An interesting decision from the Western Section of the Tennessee Court of Appeals last week in Columbus Medical Service, LLC v. Thomas and Liberty Healthcare Corporation. In summary, Columbus, a staffing agency, provided occupational, physical and speech therapists to a residential State facility for people with very severe physical and mental disabilities. The therapists all signed covenants not compete. After Liberty won the contract with the State, Columbus sued to enforce the non-competes.
The decision recognizes that Columbus, as a staffing agency, had a protectable business interest in preventing "opportunistic disintermediation." A fancy word that just means that the staffing agency had an in interest in either the improper elimination of its status as the middle man or the appropriation of the staffing agency's services without compensation. This is, however, the first time a Tennessee court has recognized such an interest.
More interestingly, the Court ultimately concluded the non-competes were unenforceable due to the public interest. Citing the Tennessee Supreme Court's 2005 decision in Murfreesboro Medical Clinic v. Udom (download), the court recognized that "restrictive covenants in the medical profession raise concerns regarding the public good." In Udom, of course, the Supreme Court held physician covenants not to compete unenforceable as against public policy. The Tennessee General Assembly, however, reversed Udom in 2007 enacting a statute that made physician non-competes enforceable under certain circumstances. Nonetheless, the Court relied, in part, on the public's interest in continuity of health care in finding the covenants not to compete unenforceable.
This raises an interesting question. If there is a public interest in continuity of care by occupational, speech and physical therapists for the severely disabled, isn't there a public interest in continuity of care by a physician for the general public? I would think so, but the legislature says not.
