Having a well-drafted, reasonable non-compete agreement can protect your medical practice from unfair competition and avoid costly litigation. In this episode, Michael and Brad are joined by trial attorney Leiza Dolghih as she shares two stories about physician non-compete agreements. Tune in to find out how Leiza responded to these enforcement actions.
Listen to the full episode using the player below, or by visiting one of the links. The episode transcript which has been edited for readability. If you have any questions or would like to learn more, email us at firstname.lastname@example.org.
Intro: [00:00:00] Welcome to Legal 123s with ByrdAdatto. Legal issues, simplified through real client stories and real world experiences. Creating simplicity in three, two, one.
Brad: Welcome back to another episode of Legal 123s with ByrdAdatto. I’m your host. Brad Adatto with my cohost Michael Byrd.
Michael: Thanks Brad. As a business and healthcare law firm, we’re often immersed in the heavy details of a particular issue or project. It’s beneficial, if not mandatory to every so often, take a step back and evaluate the bigger picture. This season’s theme is Zoom Out. We have all been immersed in the life of a global pandemic. And so we’re going to make sure this season kind of with, with each story that we take a step back and look at how the, the issue that we’ve discussed will be impacted in our new normal.
Brad: You know, Michael today, before we get into our today’s episode and introduce our awesome new, special guest. [00:01:00] I want to ask you, how many languages do you speak?
Michael: I’m so glad you asked that question. And I have something that the audience needs to understand that day of all days is an iconic day. Today is the last day at recording that you, Brad are 49 years old. And when the audience hears this, you’ll be 50. I think we all need to pause and just acknowledge that you’re mobile and that you’re able to get here and record, and, we’ll stay tuned as to whether we’ll be able to have the next season. What was the question you asked me again?
Brad: And for audiences to remember, Michael is older than me, so he probably can’t remember that far back. All right. Well, Michael, the question I asked is how many languages do you speak?
Michael: Oh, yes. I forgot. It’s an age thing. I speak two languages [00:02:00] fluently and one with a very, very basic understanding. I speak English fluently and have a barely passable understanding of Spanish.
Brad: Okay. Hold on. I may be old as you just articulated, but I think you said you speak two languages fluently and you only mentioned one English and the other Spanish. What’s the other one you’re fluent in?
Michael: Oh, I speak Brad. It took me 15 years to master it. But anyone that knows Brad knows that you can talk fast and there’s so much happening in your brain at any one time that the words can’t get out fast enough. So sometimes, it’s like drinking out of a fire hose when a sentence comes out. And I’ve managed to learn that how to translate into common English.
Brad: That’s a fair assessment.
Michael: So. [00:03:00] Where are you going with all this?
Brad: Well, I guess based on your last comment. For me, I think I speak I guess, broken English or Brad-isms fluently and a little bit of French. And probably like you, I do have some good vacation Spanish that I’ve learned. Uno mas, por favor. So that’s probably the extent of my language.
Michael: I’ve definitely heard you say, Uno mas, por favor, many times. Probably too many times, but we won’t go there today.
Brad: Okay. Well, in life, your ability to communicate is key to any relationship and this relationship can be with your family, your colleagues, your loved ones, your clients. And as it relates to our guest today in the courtroom, even if English is not her first language.
Michael: All right. Well, nice segue, Brad. Good job. Let’s bring in today’s special guest, Leiza Dolghih. Leiza is a partner at [00:04:00] Lewis Brisbois Bisgaard and Smith. Leiza handles complex commercial employment, non-competition, and trade secret litigation, and both state and federal courts around the country. She has extensive courtroom experience, including multiple jury trials, bench trials, and injunctive evidentiary hearings in person. And now we can say in zoom. Leiza is the co-chair of Louis Brisbois is trade secrets, practice area. She’s called upon often to assist with key employee moves between competitors. She advises clients on the best protection measures for their trade secrets and when necessary litigate trade secret misappropriation, non-competition, non-solicitation and other claims that are frequently brought when employees are moving between competing employers. Leiza has a long list of lawyer trophies. [00:05:00] She’s been a best lawyer under 40 in 2018, 2019, 2020. Best lawyer in Dallas. Was recognized by D magazine over the same time period. One of Dallas’ Top 50 women lawyers in 2018 by Texas diversity council, a Rising Star for many years by Texas Super Lawyer. Leiza has been a friend of the firm for over half a dozen firms where she has worked with us with a number of our mutual clients. Leiza has been a guest multiple times on our ByrdAdatto video series. She’s lectured at ByrdAdatto University events and written articles for our Access Plus member portal. Unlike Brad, she speaks English, Spanish and Russian fluently. Welcome.
