Trade Secrets and Noncompete Blog : Non-Compete Lawyer & Attorney : Epstein Becker Green Law Firm : Trade Secrets & Confidentiality Agreements

For noncompete and trade secret lawyers in the healthcare industry, the recent Michigan Court of Appeals case of Isidore Steiner, DPM v. Bonanni highlights the importance of understanding applicable state privacy laws as well as the federal Health Insurance Portability and Accountability Act (HIPAA).

In Steiner, the plaintiff claimed that the defendant (a former employee) stole its patients after separating employment. The plaintiff moved to compel the former employee to provide his patient list in discovery, but the trial court denied the motion. Even though the plaintiff claimed it needed the patient list to prove elements of its case and the amount of damages, the Court of Appeals subsequently affirmed. The Court of Appeals reasoned that, while HIPAA asserts supremacy over state law, it allows for the application of state law regarding physician-patient privilege if the state law is more protective of patients’ privacy rights. The Court then observed that, unlike HIPAA, Michigan’s law does not provide for disclosure in judicial proceedings, does not authorize disclosure under a qualified protective order, and protects the mere existence of a physician-patient relationship from disclosure. Thus, the Court held that Michigan’s privacy law was more restrictive than HIPAA, that it applied, and that it protected the names addresses, and telephone numbers of the defendant’s patients from disclosure.

Be sure to understand applicable state privacy laws in addition to HIPAA when analyzing your ability to obtain information in discovery to prove liability and damages.

Please join the attorneys of EpsteinBeckerGreen on June 7, 2011, at the National Press Club, as we present eight panels covering labor and employment topics that have increasingly impacted employers in the health care industry. 

Our first panel, entitled Significant Labor and Employment Issues that Affect Health Entities, will include representatives from the health care industry, such as a hospitals, skilled nursing facilities, and emergency medical services. These executive panelists will discuss the critical labor and employment issues they are currently experiencing and the greatest challenges they expect to manage. 

EpsteinBeckerGreen attorneys representing the Labor and Employment, Health Care and Life Sciences, and Corporate Services practices will review the issues of concern and, over the course of the day, offer practical advice and solutions.

For more details and registration information, please visit the EpsteinBeckerGreen HEAL Summit page.

We hope to meet you and other readers of this blog.

In Optical Partners, Inc. v. Dang, the Supreme Court of Arkansas recently refused to enforce a non-compete in a lease agreement -- which clearly had been violated -- because it did not arise out of a contract of employment or contract for the transfer of goodwill or property.

For several years, Kevin Dang, d/b/a Dang Eye Care & Associates, P.A., and Optical Partners, Inc. ran complementary businesses at virtually the same location. Dang performed eye exams and wrote prescriptions for glasses and contact lenses using office space leased in a location right next to his landlord Optical Partners, Inc., which (doing business as Pearle Vision) provided optician services, including filling eyeglass prescriptions and dispensing and fitting eyeglasses.

The lease agreement provided that for one year after its termination, Dang would not engage in the practice of optometry or the dispensing of optical products within a radius of three miles of the premises. On February 17, 2009, Dang stopped seeing patients at the Pearle Vision location and began practicing optometry at another location less than three miles away -- an unequivocal breach of the non-compete provision of the lease agreement.

With regard to Optical Partners, Inc.’s effort to enforce the non-compete provision, the Arkansas Supreme Court affirmed the trial court’s holdings that despite the indisputable violation of the non-compete language, that covenant was not enforceable because Optical Partners, Inc. did not have a legitimate business interest to protect, particularly because the underlying contract did not involve an employment relationship or a transfer of goodwill or property. The covenant was held to be unreasonable because the litigants were not in direct competition with each other. Their businesses, while complementary, provided different services and served different functions. Dang had no obligation to refer patients to Optical Partners to get their eyeglass prescriptions filled, and in fact it would have been illegal to do so.

Thus, while Optical Partners, Inc. was on to a good thing in having its tenant provide services which, as a practical matter, resulted in more customers going to Optical Partners, Inc., it could not prevent that tenant from moving his practice to a different location within the restricted area because that tenant was not actually competing with Optical Partners, Inc.

In summary, the non-compete provision in the lease agreement was a nice try by Optical Partners, Inc. to safeguard its business, but in the end, there was no legally recognized legitimate business interest sufficient to support that covenant, rendering it effectively worthless.