Recent Indiana Decision Regarding Non-Compete Clauses

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The Indiana Court of Appeals recently ruled that a liquidated damages provision in a non-competition agreement and concern for the public interest will not prevent a medical practice from obtaining a preliminary injunction against a former physician.  In Pinnacle Healthcare, LLC v. Sheets, a physician who had signed an employment agreement containing non-competition, non-solicitation, non-disparagement and liquidated damages provisions informed his practice employer of his intention to terminate his employment for cause based on the practice’s alleged failure to pay money owed to the physician.  The physician subsequently (i) filed a complaint against the practice for the amounts allegedly owed and sought a temporary restraining order and a preliminary injunction to prohibit the practice from enforcing the restrictive covenants, and (ii) opened a competing medical practice in the same building as the practice.  The practice then filed a counterclaim against the physician, including a preliminary injunction to enforce the restrictive covenants.

The Court of Appeals ruled that it was improper for the trial court to deny the practice’s motion for a preliminary injunction on the facts presented.  The Court made clear that the existence of a liquidated damages clause is not an admission of the adequacy of a legal remedy but, at most, is an alternative to equitable relief such as a preliminary injunction. 

The Court further stated that the public interest in community access to medical services and the opportunity for a patient to choose his or her own medical provider are insufficient, alone, to make a non-competition clause in a physician employment agreement unenforceable or prevent injunctive relief.  Of note, there was a shortage of medical care in the community in which the physician practiced, as both the physician and a nurse from a local hospital indicated there were no other physicians available to take care of the physician’s patients.
Parties entering into agreements with restrictive covenants should consider the following takeaways from the Court of Appeals decision:

·         A 25 mile radius for the non-competition restrictions was deemed enforceable.

·         Absent an exclusive remedy provision, a liquidated damages provision does not establish that monetary damages are adequate, thereby barring injunctive relief.

·         A lack of physicians in the area covered by a non-competition obligation is not a public policy concern sufficient to bar injunctive relief.

If you have any questions about this recent case or its implications for your contractual arrangements, please contact Brian Heaton at or (317) 238-6354, Michael Gaston-Bell at or (317) 238-6331, or any other member of the Krieg DeVault Healthcare Practice Group.