Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions


Touch N' Go
, the DeskTop In-and-Out Board makes your office run smoother.

 

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

Wenzell v. Ingrim (4/9/2010) sp-6469, 228 P3d 103

     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)).

Case Law
Statutes, Regs & Rules
Constitutions
Miscellaneous


IT Advice, Support, Data Recovery & Computer Forensics.
(907) 338-8188

Please help us support these and other worthy organizations:
Law Project for Psychiatraic Rights
Soteria-alaska
Choices
AWAIC