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Articles Posted in Non-Compete Agreements

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A third-party can enforce a contract even though it is not a party to that contract if the contracting parties expressly intended to primarily and directly benefit the third-party. Bochese v. Town of Ponce Inlet, 405 F.3d 964 (11th Cir. 2005) (“Under Florida law, a third party is an intended beneficiary of a contract between two other parties only if a direct and primary object of the contracting parties was to confer a benefit on the third party.”). One should not assume all contractual benefits befalling a third-party allows that third-party to enforce the contract because the benefit may only be incidental. Id. (“If the contracting parties had no such purpose in mind, any benefit from the contract reaped by the third party is merely ‘incidental,’ and the third party has no legally enforceable right in the subject matter of the contract.”) (collecting cases). Therefore, the court must determine whether the contracting parties entered the agreement for the direct and substantial purpose of conferring a benefit on the third-party. Id. Peter Mavrick is a Fort Lauderdale business litigation attorney.  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.

Ordinarily, the contract does not need to contain an express third-party beneficiary provision to allow that third-party to enforce the contract because courts look to the nature or terms of a contract to determine whether the contracting parties’ manifested an intent to benefit the third-party. Jenne v. Church & Tower, Inc., 814 So. 2d 522 (Fla. 4th DCA 2002) (“Florida law looks to “nature or terms of a contract” to find the parties’ clear or manifest intent that it “be for the benefit of a third party.” (citing Am. Sur. Co. of New York v. Smith, 130 So. 440 (Fla. 1930)). However, restrictive covenants are an exception to the rule. Florida Statute § 542.335 requires that “the restrictive covenant expressly identif[y] the person as a third-party beneficiary of the contract and expressly state[ ] that the restrictive covenant was intended for the benefit of such person.” Therefore, a third-party cannot enforce a restrictive covenant unless the contract contains an express provision allowing that third-party to do so. See Cellco P’ship v. Kimbler, 68 So. 3d 914 (Fla. 2d DCA 2011) (“The undisputed evidence was that Alltel and Cellco did not merge and that Alltel did not assign the restrictive covenant rights to Cellco. As a result, Cellco cannot enforce the Alltel–Kimbler agreement because it is not a party to the agreement nor is it a third-party beneficiary, assignee, or successor in interest.”).

Tusa v. Roffe, 791 So. 2d 512 (Fla. 4th DCA 2001) illustrates this point of law well. Tusa was a pizza restaurant and entered a contract with Roffe to rent commercial space needed to make and sell pizzas. Id. The lease contract prohibited Roffe from leasing other property on the premises to anyone who sold pizza. Id. About two months later, Roffe leased space to KKA, which also sold pizza. Id. The Roffe/KKA lease contained a provision prohibiting KKA from selling pizzas. Id. Tusa quickly discovered KKA was a pizza restaurant and commenced a lawsuit against KKA and Roffe to stop KKA from selling pizza. Id. The court dismissed Tusa’s lawsuit against KKA because the Roffe/KKA lease did not contain a provision expressly identifying Tusa as a third-party beneficiary to the contract. Id. However, the court also determined Roffe breached the Roffe/Tusa lease because Roffe allowed KKA to open a pizza restaurant on premises in violation of Tusa’s restrictive covenants. Id. (“The only reasonable interpretation of the covenant’s language that would support its protective purpose is if Roffe was prohibited from leasing space to another restaurant that sold pizza in the same building as Tusa’s restaurant.”).

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The parol evidence rule is a substantive rule of law that limits the introduction of evidence to interpret the meaning of a contractual provision. King v. Bray, 867 So. 2d 1224 (Fla. 5th DCA 2004) (“The parol-evidence rule is a substantive rule of law and… provides that a written document intended by the parties to be the final embodiment of their agreement may not be contradicted, modified or varied by parol evidence.”). The general rule prohibits the use of parol evidence to interpret contracts. As Florida’s Fifth District Court of Appeal explained in King v. Bray, 867 So. 2d 1224 (Fla. 5th DCA 2004), courts presume the parties entering the contract intended their writing “to be the sole expositor of their agreement.”  As an example, the parol evidence rule would prohibit the introduction of evidence regarding an oral agreement the parties entered contemporaneously with the written agreement. Madsen, Sapp, Mena, Rodriguez & Co., P.A. v. Palm Beach Polo Holdings, Inc., 899 So. 2d 435 (Fla. 4th DCA 2005) (“The parol evidence rule provides that a contemporaneous oral agreement may not be used to vary the terms of a written agreement unless there is ambiguity as to the meaning of the contract.”). Peter Mavrick is a Miami business litigation attorney, and represents clients 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.

