Question 2 : when a non compete agreement is entered into after employment has begun, would continued employment constitute sufficient consideration for the agreement explain
CASE ANALYSIS Case 11.1 Baugh v. Columbia Heart Clinic, P.A." Court of Appeals of South Carolina, 402 5.C. 1, 738 5.E 28 480 (20131. IN THE LANGUAGE employees of Columbia Heart since tion, and their consideration was a OF THE COURT before 2000. compensation system. THOMAS, J. (Judge] In 2004, Columbia Heart's share- When (Baugh and Feldman] holders embarked on the construct Columbia Heart (Clinic, P.A., in became shareholders, they each tion of a new medical office building Columbia, South Carolina] is a cor- entered employment agreements in Lexington County through a porate medical practice that provides that forfeited money payable to them limited liability company (the LLC) comprehensive cardiology services. Its upon termination if they competed The LLC was almost entirely owned physicians are all cardiologists with Columbia Heart in Lexington by the shareholder-physicians of J. Kevin Baugh, M.D., and Barry and Richland Counties within a year. Columbia Heart. * * * Each member J. Feldman, M.D., * * * are cardiolo- These agreements contained no other of the LLC signed personal obliga- gists who had been shareholders and provisions that discouraged competi- tions on the project debt in pro- portion to their equity [ownership of any Columbia Heart office at which supported by new consideration. We share] in the LLC. Because of (1) the Physician routinely provided services disagree. investment and liabilities undertaken during the year prior to the date of When a covenant not to compete by Columbia Heart's shareholders termination." as members of the LLC and (2) a No separate monetary consider- is entered into after the inception of employment, separate consideration, in recent departure of a large num- ation was paid to any shareholder- addition to continued . . . employment, ber of Columbia Heart physicians, Columbia Heart sought to bind its physician to sign the Agreements, is necessary in order for the covenant not did the Agreements change the to be enforceable. There is no consid shareholder-physicians more tightly [established] compensation system. to the medical practice. Thus, in July . . . . eration when the contract containing the covenant is exacted after several 2004 Columbia Heart's shareholder- Columbia Heart opened a new years' employment and the employee's physicians entered into * * * [non- office in the LLC's building in duties and position are left unchanged. compete] agreements. December 2005. In April 2006, [Emphasis added] [Baugh and Feldman] left Columbia [Baugh and Feldman] executed * * * Article 5 [of the agreements] Heart. the Agreements after they became says the following: Within a month after departing, employed by Columbia Heart, and the Physician, in the event of termina- [Baugh and Feldman] opened a new Agreements did not change the general tion * * * for any reason, during the practice, Lexington Heart Clinic, compensation system agreed to by the twelve (12) month period immedi where they treated patients in cardiol- parties under their prior employment ately following the date of termina- ogy and hired a number of Columbia contracts. However, * * * Article 4 of the tion * * * shall not Compete * * * with Heart's administrative and medical Agreements provides the following: Columbia Heart. support staff. Lexington Heart was on the same campus as Columbia Physician shall be paid Five Section 5.2 defines specific terms "for purposes of Article 5": Heart's Lexington office, separated by Thousand and No/10 0 Dollars ($5,080.80) per month for each of "Compete" means directly or indi- an approximate distance of 300 yards. the twelve (12) months following rectly, on his own behalf or on behalf Columbia Heart's * *. office closed termination, so long as the Physician of any other Person, other than at in September 2006 because of fiscal is not in violation of Article 5 of this the direction of Columbia Heart unsustainability. Agreement. and on behalf of Columbia Heart: [Baugh and Feldman] filed suit This language established that (A) organizing or owning any interest against Columbia Heart (in a South Columbia Heart promised to pay in a business which engages in the Carolina state court] . . . seeking . . . ( Baugh and Feldman] each * * . a total Business in the Territory; (B) engage a ruling that the Agreements con- of $60,000 over twelve months after ing in the Business in the Territory; tain unenforceable non-competition termination so long as they did not and (C) assisting any Person (as director, officer, employee, agent, provisions violate the non-competition provi- consultant, lender, lessor or other- The trial court * * * held the sion in Article 5. * * . Consequently, wise) to engage in the Business in the Agreements' non-competition provi- the Agreements are supported by new Territory. sions unenforceable * * . . This appeal consideration. followed. "Business" is defined as "the practice We reverse the trial court's finding of medicine in the field of cardiol- (Baugh and Feldman] con- that the non-competition provi- ogy." "Territory" is defined as "the tend * * * that the Agreements are sions in Article 5 and Article 4 are area within a twenty (20) mile radius unenforceable because they are not unenforceable. LEGAL REASONING QUESTIONS 1. What is consideration? 2. When a noncompete agreement is entered into before employment, would additional compensation (beyond the basic salary for the position) constitute sufficient consideration for the agreement? Why or why not? 3. When a noncompete agreement is entered into offer employment has begun, would continued employment consti- tute sufficient consideration for the agreement? Explain. 4. In this case, did the court hold that the noncompete agreement at the heart of the dispute was supported by consider- ation? Why or why not
