Our Illinois covenant not to compete attorneys were interested to see a ruling in a long-running contract dispute between three Madison County doctors. The Fifth District Court of Appeals has given a green light to a lawsuit over a covenant not to compete. The Madison St. Clair Record reported July 1 that the court allowed Dr. Tina Gingrich to pursue a non-compete lawsuit against her former business partner, Dr. Christina Midkiff. At issue is a covenant in the stock purchase agreement of their former corporation, Tina M. F. Gingrich, M.D., P.C., doing business as Maryville Women’s Center, an ob-gyn practice. The covenant said Midkiff and a third partner, Dr. Marlene Freeman, were not permitted to open a competing ob-gyn practice within 20 miles of Maryville Women’s Center for five years.
The underlying facts are complicated. Midkiff and Freeman joined Gingrich’s practice in the late 1990s, entering into a stock purchase agreement that gave them one-third of the shares each. That agreement also contained the covenant not to compete at issue here, as well as a provision giving Gingrich veto power. The three doctors later disagreed over issues not specified, and in 2002, Midkiff and Freeman sued Gingrich for several causes of action, including shareholder relief and a declaratory judgment that the covenant not to compete was unenforceable. Gingrich countersued and later filed a notice of stock sale offering to buy out the shares owned by the other two. That offer used a formula rather than a dollar amount to determine what she would pay for the shares. For that reason, the trial court granted a motion to strike her notice.
Gingrich filed an interlocutory appeal, and the resulting 2005 Fifth District opinion established that a formula is a valid way to offer to buy stock under the Business Corporations Act. The case was sent back to trial court, but before the court could complete its bench trial, Midkiff and Freeman sold Gingrich their shares. Midkiff started her own practice in Maryville on the first day of 2007, bringing her staff from the Maryville Women’s Center. Later that January, the trial court determined how much Gingrich should pay for Midkiff’s shares. It also refused to enforce the covenant not to compete against Midkiff, as to work she had done at a local hospital. Shortly afterward, Gingrich filed the instant lawsuit, seeking to enforce the covenant not to compete as to both the hospital and Midkiff’s new office in Maryville. The trial court dismissed the case, saying the issue had already been decided, and Gingrich appealed to the Fifth District again.
According to the Record, the Fifth District reversed that trial court ruling in June. For the majority, Justice Wexstten wrote that Gingrich’s breach of contract claim had not been decided in the prior suit, which he said had to do with the valuation of the stock shares Gingrich was trying to purchase. The decision did not enforce the non-compete clause, and in fact, the justices specifically said they made no ruling as to whether the clause was reasonable. Instead, their ruling sends the case back down to the trial court for a decision.
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