Worried about veterinary competition? Don't be unreasonable


Worried about veterinary competition? Don't be unreasonable

There's plenty of legal mumbo-jumbo out there to assertain what is a reasonable distance or period for veterinarians not to compete.
Jun 01, 2014

One of the hardest things to understand when studying law is the legal impact which has been assigned to what many would consider to be subjective and amorphous ideas. These are referred to by legislatures and judges as "legal standards."

Consider, for example, when you are watching a news program or television show about a criminal defendant who is being tried for a felony. Conviction for a crime can only occur when a judge or jury is satisfied that the prosecution's proof demonstrates the guilt of the person charged "beyond a reasonable doubt." This is a legal "standard." However, exactly what this term means is anything but established and that standard probably varies ever so slightly in every criminal case.

But what we know for sure is that "beyond a reasonable doubt" is a lot harder to show and involves much more persuasive evidentiary material than the "civil standard" of proof (non-criminal matters where the winner gets money, property or other "stuff" upon demonstration of a successful case). I spend a lot of time sifting through judicial opinions and administrative hearing records issued by tribunals across the country which have decided cases involving veterinary law. The legal standard that appears in those opinions time and time again is the term "reasonable."

I would have to say that in my world, the area where the term "reasonable" comes up most frequently is in the drafting, amending, interpreting and negotiating of agreements among veterinarians "not to compete." As many readers may know from my previous columns, veterinary covenants not-to-compete generally fall into two main categories.

The first is the more common; where an employed doctor agrees that during and after his employment as an associate, he promises his employer not to undertake competitive veterinary practice within a certain area and for a certain time. The second type is the non-compete language which usually appears in veterinary hospital sale contracts whereby the former practice owner promises not to compete with the business he is selling.

Courts across the country frequently give wide latitude to business buyers and sellers as to what constitutes a "reasonable" distance and/or period during which the seller may agree to forbear from competing against the enterprise he is selling. This discretion is probably based on two general assumptions:

First, when a business (including a veterinary or other professional practice) is sold, the customer traffic of that business can be considered one of the most valuable business assets. It just makes sense that the person purchasing the so-called "goodwill" of a practice or business would be entitled not to have the seller immediately turn around and compete against him. This is especially true in that the purchaser paid substantial money for the right to provide services to the customers of the enterprise being acquired.

The second reason is simply that if a practice or other business is being purchased for a substantial sum of money, it is likely that the buyer and seller have both committed a great deal of thought to the transaction; they probably also have involved outside business, banking and legal professionals. Therefore, it's unlikely that either party to a business-purchase related non-compete would be more "sophisticated" or "savvy" than the other or have more access to professional guidance in the deal.