His Excellency Sheikh Ahdulaziz Bin Ibrahim AL-IBRAHIM, Plaintiff, v. George EDDE, Defendant.

Civ. A. No. 95-1145 PLF.

United States District Court, District of Columbia.

Sept. 8, 1995.

Elroy H. Wolff, Sidley & Austin, Washington, DC, for plaintiff.

Mark London, London & Mead, Washington, DC, for defendant.

OPINION

PAUL L. FRIEDMAN, District Judge.

George Edde has filed a counterclaim alleging that his former employer, Sheikh Ab-dulaziz Bin Ibrahim Al-Ibrahim, breached an oral contract to reimburse Mr. Edde for tax liability Edde incurred when he fraudulently claimed some of the Sheikh’s gambling winnings as his own and paid federal income taxes on those winnings. In addition to this breach of contract claim, Mr. Edde seeks restitution of the amount of money he paid to the IRS, $400,000, plus interest. He also seeks compensatory and punitive damages for fraud, alleging that the Sheikh defrauded him by falsely promising to reimburse him for those tax payments, and for the intentional infliction of emotional distress.

DISCUSSION

On a motion to dismiss, the Court operates within the factual universe described by the complaining party. This requires that the pleader’s factual allegations be taken as true and that any ambiguities be resolved in his favor. Summit Health, Ltd. v. Pinhas, 500 U.S. 322, 325, 111 S.Ct. 1842, 1844, 114 L.Ed.2d 366 (1991); Kowal v. MCI Communications Corp., 16 F.3d 1271, 1276 (D.C.Cir.1994); Tele-Communications of Key West, Inc. v. United States, 757 F.2d 1330, 1334-35 (D.C.Cir.1985).

According to Mr. Edde’s description of the events leading up to this contentious dispute, a promise of employment by Sheikh Al-Ibrahim lured him away from his home in California during the mid 1980’s. Mr. Edde found himself occupied as the Sheikh’s constant companion. He alleges that the Sheikh, a frequent high stakes gambler, required Mr. Edde to accompany him on numerous visits to casinos in the United States and “insisted that Mr. Edde ... claim credit for [Sheikh Al-Ibrahim’s gambling] winnings.” Counterclaim ¶ 7. Mr. Edde admits that he signed for the Sheikh’s winnings on documents that were submitted to the Internal Revenue Service. Countercl. ¶ 7. Mr. Edde asserts that he “clearly understood that his signing for the Sheikh’s gambling winnings was a condition of his employment and that if he refused to do so, he would be discharged.” Countercl. ¶ 9.

In 1991 Mr. Edde’s circumstances deteriorated. Sheikh Al-Ibrahim’s demands left Mr. Edde at the point of exhaustion, he began to have marital difficulties, and the IRS began to contact him about taxes due on the gambling winnings he had signed for. Countercl. ¶¶ 10-11. Mr. Edde gave notice of his resignation to Sheikh Al-Ibrahim because “he could no longer continue to work for him at such a pace,” and left the Sheikh’s employ in late 1991. Countercl. ¶ 13. After leaving the Sheikh, Mr. Edde began negotiations with the IRS regarding the unpaid taxes on the gambling winnings. In August 1992, Mr. Edde reached an agreement with the IRS by which he would pay past obligations, interest and penalties on the gambling winnings he had claimed as his own. Countercl. ¶ 14. Mr. Edde asserts that as a result of representations made by the Sheikh both during and after his employment, he understood that the Sheikh would reimburse him for his tax obligations. Countercl. ¶¶ 8, 12, 13. Mr. Edde never informed the IRS that the gambling winnings actually were won by and retained by Sheikh Al-Ibrahim. See Countercl. ¶¶ 11, 12, 14.

Mr. Edde seeks reimbursement for the taxes he paid and compensation for breach of contract, fraud and intentional infliction of emotional distress. He maintains that “[t]o the extent Mr. Edde may have participated in an illegal act, he was not equally in the wrong with the Sheikh. Mr. Edde’s payment of the Sheikh’s tax obligations was solely for the benefit of the Sheikh.” Countercl. ¶ 26. Sheikh Al-Ibrahim has moved to dismiss, arguing, essentially, that Mr. Edde is a dishonorable character who should not be permitted to use the federal courts to enforce an illegal contract.

The Court heard oral argument on plaintiff’s motion to dismiss the counterclaim and granted the motion on August 28,1995. This Opinion sets forth the reasons for that decision.

A Breach of Contract Claim

Generally, a contract to perform an illegal act, such as the alleged contract between Mr. Edde and Sheikh Al-Ibrahim, is void and unenforceable. See, e.g., Lewis & Queen v. N.M. Ball Sons, 48 Cal.2d 141, 308 P.2d 713, 719 (1957).1 The purpose of this rule is to prevent wrongdoers from using or abusing the legitimate judicial process to resolve disputes over their illegal undertakings. Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299, 306, 105 S.Ct. 2622, 2626, 86 L.Ed.2d 215 (1985). Whether an action is brought in equity or at law, “neither party to an illegal contract will be aided by the court, whether to enforce it or to set it aside. If the contract is illegal, affirmative relief against it will not be granted at law or in equity....” United States v. Farrell, 606 F.2d 1341, 1348-49 (D.C.Cir.1979) (quoting St. Louis R.R. v. Terre Haute R.R., 145 U.S. 393, 407, 12 S.Ct. 953, 957, 36 L.Ed. 748 (1892)). The rule denying recovery is “based on public policy rather than a desire to benefit or punish either party.” United States v. Farrell, 606 F.2d at 1349 (emphasis in original); see Crylon Steel Co. v. Globus, 185 F.Supp. 757, 760 (S.D.N.Y.1960) (“[w]here ... a transaction is a fraud upon the public and is contrary to public policy ... courts will leave the parties where it finds them.”)

The courts of California and Nevada have recognized two exceptions to this otherwise accepted rule that fraud or illegality renders contracts unenforceable. A party who performed under an illegal contract may recover from a breaching party only if: (1) permitting relief to the non-breaching party would promote enforcement of the underlying law that led to the invalidity of the contract, or (2) denying relief would result in a harsh forfeiture when weighed against the seriousness of the illegality or the relative culpability of the parties. See Homestead Supplies v. Executive Life Insurance Co., 81 Cal.App.3d 978, 147 Cal.Rptr. 22, 29 (1978); Magill v. Lewis, 74 Nev. 381, 333 P.2d 717, 719 (Nev.1958). Applying these principles, the Court must consider the nature and the degree of the illegality, the public policy or policies to be served by enforcing or by refusing to enforce the contract, and the relative culpability of the parties. Homestead Supplies v. Executive Life Insurance Co., 147 Cal.Rptr. at 29; Magill v. Lewis, 333 P.2d at 719; see 6A Corbin on Contracts (1962) § 1534 (1962 and 1994 Supp.).

