ILNews

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. I will continue to pray that God keeps giving you the strength and courage to keep fighting for what is right and just so you are aware, you are an inspiration to those that are feeling weak and helpless as they are trying to figure out why evil keeps winning. God Bless.....

  2. Some are above the law in Indiana. Some lined up with Lodges have controlled power in the state since the 1920s when the Klan ruled Indiana. Consider the comments at this post and note the international h.q. in Indianapolis. http://www.theindianalawyer.com/human-trafficking-rising-in-indiana/PARAMS/article/42468. Brave journalists need to take this child torturing, above the law and antimarriage cult on just like The Globe courageously took on Cardinal Law. Are there any brave Hoosier journalists?

  3. I am nearing 66 years old..... I have no interest in contacting anyone. All I need to have is a nationality....a REAL Birthday...... the place U was born...... my soul will never be at peace. I have lived my life without identity.... if anyone can help me please contact me.

  4. This is the dissent discussed in the comment below. See comments on that story for an amazing discussion of likely judicial corruption of some kind, the rejection of the rule of law at the very least. http://www.theindianalawyer.com/justices-deny-transfer-to-child-custody-case/PARAMS/article/42774#comment

  5. That means much to me, thank you. My own communion, to which I came in my 30's from a protestant evangelical background, refuses to so affirm me, the Bishop's courtiers all saying, when it matters, that they defer to the state, and trust that the state would not be wrong as to me. (LIttle did I know that is the most common modernist catholic position on the state -- at least when the state acts consistent with the philosophy of the democrat party). I asked my RCC pastor to stand with me before the Examiners after they demanded that I disavow God's law on the record .... he refused, saying the Bishop would not allow it. I filed all of my file in the open in federal court so the Bishop's men could see what had been done ... they refused to look. (But the 7th Cir and federal judge Theresa Springmann gave me the honor of admission after so reading, even though ISC had denied me, rendering me a very rare bird). Such affirmation from a fellow believer as you have done here has been rare for me, and that dearth of solidarity, and the economic pain visited upon my wife and five children, have been the hardest part of the struggle. They did indeed banish me, for life, and so, in substance did the the Diocese, which treated me like a pariah, but thanks to this ezine ... and this is simply amazing to me .... because of this ezine I am not silenced. This ezine allowing us to speak to the corruption that the former chief "justice" left behind, yet embedded in his systems when he retired ... the openness to discuss that corruption (like that revealed in the recent whistleblowing dissent by courageous Justice David and fresh breath of air Chief Justice Rush,) is a great example of the First Amendment at work. I will not be silenced as long as this tree falling in the wood can be heard. The Hoosier Judiciary has deep seated problems, generational corruption, ideological corruption. Many cases demonstrate this. It must be spotlighted. The corrupted system has no hold on me now, none. I have survived their best shots. It is now my time to not be silent. To the Glory of God, and for the good of man's law. (It almost always works that way as to the true law, as I explained the bar examiners -- who refused to follow even their own statutory law and violated core organic law when banishing me for life -- actually revealing themselves to be lawless.)

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