FLORIDA NONCOMPETE AGREEMENTS: STIPULATIONS TO IRREPARABLE INJURY IN NON-COMPETE CONTRACTS MAY NOT BE ENFORCEABLE

It has long been recognized that before injunctive relief can be granted a movant must show irreparable injury. Langford v. Rotech Oxygen & Medical Equipment, Inc., 541 So.2d 1267 (Fla. 5th DCA 1989). Many non-compete contracts will contain a provision that stipulates that a violation of the restrictive covenant not to compete would create an irreparable injury. Courts may not find that a stipulation or waiver of this burden of proof is sufficient to justify the entry of an injunction. Peter Mavrick is an experienced business litigation attorney who has substantial experience with non-compete agreements and cases seeking entry of an injunction.

In Spencer Pest Control Co. of Fla., Inc. v. Smith, 637 So.2d 292 (Fla. 5th DCA 1994), Spencer Pest Control Company (“Spencer”) sued for a temporary and permanent injunction to restrain Lewis E. Smith (“Smith”), its former manager, from violating a noncompete agreement when Smith resigned and accepted employment as a pest control technician with a competing company.

Spencer was in the business of termite control and lawn care. Smith was hired by Spencer, with no prior experience in pest control. Spencer fully trained Smith and promoted him to manager of the Sanford location. Smith was responsible for every aspect of Spencer’s business in Sanford, including its customer base. During his employment with Spencer, Smith executed an employment agreement containing a covenant not to compete which stated, among other things, that in the event of a breach, or threatened breach, of the provisions of the agreement by either party, the non-breaching party would be entitled to an injunction, without bond, to restrain the breaching party from continuing the improper conduct.

After having worked for Spencer for 18 years, Smith resigned. Smith took a job with Jim Rowe Pest Control, one of Spencer’s competitors, as a pest control technician working within the geographic area prohibited by the non-compete agreement with Spencer. Spencer filed a lawsuit against Smith seeking a temporary injunction to enforce the covenant not to compete. At the evidentiary hearing, Spencer relied upon the stipulation contained in the non-compete agreement to show that irreparable injury was established by Smith’s alleged violation. The trial court disagreed and denied the motion for temporary injunction finding that there had been no showing of irreparable injury. Spencer filed an appeal.

Spencer Pest Control Co. of Fla., Inc. v. Smith held that “[a]lthough courts often will accept a stipulation in lieu of proof, it is not proof.” Spencer Pest Control Co. of Fla., Inc. v. Smith, supra. The appellate court ruled that a stipulation might be construed as the employee’s waiver of the employer’s statutory obligation to show irreparable injury, but it is not itself a showing of irreparable injury. There is a possibility that an employer who has the economic leverage to require a noncompete agreement can also require a stipulation of irreparable injury. The appellate court reasoned that “[b]ecause the legislature created a strong public policy against restraint of trade agreements except under a very limited set of circumstances, we find that its requirement of a showing of irreparable injury cannot be stipulated away by an employee.” The parties may not contract in violation of public policy. The appellate court, therefore, affirmed the trial court’s decision.

This case was distinguished by Diaz v. John Adcock Ins. Agency, Inc., 729 So. 2d 465 (Fla. 2d DCA 1999) over the question of whether parties could stipulate to waive the requirement to post a bond prior to issuance of a temporary injunction. Diaz v. John Adcock Ins. Agency, Inc. held that Spencer Pest Control Co. of Fla., Inc. v. Smith involved a statutory prerequisite to enforcement of a specific type of contract based on public policy grounds that irreparable injury must be established by a showing of evidence. The appellate court in Diaz reasoned that the bond requirement was not based on public policy, but rather was a procedural step applicable to temporary injunctions in general. Diaz v. John Adcock Ins. Agency, Inc. held that public policy did not prohibit honoring the parties’ agreement to waive the bond requirement.

Peter Mavrick practices non-compete litigation in Broward, Miami-Dade, and Palm Beach Counties, 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.