By: Lucero Tennis Kieffer and Chad J. Sullivan
On July 1, 2023, the new law restricting physician non-compete agreements went into effect in Indiana. Four days later, the first case relying on these new provisions was filed in Allen County Superior Court, David Lankford, D.O. v. Lutheran Medical Group, LLC, 02D02-2307-PL-000261.
In Dr. Lankford’s complaint, he alleges that the Hospital materially breached the terms of his employment agreement by requiring him to provide services “outside the scope of the services [Dr. Lankford] had agreed to provide under [his employment agreement].” Dr. Lankford then sent a notice of breach, and advised the Hospital that if it did not cure the material breaches within 30 days, he would terminate the employment agreement for cause. Approximately 30 days later, Dr. Lankford sent notice that he was terminating the employment agreement for cause.
The lawsuit seeks declaratory judgment that the non-compete provisions contained in Dr. Lankford’s employment agreement are of no force and effect for two separate reasons. Relying on Licocci v. Cardinal Assoc., Inc., 492 N.E.2d 48 (Ind. Ct. App. 1986), Dr. Lankford first argues that because the Hospital materially breached the contract first the Hospital may not enforce the non-compete provisions of the employment agreement. Second, Dr. Lankford argues that the new Indiana law[1] renders the non-compete unenforceable because he terminated the employment agreement for cause.
The case currently has scheduled a preliminary injunction hearing for August 11, 2023. We will continue to monitor the situation closely and provide updates as soon as possible. In the interim, if you have any questions regarding the effect the new Indiana law has on physician non-competes, please reach out to an attorney in our Labor and Employment practice group.
[1] Indiana Code § 25-22.5-5.5-2(b)