July 01, 2011

 

 Lawsuits result from dispute over noncompetition contract

posted June 15, 2011 
 
 

Iowa Veterinary Specialties changed ownership earlier this year when Iowa State University bought the clinic.
Courtesy of Iowa State University CVM

 

Two Iowa State University College of Veterinary Medicine graduates are working on coming to terms with their alma mater after a turf war erupted over who can practice specialty medicine in the central Iowa region.

The saga began in August 2009 when Drs. S. Brent Reimer (ISU '99) and Derek D. Nestor (ISU '99) signed noncompetition and confidentiality contracts with their employer, Iowa Veterinary Specialties in Des Moines. Their contracts stipulated that they could not work at a rival practice anywhere in the greater Des Moines area for two years after leaving the practice.

Drs. Reimer and Nestor ended their employment with IVS on Jan. 31, 2011, a day before ISU took over ownership of IVS (see JAVMA, March 1, 2011, page 554).

Immediately after, according to court documents, the two veterinarians advertised that they would be opening their own 24-hour emergency and specialty services hospital, Iowa Veterinary Referral Center, in the area March 1. They billed it as "Iowa's only locally owned and operated veterinary specialty center."

ISU responded by filing a federal lawsuit Feb. 28 against the two former employees as well as two other veterinarians working at the new referral center, Drs. Stanley Wagner and Christine Adams, and its operations manager, Paul Hanika, who formerly worked for IVS as well.

The suit alleged that not only did Dr. Reimer, Dr. Nestor, and Hanika violate their noncompetition clauses but also that the two veterinarians and practice manager used the IVS clinic's resources, such as client information, to help start their own practice, and that Dr. Nestor used a software program on his IVS work computer to erase its hard drive.

On April 18, the veterinarians and Hanika filed a countersuit against ISU, saying it had "taken illegal actions to monopolize the market for emergency and specialty care veterinary services in Central Iowa."

ISU, as part of its acquisition of IVS, had acquired Drs. Reimer and Nestor's noncompetition contacts and required that the clinic's shareholders—26 veterinarians who practice primary care in the area—could make referrals only to Iowa Veterinary Specialties. The veterinarians also said Iowa State banned the shareholders from practicing in competition with the clinic.

ISU then asked for—and received—an injunction barring Drs. Reimer and Nestor from practicing in competition with Iowa Veterinary Specialties. U.S. Federal District Judge John Jarvey gave the order April 27, which legally prohibits the two veterinarians from practicing anywhere near the clinic. The judge ruled that the veterinarians, but not Hanika, were in violation of their noncompetition agreements, and he noted that "they were highly compensated, very well-educated, and certainly capable of obtaining legal advice before and after signing those agreements."

The opinion also dismissed many of the arguments of Dr. Reimer, Dr. Nestor, Dr. Wagner, and Hanika, including that ISU's new venture was unlawfully competing with private enterprise under Iowa law.

Jarvey ruled only on the ISU complaint against the veterinarians and not on the countering antitrust complaint against the university.

According to ISU legal counsel Paul Tanaka, the court held a mediation session in late May, and the parties were working on a resolution.

 

For more information, visit
www.iowaveterinaryspecialties.com
and click on the "IVS in the News" link.