A recent Florida appellate court decision may alter 200px-Florida-StateSeal.svglong-standing prohibitions against non-compete agreements for certain professionals. In AmSurg New Port Richey FL Inc. v. Vangara, the court upheld a non-compete, finding that it prohibited a physician from operating a rival business—but not from practicing medicine. This was the pivotal distinction for saving the non-compete, and other state courts could adopt this same logic.

Background:   In 2007, Dr. Vangara and his business partners entered into a joint venture agreement with AmSurg New Port Richey FL, Inc. (AmSurg), to form the New Port Richey FL Multi–Specialty ASC, LLC (Multi–Specialty ASC)—an ambulatory surgical center. The joint-venture agreement was governed by Tennessee law and included a non-compete. By its terms, the restrictive covenants prohibited Dr. Vangara from having “any financial interest in any business or entity competing or planning to compete with the [Multi-Specialty ASC].”

But Dr. Vangara failed to comply with this covenant. In 2010, AmSurg learned that Dr. Vangara owned and operated a competing ambulatory surgery business, and after multiple cease-and-desist requests, Dr. Vangara refused to stop. AmSurg finally responded by suing Dr. Vangara for breach of contract and various other business torts.

Rationale:   At the trial court level, Dr. Vangara filed a summary judgment motion, arguing that the non-compete was invalid as a matter of law. The trial court agreed. It found that the non-compete was inimical to Tennessee’s public policy, and therefore unenforceable. The trial court relied on a Tennessee Supreme Court decision that prohibited most contracts that restrict a doctor’s right to freely practice medicine.

In that case, a medical clinic sued to enforce a non-compete that prevented a physician from practicing medicine within a twenty-five mile radius. Finding that the non-compete  was unenforceable as a matter of public policy, the Tennessee Supreme Court placed more value on public interest considerations—such as affordable healthcare and a patient’s fundamental right to freely choose physicians—rather than the specific terms of the contract. These same concerns guided the trial court’s refusal to enforce Dr. Vangara’s non-compete.

On appeal, the court took a narrower interpretation of the Tennessee Supreme Court decision.  It distinguished between “practicing medicine” and “operating a competing business.” The court reasoned that the joint-venture agreement only prevented Dr. Vangara from having ownership interests in competing businesses—not from practicing medicine. The court pointed out that the non-compete specifically provided that Dr. Vangara was “not prevent[ed] from engaging in his … profession, the practice of medicine.” Because Dr. Vangara could freely practice medicine without violating the joint-venture agreement, the court reversed the summary judgment previously entered in Dr. Vangara’s favor.

Take Away:   In states that prohibit non-competes for certain professions based on public policy concerns, this court’s distinction—between “practicing” a profession and “owning” a competing business within that profession—could limit the scope of those non-compete bans. Companies should thus consider making similar distinctions when drafting non-competes for traditionally-protected professionals.