Academic journal article The University of Memphis Law Review

Contracts-Murfreesboro Medical Clinic, P.A. V. Udom: Physician Noncompete Agreements Go under the Knife: The Tennessee Supreme Court Rejects Physician Noncompete Agreements

Academic journal article The University of Memphis Law Review

Contracts-Murfreesboro Medical Clinic, P.A. V. Udom: Physician Noncompete Agreements Go under the Knife: The Tennessee Supreme Court Rejects Physician Noncompete Agreements

Article excerpt

I. INTRODUCTION

"Public policy is a very unruly horse. Once you get astride it, you never know where it will carry you."1

In Murfreesboro Medical Clinic, P.A. v. Udom,2 the Tennessee Supreme Court, relying on public policy, banned noncompete agreements between physicians and their private employers.3 In Udom, a physician signed an employment agreement with a private medical practice that contained a noncompete provision.4 The provision provided that upon termination of the employment agreement the physician would not "engage in the practice of medicine within a twenty-five mile (25) radius of the public square of Murfreesboro, Tennessee for a period of eighteen (18) months."5

The court had three realistic options in addressing the legality of the noncompete agreement between a physician and his private employer: (1) it could have evaluated the covenant as it would any other commercial noncompete agreement to examine if it were reasonable under the circumstances;6 (2) it could have applied a special level of scrutiny, specifically for physician noncompete agreements,7 or (3) it could have invalidated the agreement as a violation of public policy.8 The Tennessee Supreme Court, relying primarily upon public policy, patient access to healthcare, and the American Medical Association Code of Medical Ethics, held that such agreements are "unenforceable and void" unless specifically protected by statute.9 In making this decision, the court created a bright-line rule prohibiting noncompete agreements between physicians and thek private employers.

The court, however, could have achieved the same objectives without making such a harsh rule. First, rather than filling the perceived legislative silence with its own view and infringing upon the Legislature's domain, the court could have allowed the Tennessee Legislature to set public policy in this area as it has done in the past.10 Second, the majority's support for its ruling is weak because it contravenes its own stated rule of statutory construction.11 Third, the Tennessee Supreme Court should have deferred to the legislature in this matter because the legislature can conduct hearings and have a full debate on this important contractual right. Fourth, the majority's comparison of the legal profession and medical profession is faulty.12 The American Bar Association totally bans noncompete agreements amongst attorneys, while the American Medical Association only discourages such agreements between physicians.13 Last, the majority's complete ban on physician noncompete agreements is too harsh because of its negative commercial effect on medical practices. The court should have avoided a bright line rule and relied on the more flexible test of reasonableness, which the court chose to ignore.14

II. COVENANTS NOT TO COMPETE IN TENNESSEE

Historically, Tennessee courts have enforced noncompete agreements that are "deemed reasonable under the particular circumstances," and a total ban of reasonable agreements was not within the court's traditional jurisprudence.15 This history suggests that the court was wrong to create a bright line rule, which prohibits even reasonable covenants not to compete. The term "reasonable covenants" when used in this comment are defined as covenants that limit such agreements in a reasonable degree of time, scope, and geographic area.

For instance, in Turner v. Abbott',16 the Supreme Court of Tennessee held that a noncompete agreement between a dentist and an employee prohibiting the employee from practicing in his employer's vicinity after the termination of his employment was "reasonable and not oppressive; nor was it in any way detrimental to the interests of the public."17 The employee was a recent graduate of dental school who contracted with his employer not to practice in the employer's town after his termination.18 The court opined that a total restraint on the practice of a profession would be void against public policy, but a partial restraint limited in time or place is not contrary to public policy but is enforceable. …

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