FTC Steps In, Invalidates Certain Physician Non-Compete Agreements In Nevada

In what may be a one-off move, or a harbinger of things to come, the FTC has stepped into a non-compete dispute in Nevada and ordered that certain cardiologists be exempt from their non-compete agreements.

The situation arose out of Renown Health’s acquisition of competitors Reno Heart Physicians and Sierra Nevada Cardiology Associates.  Upon acquiring these two competitors, cardiologists at those two health systems immediately became subject to Renown’s aggressive non-compete agreements.  Although that may seem somewhat novel, it is a process that has become routine.  Mergers frequently involve the transfer of contractual rights under non-compete agreements and standing to enforce the restrictive covenants.  The only time when such rights do not transfer is when some in-house counsel screwed up in drafting the non-compete.  See, e.g.,  Accordia of Ohio, LLC v. Fishel, Slip Opinion No. 2012-Ohio-2297 (rights under non-compete agreement non-transferable absent language re successors and assigns).

Renown and the two target companies did not have that problem.  Gold sticker for their in house teams.  They just inserted some boilerplate language about the rights under the non-compete agreement being fully transferable to successors and assigns and, just like that, Renown cornered the Reno market on cardiologists.  According to the FTC, Renown had locked up 88% of the Reno market in cardiologists, effectively eliminating competition. The problems with such a scenario are numerous and obvious, including destroying competition based on price and quality.

So hats off to the FTC for stepping in and using its muscle to sort out this mess.  Under an agreement between the FTC and Renown, 10 cardiologists who are now employed by Renown will be able to leave the company, work for competitors or start their own practices.