The next important decision ruling upon the legality of non-compete contracts with doctors and physicians comes from a decision by the Warren County (VA) Circuit Court. The case was Shenandoah Chiropractic, Inc. v. Scott Berman, decided in 1996. In some respects this case follows the ruling of the Virginia Supreme Court in Clinch Valley Physicians v. Garcia which I discussed several days ago.
Shenandoah Chiropractic was a Virginia corporation engaged in the practice of chiropractic medicine in Front Royal, Virginia. In December of 1994, Shenandoah Chiropractic and the the defendant (Berman, a chiropractor) entered into an employment contract. The relevant portions of the contract provided as follows:
…the employee further agrees not to transmit or reveal any information, written or oral, concerning the patients of the employer, its methods of operation or business forms to a competitor or prospective competitor nor use any such information for himself or others in the same or similar employment . . .
In the event that the employee terminates the employment agreement, for a period of one year from the date of such termination that the employee shall not engage in the business of the evaluation and non-surgical treatment of musculoskeletal disorders, the rehabilitation of musculoskeletal disorders, nor act in aid of such business, within a forty (40) mile radius of the center of Front Royal, Virginia, or any other clinic owned or operated by employer…
The twist with this case arose out of the fact the employment contract, by it terms, expired on June 4, 1996. The parties negotiated before and after the expiration date but were unable to agree to the terms of a new employment agreement. After the negotiations failed, Berman left Shenandoah Chiropractic and opened an independent chiropractic office in Front Royal, VA. Shenandoah Chiropractic then filed suit to enjoin Berman from operating his office.
The court denied Shenandoah Chiropractic’s request for an injunction, finding the employment agreement “expired” on June 4, 1996 and the non-compete limitations expired with the agreement. The court noted that Shenandoah Chiropractic could have written the employment agreement such that the one year non-compete would also run from the expiration of the contract but failed to do so.