Nacogdoches Heart Clinic, P.A. v. Pokala (Summary)

NON-COMPETE PROVISION

Nacogdoches Heart Clinic, P.A. v. Pokala, No. 12-11-00133-CV (Tex. App. Feb. 6, 2013)

The Texas Court of Appeals affirmed a trial court’s decision that a non-compete agreement in a cardiologist’s employment contract was unenforceable.  The cardiologist had joined a founding cardiologist’s practice at a heart clinic. The two later opened an outpatient cardiovascular lab.  Both cardiologists had an ownership interest in the practice and were employees of the heart clinic.

The employment agreement contained a non-compete clause, which prohibited each cardiologist from practicing or holding any ownership interest in a medical practice within ten miles of city limits for one year after the termination of employment.  After more than 15 years of practicing together, the two cardiologists had a dispute over a patient matter.  This prompted the founding cardiologist to fire the other cardiologist.  Immediately thereafter, the cardiologist, whose employment had been terminated, opened his own practice.

The founding cardiologist and the heart clinic sued the cardiologist for breach of the non-compete provision of the employment agreement. The cardiologist counterclaimed for breach of a buy-sell agreement and his employment contract.

The trial court found that the non-compete clause would adversely affect the interests of the public and therefore was unreasonable and unenforceable.  The court found that there was a need for cardiologists in the small town in which they lived and that “for one doctor to be taken out of the equation hurts the medical care of the people.”

The appellate court affirmed this decision.  Both courts were persuaded by the fact that the employment agreement prohibited the cardiologist from practicing medicine of any sort. Therefore, the agreement was broader than it needed to be to protect the interests of the heart clinic.

Of greater significance to the courts was a concern that enforcement of the non-compete clause would harm the public by inadequate health care and continuity to care and would deprive the public of access to the physician of its choice.  In finding that the non-compete clause was unreasonable and unenforceable, the appellate court concluded that the trial court appropriately considered evidence from the local hospital administrator and an attorney who represented the local hospital district about the injurious effects on the public from a shortage of cardiovascular services.

The appellate court also found that the provision in the buy-sell agreement that required the cardiologist to resign privileges at all hospitals where he practiced, was, in effect, a covenant not to compete, was inconsistent with public policy concerns, and would not be enforced.  Therefore, under the buy-sell agreement, the cardiologist was entitled to the full value of his shares even though he did not resign his privileges to practice at the hospital.