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Physician Must Comply With Terms of Non-Competition Agreement

by Valerie A. Judice

On September 26, 2007, the Louisiana Second Circuit Court of Appeal upheld the judgment of the First Judicial District Court in Caddo Parish in finding that the noncompetition and nonsolicitation clauses in a contract between a urology clinic and a professional medical corporation ("PMC") were enforceable as to the physician who had formed the PMC. Regional Urology, L.L.C., et al v. David T. Price, M.D. and David T. Price, M.D., A Professional Medical Corporation, 42-789 (La.App. 2^{ndrehearing denied 10/18/07.}  Cir. 9/26/07), 966 So.2d 1087,

The clauses at issue were part of an independent contractor agreement between David Price, M.D., A Professional Medical Corporation (PMC) and Regional Urology, L.L.C. (Regional Urology). Dr. Price was not a named party to the contract in his individual capacity. The contract prevented competition and solicitation by David Price, M.D., PMC for a period of 2 years in Caddo and Bossier Parishes. In addition, the contract provided that it would "apply to any physician who is a Member, any corporation which is Member or any physician's L.L.C. which is a Member of Regional Urology, L.L.C."

After Dr. Price left Regional Urology on June 1, 2007, Dr. Price created David Price, M.D., L.L.C. in Claiborne Parish on June 2, 2007. Regional Urology promptly filed suit in Caddo Parish, seeking an injunction preventing Dr. Price from performing urology services in Caddo or Bossier Parishes. The court granted the injunction and Dr. Price appealed. 

The Second Circuit Court of Appeal reasoned that although noncompetition agreements are strongly disfavored in Louisiana, they are allowed when the agreement prohibits the person from competing or soliciting within a specified area for a period of up to 2 years. La. R.S. 23:921(C). The Court also disagreed with Dr. Price's position that he was not personally bound by the provisions, which prevented competition by both the physicians and their physician organizations. The Court recognized that a separate identity for physician organizations is appropriate for taxation, business management and liability protection, but saw no reason to maintain the technical distinction of a separate identity for noncompetition agreements. Thus, the Court found that the noncompetition and nonsolicitation clauses in the contract were enforceable as to Dr. Price, in both his individual and incorporated capacities.

While a majority of Judges ruled to enforce the noncompetition agreement, a dissenting Judge aptly pointed out that the majority decision did not take into account the importance of a person's right to choose his own physician. Access to medical care is an important public policy consideration that is threatened by noncompetition agreements involving physicians. The dissent compared the profession of medicine to that of law and identified both as involving consensual, fiduciary, and trusting relationships between the specialists and clients. According to the dissent, noncompetition agreements with physicians have a negative impact on physician-patient relationships, and, thus, should not be enforced.

Full post as published by Louisiana Law Blog on February 01, 2008 (boomark / email).