While not denying that his conduct was illegal, Mr. Edde argues that his conduct was not terribly serious compared with that of Sheikh Al-Ibrahim. Under a comparative culpability analysis, he contends that because the Sheikh avoided his tax obligation entirely while Mr. Edde paid the IRS, the Sheikh is the real culprit in the ease. Indeed, at oral argument, counsel for Mr. Edde repeatedly argued that what Mr. Edde did was to make a “lawful payment” to the IRS. Tr. at 14. He therefore maintains that the Sheikh is the more culpable and that public policy would be served by holding the Sheikh liable in contract. He relies on Homestead Supplies and Magill v. Lewis.

Mr. Edde’s characterization of this aspect of his conduct as lawful must be rejected. A United States citizen, Mr. Edde made false statements to the Internal Revenue Service in an effort to frustrate the lawful and timely collection of taxes. The fact that Mr. Edde ultimately paid the IRS does not excuse his behavior. According to the facts alleged in his own counterclaim, he broke the law.2 To enforce the contract between Mr. Edde and Sheikh Al-Ibrahim would be to excuse Mr. Edde’s conduct, to enforce a contract that had as its purpose the commission of illegal acts, and to permit the judicial process to be used in violation of public policy. See Dent v. Ferguson, 132 U.S. 50, 66, 10 S.Ct. 13,19, 33 L.Ed. 242 (1889); Maryland v. Baltimore & Ohio R.R. Co., 44 U.S. (3 How.) 534, 546, 11 L.Ed. 714 (1845); California Chicks, Inc. v. Viebrock, 254 Cal.App.2d 638, 62 Cal.Rptr. 269, 271 (1967). Mr. Edde’s breach of contract claim is dismissed.

B. Restitution

Mr. Edde contends that even if he is not entitled to damages for breach of contract, he should be permitted to maintain an action for restitution to ensure that the Sheikh is not unjustly enriched for his unlawful acts. He argues that he and the Sheikh were not equally culpable or in pari delicto (of equal fault). He asserts that he was induced, if not coerced, to take part in the illegal conduct by the influence of Sheikh Al-Ibrahim’s superior economic and bargaining position. He insists that he was not a “free agent.” See Karpinski v. Collins, 252 Cal.App.2d 711, 60 Cal.Rptr. 846 (1967); McAllister v. Drapeau, 14 Cal.2d 102, 92 P.2d 911 (1939); San Diego Prestressed Concrete Co. v. Chicago Title Ins. Corp., 92 Nev. 569, 555 P.2d 484, 487 (1976); 6A Corbin on CONTRACTS § 1537 (1967 and 1994 Supp.). Mr. Edde maintains that he is entitled to restitution because the Sheikh masterminded the tax avoidance scheme and was the only one who profited from it. See Asdourian v. Araj, 38 Cal.3d 276, 211 Cal.Rptr. 703, 712-13, 696 P.2d 95, 105 (1985) (citing Southfield v. Barrett, 13 Cal.App.3d 290, 91 Cal.Rptr. 514 (1970)). Indeed, Mr. Edde argues that as a result of this illegal scheme, his own finances were substantially depleted.

There is no mechanical rule by which to determine whether one party to an illegal contract is in pari delicto with another party to the contract. In considering the question on a motion to dismiss, the Court must accept the allegations made by the pleader. The Court therefore accepts Mr. Edde’s assertion that the Sheikh had a strong influence over him that enabled the Sheikh to make unusually burdensome demands, that the Sheikh expressed in angry terms his insistence that Mr. Edde sign for his gambling winnings, that Mr. Edde believed that signing for the winnings was a condition of his continued employment (although there is no allegation that the Sheikh threatened to fire him if he did not), and that Sheikh Al-Ibrahim was able to induce Mr. Edde’s illegal conduct because of his superior economic position in the relationship. Countercl. ¶¶ 7, 9.

If the remedy of restitution originates from the Court’s equitable powers, then the Court is guided by the principle that “he who comes to equity must come with clean hands.” Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806, 814, 65 S.Ct. 993, 997, 89 L.Ed. 1381 (1945). The doors of a court of equity are traditionally closed to one who acted inequitably, in bad faith or illegally in relation to the matter as to which he seeks relief; “however improper may have been the behavior of the defendant,” the court will not be “the abettor of inequity.” Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. at 814, 65 S.Ct. at 997 (quoting Bein v. Heath, 47 U.S. (6 How.) 228, 247, 12 L.Ed. 416 (1848)); see Blain v. The Doctor’s Co., 222 Cal.App.3d 1048, 272 Cal.Rptr. 250, 258-59 (1990); see McAdam v. Dean Witter Reynolds, 896 F.2d 750, 756-57 (3d Cir.1990) (citing Rothberg v. Rosenbloom, 808 F.2d 252, 256 n. 6 (3d Cir.1986), cert. denied, 481 U.S. 1017, 107 S.Ct. 1895, 95 L.Ed.2d 501 (1987)).

If restitution is an action brought at law, as most courts and commentators maintain, see W. Page Keeton et al., PROSSER and Keeton on Torts § 94, at 672-75 (5th ed. 1984 and 1988 Supp.), then the Court is guided by similar principles to those that bar Mr. Edde’s breach of contract claim. In a case involving a void, unenforceable contract, restitution is available only in exceptional circumstances. The cases cited by Mr. Edde do not provide support for the proposition that the exception should be invoked in this case.

