New Physician Non-Compete Ruling

On March 4, 2015, in the case of AmSurg New Port Richey FL, Inc. v. Sreenivasa Prasad Vangara, the Florida Second District Court of Appeal (2nd DCA) issued a ruling involving a physician covenant not to compete.  Physician non-competes are quite common in Florida; however, the case law in this area is not uniform, in part because the enforceability of a non-compete is a fact-specific inquiry.  Therefore, although Florida has a statute permitting non-competes, these cases must be decided on a case-by-case basis.

In the Vangara case, Dr. Vangara was an investor in an ambulatory surgery center (ASC) that is also owned by AmSurg, a national owner and operator of ASCs.  The agreement governing the ownership and management of the ASC contained a provision prohibiting its owners from having a financial interest in, managing, leasing, or developing a business competitive with the ASC.  The provision went on to state that the ASC’s physician-owners were not prohibited from practicing medicine nor were they required to refer patients to or perform procedures at the ASC.  While he was an owner of the ASC, Dr. Vangara operated a competing ASC.  AmSurg sued Dr. Vangara for breach of contract, but the trial court ruled in favor of Dr. Vangara.  Applying Tennessee law (which the parties had agreed in the contract would govern the contract), the trial court held that Tennessee’s non-compete case law prohibited non-competes against physicians, except in extremely limited circumstances, none of which applied to this case.

On appeal, the 2nd DCA reversed this ruling, distinguishing the Tennessee case law prohibiting most non-competes against physicians by noting that Dr. Vangara’s non-compete did not prohibit him from practicing medicine but only from being involved in a competing business.  The 2nd DCA reasoned that, because Dr. Vangara’s non-compete did not interfere with the physician-patient relationship, the broad prohibition on physician non-competes under Tennessee law was inapplicable.  On that basis, the appellate court overturned the trial court’s ruling and upheld the non-compete.

Although this case involved an interpretation of Tennessee law rather than Florida law, it is instructive in analyzing physician non-competes in Florida.  Since Florida has a statute on the books that specifically permits non-competes (and not just in the physician context), it might be inferred that the case for enforcing this kind of non-compete would be even stronger under Florida law.  Since these types of non-competes (relating to involvement in a competing business but not necessarily prohibiting the practice of medicine) are common in the ASC context, physicians should take note and not assume such a clause is unenforceable.  (As a sidebar, parties should always be cognizant of governing law provisions as well).  It is also interesting to consider the impact this case might have on future non-compete cases in Florida involving restrictive covenants prohibiting the practice of medicine itself, which are also common.  Although this case is not binding precedent in Florida and although non-compete cases will always be fact-specific inquiries, read in conjunction with other current Florida cases declining to enforce physician non-competes to the extent they prohibit the practice of medicine, this case could signal a growing consensus among Florida courts as to the enforceability of physician non-competes.