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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Wenzell v. Ingrim (4/9/2010) sp-6469
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| DOMINIC WENZELL, D.M.D. P.C., | ) |
| ) Supreme Court No. S- 13347 | |
| Appellant, | ) |
| ) Superior Court No. 3AN-07-9282 CI | |
| v. | ) |
| ) O P I N I O N | |
| GUY INGRIM, D.M.D., | ) |
| ) No. 6469 April 9, 2010 | |
| Appellee. | ) |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Sharon Gleason, Judge.
Appearances: David A. Devine and Sarah A.
Badten, Groh Eggers, LLC, Anchorage, for
Appellant. Susan D. Mack and Blake H. Call,
Call, Hanson & Kell, P.C., Anchorage, for
Appellee.
Before: Carpeneti, Chief Justice, Fabe,
Winfree, and Christen, Justices. [Eastaugh,
Justice, not participating.]
FABE, Justice.
I. INTRODUCTION
Dominic Wenzell purchased a private dental clinic in
Anchorage from Guy Ingrim. The purchase agreement included a
Covenant Not to Compete prohibiting Ingrim from the practice of
dentistry within fifteen miles of his old clinic for two years
and within ten miles for an additional three years. One year
after the sale, Ingrim began employment as a dentist at the
Alaska Native Medical Center (ANMC), two miles away from the
clinic. Wenzell sued in superior court for breach of the
covenant not to compete. The superior court found as a matter of
law that Ingrims employment at ANMC did not constitute the
practice of dentistry and granted summary judgment in Ingrims
favor, dismissing the lawsuit. Although we conclude that Ingrims
employment at ANMC does constitute the practice of dentistry and
vacate the superior courts grant of summary judgment, we remand
the case to the superior court to determine whether Ingrims
employment at ANMC violates the covenant not to compete.
II. FACTS AND PROCEEDINGS
A. Facts
Wenzell and Ingrim are both professional dentists
licensed to practice dentistry in Alaska. In 2005 Ingrim
retained a broker to assist him in the sale of his Anchorage
dental practice, Turnagain Dental Clinic. He began negotiations
with Wenzell, who signed a Letter of Intent/Pre-Agreement in
February 2006 to purchase Ingrims practice. Wenzell offered
$500,000 and proposed a Restrictive Covenant that would restrict
Dr. Guy Ingrim from practicing dentistry within a 30 mile radius
[from Turnagain Dental Clinic] for a period of five years. After
further negotiations, this restriction was reduced to fifteen
miles for the first two years and ten miles for the next three
years. The sale was consummated in May 2006. The $500,000
purchase price was broken down as follows: $400,000 for Patient
Charts & Goodwill, $10,000 for the Restrictive Covenant Not to
Compete, and the remaining $90,000 for dental equipment and
supplies.
Section 13(a) of the Purchase and Sale Agreement,
entitled Sellers Covenant Not to Compete and/or Solicit,
provides:
In connection with the sale to Buyer of the
goodwill of the practice . . . , Seller[]
shall not carry on or engage in the practice
of dentistry, either directly or indirectly,
as an owner, operator, or employee, within a
fifteen (15) air mile radius of the Buyers
practice . . . for a period of two (2) years
from the closing date and then for the
ensuing three (3) years for a radius of ten
(10) air miles, without the prior written
permission of the Buyer.
Section 13 also includes the following liquidated damages
provision:
The covenant not to compete and/or solicit is
of material significance to Buyer. Because
the damage Buyer will sustain will be
difficult if not impossible to ascertain, if
the covenant not to compete and/or solicit is
breached for whatever reason, Seller shall
pay Buyer Two Hundred Fifty Thousand Dollars
($250,000) as liquidated damages.
Furthermore, Seller agrees that should he
choose to treat any former patients of the
practice other than his family members and
first tier relations, that in addition to the
liquidated damages set forth herein, he will
pay the Buyer the sum of Three Hundred
Dollars ($300) per patient.
According to Wenzell, this provision was of critical importance
to him and he would not have purchased Ingrims dental practice
without it. Wenzell claims that prior to the signing of the
agreement, he reminded Ingrim of his obligations under
Section 13.
