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Medical Education Assistance Corporation v. State12/16/1999
This is an appeal of the Trial Court's enforcement of a covenant not to compete against Ashok V. Mehta, M.D. ("Dr. Mehta"), a pediatric cardiologist, in favor of Medical Education Assistance Corporation ("MEAC"), and the State of Tennessee through East Tennessee State University Quillen College of Medicine ("ETSU"). The Trial Court enjoined Dr. Mehta from practicing medicine in a seven county area for five years, and awarded damages of $358,265 to MEAC.
On appeal, Dr. Mehta states the issues as follows:
1. The Trial Court erred in finding that as a matter of public policy in Tennessee a covenant not to compete involving a medical specialty is enforceable by a non profit corporation. 2. The Trial Court erred in finding that there were special circumstances which entitled MEAC and ETSU to protection by enforcement of the covenant. 3. The Trial Court erred in finding that the covenant in question, if enforceable, was fair and reasonable under the circumstances as set forth in existing case law. 4. The Trial Court erred in failing to find that there was not intentional/negligent misrepresentation relating to Mehta's inducement to sign the employment contract containing the covenant. 5. The Trial Court erred in failing to find that MEAC and ETSU had waived their entitlement to enforcement of the covenant by their actions. 6. The Trial Court erred in not finding that MEAC and ETSU breached its contract with Mehta for failure to provide adequate equipment, space, research funds, and facilities. 7. The Trial Court erred in awarding damages and the computation of the same as well as erred in granting a five year enforceable covenant.
MEAC appeals the Trial Court's award of six months' severance pay to Dr. Mehta as provided under the employment contract.
For the reasons stated in this opinion, we modify the judgment so as to enforce the covenant not to compete for an additional two years starting thirty days from the date of the entry of judgment of this Court. We remand this case to the Trial Court for the determination of additional damages to be awarded to MEAC for the period from the entry of the Trial Court's judgment through the date of entry of this Court's judgment. In all other respects, we affirm the decision of the Trial Court.
BACKGROUND
The East Tennessee State University Quillen College of Medicine was established pursuant to the Teague-Cranston Act. One of its goals, in addition to training physicians generally, was to encourage physicians to enter into practice in rural areas of Tennessee. ETSU has the ability to pay its faculty physicians only a state-furnished base salary, an amount much lower than the salaries generally earned by similar physicians in private practice. ETSU depends upon the Medical Educational Assistance Corporation (MEAC) to supplement that base salary in order to attract highly qualified faculty members. MEAC is a non-profit, professional corporation affiliated with ETSU for the purposes of allowing physician faculty members to conduct a clinical practice in addition to their faculty duties, and providing a means by which students in the College of Medicine and resident physicians can have valuable hands-on integral experience. Such an arrangement is known as a "faculty practice plan."
The State of Tennessee funds approximately $19 million per year of the ETSU College of Medicine budget. MEAC supplements this by providing 31% of the total College of Medicine annual budget from the income brought in by faculty physician clinical practices. Nationally, medical school budgets are supplemented an average of 41% from similar practice group funds.
In 1986, Dr. Mehta accepted a
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