Ill. judges giving departing doctors new leverage

Illinois courts are issuing new ammunition to doctors seeking to fight noncompete contracts after they change jobs.

Two separate three-judge panels of the Illinois Appellate Court in Chicago have sided with departing doctors in lawsuits filed by medical practices seeking to enforce noncompete agreements, which are contracts that bar an employee from competing against former employers.

“These cases certainly will give doctors who want to leave more incentive to go out and compete,” said attorney Tony Valiulis, a partner in Chicago-based law firm Much Shelist P.C. who specializes in business litigation, including noncompete contracts.

Litigation over noncompete agreements can be found in all business sectors, but often arise between doctors and medical practice groups.

When it comes to doctors, noncompete cases can be “somewhat emotional,” said Robert Lang, a partner in the Chicago office of law firm Thompson Coburn LLP, who represented two doctors in one of the appellate court cases. “I think the word 'divorce' is appropriate.”

Doctors also have the financial resources for a court battle and try to make a strong claim that the patients are “theirs” and don't belong to the practice. Noncompete agreements not only limit the customers that a former employee can recruit but usually place geographic limits on where a former employee can work.

The cases reflect a shift in how Illinois courts are taking a harder look at such agreements in the wake of a 2011 Illinois Supreme Court decision that made them more difficult to enforce. In the Reliable Fire Equipment Co. case, the court held evidence that a customer had a “near-permanent” relationship with the employer or that the employee acquired the employer's confidential information were not enough to require enforcement of a noncompete agreement.

Before Reliable Fire, courts asked to enforce noncompete agreements against doctors often assumed the patient's relationship was with the practice, not the physician, Mr. Valiulis said.

Instead, the Supreme Court proposed a “totality of the circumstances” test to determine if it was reasonable to enforce the agreement. That in turn has strengthened doctors' legal ability to challenge noncompetes, according to experts.

On May 8, the appellate court overturned an injunction granted against Drs. Gary Ochwat and Craig Halihan, who had left Niles, Ill.-based Northwest Podiatry Center Ltd. to start their own practice. In an opinion written by Justice Thomas Hoffman, the court ruled that the trial court had overreached when it permanently barred the two podiatrists from treating any patients from Northwest Podiatry. The appellate court upheld an injunction preventing the doctors from interfering with a contract the practice had with a managed-care provider in the northwest suburbs.

Northwest Podiatry is appealing the decision to the state Supreme Court, said attorney Gary Hollander, a partner at Northbrook-based Strauss & Malk LLC, who represents the practice.

That decision came about a month after a different three-judge panel affirmed a trial court's refusal to enforce a noncompete agreement against Dr. Mick Meiselman, who left Kenilworth, Ill.-based Gastroenterology Consultants of the North Shore SC to join NorthShore University Health System, where he is chief of advanced therapeutic endoscopy. That opinion was written by Justice Michael Hyman.

James Dahl, a partner at Chicago-based law firm Dahl & Bonadies LLC, who represents the gastroenterology practice, said the trial and appellate courts “simply ignored” case law that supports his client's position.

The practice is also appealing the case to the Supreme Court. Avery Delott, a partner in Lincolnwood, Ill.-based law firm Kamensky Rubinstein Hochman & Delott LLP who is representing Dr. Meiselman, declined to comment.

"Judges giving departing doctors new leverage" originally appeared in Crain's Chicago Business.