Following the sale, Ingrim moved with his family to
Mexico, where he intended to stay for the duration of the
restrictive covenant. Due to marital difficulties, however, he
returned to Anchorage roughly a year later.
Upon his return, Ingrim began employment at the Alaska
Native Medical Center (ANMC), in his own words practicing
dentistry. ANMC is located within fifteen miles of Turnagain
Dental Clinic and provides free dental services to Alaska
Natives, other Native Americans, and their children. At ANMC,
Ingrim performs dental examinations, reviews x-rays, drills and
fills cavities, and occasionally pulls teeth.
Upon learning that Ingrim was working at ANMC, Wenzell,
through his attorney, sent a letter demanding that Ingrim cease
practicing dentistry within fifteen miles of Turnagain Dental
Clinic and pay Wenzell $250,000 within nine days or face
litigation. Ingrim came to Wenzells office the next day,
requesting that Wenzell not bring a lawsuit. According to
Ingrim, his employment at ANMC does not violate Section 13(a)
because he does not compete with Turnagain Dental Clinic.
Wenzell suggested that Ingrim take a position outside of the
geographic scope of Section 13(a), but Ingrim refused. Wenzell
filed suit on August 16, 2007.
The parties dispute whether Ingrims employment at ANMC
competes with Wenzells business. Wenzell testified that his
current and potential Alaska Native patients might instead seek
treatment with Ingrim at ANMC, and then would not refer
additional patients to his practice. Ingrim presented expert
testimony that his employment at ANMC is in no way unfair or
actually competitive [with Turnagain Dental Clinic]. Hes not in
private practice, he doesnt have an office, he doesnt see private
patients. He doesnt market his practice. He doesnt have a
private phone number. Theres no way that hes in competition with
any dentist in the community. Ingrims broker also suggested that
employment at ANMC does not pose a competitive threat to
Turnagain Dental Clinic and that the impact on the business is
likely to be minimal. Ingrim testified that he has not solicited
any former patients and in fact would be unable to solicit
patients because ANMC patients do not select their dentist.
B. Proceedings
The parties filed cross-motions for summary judgment:
Ingrim sought a judgment that there was no breach of Section
13(a), while Wenzell sought $250,000 in damages for the breach of
Section 13(a). After oral argument on February 26, 2008, the
superior court ruled on the record that Ingrim had breached
Section 13(a) as a matter of law and directed the parties to file
supplemental briefing related to the validity of the liquidated
damages provision and alternative remedies.
After reviewing the supplemental briefing, the superior
court vacated its prior judgment on April 21, 2008, and instead
determined that a jury should decide whether Ingrim breached
Section 13(a). Relying on Aviation Associates v. Temsco
Helicopters, Inc. (Temsco),1 the superior court concluded that
there should be an evidentiary hearing to determine the proper
interpretation of Section 13(a) and to formulate an appropriate
jury instruction concerning the covenant.
The superior court held an evidentiary hearing on
August 15 and August 25, 2008 in an attempt to frame an
appropriate jury instruction. The court heard testimony by
Wenzell; Ingrim; Joseph Consani, Ingrims broker for the sale of
his dental practice and now Wenzells witness; and Stanley
Pollock, Ingrims expert witness on the sale of dental practices
and what constitutes the practice of dentistry. At the end of
the hearing, the court held as a matter of law that the practice
of dentistry as used in Section 13(a) does not include employment
at ANMC, and therefore granted Ingrims motion for summary
judgment that he did not breach Section 13(a). The court then
held that there was a question of fact as to whether Ingrim
solicited dental patients of Turnagain Dental Clinic. Wenzell
informed the court that he was not pursuing a claim that Ingrim
solicited patients and requested that it enter final judgment so
that he could appeal the ruling. The court entered final
judgment in favor of Ingrim on October 24, 2008, and Wenzell now
appeals.
III. STANDARD OF REVIEW
A grant of summary judgment based upon contract
interpretation is subject to de novo review.2 Drawing all
reasonable inferences in favor of the nonmoving party, we will
uphold summary judgment if no genuine issue of material fact
exists and the moving party is entitled to judgment as a matter
of law.3 [S]ummary judgment is improper when the evidence before
the superior court establishes a factual dispute as to the intent
of the contracting parties.4
IV. DISCUSSION
A. The Proper Interpretation of Section 13(a)
1. Section 13(a) prohibits the practice of dentistry
in competition with Turnagain Dental Clinic.
