A recent North Carolina non-compete case has pitted one of the nation’s largest allergy clinics against one of North Carolina’s most respected physicians. Earlier this month, Charlotte-based Carolina Asthma and Allergy Center (CAAC) filed a lawsuit against one of its former doctors, Dr. Maeve O’Connor. Dr. O’Connor has joined the practice back in 2003 and worked there for nearly a decade. Over that time, she built up a tremendous reputation in the Charlotte medical community, even serving as the head of the Mecklenburg County Medical Society, a group of more than 1,300 doctors. In late July of last year, O’Connor terminated her employment with CAAC. This January, she opened up a competing practice in Charlotte, a few miles away from where she formerly practiced. CAAC sued, alleging O’Connor had violated non-compete and non-solicitation provisions of her employment agreement.
In response, Dr. O’Connor fired back with accusations regarding subpar quality of care at the clinic, numerous clinical errors and excessive caseloads. To bolster those accusations, numerous former CAAC employees submitted affidavits confirming that CAAC had serious problems. Those problems, allegedly, ranged from relatively minor concerns over customer service to more troubling issues like sloppy documentation and prescribing patients the incorrect medications. But the affidavits in support of Dr. O’Connor were not limited to those opining on conditions at the clinic. There were affidavits from referring doctors who indicated that they referred patients to Dr. O’Connor, not to CAAC (calling into question the existence of any relationship with CAAC). There were affidavits from current and former patients, touting Dr. O’Connor’s skill as a physician.
That was just half of the assault. The Doctor (and her attorneys) then went on to attack the non-compete agreement as overbroad in time and scope (two years, twelve counties and any affiliation with any asthma or allergy care practice). The Defendants (the doctor and her new practice) made their big stand on the issue of geographic scope. As written, the non-compete agreement would prevent Dr. O’Connor from working anywhere in an area of more than 5,700 square miles (with a population of nearly 2.5 million people). If Defendants papers are factually accurate, CAAC only maintains medical practices in a fraction of this territory. If true, the geographic scope of the agreement is massive overreaching on the part of CAAC.
In light the overbroad geographic scope of the non-compete provision, the Defendants urged the court simply to hold the non-compete provision void in its entirety. As it turns out, North Carolina’s blue-pencil rule severely limits the types of changes courts can make to overbroad non-compete agreements. Although many states allow for judicial modification of non-compete agreements, North Carolina is not one of them. Instead, the leading North Carolina authority on point holds that “[C]ourts will not rewrite a contract if it is too broad but will simply not enforce it. If the contract is separable, however, and one part is reasonable, the courts will enforce the reasonable provision.” Whittaker Gen. Med. Corp. v. Daniel, 324 N.C. 523, 528, 379 S.E.2d 824, 828 (1989). This is not some ancient and now disfavored opinion. Whittaker is the law in North Carolina today and its holding means exactly what it says: If a provision is overbroad or unreasonable, it is struck. The results can be drastic. If a time limitation is too long, it will be struck. A more recent decision from one of the North Carolina appellate courts is illustrative. Here is how the court disposed of both non-compete and non-solicitation provisions:
Furthermore, when the trial court “blue-penciled” the agreement, it struck the entire first sentence, which constituted the non-compete clause of the agreement. This sentence included the only time restriction in the agreement. The remaining non-solicitation clause includes no time restriction. A plain reading of the non-solicitation agreement would permit MJM to prohibit Defendants from soliciting “current or prospect clients” indefinitely. A non-solicitation clause without any time restriction is clearly too broad and, therefore, unenforceable, no matter the scope of the territorial limitation.
Now that is vicious. In the case at bar, it looks like things might be headed in that direction. On January 25th, the Court issued a sparse, one-page order denying the Plaintiff’s motion for a preliminary injunction. Although the Court did not offer any insight into its reasoning, I suspect that North Carolina’s harsh blue pencil rules had something to do with the decision.
The case is Carolina Asthma and Allergy Center, P.A. vs. Maeve O’Connor, M.D., Case No. 13-CVS-328, (General Court of Justice, Mecklenburg County, NC). The entire docket is available here.
Jonathan Pollard is a trial lawyer and litigator based in Fort Lauderdale, Florida. He focuses his practice on cases involving non-compete disputes, antitrust and business torts. He represents clients in Miami, Fort Lauderdale, Boca Raton, West Palm Beach, Jupiter, Fort Myers, Tampa, and Orlando. If you have a non-compete question or need a referral to a non-compete lawyer in your area, please contact Jonathan’s Fort Lauderdale office at 954-332-2380.
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