FLORIDA NON-COMPETE LAW: COURTS SCRUTINIZE THE CONTRACTUAL WORDING WHEN DECIDING THE SCOPE OF A NON-COMPETE COVENANT

A party seeking a temporary injunction to enforce a non-compete agreement must establish four elements: (1) a likelihood of irreparable harm and the unavailability of an adequate remedy at law; (2) a substantial likelihood of success on the merits; (3) the threatened injury to the petitioner outweighs any possible harm to the respondent, and (4) the granting of a temporary injunction will not disserve the public interest. Avisena, Inc. v. Santalo, 65 So. 3d 14, (Fla. 3d DCA 2011). The party seeking the injunction has the burden of persuasion of these four elements. Peter Mavrick is a Miami non-compete lawyer who has extensive experience representing clients in non-compete litigation, including cases seeking injunctions.

In Avisena, Inc. v. Santalo, 65 So. 3d 14, (Fla. 3d DCA 2011), Avisena, Inc., (“Avisena”), i.e., the former employer, sued Alberto C. Santalo (“Santalo”), its founder and former president and chief executive officer, along with his new company CareCloud Corporation (“CareCloud”) for alleged violation of a non-compete agreement. Santalo had previously signed an employment agreement containing non-compete covenant that prohibited competition with his former employer. Santalo’s non-compete period was conditional because it depended on whether he voluntarily quit or instead whether he was terminated and what was the basis for the employment termination.

The employment agreement articulated three reasons that Santalo’s employment may be terminated either by the Avisena or by Santalo. Subsection 5.5 of the employment agreement described termination by Avisena without cause. This subsection stated that Santalo may be terminated by Avisena for any reason or for no reason. Subsection 8.9 of the employment agreement provided varying lengths of non-compete periods depending on which of the three subsections of Section 5 applied. Subsection 8.9 provided that if Santalo were terminated without cause, then the non-compete period would be the twelve-month period following Santalo’s termination from Avisena.

Avisena terminated Santalo without cause on September 15, 2008. Santalo incorporated CareCloud in January 2009 and began directly competing with Avisena on September 16, 2009, one year and one day after his termination. Avisena filed this lawsuit and a motion for temporary injunction. The trial court denied the motion for temporary injunction and this appeal followed.

Avisena argued that a different section of the employment agreement applied to Santalo’s termination. Subsection 8.1 of the employment agreement stated that “[e]mployee shall not for a period of two (2) years during the period of time immediately following the Employee’s termination of employment with the company….” Avisena argued that the phrase “[e]mployee’s termination of employment with the company,” refers to any termination of an employee’s employment. The appellate court disagreed, and determined that the written employment contract unambiguously referred to a circumstance where Santalo quit his job. The only scenario not covered in Section 5 was where Santalo terminated his own employment without cause. The appellate court concluded that if Santalo terminated his own employment without cause, then the harsher two-year non-compete period in subsection 8.1 would have applied.

To prove a likelihood of success on the merits, Avisena needed to prove that the two-year non-compete clause of the employment agreement applied to the facts of Santalo’s termination without cause. The appellate court, however, found that the provisions of the employment agreement unambiguously provided for a twelve-month non-compete period following Santalo’s termination without cause by Avisena. On this basis alone, the appellate court found that Avisena could not demonstrate substantial likelihood of success on the merits.

Avisena then needed to establish whether the non-compete period was tolled by a violation of the non-compete provision during the twelve months following Santalo’s termination. The appellate court found that there was no evidence in the record that Santalo or CareCloud solicited Avisena’s customers or employees before expiration of the twelve-month non-compete period. The appellate court held that the incorporation of CareCloud was mere preparation and therefore did not demonstrate a breach of the non-compete provision. Harllee v. Prof’l Serv. Indus., Inc., 619 So. 2d 298, 300 (Fla. 3d DCA 1992) (under Florida law, mere preparation to open a competing business, such as assisting in the opening of a bank account, obtaining of office space, and other preparatory to creating a future competing business, are lawful acts and do not qualify as breaches of a non-compete covenant).

The appellate court held there was no evidence that Santalo violated the non-compete covenant in his employment agreement. Avisena did not prove a substantial likelihood of success on the merits. The appellate court affirmed the trial court’s decision to deny Avisena’s motion for a temporary injunction.

Peter Mavrick regularly practices non-compete and non-solicitation litigation in Miami, Florida. This article does not serve as a substitute for legal advice tailored to a particular situation. Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311.