PALM BEACH NON-COMPETE AGREEMENTS: NON-COMPETE AGREEMENTS MAY NOT BAR ORDINARY COMPETITION

Non-compete agreements are often drafted with broad provisions to prevent a business’s former employee from competing for its customers for a period of time. To be enforceable non-compete agreements must be based on a legitimate business interest, such as trade secrets, confidential information, and substantial customer relationships. However, a legitimate business interest must be harmed by the act that is allegedly violating the non-compete agreement. For example, if a sales person is barred from competing against its former employer, the agreement may not be enforceable to bar the worker from holding such a non-sales position because it may not harm a legitimate business interest. Peter Mavrick is a Palm Beach non-compete attorney and business litigation lawyer who has substantial experience with non-compete litigation, including injunction proceedings. The Mavrick Law Firm also practices non-compete litigation and business litigation in Fort Lauderdale, Boca Raton, and Miami.

In the case of Thyssenkrupp Elevator Corp. v. Hubbard, 2:13-CV-202-FTM-29, 2013 WL 5929132, (M.D. Fla. Nov. 4, 2013), ThyssenKrupp Elevator Corporation (ThyssenKrupp) provided components, systems, and customized service programs for elevators, escalators, and moving walks. Larry Hubbard, Jr. (Hubbard) was hired by ThyssenKrupp’s predecessor, General Elevator Sales and Service, Inc. (GESS). Hubbard signed GESS’s Employment Agreement, as a condition of his employment. GESS’s Employment Agreement contained non-compete and non-solicitation provisions which for a period of 2 years, prohibited Hubbard from providing a product or service which “resembles” or competes with a product or service he was involved with for GESS; and prohibited Hubbard from soliciting GESS’s customers.

GESS merged with ThyssenKrupp, leaving ThyssenKrupp as the surviving company. Hubbard later argued that his Employment Agreement was not transferred along with the stock to ThyssenKrupp, resulting in its exclusion from the merger. Hubbard asserted that ThyssenKrupp did not have standing to enforce the Employment Agreement because his Employment was not specifically included in the merger agreements. The trial court disagreed because the merger included all assets of GESS, whether disclosed in a prior transaction or not.

Hubbard resigned his employment with ThyssenKrupp. When Hubbard resigned his position with ThyssenKrupp, he was a service manager for an area encompassing Lee County, Collier County, Hendy County, and Charlotte County. As service manager, Hubbard assisted with and evaluated the work performed by the technicians and assisted customers with decisions regarding repairs and modernization. After resigning from ThyssenKrupp, Hubbard started a consulting company called JR Consulting Services. Hubbard planned to assist clients with modernizations by identifying the required equipment, advertising and collecting bids, and overseeing the project once a bid was awarded. Hubbard contacted John Atherton (Atherton), a former GESS employee, for assistance. Atherton hired Hubbard has a mechanic to help him get started. Atherton allowed Hubbard to “hang” his Elevator Inspection license with his company, General Elevator Solutions LLC (General).

Hubbard attempted to generate business by providing free service audits to his prospective customers. One such customer, Palmas Del Sol, was serviced by ThyssenKrupp. Palmas Del Sol ultimately decided not to renew its contract with ThyssenKrupp and instead received its service from General. Thereafter, Palmas Del Sol’s management firm recommended General to all of its clients that have the ability to switch vendors. Palmas Del Sol’s management firm later stated that the decisions to leave ThyssenKrupp were based on failing relationships and had nothing to do with Hubbard.

Hubbard’s free service audits did not generate any business for JR Consulting Services. Hubbard continued working as a mechanic at General. ThyssenKrupp contended that Hubbard violated the Employment Agreement by competing with ThyssenKrupp in the prohibited counties, directly or indirectly soliciting ThyssenKrupp’s clients and prospects to do business with General, and aided, abetted, and assisted others to solicit ThyssenKrupp’s clients and prospects to cease doing business with ThyssenKrupp. ThyssenKrupp filed a lawsuit against Hubbard and sought a preliminary injunction against Hubbard based on alleged violations of the Employment Agreement, among other causes of action.

A preliminary injunction is warranted if the movant demonstrates “(1) a substantial likelihood of success on the merits of the underlying case, (2) the movant will suffer irreparable harm in the absence of an injunction, (3) the harm suffered by the movant in the absence of an injunction would exceed the harm suffered by the opposing party if the injunction is issued, and (4) an injunction would not disserve the public interest. Odebrecht Const., Inc. v. Secretary, Florida Dept. of Transp., 715 F.3d 1268 (11th Cir.2013). The trial court held that in order to prevail on its motion for a preliminary injunction, there must have been a substantial likelihood that ThyssenKrupp would prove that Hubbard breached the Employment Agreement. Hubbard contended that Employment Agreement was not breached because he was not providing any product, process, or service that he was providing while employed by ThyssenKrupp. Alternatively, Hubbard argued that if the Court determines he breached the Employment Agreement, he should not be precluded from working for General as a mechanic because it is not harmful to ThyssenKrupp’s legitimate business interests.

The trial court held that non-compete agreements are to be construed in favor of providing reasonable protection to all legitimate business interests established by the person seeking enforcement and must not be construed narrowly, against the restraint, or against the drafter of the contract. Fla. Stat. § 542.335(1)(h). The non-compete agreement in Hubbard’s Employment Agreement prohibited Hubbard from marketing, producing, soliciting, selling, delivering, or providing any product, process, or service which resembled or competed with any product, process, or service with which he was involved in any capacity while employed by ThyssenKrupp. The trial court held that the non-compete did not rely on Hubbard’s position or job title, rather, it focused on the employee’s involvement in the product, process, or service at issue.

Hubbard’s deposition testimony showed that he supervised, assisted, and evaluated elevator maintenance, and occasionally worked with customers on decisions about repairs and modernization while employed by ThyssenKrupp. After his resignation from ThyssenKrupp, Hubbard provided service evaluations for two of ThyssenKrupp’s customers, attempted to solicit work as a consultant regarding modernization, and also worked as a mechanic for General in the prohibited counties. Based on this evidence, the Court found a substantial likelihood Hubbard was in breach of the Employment Agreement.

Hubbard contended that an injunction prohibiting him from acting as a mechanic was not reasonably necessary to protect any of ThyssenKrupp’s alleged business interests. A non-compete agreement cannot be used as a tool simply to eliminate competition and may be unreasonable if it inflicts an unduly harsh or unnecessary result upon the employee. Edwards v. Harris, 964 So.2d 196 (Fla. 1st DCA 2007). The trial court agreed with Hubbard and held that an employee can only be restricted from engaging in activities “harmful to the legitimate business interest” of the former employer. Nothing in the evidence suggested that ThyssenKrupp’s legitimate business interest in client relationships would have been harmed if Hubbard was allowed to work as a mechanic. The trial court preliminarily enjoined and restrained Hubbard from acting as a competitor to TyssenKrupp regarding customers and/or prospective customers; and enjoined Hubbard from marketing, producing, soliciting, selling, delivering, or providing any product, process, or service which resembled or competed with any product, process, or service with which he was involved in any capacity while employed by ThyssenKrupp, but was not enjoined from working as a mechanic.

Peter Mavrick is a Palm Beach non-compete attorney who also practices non-compete litigation in Fort Lauderdale, Boca Raton, and Miami. This article does not serve as a substitute for legal advice tailored to a particular situation.