In Homestead, for instance, the Court ruled against an insurance company that agreed to accept a lower premium than the legal premium prescribed in its rate table, explaining that the company should have known of the illegality, while there was no reason to find that the insured should have known. Homestead Supplies v. Executive Life Insurance Co., 147 Cal.Rptr. at 29. By way of contrast, Mr. Edde knew that he was misleading the IRS in reporting the Sheikh’s gambling winnings as his own and he should have known that making false statements to the IRS is illegal. In Karpinski, the Court concluded that the parties were not in pari delicto because the small dairyman who had been forced to pay a bribe in order to keep his milk contract had virtually no economic alternative but to pay the bribe. Karpinski v. Collins, 60 Cal.Rptr. at 848. While Mr. Edde maintains that his participation in the illegal contract was a condition of his job, his counterclaim is very carefully drafted. It alleges only that he “clearly understood that his signing for the Sheikh’s gambling winnings was a condition of his employment and that if he refused to do so, he would be discharged.” Countercl. ¶9 (emphasis added). He does not allege that he was ever threatened with loss of employment and does not set forth any facts, only eonclusory statements, from which the Court could infer that he was truly under economic duress or that he lacked an economic alternative to working for Sheikh Al-Ibrahim. Mr. Edde’s claim for restitution is dismissed.

C. Fraud

In order to state a prima facie case of fraud under California and Nevada law, a party must allege: (1) a misrepresentation of a material fact, (2) knowledge of the falsity, (8) intent to induce reliance, (4) actual and justifiable reliance, and (5) resulting damages. Williams v. Wraxall, 33 Cal.App. 4th 120, 39 Cal.Rptr.2d 658, 664 n. 9 (1995); Blanchard v. Blanchard, 108 Nev. 908, 839 P.2d 1320, 1322 (1992). In the federal courts, the circumstances constituting an alleged fraud must be pleaded with particularity. Rule 9(b), Fed.R.Civ.P. The pleader must specify “what statements were made in what documents or in what context, the time and place of such statements, who made the statements, the manner in which the statements were misleading, and what the defendants obtained as a consequence of the statements.” In re Newbridge Networks Securities Litigation, 767 F.Supp. 275, 282 (D.D.C.1991); see Kowal v. MCI Communications Corp., 16 F.3d at 1278.

Mr. Edde alleges that the Sheikh made promises to him in order to induce him to sign for and pay the Sheikh’s taxes, that these promises were made after Mr. Edde had tendered his resignation, that these promises were false at the time they were made and were made for the purpose of inducing reliance by Mr. Edde, that Sheikh Al-Ibrahim had a motive for defrauding Mr. Edde, that Mr. Edde relied on the promises, and that Mr. Edde was damaged as a result. Countercl. ¶¶8, 12, 13, 18, 19, 22. These allegations are sufficient for the Court to draw an inference of fraud even under Rule 9(b). See Kowal v. MCI Communications Corp., 16 F.3d at 1278; Stebbins v. Keystone Ins. Co., 481 F.2d 501, 511 (D.C.Cir.1973). Whether Mr. Edde’s allegations can be proven at trial is not the issue before the Court. The allegations in the counterclaim are sufficiently pled and he has said enough to withstand a motion to dismiss.

On the other hand, fraud is an equitable remedy, and “he who comes into equity must come with clean hands.” Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. at 814, 65 S.Ct. at 997; Fibreboard Paper Products Corp. v. East Bay Union of Machinists, 227 Cal.App.2d 675, 39 Cal.Rptr. 64 (1964); see Locken v. Locken, 98 Nev. 369, 650 P.2d 803, 805 (1982). Thus, “equity requires that those seeking its protection shall have acted fairly and without fraud or deceit as to the controversy in issue.” Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. at 814-15, 65 S.Ct. at 997; see Blain v. The Doctor’s Co., 272 Cal.Rptr. at 258-59. In this case, in order to allege fraud, Mr. Edde has admitted his own involvement in serious illegal conduct. His hands are not washed clean merely because he paid money to the IRS. The very facts alleged in his counterclaim lead to the inescapable conclusion that Mr. Edde has not displayed that standard of conduct in his agreement with the Sheikh that entitles him to maintain an equitable action for fraud. That Sheikh Al-Ibrahim’s conduct may have been worse is irrelevant. McAdam v. Dean Witter Reynolds, 896 F.2d at 756-57.

D. Intentional Infliction of Emotional Distress

The tort of intentional infliction of emotional distress was created to punish conduct “exceeding all bounds usually tolerated by a decent society, of a nature which is especially calculated to cause, and does cause, mental distress.” Agarwal v. Johnson, 25 Cal.3d 932, 160 Cal.Rptr. 141, 149-50, 603 P.2d 58, 67 (1979) (internal quotation omitted). A prima facie case requires allegations of (1) outrageous conduct by the defendant, (2) an intention by the defendant to cause, or the reckless disregard of the probability of causing, emotional distress, (3) severe emotional distress, and (4) an actual and proximate causation of the emotional distress. Christensen v. Superior Court, 54 Cal.3d 868, 2 Cal.Rptr.2d 79, 100, 820 P.2d 181, 202 (1991); Star v. Rabello, 97 Nev. 124, 625 P.2d 90, 92 (1981).

There are two problems with Mr. Edde’s emotional distress claim. First, the alleged outrageous conduct is not so extreme as to exceed all bounds of that usually tolerated in a civilized society. The fact that Mr. Edde may have suffered real distress as a result of his dealings with Sheikh Al-Ibrahim and his pursuit by the IRS does not render the Sheikh’s alleged conduct extreme and outrageous. To the extent that the Court is able to identify the conduct of which Mr. Edde complains, it appears that Mr. Edde has simply alleged a breach of contract and fraud. Indeed, when asked at oral argument which allegations in his counterclaim related to the intentional infliction of emotional distress claim, counsel for Mr. Edde explained that “Sheikh [Al-Ibrahim] knew ... that Edde did not have the resources to pay these monies ... that Edde had entered into this agreement with the prospect that he would be paid back ... that Edde was suffering ... and he ignored [Mr. Edde’s pleas].” Tr. at 14. Accepting Mr. Edde’s allegations as true for purposes of this motion, the Sheikh’s conduct is not so outrageous as to meet the test announced by the courts of California and Nevada. See Cervantez v. J.C. Penney Co., 24 Cal.3d 579, 156 Cal.Rptr. 198, 206, 595 P.2d 975, 983 (1979); Star v. Rabello, 625 P.2d at 92.

