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Illinois Supreme Court

Blesses MD Restrictive Covenants


Not Void against Public Policy


        In Jyoti Mohanty M.D. et al v. St. John Heart Clinic, S.C., et al, No. 101251 (Ill. December 21, 2006) the court ruled that physician restrictive covenants were not void against public policy. 

        Doctors Mohanty and Ramadurai, who are cardiologists, quit their jobs at St. John Heart and just prior to resignation had asked a court to attack the entire concept of non-competition contracts with doctors.  They asked the court to render a declaratory judgment that their agreements with the hospital were unenforceable because public policy in Illinois no longer recognized them.  In other words, they were void.  The doctors “hung their hats” on a supreme court decision from eight years ago that found similar contracts for attorneys to be void. 

        These non-compete agreements were dissimilar.  Mohanty’s agreement restricted him from the practice of medicine for three years within a two mile radius from any of the four Chicago hospitals where the clinics were located: St. Mary of Nazareth, Norwegian American, St. Elizabeth, and Sacred Heart.   Ramadurai’s agreement prohibited him from competing with St. John Heart within a five-mile radius of each hospital for five years.

        An appeals court upheld a restraining order against the doctors, but the appeals court also held that the preliminary injunction against the doctors – a more long-term restraint – was invalid because it was overbroad.  The problem, the appellate judges ruled, was that these doctors were cardiologists, and the restrictive covenant referred to the “practice of medicine.”

        The supreme court rejected the analogy with attorney contracts, because the codified professional ethics for the practice of law specifically declare that such contracts are void.

        The Illinois Supreme Court also rejected the overbreadth argument.  First, St. John had invested ten years in the formation of a community based cardiology practice. Its “practice of medicine” was predominantly cardiology.  And because the time and geographical restrictions were reasonable based on earlier court cases, the doctors’ primary specialty, cardiology, was “inextricably intertwined with the practice of medicine.”

        Sensitive to the outmoded status of such covenants in the forty years since the court has considered them, the court noted that any change in the law had to come from the General Assembly.

        Justice Freeman concurred in the result but found that the majority had given “short shrift” to patient care.  This is not a mere commercial matter of a merchant-consumer relationship.  Public policy includes the regulation of health care and physician care in particular, and the formation of doctor-patient bonds, and these considerations should be given substantial weight in deciding whether to grant injunctive relief. 

        He went on to say that “a strong case exists for abolishing all physician restrictive covenants.”  Justice Freeman relied in no small part on the consequential interruption of care between the doctor and the patient.  But this change in the rules was the job of the legislature, rather than the courts.

        Will the Illinois legislature react to Mohanty?  No potential or pending bill seems to be taken seriously.