Virginia Family Doctor Not Bound by Non-Compete Contract

Family Care Center, Inc., hired Dr. Nipun Parikh, M.D., to work as a family physician at its Lynchburg medical practice. In 1993, Dr. Parikh signed an employment contract which contained the following non-compete provision:

Upon termination of employment for any reason and for a period of three years thereafter, Employee agrees to pay employer ten thousand dollars each month employee is engaged in a competing practice of General Practice, Family Medicine Ambulatory Care, or General Internal Medicine within a radius of twenty miles measured from the offices of the Employer.

In 2003, the sole shareholder of the Family Care Center died, and the practice converted from a professional corporation to a non-professional corporation.  Later that year, Dr. Parikh terminated his employment with the practice and began as family physician at a competing medical practice located one mile from Family Care Center’s office.

Family Care Center, whose sole shareholder was no longer an individual licensed to practice medicine, sued Dr. Parikh in Campbell County Circuit Court. After a bench trial, the court entered a judgment in favor of Family Care Center and awarded $210,000 in damages.

On appeal, Dr. Parikh challenged whether Family Care Center had standing to enforce a non-compete against a physician.

The agreement between Family Care Center and Dr. Parikh stated its intended protection of the Family Care Center, which was “engaged in the practice of medicine in Lynchburg, Virginia . . . ” and referenced Family Care Center’s sole director and shareholder, Dr. Dennis Burns.

After Dr. Parikh separated from his employment with Family Care Center, it was no longer able to lawfully engage in the practice of medicine, as set forth in the 1993 employment agreement. 

The question for the Supreme Court of Virginia was whether a non-professional corporation, which was not authorized to engage in the practice of medicine, had a “legitimate business interest” in enforcing a non-compete against a physician.

The Court held in favor of Dr. Parikh because Family Care Center’s stated business purpose was no longer valid after Dr. Burns’s death.  The Court further found that Family Care Center could not enforce a restraint on competition when it was incapable of competing without the ability to engage in the authorized practice of medicine.

Click here to download: Nipun Parikh, M.D. v. Family Care Center, Inc., 641 S.E.2d 98 (2007)