Apparently in Texas, it's not enough to have your physician investors sign a non-compete covenant. A Texas appeals court ruled on July 9 that the covenant has to have a price attached for physicians who want to get out of the deal.

The decision stems from a lawsuit between the Greenville Surgery Center, an ophthalmic facility in Dallas, and several physicians who left a limited partnership to build a new surgery center 1.5 miles away from the existing center.

In early 2007, 9 of the 17 investors began discussing building a new center because the lease on the Greenville Surgery Center was expected to expire, according to court documents. Once they contracted to purchase land, the rest of the limited partnership asked to be part of the new center. But the departing investors were not interested in having the rest of the limited partnership join them.

The Greenville partnership threatened to sue the departing investors for breach of the covenant. Instead, the departing investors filed a lawsuit against the surgery center partnership claiming that the non-compete clause was unenforceable because it didn't include a way-out. The Greenville partnership sued in return, claiming breach of contract, according to court documents.

The trial court ruled that the non-compete was unenforceable. The Greenville partnership appealed the district court ruling. However, the Court of Appeals of Texas, Dallas, affirmed the lower court ruling.

Citing Texas law, the court wrote, "the covenant must provide for a buyout of the covenant by the physician at a reasonable price or, at the option of either party, as determined by a mutually agreed upon arbitrator."

"We are very disappointed with the court's decision," said Jennifer Henry, the attorney for the Greenville partnership. "We are exploring our other options." Attorneys for the group of physician investors who left the Greenville deal did not respond to requests for comment.

Kent Steinriede