The next important decision by a Virginia court on the legality and enforceability of a non-compete contract arises from a 1996 decision in Loudon County, VA, Joseph Statkus v. Loudoun Anesthesia Associates, LLC.
In 1994, Dr. Statkus joined with four other physicians to form a company known as Loudoun Anesthesia Associates (LAA). LAA was formed for the purpose of providing specialized and exclusive medical services to the Loudoun Hospital Center (LHC) and to the Loudoun Health Services (LHS). Subsequent to the formation of the company, the physician members (licensed anesthesiologists) executed an Operating Agreement which contained the following non-compete provision:
That for a period of one (1) year following withdrawal from the Company, whether voluntary or involuntary and whether with or without cause, that Member will not directly or indirectly engage in a business similar to that conducted by the Company or in any other business competitive with the Company, but only so far as such competitive business is located in or actively solicits business in Loudoun County, Virginia . . .. The Members hereof expressly agree that the terms, duration, and geographic extent of this Covenant Not to Compete are reasonable.
The court found the non-compete language to be invalid and unenforceable because it represented an unreasonable restraint on the practice of anesthesiology and pain management by Dr. Statkus.
Why? Because the court found that LAA was the sole provider (pursuant to a separate contract) of anesthesia services to LHC and LHS. Also, pursuant to that separate contract, LHC and LHS could only retain the doctors at LAA for anesthesia services. Therefore, the non-compete between LAA and Dr. Statkus was unnecessary…he could not work for LHC or LHS because he was no longer a part of LAA.
Final Comment: Interestingly, the court did not place any significance on the recitation in the covenant that the parties “agreed that the terms, duration, and geographic extent of this Covenant Not to Compete are reasonable.” Finding that such a recitation would have no more significance than a statement that the covenant is legally binding because questions of reasonableness or legal efficacy are ones for a court, and not for the parties, to decide.