Florida Business Litigation Lawyer Blog
Section 542.335(1)(d), Florida Statutes, states that a non-compete agreement, in an employment context that exceeds two years is subject to a legal presumption that the non-compete period is unreasonable. An employer may overcome this legal presumption in variety of ways. If the court finds that a longer non-compete period is necessary to protect a legitimate business interest, the non-compete period may be enforced. An employment non-compete exceeding two years might also be justified if the particular employee is especially important to the business. Peter Mavrick is a Miami non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.
In the case of Avalon Legal Info. Services, Inc. v. Keating, 110 So. 3d 75, 84 (Fla. 5th DCA 2013), Judy B. Schneider (“Schneider”) a paralegal and owner of a business that provided civil process service training and consulting to Florida’s Sheriffs, bifurcated the business and sold the consulting portion to Gerard F. Keating (“Keating”), an attorney who previously acted as the supervising attorney for the business. Schneider also sold the training and education portion of the business to Avalon Legal Information Services, Inc., a Florida corporation (“Avalon”). Schneider continued to work the consulting contracts with Keating and simultaneously worked for Avalon as an instructor in its training program, as well as co-authored a civil process manual with Avalon’s owner.
On October 1, 2008, Keating and Schneider entered into an independent contractor agreement (“Agreement”). Per the Agreement, Schneider was to continue to perform the same paralegal services for Keating as an independent contractor. The Agreement was to last two years, until September 2010, and was renewable at the parties’ option for an additional two years. The Agreement incorporated a non-compete/non-solicitation covenant. The Agreement permitted Schneider to continue to work as an instructor and manual writer for Avalon. The non-compete covenant prohibited Schneider from competing with and soliciting Keating’s civil process consulting contracts in the State of Florida for three years following the expiration of the Independent Contractor Agreement, i.e. until September 2013.
Schneider opted not to renew the Agreement when it expired in September 2010. By then, Keating had four-year contracts with fifty-four sheriffs’ offices, each set to renew in 2012. Shortly after the termination, Keating received a copy of a solicitation letter sent by Avalon to all sixty-seven of Florida’s sheriffs’ offices. The letter advertised two new changes at Avalon, the first being that Schneider, a known instructor and its paralegal responding to questions by phone—was going to start working exclusively for Avalon. The second change included a new Help CD and 24/7 telephone support designed to answer questions about enforceable and non-enforceable process. A flyer attached to the letter marketed these services as a bundle with a reduced cost. Despite Keating’s efforts to prevent the loss of his clients, sixteen sheriffs’ offices cancelled their contracts with Keating over the course of the next year.
In September 2011, Keating sued Avalon and Schneider for temporary and permanent injunctive relief, an accounting, tortious interference with contractual relationships, and attorney’s fees. Keating subsequently moved for a temporary injunction. At the hearing, Keating testified that his motivation behind requiring that Schneider sign the non-compete agreement was due to the fact that she enjoyed a great deal of goodwill and personal loyalty with the clients. Keating did not want to compete against her after purchasing the contracts. Keating believed Schneider and Avalon were directly competing against him because they were offering his clients the same telephonic support and document review service that he provided, but at a lower price. Keating testified that he received eighteen cancellations, resulting in a loss of $55,200 in revenue from September 2010 to September 2011. According to Keating, future losses were difficult to quantify given the expiration period of the existing contracts in 2012. He believed that had Avalon not offered the bundled service in competition against him, the sheriffs’ offices would have renewed their contracts in 2012. The trial court granted the temporary injunction. Avalon and Schneider immediately appealed.
Avalon and Schneider contended that the non-compete/non-solicitation covenant’s three-year time limitation was presumptively unreasonable under Section 542.335(1)(d), Florida Statutes (non-compete limitations over 2 years are presumptively unreasonable). Despite the statutory presumption, however, the appellate court held that the trial court findings supported such a limitation. The trial court found that the three-year limitation was chosen because the contracts entered into in 2008 were set to expire in 2012. By prohibiting Schneider from competing until after the first year of the second contract cycle, i.e. 2013, Keating believed his clients would renew their contracts. The appellate court reasoned that any limitation of less than three years would have done little to protect the contracts. Schneider’s importance in the field of civil service consulting also may have been a factor considered by the trial court. “[T]he higher in management and the more key or important the function performed by the employee[,] the longer the time which could be justified for a no-competition covenant.” Dorminy v. Frank B. Hall & Co., 464 So.2d 154, 158 (Fla. 5th DCA 1985). As such, the appellate court held that the trial court did not err in finding the three-year non-compete/non-solicitation covenant to be reasonable.
The appellate court found that the temporary injunction was enforceable against Avalon and Schneider, however it was overly broad in terms of the activities prohibited. The non-compete/non-solicitation covenant restricted Schneider from civil process, “consulting,” which the Independent Contractor Agreement described as “handl[ing] all phone calls and fax reviews to questions of the proper service and execution of civil process from contracted Sheriffs.” The injunction went beyond prohibiting civil process consulting because it restricted Schneider and Avalon from answering questions that included, for example, “civil procedure or domestic violence issues …,” and these areas do not concern service of process. To the extent the injunction restricted Schneider and Avalon from answering questions related to civil process education and training, or civil procedure and domestic issues unrelated to service of process, the appellate court remanded with directions to modify and narrow the terms of the injunction consistent with the appellate court’s opinion.
Peter Mavrick is a Miami non-compete lawyer. This article does not serve as a substitute for legal advice tailored to a particular situation.