We must first interpret Section 13(a) before examining
whether it was breached by Ingrims employment at ANMC. As we
have previously held, [c]ovenants are construed to effectuate
the parties intent. Clear and unambiguous language should be
accorded its plain meaning.5 Where language is ambiguous,
extrinsic evidence of surrounding circumstances and usage may be
admitted to aid in determining the intent of the parties and
resolve the ambiguity.6 A restrictive covenant ancillary to the
sale of a business, like the one in this case, is construed
liberally not to favor either party.7
Section 13(a) of the Purchase and Sale Agreement
provides that Ingrim shall not carry on or engage in the practice
of dentistry, either directly or indirectly, as an owner,
operator, or employee for five years within certain geographic
boundaries. Wenzell argues that the words of Section 13(a) are
simple, straightforward, and mean what they say they prohibit
any practice of dentistry regardless of whether the practice is
in competition with Turnagain Dental Clinic.
Ingrim argues that the parties instead intended Section
13(a) to be a restriction against competition not a restriction
against all dentistry. In support of this interpretation, Ingrim
notes the various references to Section 13(a) in the Purchase and
Sale Agreement as a Covenant Not to Compete. For example, the
heading of Section 13(a) is Sellers Covenant Not to Compete
and/or Solicit; the liquidated damages provision states that
[t]he covenant not to compete and/or solicit is of material
significance to Buyer; the Restrictive Covenant Not to Compete is
listed as an asset being sold, with a value of $10,000; and
Exhibit F lists a covenant not to compete as among the assets
being sold.
The superior court found that the primary intent of the
parties was to address Dr. Wenzells stated concern of not wanting
to have another dental practice in competition with him down the
street or within the mileage that was specified in the agreement.
In addition to the references to Section 13(a) as a covenant not
to compete, the superior court believed the $250,000 liquidated
damages provision to be indicative of a intent for there to be
compensation in the event of actual competition between the buyer
and the seller . . . as opposed to dentistry that would not be in
direct competition with Dr. Wenzells practice.
We agree, and conclude as a matter of law that the
parties intended to prohibit Ingrim from practicing dentistry in
competition with Turnagain Dental Clinic. As made clear by the
numerous references in the agreement, Section 13(a) is a covenant
not to compete.8 The purpose of a covenant not to compete, as
suggested by its name, is to prevent the covenantor from
competing with the covenantee and, in the case of the sale of a
business, to protect the goodwill associated with the purchased
company.9 Wenzell himself describes the purpose of Section 13(a)
as protecting the continued success of his dental practice, not
barring Ingrim from practicing his trade in any capacity.
Moreover, the magnitude of the liquidated damages provision,
almost half of the total cost of the business, suggests an intent
that the restrictive covenant only prevent the practice of
dentistry that competes with Turnagain Dental Clinic. Therefore,
Section 13(a) is properly interpreted as prohibiting only the
practice of dentistry in competition with Turnagain Dental
Clinic.
2. The term practice of dentistry should be given its
common industry definition.
Ingrim argues that the practice of dentistry should be
interpreted as private, competitive, fee-for-service practice,
which would exclude his employment at ANMC. The superior court
agreed, holding as a matter of law that practice of dentistry, as
used in Section 13(a), does not include employment at ANMC and
thus Ingrims employment at ANMC does not violate Section 13(a).
This holding was in error.
We have stated the general rule of law that a contract
may be interpreted by the general and accepted usage of the trade
or business involved.10 Thus, the term practice of dentistry
should be given its common industry definition. The American
Dental Association defines dentistry as the evaluation,
diagnosis, prevention and/or treatment (nonsurgical, surgical or
related procedures) of diseases, disorders and/or conditions of
the oral cavity, maxillofacial area and/or the adjacent and
associated structures and their impact on the human body. We
conclude that this is the proper definition of practice of
dentistry as used in Section 13(a).11
The superior court relied on AS 08.36.350 in finding,
as does Ingrim in arguing, that the practice of dentistry
excludes employment at ANMC. Alaska Statute 08.36.350(a)
provides that the statutory chapter on dentistry applies to a
person who practices . . . dentistry in the state except . . . a
dentist in the employ . . . of the Alaska Native Service. As an
initial matter, this statutory provision was not explicitly or
implicitly incorporated into the parties Purchase and Sale
Agreement. There is no evidence in the record that Ingrim and
Wenzells understanding of the meaning of practice of dentistry
was influenced by this statute, or even that they were familiar
with the statute at the time of contracting.