Contractual ambiguity is an exception to the parole evidence rule. When the term of a contract is ambiguous, parol evidence is admissible to “explain, clarify or elucidate” the ambiguous term. Strama v. Union Fid. Life Ins. Co., 793 So.2d 1129 (Fla. 1st DCA 2001) (citation omitted). However, a trial court cannot admit parol evidence until it first determines the term in dispute is ambiguous. See Weisfeld-Ladd v. Estate of Ladd, 920 So. 2d 1148 (Fla. 3d DCA 2006). Ambiguous terms are susceptible to more than one meaning. Friedman v. Va. Metal Prods. Corp., 56 So.2d 515 (Fla.1952). The court must determine whether the provision in question is susceptible to more than one meaning because it is a question of law. Strama v. Union Fid. Life Ins. Co., 793 So. 2d 1129, 1132 (Fla. 1st DCA 2001) (“The initial determination of whether the contract term is ambiguous is a question of law for the court, and, if the facts of the case are not in dispute, the court will also be able to resolve the ambiguity as a matter of law.”). Thereafter, the fact finder determines the correct interpretation of the ambiguous provision assuming the parties disagree on the interpretation. Universal Underwriters Ins. Co. v. Steve Hull Chevrolet, Inc., 513 So.2d 218 (Fla. 1st DCA 1987). (“Where the terms of the written instrument are disputed and reasonably susceptible to more than one construction, an issue of fact is presented as to the parties’ intent which cannot properly be resolved by summary judgment.”).

Non-compete contracts are no exception. The parol evidence rule prohibits introduction of evidence intended to demonstrate the meaning of a restrictive covenant provision unless a party shows the covenant is susceptible to more than one meaning. Thompson v. Squibb, 183 So.2d 30 (Fla. 2d DCA 1966). (“In construing restrictive covenants[,] the question is primarily one of intention, and the fundamental rule is that the intention of the parties as shown by the agreement governs, being determined by a fair interpretation of the entire text of the covenant.”); Barnett v. Destiny Owners Ass’n, Inc., 856 So. 2d 1090 (Fla. 1st DCA 2003) (holding that when a restrictive covenant is ambiguous, parol evidence regarding the developer’s intent is material). Application of the parol evidence rule in a restrictive covenant lawsuit may enable the party opposing enforcement to create a factual issue and avoid early judgment. See Evergreen Communities, Inc. v. Palafox Pres. Homeowners’ Ass’n, Inc., 213 So. 3d 1127 (Fla. 1st DCA 2017) (finding that the “language in the declaration of covenants and restrictions that expressed the developer’s personal intent to develop the property for commercial use is ambiguous as to whether the developer intended to create a restriction on the property such that it could only be used for commercial purposes” and reversing summary judgement because an ambiguity existed).

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Restrictive covenants like non-compete agreements and non-solicit agreements are valid if supported by one or more legitimate business interests. Fla. Stat. § 542.335. Those legitimate business interests often include the protection of trade secrets, valuable information that does not qualify as trade secret, existing customers, or future prospective customers. Id. However, legitimate business interests can also include extraordinary or specialized training. Id. This type of legitimate business interest is often pleaded by a former employer seeking to enforce its restrictive covenant against a former employee, but commonly rejected by the fact-finder. Below we identify the facts needed to successfully assert an extraordinary or specialized training legitimate business interest claim and provide some examples demonstrating why claims for extraordinary or specialized training frequently fail. Peter Mavrick is a Fort Lauderdale business litigation attorney.  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.

