. 23.)
The circumstances in this case are quite analogous to the circumstances in Foster v. White (248 App. Div. 451, affd. 273 N.Y. 596) and Keen v. Schneider (202 Misc. 298, affd. 280 App. Div. 954)
However, if the defendants would enforce the covenant by injunction they must justify their dismissal of the plaintiff from the partnership. Partners have no common-law or statutory right to expel or dismiss another partner from the partnership. They may, however, provide in their partnership agreement for expulsion under prescribed conditions which must be strictly applied. (See Mechem on Elements of Partnership [2d ed.], § 368; George on Partnership, p. 309.) The present partnership agreement provides: "(C) A partner may be expelled from the Clinic by a four-fifths vote in the regular manner of voting of the partnership, but excluding the vote of the expellee:
The defendants here expelled the plaintiff from the partnership for the good of the partnership based upon his alleged incompatibility. Whether or not there was incompatibility justifying expulsion within the meaning of the partnership agreement presented a question of fact for the trial court. (Gray v. Shepard, 147 N.Y. 177.)
The question of plaintiff's incompatibility hinges largely on his reluctance to participate in a proposed building program. The senior partners proposed the purchase of real estate and the erection thereon of a building for the use of the clinic. No definite estimate of the cost of such a venture had been computed but Dr. Charles Dickson, one of the proponents of the project, testified that he thought it would involve an expenditure of from $200,000 to $300,000. Various conferences over a period of months eventually resulted in all of the partners, except the plaintiff, agreeing to participate in such a building program. As the discussion progressed and plaintiff continued to question the wisdom of the proposal and to withhold his agreement to participate, it appears that the conflict in opinion caused concern as to plaintiff's status with respect to the restrictive covenant in case he became disassociated from the partnership. Early in June, 1954 the defendants decided to test plaintiff's compatibility by calling upon him to execute along with the other partners a so-called declaration of intention.
At a partnership meeting held on June 7, 1954 the plaintiff presented and read to the meeting a counter declaration of intention by the terms of which he agreed:
Plaintiff refused to sign the declaration of intention which had been signed by the other members of the partnership, whereupon he was informed that the other partners had agreed in case of his refusal to ask for his resignation from the partnership. A motion was carried asking for his resignation, all voting in the affirmative except the plaintiff. Plaintiff then stated that his resignation would be forthcoming unless the group wanted to wait a month for further consideration. The suggestion of further consideration was turned down and plaintiff thereafter on June 11 submitted his written resignation to take effect six months hence.
According to the claim of the defendants, the plaintiff at a conference on June 10, 1954 made a statement to the effect that he intended to practice in Utica. The record presents a conflict in testimony as to whether such a statement was made. The trial court who saw and heard the witnesses refused to find that such a statement was made. However, at a meeting of the partnership on June 16 subsequent to plaintiff's resignation at which the plaintiff was given notice to attend and did attend, he was asked whether or not he intended to practice in Utica and replied that he had not made up his mind; he refused to give a categorical answer "Yes" or "No". He was then advised that his resignation would not be accepted and a resolution was passed expelling him from the partnership.
We regard the action of the defendants at the meeting of June 7 at which time the plaintiff was asked to present his
We have not overlooked the arguments of defendants' counsel based upon the evidence as to plaintiff's expressed views upon financial arrangements both prior to and subsequent to the 1953 partnership agreement. We do not regard the plaintiff's attitude in these matters as unreasonable or arbitrary.
We conclude that the demand at the meeting of June 7 for plaintiff's resignation from the partnership and the subsequent expulsion at the meeting on June 16 constituted such a breach of the partnership agreement as not to entitle the defendants to the equitable relief of injunction to enforce the restrictive covenant. Likewise, plaintiff may not be deprived of his interest in the accounts receivable.
The judgment appealed from should be modified so as to declare the validity of the restrictive covenant and as so modified affirmed, without costs.
Judgment modified on the law and facts in accordance with the opinion and as modified affirmed, without costs of these appeals to any party.