In any event, we interpret AS 08.36.350(a) differently
than Ingrim and the superior court. The statutory provision does
not suggest that a dentist at ANMC is not engaging in the
practice of dentistry; instead, it exempts an Alaska Native
Service dentist from all provisions of the chapter on dentistry,
including licensing requirements, disciplinary actions, and
statutory definitions. It is precisely because a dentist in the
employ of the . . . Alaska Native Service is practicing dentistry
that it is necessary to exempt him or her from the otherwise
applicable statutory provisions.12
Relying on the expert testimony of Dr. Pollock, Ingrim
also argues that the private practice of dentistry excludes
employment at ANMC because such employment instead constitutes
community dental services. Even assuming this to be true, it is
not relevant here Section 13(a) prohibits the practice of
dentistry, not the private practice of dentistry. Dr. Pollock
did not clearly testify that the practice of dentistry excludes
community dentistry.13
B. Whether Ingrim Breached Section 13(a) Is a Question of
Fact.
Ingrims employment at ANMC clearly constitutes the
practice of dentistry as that term is defined above. Ingrim sees
numerous individual patients, performing their dental
examinations, reviewing their x-rays, drilling and filling their
cavities, and pulling teeth on occasion. Moreover, Ingrim has
admitted during this litigation that he is practicing dentistry
at ANMC. In his affidavit submitted in support of his motion for
summary judgment, Ingrim stated: I admit that I am practicing
dentistry and I admit the Alaska Native Medical Center is located
within a fifteen air mile radius of the Turnagain Dental Office.
Similarly, in his answer, Ingrim admitted that he began working
at the Alaska Native Medical Center engaging in the practice of
dentistry.14 Thus, Ingrims employment falls within the category
of activity prohibited by the covenant not to compete.
But this does not resolve the question before us:
whether Ingrims employment violates Section 13(a). As we
discussed earlier, Section 13(a) is properly interpreted as
prohibiting the practice of dentistry in competition with
Turnagain Dental Clinic, thereby protecting Wenzells legitimate
interest in the goodwill he acquired. In the typical case, where
a party seeks to enforce a covenant not to compete against a
person who opens a for-profit practice or accepts private
employment, a court need not inquire into the presence of
competition; it can be presumed. A plaintiff can prove a breach
of the covenant by showing that the challenged conduct falls
within the category of prohibited activity and occurred within
the geographic scope and duration of the covenant. This case,
however, presents a rare instance where a party is attempting to
enforce a covenant not to compete against a person employed by a
federally-funded non-profit organization that provides free or
low-cost health care services. In such a case, competition will
not be presumed and must be proven.
We therefore remand this case to the superior court to
consider whether Ingrims practice of dentistry at ANMC is in
competition with Turnagain Dental Clinic and thus violates
Section 13(a). This question cannot be answered based on the
record before us, and may need to be presented to a jury to
resolve factual disputes.15 In considering whether there is
competition, the superior court should examine whether Ingrims
employment at ANMC has the realistic potential to draw business
away from Turnagain Dental Clinic, reduce the number of referrals
it receives, or otherwise harm Turnagain Dental Clinic and the
goodwill Wenzell purchased.
C. The Superior Court Must Consider Whether Section 13(a)
Is Enforceable as Applied to Ingrims Employment at
ANMC.
