Articles Posted in Real Estate Litigation

Published on: September 28, 2024

MIAMI NON-COMPETE LITIGATION: LINE OF BUSINESS LIMITATION

Many businesses require employees, independent contractors, and others to sign restrictive covenants. Common restrictive covenants are non-compete agreements prohibiting competition with the business, non-solicitation covenants prohibiting solicitation of the businesses’ customers and employees, and non-disclosure covenants preventing the disclosure of certain company information. However, these covenants have certain restrictions on enforceability. Some of those restrictions limit enforceability to a particular durational period of time. Other restrictions prevent the covenant from being enforced beyond a certain geographic area or a particular line of business. Fla. Stat. § 542.335. The limitations placed on restrictive covenants can provide a defendant with a basis to avoid enforcement of the covenant. 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.

The defendant in a lawsuit for breach of a restrictive covenant can argue his or her alleged competitive actions do not breach the restrictive covenant because they pertain to a different line of business as the plaintiff’s company. A defendant might argue he or she does not target the same types of customers or offers different product or services than those of the plaintiff even both operate in the same industry. USI Insurance Services of Fla., Inc. v. Pettineo, 987 So. 2d 763 (Fla. 4th DCA 2008), addressed this issue within the context of a business purchase. In USI, the owner of an insurance agency sold the company to a buyer pursuant to a sales agreement that included a non-compete provision prohibiting the seller from providing any insurance-related services. After the purchase, the buyer decided it would only sell expensive insurance policies. The seller then opened a new business selling more economical insurance policies that the buyer refused to sell. The buyer sued the seller for breaching the non-compete restrictive covenant and asked the trial court to enjoin the seller from competing. The trial court denied the injunction request because the buyer did not operate a “like business” as the seller. The buyer catered to persons desiring expensive insurance policies while the seller catered to persons desiring more economical insurance policies. However, the trial court was reversed on appeal. The appellate court determined the buyer’s decision to refrain from selling economical insurance policies did not remove the buyer from the broad “line of business” the seller agreed to avoid under the sales contract. USI Insurance’s broad interpretation of “line of business” suggests that persons or companies targeting different customers in the same industry are within the same “line of business.”

The holding in USI Insurance raises questions about when companies are, and are not, in the same line of business. The questions can get more complex for companies with different divisions or product lines. Lincare, Inc. v. Tinklenberg, 2020 WL 10354020 (M.D. Fla., June 26, 2020) may provide some instruction on these complexities. In Lincare, a large conglomerate had many business lines in the medical services and supplies industry. The conglomerate hired a manager that only worked in two of the conglomerate’s business lines. The manager was required to sign a broad non-compete agreement prohibiting the manager from competing against the conglomerate in all of its business lines. The manager left the conglomerate for a competing company and the conglomerate sought an injunction to stop the manager from competing. The court found that the agreement was overbroad and narrowed the restrictive covenant to the two specific business lines the manager worked in during her employment with the conglomerate.

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Published on: April 16, 2023

MIAMI BUSINESS LITIGATION: NON-COMPETE COVENANTS IN COMMERCIAL LEASES

By Mavrick Law Firm

In Florida, it is common for shopping centers to have leases with “exclusivity covenants” allowing a commercial business the exclusive right to operate its type of business in the shopping center. For example, a shopping center may have a grocery store as an anchor tenant, i.e., a tenant that provides a benefit to the shopping center and its other tenants by attracting customers. Some parties have challenged the legal authority of such restrictive covenants on the grounds that they violate Florida’s restrictive covenant statute, Florida Statutes section 542.335, which regulates when a non-compete covenant can be enforceable. Florida courts have examined the applicability of Florida’s restrictive covenant statute in the context of a commercial shopping centers and whether the statute was designed to apply in that context. Peter Mavrick a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. 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 litigation, and other legal disputes in federal and state courts and in arbitration.

