Articles Posted in Non-Compete Agreements

In Florida business litigation, a non-compete restriction may not exist solely as a tool to eliminate competition or merely to prevent an employee from working with a competing employer in any capacity. Crom, LLC v. Preload, LLC, 380 F. Supp. 3d 1190 (N.D. Fla. 2019). When a breach-of-contract action is based upon enforcement of a restrictive covenant, the plaintiff must plead and prove specific elements to establish that the restrictive covenant is a valid restraint of trade. Rauch, Weaver, Norfleet, Kurtz & Co., Inc. v. AJP Pine Island Warehouses, Inc., 313 So. 3d 625 (Fla. 4th DCA 2021). “[T]he term ‘restrictive covenants’ includes all contractual restrictions upon competition, such as noncompetition/nonsolicitation agreements, confidentiality agreements, exclusive dealing agreements, and all other contractual restraints of trade.” Henao v. Prof’l Shoe Repair, Inc., 929 So. 2d 723 (Fla. 5th DCA 2006). Peter Mavrick is a Miami business litigation attorney, and represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents 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 law, and other legal disputes in federal and state courts and in arbitration.

“Section 542.335 contains a comprehensive framework for analyzing, evaluating and enforcing restrictive covenants in Florida based on an ‘unfair competition’ analysis.” Henao v. Prof’l Shoe Repair, Inc., 929 So. 2d 723 (Fla. 5th DCA 2006). Under Section 542.335, three requirements must be satisfied for a restrictive covenant to be enforceable: (1) the restrictive covenant must be “set forth in writing signed by the person against whom enforcement is sought”; (2) the party seeking to enforce the restrictive covenant “shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant”; and (3) the party seeking to enforce the restrictive covenant “shall plead and prove that the contractually specified restraint is reasonably necessary to protect the legitimate business interest or interests justifying the restriction.” § 542.335, Fla. Stat.

Any restrictive covenant that is not supported by a legitimate business interest is unlawful, void, and unenforceable. § 542.335, Fla. Stat. “[T]he determination of whether an activity qualifies as a protected legitimate business interest under [section 542.335] is inherently a factual injury, which is heavily industry – and context-specific.” White v. Mederi Caretenders Visiting Servs. of Se. Fla., LLC, 226 So. 3d 774 (Fla. 2017). “Section 542.335 provides a list of ‘legitimate business interests,’ but it specifically states that the list is not exclusive.” Infinity Home Care, L.L.C. v. Amedisys Holding, LLC, 180 So. 3d 1060 (Fla. 4th DCA 2015). This list includes, but is not limited to the following: trade secrets; valuable confidential business or professional information that otherwise does not qualify as trade secrets; substantial relationships with specific or existing customers, patients, or clients; customer, patient, or client goodwill associated with an ongoing business or professional practice, a specific geographic location, or a specific marketing or trade area; and extraordinary or specialized training. § 542.335, Fla. Stat.

Under Florida law, non-compete agreements are enforceable to protect a company’s customer, patient, or client goodwill. In business litigation, a business’ goodwill qualifies as a legitimate business interest under Section 542.335, Florida’s non-compete statute. “Florida statutory law (as a matter of public policy) does not allow a party to enforce a restrictive covenant unless it proves that enforcement is necessary to protect its legitimate business interests.” Evans v. Generic Sol. Eng’g, LLC, 178 So. 3d 114 (Fla. 5th DCA 2015). Section 542.335 includes a non-exhaustive list of examples of legitimate business interests, one of which is a party’s “customer, patient, or client goodwill” associated with “a specific geographic location” or “a specific marketing or trade area.” Ansaarie v. First Coast Cardiovascular Inst., P.A., 252 So. 3d 287 (Fla. 1st DCA 2018). Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents 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.

In business litigation, some Florida courts have viewed a company’s purported goodwill as an asset that generates a reasonable expectation of greater-than-usual business or revenue. Held v. Held, 912 So. 2d 637 (Fla. 4th DCA 2005). Customer goodwill also typically qualifies as a “legitimate business interest” if it “represent[s] an investment by the employer” and “enable[s] unfair competition if misappropriated.” IDMWORKS, LLC v. Pophaly, 192 F. Supp. 3d 1335 (S.D. Fla. 2016). In Swann v. Mitchell, Florida’s Supreme Court defined goodwill as “the advantage or benefit the business has beyond the mere value of its property and capital.” Swann v. Mitchell, 435 So. 2d 797 (Fla. 1983). “Black’s Law Dictionary defines goodwill as ‘the ability of a business to generate in excess of a normal rate on assets due to superior managerial skills, a market position, [or] new product technology.’” Nelson v. Nelson, 795 So. 2d 977 (Fla. 5th DCA 2001).

