The District Court of Appeal of the State of Florida affirmed a lower state court holding that certain aspects of a restricted covenant were not enforceable. In Florida Hematology and Oncology v. Rambabu Tummala, M.D., the Practice had terminated Dr. Tummala allegedly after he began questioning certain billing practices. Although Dr. Tummala was subject to a restrictive covenant prohibiting competition for two years within fifteen (15) miles of any office of the Practice, Dr. Tummala immediately opened a competing practice within the proscribed area. The Practice sought an injunction forcing the restrictive covenant.
Florida has a statute specifically dealing with restrictive covenants, i.e., Section 542.335 of the Florida statutes. It provides that a restricted covenant is not enforceable unless supported by a "legitimate business interest" and defines legitimate business interest with respect to medical practice patients as only those "specific prospective or existing patients and with whom the party has a substantial relationship."
The Practice alleged that it was protecting three business interests, i.e., existing patients, exclusive contracts with local hospitals, and referring physicians. The Court held that the Practice was unable to prove any legitimate interest with respect to the exclusive contracts, based mainly upon the facts of the case. The holding with respect to referring physicians however, has general application. The Court stated that referring physicians supply a stream of "unidentified prospective patients with whom Appellants had no prior relationship. Therefore, to accept referring physicians as a statutory legitimate business interest would completely circumvent the clear statutory directive that prospective patients are not to be recognized as such."