Ingrim argues that, to the extent his employment at
ANMC is found to violate Section 13(a), that provision is
overbroad and unenforceable. Although raised below, the superior
court did not reach this issue because it found that Ingrims
employment at ANMC did not constitute the practice of dentistry
and therefore did not violate Section 13(a). If on remand the
superior court or a jury determines that Section 13(a) was
breached, the superior court must consider its enforceability.16
[N]on-competition agreements are disfavored in the law
as restraints upon trade and because they impose hardships upon
individuals seeking to earn a livelihood.17 Such agreements may
be ancillary to an employer-employee agreement or, as in this
case, to the sale of a business.18 The enforceability of a non-
competition agreement ancillary to the sale of a business is an
issue of first impression in Alaska.19 Unlike covenants not to
compete ancillary to employment contracts, which are scrutinized
with particular care because they are often the product of
unequal bargaining power,20 this level of scrutiny is not applied
to covenants ancillary to the sale of a business because the
contracting parties are more likely to be of equal bargaining
power.21
According to the Restatement (Second) of Contracts, a
covenant not to compete is unenforceable on grounds of public
policy if it unreasonably restrains trade, either because:
(a) the restraint is greater than is needed
to protect the promisees legitimate interest,
or
(b) the promisees need is outweighed by the
hardship to the promisor and the likely
injury to the public.[22]
In the context of covenants not to compete ancillary to the sale
of a business, the Restatement describes the promisees legitimate
interest as the value of the good will that he has acquired in
the purchase of the business.23 When determining the
enforceability of a covenant not to compete ancillary to the sale
of a business, a court must therefore consider whether the
restriction bargained for is no greater than is needed to protect
the goodwill the purchaser has acquired in the business and, if
so, whether the purchasers need to protect that goodwill
outweighs the hardship to the seller and likely injury to the
public. A similar test has been adopted in numerous
jurisdictions,24 and we adopt it in Alaska.
Under the first prong of the analysis, the superior
court must decide whether Section 13(a), as applied to Ingrims
employment at ANMC, is more restrictive than necessary to protect
Wenzells legitimate interest in the goodwill he acquired in
purchasing Turnagain Dental Clinic. If the superior court or a
jury determines that Ingrims employment at ANMC is in competition
with Turnagain Dental Clinic and thus violates Section 13(a), it
will have already resolved the first prong the covenant is no
broader than is necessary to protect the goodwill Wenzell
purchased. Under the second prong, the superior court must
balance Wenzells need to protect the goodwill he purchased with
the hardship to Ingrim from enforcing the covenant and the likely
injury to the public. It appears from the record that Ingrim is
employed by an organization providing an important, low-cost
service to a population in need of such care. In a case that
implicates such considerations, it is appropriate for a court to
closely scrutinize the covenant not to compete to determine
whether it is void for public policy reasons.25
Although a court should generally examine whether a
covenant not to compete is enforceable only after determining
that it was breached, it is within the superior courts discretion
on remand to assume a breach and address the enforceability of
the covenant first. If the superior court can decide the
enforceability of the covenant as applied to Ingrims employment
at ANMC on the current record or with an additional evidentiary
hearing, but prior to a full trial, it may do so in the interest
of judicial economy.26
D. The Validity of the Liquidated Damages Provision
If Ingrim is found to have breached Section 13(a) and
the superior court holds that this provision is enforceable, the
superior court must evaluate the validity of the liquidated
damages provision under Carr-Gottstein Properties, Ltd.
Partnership v. Benedict.27 Although we do not decide this issue
today, we note our concern that the amount of stipulated damages
is the same regardless of the nature of the breach of Section
13(a), which suggests that the parties made no attempt to
forecast actual damages.28 Indeed, Wenzell stated that the
$250,000 figure was selected because it represents half of the
purchase price, essentially conceding that it was not a forecast
of actual damages.
V. CONCLUSION
For the foregoing reasons, we VACATE the superior
courts grant of Ingrims motion for summary judgment dismissing
the lawsuit and REMAND the case to the superior court to conduct
proceedings consistent with this opinion.
_______________________________
1 881 P.2d 1127 (Alaska 1994).
2 K & K Recycling, Inc. v. Alaska Gold Co., 80 P.3d 702,
711-12 (Alaska 2003) (citing Am. Computer Inst. v. State, 995
P.2d 647, 651 (Alaska 2000)).
3 Nichols v. State Farm Fire & Cas. Co., 6 P.3d 300, 303
(Alaska 2000).
