FLORIDA NON-COMPETE LAW AND BUYING OR SELLING A BUSINESS: COURTS SCRUTINIZE THE CONTRACTUAL WORDING WHEN DECIDING THE MEANING OF A NON-COMPETE COVENANT

Purchasers of businesses and business assets often protect their investment by requiring the seller to sign a non-compete agreement. If the seller continued to engage in the same services, there would be little to no incentive for customers to buy from the Purchasers. The contract must specify the type of services that are prohibited by the contract or it may not be enforceable. It is not important that the parties meant the same thing, but that they said the same thing. Robbie v. City of Miami, 469 So. 2d 1384 (Fla. 1985). Peter Mavrick is an experienced business litigation attorney who has substantial experience with non-compete agreements and cases seeking entry of an injunction.

In Coastal Loading, Inc. v. Tile Roof Loading, Inc., 908 So.2d 609 (Fla. 2d DCA 2005) Matthew Garcia (“Garcia”) and Lucinda Burke (collectively the “Purchasers”) negotiated an asset sale and purchase agreement of Coastal Loading, Inc. with the Seller. Coastal Loading, Inc. provided the services of loading and hauling roof tiles. The Business Asset Sale and Purchase Agreement (the “Asset Purchase Agreement”) stated that states that Garcia purchased “all of SELLER’S assets and properties pertaining to the business known as Coastal Loading, Inc. [,]” including the name of the business. The Asset Purchase Agreement also provided that the Seller and its stockholders “shall agree at the closing not to compete with the business being sold” and that “Brett and Carolyn Williamson (collectively the “Williamsons”) [Seller’s principals] shall agree to not compete in the same business terms as SELLER.” The Asset Purchase Agreement did not provide any further description of the business.

At the closing, Purchasers and Seller entered into a non-compete agreement that specifically prohibited Seller and Williamsons from engaging in the business of “roof tile loading” for five years in the State of Florida. Purchasers later discovered that Williamsons engaged in hauling roof tiles for a Florida customer. The customer contacted Brett Williamson and requested his services. Purchasers filed a lawsuit against Seller and Williamsons for injunctive relief, breach of the non-compete agreement and breach of the Asset Purchase Agreement.

After a hearing on Purchasers’ motion for temporary injunctive relief, the trial court entered an order enjoining Seller and Williamsons from (1) “engaging in the truck hauling business related to the transportation or installation of roof tiles in the State of Florida” and (2) “contacting, or transacting business related to the hauling and placement of roof tiles for customers of the Plaintiff, including but not limited to those customers identified on the Customer Contact List dated December 3, 2003.” Seller and Williamsons immediately appealed.

Seller and Williamsons argued that the non-compete agreement only prohibited roof tile loading and not roof tile hauling. The Purchasers contended that a review of all of the pertinent documents, including the Asset Purchase Agreement, Bill of Sale, and customer contact list, together with Purchasers’ testimony reflected the intent of the parties was to restrict both roof tile loading and hauling. The appellate court disagreed with Purchasers.

The appellate court reviewed the trial court’s decision under a de novo standard, meaning that the appellate court was empowered assess the record evidence and independently interpret the covenant. Emergency Assoc. of Tampa, P.A. v. Sassano, 664 So. 2d 1000 (Fla. 2d DCA 1995). The appellate court ruled that it was clear from the record evidence that the parties understood that roof tile hauling and roof tile loading were two separate aspects of the Seller’s business. Purchasers testified that these services were often provided separately.

The Asset Purchase Agreement stated that at the closing, the parties would enter into a separate agreement not to compete. The non-compete agreement contained a blank line for insertion of the description of the business in which the Seller and the Williamsons would not engage. The parties negotiated and specifically agreed to the words that were handwritten on the blank line, “roof tile loading.” The appellate court ruled that the non-compete agreement was unambiguous as to the meaning of the phrase “roof tile loading.” None of the other closing agreements or record evidence provided any further context for the term. The appellate court affirmed the temporary injunction on an unrelated issue but reversed the temporary injunction in all other aspects and remanded the case for further proceedings.

The Mavrick Law Firm 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.