### IN THE S UP REME COURT OF TENNESS EE AT NAS HVILLE Fe bruary2, 200 5 S es sio n
MU RF REE SBOR O ME DIC AL CLIN IC, P. A. v. D AV ID U DOM

Appeal by Per m ission from the Court of Appeals, Midd le Section

Chancery Court

for Rutherford Coun ty No. 02-5739CV Robert E. Corlew, III, Chan cellor

No. M2003- 00313-SC-S09-CV - F iled Jun e 29, 2005

J ANI CE M. H OL DER , J

. , co n cu rr i n g an d d i s s en t i n g.

Al tho ug h I

a g re e that th e re stric tiv e c ov e na nt in this c a se is une nf or c e able , I write se pa

rate ly to voice my

disag ree ment with the majority ’s holding that restric tive covenants involvi ng phy sicians

are unenfor cea

ble and void unless spec if i ca l l ypermitted by

Tenne ssee Code A nnotated sec tion 63 -6 -2 04 (d ) and(e ) ( Sup p. 19 98 ). I do no t be lie ve that th e le g isl a tur e ’s de c isi on to v a lid a te phy sicians’ re strictive cove nants in the two circ umstances de scribed in section 63-6-204(d) and (e) pr oh ibi ts a ll o the r r e stric tiv e c ov e na nts be tw e e n p hy sic ia ns

.
I n 1994, the leg islature ame nded sec tion 63-6-204 to include subsection (d). Subsec tion (d) validates phy sicians’ re strictive cove nants when the em p l o y er i s a hospital, or an a ffiliate of a hospital, that has made a bona fi d e purc hase of

the phy sician’s pra ctice. SeeTenn. Code Ann. § 63-6-204( d) (Supp. 1994). I n 1998, the leg islature further a mended se ction 63-6-204 to include subsection (e ). Subse c ti o n( e ) v ali d ate s r e s tr ictive cove nants betwe en phy sicians and f aculty prac tice plans associated with a medica l school. See Tenn. Code Ann. § 6 3 -6 -204(e ) (Supp. 1998). The leg islative history

of subsec tion 63-6-204(e ) indicate s th at the leg islature did not intend a substantive chang e in the law but mer ely a cla rification of pre- exis ting law . See Med. Educ . Assistance Corp. v. Mehta, 19 S.W.3d 803, 813 n.2 (Tenn. Ct. App. 1999) (quoting testimonyfrom the Senate Ge nera l Wel fa reCom mitte e on May

21 , 1 99 7) . T hu s, thele g isl a tur e re c og nize d th a t pr e -e xistin g la w s til l permitted some forms of covenants-not-to-compete involving phy sicians even afte r the ena ctment of sec tion 63-6-204(d).

I n enac ting subsec tions ( d ) an d (e ), the leg islature chose to reg ulate only some of the restric tive covenants involvi ng phy sicians. Had the leg islature in t en d ed t o prec lude all other ph y sic ia ns ’ r e stric tiv e c ov e na nts , it c ou ld h a ve simply

pr e c lud e d a ll r e stric tiv e c ov e na nts

.-2-

The majority

discusses Spieg el v. Thomas, Mann, & Smit h, P.C., 811 S .W.2d 528, 531 (Tenn. 1991) , in which this Court held that restrictive c ovenants be t we en attorney s are void and unenfor cea

ble. The ma

jority conclude s that “no prac tical differ ence ” exis ts “ betwee n the pra ctice of la w andthepr a c tic e of me dic ine .” Th is Cou rt , how e ve r, is re sp on sib le fo r r e g ulatin g a tto rn e y s’

c o n d u c t an d p r e s c r ib in g s tan d ar d s o f e thical conduc t. Se e T e n n

. Su p

. Ct

. R. 8 , 9 ; s e e a ls o L a zy Seven Coal Sales, Inc. v. Stone & Hinds, P.C., 813 S.W.2d 400, 403-04 (Tenn. 1991) ( discussing the purpose of the Code of Profe ssional Responsibil ity ). In Spiege l, we interpr eted the T ennesse e Supreme Court Rules a s prohibiting attorney s’ re strictive cove nants. Spieg el, 811 S.W.2d at 531.

I n contra st, the Tenne ssee Boa rd of Me dical Examiners, not this C ourt, establishes ethica l stand ard s f

or ph y sic ia ns

. Se e Te nn . Code An n. § 63- 6- 21 4( b) (1 ) (Su pp . 1 99 9) ; Sw a ff or d v . H arris, 96 7 S.W. 2d 31 9, 32 1 (T e nn