Leiza: Thank you. Good morning and happy birthday, Brad.
Brad: Oh, thank you. We’re real excited that you’re here today with us and you can join us in today’s episode. You know, as Michael mentioned, you’ve worked with us many [00:06:00] times and a lot of our clients, you’ve been a big part of our educational program for our clients and our team. But before we get into today’s story, why don’t you tell us a couple of things. Where are you from? And what made you want to become a lawyer?
Leiza: Well, I’m originally from Kishinyov, Moldova, which is a former USSR country that almost no one has ever heard of. I’ve been here in Texas for 23 years and practicing law for 15 years. And it’s funny that you ask what made me want to become a lawyer, because up until very recently, I thought my parents told me, you know your typical immigrant story, you’re going to be a lawyer and your twin sister is going to be a doctor. It turns out my memory of that is faulty because my mother recently told me that it was my decision to be a lawyer. Why I picked that I have no idea, but I’m glad I did because I really enjoy practicing law. But I really can’t tell you why.
Michael: I’ve [00:07:00] shared my story many times and I basically tripped up the stairs, into being a lawyer. So I didn’t have also some grand story. As most of the audience knows, at ByrdAdatto we’re a transactional business and healthcare firm. And over the years, Leiza has worked with us on some very contentious enforcement actions. And we would love to hear from you Leiza, a story of a non-compete enforcement action.
Leiza: Yeah, absolutely. You know, I have probably dozens and dozens of stories, but two particularly come to mind because I think in both of those stories, those lawsuits could have been avoided, had the person that signed the non-compete consulted with an attorney. Or had the person who drafted the non-compete, the owner of a medical practice consulted with an attorney. That didn’t [00:08:00] happen. So we ended up in court and in those cases, but, one of the stories involves a medical practice owner who took an agreement that he signed at some point with a hospital and used it to hire another physician. He didn’t consult with an attorney. He kind of modified the agreement himself and had this young physician sign the agreement. This was of course in Texas, and the owner of the medical practice thought that would be sufficient if it was good enough for the hospital that has really good attorneys. Then certainly that agreement would have worked for him,
Brad: You know, we’ve actually seen this show before and it never ends well at all, Michael. I mean, we just did an entire episode on the do it yourself movement. Let’s not get into that today, but let’s keep going with your story.
Leiza: So in that particular situation, the young physician signed the agreement, and he lived in another place. So he was going to move to the location of the medical practice. And [00:09:00] before he even made the move, he decided he wasn’t going to join the practice, actually anymore. He found out something about the practice that didn’t really make him want to join it. And he decided, and he notified his employer and the employer told him no on certain terms. That well, you signed this non-compete and even though you haven’t worked for me a single day, and I haven’t paid you a single dollar, I’m still going to enforce this non-compete agreement, which is going to last for two years. And it’s going to lock you out of a major metropolitan area.
Michael: Wow. I mean, we know that a big part of non-compete enforcement ties to whether or not the employee has received confidential information. And so while I know we’re going to be touching on that quite a bit. So just kind of vocabulary word of the day and trying to give the basic definition of confidential information is that it [00:10:00] comprises of data, practices, processes, designs that have an inherent economic value because they are not generally known or readily ascertainable by others. And which the owner, and this is important, which the owner takes reasonable measures to keep secret.
Brad: Good job, Michael. Great explanation. So let’s pause on this story. Because you said you had dozens, but let’s just move maybe to another one. And on the second half of this podcast, we’ll start addressing how you actually dealt with that particular issue. But let’s hear another story you got.
Leiza: Sure. Another story involves a physician. Also relatively young physician that worked for a medical practice for a number of years, had an employment agreement with them. That employment agreement did not have a non-compete. At some point, the physician decides to leave the practice because he found out some concerning information or he was contacted by a PI who wanted to interview him about some things that were going on for the practice.