All training does not qualify as extraordinary or specialized training. “To constitute a protectible interest,… the provi[sion] of training or education must be extraordinary.” Hapney v. Cent. Garage, Inc., 579 So. 2d 127 (Fla. 2d DCA 1991), reh’g denied and opinion modified, (Fla. 2d DCA May 15, 1991). Therefore, the training must go “beyond what is usual, regular, common, or customary in the industry in which the employee is employed. Id. Courts reason that extraordinary training allows employees to gain unique skills or an enhanced sophistication that makes it unfair for those employees to use the new skills to compete. Id.

It is difficult to precisely distinguish between training that does and does not qualify as a legitimate business interest because it is a fact-based inquiry that varies industry to industry. Id. Notwithstanding, the case law provides some guidance by demonstrating that routine training does not meet the extraordinary standard. In IDMWORKS, LLC v. Pophaly, 192 F. Supp. 3d 1335 (S.D. Fla. 2016), the court ruled the plaintiff’s training was not a legitimate business interest for three reasons. First, the training provided by the former employer to the former employee was typical of most industries because the plaintiff failed to produce evidence demonstrating the training went beyond industry norms. Id. (“The only testimony about training within the industry came from the Defendant, who testified that the training he received was not different from training he would expect to receive at other companies in the industry.”). Second, the former employer’s provision of a database containing training materials did not create a legitimate business interest because the evidence established that many other companies can access the same database for those same training materials. Id. Third, the evidence revealed that the training materials provided by the employer were optional. Id; see also Autonation, Inc. v. O’Brien, 347 F. Supp. 2d 1299 (S.D. Fla. 2004) (“O’Brien testified that he was not required to attend the various training seminars and only ‘popped in and out’ of the meetings. Accordingly, AutoNation has not demonstrated any specialized training exceeding what would be common or typical in the industry.”).

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A party seeking to enforce a restrictive covenant must plead and prove the existence of one or more legitimate business interests. Fla. Stat. § 542.335. The proponent typically claims to have a legitimate business interest in its trade secrets, valuable confidential information that otherwise does not qualify as a trade secret, substantial relationships with specific prospective or existing customers, or specialized training. Id. However, a lesser-known category of legitimate business interest called customer goodwill is also available. Id. The goodwill legitimate business interest usually has to be associated with an ongoing business, a trade name, a trademark, trade dress, a specific geographic location, or a specific marketing area. Id.  However, this is not always the case. In this article, we explore the courts’ willingness to expanded the goodwill legitimate business interest to franchisor/franchisee relationships even though these relationships are not specifically defined as goodwill. Peter Mavrick is a Fort Lauderdale business litigation attorney.  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.

The goodwill legitimate business interest can be used to protect a franchise from unlawful competition. The franchisor assets a claim against its franchisee for violating a non-compete provision and, in turn, the franchisee attempts to defend the claim by asserting the franchisor has no legitimate business interest in protecting the goodwill of a franchise. E.g., Pirtek USA, LLC v. Layer, 2005 WL 8159764 (M.D. Fla. Sept. 23, 2005) (acknowledging that “goodwill associated with a company’s franchise system is not specifically listed in the Florida statute’s non-exclusive list of legitimate business interests.”). However, the franchisee’s argument is usually rejected because courts liken franchise goodwill to trademark goodwill. Id. (While “goodwill associated with a company’s franchise system is not specifically listed in the Florida statute’s non-exclusive list of legitimate business interests, it is akin to (and somewhat overlapping with) trademark-related goodwill.”). The rationale for expanding goodwill to franchises is that the franchisor “developed a system for operating [the business]… thereby develop[ing] good will in its trademarks” and the franchisor “recognized the value of this good will when he purchased the [ ] franchise.” Quizno’s Corp. v. Kampendahl, 2002 WL 1012997 (N.D. Ill. May 20, 2002); see also Economou v. Physicians Weight Loss Ctrs. of Am., 756 F. Supp. 1024 (N.D. Ohio 1991) (“The franchisee has gained knowledge and experience from the franchisor, and to allow the franchisee to use this knowledge and experience to serve former or potential customers of the franchisor would work a hardship and prejudice to the latter.”). As a result, the franchisee should not be permitted to benefit from the franchise it is prohibited from competing against. Servicemaster Residential/Commercial Servs., L.P. v. Westchester Cleaning Servs., Inc., 2001 WL 396520 (S.D. N.Y. Apr. 19, 2001) (“There is a recognized danger that former franchisees will use the knowledge that they have gained from the franchisor to serve its former customers, and that continued operation under a different name may confuse customers and thereby damage the good will of the franchisor.”).

