Washington Court Upholds Physician Noncompete, But Caution Is Warranted

In Emerick v. Cardiac Study Center, Inc., P.S., the Washington court of appeals held a physician noncompete does not automatically violate public policy, and will be upheld when reasonable.

The case involved a cardiology practice with four office locations in Pierce County, each near a hospital.  The noncompete prohibited physicians from practicing cardiac medicine in competition with the company for five years after employment terminated anywhere within Pierce County or Federal Way.  The group terminated Dr. Emerick’s employment, and Dr. Emerick set up a new office within a half mile of the group’s office.

At the trial court level, the court ruled that the covenant against competition was unreasonable as drafted, but used its equitable power to revise the noncompete.  The court reduced the geographic restriction from Pierce County and Federal Way to a two mile radius around the group’s current offices, reduced the time period restriction from five years to four, specifically allowed Dr. Emerick to practice at hospitals and emergency care clinics and make house calls within the restricted area, and specifically provided that patients could still select Dr. Emerick as their physician.  Likely because Dr. Emerick’s office location violated the revised scope of the noncompetition agreement, the trial court awarded the group over $200,000 in attorney fees as the prevailing party.

The court of appeals upheld the trial court’s ruling.  Importantly, the court of appeals rejected the argument that all physician noncompetes violate public policy.  Instead, courts evaluate the reasonableness of noncompetes on a case-by-case basis.  The court of appeals seemed to take comfort in the fact that Dr. Emerick could still practice within the restricted area at hospitals and emergency clinics, and that current patients could still see Dr. Emerick outside the restricted area without undue burden.  Importantly, the court ruled that enforcing the noncompete did not require the group prove that Dr. Emerick was actually competing with or harming the group.

While the decision shows that Washington courts continue to uphold physician noncompetes, it also shows the significant uncertainty when it comes to determining the appropriate scope of covenants against competition.  If Dr. Emerick had established his practice two miles from the group’s office rather than a half mile, then perhaps Dr. Emerick would have been the prevailing party, requiring the group to reimburse him for substantial attorney fees.

Both physicians and groups should engage attorneys when negotiating and seeking to enforce or avoid noncompetition agreements.  If you have additional questions about Emerick v. Cardiac Study Center, Inc., P.S. or other legal matters involving health care law, please contact Luke Campbell at lcampbell@mpba.com or 206-682-7090.

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