Second, a cause of action for intentional infliction of emotional distress, like Mr. Edde’s other equitable claims, is barred by the defense of unclean hands. Blain v. The Doctor’s Co., 272 Cal.Rptr. at 258; see Locken v. Locken, 650 P.2d at 805. Mr. Edde’s emotional distress is directly attributable to his own knowing illegal conduct; it stems from his own illegal agreement with the Sheikh and his own misrepresentations to the IRS. Camp v. Jeffer, Mangels, Butler & Marmaro, 35 Cal.App.4th 620, 41 Cal.Rptr.2d 329, 340 (1995); Fibreboard Paper Products Corp. v. East Bay Union of Machinists, 39 Cal.Rptr. at 96-97. Because Mr. Edde comes before the Court with unclean hands, his claim for intentional infliction of emotional distress is dismissed.

CONCLUSION

For these reasons, plaintiffs motion to dismiss defendant’s counterclaim is granted. An Order Consistent with this Opinion was entered on August 28, 1995.

SO ORDERED.

1

Mr. Edde contends that under District of Columbia choice of law principles the Court should apply Nevada and/or California law in assessing the counterclaim. At oral argument, counsel for the Sheikh conceded the point, Tr. at 12, as he should have. Rymer v. Pool, 574 A.2d 283, 285-86 (D.C.1990); Moore v. Ronald Hsu Const. Co., Inc., 576 A.2d 734, 737 (D.C.1990); Hercules & Co., Ltd. v. Shama Restaurant Corp., 566 A.2d 31, 40 (D.C.1989); see Restatement (Second) of Conflict of Laws §§ 145, 188 (1971 and 1988 Supp.).

The District of Columbia's interest in this action is slight. Washington, D.C., is mentioned only once in the counterclaim as one of several locations where Sheikh Al-Ibrahim made promises to Mr. Edde. Countercl. ¶ 18. Most of the conduct underlying Mr. Edde’s claims is alleged to have taken place in California, Nevada or at unspecified locations; Mr. Edde’s injuries are largely alleged to have taken place in California; and Mr. Edde lives in California and the Sheikh lives outside of the United States. The Court need not resolve whether it would be more appropriate to apply California or Nevada law because the law of those two states is consistent on all the relevant issues.

2

If Mr. Edde’s allegations are accepted as true, then he attempted to evade and defraud the IRS in violation of the Internal Revenue Code. See, e.g., 26 U.S.C. §§ 7201, 7202, 7203, 7206. See Countercl. ¶¶ 7-14.

982 P.2d 1277

VALLEY MEDICAL SPECIALISTS, an Arizona professional corporation, Plaintiff-Appellant, v. Steven S. FARBER, D.O. and Susan H. Farber, husband and wife, Defendants-Appellees.

No. CV-97-0488-PR.

Supreme Court of Arizona, En Banc.

June 18, 1999.

Lane Campbell & Nach, P.C. By: Richard N. Brandes and Renaud Cook & Drury By: LeslieAnn Haacke and Bell & O’Connor, P.C., Phoenix By: John Daniel Campbell III and David A. Joffe, Scottsdale, for Plaintiff-Appellant.

Snell & Wilmer By: Lonnie J. Williams, Jr. and Bryan Cave, L.L.P. By: Mark I. Harrison, Rodney W. Ott, Phoenix, for Defendants-Appellees.

OPINION

FELDMAN, Justice.

We granted review to determine whether the restrictive covenant between Dr. Steven Farber and Valley Medical Specialists is enforceable. We hold that it is not. Public policy concerns in this case outweigh Valley Medical’s protectable interests in enforcing the agreement. We thus vacate the court of appeals’ opinion, affirm the trial court’s judgment, and remand to the court of appeals to resolve any remaining issues. We have jurisdiction pursuant to Arizona Constitution article VI, § 5(3) and A.R.S. § 12-120.24.

FACTS AND PROCEDURAL HISTORY

In 1985, Valley Medical Specialists (“VMS”), a professional corporation, hired Steven S. Farber, D.O., an internist and pulmonologist who, among other things, treated AIDS and HIV-positive patients and performed brachytherapy — a procedure that radiates the inside of the lung in lung cancer patients. Brachytherapy can only be performed at certain hospitals that have the necessary equipment. A few years after joining VMS, Dr. Farber became a shareholder and subsequently a minority officer and director. In 1991, the three directors, including Dr. Farber, entered into new stock and employment agreements. The employment agreement contained a restrictive covenant, the scope of which was amended over time.

In 1994, Dr. Farber left VMS and began practicing within the area defined by the restrictive covenant, which at that time read as follows:

The parties recognize that the duties to be rendered under the terms of this Agreement by the Employee are special, unique and of an extraordinary character. The Employee, in consideration of the compensation to be paid to him pursuant to the terms of this Agreement, expressly agrees to the following restrictive covenants:

(a) The Employee shall not, directly or indirectly:

(i) Request any present or future patients of the Employer to curtail or cancel their professional affiliation with the Employer;

(ii) Either separately, jointly, or in association with others, establish, engage in, or become interested in, as an employee, owner, partner, shareholder or otherwise, or furnish any information to, work for, or assist in any manner, anyone competing with, or who may compete with the Employer in the practice of medicine.

(in) Disclose the identity of any past, present or future patients of the Employer to any other person, firm or corporation engaged in a medical practice the same as, similar to or in general competition with the medical services provided by the Employer.

(iv) Either separately, jointly or in association with others provide medical care or medical assistance for any person or persons who were patients or [sic] Employer during the period that Employee was in the hire of Employer.

(d) The restrictive covenants set forth herein shall continue during the term of this Agreement and for a period of three (3) years after the date of termination, for any reason, of this Agreement. The restrictive covenants set forth herein shall be binding upon the Employee in that geographical area encompassed within the boundaries measured by a five (5) mile radius of any office maintained or utilized by Employer at the time of execution of the Agreement or at any time thereafter.

(e) The Employee agrees that a violation on his part of any covenant set forth in this Paragraph 17 will cause such damage to the Employer as will be irreparable and for that reason, that Employee further agrees that the Employer shall be entitled, as a matter of right, and upon notice as provided in Paragraph 20 hereof, to an injunction from any court of competent jurisdiction, restraining any further violation of said covenants by Employee, his corporation, employees, partners or agents. Such right to injunctive remedies shall be in addition to and cumulative with any other rights and remedies the Employer may have pursuant to this Agreement or law, including, specifically with regard to the covenants set forth in subparagraph 17(a) above, the recovery of liquidated damages equal to forty percent (40%) of the gross receipts received for medical services provided by the Employee, or any employee, associate, partner, or corporation of the Employee during the term of this Agreement and for a period of three (3) years after the date of termination, for any reason, of this Agreement. The Employee expressly acknowledges and agrees that the covenants and agreement contained in this Paragraph 17 are minimum and reasonable in scope and are necessary to protect the legitimate interest of the Employer and its goodwill.