Courts look to several unenumerated factors to determine whether the franchisor has a protectable legitimate business interest in the franchise’s goodwill. One factor is the amount of time and money the franchisor invested in creating the franchise. See Winmark Corp. v. Brenoby Sports, Inc., 32 F. Supp. 3d 1206 (S.D. Fla. 2014). Another factor is the extent to which the franchisor developed operational methods and practices employed by the franchisees that are designed to attract clients. U.S. Lawns, Inc. v. Landscape Concepts of CT, LLC, 2016 WL 9526340 (M.D. Fla. Oct. 31, 2016). And a third factor is the degree to which the franchisor created tools and resources for its franchisees to access and utilize in the operation of the franchisee’s business. Id.

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One cornerstone needed to enforce a valid restraint on trade is the requirement to be in writing and “signed by the person against whom enforcement is sought.” Fla. Stat. § 542.335. Courts use this requirement to reject enforcement of restrictive covenants that are not in writing or signed by the enforcee. See Iron Bridge Tools, Inc. v. Meridian Int’l Co., Ltd., USA, 2016 WL 8716673 (S.D. Fla. Feb. 2, 2016) (refusing to enforce the plaintiff’s claim because it hinged on a contract that was “in form and substance, an agreement in the nature of an agreement not to compete” that “was never reduced to a writing in any form”). Based on a plain reading of the statutory text, it seems obvious that one cannot be liable for violating a restrictive covenant he or she did not sign. However, this is not always true. The caselaw surrounding restrictive covenants provide courts with power to enjoin third-parties from helping another violate his or her restrictive covenant even though the third-party never signed the covenant. Infra. Peter Mavrick is a Fort Lauderdale business litigation attorney.  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.

Florida juris prudence contains many examples demonstrating that a third-party can be enjoined if he or she helps another violate his or her restrictive covenant. USI Ins. Services of Florida Inc. v. Pettineo, 987 So. 2d 763 (Fla. 4th DCA 2008) (“There is no doubt that a court can enjoin others who were not parties to the non-compete agreement” as long as they “receive notice and have an opportunity to be heard.”). The power to enjoin comes from common law rather than the restrictive covenant statute. Bauer v. DILIB, Inc., 16 So. 3d 318 (Fla. 4th DCA 2009) (At “no time has this court or any other court held that the power to enjoin third parties derives from section 542.335… Florida Statutes.”). Third-party enjoinment was created to prevent a person from violating a restrictive covenant through a strawman. Dad’s Properties, Inc. v. Lucas, 545 So. 2d 926 (Fla. 2d DCA 1989) (“Mr. Lucas cannot be allowed to do indirectly, through his wife and her controlled corporation, that which he covenanted not to do himself.”). Therefore, a third-party who knows about the restrictive covenant and provides substantial assistance to help violate the restriction will be enjoined. LLW Enter., LLC v. Ryan, 2020 WL 2630859 (M.D. Fla. May 4, 2020) (“A cause of action for aiding and abetting requires ‘(1) an underlying violation on the part of the primary wrongdoer; (2) knowledge of the underlying violation by alleged aider and abettor; and (3) the rendering of substantial assistance in committing the wrongdoing by the alleged aider and abettor.”). But the third-party will not be liable for damages. See Bauer, 16 So. 3d 318 (holding that the court could not require the third-party to pay the attorney’s fees of the covenant’s enforcer even though the court could enjoin the third-party from further assistance).

