Declaratory Judgments: An Underutilized Tool in Non-Compete Litigation

When an executive, doctor or other high-level employee leaves one company under a non-compete agreement, the threat of non-compete litigation usually follows shortly thereafter.  In many instances, the scenario plays out as follows:

Dr. Jordan is a prominent physician in Miami, Florida.  He practices with Major Medical Group, which has offices throughout South Florida.  Jordan has a falling out with the owners of the company and decides to resign.  On his last day with Major Medical Group, Jordan receives an email from one of the owners of the practice:

“Dr. Jordan:

We regret your decision to leave the practice.  Please be advised that you remain subject to the non-compete restrictions contained in your employment agreement.  We trust you will honor the terms of your contract. We wish you the best.


The Owners”

In my experience, doctors and particularly owners of medical practices will aggressively enforce non-compete agreements.  MMG is no exception.  They are well capitalized, they have a team of lawyers and they are afraid that Dr. Jordan might try to steal their patients.  Plus, they have a personal vendetta against Dr. Jordan for leaving the practice.  After all, Jordan was with them for 10 years.  In MMG’s view, they helped launch Jordan’s career.  Without MMG, he would not be the superstar physician that he is today.  And in spite of all those years together, Jordan has abruptly left the practice, probably to go work for a competing practice.  As much as this is business, it’s also personal.

MMG immediately puts out feelers to figure out where Dr. Jordan is headed.  Two weeks later, MMG learns that Jordan joined a booming practice down in Coral Gables.  MMG’s attorney immediately fires off a cease and desist letter.  It’s standard fare.  It informs Jordan of the following:

  • The law firm represents MMG
  • Jordan has a non-compete agreement
  • They have learned that Jordan is practicing medicine
  • Jordan is therefore competing and violating the agreement
  • MMG will sue

Jordan has received a cease and desist letter.  From here, his next move all depends on the facts of his case.  As I have frequently said on this blog, you can often resolve a non-compete dispute out of court by hiring a good attorney to prepare a strong written response to the employer’s cease and desist letter.   The response should walk through the facts and the law and make it clear that the company could lose the case, that the litigation would be a nightmare and that both parties should just agree to walk away.  In many instances, a compelling letter from a legitimate attorney can help resolve the dispute.

In other situations, a written response simply will not be enough.  Sometimes, it is apparent that the company plans to sue.  A lawsuit is imminent.  Other times, the former employee – like Dr. Jordan – needs a formal resolution to the dispute.  I have seen numerous instances where the employee had lined up a lucrative new position or lucrative new venture, but could not formally begin that position or venture until the non-compete dispute was resolved.  For instance, suppose the practice down in Coral Gables gets a bit nervous.  They tell Dr. Jordan that he can’t formally begin working with them until the non-compete dispute with MMG is resolved.  In this type of situation, Jordan may want to pursue a declaratory judgment.   Exactly what Jordan seeks will depend on the terms of the contract.  Perhaps the practice in Coral Gables is outside of the restricted territory.  Or perhaps Jordan plans to practice medicine there, but has not and will not solicit any of his former patients.  Or perhaps the non-compete agreement has technically expired.  In any number of circumstances, the best way to resolve the dispute is through seeking a declaratory judgment.

Jonathan Pollard is a competition lawyer based in Fort Lauderdale, Florida. His office can be reached at 954-332-2380.