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Prohibition on stock voided noncompete

A Virginia Beach Circuit judge has struck a noncompete agreement after a medical company tried to enforce the covenant against a family nurse practitioner who sought to start another medical business.

The key phrase that caused the agreement to fail: The document prohibited her from competing as a “shareholder.” That covenant would bar a former worker from owning stock in a publicly traded company and was “inherently overbroad,” the judge said.

The issue arose after Ameanthea Blanco last August left the Patient First in Virginia Beach where she had worked for four years as a family nurse practitioner. Before she left she solicited two doctors who worked there to join her in forming The Practice, Set Fee Clinic.

The business opened a little over a month after Blanco left Patient First, and the company promptly filed suit to enforce a covenant not to compete and a covenant not to solicit other employees. Her attorney, Kevin E. Martingayle of Virginia Beach, said, “She had an idea of a better way to do it,” but he acknowledged “some degree of business and mission overlap.”

The noncompete provided that Blanco could not work at a competing business within seven miles of where she worked for two years after leaving Patient First and could not perform “urgent care medical services” within 15 miles of a Patient First.

If the language had been that limited, Lowe’s opinion suggests, the covenant might have been enforced.

But the precise language was that Blanco would not perform the services of the type she performed at Patient First “directly, or indirectly, for [herself] or as an agent, officer director, member, partner, shareholder, independent contractor owner or employee … .”

“This would prohibit the defendant from owning stock in a public traded company if some part of that company provided the same medical services as the defendant, and had a location within seven miles of where the defendant ‘regularly provided medical services for Patient First,” Lowe wrote. “Likewise … , there are certainly companies that would fit these parameters that would not be in competition with Patient First.”

The covenant failed to identify what constituted “medical services” or define “indirect” performance of the services so that Blanco was not on notice as to what services she could provide without violating the covenant, which appeared to apply to businesses that are not in competition with Patient First as well, Lowe said.

The nonsolicitation agreement was similarly overbroad, Lowe found. The language prohibits the solicitation of an employee “of Patient First for any reason whatsoever, or to hire any such individual” employed by Patient First in the 12 months before the person covered by the agreement left.

The agreement “is unlimited as to location or function,” Lowe wrote. “Patient First lacks a legitimate interest for preventing a prior employee from soliciting or hiring employees internationally and for any occupation whatsoever.”

Martingayle said lawyers often yield to the temptation to use in covenants not to compete the broad language typically employed to address any contingency that might arise under a contract.

That temptation is at odds with cases that hold noncompetes are invalid altogether if any part of them is overbroad, even if some parts of them might be enforced if it were nor for provisions that overreach, Martingayle said. He noted that those challenging the enforcement of noncompetes are on a decade-long winning streak in the Supreme Court of Virginia.

D. Eugene Webb, the Richmond lawyer who represented Patient First, said he and his client are considering their options and would have no immediate comment.

VLW 011-8-014

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