In Winn Dixie Stores, Inc. v. Dolgencorp, Inc., 964 So.2d 261 (Fla. 4th DCA 2007), Florida’s Fourth District Court of Appeal overturned summary judgment against grocery store that sought sued the commercial landlord for failure to abide by the restrictive covenant their commercial lease. The covenant required that Winn Dixie be the exclusive grocery store in the shopping center, as its anchor tenant. The appellate court rejected the argument that section 542.335, Florida Statutes, applied to restrictive covenants that run with the land, explaining: “When read in context with the other provisions of section 542.335, subsection (1)(a)’s reference to ‘a restrictive covenant’ does not include real property covenants running with the land. Rather, the section is directed at personal service contracts not to compete. For example, section 542.335(1) refers to ‘contracts that restrict or prohibit competition’ that ‘are reasonable in time.’ Subsections 542.335(1)(d) & (e) set out four rebuttable presumptions a court is to apply to determine the ‘reasonableness in time’ of a ‘postterm restrictive covenant.’ ‘Postterm’ connotes an employment relationship that has terminated, which is the time when one party seeks to enforce a covenant not to compete. ‘Postterm’ is nonsensical when applied to a real property covenant, which typically does not have a stated termination point. Absent a specified term or materially changed conditions, a real property covenant running with the land is without duration … All four presumptions in subsections 542.335(1)(d) & (e) apply to personal service contracts, concerning restrictive covenants sought to be enforced (1) against a former employee, agent, or independent contractor; (2) against a former distributor, dealer, franchisee, or licensee of a trademark or service mark; (3) against a seller of all or part of a business, and (4) to protect trade secrets. None of these presumptions have any application to real property covenants that run with the land.” More recently, Florida’s First District Court of Appeal in Amelia Island Restaurant II, Inc. v. Omni Amelia Island, LLC, 164 So.3d 26 (Fla. 1st DCA 2015), also concluded that Section 542.335, Florida Statutes, did not require invalidation of a commercial lease’s exclusivity provision even though the restrictive covenant in that case did not run with the land. The appellate court questioned the restrictive covenant statute’s applicability to “real property related restrictive covenants, because the law appears directed a personal covenants not to compete.”

Peter Mavrick is a Miami business litigation lawyer, and represents 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.

Published on: February 23, 2020

FLORIDA BUSINESS LITIGATION: GUARANTORS AND AFFIRMATIVE DEFENSES BASED ON UNDERLYING DEBT

By Mavrick Law Firm

When a guarantor is sued based on an absolute guarantee of a debt, the guarantor may either challenge the validity of the guarantee or show that the guaranteed debt is not owed. Under Florida law, the guarantor can be held liable only when a court determines the guaranty is lawful and the alleged debt is actually owed. In other words, a guarantor may not escape liability if the absolute guarantee is lawful and the party owing the underlying debt is liable under that debt. Peter Mavrick is a Fort Lauderdale business litigation attorney with extensive experience in defending and prosecuting the interests of businesses in court proceedings and arbitration.

As discussed in the recent decision by Florida’s Fourth District Court of Appeal in Gulfstream Park Racing Ass’n, Inc. v. MI-V1, Inc., 286 So. 3d 315 (Fla. 4th DCA 2019), guarantors are limited in the defenses they may bring in a breach of contract action concerning a guaranteed debt. In Gulfstream, the appellate court reviewed the propriety of a jury verdict holding the tenant liable but not, however, the guarantor of the tenant’s debt. The plaintiff was a commercial landlord. The landlord claimed that the tenant had not paid required monthly rent, and therefore locked the entrance to the tenant’s nightclub. The landlord’s action was an apparent violation of § 83.05, Florida Statutes, which prohibits commercial landlords from undertaking “self-help” that inhibits tenant use over the leased property unless either the landlord won a judgment of eviction, the tenant surrendered the property, or the tenant abandoned the property.

The Gulfstream landlord sued the tenant and the guarantor for the tenant’s liability for a breach of the lease. The tenant and the guarantor claimed they were not required to pay rent because the landlord’s self-help violated § 83.05, Florida Statutes.

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Published on: May 11, 2016

Are handshake agreements binding?

By Mavrick Law Firm

An oral agreement is usually binding but not always. Florida has a statute of frauds so certain types of contracts are not binding unless they’re in writing and signed by the party against whom it’s charged. For example, selling a house or a piece of real property requires a written agreement. It has to be signed by the other party. Commercial leases exceeding a year’s length will need to be in writing. There’s a witness requirement of 2 witnesses to the execution of the lease. Many other contracts can be enforced simply because they’re oral contracts where one part has agreed and as somebody has often said, its simply a handshake where they’ve mutually agreed orally as to what the contract is.

Published on: April 12, 2016

WHAT IS A LEASE GUARANTEE?

By Mavrick Law Firm

A lease guarantee is a promise by somebody to pay the obligations under the lease, separate from the signatory to the lease. This typically will happen where a business owner will lease premises in a shopping center. The business will sign a lease and the landlord of the shopping center will demand that the business owner himself personally sign a promise that it will pay for what’s owed in the lease in case the business doesn’t pay. Those are very risky documents to sign sometimes because sometimes the business owner many years later will sell the business and forget that it had this guarantee. If the new buyer years later breaches the lease the shopping center owner, the landlord sometimes will come after the guarantor. The business owners often have to be very careful to revoke the guarantee.