Brad: Yeah. That’s [00:11:00] concerning information.
Leiza: Absolutely. And so he decides, okay, I’m going to leave this practice. Well on his way out, literally on the last day of the employment, the medical practice, hands him a severance agreement with a severance payment and says if you want the severance payment, go ahead and sign it. And he signs the agreement. Well, that separation agreement that he signed on his last day of employment actually does have a non-compete. And of course the medical practice now wants to enforce it. When this physician finds a competitor medical practice, just a few miles down the road. And threatened him with enforcement.
Michael: It’s crazy. I love that you pick those two stories. I think there’s a lot that can be learned from this. And they both have some really important principles that we learned from non-compete laws. Let’s take a quick commercial break. And when we come back, we can talk about. How you as a trial attorney [00:12:00] responded to these enforcement actions and maybe even talk a little bit how we would deal with this from a transactional viewpoint.
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Brad: Welcome back to Legal 123s with ByrdAdatto, I’m your host Brad Adatto with my cohost Michael Byrd. And we’re still here with our friend and special guest who obviously speaks English better than I do. Apparently, according to Michael. Leiza Dolghih.
Michael: Leiza, this season’s theme is Zoom Out. And, [00:13:00] you just told us, a couple of stories with two different non-compete enforcement actions and kind of, as part of our zoom out theme, we start with the bigger picture when it comes to non-competes. And so just share why would a client even want to have a non-compete in their employment agreement?
Leiza: Well, and look, I enforce non-competes on behalf of medical practices sometimes, and sometimes I defend physicians whose non-competes have been enforced, but in those situations where I enforce non-competes on behalf of medical practices, it’s very clear why they want to enforce them. It’s because usually they’ve put in a lot of money and time into helping that particular physician build up their patient base in a particular geographic area. A lot of times it involves a physician who’s been with the practice for a number of years. And there’s been a lot of advertising, marketing efforts, referral sources that have been shared with that physician and all of that, and be protected with a non-compete agreement that should [00:14:00] be.
Brad: Yeah. And Michael, that was actually a good question for you. So I’m kind of surprised. So how would you answer your question?
Michael: At its most basic level, I totally agree with Leiza that from a Physician practice perspective. There is this fear that they’re going to bring someone into their world. All their secrets that make them, magic and being successful as a practice are going to be taught to this new physician and they’re going to just leave and go across the street and take all their patients and everything’s going to be a disaster. And so there is particularly in the smaller practices. This is a huge motivator and it’s always a motivator if it’s an issue, but as you get more sophisticated, there’s also a strategy reason to have it. If you’re a business, looking [00:15:00] to have an exit event, whether being acquired by private equity or some something more sophisticated, having your key people locked up in non-competes really helps with value and helps with that, in the transaction.
Brad: That’s actually a really good point. That’s where people don’t realize that it’s not just the fact that they could go across the street depending on your exit strategy. Something we talk a lot about in other podcasts and we won’t go too heavy in this one, but if you’re, if one of your big assets or certain key employees having a good solid non-compete non-solicitation is very important.
Michael: Excellent. So Leiza in the first story, the medical practice was attempting to enforce a non-compete based on the confidential information, the young physician received prior to him even working there. Earlier on in this episode, I very delicately attempted to define confidential information. So [00:16:00] explain to our audience how the actions of an employer can impact what is confidential information.
Leiza: Absolutely. And look, the definition that you gave is the textbook definition of confidential information, and it’s really broad and it can cover a lot of information. But what it comes down to in litigation is whether the employer, the owner of the medical practice took measures to protect that information. So if the position in the courtroom is that we shared confidential information with this physician. Then the employers should be able to show, have evidence of the measures that it took prior to the lawsuit to protect the information and what we find a lot of times in the courtroom, what will happen is the employer will say why all of the information I shared with the physician was confidential. All of that information is my magic that makes me wonderful and competitive, but when we start digging down and saying, okay, well, who had access to this information in the last three years? [00:17:00] did you have people sign confidentiality agreements? Did you have people use different logins? So you could track who accessed the information? When we drill down on that information, we find out a lot of times that the employer took very little. Or no protection measures. And then that arguments just falls apart in the courtroom. So it’s very important for the employers to make sure that everyone that works for them has confidentiality agreements. And then they take other physical and other measures to protect the information.