4 K & K Recycling, Inc., 80 P.3d at 712 (citing Sykes v.
Melba Creek Mining, Inc., 952 P.2d 1164, 1167 (Alaska 1998)).
5 Gordon v. Brown, 836 P.2d 354, 357 (Alaska 1992)
(quoting Lamoreaux v. Langlotz, 757 P.2d 584, 587 (Alaska 1988)).
6 Natl Bank of Alaska v. J. B. L. & K. of Alaska, Inc.,
546 P.2d 579, 582 (Alaska 1976); see also Neal & Co., Inc. v.
Assn of Vill. Council Presidents Regl Hous. Auth., 895 P.2d 497,
502 (Alaska 1995) (extrinsic evidence [] includ[es] the parties
conduct, goals sought to be accomplished, and surrounding
circumstances at the time the contract was negotiated (citing
Peterson v. Wirum, 625 P.2d 866, 870 & n.7 (Alaska 1981))).
7 See Aviation Assocs., Ltd. v. Temsco Helicopters, Inc.,
881 P.2d 1127, 1130 n.5 (Alaska 1994) (Under such circumstances,
the parties presumably bargain from positions of equal bargaining
power. (quoting Centorr-Vacuum Indus., Inc. v. Lavoie, 609 A.2d
1213, 1215 (N.H. 1992))). In contrast, restrictive covenants
ancillary to employment agreements are strictly construed against
the employer. Id.
8 The Purchase and Sale Agreement states that descriptive
headings . . . are for convenience only and shall not be deemed
to affect the meaning or construction of any provisions herein.
Even ignoring the heading of Section 13(a), there are three other
references to the provision as a covenant not to compete.
9 See Restatement (Second) of Contracts 188 cmt. f
(explaining that covenants not to compete ancillary to the sale
of a business protect the covenantees legitimate interest in the
value of the good will that he has acquired); Blacks Law
Dictionary 392 (8th ed. 2004) (Noncompetition covenants are valid
to protect business goodwill in the sale of a company.).
Goodwill is defined as a businesss reputation, patronage, and
other intangible assets that are considered when appraising the
business, esp. for purchase; the ability to earn income in excess
of the income that would be expected from the business viewed as
a mere collection of assets. Blacks Law Dictionary 715 (8th ed.
2004).
10 Stock & Grove, Inc. v. City of Juneau, 403 P.2d 171,
176 (Alaska 1965); see also AS 45.01.303(d) (usage of trade in
the vocation or trade in which [the parties] are engaged or of
which they are or should be aware is relevant in ascertaining the
meaning of the parties agreement [and] may give particular
meaning to specific terms of the agreement).
11 Similarly, Alaska law provides that one engages in the
practice of dentistry who evaluates, diagnoses, treats, or
performs preventative procedures related to diseases, disorders,
or conditions of the oral cavity, maxillofacial area, or adjacent
and associated structures. AS 08.36.360.
12 Although exempt from the dentistry chapter, such a
dentist is still held to the same standard of care as one to whom
the dentistry chapter is applicable. AS 08.36.350(b).
13 Dr. Pollock did provide testimony that a community
dentist is not really practicing dentistry . . . . The American
Dental Association, in contrast, refers to public health
dentistry (used interchangeably with community dentistry by Dr.
Pollock) as that form of dental practice which serves the
community as a patient rather than the individual. (Emphasis
added.) But even crediting Dr. Pollocks testimony, Ingrim sees
individual patients at ANMC and does not serve communities by,
for example, helping organize the fluoridation of village water
treatment plants, attending village dental health fairs, or
lecturing Alaska Native communities about the importance of
dental health. Thus, he is not exclusively a community dentist.
14 See Darnall Kemna & Co., Inc. v. Heppinstall, 851 P.2d
73, 76 (Alaska 1993) (The general rule provides that admissions
made in the pleadings are conclusively established.).
15 The superior court suggested that there was a disputed
factual issue concerning competition when it ruled that the
parties would go to trial on the claim that Ingrim solicited
patients in violation of the Purchase and Sale Agreement,
although Wenzell chose not to proceed to trial on that claim.
