FORT LAUDERDALE NON-COMPETE AGREEMENT: CHOICE OF LAW

The outcome of a lawsuit can be determined by the applicable law. Parties to a contract can choose which state’s laws apply to the execution of the contract by using a choice of law provision. Many contracts contain choice of law provisions, but few contracting parties think critically about the ramifications for selecting the application of one state’s laws over another state’s laws. Below, we provide some insight into how the selection of laws can have substantial consequences for the enforcement of restrictive covenants like non-compete provisions. The Fort Lauderdale business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

Contractual choice of law provisions are generally enforced and presumed valid. Continental Mortgage Investors v. Sailboat Key, Inc., 395 So. 2d 507 (Fla. 1981) (demonstrating that courts uniformly enforce choice of law provision.”); Mazzoni Farms, Inc. v. E.I. DuPont De Nemours & Co., 761 So. 2d 306 (Fla. 2000) (The “choice-of-law provision is presumptively valid.”). Theprovision will only be rejected when the foreign law violates public policy of the forum jurisdiction. Delhomme Indus., Inc. v. Houston Beechcraft, Inc., 669 F.2d 1049 (5th Cir.1982) (“The party who seeks to prove [a choice of law] provision invalid because it violates public policy bears the burden of proof.”). This is a high bar of proof. Pizza U.S.A. of Pompano Inc. v. R/S Assocs. of Fla., 665 So. 2d 237 (Fla. 4th DCA 1995) (“[U]nless it is made clear to appear that there has been some great prejudice to the dominant public interest sufficient to overthrow the fundamental policy of the right to freedom of contract between parties sui juris.”). “The [mere] fact that the law of the forum state is different than the law of the foreign state does not mean that the foreign state’s law necessarily is against the public policy of the forum state.” Punzi v. Shaker Adver. Agency, Inc., 601 So. 2d 599 (Fla. 2d DCA 1992).

Parties choosing to apply Florida law to restrictive covenants will have to plead and prove the existence of at least one legitimate business interest justifying enforcement of those restrictive covenants. Florida’s legislature created a non-exhaustive list of legitimate business interests. White v. Mederi Caretenders Visiting Services of Se. Florida, LLC, 226 So. 3d 774 (Fla. 2017) (“The statute defines legitimate business interests through a non-exhaustive list.”). They include trade secrets, valuable confidential business information, substantial customer relationships, goodwill, or specialized training. Fla. Stat. § 542.335. However, parties choosing to apply Colorado law to restrictive covenants will have a more difficult time enforcing those restrictive covenants because the restrictive covenant statute in Colorado is more restrictive. Colorado limits the legitimate business interests to trade secrets, paid training, and paid scholarships. Colo. Rev. Stat. § 8-2-113. Colorado also has certain income thresholds and notification requirements that often have to be met before enforcement of the restrictive covenant is permitted. Therefore, the application of Colorado law to a restrictive covenant makes it harder to enforce than Florida law. If you are the party that would want to enforce the restrictive covenant, choosing Florida law or the laws of other states similar to Florida would provide the best chance of success. Conversely, if you are the party that would likely want to avoid enforcement of the restrictive covenant, selecting the application of Colorado law or states like Colorado would provide you the best chance of success.  

The Fort Lauderdale business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.