Brad: So it sounds like from an employer’s perspective, there are certain safeguards they need to put in place to actually protect their “confidential information”. So in our first case, how did you protect your client? Who is an outsider looking in?
Leiza: So the physician that came to me had already received threats from this employer saying that, look, I have shared my confidential information with you. And so that’s why you were locked out, out of working in this area for two years. We knew that the lawsuit was probably coming and [00:18:00] we beat the employer to the punch. We filed a lawsuit first and we filed what’s called a DEC action or a declaratory judgment action asking the court to declare the non-compete unenforceable because from my review of their agreement, it looked like the agreement that the employer cobbled up together by using other people’s employment agreements or hospital employment agreements. Somehow admitted, very key statutory language that’s required in Texas to be in the agreement. And just based on that emission, we were able to show the judge within 11 days of filing the lawsuit. Having the judge ruled that yep, this agreement clearly is missing the language. The statute is very clear that their given has to have this language and it’s not there. And the judge basically ruled that the agreement is not enforceable.
Brad: What I liked about that story is that you were able to frame it and that prevented them from actually being able to go out and say, oh, look how horrible this young physician is. It’s going to end in [00:19:00] damaging us. You actually got to be in front of the whole situation. And that’s why in your case with that DEC action, it made a lot of sense.
Leiza: Yeah, absolutely. And we do that quite a bit. I mean, obviously don’t go off and file lawsuits, just in every single situation, just to be the first ones. But a lot of times it makes absolute sense to do that.
Michael: You need to give some counsel to my kids because they filed DEC actions with us. Like every chance they get, they race to the parents to see who can get to us first. That’s a great strategy. So in the second story, the client did not have a non-compete while he worked for the employer. But then had one slid in right at the end and he signed it. How does this impact the enforceability?
Leiza: In that particular case, we were in different jurisdiction in Texas different geographic area. We had a different judge and we were not the [00:20:00] first to file a lawsuit. So they framed the story, that they paid this physician money in exchange for the non-compete and now he was breaching it and they got sort of to the court first with that story. Ultimately, we prevailed in that litigation. What was key in that particular lawsuit is that the employer had a lot of dirty laundry, a lot. And in the process of litigation a lot of that would have come out. So that helped us reach a resolution with that employer. I see that happen actually in a lot of Non-compete disputes between medical practices and physicians that one or the other will talk about something that’s happening inside the practice. That’s not publicly known, but will inevitably come out during litigation because litigation is public. A lot of things get filed with the court. Then a lot of courts publish that information online. And if you know where to look, you can certainly find it.
Brad: That’s a really [00:21:00] great point. If you are going to go into litigation, understand the other side can bring out a lot of information that you don’t want to be known. And that’s all fair in love and war, as they say. So before we wrap up this episode, the theme as Michael said, in the beginning of this of this season is Zooming Out. We like to have a moment to re-examine the big picture. So, Leiza, I want to start with you first, since you’re our guest and you’re much, much, much better at this than Michael. Please share your thoughts. As a trial attorney from a trial attorney’s perspective, what are you seeing happening with enforcement? Just in general, especially with enforcement of non-compete.
