Recent Developments from Around the States

Idbeis involuntarily left the practice in January 2002, and Rumisek, Benton, and Fleming resigned from the group to start a surgery practice with him in Wichita. They immediately sought a restraining order in court, attempting to enjoin Wichita Surgical Specialists from enforcing their restrictive covenants against them and finding the covenants unenforceable as a matter of law. Basing its decision on Weber v. Tillman, 913 P.2d 84 (Kan. 1996), the trial court determined that the covenants were unenforceable. Citing Weber's four-part test to determine whether a noncompetition agreement is reasonable, the court examined whether the covenant protects an employer's legitimate business interest, whether the covenant imposes an undue burden on the employee, whether the covenant injures the public welfare, and whether the temporal and geographic limitations of the covenant are reasonable.

On appeal, the Kansas Supreme Court found the noncompete pacts enforceable. Neither party had disagreed with the trial court's finding that the temporal and geographic limitations of the covenants were reasonable. However, the court rejected the trial court's finding the noncompetes did not protect a “legitimate business interest” of the employer. Legitimate business interests, the court wrote, include “customer contacts … the special training of employees, trade secrets, confidential business information, loss of clients, good will, reputation, seeing that contracts with clients continue, and referral sources.” The court also examined New Jersey Supreme Court authority identifying three additional business interests, including patient referral bases, patient lists, and protecting investment in the training of a physician. The trial court had also held that the noncompetes without “buyout” provisions violated the “public interest” element of Weber because they did not afford the doctors the option of paying damages rather than being barred from practice in Wichita altogether. Again disagreeing with the trial court, the Kansas Supreme Court held that the lower court had misread Weber.

Noncompetition Agreement Binding on Surgeons

The Supreme Court of Kansas held on June 3 that restrictive covenants in the employment agreements of four surgeons are enforceable and bar them from practicing in and around Wichita. The court also found that protecting the public interest would not require giving the surgeons the option of paying damages in lieu of complying with the terms of their noncompetition agreements. Idbeis v. Wichita Surgical Specialists , 112 P.3d 81 Kan. June 3).

Wichita Surgical Specialists is organized into five “divisions,” one of which the four physicians were a part of. While other divisions in the medical practice did not require its doctors to enter into restrictive covenants, the one in which the doctors in question worked did. Their noncompetition agremeents included temporal and geographic restrictions, and a liquidated damages or “buyout” clause. Surgeons who introduced a new specialty to their division did not have to enter the restrictive covenant. Dr. Idbeis, a certified general and thoracic surgeon who had practiced in Wichita before joining the surgical group, signed an agreement that included a 2-year noncompetition restriction and a buyout clause. Dr. Rumisek and Dr. Benton also signed agreements restricting them from practicing within the county where the practice was located for 2 years following their departures. Dr. Fleming signed an agreement restricting him from practicing within 75 miles of the Wichita area if he left the surgical group. Unlike Dr. Idbeis' restrictive covenant, the remaining doctors' agreements contained no liquidated damages clause.

Idbeis involuntarily left the practice in January 2002, and Rumisek, Benton, and Fleming resigned from the group to start a surgery practice with him in Wichita. They immediately sought a restraining order in court, attempting to enjoin Wichita Surgical Specialists from enforcing their restrictive covenants against them and finding the covenants unenforceable as a matter of law. Basing its decision on Weber v. Tillman , 913 P.2d 84 (Kan. 1996), the trial court determined that the covenants were unenforceable. Citing Weber's four-part test to determine whether a noncompetition agreement is reasonable, the court examined whether the covenant protects an employer's legitimate business interest, whether the covenant imposes an undue burden on the employee, whether the covenant injures the public welfare, and whether the temporal and geographic limitations of the covenant are reasonable.

On appeal, the Kansas Supreme Court found the noncompete pacts enforceable. Neither party had disagreed with the trial court's finding that the temporal and geographic limitations of the covenants were reasonable. However, the court rejected the trial court's finding the noncompetes did not protect a “legitimate business interest” of the employer. Legitimate business interests, the court wrote, include “customer contacts … the special training of employees, trade secrets, confidential business information, loss of clients, good will, reputation, seeing that contracts with clients continue, and referral sources.” The court also examined New Jersey Supreme Court authority identifying three additional business interests, including patient referral bases, patient lists, and protecting investment in the training of a physician. The trial court had also held that the noncompetes without “buyout” provisions violated the “public interest” element of Weber because they did not afford the doctors the option of paying damages rather than being barred from practice in Wichita altogether. Again disagreeing with the trial court, the Kansas Supreme Court held that the lower court had misread Weber.