Court split on non-compete geography

Michael W. Hoskins
January 1, 2008
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Geography is the main sticking point that has split the Indiana Supreme Court on determining reasonableness of non-compete covenants as they relate to physicians and medical practices.

With its 3-2 ruling March 11 in Central Indiana Podiatry v. Kenneth Krueger, Meridian Health Group PC, No. 29S05-0706-CV-256, the court held that employment contracts between doctors and medical practice groups don't absolutely go against public policy and are enforceable if written reasonably.

But views on what's "geographically reasonable" in the latter part of the holding is what drew disagreement from the court, with covenants only being able to restrict an area where a physician has developed patient relationships using the practice group's resources. That didn't happen in this case, the majority determined.

The case involved a claim that the Carmel practitioner violated his non-compete contract with his former employer, Indiana's largest podiatry group, when he began working for a nearby competitor within two years. Krueger had been fired in 2005 from Central Indiana Podiatry on the north side of Indianapolis in Marion County, and set up shop about 10 minutes north in Hamilton County at Meridian Health Group.

An agreement he'd signed before leaving Central Indiana Podiatry prevented him from working within 14 counties during those two years. He ended up in court and Hamilton Superior Judge Daniel Pfleging ruled in January 2006 that the geographic restrictions of the contract were unreasonable and couldn't be enforced.

Last summer, the Indiana Court of Appeals had reversed the trial court decision on grounds that the non-compete was geographically reasonable, since Central Indiana Podiatry had several locations and drew patients from surrounding counties.

But a majority of justices determined the podiatry group's restrictions were too strict and the business shouldn't be able to stop Krueger from practicing in the Hamilton County area, since the record didn't reflect a large number of patients traveling from other areas to that new office location. The court did leave in place some of the off-limit locales of Marion, Howard, and Tippecanoe counties.

In doing so, justices applied what is known as the blue pencil doctrine, which is typical in non-competes with a territorial issue, and allows courts to reform or rewrite portions of agreements determined to be too broad.

Justices Ted Boehm, Frank Sullivan, and Robert Rucker held the majority; Chief Justice Randall T. Shepard wrote a dissent, and Justice Brent Dickson joined him.

"The competitive reality is that these two areas function as one for commercial purposes," the chief justice wrote. "That a county line divides these two locations means very little to most customers or purveyors of service, and I wouldn't regard it as grounds for a court voiding a contract by which two relatively sophisticated parties ordered their commercial relationship."

While the court determined the issue of injunctive relief is moot in this case - as the two-year term expired in July 2007 - justices decided that injunctive relief is permissible in physician non-compete agreements because they raise significant policy concerns and recur frequently.

Overall, the court declined to ban non-competes all together as three other states do and Krueger urged the court to consider. Justices relied on a quarter-century old case of Raymundo v. Hammond Clinic Association, 449 N.E.2d 276 (Ind. 1983) that established a reasonableness test for the contracts, pointing out that banning the covenants is a public policy decision for legislators and no change has come since then.

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  1. Especially I would like to see all the republican voting patriotic good ole boys to stop and understand that the wars they have been volunteering for all along (especially the past decade at least) have not been for God & Jesus etc no far from it unless you think George Washington's face on the US dollar is god (and we know many do). When I saw the movie about Chris Kyle, I thought wow how many Hoosiers are just like this guy, out there taking orders to do the nasty on the designated bad guys, sometimes bleeding and dying, sometimes just serving and coming home to defend a system that really just views them as reliable cannon fodder. Maybe if the Christians of the red states would stop volunteering for the imperial legions and begin collecting welfare instead of working their butts off, there would be a change in attitude from the haughty professorial overlords that tell us when democracy is allowed and when it isn't. To come home from guarding the borders of the sandbox just to hear if they want the government to protect this country's borders then they are racists and bigots. Well maybe the professorial overlords should gird their own loins for war and fight their own battles in the sandbox. We can see what kind of system this really is from lawsuits like this and we can understand who it really serves. NOT US.... I mean what are all you Hoosiers waving the flag for, the right of the president to start wars of aggression to benefit the Saudis, the right of gay marriage, the right for illegal immigrants to invade our country, and the right of the ACLU to sue over displays of Baby Jesus? The right of the 1 percenters to get richer, the right of zombie banks to use taxpayer money to stay out of bankruptcy? The right of Congress to start a pissing match that could end in WWIII in Ukraine? None of that crud benefits us. We should be like the Amish. You don't have to go far from this farcical lawsuit to find the wise ones, they're in the buggies in the streets not far away....

  2. Moreover, we all know that the well heeled ACLU has a litigation strategy of outspending their adversaries. And, with the help of the legal system well trained in secularism, on top of the genuinely and admittedly secular 1st amendment, they have the strategic high ground. Maybe Christians should begin like the Amish to withdraw their services from the state and the public and become themselves a "people who shall dwell alone" and foster their own kind and let the other individuals and money interests fight it out endlessly in court. I mean, if "the people" don't see how little the state serves their interests, putting Mammon first at nearly every turn, then maybe it is time they wake up and smell the coffee. Maybe all the displays of religiosity by American poohbahs on down the decades have been a mask of piety that concealed their own materialistic inclinations. I know a lot of patriotic Christians don't like that notion but I entertain it more and more all the time.

  3. If I were a judge (and I am not just a humble citizen) I would be inclined to make a finding that there was no real controversy and dismiss them. Do we allow a lawsuit every time someone's feelings are hurt now? It's preposterous. The 1st amendment has become a sword in the hands of those who actually want to suppress religious liberty according to their own backers' conception of how it will serve their own private interests. The state has a duty of impartiality to all citizens to spend its judicial resources wisely and flush these idiotic suits over Nativity Scenes down the toilet where they belong... however as Christians we should welcome them as they are the very sort of persecution that separates the sheep from the wolves.

  4. What about the single mothers trying to protect their children from mentally abusive grandparents who hide who they truly are behind mounds and years of medication and have mentally abused their own children to the point of one being in jail and the other was on drugs. What about trying to keep those children from being subjected to the same abuse they were as a child? I can understand in the instance about the parent losing their right and the grandparent having raised the child previously! But not all circumstances grant this being OKAY! some of us parents are trying to protect our children and yes it is our God given right to make those decisions for our children as adults!! This is not just black and white and I will fight every ounce of this to get denied

  5. Mr Smith the theory of Christian persecution in Indiana has been run by the Indiana Supreme Court and soundly rejected there is no such thing according to those who rule over us. it is a thought crime to think otherwise.