The first Florida case that allowed a third-party to be enjoined for helping violate a restrictive covenant was called W. Shore Rest. Corp. v. Turk, 101 So. 2d 123 (Fla. 1958). In Turk, the court looked to two decisions from the state of Washington. The first decision enjoined a son from helping his father operate a business that competed with the plaintiff in violation of a non-compete and the second decision found there was “overwhelming weight of authority” to enjoin a stranger of a restrictive covenant when he or she aids and abets. Id. (citing Madison v. La Sene, 44 Wash. 2d 546 (Wash. 1954) and Le Maine v. Seals, 47 Wash. 2d 259 (Wash. 1955)). Subsequent legal authorities in Florida rely on Turk to prohibit third-parties from rendering aid or assistance that would violate another’s restrictive covenant (assuming the elements escribed above are met). See, Yours-Temp. Help Services, Inc. v. Manpower, Inc., 377 So. 2d 825 (Fla. 1st DCA 1979) (finding that Turk recognized “a decree of injunction not only binds the parties[’] defendant but also those identified with them in interest, in privity with them, represented by them or subject to their control.”). Therefore, third-parties could become entangled in litigation concerning a restrictive covenant it did not sign if the third-party knows about the covenant and helps another to violate it.

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“Florida law … contains a comprehensive framework for analyzing, evaluating and enforcing restrictive covenants contained in employment contracts.”  Vital Pharmaceuticals, Inc. v. Alfieri, 23 F. 4th 1282, 1291 (11th Cir. 2022) (quotation and citation omitted).  This framework includes a burden shifting approach between the restrictive covenant’s enforcer and enforcee that provides each party with an opportunity the negate the other’s position. Below we explore the framework’s burden shifting approach and each parties’ ability to use those burdens to their advantage.  Peter Mavrick is a Fort Lauderdale business litigation attorney.  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.

The restrictive covenant’s enforcer has the initial burden of pleading and proving that the restrictive covenant is supported by one or more legitimate business interests justifying the restrictive covenant. Fla. Stat. § 542.335. These legitimate business interests are identified by statute in a non-exhaustive list and include the protection of trade secrets, valuable confidential business information that does not qualify as a trade secret, substantial relationships with specific prospective or existing customers, and customer good will. Id; Alonso-Llamazares v. Int’l Dermatology Research, Inc., 339 So. 3d 385 (Fla. 3d DCA 2022) (“Section 542.335(1)(b) sets forth a non-exhaustive list of legitimate business interests that may justify the restrictive covenant sought to be enforced.”). The initial requirement that the enforcer plead and prove the existence of a legitimate business interest may present the enforcee with his or her first opportunity to thwart enforcement. If the enforcee can demonstrate the enforcer failed to prove the existence of a legitimate business interest, the court cannot enforce the restrictive covenant. See Blue-Grace Logistics LLC v. Fahey, 653 F. Supp. 3d 1172 (M.D. Fla. 2023), appeal dismissed, 2023 WL 3691014 (11th Cir. Apr. 12, 2023) (granting summary judgment against the enforcer because it “repeatedly speaks of ‘confidential’ and ‘proprietary’ information, but it never explains exactly what that information is or what makes it proprietary or confidential. Even where it describes the information with slightly more detail, it fails to explain the information’s value”).

The enforcer must also plead and prove that the restrictive covenant is reasonably necessary to protect the legitimate business interest asserted. Fla. Stat. § 542.335. This presents the enforcee with his or her second opportunity to thwart enforcement of the restrictive covenant if the enforcee can prove the covenant does not reasonably protect the legitimate business interest. For example, maybe the confidential information the enforcer is trying to protect has no utility in the hands of a competitor. See Blue-Grace Logistics LLC, 653 F. Supp. 3d 1172 (granting summary judgment because the plaintiff failed to show that the purported confidential information “was still relevant ‘given fluctuations in the industry,’ which Blue-Grace’s corporate representative agreed led to rate changes and customers having to rebid their freight”). Or maybe, the enforcer no longer conducts business with the customer it is trying to protect. IDMWORKS, L.L.C. v. Pophaly, 192 F. Supp. 3d 1335 (S.D. Fla 2016) (rejecting the plaintiff’s request to enforce a non-compete agreement because a “company cannot successfully claim a protectable business interest in a relationship with a former customer”). These are just two ways the enforcee can demonstrate that the enforcer failed to meet its second burden.

