Virginia Family Doctor Not Bound by Non-Compete Contract
A physician signed a non-compete with a medical practice. Later, the practice’s sole shareholder, a physician, passed away. Thereafter, the practice ceased operating as a professional corporation and began operating a non-professional corporation.
On appeal, the Supreme Court of Virginia held a non-professional corporation has no standing, and no competitive interest, to enforce a restraint on trade against a physician, and found in favor of the doctor.
Facts
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, Dr. Parikh terminated his employment. He obtained employment as a family physician at a competing medical practice located one mile from Family Care Center’s office.
Family Care Center 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.
Virginia Doctor Non-Compete Strictly Construed
On appeal, Dr. Parikh challenged whether Family Care Center had standing to enforce a non-compete against a physician.
The contract between Family Care Center and Dr. Parikh stated, “[Family Care Center] is presently engaged in the practice of medicine in Lynchburg, Virginia, … ” and referenced Family Care Center’s sole director and shareholder, Dr. Dennis Burns.
In the years after Dr. Parikh signed the contract, however, Dr. Burns passed away. His widow, Karen Burns, a non-physician, became sole shareholder. Thereafter, Family Care Center ceased to be a professional corporation engaged in the practice of medicine. Family Care Center continued to employ Dr. Parikh and operated as a non-professional corporation. The contract was never amended.
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 for Dr. Parikh. First, the Court strictly construed the terms of the non-compete contract. Family Care Center’s stated business purpose was no longer valid since, after Dr. Burns’s death, it was not authorized to “engage in the practice of medicine.”
Second, as Family Care Center cannot practice medicine, it cannot compete with Dr. Parikh, and therefore it had no valid purpose to enforce a restraint on competition.
The judgment of the trial court was reversed in favor of the physician.
Click here to download: Nipun Parikh, M.D. v. Family Care Center, Inc., 641 S.E.2d 98 (2007)
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