(Emphasis added.)

VMS filed a complaint against Dr. Farber seeking (1) preliminary and permanent injunctions enjoining Dr. Farber from violating the restrictive covenant, (2) liquidated damages for breach of the employment agreement, and (3) damages for breach of fiduciary duty, conversion of patient files and confidential information, and intentional interference with contractual and/or business relations.

Following six days of testimony and argument, the trial court denied VMS’s request for a preliminary injunction, finding that the restrictive covenant violated public policy or, alternatively, was unenforceable because it was too broad. Specifically, the court found that: any covenant over six months would be unreasonable; the five-mile radius from each of the three VMS offices was unreasonable because it covered a total of 235 square miles; and the restriction was unreasonable because it did not provide an exception for emergency medical aid and was not limited to pulmonology.

The court of appeals reversed, concluding that a modified covenant was reasonable. Valley Med. Specialists v. Farber, 190 Ariz. 563, 950 P.2d 1184 (App.1997). The court noted that there were eight hospitals outside the restricted area where Dr. Farber could practice. Id. at 567, 950 P.2d at 1188. Although the covenant made no exceptions for emergency medicine, the court held that the severability clause permitted the trial court to modify the covenant so Dr. Farber could provide emergency services within the restricted area. Id. (citing Phoenix Orthopaedic Surgeons, Ltd. v. Peairs (“Peairs”), 164 Ariz. 54, 61, 790 P.2d 752, 759 (App.1989)). Moreover, VMS was allowed to stipulate that Dr. Farber could perform brachytherapy and treat AIDS and HIV patients within the restricted area, again even though the covenant contained no such exceptions. Valley Med. Specialists, 190 Ariz. at 567, 950 P.2d at 1188.

The court of appeals found the restriction, when so modified, reasonable as to time and place. Although non-emergency patients might be required to travel further to see Dr. Farber, they could continue to see him if they were willing to drive that far. Id. at 567-68, 950 P.2d at 1188-89. Three years was reasonable because the record contained testimony that it might take Dr. Farber’s replacement three to five years to develop his pulmonary practice referral sources to the level they were when Dr. Farber resigned. Id.

The court found that the restrictive covenant did not violate public policy, believing that courts must not unnecessarily restrict the freedom of contract. Id. at 568, 950 P.2d at 1189. Moreover, the record was void of any evidence that the availability of pulmonologists in the restricted area would be inadequate without Dr. Farber. Id.

DISCUSSION

A. Standard of review

There is some dispute over what standard of review should be applied to the trial court’s decision. Dr. Farber contends the court of appeals usurped the trial court’s discretion by applying a de novo standard. Granting or denying a preliminary injunction is within the sound discretion of the trial court, and its decision will not be reversed absent an abuse of that discretion. Financial Assocs., Inc. v. Hub Properties, Inc., 143 Ariz. 543, 545, 694 P.2d 831, 833 (App.1984). The trial judge’s factual findings are reviewed on a clearly erroneous standard. See Rule 52(a), Ariz.R.Civ.P.

VMS contends, however, that the court of appeals correctly applied a de novo standard. Mixed findings of fact and law are reviewed de novo. Indeed, some courts have held that the determination of whether a restrictive covenant is reasonable is a question of law. See, e.g., Gann v. Morris, 122 Ariz. 517, 518, 596 P.2d 43, 44 (App.1979); Raymundo v. Hammond Clinic Ass’n, 449 N.E.2d 276, 280 (Ind.1983).

It is true that the ultimate question of reasonableness is a question of law. But reasonableness is a fact-intensive inquiry that depends on weighing the totality of the circumstances. Bryceland v. Northey, 160 Ariz. 213, 217, 772 P.2d 36, 40 (App.1989) (“Each ease hinges on its own particular facts.”); Olliver/Pilcher Ins. v. Daniels, 148 Ariz. 530, 532, 715 P.2d 1218, 1220 (1986). Thus, we will give substantial deference both to the trial court’s findings of fact and its application of law to fact, reviewing the former on a clearly erroneous standard and the latter for abuse of discretion.

B. History of restrictive covenants

A brief reference to basic principles is appropriate. Historically, covenants not to compete were viewed as restraints of trade and were invalid at common law. Ohio Urology, Inc. v. Poll, 72 Ohio App.3d 446, 594 N.E.2d 1027, 1031 (1991); see generally Harlan M. Blake, Employee Agreements not to Compete, 73 Harv. L. Rev. 625 (1960); Serena L. Kafker, Golden Handcuffs: Enforceability of Noncompetition Clauses in Professional Partnership Agreements of Accountants, Physicians, and Attorneys, 31 Am. Bus. L J. 31, 33 (1993). Eventually, ancillary restraints, such as those incident to employment or partnership agreements, were enforced under the rule of reason. See Restatement (Second) of Contracts § 188 (hereinafter “Restatement”). Given the public interest in doctor-patient relationships, the validity of restrictive covenants between physicians was carefully examined long ago in Mandeville v. Harman:

The rule is not that a limited restraint is good, but that it may be good. It is valid when the restraint is reasonable; and the restraint is reasonable when it imposes no shackle upon the one party which is not beneficial to the other.

The authorities are uniform that such contracts are valid when the restraint they impose is reasonable, and the test to be applied, ... is this: To consider whether the restraint is such only as to afford a fair protection to the interest of the party in favor of whom it is given, and not so large as to interfere with the interest of the public. Whatever restraint is larger than the necessary protection of the party can be of no benefit to either; it can only be oppressive, and, if oppressive, it is, in the eye of the law, unreasonable and void, on the ground of public policy, as being injurious to the interests of the public.