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In the absence of a non-compete agreement, Florida law prohibits tortious interference with certain business relationships.  The Supreme Court of Florida, in Tamiami Trail Tours, Inc. v. Cotton, 463 So.2d 1126 (Fla. 1985), explained that the elements of a claim for tortious interference with a business relationship are “(1) the existence of a business relationship…(2) knowledge of the relationship on the part of the defendant; (3) an intentional and unjustified interference with the relationship by the defendant; and (4) damage to the plaintiff as a result of the breach of the relationship.”  A protected business relationship need not be evidenced by an enforceable contract.  In Landry v. Hornstein, 462 So.2d 844 (Fla. 3d DCA 1985), Florida’s Third District Court of Appeal explained in pertinent part: “An action for intentional interference is appropriate even though it is predicated on an unenforceable agreement, if the jury finds that an understanding between the parties would have been completed had the defendant not interfered…A mere offer to sell, however, does not, by itself, give rise to sufficient legal rights to support a claim of intentional interference with a business relationship.”  In other words, “an action for intentional interference with a business relationship will lie if the parties’ understanding would have been completed if the defendant had not interfered.”  Charles Wallace Co. v. Alternative Copier Concepts, Inc., 583 So.2d 396 (Fla. 2d DCA 1991).  Peter Mavrick is a Miami business litigation attorney, and represents clients 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.

Important precedent from the Supreme Court of Florida, in Ethan Allen, Inc. v. Georgetown Manor, Inc., 647 So.2d 812 (Fla. 1995), held that “a plaintiff may properly bring a cause of action alleging tortious interference  with present or prospective customers but no cause of action exists for tortious interference with a business’s relationship to the community at large…As a general rule, an action for tortious interference with a business relationship requires a business relationship evidenced by an actual and identifiable understanding or agreement which in all probability would have been completed if the defendant had not interfered.”  In reaching its decision, the Supreme Court found the Landry decision persuasive.  In Landry, a pharmacist who rented premises for his drugstore entered into negotiations, with his landlord’s permission, with a prospective purchaser to sell the pharmacist’s business and to assign the pharmacy lease.  However, when the landlord told the prospective buyer that the landlord was “going to get rid of” the pharmacist and that the landlord would rent the premises directly to the buyer, the negotiations stopped between the pharmacist and the prospective buyer.  Thereafter, the prospective buyer leased the drugstore from the landlord. The pharmacist then sued the landlord for tortious interference with a business relationship.  The appellate court in Landry found a business relationship existed between the pharmacist and the prospective buyer, explaining: “[T]he negotiations had progressed beyond the stage of a mere offer, to an understanding between [the pharmacist and the prospective buyer] for the sale of the business and assignment of the lease, transactions which would have been consummated had [the landlord] not interfered.  Evidence disclose that [the landlord]…had undertaken their own negotiations with [they buyer] regarding the rental of the drugstore premises while [the buyer and the pharmacist] were still involved in negotiations.”  In Ethan Allen, the Supreme Court explained that the plaintiff, Georgetown, was entitled to damages reasonably flowing from Ethan Allen’s interference with existing relationships.  Ethan Allen also qualified its decision, stating that Georgetown’s “relationship with its past customers was not one upon which a claim for tortious interference could be based.  Georgetown had no identifiable agreement with its past customers that they would return to Georgetown to purchase furniture in the future.   The mere hope that some of its pas customers may choose to buy again cannot be the basis for a tortious interference claim.”  The Supreme Court recognized, however, that there are situations where a plaintiff may have valid tortious interference claim based on the plaintiff’s reasonable expectation of future business from a recurring practice of performing work for certain clients.  Such a scenario would be distinguishable from a situation of a retail furniture dealer, like Georgetown, with tens of thousands of past customers who may or not return for future furniture purchases.

Peter Mavrick is a Miami business litigation lawyer, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.

