In Texas, non-compete agreements that relate to the practice of medicine must meet certain statutory requirements in addition to the consideration and reasonableness conditions discussed here. Last week, the Fourteenth Court of Appeals in LasikPlus of Texas, P.C., et al. v. Mattioli denied a lasic clinic’s application for a temporary injunction against a former doctor precisely because his non-compete agreement failed to comply with one of the requirements, thus allowing the doctor to proceed with the competitive practice while the parties litigated their dispute.
Pursuant to Tex. Bus. Com. Code § 15.50(b), a covenant not to compete relating to the practice of medicine is enforceable against a person licensed as a physician by the Texas Medical Board as long as such covenant:
In LasikPlus of Texas, after working for the laser eye surgery center for nine years, Mattioli, a licensed ophtalmologist, terminated his employment and notified LasikPlus that he was opening his own clinic featuring laser surgical procedures less than two miles from his former clinic’s location. LasikPlus requested a temporary restraining order (TRO) as well as a permanent injunction seeking to enjoin Mattioli from operating his clinic within the area and for the time-period prohibited by the covenant not to compete. The district court first granted an ex parte TRO, but then dissolved it after the hearing on a temporary injunction.
The Court of Appeals affirmed the district court’s decision after finding that LasikPlus had failed to prove the likelihood of success on the merits on its breach of contract claim. Since the parties conceded that the non-compete agreement did not contain a buy out clause required under Tex. Bus. & Com. Code 15.50(b), the agreement was probably not enforceable and LasikPlus would ultimately loose its breach of contract claim. Thus, in absence of the required clause, the probability of ultimate success on the merits for LasikPlus was too low to justify a temporary injunction.
The Court of Appeals also explained that while Section 15.50(b) authorized a court to reform i.e. rewrite a buy out clause that was unreasonable, it did not authorize the court to write a buy out clause into a contract where one was absent. The Court of Appeals specifically stated that “there is no indication in Section 15.50 that the legislature intended to invest courts or arbitrators with the authority to reform noncompete covenants to create buy out provisions. To the contrary, the section as a whole provides that if a noncompete covenant involving a physician does not have a buy out clause, it is not enforceable.” Thus, the Court rejected LasikPlus’ argument that it was likely to succeed on the merits with respect to the reformation request.
In denying the temporary injunction, the district court allowed Matiolli to compete with the clinic while the parties litigated their dispute and also determined that LasikPlus was not likely to prevail on its breach of contract claim because the non-compete agreement was not enforceable.
CONCLUSION: In Texas, non-competition agreements that relate to the practice of medicine are subject to a specific list of requirements. Failing to comply with these requirements will result in a non-compete agreement being unenforceable, and, therefore, completely useless. Thus, the parties should always include a buy out clause in the agreement with an understanding that if they disagree later about the reasonableness of the clause, a court or an arbitrator can be asked to resolve their dispute.
For more information regarding the enforcement or drafting of non-competition agreements in Texas, contact Leiza Dolghih.