ILNews

Court split on non-compete geography

Michael W. Hoskins
January 1, 2008
Keywords
Back to TopCommentsE-mailPrintBookmark and Share
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.
ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Hey 2 psychs is never enough, since it is statistically unlikely that three will ever agree on anything! New study admits this pseudo science is about as scientifically valid as astrology ... done by via fortune cookie ....John Ioannidis, professor of health research and policy at Stanford University, said the study was impressive and that its results had been eagerly awaited by the scientific community. “Sadly, the picture it paints - a 64% failure rate even among papers published in the best journals in the field - is not very nice about the current status of psychological science in general, and for fields like social psychology it is just devastating,” he said. http://www.theguardian.com/science/2015/aug/27/study-delivers-bleak-verdict-on-validity-of-psychology-experiment-results

  2. Indianapolis Bar Association President John Trimble and I are on the same page, but it is a very large page with plenty of room for others to join us. As my final Res Gestae article will express in more detail in a few days, the Great Recession hastened a fundamental and permanent sea change for the global legal service profession. Every state bar is facing the same existential questions that thrust the medical profession into national healthcare reform debates. The bench, bar, and law schools must comprehensively reconsider how we define the practice of law and what it means to access justice. If the three principals of the legal service profession do not recast the vision of their roles and responsibilities soon, the marketplace will dictate those roles and responsibilities without regard for the public interests that the legal profession professes to serve.

  3. I have met some highly placed bureaucrats who vehemently disagree, Mr. Smith. This is not your father's time in America. Some ideas are just too politically incorrect too allow spoken, says those who watch over us for the good of their concept of order.

  4. Lets talk about this without forgetting that Lawyers, too, have FREEDOM OF SPEECH AND ASSOCIATION

  5. Baer filed with the U.S. Court of Appeals Seventh Circuit on April 30 2015. When will this be decided? How many more appeals does this guy have? Unbelievable this is dragging on like this.

ADVERTISEMENT