. 19 98 ). I n s e tti ng the se e thi c a l st a nd ard s, theB oa rd a do pte d th e AM A Cod e of Me dic a l E thi c s, wh ic h v ie ws no n- c omp e te a g re e me nts inv olv ing ph y sici a ns un fa vo ra bly but does n o t p rohi bit them. AMA Code of Medica l Ethics § E-9.02 (1998). T he twelve -member B oa rd , o f w hic h n ineme mbe rs aredu ly li cense d p hy sic ia ns , is in a muc h b e tte r p os iti on than th is C o u rtt o d e t e r m i n e w h e t h e r r e s tr i c t i v e c o v e n a n t s i n v o l v i n g p h ys i c i a n s s h o u l d b e p r o h i b i t e d e n t i r e l y. See Te nn. Code Ann. § 63-6-101 (1997) (providing for the cr eation and c ompositi on of the B oard) ;
see a lso St ate v. Robinson, 139 S.W .3d 661, 666-67 (Te nn. Crim. App. 20 0 4 ) (rever sing the trial court’s or der pr ohibitin g the def endant, a pharma cist, from pra cticing pharma cy as a c ondition of prob at i on beca

use “the power s of the Te nnessee Boa rd of Pharmacy

are adequate to reg ulate the defe ndant’s conduc t within the profession”)

. Phy sicians’ re strictive cove n ants that are not otherwise r eg ulated by Tenne ssee Code Annotated se ction 63-6-204 ( Supp. 1998) are enfor cea ble if reas o n ab l e and not injurious t o the public. I ag ree , howeve r, with those jurisdictions that hold these restric tive covenan t s t o a hig her level of sc ruti n ythan cove nants not to compete in commer cial conte x ts. See e.g ., Valley Med. Specialists v. Far

ber, 982 P.2d 1277, 1282-83 ( Ariz. 1999); Irede ll Dige stive Disease Cl i nic v. Petrozz a, 373 S.E.2d 449, 455 (N.C. Ct. App. 1988); Ohio Urolog y , I nc. v. Poll, 594 N.E.2d 1027, 1032 (Ohio Ct. App. 1991). Fa ctors that should be consider ed in determining whe ther a particula r
re stric tiv e c ov e na nt inv olv ing a ph y sic ia n mee ts this he ig hte ne d scr uti ny inc lud e : 1) the ne c e ssi ty of protec ting a

leg itimate business interest; 2) the re asonable ness of the time a nd t er ri torial lim itatio ns ; 3) thee c onom ic hards hip s impo se d o n th e e mpl oy e e , a nd4) a ny ha rm to the pu bli c int e re st r e su lti ng fr om thec ov e na nt.

Th e bu sin e ss i nte re st that Mu rf re e sb or o M e dic a l Cli nic (“ MMC ”) seek s to pr ote c t in enfor cing the cove nant is its continued relationship with its patients. A perso n , h o we ver, ha s the rig ht to choose a phy sician and c ontinue a relationship with that phy sician. F urthermor e, the r ecor d

c on ta ins no e vid e nc e that Dr

. Ud om ob ta ine d bu sin e ss se c re ts or re mov e d c on fi de nti al b us ines s information or patient lists upon leaving MMC. The r ecor d fails to demonstrate that Dr. Udom, who

wa s a lice ns e d p hy sic ia n w he n h ir e d b y MMC , r e c e ive d a dv a nc e d tr a ini ng or a c qu ir e d s pe c ia l skill s while employ ed at MMC other than pr actica l, on-the-jo b ex p er i ence. Althoug h MMC ex pended sums f or salary , equipment, office space , and administrative support, these expenditures were
nece ssary for MMC to conduct business indepe ndent of Dr . Udom’s pre sence in the prac tice.-3-

The twe nty -five- mile limi tation is overly broad a s the evide n c ef

ail s to d e mo n s tr ate the e x tent to which MMC and Dr. Udom would compete for patients within the entire twenty -five- mile are a. This are a also a

ppear s to ext end bey ond one county and into communities outside of Murfre esboro. Th e le g isl a tur e , inc ho os ing to r e g ulate so me fo rm s o f r e stric tiv e c ov e na nts inv ol vi ng ph y sic ia ns , has re stricted the a

pplicable a

rea to ten miles or t he county in which the employ er’ s site is located, whicheve r is g reater. See Tenn. Code Ann. § 63- 6-204(d) , (e) (Supp. 1998). While this restric tion is not applicable to Dr. Udom’s covenant, it is i nstructive in determining the r easona bleness of the restric tion at issue.

F urthe rm or e , e nf

or c e me nt o f the c ov e na nt w ou ld i nf lic t a n u nd ue har ds hip on Dr . U do m. The c ovenant r estricts Dr. U dom from pra cticing in any field of medic ine within the restricted ar ea reg ardle ss of

whether he wa s competing with MMC i n the field of internal medicine. T his restriction is particularly

harsh be cause MMC, not Dr. Udom, decided to e nd the employ ment relationship, and the evidenc e does not indicate that MMC terminated the r elationship for c ause. Finally , the evidenc e does not sug g est t h at en fo rcement of the c ovenant would r esult in a shortag e of phy sicians or internal medic ine spec ialists in t he ar ea. T he re maining f actor s, howeve r, weig h ag ainst enfor ceme nt of the covenant. Thus, while I ag reethat this particular r estrictive

covenant is unenfor cea

ble, I respe ctfully dissent f rom the majority ’s holding that all re s t ri ct ive

c ov e na nts inv olv ing ph y sic ia ns arevo id an d une nf or c e able abs e nt a s pe c if

ic statut ory

pr ov isi on to t h e c o n tr ar y.

______________________________ JANI CE M . H OLDE R, JUS TI CE