“Courts are statutorily required to construe a restrictive covenant in favor of providing reasonable protection to all legitimate business interests established by the person seeking enforcement.” SC Maint., Inc. v. Martin, 2021 WL 4948183 (M.D. Fla. Aug. 22, 2021). To determine whether a business’ customer goodwill exists, Florida courts analyze the scope and nature of the business’ customer relationships. Florida courts typically focus on the geographic regions where the customers are located. For example, in Surgery Center Holdings, Inc. v. Guirguis, Florida’s Second District Court of Appeal held that the business “established patient goodwill within a specific geographic location and substantial relationships with existing patients, proving legitimate business interests that are reasonably related to the restrictive covenants.” 318 So. 3d 1274 (Fla. 2d DCA 2021). Guirguis relied upon documentation, testimony, and other testimony demonstrating that the business “invest[ed] in physicians, geographies, and markets to best serve their patient population.” Surgery Ctr. Holdings, Inc. v. Guirguis, 318 So. 3d 1274 (Fla. 2d DCA 2021).

Florida Courts routinely enforce non-compete agreements to prevent a former or current employees’ improper solicitation of the business’ current and prospective employees and customers.  Such restrictive covenants, also commonly referred to as non-solicitation provision, are governed by Section 542.335, Florida Statutes. The non-solicitation provisions must be: (1) reasonable in time, area, and line of business, (2) supported by a legitimate business interest, and (3) reasonably necessary to protect such interest. Non-solicitation clauses are useful to protect a business’ substantial business relationships with its existing or prospective customers. As with other contractual covenants, Florida courts will interpreted interpret non-solicitation provisions under Florida law in business litigation. Peter Mavrick is a Fort Lauderdale non-compete attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents 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.

“Generally, the intentions of the parties to a contract govern its construction and interpretation.” Waverly 1 & 2, LLC v. Waverly at Las Olas Condo. Ass’n, 242 So. 3d 425 (Fla. 4th DCA 2018). Where contractual terms are clear and unambiguous, the court is bound by the plain meaning of those terms. The intent of the parties by their use of such terms must be discerned from within the ‘four corners of the document.’”  Emerald Pointe Prop. Owners’ Ass’n, Inc. v. Commercial Const. Indus., Inc., 978 So. 2d 873 (Fla. 4th DCA 2008). ”Furthermore, the language being interpreted must be read in conjunction with the other provisions in the contract.”  Waverly 1 & 2, LLC v. Waverly at Las Olas Condo. Ass’n, Inc., 242 So. 3d 425 (Fla. 4th DCA 2018). ”In construing the language of a contract, courts are to be mindful that ‘the goal is to arrive at a reasonable interpretation of the text of the entire agreement to accomplish its stated meaning and purpose.’”  Silver Shells Corp. v. St. Maarten at Silver Shells Condo. Ass’n, 169 So. 3d 197 (Fla. 1st DCA 2015).  ”To that end, a cardinal principle of contract interpretation is that the conduct must be interpreted in a manner that does not render any provision of the contract meaningless.” Silver Shells Corp. v. St. Maarten at Silver Shells Condo. Ass’n, 169 So. 3d 197 (Fla. 1st DCA 2015).

Florida courts that interpret a “solicitation” term in a non-compete agreements typically find found that the offending “solicitation” must be active, rather than passive. In Scarbrough v. Liberty Nat’l Life Ins. Co., the Florida’s First District Court of Appeal held “that the term ‘solicit’ in an agreement prohibited the employee from being ‘proactive’ in such efforts”. 872 So. 2d 283 (Fla. 1st DCA 2004). In this sense, an employee’s mere suggestion or statement to coworkers that they are starting their own business likely will not, on its own, qualify as a “solicitation” under Florida law.