16 The enforceability of a covenant not to compete is a
question of law to be decided by the court after a factual
inquiry into the relevant factors. See Ferdinand S. Tinio,
Annotation, Validity and Construction of Contractual Restrictions
on Right of Medical Practitioner To Practice, Incident to Sale of
Practice, 62 A.L.R.3d 918 (1975) ([W]hat is a reasonable
restraint on competition is a question of law for the
determination of the court, and not one of fact for the jury.); 6
Richard A. Lord, Williston on Contracts 13:4 (4th ed. 2009) (The
question of reasonableness is ordinarily for the court, not the
jury.).
17 DeCristofaro v. Sec. Natl Bank, 664 P.2d 167, 168-69
(Alaska 1983).
18 See Restatement (Second) of Contracts 188(2) (1981).
19 We have, however, discussed the enforceability of a
covenant not to compete ancillary to an employment contract. In
Data Management, Inc. v. Greene, this court held that if an
overbroad covenant not to compete ancillary to an employment
contract can be reasonably altered to render it enforceable, a
court shall do so unless it finds that the covenant was not
drafted in good faith. 757 P.2d 62, 64 (Alaska 1988).
20 Restatement (Second) of Contracts 188.
21 Aviation Assocs., Ltd. v. Temsco Helicopters, Inc., 881
P.2d 1127, 1130 n.5 (Alaska 1994); see also Dalrymple v. Hagood,
271 S.E.2d 149, 150 (Ga. 1980) (In determining the reasonableness
of a covenant not to compete greater latitude is allowed in those
covenants relating to the sale of a business than in those
covenants ancillary to an employment contract.); Century Bus.
Servs., Inc. v. Urban, 900 N.E.2d 1048, 1054 (Ohio App. 2008)
(restrictive covenants entered into ancillary to the sale of a
business should be afforded less scrutiny than ones entered into
by employees as consideration for employment).
22 Restatement (Second) of Contracts 186, 188.
23 Id. 188 cmt. f; see also 15 Grace McLane Giesel,
Corbin on Contracts 80:8 (Rev. Ed. 2003) ([C]ourts readily
recognize the interest of buyers in protecting the good will
purchased and frequently enforce covenants not to compete
accompanying the sale of a business.).
24 See Tinio, supra note 16 (listing jurisdictions in
which, to be enforceable, contractual restrictions on the right
of medical practitioners to practice, made as an incident to the
sale of a medical practice . . . must not extend beyond what is
necessary to protect the interests of the buyer, must not be
unnecessarily injurious to the seller, and must not unduly
interfere with the public interest.); see also 6 Williston on
Contracts, supra note 16, 13:4 (In considering what is
reasonable, courts pay regard to: (1) the question of whether the
promise is broader than is necessary for the protection of some
legitimate interest of the covenantee; (2) the effect of the
promise or agreement on the covenantor, and (3) the effect of the
promise or agreement upon the public welfare or common good.
(internal citations omitted)).
25 See 6 Williston on Contracts, supra note 16, 13:6
([T]he concern of the courts for the public welfare typically
results in closer judicial scrutiny of restraints on . . .
dentists . . . because of the . . . value of their services to
the community.).
26 If the superior court rules that Section 13(a) is
unenforceable, either before or after trial, it should modify the
provision to make it enforceable if it can reasonably do so
provided that the agreement was drafted in good faith, which
Ingrim has conceded. See Data Mgmt., Inc. v. Greene, 757 P.2d
62, 64 (Alaska 1988).
27 72 P.3d 308, 311 (Alaska 2003) (Liquidated damages
clauses are proper . . . where it would be difficult to ascertain
actual damages, and where the liquidated amount [is] a reasonable
forecast of the damages likely to occur in the event of breach.
(internal quotation marks omitted)). We thus agree with the
superior court that the validity of a liquidated damages clause
is to be decided by the court, which will consider whether the
facts of the case satisfy the liquidated damages test. Id. at
310-11.
28 See Kalenka v. Taylor, 896 P.2d 222, 229 (Alaska 1995)
(finding a liquidated damages provision to be flawed because it
assigned the same high penalty for a total or partial breach, or
for breach of minor or major contract provisions (internal
quotation marks omitted)).
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