A recent case out of the Louisiana Court of Appeal reminds us that some states will enforce physician non-compete agreements, even in the absence of a clear protectable interest and even where such enforcement threatens harm to the public. But the case does more than that: It forces us to take a hard look at Louisiana’s non-compete statute, which – upon closer inspection – is fundamentally at odds with antitrust law. Let’s take a look:
Dr. Peter Abel is a board certified doctor of internal medicine and interventional cardiologist. He has practiced medicine for more than thirty years. In 1990, he began working with Cardiovascular Institute of the South (“CIS”) in Morgan City, LA. In 2011, due to personal health issues, he transitioned from full-time to part-time practice with CIS. In connection with his new part-time role at CIS, he executed a Physician Employment Agreement (“the Agreement”). The Agreement contained a restrictive covenant that prohibited Dr. Abel from practicing cardiology for two years following his separation from CIS in a restricted territory that’s spanned eleven parishes (basically counties).
In late December 2013, Dr. Abel ended his employment with CIS. In April 2014, Dr. Abel launched a new practice as part of the Prevention Plus Clinic, also located in Morgan City. In May 2014, CIS sued seeking a preliminary injunction. Following a hearing, the 16th Judicial District Court of Louisiana issued an injunction barring Dr. Abel from practicing cardiology in the restricted territory for the remainder of the two year term.
Dr. Abel appealed the injunction, but not on the grounds of public policy. Instead, Abel argued that his new practice focused on internal and preventative medicine, as opposed to cardiology. The Court of Appeal rejected that argument. As it turns out, in his new practice at Prevention Plus, Dr. Abel had practiced cardiology. Testimony revealed that, at least in one instance, Dr. Abel had treated a patient who was complaining of chest pains and performed an echo-cardiogram on her. This amounted to the practice of cardiology. The Court of Appeal went on to note that by treating patients with the goal of reducing their risk of heart attack and vascular disease, Dr. Abel was clearly practicing cardiology and clearly violating his Agreement.
The case is noteworthy for two reasons: First, there is utterly no analysis of any legitimate business interest that would justify enforcement of the non-compete agreement. Second, there is no discussion of public policy and the public interest.
With respect to a legitimate business interest, the decision says absolutely nothing. There is no confidential information at issue. And Dr. Abel was a board certified cardiologist years before working at CIS, so extraordinary training or education is not at issue. As in most physician non-compete cases, the only possible interest at stake is patient relationships. But the decision says nothing about patients. There is no suggestion that Dr. Abel started a competing practice and then attempted to solicit his old patients from CIS. There is no legitimate business interest at stake and – as such – any restraint of trade should be unreasonable. But this is Louisiana. So the explanation for this somewhat absurd result lies in Louisiana law, specifically La. R. S. 23:921. In relevant part, that statute provides as follows:
Any person … who is employed as an agent, servant, or employee may agree with his employer to refrain from carrying on or engaging in a business similar to that of the employer and/or from soliciting customers of the employer within a specified parish or parishes, municipality or municipalities, or parts thereof, so long as the employer carries on a like business therein, not to exceed a period of two years from termination of employment…
The statute does not contain any requirement that an agreement not to compete be based on a legitimate business interest (i.e. confidential information, customer relationships, etc.) or be no broader than necessary to protect that interest. Instead, in Louisiana, non-compete agreements apparently are enforceable without any regard to whether or not such agreements are necessary. In my view, Louisiana 23:921 creates an antitrust problem. Because ultimately, when we talk about non-compete issues we are talking about antitrust.
In most states, there is not a stand-alone non-compete law. Instead, non-compete laws are contained in state antitrust statutes. For example, consider Florida: Florida’s non-compete law (542.335) is part of the Florida Antitrust Law, Fla. Stat. 542.15 et seq. Non-compete agreements are restraints of trade. Granted, vertical restraints are presumptively less harmful to competition than horizontal restraints. But they are restraints of trade nonetheless and therefore subject to antitrust scrutiny. Vertical restraints of trade are subject to a rule of reason analysis. That is essentially what state non-compete laws do: They codify a rule of reason analysis for non-compete agreements in the employment and sale of a business context.
The problem with Louisiana 23:921 is that it does not do this. The statute does not require a legitimate business interest. It does not require that a non-compete agreement be no broader than necessary to protect an employer’s interest. It contains no limitations whatsoever. Instead, the statute deems all employee non-compete agreements enforceable for two years, full-stop, with one minor exception: Car salesmen. By statute, non-compete agreements in Louisiana are not enforceable against car salesman. I’m not joking:
There shall be no contract or agreement or provision entered into by an automobile salesman and his employer restraining him from selling automobiles.
The upshot of all this: Many people recently have read about companies forcing low wage workers to sign non-compete agreements. A few months ago, news broke that Jimmy Johns required all of its employees – including sandwich makers and delivery drivers – to sign non-compete agreements. And just a few days ago, we learned that Amazon requires even its temporary warehouse workers to sign non-compete agreements. These Jimmy Johns and Amazon non-compete agreements are clearly unenforceable. They are unreasonable restraints of trade. In nearly every state throughout the country, courts would refuse enforcement. But in Louisiana, based on the plain language of the relevant statute, such agreements would be enforceable.
Finally, there is the issue of the public interest. Dr. Abel is an experienced, board certified cardiologist. I question the propriety of prohibiting an experienced cardiologist from practicing medicine in a broad swath of Louisiana when there is no suggestion that such a prohibition is necessary to prevent unfair competition. Nothing in the Court’s order suggests that Dr. Abel has interfered with the relationships between CIS and its existing patients. Further, the record contains no evidence about patient access to cardiology care in this part of the state. It is widely accepted that Louisiana experienced a shortage of physicians in the years following Hurricane Katrina. Beyond this, the state has a tremendous demand for cardiology services in particular. And according to some sources, the state faces an outright shortage of cardiologists. I would not be surprised to see the Federal Trade Commission step in and begin an investigation regarding CIS’s market share and issues of patient access to cardiology services within the restricted territory. If that sounds far-fetched, then you should recall what happened to Renown Health out in Nevada.
To sum up: Louisiana Statute 23:921 cannot be reconciled with antitrust law. In Louisiana, non-compete agreements are enforceable without regard to any legitimate business interest. There is no requirement that such agreements be reasonable or necessary. There are no exceptions for doctors or cardiologists, even if enforcement may harm the public interest. But apparently there’s a big exception for car dealers.
The case is Cardiovascular Institute of the South v. Abel, 2015 WL 1019500 (La. Ct. App. Mar. 9, 2015).
Jonathan Pollard is a trial lawyer and business litigation attorney based on Fort Lauderdale, Florida. He focuses his practice on competition law and has extensive experience litigating non-compete, trade secret, trademark and antitrust claims. He is licensed in all Florida federal and state courts and routinely represents clients in Miami, Fort Lauderdale, West Palm Beach, Fort Myers, Tampa, Orlando and Jacksonville. His office can be reached at 954-332-2380.
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