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From Antitrust Law Daily, July 18, 2014

Audiologist’s antitrust claims against restrictive employment covenant fails

By Edward L. Puzzo, J.D.

An audiologist challenging her employer’s covenant not to compete on state antitrust grounds failed to show that restrictions on competition from her were monopolistic or restraints of trade, the federal district court in Wheeling, West Virginia has ruled (Audiology Distribution, LLC v. Hawkins, July 17, 2014, Stamp, F.).

On October 1, 2012, licensed audiologist Jill Hawkins signed an employment agreement with Audiology Distribution, LLC, doing business as HearUSA, containing a covenant not to compete. Under the covenant, Hawkins agreed that, for a 12-month period following the termination of her employment with HearUSA, she would not compete for audiology patients within a 10-mile radius of her employment location at HearUSA.

In September 2013, Hawkins resigned from HearUSA, after earlier incorporating her own limited liability company and having it sign a lease for a business property less than 3 miles from HearUSA’s location. In November 2013, she began seeing patients at her new location, the majority of whom had been patients at HearUSA.

In November 2013, HearUSA brought an action alleging that Hawkins breached the covenant not to compete. HearUSA sought a temporary restraining order against her competing business, which the court granted, and a permanent injunction. Hawkins filed counterclaims, alleging, among other claims, that HearUSA had violated the West Virginia Antitrust Act (WVATA). After her antitrust counterclaims were dismissed, Hawkins moved to re-plead them.

Restraint of trade. To state a claim under §47-18-3 of the West Virginia Antitrust Act (WVATA), the court explained, there must be an allegation of conspiracy and that the concerted action imposed an unreasonable restraint on trade. The court noted that a covenant not to compete is not a per se antitrust violation, so it must be evaluated under the rule of reason approach. Under that approach, injury to the party making the claim is, alone, insufficient; it must also be shown that there has been injury to competition itself, as shown by increased costs, reduced supply or patient harm.

The court noted that in Hawkins’ revised counterclaim, she alleged that HearUSA’s concerted action, in imposing covenants not to compete on employees, was designed to eliminate competition “at least by Hawkins or those with whom she would associate.” This failed to state a claim upon which relief could be granted, the court stated. Assertions concerning Hawkins and not the relevant geographic market do not allege an injury to competition itself, as required by WVATA §47-18-3, the court found.

Monopoly. To state a claim under §47-18-4 of the WVATA, the court explained, there must be an allegation of monopoly power and a willful acquisition or maintenance of that power. In Hawkins’ revised counterclaim, she alleged that HearUSA had a monopoly in the 10-mile radius restricted area, allowing it to charge inflated prices. However, the court noted, there was no assertion that HearUSA prevented any other entity from entering into the audiology business within that area, or that it otherwise willfully acquired or maintained monopoly power. A business preventing one person or entity from entering a given region does not meet the definition of controlling that region. Therefore, this claim too failed to state a claim upon which relief could be granted, the court found.

Consequently, the court ruled that amendment of her antitrust counterclaims would be futile and denied Hawkins’ motion to amend her complaint in this regard.

The case is Civil Action No. 5:13CV154.

Attorneys: Theodore A. Schroeder (Littler Mendelson, PC) for Audiology Distribution, LLC. Michael A. Adams (Hinerman & Associates) for Jill K. Hawkins.

Companies: Audiology Distribution, LLC; Hawkins Hearing, LLC

MainStory: TopStory Antitrust WestVirginiaNews

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