Forum selection clauses are contract provisions intended to assign the forum where any disputes under the contract will be resolved, such as Broward County or Miami-Dade County, Florida. While signatories to the contract have agreed to be bound to the forum selected in the agreement, it is not always evident whether non-signatories will be bound. Non-compete lawsuits often involve non-signatory parties, such as the employee’s new employer and related parties. Peter Mavrick is a Fort Lauderdale, Palm Beach, and Miami non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.
An example of this circumstance occurred in East Coast Karate Studios, Inc. v. Lifestyle Martial Arts, LLC, 65 So. 3d 1127 (Fla. 4th DCA 2011). A martial arts business hired an employee to work in its Broward County location and had the employee sign a non-compete agreement. The non-compete agreement prohibited the employee from engaging in the same business in Broward County or within a twenty-five mile radius of Broward County for two years from the date of termination of his employment. The agreement also contained a mandatory forum selection clause which required Broward County to be the “exclusive” forum for any case or controversy arising either directly or indirectly, under or in connection with the non-compete agreement. The employee also agreed not to contest or challenge the jurisdiction or venue of the court. The employee subsequently resigned and immediately began working for a martial arts business in Delray Beach. The new employer was located within a twenty-five mile radius of Broward County. The new employer’s managing member was the employee’s wife.
The employee, his wife, and the new employer filed a declaratory judgment lawsuit in Palm Beach County. They sought a declaration that the non-compete agreement was unenforceable. The former employer moved to transfer venue from Palm Beach County to Broward County. The former employer’s motion to transfer was based on the non-compete agreement’s mandatory forum selection clause. The employee, his wife, and the new employer contended that Palm Beach was the appropriate venue because: the employee and his wife resided in Palm Beach County; the new employer’s business address was in Palm Beach County; and the employee’s wife and the new employer were not bound by the mandatory forum selection clause because they did not sign the non-compete agreement.
Before a hearing on that motion, the former employer filed a lawsuit in Broward County against the employee, his wife, and the new employer. The former employer sued the employee for breach of the non-compete agreement, and the employee’s wife and the new employer for tortious interference with the agreement. The employee, his wife, and the new employer moved to transfer venue from Broward County to Palm Beach County, based on the same arguments. They also contended that the former employer’s causes of action arose in Palm Beach County. The former employer opposed that motion by contending that all parties were subject to the mandatory forum selection clause.
The Palm Beach County Circuit Court denied the motion to transfer venue of employee’s lawsuit to Broward County. The Broward County Circuit Court granted the motion to transfer venue of the former employer’s lawsuit to Palm Beach County. Both trial courts’ orders were based mainly on two grounds: (1) the causes of action arose in Palm Beach County where the employee and his wife resided and where his new employer’s business was located; and (2) the employee’s wife and his new employer were not signatories to the non-compete agreement. The former employer appealed both orders.
Florida’s Fourth District Court of Appeal reversed the trial courts’ decisions and held that the forum selection clause clearly was mandatory upon the employee regardless of his residence or where the causes of action arose. “[A] forum selection clause is considered mandatory where it requires that a particular forum be the exclusive jurisdiction for litigation concerning the contract.” See Golf Scoring Sys. Unlimited, Inc. v. Remedio, 877 So.2d 827 (Fla. 4th DCA 2004). The remaining issue was whether the mandatory forum selection clause also applied to the employee’s wife and his new employer even though they were non-signatories to the non-compete agreement.
Florida courts have enforced forum selection clauses against non-signatories where the claims arise directly out of the agreement and the commercial relationship of the parties. See World Vacation Travel, S.A. v. Brooker, 799 So.2d 410 (Fla. 3d DCA 2001) and Tuttle’s Design–Build, Inc. v. Florida Fancy, Inc., 604 So.2d 873 (Fla. 2d DCA 1992). Florida’s Fifth District Court of Appeal in Deloitte & Touche v. Gencor Industries, Inc., 929 So.2d 678 (Fla. 5th DCA 2006), applied the following factors to determine whether forum selection clause applied to non-signatories: (1) whether there existed a close relationship between the non-signatories and the signatory who was the subject of the agreement; (2) whether the non-signatories’ interests were derivative of the signatory’s interests; and (3) whether the claims involved the non-signatories arose directly out of the agreement.
The appellate court held that the factors of Deloitte apply here. First, there was a close relationship between the employee, his wife, and his new employer. Second, the interests of the employee’s wife and his new employer were derived from the employee’s interests because they depended on whether the non-compete agreement is enforceable. Third, the claims involved the employee’s wife and his new employer arose directly out of the non-compete agreement. The appellate court also held that all causes of action in both lawsuits arose from the non-compete agreement which contained the forum selection clause. The appellate court concluded that the forum selection clause applied to the employee’s wife and his new employer, even though they never signed the non-compete agreement. The appellate court required the Palm Beach County Circuit Court to transfer venue of both actions to the Broward County Circuit Court.
Peter Mavrick is a Fort Lauderdale, Palm Beach, and Miami non-compete lawyer who has substantial experience with business litigation. This article does not serve as a substitute for legal advice tailored to a particular situation.