42 N.J. Eq. 185, 7 A. 37, 38-39 (1886) (citations omitted); see also Karlin v. Weinberg, 77 N.J. 408, 390 A.2d 1161, 1165 (1978). To be enforced, the restriction must do more than simply prohibit fair competition by the employee. Bryceland, 160 Ariz. at 216, 772 P.2d at 39. In other words, a covenant not to compete is invalid unless it protects some legitimate interest beyond the employer’s desire to protect itself from competition. Amex Distrib. Co. v. Mascari, 150 Ariz. 510, 518, 724 P.2d 596, 604 (App.1986). The legitimate purpose of post-employment restraints is “to prevent competitive use, for a time, of information or relationships which pertain peculiarly to the employer and which the employee acquired in the course of the employment.” Blake, supra, 73 Harv. L. Rev. at 647. Despite the freedom to contract, the law does not favor restrictive covenants. Ohio Urology, Inc., 594 N.E.2d at 1031. This disfavor is particularly strong concerning such covenants among physicians because the practice of medicine affects the public to a much greater extent. Id. In fact, “[f]or the past 60 years, the American Medical Association (AMA) has consistently taken the position that noncompetition agreements between physicians impact negatively on patient care.” Paula Berg, Judicial Enforcement of Covenants not to Compete Between Physicians: Protecting Doctors’ Interests at Patients’ Expense, 45 Rutgers L. Rev. 1, 6 (1992).

C. Level of scrutiny — public policy considerations

We first address the level of scrutiny that should be afforded to this restrictive covenant. Dr. Farber argues that this contract is simply an employer-employee agreement and thus the restrictive covenant should be strictly construed against the employer. See Amex Distrib. Co., 150 Ariz. at 514, 724 P.2d at 600 (noting employer-employee restrictive covenants are disfavored and strictly construed against the employer). This was the approach taken by the trial court. VMS contends that this is more akin to the sale of a business; thus, the noncompete provision should not be strictly construed against it. See id. (courts more lenient in enforcing restrictive covenants connected to sale of business because of need to effectively transfer goodwill). Finding the agreement here not on all fours with either approach, the court of appeals applied a standard “somewhere between” the two. Valley Med. Specialists, 190 Ariz. at 566, 950 P.2d at 1187.

Although this agreement is between partners, it is more analogous to an employer-employee agreement than a sale of a business. See Restatement § 188 cmt. h (“A rule similar to that applicable to an employee or agent applies to a partner who makes a promise not to compete that is ancillary to the partnership agreement or to an agreement by which he disposes of his partnership interest.”). Many of the concerns present in the sale of a business are not present or are reduced where, as here, a physician leaves a medical group, even when that physician is a partner. When a business is sold, the value of that business’s goodwill usually figures significantly into the purchase price. The buyer therefore deserves some protection from competition from the former owner.' See Kafker, supra, 31 Am. Bus. L.J. at 33. A restraint accompanying the sale of a business is necessary for the buyer to get the full goodwill value for which it has paid. Blake, supra, 73 Harv. L. Rev. at 647.

It is true that in this case, unlike typical employer-employee agreements, Dr. Farber may not have been at a bargaining disadvantage, which is one of the reasons such restrictive covenants are strictly construed. See, e.g., Rash v. Toccoa Clinic Med. Assocs., 253 Ga. 322, 320 S.E.2d 170, 172-73 (1984). Unequal bargaining power may be a factor to consider when examining the hardship on the departing employee. But in cases involving the professions, public policy concerns may outweigh any protectable interest the remaining firm members may have. Thus, this ease does not turn on the hardship to Dr. Farber.

By restricting a physician’s practice of medicine, this covenant involves strong public policy implications and must be closely scrutinized. See Peairs, 164 Ariz. at 60, 790 P.2d at 758; Ohio Urology, Inc., 594 N.E.2d at 1032 (restrictive covenant in medical context “strictly construed in favor of professional mobility and access to medical care and facilities”). Although stopping short of banning restrictive covenants between physicians, the American Medical Association (“AMA”) “discourages” such covenants, finding they are not in the public interest.

The Council on Ethical and Judicial Affairs discourages any agreement between physicians which restricts the right of a physician to practice medicine for a specified period of time or in a specified area upon termination of employment or a partnership or a corporate agreement. Such restrictive agreements are not in the public interest.

1989 Current Opinions of the Council on Ethical and Judicial Affairs, Section 9.02 (hereinafter “AMA Opinions”). In addition, the AMA recognizes that free choice of doctors is the right of every patient, and free competition among physicians is a prerequisite of optimal care and ethical practice. See AMA Opinions, Section 9.06; Ohio Urology, Inc., 594 N.E.2d at 1030.

For similar reasons, restrictive covenants are prohibited between attorneys. See Dwyer v. Jung, 133 N.J.Super. 343, 336 A.2d 498, 501 (Ct. Ch. Div.), aff'd, 137 N.J.Super. 135, 348 A.2d 208 (App.Div.1975); Cohen v. Lord, Day & Lord, 75 N.Y.2d 95, 551 N.Y.S.2d 157, 550 N.E.2d 410, 410-11 (1989). In 1969, the American Bar Association adopted a code of professional conduct that contained a disciplinary rule prohibiting restrictive covenants between attorneys. See Berg, supra, 45 Rutgers L. Rev. at 37. The ethical rules adopted by this court provide:

A lawyer shall not participate in offering or making:

(a) a partnership or employment agreement that restricts the rights of a lawyer to practice after termination of the relationship except an agreement concerning benefits upon retirement; or

(b) an agreement in which a restriction on the lawyers right to practice is part of the settlement of a controversy between private parties.

Ethical Rule (“ER”) 5.6, Arizona Rules of Professional Conduct, Rule 42, Ariz.R.Sup. Ct.

Restrictive covenants between lawyers limit not only their professional autonomy but also the client’s freedom to choose a lawyer. See ER 5.6 cmt. We do not, of course, enact ethical rules for the medical profession, but given the view of the AMA to which we have previously alluded, we believe the principle behind prohibiting restrictive covenants in the legal profession is relevant.

Commercial standards may not be used to evaluate the reasonableness of lawyer restrictive covenants. Strong public policy considerations preclude their applicability. In that sense lawyer restrictions are injurious to the public interest. A client is always entitled to be represented by counsel of his own choosing. The attorney-client relationship is consensual, highly fiduciary on the part of counsel, and he may do nothing which restricts the right of the client to repose confidence in any counsel of his choice. No concept of the practice of law is more deeply rooted.

Dwyer, 336 A.2d at 500.