Leiza: Well, they’re definitely getting enforced. I mean, even in the times of COVID the agreements were being enforced even though American Medical Association issued a statement saying that it’s an emergency situation and it would be unethical to do it. The courts are not looking at that [00:22:00] information they’re looking at what did you sign. What contract did you sign? Does it look reasonable and how much money were you paid? Even though that’s not a legal factor, it is a factor the judges consider. So it’s very hard for physicians to argue that this agreement is not reasonable when they’re being paid huge amounts of money, much more than a regular person makes. So I hear this all the time from physicians, they say two things. One is I’ve heard that the agreements are not enforceable. Their non-compete agreements are not enforceable in Texas, or they’re not worth the paper they’re written on the exact words. Actually, I was just talking to anesthesiologist last week in a social setting. And that’s exactly what he said. And I said, no, that’s false information. They are enforceable. They are worth the paper they’re written on, if they’re written correctly. And so if a physician signs an agreement without reading it they’re basically gambling on the fact whether the agreement was written well or [00:23:00] not, which they’re not going to know because they’re not attorneys. And then the second argument that I hear from physicians a lot of times is, well, the patient has the right to choose their physician. And that is true. That is what probably is taught in medical school. And under the ethical rules is certainly something that physicians think about. But the Texas non-compete statute, which is the law in Texas does not really take that into consideration. What physicians need to know is the agreements are enforceable in Texas if they’re written correctly. And what medical practices need to know is that if they truly want to protect their magic, as Michael said, and I agree with that choice of words completely, then they need to make sure that they write not just an agreement, but a properly written agreement with the help of an attorney.
Brad: To add to that. What you just said is I think is yes, you can still see that patient, but you might have to see that patient 5 miles away, [00:24:00] 15 miles away, 25 miles away. Absolutely. You could treat that patient all day long, generally speaking, but you just can’t do it in a certain geographic scope. And then we didn’t really get in the non-solicitation piece of it. That’s just in general. Yes. The patient can still choose you. You just can’t be in that same geographic area. All great points. Michael, going with our theme again, zooming out here. What are some of your final thoughts?
Michael: I think for transactional lawyers like us. It’s so important. Just for the audience to receive the message that whether you’re an employer or employee, when you’re at the initial phase to really have a well-informed conversation about the non-compete, both the things that Leiza mentioned about looking at it and how’s it constructed and is it having enforceability issues in it and are there things to deal with there, but also the bigger [00:25:00] picture, like what’s going to happen if this relationship doesn’t work out and are all of us going to be under pressure at some point and emotions get triggered. And are you a fight or flight person? And if you’re a flight person you need to factor that in because litigation is a fight. It is a war and you need to have someone like Leiza on your side, because this is not only is it not for the faint of heart, but you need to have someone that knows this area of law and you need to kind of have the gumption and willingness to stick through the cost financially and the emotional toil and commitment that goes with fighting the war. And there are certainly times Leiza is a very busy person where it makes sense to stand up for yourself and fight whether you happen to be the employer or the employee. I just think [00:26:00] that it’s, the more you can be thoughtful and well-informed on the front end. The more you can kind of execute on a plan B on the back end.
Brad: Yeah. And I want to add one more thing to what you said is you and I both have obviously reviewed contracts over the years and seen unenforceable provisions in an employment agreement, whether it’s in Texas or otherwise. And we will point this out to our clients saying, hey, this is unenforceable by law. That doesn’t mean that your employer won’t try to enforce it. So that’s another element to the risk of even if it does have an unenforceable vision, you still may have to have someone like our buddy right here, take you down and defend you because they can still try to enforce it. They could take you to court and try to prevent you from operating and you still have to get litigation counsel involved. So that’s just an aspect of contract law in general. And especially for our physicians who aren’t used to it, it’s just an aspect that you have to understand. [00:27:00] Non-competes are well known in multiple different states about how this works. But Leiza, Thank you so much for joining us today.
Leiza: No, thank you for having me.
Brad: Well, we always appreciate you spending time with our clients, spending time with our team and at ByrdAdatto we think education is a very important aspect of life in general. And so we’re appreciative that you can spend your time with us and educating our audience.
Leiza: Absolutely. Thanks for having me.
Brad: Well that’s all the time we have today. Join us next Wednesday for the Gordon Gecko plan, selling your medical practice to a private equity.
Outro: Thanks again for joining us today. And remember, if you liked this episode, please subscribe. Make sure to give us a five- star rating and share with your friends. You can also sign up for the ByrdAdatto newsletter by going to our website at byrdadatto.com. ByrdAdatto is providing this podcast as a public service. This podcast is for educational purposes only. This podcast does not constitute legal advice, [00:28:00] nor does it establish an attorney- client relationship. Reference to any specific product or entity does not constitute an endorsement or recommendation by ByrdAdatto. The views expressed by guests are their own and their appearance on the program does not imply an endorsement of them or any entity they represent. Please consult with an attorney on your legal issues.