For businesses, the decision highlights the value of careful drafting in equity, bonus, deferred-compensation and buyout arrangements.
On August 6, 2026, in Afzal v. Ramineni, No. 09-25-00138-CV (Tex. App.—Beaumont Aug. 6, 2026) (mem. op.), the Texas Ninth Court of Appeals issued an important reminder that not every contract provision tied to post-employment competition is automatically a noncompete governed by the reasonableness requirements of Section 15.50 of the Texas Business and Commerce Code.
The provision at issue, Section 5.2b of Healing Hearts Clinic’s shareholders’ agreement, required a departing physician-shareholder to sell his shares back for a nominal “agreed value” and then provided:
In addition, if the Transferor continues to practice cardiology, but outside of a twenty (20) mile radius from the principal office of the [clinic] or if such Transferor retires from the active practice of cardiology, then such Transferor shall also receive an amount equal to 50% of his or her accounts receivable as of the Closing Date.
The physician left, opened a practice across the street and sued for $428,828.43—50 percent of his receivables—arguing that the 20-mile condition was an unenforceable noncompete. The trial court agreed, severed the condition and awarded the physician-shareholder that amount plus fees, interest and costs. The appellate court reversed and rendered a take-nothing judgment.
Applying Exxon Mobil Corp. v. Drennen, 452 S.W.3d 319 (Tex. 2014), the appellate court held that Section 5.2b was a forfeiture provision, not a covenant not to compete. It did not bar the physician from practicing anywhere but, instead, gave him a choice: practice outside the radius and receive an additional payment, or compete nearby and forgo it. Because the court viewed the payment as an unvested bonus to which the physician otherwise had no right, it held that the provision was not a covenant not to compete.
That distinction matters. Had Section 5.2b of the shareholders’ agreement been a noncompete, it would have had to satisfy Section 15.50 of the Texas Business and Commerce Code, including reasonable time, area and scope limits as well as physician-specific buyout and patient-access requirements, and would have been subject to statutory judicial reformation. Because it was not a noncompete, Chapter 15 did not apply, the trial court had no authority to rewrite it and—with the condition intact—there was no evidence of breach by the clinic. The court did not reach the physician’s separate restraint-of-trade theory under Section 15.05(a), which had been dismissed without prejudice.
For businesses, the decision highlights the value of careful drafting in equity, bonus, deferred-compensation and buyout arrangements. A provision that bars work for a competitor or penalizes competition too aggressively may still be attacked as a noncompete, but a well-drafted forfeiture or incentive provision may be treated differently when it does not restrain the individual’s ability to work. While employers should not read the decision as a blanket approval of all competition-based forfeitures, particularly where state noncompete statutes, medical practice rules or public-policy concerns may apply, the practical takeaway is that companies should review their restrictive covenants and compensation structures together, because the enforceability analysis may turn on whether the provision restricts competition or merely conditions unvested economic benefits on a permissible business choice.
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