We therefore conclude that the doctor-patient relationship is special and entitled to unique protection. It cannot be easily or accurately compared to relationships in the commercial context. In light of the great public policy interest involved in covenants not to compete between physicians, each agreement will be strictly construed for reasonableness.1

D. Reasonableness of covenant

Reasonableness is a fact-intensive inquiry that depends on the totality of the circumstances. Bryceland, 160 Ariz. at 217, 772 P.2d at 40 (“Each case hinges on its own particular facts.”); Olliver/Pilcher Ins., 148 Ariz. at 532, 715 P.2d at 1220. A restriction is unreasonable and thus will not be enforced: (1) if the restraint is greater than necessary to protect the employer’s legitimate interest; or (2) if that interest is outweighed by the hardship to the employee and the likely injury to the public. See Restatement § 188 cmt. a.; see also Blake, supra, 73 Harv. L. Rev. at 648-49; Ferdinand S. Tinio, Annotation, Validity and Construction of Contractual Restrictions on Right of Medical Practitioner to Practice, Incident to Partnership Agreement, 62 A.L.R.3d 970, 984 (1975). Thus, in the present case, the reasonableness inquiry requires us to examine the interests of the employer, employee, patients, and public in general. See 62 A.L.R.3d at 976; see also Peairs, 164 Ariz. at 57, 790 P.2d at 755; Amex Distrib. Co., 150 Ariz. at 514, 724 P.2d at 600 (accommodating right to work, right to contract, and public’s right to competition); see generally Blake, supra. Balancing these competing interests is no easy task and no exact formula can be used. See Restatement § 188 cmt. a.

In holding this restrictive covenant enforceable, the court of appeals relied heavily on Peairs, noting the restriction here was “very similar to the one in Peairs, which restricted a doctor from practicing orthopedic medicine and surgery within a five-mile radius of each of three offices for three years.” Valley Med. Specialists, 190 Ariz. at 567, 950 P.2d at 1188. As noted, however, each case must be decided on its own unique facts. Bryceland, 160 Ariz. at 217, 772 P.2d at 40. Here, the facts are sufficiently distinguishable from Peairs to warrant different treatment. For instance, in Peairs the three offices were “clustered,” and the total restricted area was thus much smaller. 164 Ariz. at 60, 790 P.2d at 758. The Peairs restrictive covenant prevented the practice of “orthopedic medicine and surgery.” Id. at 56, 790 P.2d at 754. Here, however, the covenant prohibited Dr. Farber from providing any and all forms of “medical care,” including not only pulmonology, but emergency medicine, brachytherapy treatment, and HIV-positive and AIDS patient care. Finally, the trial court in Peairs granted the preliminary injunction, while the trial court here denied it. Because we review the grant or denial of a preliminary injunction for abuse of discretion, the trial judge’s ruling after hearing the evidence in both cases is another factor that distinguishes the two cases.

E. VMS’s protectable interest

VMS contends, and the court of appeals agreed, that it has a protectable interest in its patients and referral sources. In the commercial context, it is clear that employers have a legitimate interest in retaining their customer base. See, e.g., Bryceland, 160 Ariz. at 217, 772 P.2d at 40. “The employer’s point of view is that the company’s clientele is an asset of value which has been acquired by virtue of effort and expenditures over a period of time, and which should be protected as a form of property.” Blake, supra, 73 Harv. L. Rev. at 654. In the medical context, however, the personal relationship between doctor and patient, as well as the patient’s freedom to see a particular doctor, affects the extent of the employer’s interest. See Ohio Urology Inc., 594 N.E.2d at 1031-32. “The practice of a physician is a thing so purely personal, depending so absolutely on the confidence reposed in his personal skill and ability, that when he ceases to exist it necessarily ceases also____” Mandeville, 7 A. at 40-41 (holding medical practice’s patient base is not protectable interest); see also Berg, supra, 45 Rutgers L. Rev. at 17.

Even in the commercial context, the employer’s interest in its customer base is balanced with the employee’s right to the customers. Where the employee took an active role and brought customers with him or her to the job, courts are more reluctant to enforce restrictive covenants. Blake, supra, 73 Harv. L. Rev. at 664, 667. Dr. Farber was a pulmonologist. He did not learn his skills from VMS. Restrictive covenants are designed to protect an employer’s customer base by preventing “a skilled employee from leaving an employer and, based on his skill acquired from that employment, luring away the employer’s clients or business while the employer is vulnerable — that is — before the employer has had a chance to replace the employee with someone qualified to do the job.” Bryceland, 160 Ariz. at 217, 772 P.2d at 40. These facts support the trial judge’s conclusion that VMS’s interest in protecting its patient base was outweighed by other factors.

We agree with VMS, however, that it has a protectable interest in its referral sources. See Medical Specialists, Inc. v. Sleweon, 652 N.E.2d 517, 523 (Ind.App.1995) (“Clearly, the continued success of [a specialty] practice, which is dependent upon patient referrals, is a legitimate interest worthy of protection.”); Ballesteros v. Johnson, 812 S.W.2d 217, 223 (Mo.App.1991).

F. Scope of the restrictive covenant

The restriction cannot be greater than necessary to protect VMS’s legitimate interests. A restraint’s scope is defined by its duration and geographic area. The frequency of contact between doctors and their patients affects the permissible length of the restraint. Blake, supra, 73 Harv. L. Rev. at 659. The idea is to give the employer a reasonable amount of time to overcome the former employee’s loss, usually by hiring a replacement and giving that replacement time to establish a working relationship. Id. Even in the commercial context, “[w]hen the restraint is for the purpose of protecting customer relationships, its duration is reasonable only if it is no longer than necessary for the employer to put a new man on the job and for the new employee to have a reasonable opportunity to demonstrate his effectiveness to the customers.” Amex Distrib. Co., 150 Ariz. at 518, 724 P.2d at 604 (quoting Blake, supra, 73 Harv. L. Rev. at 677).

In this case, the trial judge found that the three-year period was an unreasonable duration because

all of the experts agree that the practice of pulmonology entails treating patients with chronic conditions which require more hospital care than office care and which requires regular contact with the treating physician at least once within each six-month period so that any provision over six months is onerous and unnecessary to protect VMS’s economic interests where virtually all of Dr. Farber’s VMS patients had an opportunity by late 1994 or early 1995 (Farber left September 12, 1994) to decide which pulmonologist ... they would consult for their ongoing treatment[.]

On this record, we cannot say this factual finding was clearly erroneous. The three-year duration is unreasonable.