A prevalent issue in non-compete litigation is whether a company’s non-compete agreement is enforceable to protect a company’s customer, patient, or client goodwill. In certain sitations, a company’s goodwill qualifies as a legitimate business interest under Section 542.335, Florida’s non-compete statute. “Florida statutory law (as a matter of public policy) does not allow a party to enforce a restrictive covenant unless it proves that enforcement is necessary to protect its legitimate business interests.” Evans v. Generic Sol. Eng’g, LLC, 178 So. 3d 114 (Fla. 5th DCA 2015). Section 542.335 includes a non-exhaustive list of examples of legitimate business interests, one of which is a party’s “customer, patient, or client goodwill” associated with “a specific geographic location” or “a specific marketing or trade area.” Ansaarie v. First Coast Cardiovascular Inst., P.A., 252 So. 3d 287 (Fla. 1st DCA 2018). Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents 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.

Goodwill typically qualifies as a “legitimate business interest” if it “represent[s] an investment by the employer” and “enable[s] unfair competition if misappropriated.” IDMWORKS, LLC v. Pophaly, 192 F. Supp. 3d 1335 (S.D. Fla. 2016). “Courts are statutorily required to construe a restrictive covenant in favor of providing reasonable protection to all legitimate business interests established by the person seeking enforcement.” SC Maint., Inc. v. Martin, 2021 WL 4948183 (M.D. Fla. Aug. 22, 2021). In business litigation, some Florida courts have viewed a company’s purported goodwill as an asset that generates a reasonable expectation of greater-than-usual business or revenue. Held v. Held, 912 So. 2d 637 (Fla. 4th DCA 2005). In Swann v. Mitchell, Florida’s Supreme Court defined goodwill as “the advantage or benefit the business has beyond the mere value of its property and capital.” Swann v. Mitchell, 435 So. 2d 797 (Fla. 1983). “Black’s Law Dictionary defines goodwill as ‘the ability of a business to generate in excess of a normal rate on assets due to superior managerial skills, a market position, [or] new product technology.’” Nelson v. Nelson, 795 So. 2d 977 (Fla. 5th DCA 2001).

When determining whether goodwill exists in business litigation, Florida courts often must also analyze the scope and nature of the business’ customer relationships. To this end, Florida courts typically focus on the geographic regions where the customers are located. For example, in Surgery Center Holdings, Inc. v. Guirguis, Florida’s Second District Court of Appeal held that the business “established patient goodwill within a specific geographic location and substantial relationships with existing patients, proving legitimate business interests that are reasonably related to the restrictive covenants.” 318 So. 3d 1274 (Fla. 2d DCA 2021). Guirguis relied upon documentation, testimony, and other testimony demonstrating that the business “invest[ed] in physicians, geographies, and markets to best serve their patient population.” Surgery Ctr. Holdings, Inc. v. Guirguis, 318 So. 3d 1274 (Fla. 2d DCA 2021).

Businesses can use non-compete agreements to protect their substantial business relationships with prospective and current customers, patients, or clients. A common issue in business litigation seeking to enforce non-compete agreements is whether the business sufficiently demonstrates that it has substantial business relationships to protect. Such business relationships are typically based on the contractual agreements between the business and customer. However, a business can establish a “prospective” substantial relationship when the customers are specific and identifiable. Peter Mavrick is a Miami business litigation attorney, and represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents 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.

To “enforce restrictive covenants under Florida law, a plaintiff must plead and prove the existence of one or more legitimate business interests justifying a restrictive covenant; generally, a legitimate business interest takes the form of confidential information, substantial customer relationships, or extraordinary training and education, and a restrictive covenant may be no broader than is necessary to protect the legitimate business interest at issue.” Lucky Cousins Trucking, Inc. v. QC Energy Resources Texas, LLC, 223 F. Supp. 3d 1221 (M.D. Fla. 2016). Under Florida law, “to have protectable interest in specific prospective or existing customer relationships, employer seeking to enforce restrictive covenant in employment agreement need not prove that its former employee himself had a substantial relationship with any particular customer; proper inquiry focuses on relationship between employer and its prospective and existing customers.” Milner Voice and Data, Inc. v. Tassy, 377 F. Supp. 2d 1209 (S.D. Fla. 2005).

A business’ customer relationships are protected as legitimate business interests under Section 542.335, Florida Statutes, because such relationships are often the lifeblood of a business. Indeed, “[a]s with many sales positions, regardless of the industry, forming relationships with prospective and existing customers is invaluable and often vital for success.” Allied Universal Corp. v. Given, 223 So. 3d 1040 (Fla. 3d DCA 2017). This is one example of why “the harm presumed under the statute includes the potential damages to [the plaintiff’s] longstanding relationships with its customers and the protection of confidential client information.” Variable Annuity Life Ins. Co. v. Hausinger, 927 So. 2d 243 (Fla. 2d DCA 2006).