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Florida law protects employers and similarly situated persons from unlawful competition. But every competitive act does not qualify as an unlawful competitive act. White v. Mederi Caretenders Visiting Services of Se. Florida, LLC, 226 So. 3d 774 (Fla. 2017) (“Section 542.335 does not protect covenants ‘whose sole purpose is to prevent competition per se’ because those contracts are void against public policy.”). There “must be special facts present over and above ordinary competition” to be protected by Florida’s non-compete laws. Passalacqua v. Naviant, Inc., 844 So. 2d 792 (Fla. 4th DCA 2003). “These special facts must be such that without the covenant not to compete the employee would gain an unfair advantage in future competition with the employer.” Id (emphasis removed). Peter Mavrick is a Fort Lauderdale business litigation attorney.  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.

Florida’s legislature created a list of special facts constituting unlawful competition. They are called legitimate business interests and are as follows:

1: Use of another’s trade secrets;

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We previously wrote about two potential laws that might limit enforceability of non-compete agreements. The first law is a proposed Florida statute that would constrain or prohibit restrictive covenants for certain medical professionals. The second law is a Federal Trade Commission rule that would ban most non-compete agreements as unfair competition. Congress is proposing a similar law that would ban most non-compete agreements, called the Workforce Mobility Act (the Act). The relevant wording of the Act, in its present form, is as follows: “…No person shall enter into, enforce, or attempt to enforce a noncompete agreement with any individual who is employed by, or performs work under contract with, such person with respect to the activities of such person in or affecting commerce.  S. 220, 118th Cong. § 3 (2023-2024). Peter Mavrick is a Miami business litigation attorney, and represents clients 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.

Public agencies and private citizens can enforce the Act. If passed, the Act would make any violation an unlawful unfair and deceptive act or practice under 15 USC § 57a. Id. The Federal Trade Commission, the United States Department of Labor, and the States of the United States would each have authority to enforce the law. Id. Individuals will also have a private cause of action to enforce the Act. Id. They can sue to recover damages (if any) along with attorney’s fees if they are the prevailing party. Id.

The sweeping nature of the Act’s wording will likely have broad effect throughout interstate commerce. However, the Act does not ban all non-compete agreements outright because the definition of “non-compete agreements” is somewhat narrow. Congress defined non-compete agreements as:

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Nationwide, the body of law regulating non-compete agreements (including non-solicitation covenants, non-circumvention covenants, covenants barring poaching of employees) has been mainly regulated by state statutes as well as court decisions in state and federal courts.  Federal law has generally stayed out of the regulation of restrictive covenants.  About a year ago, the Federal Trade Commission (FTC), a federal agency regulating commerce and competition law, issued a proposed rule that would ban most non-compete agreements as unfair competition.  If promulgated, such a rule would have a significant impact on many businesses and their employees.  At this point, the proposed rule is not the law and awaits a final decision.  The wording of the proposed draft of the rule is as follows: “It is an unfair method of competition for an employer to enter into or attempt to enter into a non-compete clause with a worker; maintain with a worker a non-compete clause; or represent to a worker that the worker is subject to a non-compete clause where the employer has no good faith basis to believe that the worker is subject to an enforceable non-compete clause. To comply with paragraph (a) of this section,… an employer that entered into a non-compete clause with a worker prior to the compliance date must rescind the non-compete clause no later than the compliance date.  Proposed CFR § 910.2. The FTC accepted comment concerning the proposed rule through April 2023, and is expected to make a final decision about the proposed rule sometime in April 2024.  Peter Mavrick is a Miami business litigation attorney, and represents clients 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.

The effects of the FTC’s proposed rule are probably far reaching based on the FTC’s definition of “noncompete clause.” The FTC defines a noncomplete clause to mean “a contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer.”  Proposed CFR § 910.1. This definition includes de facto clauses prohibiting workers from obtaining employment or operating a business after the conclusion of the worker’s employment with an employer. Id. One example of a de facto clause is an overly broad non-disclosure agreement that precludes a former employee from working in the same field as the former employer.

The FTC similarly defined worker broadly. Worker encompasses any natural person who works for an employer. Id. It does not matter whether the worker was paid or unpaid. Id. It does not matter whether the worker was classified as an employee or independent contractor. Id. Any worker qualifies under the proposed rule. Therefore, most, if not all, employment related relationships will fall within the ambit of “worker” for purposes of the proposed rule.

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