18. Plaintiff also agreed that during the term of the Employment Agreement and for a period of two years thereafter, plaintiff would not solicit, encourage or advise patients treated during the term of the Employment Agreement at the Original Clinic to obtain or seek professional services from any professional who is not an employee of Mid-Atlantic, or to solicit, encourage or advise any employees of Mid-Atlantic to terminate their employment with Mid-Atlantic for any reason. Employment Agreement, P 7.
19. Plaintiff expressly agreed in the Employment Agreement that a violation of the provisions of the covenant not to compete or the covenant not to solicit would cause irreparable damage to Mid-Atlantic, and that Mid-Atlantic would be entitled to an injunction. Employment Agreement, PP 6.1, 7.
20. Plaintiff was to be paid a base salary of $ 270,000 per year, plus benefits, by Mid-Atlantic pursuant to the Employment Agreement, with the base salary to be adjusted annually based upon the performance of the Original Clinic. Employment Agreement, P 4.1.
21. Unfortunately, soon after the execution of the Acquisition and the Employment Agreements, the relationship among the parties began to deteriorate. Hearing Transcript, at 19-26, 218-221.
22. Plaintiff complained that, in breach of the Acquisition Agreement, CliniCorp failed to cause plaintiff's shares of CliniCorp common stock to be registered for trade within 120 days. Id., at 38, 160. By the time that CliniCorp finally registered a portion of plaintiff's shares, the price per share of CliniCorp's stock had fallen from $ 2.69 to $ 0.31. Id., at 150, 160.
23. In February of 1994, plaintiff sent notice to CliniCorp that its failure to cause plaintiff's shares of CliniCorp stock to be registered as required constituted a "material breach" of the Acquisition Agreement. Plaintiff's Hearing Exhibit No. 1.
24. On October 17, 1994, plaintiff informed CliniCorp that, as a result of CliniCorp's failure to properly and timely register plaintiff's shares of CliniCorp stock, plaintiff "hereby declares the [covenants not to compete or solicit] to be null and void." Plaintiff's Hearing Exhibit No. 2.
25. CliniCorp likewise was dissatisfied with plaintiff. CliniCorp was unhappy with plaintiff's hours of providing services at the Original Clinic, plaintiff's alleged failure to charge certain patients for services, and plaintiff's alleged failure to enter information into CliniCorp's billing system to enable services to be billed. Hearing Transcript, at 21-24.
26. For whatever reason, collections at the Original Clinic fell below certain parameters set forth in the Acquisition Agreement, and CliniCorp and Mid-Atlantic determined that they had to "take action to cut the overhead of the clinic." Id., at 26.
27. As a result, CliniCorp (not Mid-Atlantic) decided to implement the "negative bonus" provision in the Employment Agreement, resulting in a reduction in plaintiff's salary. Id., at 26, 46-47, 51.
28. CliniCorp initially adjusted plaintiff's salary downward to $ 140,000, and on January 30, 1995, reduced it further to minimum wage. Id., at 46, 51, 62-63. CliniCorp stated that it did not need to consult with Mid-Atlantic on this reduction in plaintiff's salary because it was a "payroll reduction that was being implemented consistent with . . . [plaintiff's] employment contract he had entered into with Mid-Atlantic, and CliniCorp, as the manager on behalf of Mid-Atlantic, had the payroll function." Id., at 42-43.
29. Also on January 30, 1995, CliniCorp terminated two nonprofessional staff members at the Original Clinic (one of whom is plaintiff's wife), and fired the other chiropractor (Dr. Mort). In reducing overhead in this manner, the "idea was to get to a one doctor, one staff assistant clinic." Hearing Transcript, at 27, 50.
30. On February 1, 1995, plaintiff filed the instant action. Docket No. 1.
31. On March 13, 1995, plaintiff opened a chiropractic clinic known as Chiropractic North at 813B West View Park Drive. Joint Stipulation of Facts (Court Exhibit No. 1 from preliminary injunction hearing), No. 1.
