Score one for those doctors looking to leave their old medical practices and compete - at least according to a unanimous panel of New York's Appellate Division, First Department in its February 7, 2019 decision in Harris v. Patients Medical P.C. Since the facts of this case are not at all uncommon - nor is the way the trial and appellate courts approached it - it is certainly worthwhile to cull through it in order to gain a greater insight and understanding for predicting how a New York court might view similar cases.
What Happened at the Trial Court in Harris v. Patients Medical P.C.
Admittedly, since there wasn't much factual detail contained in the appellate court's decision, I went back to read the trial court's decision (the decision appealed from) to try to glean a bit more of what was going on in this case.
In this case, Dr. Harris's former employer, Patients Medical P.C., brought an application seeking a preliminary injunction barring her from doing two things, which Patients Medical's attorney summed up as follows:
"There are a number of non-compete type clauses. I would frame the two main ones as she agreed not to open an office below 62nd Street in Manhattan, and she agreed not to take away patients from Patients Medical. Both of those things for one year after termination of her employment ...
"I think it's a perfectly enforceable agreement. I think we need a preliminary injunction, because if we wait all the way through trial, of course, it will have expired well before we are done. And I think it's a relatively routine thing for a court to enforce. We're asking the Court to issue an order that she should stop seeing patients and that she should stop practicing below 62nd Street, as she agreed to do, Your Honor."
As some trial courts are wont to do, this particular judge chose to render his decision on the record, stating, in pertinent part, as follows:
"I am going to deny the application for a stay, because you have not met the high standards associated with establishing the likelihood of success on the merits ... [The contract] has exceptions for patients brought to the practice by Dr. Harris ... And my reading of the contract ... is that if she brought something brand-new to the enterprise she can take it with her when she leaves ... So you've got issues with likelihood of success on the merits ... "
What the Appellate Court Did in Harris
Interestingly, what may come as something of a surprise to the uninitiated, but practitioners who are in the trenches would certainly confirm is also not that uncommon, is that the Appellate Division went in a different direction when rendering its decision, stating:
"Patients Medical has not established that Harris's OB/GYN and ancillary services are unique or extraordinary such that they gave her an unfair advantage over its practice. Patients Medical has not demonstrated an unfair competitive advantage as it is undisputed that Harris brought her own OB/GYN practice to Patients Medical and that Patients Medical did not offer OB/GYN care after Harris left the practice. Accordingly, Patients Medical has not shown that the restrictive covenants were necessary to protect its legitimate interests.
"We find that irreparable harm is not established as monetary damages is an adequate remedy (Metropolitan Med. Group, v Eaton, 154 AD2d 252 [1st Dept 1989]; see also Sterling Fifth Assoc. v Carpentille Corp, 5 AD3d 328 [1st Dept 2004]). Moreover, the equities tip in Harris' favor. Granting a preliminary injunction would disrupt the physician-patient relationship she has with her current patients."
The Appellate Division took a fascinating tack, focusing on the uniqueness - or in this case, the lack of it - of what Dr. Harris did as an OB/GYN to deny injunctive relief to Patients Medical, even though that argument was not raised at oral argument. In addition, the appellate court suggested that the underlying rationale for denying the injunctive relief was because absent a truly compelling reason, they did not, as a policy matter, want to interfere with a patient's choice of their preferred doctor.
Therefore, it would certainly seem that these arguments should be front and center for any other doctors looking to challenge their restrictive covenants - at least in front of the Appellate Division, First Department.