Pediatrix Medical Group of California, Inc. v. Tri-City Medical Center
Jul 25, 2013OUTCOME: Contract voided
On Thursday, July 25, 2013, Hon. Burton S. Katz (Ret) issued a final, binding arbitration award in a lawsuit between Tri-City Healthcare District (“Tri-City”) and Pediatrix Medical Group of California ... (“Pediatrix.”) Tri-City and Pediatrix participated in arbitration before the American Arbitration Association to resolve a dispute over Tri-City’s May 2011 decision to replace Pediatrix with Dr. Hamid Movahhedian as head of Tri-City’s Neonatal Intensive Care Unit (“NICU”). Pediatrix sought to enforce an illegal “no hire” provision contained in its contract with Tri-City that purported to prevent Tri-City from hiring the best and most qualified physician, Dr. Movahhedian, to run the NICU. Pediatrix also sought over $2 million in damages against Tri-City for allegedly inducing Dr. Movahhedian to violate an illegal covenant not to compete contained in its employment agreement with Dr. Movahhedian. California law has long condemned the use of and has consistently refused to enforce “no hire” provisions and “covenants not to compete.” Ruling that these clauses are in fact illegal in California, Judge Katz noted: This is not a case of who … is at fault; rather it is a case about the freedom in making decisions to renew or not renew an existing contract and to hire another provider. This is a free society and the law has little patience with either restrictive covenants that purport to limit this freedom of choice or penalties imposed because such free choices are exercised. Tri-City sought and received a judicial determination that the “no hire” provision in its contract with Pediatrix was illegal. Judge Katz also ruled that Tri-City is not liable to Pediatrix for inducing Dr. Movahhedian to breach the illegal covenant not to compete in Dr. Movahhedian’s employment agreement and hence denied Pediatrix’s request for two million dollars in alleged lost profits that Pediatrix claimed it would have earned over a four year period. Following ten days of testimony, Judge Katz did award Pediatrix $3,800 in damages against Tri-city because Tri-City did not allow Pediatrix to complete the final 18 days of its contract in May 2011. “We are gratified that the Arbitrator followed the law and allowed Tri-City to retain the most qualified physician, Dr. Movahhedian, as Director of the NICU,” said Larry B. Anderson, Tri-City CEO. “I hope that other hospitals will follow suit and challenge illegal contracts that limit a hospital’s ability to hire the best physicians available.” Tri-City was represented by Jeffrey Lewis and Hanni Pichel of BROEDLOW LEWIS LLP. Pediatrix was represented by Matt Oster of McDermott Will & Emery. Dr. Movahhedian was represented by William W. Whelan of SOLOMON WARD SEIDENWURM & SMITH, LLP
