Restrictive covenants, such as non-solicitation and non-compete agreements, are important tools for businesses to protect their business interests. Restrictive covenants are enforceable if they are reasonable in time, geographic area, line of business, and supported by a “legitimate business interest.” Fla. Stat. § 542.335. Florida Statutes section 542.335 contains a non-exhaustive list of legitimate business interests that could support a restrictive covenant, which include the protection of trade secrets, valuable confidential business information, substantial relationships with specific prospective and existing customers, patients, or clients, and customer or client goodwill. But what is a “substantial business interest” with a customer? The Miami business litigation attorneys of the Mavrick Law Firm represent 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.
A business must plead and prove “the identity of specific customers and the substantially of the relationship with those customers” to establish the legitimate business interest legal requirement. Vital Pharmaceuticals, Inc. v. Alfieri, 23 F.4th 1282 (11th Cir. 2022). In Evans v. Generic Solution Engineering, LLC, 178 So. 3d 114 (Fla. 5th DCA 2015), the appellate court reversed a trial court order that granted a preliminary injunction enforcing a restrictive covenant against a former employee because the business failed to prove the existence of substantial relationships with customers. The restrictive covenant prohibited the former employee from providing services to customers of the business. After the former employee left and formed a competitive company, the business sued. The business argued the former employee was providing services to a specific former customer of the business, and the trial court granted a preliminary injunction. However, the appellate court reversed. The appellate court reasoned that the business failed to prove substantial relationships with customers because the former customer did not have an exclusive relationship with the business. The former customer often used competitors. As a result, the business had no reasonable expectation that the customers would continue to obtain services from the business in the future. Likewise, in Anich Industries, Inc. v. Raney, 751 So. 2d 767 (Fla. 5th DCA 2000), the court also found that a business failed to prove substantial relationships with customers when customers had no exclusivity relationship with the business.
Although the Evans and Anich decisions were based on the absence substantial relationships due to a lack of exclusivity, Environmental Services, Inc. v. Carter, 9 So. 3d 1258 (Fla. 5th DCA 2009) was decided a similar issue differently. In Environmental Services, Inc., the court stated that exclusivity was not required to have substantial relationships with customers. The court determined substantial business relationships existed where a company “was attempting to protect established relationships with identifiable clients with whom it either had current projects of ongoing relationships.” The juxtaposition of these cases demonstrate the decision on whether substantial business relationships concerning customers often involves construing the likelihood that the customer will continue conducting business with the employer and whether the customer/business relationship is exclusive.
Several appellate courts in Florida have stated that a business must specifically identify the customers with whom it alleges it has a substantial relationship. See Passalacqua v. Naviant, Inc., 844 So. 2d 792 (Fla. 4th DCA 2003) (finding business failed to prove a legitimate business interest because it did not name any customers in the complaint or other filings, and could not identify a single customer solicited by the former employee); University of Florida, Bd. Of Trustees v. Sanal, 837 So. 2d 512 (Fla. 1st DCA 2003) (same). But here again, a contradiction lies. In Alonso-Llamazares v. Internat’l Dermatology Research, Inc., 339 So. 3d 385 (Fla. 3d DCA 2022), the court held that a business did not need to present evidence of an identifiable existing customer with which it has a substantial relationship as long as the business presents evidence that the former employee directly solicited the business’ customers.
As you can see, the law on this issue is not always clear and often presents contradictions. It is best to hire competent legal counsel to address your particular circumstances.
The Miami business litigation lawyers of the Mavrick Law Firm also represent clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.