Central Indiana Podiatry v. Kenneth Krueger - The Indiana Supreme Court Speaks

Back on March 11, The Indiana Supreme Court handed down its opinion (PDF format) in Central Indiana Podiatry v. Kenneth Krueger. Justice Boehm started the opinion with a clear statement about the case:

We hold that noncompetition agreements between a physician and a medical practice group are not per Se void as against public policy and are enforceable to the extent they are reasonable. To be geographically reasonable, the agreement may restrict only that area in which the physician developed patient relationships using the practice group's resources.

Opinion at page 1.

My only other post on this case only noted the webcast for the arguments before the Indiana Supreme Court case and that did not mention any of the case's facts. The Indiana Supreme Court noted these facts:

For two years after leaving CIPs employ. Krueger would be prohibited from divulging the names of patients. contacting patients to provide podiatric services, and soliciting CIP employees. Krueger also would be prohibited from practicing podiatry for two years within a geographic area defined as fourteen listed central Indiana counties and "any other county where [CIP] maintained an office during the term of this Contract or in any county adjacent to any of the foregoing counties." CIP maintained an office in two unlisted counties, and another twenty-seven counties are contiguous to one or more of these sixteen. The restricted area thus consisted of forty-three counties, essentially the middle half of the state....

However, Krueger did not work in but about six counties. CIP sued Krueger for taking a position in Hamilton County which was very close to CIP's Nora office in Marion County. The trial court denied the preliminary injunction on grounds of being too geographically broad, but the Court of Appeals reversed and then the Indiana Supreme Court took transfer.

The case has several interesting points:

1. The Indiana Supreme Court held this case mooted because the time had run for the non-competition agreement but decided to proceed because of the need for clarifying non-competition agreements in the medical field.
   
2. Krueger argued (among other things) that his actions were justified by the Indiana Administrative Code - a new argument for me.
3. Krueger (relying on an American Medical Association position paper) also argued that non-competition agreements were void against public policy. (I wrote about non-compete agreements and doctors in Non-compete Agreements - The Medical Field, and there are links to articles that support Krueger's argument.)
   
4. Krueger took with him the list of his patients from the Nora office.
5. The Indiana Supreme Court struck down the provision against contiguous counties.
   

The Indiana Supreme Court shredded the third argument: for twenty some years Indiana case law allowed for physician non-compete agreements and the legislature has not acted to provide protection for physicians.

I find no mention of a trade secrets claim which seems to me a possible claim with the removal of the client list. However, pay close attention to Krueger's Indiana Administrative Code which was based on the 845 Ind. Admin. Code 1-6-1 (2004):

A podiatrist, upon his retirement, or upon discontinuation of the practice of podiatric medicine or surgery or upon leaving or moving from a community shall notify all of his active patients in writing. or by publication once a week for three (3) consecutive weeks in a newspaper of general circulation in the community, that he intends to discontinue his practice of podiatric medicine and surgery in the community, and shall encourage his patients to seek the services of another practitioner.

That administrative regulation complicates a trade secrets case - taking the list is probably not enough for a trade secrets suit without knowing more of what use is made of the list.

Frankly, striking the contiguous county provision is not a radical change in Indiana non-compete law. It does allow me to write on the problems of evidence. The following sentence from the opinion strikes me as showing the difference evidence makes in a case's success or failure:

We assume the dissent is correct that southern Hamilton Count) and northern Marion County, including the Nora area, form a common economic bond, but there is nothing to suggest that CIPs Nora office has a significant contingent of patients traveling from Arcadia. Atlanta, or other communities in northern Hamilton County. Accordingly. the contiguous county provision is unreasonable....

If the employer created a non-compete agreement including contiguous counties, then the employer had better have evidence that the business drew customers from those contiguous counties.