Published on:

$500K Damages Award Supported By Evidence in Breach of Covenant Not to Compete Action

In a recent unpublished opinion, the Nevada Supreme Court reversed a district court’s order for a new trial on the issue of damages in an action involving the breach of a covenant not to compete. In Georges Tannoury, MD, PC v. Stacey Kokopelli Medical, P.C., Dr. Tannoury, doing business as Specialty Medical Center (SMC), hired Dr. Stacey to work with the medical practice. At the start of the relationship, Dr. Stacey signed a contract that required her to work for SMC for three years, and that included a covenant not to compete with SMC. After less than ten months, Dr. Stacey resigned from SMC and opened her own practice, in violation of the non-compete agreement.

A jury returned a verdict in favor of SMC, and awarded SMC $500,000 in damages. Agreeing with Dr. Stacey that the jury manifestly disregarded the court’s instruction that damages for breach of a covenant not to compete must be proven with reasonable certainty, the district court allowed Dr. Stacey’s motion for a new trial as to damages.

On appeal, the Nevada Supreme Court reversed the grant of the new trial. The court noted that, in a breach of contract case, “lost profits are generally an appropriate measure of damages so long as the evidence provides a basis for determining, with reasonable certainty, what the profits would have been had the contract not been breached.” The evidence at trial showed that the $500,000 damages award was less than 20 percent of the revenue SMC estimated it would have received had Dr. Stacey stayed with the practice for the full three years per the contract. That estimate did not include the revenue that SMC expected Dr. Stacey would generate from ancillary services over that same time period.

The court concluded that the $500,000 damages award was within the damages calculations that could be supported by the evidence in the record, and reflected an appropriate measure of damages for Dr. Stacey’s breach of her non-compete agreement with SMC.