[Source: Health Lawyers Weekly, August 31, 2007]
A physician did not anticipatorily repudiate a noncompete covenant in her employment contract with a medical practice when she expressed an ongoing desire to exercise the agreement’s buy-out option, the Tennessee Supreme Court ruled August 20.
Plaintiff Val Y. Vogt, M.D., a urogynecologist, entered into an employment agreement with UT Medical Group, Inc. (UTMG), a not-for-profit organization in which faculty members of the University of Tennessee Medical School practice medicine privately.
The agreement included a noncompete provision that restricted Vogt from practicing within a 150-mile radius of Shelby County, Tennessee for one year. The provision also provided a "buy-out" provision that would allow Vogt to practice in the restricted area.
Vogt eventually informed UTMG’s chief medical officer that she planned to resign her position on March 12, 2004. In a subsequent follow-up email, Vogt indicated that she planned “to engage in the practice of medicine locally” and wished to discuss the buy-out option.
When the parties failed to reach an agreement on the buy-out amount, UTMG sued Vogt claiming she had committed an anticipatory breach of the agreement and seeking declaratory and injunctive relief.
Several physicians who were going to practice with Vogt intervened in the action, alleging UTMG unlawfully restrained trade and unlawfully interfered with the medical treatment of their patients, among other things.
The intervenors eventually settled with UTMG, which prevented them from practicing with Vogt until March 12, 2005.
Vogt, who consistently had sought to exercise the buy-out option, then informed the court that she was not going to practice medicine in Shelby County and instead had found employment far outside the restricted area in Indianapolis, Indiana.
The trial court dismissed UTMG’s suit, finding it failed to present a continuing controversy. The appeals court reversed, holding the trial court should have allowed UTMG more time for discovery.
The Tennessee Supreme Court reversed, holding Vogt did not commit an anticipatory repudiation of the agreement and therefore no justiciable controversy was ever before the trial court.
UTMG based its anticipatory repudiation claim on Vogt’s email correspondence indicating she planned to practice medicine locally and evidence that she had leased office space.
The high court found neither of these pieces of evidence demonstrated an anticipatory contract breach.
In the email, as well as throughout subsequent dealings, Vogt indicated her desire to exercise the buy-out option, as specifically allowed under the contract, the high court noted.
According to the high court, the lease only showed that Vogt was considering practicing medicine in the restricted area and must also be considered in light of her ongoing intentions to pursue the buy-out option.
Because Vogt did not commit an anticipatory breach, UTMG failed to present a justiciable controversy.
UT Med. Group, Inc. v. Vogt, No. W2005-00256-SC-R11-CV (Tenn. Aug. 20, 2007).
