Commonwealth Health’s physician group can’t enforce its former surgeon’s non-compete clause, judge rules

Scartelli Olszewski P.C.

As it appeared in The Times-Tribune

As it appeared in Yahoo! News

Additional news coverage in Becker’s Hospital Review

Jeff Horvath, The Times-Tribune, Scranton, Pa.

Aug. 21—Commonwealth Health’s physician group can’t prevent its former vascular surgeon from working locally for Geisinger, Lackawanna County Judge Michael Barrasse ruled.

Board-certified vascular surgeon Dr. John Kutz began practicing at Geisinger Community Medical Center in Scranton in mid-May, several months after Commonwealth Physician Network (CPN) notified him in late January that his employment contract would not be renewed.

CPN then moved to enforce a noncompete clause prohibiting Kutz from practicing medicine or surgery within 20 miles for two years. It argued in court that Kutz breached the restrictive covenant in his CPN employment agreement.

Barrasse ruled against CPN in an order dated Thursday, denying its request for an injunction and declaratory relief.

Enforcing the noncompete clause would be against the public interest, as access to health care would be compromised given a shortage of board-certified vascular surgeons in the Scranton market, Barrasse ruled.

CPN also lacks a protectable business interest to enforce the noncompete covenant, he said.

The court found no evidence Kutz used confidential information, solicited CPN patients or received any specialized or extensive training from CPN.

“CPN failed to indicate or introduce evidence of whether the practice would be damaged or if its income would decrease,” Barrasse wrote. “Rather, CPN clearly demonstrated that its business interests are best promoted without Dr. Kutz in its service.”

According to the judge’s order, CPN Chief Operating Officer Patricia Kane testified that Kutz’s contract was “lopsided” — a high salary for low production. CPN “decided not to proceed with employment after multiple attempts to renegotiate,” she testified.

Citing other testimony, Barrasse’s ruling notes CPN vascular surgery patients were being absorbed by ancillary services and CPN was not looking for a substitute to replace Kutz in the Scranton market.

“In choosing to terminate Dr. Kutz without cause, hire a replacement located in Wilkes-Barre, and not relocate one of their Wilkes-Barre vascular surgeons to the Scranton catchment area, CPN reduced, the already below average, quantity of vascular surgeons in the Scranton market and effectively abandoned the Scranton catchment area,” Barrasse’s ruling reads.

Peter Paul Olszewski Jr., the lead attorney representing Kutz, celebrated the ruling as precedent setting for the state.

“The judge ruled that a health care provider cannot enforce a restrictive covenant exclusively for financial gain,” he said. “That’s precedent setting and that is a tremendous help for all patients … because it ensures continuity of care.”

Forecasting a possible appeal, Commonwealth Health addressed the ruling in a statement Monday.

“We believe the facts in this case support the enforcement of the non-compete,” Commonwealth said. “We strongly disagree with the ruling and are evaluating our options for an appeal.”

Contact the writer: jhorvath@timesshamrock.com; 570-348-9141; @jhorvathTT on Twitter.