Antitrust Law Daily Wrap Up, ANTITRUST—Tex. App.: Hospital’s non-compete clause unlawfully limits competition, (Jan 14, 2016)

By Greg Hammond, J.D.

A non-compete provision contained in a company’s hospitalist services contract with a Texas hospital was deemed unenforceable by the Texas Appellate Court in Edinburg. In affirming the lower court’s order denying the company’s motion for summary judgment and granting the hospital’s motion for summary judgment, the state appellate court concluded that to enforce the non-compete clause would be an “unreasonable and unjust restraint of trade” (Wharton Physician Services, P.A. v. Signature Gulf Coast Hospital, L.P., January 14, 2016, Benavides, G.).

Prior to the end of the contract’s term, Signature Gulf Coast Hospital, L.P. terminated the hospitalist contract with Wharton Physician Services, P.A. and soon thereafter entered into another hospitalist services agreement with a different company. Wharton sought liquidated damages under the non-compete clause, which Gulf Coast refused to pay. The lower court granted Gulf Coast’s motion for summary judgment on Wharton’s breach of contract claims and denied Wharton’s cross-motion for summary judgment.

The appellate court affirmed the lower court’s decision, finding that although there was a valid contract between the parties, the non-compete clause was unenforceable as a matter of law. In particular, the court construed the non-compete clause in the contract as a way to limit competition to Wharton from another company providing similar services. To enforce the non-compete clause would be an “unreasonable and unjust restraint of trade” because there were no reasonable restrictions as to geographical area or the scope of activity to be restrained. Further, the restrictions imposed a greater restraint than was necessary to protect the goodwill or other business interest of Wharton, the court concluded.

The case is No. 13-14-00437-CV.

Attorneys: Paul Daniel Gibson (Gibson Law Group, PLLC) for Wharton Physician Services, PA. Pamela A. Ferguson (Greenberg Traurig, LLP) for Signature Gulf Coast Hospital, LP.

Companies: Wharton Physician Services, PA; Signature Gulf Coast Hospital, LP

Cases: Antitrust TexasNews