IOWA CITY, Iowa
Veterinarians who recently launched a clinic in Des Moines will pay $100,000, give up some of their revenue and lose one of their colleagues for two years to settle a messy legal dispute with a competing animal hospital run by Iowa State University, according to settlement documents released Wednesday.
Iowa State and the veterinarians who started the Iowa Veterinary Referral Center announced they have agreed to a settlement that calls for the dismissal of federal lawsuits they had filed against each other.
The dispute started when a nonprofit run by Iowa State in January received approval from the Iowa Board of Regents to purchase a Des Moines animal hospital, Iowa Veterinary Specialties, for $4.6 million. The day the sale closed on Feb. 1, three key doctors and its operations manager left the hospital and launched the competing firm, IVRC.
Iowa State filed a lawsuit in February accusing the employees of taking confidential customer and financial information, using hospital resources to launch the competing firm and deleting key files before leaving. The lawsuit also accused the animal doctors of violating employment contracts that bar them from working in veterinary medicine in the Des Moines area for two years if they left the hospital's employment.
The doctors filed a countersuit against Iowa State, arguing the school was seeking a monopoly over pet care in the region and illegally interfering with private enterprise.
U.S. District Judge John Jarvey ruled April 27 that Steven Reimer and Derek Nestor were likely in breach of their non-compete agreements and issued a preliminary injunction barring them from practicing in central Iowa. His ruling cleared the way for settlement talks between the two sides with the assistance of a mediator.
The settlement requires the veterinarians to pay $100,000 to Iowa Veterinary Specialties by June 30 and their new firm to give the hospital 5 percent of its gross revenue each month for the next two years. It bars Reimer from having any association with IVRC until Feb. 1, 2013 but lets three other employees who had non-compete agreements to work there under certain stipulations.
The firm agreed not to advertise on television or radio, not to expand the services it currently offers and not to hire away any more employees from the ISU-run hospital. Its employees were also required to immediately return all ISU documents in their possession.
ISU General Counsel Paul Tanaka said the school's goal all along has been to get Iowa Veterinary Specialties -- which will give veterinary students a place to practice under top specialists -- off to a good start under its new ownership, "and we believe the total agreement accomplishes that goal."
The school had feared the competing firm would take away much of the business and value of the hospital.
Reimer, Nestor and IVRC said in a statement they were pleased to announce the settlement, which will allow their new business to "fully function as an emergency and specialty veterinary clinic in Des Moines."