A bunch of doctors were limited partners in a surgery center
with the general partner being – let’s say – Cut
‘Em Corporation. The partnership agreement stated that the
limited partnership doctors could not own an interest in a
competing facility as long as they were limited partners. Well, be
that as it may, nine docs decided to form a new surgery center and
bought land to accomplish this goal. Since it would take over a
year to build, they figured they would stay with the partnership
during that time. Cut ‘Em Corporation asked to be part of the
new facility and the nine doctors said “no way.” Cut
‘Em Corporation threatened a lawsuit and the doctors filed a
Declaratory Judgment asking the Court to declare the non-compete
unenforceable.
The doctors won because the partnership agreement did not have a
buy-out provision. The Corporation appealed arguing that the
statute did not apply as the covenant did not affect the
physicians’ practice of medicine.
Section 15.50(b) of the Texas Bus. & Comm. Code provides the
specific language that must be used to enforce a non-compete
against physicians. Section 15.50(b)(2) states: “the covenant
must provide for a buy-out of the covenant by the physician at a
reasonable price or, at the option of either party,….”
The Appeals Court held Cut ‘Em Corporation’s
non-compete violated the plain language of the statute since it did
not include a buy-out provision. So, the doctors won and got paid
while they built their new facility!
The moral here is, if you are a medical facility, make sure you
know the rules for non-compete for physicians as they are much
different than non-competes for non-medical companies.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
