Non-Compete Agreement Inapplicable to Former LLC Member.

In 2000, a group of doctors formed an LLC to provide diagnostic testing services to patients in two counties.  They had a post-withdrawal non-compete agreement prepared that included a provision protecting member investments by restricting competition of former members in the two counties in which the LLC operated.  The provision specified that "each member shall...refrain from competing with the Company" within the two designated counties.  About five years later, one of the doctors began constructing a sleep laboratory and was going to operate it in the designated counties.  The LLC informed the doctor that such operation would violate the LLC agreement, so he withdrew from the LLC and operated the sleep lab.  The LLC sued the doctor for breach of the non-compete agreement.  The trial court ruled for the former member, holding that the agreement only applied to current or active members.  On appeal, the court affirmed, holding that the agreement no longer applied to a former member.  The court also held that the withdrawn doctor did not breach any implied duty of good faith and fair dealing and that the LLC had foregone any breach of fiduciary duty claim.  Grants Pass Imaging & Diagnostic Center, LLC, et al. v. Machini, No. A152437 (Ore. Ct. App. Mar. 25, 2015).    

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