It is common in lawsuits regarding non-compete agreements for plaintiffs to sue the new enterprise started by the former employee or the company that hires the former employee, i.e. a third party. Plaintiffs seek to enjoin these third parties from aiding and abetting the violation of the non-compete, as well as, hold them liable for damages, attorney’s fees and costs. Section 542.335(1)(k) states that a court may award attorney’s fees and costs to the prevailing party in any action seeking enforcement of, or challenging the enforceability of, a non-compete agreement. Third parties who aid and abet former employees in violation of a non-compete agreement, however, may not be subject to an award attorney’s fees and costs under the statute. Although the third parties may have aided and abetted the former employee in violating the non-compete agreement, they are not parties to the contract. As such there may not be legal authority to support an award of attorney’s fees against the third parties. Peter Mavrick is a Fort Lauderdale non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.
An example of this circumstance is the case of Bauer v. DILIB, Inc., 16 So. 3d 318, 319–22 (Fla. 4th DCA 2009), where DILIB, INC., d/b/a Incredibly Edible Delites (hereinafter “DILIB”) and two employees entered into non-compete agreements which stated, in pertinent part, that for two years after the employees’ last date of employment, they would not compete with the DILIB’s business. The employees later terminated their employment and were hired a few months later by Denise Bauer (“Bauer”), a competitor.
DILIB filed a lawsuit against the former employees and Bauer. DILIB also filed a motion for a temporary injunction to prevent the employees from violating the non-compete agreement, and to enjoin Bauer from aiding and abetting their violation. Additionally, DILIB pled entitlement to recover its attorney’s fees and costs from the two employees and Bauer. Section 542.335(1)(k) of the Florida Statutes provides in pertinent part, that, “[i]n the absence of a contractual provision authorizing an award of attorney’s fees and costs to the prevailing party, a court may award attorney’s fees and costs to the prevailing party in any action seeking enforcement of, or challenging the enforceability of, a restrictive covenant.”
After an evidentiary hearing on the DILIB’s motion for temporary injunction, the trial court granted the motion and entered a temporary injunction. The temporary injunction, among other things, prohibited Bauer from employing or associating with the employees for two years from their last date of employment with the DILIB. Bauer terminated the employees to comply with the injunction and stipulated with Bauer to convert the temporary injunction into a permanent injunction as to Bauer.
DILIB filed a motion seeking to recover its attorney’s fees and costs from Bauer under section 542.335(1)(k). Bauer contended that DILIB was not entitled to recover its attorney’s fees from her. The trial court found that Bauer knew of the non-compete agreement when she hired the employees. The trial court, therefore, held Bauer was liable for DILIB’s attorney’s fees and costs as a matter of equity. After the amount of attorney’s fees were determined at an evidentiary hearing, Bauer immediately appealed.
The appellate court held that the trial court erred in awarding attorney’s fees as a matter of equity. “Attorney’s fees cannot be awarded as a matter of equity.” Attorney’s Title Ins. Fund, Inc. v. Landa–Posada, 984 So.2d 641, 643 (Fla. 3d DCA 2008). “The fundamental rule in Florida is that attorneys’ fees are in derogation of the common law and will only be granted pursuant to a contractual agreement or statutory authority.” Consol. Ins. Servs. v. Freeman, 848 So.2d 444, 447 (Fla. 4th DCA 2003). The appellate court held that there is no statutory authority under section 542.335(1)(k), for a party to recover attorney’s fees and costs against a third party like Bauer. Subsection (1)(k) of the statute must be read in context with subsection (1)(a), which states, “A court shall not enforce a restrictive covenant unless it is set forth in a writing signed by the person against whom enforcement is sought.” § 542.335(1)(a), Florida Statutes. Bauer did not sign the non-compete agreement, and therefore, subsection (1)(a) precluded DILIB from enforcing the non-compete agreement against her. Because DILIB could not enforce the non-compete agreement against Bauer, the trial court could not order her to pay DILIB’s attorney’s fees and costs under subsection (1)(k). Bauer v. DILIB, Inc. held that “[i]f a plaintiff cannot enforce a restrictive covenant against a person who did not sign it, then it follows that a plaintiff cannot recover its attorney’s fees from that person either.”
Florida law requires that courts strictly construe attorney’s fee statutes. Consol. Ins. Servs. v. Freeman, 848 So.2d 444, (Fla. 4th DCA 2003) The appellate court read subsection (1)(k) and in context with subsection (1)(a) and found that the Legislature intended to obligate the payment of attorney’s fees only between the parties to non-compete agreements that do not contain attorney’s fees provisions. Since Bauer was not a party to the non-compete agreement, she was not subject to the attorney’s fee statute. The appellate court reversed the judgment for attorney’s fees against Bauer.
Peter Mavrick is a Fort Lauderdale non-compete lawyer. This article does not serve as a substitute for legal advice tailored to a particular situation.