Sadler Clinic Ass’n. v. Hart (Summary)

RESTRICTIVE COVENANT

Sadler Clinic Ass’n. v. Hart, No. 09-12-00086-CV (Tex. App. June 13, 2013)

Multiple physicians brought a declaratory action claim against a clinic that was located in Texas seeking to have the restrictive covenant in their employment contract that prohibited them from competing with the clinic while they were employed by the clinic and for 18 months thereafter within a 22-mile radius of the clinic to be declared unenforceable.  The agreement also contained a buyout clause that allowed the physicians to opt out of the noncompetition covenant if they did not wish to be bound by it. The lower court held that the buyout clause was ambiguous and did not contain a reasonable buyout clause, and so was unenforceable as a matter of law.

The appellate court reversed the lower court holding that the noncompetition clause in the physicians’ agreement was reasonable. The court stated that the clause was intended to protect certain confidential information that the physicians had access to during their time at the clinic. The appellate court then held that the trial court did not have the authority to determine the reasonable price of a buyout.  Rather, the statute provided that the proper remedy was binding arbitration to determine a reasonable buyout price.

The appellate court also declined to grant an extension to the restrictive covenant based on the amount of time the agreement was in litigation. The court stated that the noncompetition covenant contained its own tolling provision extending the restricted period during a breach. The maximum tolling period was already anticipated by the parties, so there was no reason for the court to address the issue.