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Pennsylvania Superior Court Rules in Favor of MBK Client on Covenant Not To Compete

 

In a precedential opinion, the Pennsylvania Superior Court ruled that a primary care physician was barred by a restrictive covenant from competing with his former medical practice by working as a hospitalist at a regional hospital. Geisinger Clinic v. Mark M. Radziewicz, D.O., NO: 505 MDA 2014 (Pa. Super. Apr. 24, 2015). The Superior Court held that the trial court had no reasonable grounds to deny Geisinger Clinic’s request for preliminary injunction in these circumstances and remanded the case for entry of an injunction.

This case is significant for health care providers and other employers relying on reasonable restrictive covenants to limit client base disruption caused by an employee’s departure. Contact Frank Brier at 570-342-6100 or email FBrier@MBKLaw.com with questions.

In December 2013, Geisinger Clinic sought an injunction against its former employee, Mark Radziewicz, D.O., to enforce the restrictive covenant contained in Dr. Radziewicz’s employment agreement. In accepting his employment Dr. Radziewicz agreed that in the event his employment with Geisinger Clinic was terminated he would restrict his practice of medicine to an area outside of a fifteen mile radius from his principal practice site for a period of two years. His agreement also contained a liquidated damages clause whereby Geisinger Clinic agreed to waive the restrictive covenant obligations if Dr. Radziewicz paid a designated sum to Geisinger Clinic.

Dr. Radziewicz’s employment with Geisinger Clinic ended on June 22, 2012. On October 7, 2013, Dr. Radziewicz began violating his restrictive covenant by exercising clinical privileges and practicing medicine as a hospitalist at Wilkes-Barre General Hospital. Finding the restrictive covenant valid and enforceable, the Superior Court wrote that “[i]f a party to such an agreement violates its tenets, then compliance with the accord must be compelled through injunctive relief. Otherwise, the agreement is not worth the paper upon which it is written.”

The Superior Court also held that the liquidated damages provision in the agreement did not act as a bar to injunctive relief. The Superior Court cited the Restatement (Second) of Contracts § 356(1) which provides that injunctive relief remains a viable option despite a liquidated damages clause. The Superior Court was persuaded that “the same uncertainty as to the loss caused that argues for the enforceability of the provision may also argue for the inadequacy of the remedy that it provides.”  The Superior Court observed that, the agreement provided a mechanism for Dr. Radziewicz to avoid the restrictive covenant limitations by tendering a specified amount, which he failed to do. Since he failed to proffer that amount, the Superior Court determined that Geisinger Clinic’s ability to enforce the restrictive covenant is reinforced rather than eroded by the liquidated damages clause.

In finding that the restrictive covenant was reasonably related to a legitimate business interest of Geisinger Clinic, the Superior Court rejected Dr. Radziewicz’s argument that the restrictive covenant was unenforceable since he changed medical subspecialties from his previous Geisinger Clinic out-patient primary care practice to an in-patient hospitalist practice. According to the Superior Court, the “clear and unequivocal” language of the agreement made the change in his practice irrelevant.

Significantly, the two-year restrictive covenant in Dr. Radziewicz’s agreement expired while the case was pending. In its Complaint, Geisinger Clinic sought an injunction for a period of six months and three weeks, which reflected the period of time remaining on Dr. Radziewicz’s restrictive covenant when Geisinger Clinic filed its Petition for Injunctive Relief. Geisinger Clinic argued that Dr. Radziewicz should not be permitted to use the court process as a shield to avoid his clear obligation. The Superior Court agreed and fashioned an appropriate remedy for Dr. Radziewicz’s breach – an injunction against competition for six months and three weeks. To do otherwise, the Superior Court wrote, would encourage others to prematurely breach valid restrictive covenants in the hopes of running out the term during the pendency of legal proceedings.

Myers, Brier and Kelly LLP.

Frank represents both companies and individuals in investigations, in trials and on appeals. Frank tried more than twenty complex medical malpractice cases to verdict in counties throughout Northeastern and Central Pennsylvania.

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