Florida Business Litigation Lawyer Blog
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).
Guirguis ultimately enforced a restrictive covenant to protect a company’s customer goodwill because the company demonstrated that it “operate[d] a patient-centric business that focuses on a strong patient experience.” Specifically, two corporate representatives testified that the company “implement[ed] measures to promote patient goodwill and satisfaction” and that the company “strive[s] for continuity of care, where a patient see[s] the same provider for months or years at a time.” Surgery Ctr. Holdings, Inc. v. Guirguis, 318 So. 3d 1274 (Fla. 2d DCA 2021). Moreover, the company’s corporate representatives also testified that “eighty-four to eighty-seven percent of [its] patients live within the [restricted] fifteen-mile radius.” Finally, the company in Guirguis also “presented evidence that [the company] lost 644 of its patients after the doctors left their employment and that the patents typically visit the doctors twelve times per year.” Surgery Ctr. Holdings, Inc. v. Guirguis, 318 So. 3d 1274 (Fla. 2d DCA 2021). Accordingly, Guirguis held that the company established its customer goodwill as legitimate business interest because of its demonstrably impact and importance to business operations.
Peter Mavrick is a Fort Lauderdale non-compete lawyer, and represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.