Posted by: Robert Markette
January 17, 2007

Well, just a few weeks into 2007 and the Indiana Court of Appeals has already issued a new opinion involving non-competition agreements in the world of health care. This new case, Central Indiana Podiatry v. Kreuger, involves a non-competition agreement between a podiatrist and the practice group for which he worked.

In this case, Kreuger went to work for CIP, after his own practice ran into some financial difficulties. As part of being hired, he signed a non-competition agreement. After working at COP for some time, another employee alleged he had kissed her. During the investigation he confessed not only to the kiss, but to touching another employee. Dr. Kreuger realized he was probably going to be terminated, and he made preparations to move onto a new job. As part of his preparation, he obtained a list of all the clients he served while at CIP.

Kreuger used that list to notify all of his patients of his new job, when he was hired by a competitor just ten minutes away from his old office. His former employer filed suit seeking an injunction to stop Kreuger from serving CIPs patients. In responding to the complaint, Kreuger argued that he had a duty to inform his patients of his new practice. See, 845 IAC 1-6-1(c), he also argued that the patients right to choose a provider trumped the employers right to enforce a non-compete agreement.

Surprisingly, the trial court agreed with Kreuger and denied the former employers request for an injunction. The trial court found that the employer had an adequate remedy at law, that Dr. Kreuger had a duty to inform his patients, and that the former employer was not seeking to protect the good will of the corporation but to protect its patient population and insure that there was no loss of income. Central Indiana Podiatry v. Kreuger, 2007 WL 46066 (IN App 2007).

As to that last point, the obvious response is that of course protecting the goodwill of the company involves protecting your patient population which insures no loss of income. While economic harm is generally not a sufficient basis for an injunction, the harm to good will is. When a health care provider puts an employee in the position of Kreuger, or a home health aide, or a home health nurse, the company is allowing the professional to care for the companys patients. When the professional tries to take the patients with him or her, he is trafficking in the companys goodwill. This case was even more egregious because the doctor took a patient list with him.

The Court of Appeals reversed the trial courts ruling. The court of appeals found a protectable interest, because of the use of customer lists, and because the non-compete stated he would be entrusted with valuable, confidential, and proprietary business information. The contract also stated that use of this information would be harmful to the employer. This demonstrates the value of recitals in a non-compete, because they can establish the existence of a protectable interest. I would also mention that there is a long line of cases that recognize corporate goodwill and how it can be misused by employees who are primarily responsible for generating goodwill with clients. It is the companys goodwill they are generating, not their own.

Other points of interest in the case include the court stating that a two year limitation period was reasonable as a matter of law. As for the argument that he had a duty to notify his patients, the Court noted that the contract between Kreuger and his employer expressly stated that the patients were the employers. Because the patients were the employers, Kreuger did not have a duty to notify them of his move. Home health professionals do not have a similar requirement, but having the employees agree that the patients are the agencys patients reinforces the existence of a protectable interest.

Finally, the Court addressed Kreugers public policy argument. Kreuger argued that a patients right to choose a provider as guaranteed by Indiana law should overcome the providers right to enforce the non-compete. The court noted that the Indiana Supreme Court expressly rejected this argument over twenty-three years ago and that Kreuger offered no evidence or case law to support his claim that the recent trend was to look to the rights of the patient over the business interests of the provider. In other words, while patients may have a right to choose a provider, the provider and professionals may agree to restrictions such as a non-compete. In other words, while a patient is still free to pick a different home health agency, they may not choose the same home health aide if doing so violates a non-compete agreement.

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