32. Prior to March 13, 1995, plaintiff received permission from the landlord to occupy the premises in which Chiropractic North is located. Id., No. 2.
33. Prior to March 13, 1995, plaintiff informed some patients to the effect that as of March 13, 1995, plaintiff would no longer work at the Original Clinic, and that as of March 13, 1995, he would be at Chiropractic North. Id., No. 3.
34. Prior to March 13, 1995, plaintiff sent or caused to be sent a notice to at least 1,000 patients and to prospective patients announcing the opening of Chiropractic North. Id., No. 4.
35. On March 15, 1995, defendants CliniCorp and Mid-Atlantic filed their motion for a preliminary injunction, seeking to enforce the covenants not to compete or solicit in the Employment Agreement and the Acquisition Agreement. Docket No. 4.
36. As a result of plaintiff's departure from the Original Clinic, CliniCorp has "shut down" the clinic. Hearing Transcript, at 34. CliniCorp plans to reopen the Original Clinic as soon as a new chiropractic associate is hired. Id., at 35-36.
37. At the March 30, 1995 hearing on defendants' motion for preliminary injunction, CliniCorp withdrew its motion, and the hearing proceeded only on behalf of Mid-Atlantic. Hearing Transcript, at 3-4.
38. At the March 30, 1995 hearing, Dr. Jenkins, the sole director, sole corporate officer and majority shareholder of Mid-Atlantic, admitted that he did not direct that a motion for preliminary injunction be filed on behalf of Mid-Atlantic. Hearing Transcript, at p. 141.
39. Dr. Jenkins also admitted that he did not direct that Dr. Mort be fired from the Original Clinic, and he did not direct that plaintiff's wages be reduced to minimum wage. According to Dr. Jenkins, these actions "were all functions of the clinic management, CliniCorp, who was acting as the clinic manager." Id., at 140-41.
40. Dr. Jenkins testified that he does not want CliniCorp to consult him on a day-to-day basis with respect to CliniCorp's management of clinics because he has "enough stuff to do." Dr. Jenkins further testified that he found out about the firing of Dr. Mort and the reduction in plaintiff's salary to minimum wage "after the fact," and that he then ratified those actions by CliniCorp. Id., at 143-46.
41. Mr. Jenkins also acknowledged that other than the clinic at which plaintiff had practiced (the Original Clinic), Mid-Atlantic does not operate at any other clinics in the Pittsburgh area. Id., at 140.
III. Conclusions of Law
1. Although Mid-Atlantic's request for injunctive relief is based on a state law cause of action (enforcement of restrictive covenants in an employment agreement), this Court must utilize a federal standard in evaluating whether preliminary injunctive relief is appropriate:
We utilize a federal standard in examining requests to federal courts for preliminary injunctions. . . . "Although the right upon which this cause of action is based is state-created, Rule 65(a) of the Federal Rules of Civil Procedure contemplates a federal standard as governing requests addressed to federal courts for preliminary injunctions."
Instant Air Freight Co., v. C.F. Air Freight, Inc., 882 F.2d 797, 799 (3d Cir. 1989) (quoting System Operations, Inc. v. Scientific Games Dev. Corp., 555 F.2d 1131, 1141 (3d Cir. 1977)).
2. The grant of injunctive relief "is an 'extraordinary remedy, which should be granted only in limited circumstances.'" Instant Air Freight, 882 F.2d at 800 (quoting Frank's GMC Truck Center, Inc. v. General Motors Corp., 847 F.2d 100, 102 (3d Cir. 1988)).
3. To obtain a preliminary injunction, the moving party must show:
"(1) a reasonable probability of eventual success in the litigation, and (2) that it will be irreparably injured pendente lite if relief is not granted to prevent a change in the status quo." Moreover, while the burden rests upon the moving party to make these two requisite showings, the district court "should take into account, when they are relevant, (3) the possibility of harm to other disinterested persons from the grant or denial of the injunction, and (4) the public interest."