In Bako Pathology LP v. Bakotic, 382 (Del. November 28, 2022), the appellants argued that the trial court erred in its calculation of damages and by refusing to award attorney fees under the parties’ agreements. The doctors, who were the plaintiffs in the original action, cross-appealed. Among the doctors’ challenges were the trial court’s finding that Del. Code tit. 6 § 2707 was inapplicable and its finding that the doctors breached their employment and partnership agreements’ non-compete provisions. 

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Del. Code tit. 6 § 2707 was inapplicable 

The Delaware Supreme Court affirmed the trial court’s finding that Del. Code tit. 6 § 2707 was inapplicable. Section 2707 governs agreements not to compete between and/or among physicians that restrict a physician's right to practice medicine. The statute required the counterparties to be physicians. The Court explained that nothing in the record suggested that the signatories to the agreements were acting in any capacity other than as investors in the company (Bako, LP). 

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The doctors’ participation in conferences breached the non-compete provisions

The employment agreements’ non-compete provisions set out that the doctors could not perform the same or similar duties that they performed for the company. While working for Bako, LP, the doctors routinely sponsored and gave lectures on podiatry topics at medical conferences, which helped the business gain success. Thus, by continuing to engage in this marketing strategy after they left the company, the doctors violated the non-compete provisions. 

The Court also found that the record supported the trial court’s conclusion that the doctors breached the partnership agreement’s non-compete provision. The partnership agreement included a broad restriction on business interests and activities in direct competition with the partnership or any of its subsidiaries. The trial court found that the doctors’ activities were detrimental to the company’s historical marketing practices. Furthermore, the doctors hired several previous Bako, LP employees and purchased lab equipment. Thus, the trial court found there was no doubt that the doctors intended to conduct their new business activities with the intent of undermining the company.

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Disposition

The Court affirmed the trial court’s decisions on the cross-appellants’ claims. However, the Court remanded two aspects of the trial court’s damages calculations for clarification and revision, if necessary. Additionally, the Court reversed the trial court’s decision not to award attorneys’ fees under the employment agreements and remanded the issue for further development of the record.