The Indiana Court of Appeals has affirmed a ruling in favor of defendants that were sued by a revenue cycle management company for violating a second non-compete agreement, which came four years after one of the defendants signed her first agreement when she started working for the company. The defendant was told that if she didn’t sign the second non-compete agreement, she would be fired.
The background: The defendant initially signed a non-compete agreement in 2010 when she was hired as a marketing manager for the plaintiff’s company. This agreement included a two-year restriction, post-termination, prohibiting the defendant from engaging in or participating in any medical fee collection business within 20 miles of any of the plaintiff’s locations.
- In 2014, the plaintiff presented a new non-compete agreement and demanded that the defendant sign it or face termination. The defendant signed the second agreement under duress of losing her job.
- In 2023, the defendant resigned from the plaintiff’s company and subsequently began working for another firm offering similar revenue-cycle services.
- This prompted the plaintiff to file a lawsuit, claiming that the defendant had violated the 2010 and 2014 non-compete agreements. The plaintiff requested a preliminary injunction to prevent the defendant from continuing to work for the competitor.
- The trial court denied the preliminary injunction, ruling that the 2014 non-compete agreement was not supported by sufficient consideration. The court found that the defendant’s employment had already been secured by the initial 2010 agreement, and thus her continued employment could not serve as valid consideration for signing the second non-compete in 2014. The plaintiff failed to establish a reasonable likelihood of success in proving its case, and the trial court concluded that the non-compete covenant was overly broad in restricting the defendant from working for any company that performed any part of the plaintiff’s services.
The ruling: The plaintiff appealed, arguing that continued employment was adequate consideration for the 2014 non-compete agreement.
- However, the Court of Appeals upheld the trial court’s decision, agreeing that the 2014 agreement was unenforceable due to lack of valid consideration.
- The appeals court further concluded that the plaintiff had not demonstrated a reasonable likelihood of success on claims that the defendant had breached confidentiality or engaged in activities violating the non-compete provisions.
