One of the first reported (and important) cases involving doctors and non-compete contracts arose in Richlands, Virginia, a town in Tazewell County. The case, Clinch Valley Physicians, Inc. v. Luis Garcia, MD, was decided by the Virginia Supreme Court in 1992.
Clinch Valley Physicians, Inc. (CVP) was a professional corporation whose shareholders were physicians. Each physician had a contract with CVP which provided, among other things, as follows:
1. The contract term was for one year but could be automatically renewed.
2. The Board of Directors of CVP could terminate the contract for justifiable cause, which included, but was not limited to any of the following: (a) the withdrawal or suspension of the license to practice medicine and/or surgery in Virginia; (b) the withdrawal or suspension of the license to dispense or prescribe narcotic drugs; (c) being guilty of professional misconduct by any professional organization having jurisdiction; (d) the withholding of any professional or other fees in breach of the terms and provisions of this agreement; and (e) failure to observe the general rules promulgated by the Board of Directors of CVP.
3. Upon termination of the agreement, for any reasons whatsoever, the Physician could not, for a period of 3 years, engage in the practice of medicine or surgery in a radius of 25 miles of Richlands.
Dr. Garcia decided to leave CVP and his contract was not renewed. He then filed suit against CVP asserting the non-compete language did not apply to him since his employment agreement with CVP had lapsed and he was not “terminated.”
The Virginia Supreme Court agreed with Dr. Garcia’s position and held the non-compete provision was not enforceable against him. The Court reasoned that, in reading the agreement in its entirety, the non-compete provision applied only to physicians who were “terminated” as set forth in the agreement.
The importance of this decision is that it is a great example of how the court looks very closely at the precise language of the agreement and, if it is unclear or ambiguous, such flaws will be held against the employer who drafted the agreement. The Court noted that CVP could have drafted the agreement so that it would have applied in situations where the physician chose not to renew his contract.