FORT LAUDERDALE NON-COMPETE AGREEMENTS: LEGITIMATE BUSINESS INTERESTS AND UNFAIR COMPETITION

The Sherman Anti-Trust Act prohibits conspiracies unreasonably restraining trade. A group of competitors cannot enter agreements fixing prices or wages; rigging bids; or allocating customers, workers, or markets. 15 U.S.C. § 1. Consequently, exclusivity contracts and other restrictive covenants reducing competition may violate the Sherman Antitrust Act if they are solely intended to prevent ordinary competition. The Supreme Court of Florida, in White v. Mederi Caretenders Visting Servs., 226 So.3d 744 (Fla. 2017), explained that “[c]ovenants whose sole purpose is to prevent competition per se are void against public policy.” In addition, Florida Statutes Section 542.18 states that, “[e]very contract, combination, or conspiracy in restraint of trade or commerce in this state is unlawful.” In the the White decision, the Supreme Court explained Florida courts will enforce non-compete agreements only to the extent they prevent unfair competition, that is, “there [are] special facts present over and above ordinary competition’ such that, absent a non-competition agreement, the employee would gain an unfair advantage in future competition with the employer.” 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 law, and other legal disputes in federal and state courts and in arbitration.

This is why Florida’s non-compete statute, Section 542.335, Florida Statutes, requires that non-compete covenants be supported by a legitimate business interest. Fla. Stat. § 542.335 (“Any restrictive covenant not supported by a legitimate business interest is unlawful and is void and unenforceable.”); see also Tri-Cont’l Fin. Corp. v. Tropical Marine Enterprises, Inc., 265 F. 2d 619 (5th Cir. 1959) (“Measured by rules governing such ancillary agreements, the covenant, limited as it is in time and in scope, is, in every respect important here, reasonable in time, territory and extent, and of no further extent than is necessary to protect West India; and that the authorities are almost uniform that such a restriction does not violate the anti-trust laws”).

Florida’s restrictive covenant statute provides a non-exhaustive list of legitimate business interests. The statute specifically references protection of trade secrets, confidential information that does not qualify as trade secret, relationships with existing customers, and relationships with specific prospective customers. Following the statutory requirement to establish a “legitimate busiess interest” to enforce a non-compete agreement, the United States District Court for the Southern District of Florida in Autonation, Inc. v. O’Brien, 347 F. Supp. 2d 1299 (S.D. Fla. 2004), held that “AutoNation… established legitimate business interests justifying the enforcement of [the]… Non–Compete Agreement [because t]he testimony and evidence submitted… demonstrated [the defendant] was exposed to confidential and proprietary information.” Similarly, Florida’s Fourth District Court of Appeal in Hilb Rogal & Hobbs of Florida, Inc. v. Grimmel, 48 So. 3d 957 (Fla. 4th DCA 2010), stated that “HRH proved that it had a legitimate business interest in its substantial relationships with specific existing customers; that the restrictive covenant prohibiting the piracy of those customers was no broader than necessary to protect that interest.” In the White decision, the Supreme Court of Florida held that referral sources also can qualify as a legitimate business interest under the statute. White explained that, “Section 542.335… is non-exhaustive and does not preclude the protection of referral sources; hence, home health service referrals may be a protected legitimate business interests depending on the context and proof adduced.”

The non-exhaustive list of legitimate business interests is not without limitation. A recent case from the United States District Court for the Middle District of Florida, Blue-Grace Logistics LLC v. Fahey, 2023 WL 424285 (M.D. Fla. Jan. 26, 2023), interpreted Florida’s non-compete statute, and stated in pertinent part that, “[v]endor and supplier relationships, on the other hand, do not generally lend to such a competitive advantage.” In this vein, S. Wine & Spirits of Am., Inc. v. Simpkins, 2011 WL 124631 (S.D. Fla. Jan. 14, 2011) held that protecting an exclusive supplier was not a legitimate business interest, reasoning that vendors and suppliers “will do business with anyone at any time and do not work exclusively with any one third-party logistics company.”

Peter Mavrick is a Fort Lauderdale business litigation 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.