Opinion

Opinion issued August 27, 2015

In The

Court of Appeals

For The

First District of Texas

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NO. 01-14-00458-CV

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JAGDISH TUMMALA, M.D., EVEREST INPATIENT PHYSICIANS,

PLLC, SHAH & DICHOSO, PLLC, PRAGNESH R. SHAH, M.D., P.A., AND

DARYL D. DICHOSO, M.D., P.A., Appellants/Cross-Appellees

V.

TOTAL INPATIENT SERVICES, P.A., Appellee/Cross-Appellant

On Appeal from the 270th District Court

Harris County, Texas

Trial Court Case No. 2012-72321

CONCURRING OPINION

The majority concludes that the non-compete covenant was never

triggered—and thus never breached—because Jagdish Tummala left his job at

TIPS during the Introductory Period. I disagree with this conclusion, but I

nevertheless concur in the Court’s judgment because the trial court erred in

awarding $100,000 in damages in the absence of any evidence of damages and

based solely on the Agreement’s non-mandatory buyout provision.

The Business and Commerce Code provides that a covenant not to compete

relating to the practice of medicine must include a buyout provision to be

enforceable against a Texas physician. It states:

(b) A covenant not to compete relating to the practice of medicine

is enforceable against a person licensed as a physician by the

Texas Medical Board if such covenant complies with the

following requirements:

…

(2) the covenant must provide for a buy out of the covenant

by the physician at a reasonable price or, at the option of

either party, as determined by a mutually agreed upon

arbitrator or, in the case of an inability to agree, an arbitrator

of the court whose decision shall be binding on the parties.

TEX. BUS. & COM. CODE ANN. § 15.50(b) (West 2011); see also Greenville Surgery

Ctr., Ltd. v. Beebe, 320 S.W.3d 850, 853 (Tex. App.—Dallas 2010, no pet.)

(physician’s covenant not to compete unenforceable because it contained no

buyout clause as required by Section 15.50(b)(2)).

The Business and Commerce Code also prescribes the remedies available in

actions to enforce covenants not to compete. Section 15.51(a) states, in relevant

part: “a court may award the promisee under a covenant not to compete damages,

injunctive relief, or both damages and injunctive relief for a breach by the promisor

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of the covenant.” TEX. BUS. & COM. CODE ANN. § 15.51(a) (West 2011). Thus,

the statutory remedies available for breach of an enforceable covenant not to

compete are limited to damages, injunctive relief, or both. Notably, Section

15.51(a) does not authorize courts to award the buyout amount per se, but that is

what the trial court did here.

There may be cases in which the parties expressly contract for payment of

the buyout amount as liquidated damages in the case of a breach. See Sadler

Clinic Ass’n, P.A. v. Hart, 403 S.W.3d 891, 895–97 (Tex. App.—Beaumont 2013,

pet. denied) (buyout provided that “the physician must pay to clinic as liquidated

damages” an amount to be calculated based on the length of employment

(emphasis added)). In such a case, and provided the liquidated damages provision

is itself enforceable, the trial court could correctly award the agreed-upon

liquidated damages, because they would be “damages” within the meaning of

Section 15.51(a). But this is not such a case.

The Agreement at issue here contains no liquidated damages provision. See

Flores v. Millenium Interests, Ltd., 185 S.W.3d 427, 431 (Tex. 2005) (“The term

‘liquidated damages’ ordinarily refers to an acceptable measure of damages that

parties stipulate in advance will be assessed in the event of a contract breach.”

(emphasis added)). Its buyout provision merely states: “Physician may buy-out

this non-compete covenant for a cash price of $100,000 which Physician agrees is

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a reasonable price.” This provision is permissive—it states that Tummala may pay

the $100,000 cash price, which he presumably would have done if he believed that

moving on to his next endeavor free from the threat of litigation was worth the

$100,000 price tag. See Sadler Clinic Ass’n, 403 S.W.3d at 896–97 (distinguishing

“price” from “damage”). But because Tummala nowhere obligated himself to pay

the buyout amount in the event of a breach, the buyout amount cannot be construed

as a liquidated damages provision that relieves TIPS of the burden to prove

“damages” within the meaning of Section 15.51(a).

Moreover, TIPS offered no evidence of any actual damage it suffered as a

result of Tummala’s breach of the covenant not to compete. When Dr. Mark

Murray was asked how much money TIPS lost as a result of Tummala departing

TIPS and rounding at competitor hospitals, he was unable to answer and said that

Everest would be in a better position to respond. The record thus reflects that TIPS

relied solely on the buyout provision to persuade the trial court to award $100,000

in damages.

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In short, the trial court erred in construing the permissive buyout provision

as a liquidated damages provision, and there is no evidence to support the trial

court’s damage award. Accordingly, I respectfully concur in the Court’s judgment

only.

Rebeca Huddle

Justice

Panel consists of Justices Jennings, Higley, and Huddle.

Justice Huddle, concurring.

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