The activity prohibited by the restraint also defines the covenant’s scope. The restraint must be limited to the particular speciality of the present employment. See Blake, supra, 73 Harv. L. Rev. at 676. On its face, the restriction here is not limited to internal medicine or even pulmonology. It precludes any type of practice, even in fields that do not compete with VMS. Thus, we agree with the trial judge that this restriction is too broad. Compare Peairs, 164 Ariz. at 56, 790 P.2d at 754 (upholding injunction that enforced restrictive covenant preventing doctor from practicing only orthopaedic medicine and orthopaedic surgery).

G. Public policy

The court of appeals held that the restrictive covenant does not violate public policy, pointing out that the record contains nothing to suggest there will be a lack of pulmonologists in the restricted area if Dr. Farber is precluded from practicing there. Even if we assume other pulmonologists will be available to cover Dr. Farber’s patients, we disagree with this view. It ignores the significant interests of individual patients within the restricted area. Kafker, supra, 31 Am. Bus. L.J. at 39-40. A court must evaluate the extent to which enforcing the covenant would foreclose patients from seeing the departing physician if they desire to do so. See Karlin, 390 A.2d at 1170; see also AMA Opinions, Section 9.06.

Concluding that patients’ right to see the doctor of their choice is entitled to substantial protection, VMS’s protectable interests here are comparatively minimal. See Berg, supra, 45 Rutgers L. Rev. at 15-36. The geographic scope of this covenant encompasses approximately 235 square miles, making it very difficult for Dr. Farber’s existing patients to continue treatment with him if they so desire. After six days of testimony, the trial judge concluded that this restrictive covenant was unreasonably broad and against public policy. Specifically, the judge found:

(1) the three year duration was unreasonable because pulmonology patients typically require contact with the treating physician once every six months. Thus, a restriction over six months is unnecessary to protect VMS’s economic interests. Patients would have had opportunity within approximately six months to decide which doctor to see for continuing treatment;

(2) the five mile radius was unreasonable because with the three offices, the restriction covered more than 235 square miles;

(3) the restriction was unreasonable because it did not expressly provide for an exception for emergency medical treatment;

(4) the restriction was overly broad because it is not limited to pulmonology;

(5) the covenant violates public policy because of the sensitive and personal nature of the doctor-patient relationship.

Given the facts and the principles discussed, that finding is well supported factually and legally.

H. Severance — the blue pencil rule

This contract contains a severance clause.2 The court of appeals accepted a stipulation by VMS that the restriction would not prohibit Dr. Farber from treating HIV-positive and AIDS patients or from performing brachytherapy. On its face, however, the restriction is broader than that, restricting him from providing “medical care or medical assistance for any person or persons who were patients or [sic] Employer during the period that Employee was in the hire of Employer.” Arizona courts will “blue pencil” restrictive covenants, eliminating grammatically severable, unreasonable provisions. See Amex Distrib. Co., 150 Ariz. at 514, 724 P.2d at 600; Olliver/Pilcher Ins., 148 Ariz. at 533, 715 P.2d at 1221 (“If it is clear from its terms that a contract was intended to be severable, the court can enforce the lawful part and ignore the unlawful part.”). Here, however, the modifications go further than cutting grammatically severable portions. The court of appeals, in essence, rewrote the agreement in an attempt to make it enforceable. This goes too far. “Where the severability of the agreement is not evident from the contract itself, the court cannot create a new agreement for the parties to uphold the contract.” Olliver/Pilcher Ins., 148 Ariz. at 533, 715 P.2d at 1221.

Even the blue pencil rule has its critics. For every agreement that makes its way to court, many more do not. Thus, the words of the covenant have an in terrorem effect on departing employees. See Blake, supra, 73 Harv. L. Rev. at 682-83. Employers may therefore create ominous covenants, knowing that if the words are challenged, courts will modify the agreement to make it enforceable. Id. Although we will tolerate ignoring severable portions of a covenant to make it more reasonable, we will not permit courts to add terms or rewrite provisions.

In modifying the agreement, the court of appeals cited Peairs, which indeed allowed the trial court to alter the restrictive covenant in a contract “between medical professionals whose services are necessary for the welfare of the public.” 164 Ariz. at 61, 790 P.2d at 759. We disapprove of the portion of Peairs that permits courts to rewrite and create a restrictive covenant significantly different from that created by the parties.

CONCLUSION

We hold that the restrictive covenant between Dr. Farber and VMS cannot be enforced. Valley Medical Specialists’ interest in enforcing the restriction is outweighed by the likely injury to patients and the public in general. See Restatement § 188. In so holding, we need not reach the question of the hardship imposed on Dr. Farber. The public policy implications here are enough to invalidate this particular agreement. We stop short of holding that restrictive covenants between physicians will never be enforced, but caution that such restrictions will be strictly construed. The burden is on the party wishing to enforce the covenant to demonstrate that the restraint is no greater than necessary to protect the employer’s legitimate interest, and that such interest is not outweighed by the hardship to the employee and the likely injury to the public. Here VMS has not met that burden. The restriction fails because its public policy implications outweigh the legitimate interests of VMS.

Dr. Farber listed in his petition for review several issues “presented to, but not decided by, the court of appeals.” Valley Medical Specialists’ response also contained “additional issues if the court accepts review.” None of the issues were briefed in this court. We thus remand to the court of appeals for a determination of those issues that are capable of decision and still need to be decided.

THOMAS A. ZLAKET, Chief Justice, and CHARLES E. JONES, Vice Chief Justice, FREDERICK J. MARTONE, Justice, and RUTH V. McGREGOR, Justice, concur.

1

. Dr. Farber asks us to hold restrictive covenants in the medical profession void per se as against public policy. Finding the present covenant unreasonable and thus unenforceable by injunction, we need not and do not address that contention.

2

. Since it is the agreement and desire of the parties hereto that the provisions of this Paragraph 17 be enforced to the fullest extent possible under the laws and public policies applied in each jurisdiction in which enforcement is sought, should any particular provision of this Paragraph 17 be deemed invalid or unenforceable, the same shall be deemed reformed and amended to delete herefrom that portion thus adjudicated invalid, and the deletion shall apply only with respect to the operation of said provision and, to the extent a provision of this Paragraph 17 would be deemed unenforceable by virtue of its scope, but may be made unenforceable by limitation thereof, each party agrees that this Agreement shall be reformed and amended so that the same shall be enforceable to the fullest extent permissible under the laws and public policies applied in the jurisdiction in which enforcement is sought, the parties hereto acknowledging that the covenants contained in this Paragraph 17 are an indispensable part of the transactions contemplated herein.