ISU settles lawsuit with veterinarians

Specialty referral practice to pay ISU

Published: June 29, 2011
By Jennifer Fiala

Owners of an emergency and specialty hospital have agreed to pay Iowa State University (ISU) $100,000, 5 percent of gross monthly revenues until April 2013, and will temporarily cut ties with one of their doctors to end a legal battle that threatened to kill the privately run practice.  

Signed last week, the settlement between the privately owned Iowa Veterinary Referral Center (IVRC) in Des Moines and ISU closes lawsuits filed by both sides against each other nearly four months ago.

The settlement comes roughly two months after U.S. District Judge John A. Jarvey issued preliminary injunctions against Drs. Steven Brent Reimer and Derek Nestor of IVRC, barring the specialists from competing for two years against Iowa Veterinary Specialties (IVS), their former employer that’s now owned by ISU. 

In addition to the lump-sum payout, settlement concessions made by IVRC include the temporary loss of Reimer, a co-owner of the practice and a clinical surgeon. Reimer has agreed to work elsewhere in the state until Feb. 1, 2013. While the non-compete covenant he signed with IVS in 2009 encompassed 1,700 square miles around Des Moines, the new settlement deal extends it to areas around Ames, Iowa, home of ISU’s veterinary teaching hospital. 

In exchange, the non-compete covenants that Nestor and several others working at IVRC had signed while employed by IVS are negated. 

Officials with ISU “regard the settlement to be in the best interests of all involved,” reads a statement signed by Dr. Lisa Nolan, dean of the veterinary medical college, and Lee Holmes, CEO of ISU-Veterinary Services Corp.

Reimer has mixed feelings.  

“On one hand we’re disappointed with this outcome, but in the end, we’re happy to be moving forward,” he says in an interview with the VIN News Service. “I can load up with instruments, and I rather enjoy mobile surgical practice. I feel very fortunate that I can easily perform my specialty in a mobile situation.”  

The dispute between ISU and IVRC evolved earlier this year from a battle for business in the Des Moines area. On Feb. 1, ISU closed a $4.6-million deal to buy IVS from the 26 local veterinary shareholders who owned it. 

While employed by IVS, Reimer, Nestor and some of their co-workers made it clear to university officials that they had no interest in working for a state-run veterinary practice. In fact, the specialists were among a handful of prospective buyers who proposed to purchase IVS but lost to ISU’s bid, which topped other offers by roughly a million dollars. 

“There was a concern that with the state’s ownership, we would lose the ethos that we had established at IVS,” Reimer explains. “We were streamlined. We passed savings on to the consumers. I had a concern that we’d get top heavy on the administrative side and have to raise our prices to meet the demands of a large, bureaucratic machine. I wouldn’t want to stand by and watch that happen.” 

Armed with legal advice that their non-compete agreements with IVS would not transfer with the sale to ISU (Iowa statute precludes public entities from competing with private business), Reimer and Nestor joined with Dr. Christine Adams, who had completed a residency in emergency and critical care medicine, and operations manager Paul Hanika to open IVRC. Situated roughly 10 miles away from IVS, the new emergency and specialty hospital competed with the practice directly. 

ISU sued, claiming two of the specialists — ISU alums Reimer and Nestor — breached their contracts with IVS that included non-compete bans covering a territory around Des Moines that included half-a-million residents.  

The doctors countersued by filing an antitrust lawsuit against ISU, contending that the publicly funded institution bullied smaller, private competitors for business in tertiary veterinary care. With ISU's purchase of IVS, the institution controls the vast majority of emergency and specialty veterinary medicine practices in the state.  
On April 27, Judge Jarvey preliminarily sided with ISU by upholding the non-compete agreements — a decision that opened the door to settling the case.

Apart from the statement from ISU's Nolan and Holmes, officials with the institution have not spoken publicly about the settlement. Background information published by the university makes clear that the non-compete agreements signed by Reimer and his colleagues were considered part of the value of IVS when ISU purchased it. 

The university did not respond to VIN News Service interview requests.  

Reimer notes that IVRC, a start-up operation, had to borrow money to pay off ISU. While the debt hurts the practice, Reimer considers it to be better than the alternative: having to close IVRC because the specialists who run it can no longer work there.  

“This case has soured me a bit,” he says. “This is a state that I love. I grew up here; it’s in my blood. And the fact that the state in which I am trying to remain has devoted so many resources in trying to prevent me from practicing, stings a bit. It has sadly placed a proverbial asterisk next to my lifelong dream of graduating from the Iowa State University College of Veterinary Medicine."


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