Why doctors shouldn't practice law: the American Medical Association's misdiagnosis of physician non-compete clauses.

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Why doctors shouldn't practice law: the American Medical Association's misdiagnosis of physician non-compete clauses.

I. INTRODUCTION

In its model rules, the American Bar Association (ABA) adopted a restriction on an attorney's ability to enter into non-compete clauses. The American Medical Association (AMA) has no such restriction. This Article discusses the history, case law, and justifications for this restriction in a lawyer's practice; details the reasons why the AMA has failed to implement such a restriction for doctors, despite the AMA's position in favor of the policy; and argues that the AMA should adopt a policy against restrictive covenants that is similar to the ABA's policy.

The U.S. Constitution states, "No State shall ... pass any Law impairing the Obligation of Contracts.... No State shall ... deprive any person of life, liberty, or property, without due process of law." (1) Pursuant thereto, in Lochner v. New York, the Supreme Court ruled unconstitutional a New York statute that prohibited bakers from working more than ten hours per day. (2) In that seminal case, the Court held,

The statute necessarily interferes with the right of contract between the employer and employees, concerning the number of hours in which the latter may labor in the bakery of the employer. The general right to make a contract in relation to his business is part of the liberty of the individual protected by the Fourteenth Amendment of the Federal Constitution. Under that provision no State can deprive any person of life, liberty or property without due process of law. The right to purchase or to sell labor is part of the liberty protected by this amendment, unless there are circumstances which exclude the right. (3) The short-lived preeminence of Lochner represented the apex of American law's recognition of a virtually unfettered right to contract. Even during this time, however, courts recognized an exception to this principle in the context of police powers relating to the safety, health, morals, and general welfare of the public. (4) The Supreme Court stated that "[b]oth property and liberty are held on such reasonable conditions as may be imposed by the governing power of the state in the exercise of those powers, and with such conditions the 14th Amendment was not designed to interfere." (5) As a consequence, "restraints of trade"--contracts in which a party agrees to foreclose the method of engaging in, or opportunity to engage in, a vocation--had been regulated or prohibited under British and American common law for centuries, even during the Lochner era. A contemporary court even suggested that "among the most ancient rules of the common law" was that restraints of trade were void--noting their existence as early as 1415--because of the many negative effects:

1. Such contracts injure the parties making them, because they diminish their means of procuring livelihoods and a competency for their families. They tempt improvident persons, for the sake of present gain, to deprive themselves of the power to make future acquisitions. And they expose such persons to imposition and oppression.

2. They tend to deprive the public of the services of men in the employments and capacities in which they may be most useful to the community as well as to themselves.

3. They discourage industry and enterprise, and diminish the products of ingenuity and skill.

4. They prevent competition and enhance prices.

5. They expose the public to all the evils of monopoly. And this especially is applicable to wealthy companies and large corporations which have the means, unless restrained by law, to exclude rivalry, monopolize business, and engross the market. Against evils like these, wise laws protect individuals and the public by declaring all such laws void. (6)

Notwithstanding these strong judicial proclamations eschewing restraints of trade, as early as the seventeenth century courts began to chip away at this limitation on the right to contract. (7) over time, the common law came to recognize the validity of restraints of trade when limited in time or place. (8) And though Lochner recognized the limitation on restraints of trade even while forging a singularly broad view of the rights of privately contracting parties, post-Lochner jurisprudence--although far more accepting of limitations on private contracts--somewhat paradoxically accepted the notion that in certain circumstances private parties may elect to employ restraints of trade.

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