Iowa State reaches settlement with veterinarians over non-compete agreements


Des Moines — A settlement was reached in a high-profile lawsuit over non-compete agreements between Iowa State University (ISU) and several former veterinarian employees.

The settlement will force one veterinarian to sell his stake in the newly created Iowa Veterinary Referral Center (IVRC), and it mandates IVRC's owners pay the university $100,000.

The action stems from a lawsuit initiated by Iowa State against Drs. Steve Reimer and Derek Nestor in February after they opened a new specialty veterinary practice, IVRC, just six miles away from a specialty practice (ISU-VSC) that was sold to the university for $4.6 million in January.

Immediately after the purchase, ISU learned the former employees Reimer and Nestor planned to open a competing specialty hospital. The action triggered this lawsuit. A court later ruled that the non-compete agreements were transferable upon the sale of the practice, previously known as Iowa Veterinary Specialties. The court additionally barred the doctors from practicing specialty veterinary medicine in several counties in the Des Moines area.

Reimer and Nestor had argued that, as a non-profit organization, ISU could not legally compete with a private enterprise, rendering the non-compete agreements moot, and that that competition in the veterinary specialty market is in the best interest of the public.

They filed a monopoly countersuit against ISU. But the courts sided with the university in late-April, ruling that the non-compete agreements were valid. The court also issued an injunction prohibiting the doctors from providing specialty veterinary services that would compete with ISU-VSC in Polk, Dallas and Warren counties.

The settlement was reached following court-assisted mediation.

Under the terms of the settlement, Reimer’s non-compete agreement will be fully enforced until February 2013. He can no longer have any involvement in IVRC, nor can he provide services that compete with ISU-VSC in Polk, Dallas, Story or Warren counties. He must sell his IVRC stock and cut all ties to the hospital by June 30. The settlement does, however, allow Reimer to own, operate or be employed by a mobile veterinary surgery practice until February 2013 in Story County, but he is limited to five days of practice each month.

The non-compete agreements for Nestor, along with two other doctors—Roxanne Jacobson and Carolyn Stafford—named in the settlement but not in previous court filings, will not be enforced, according to the settlement, in regard to their employment at IVRC. However, the doctors are barred from performing any emergency or specialty services anywhere other than IVRC until February 2013.

Additionally, IVRC must jointly pay a lump sum of $100,000 to ISU by June 30, plus 5 percent of its total gross revenues every month for the next two years. IVRC is also prohibited from carrying out a plan to add an in-house reference laboratory or expanding the services it offers. Under the terms of the settlement, IVRC is restricted to emergency and critical care veterinary medicine, internal veterinary medicine and veterinary surgical services. Finally, IVRC is not permitted to advertise on television, radio or in business telephone directories, or hire any former ISU-VSC employees with non-compete agreements. The company must also return any documents or information taken from ISU-VSC, which, the university alleges, Reimer and Nestor used to establish their practice.

In return, ISU agrees to dismiss all claims against IVRC, as long as the practice doesn’t file an appeal to the court-ordered injunction. IVRC and the doctors named in the suit filed by ISU also agree to retract a public-records request filed in relation to ISU’s acquisition and operation of ISU-VSC.

“ISU and ISU-VSC regard the settlement to be in the best interest of all involved,” ISU said in a June 22 statement. Under the terms of the settlement, any statements made about it must be mutually agreed upon by all parties. Jesse Linebaugh, the attorney for Reimer and Nestor, could not be reached for comment by press time.