FORT LAUDERDALE BUSINESS LITIGATION: NON-COMPETE AGREEMENTS ARE LEGAL

A free market economic system like the one used throughout the United States requires competition because market forces of supply and demand control the system. Congress and Florida’s Legislature even enacted laws to promote competition and prevent restraints on trade and commerce. 15 U.S.C.A. § 1 (“Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”); Fla. Stat. § 542.18 (“Every contract, combination, or conspiracy in restraint of trade or commerce in this state is unlawful.”). So how can restrictive covenants like non-compete agreements survive this law? The Fort Lauderdale 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.

It is important to recognize that the economic restraints prohibited under statutes like Fla. Stat. § 542.18 are limited to restraints on trade or commerce in general rather than competitiveness or incentives to individuals acting within the economic system. United Am. Corp. v. Bitmain, Inc., 530 F. Supp. 3d 1241 (S.D. Fla. Mar. 31, 2021) (“An unreasonable restraint of trade is one that harms competition in general, rather than the plaintiff, or any other competitor.” Therefore, Fla. Stat. § 542.18 does not prohibit every agreement that might reduce competitiveness or profit motives. See Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993) (“The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself.”). Laws like Fla. Stat. § 542.18 govern restraints on “trade” or “commerce” themselves; not the discreet effects that agreements might have on the parties entering them.

Although the title of Florida’s non-compete statute, Fla. Stat. § 542.335, indicates it governs the enforceability of “valid retrains of trade or commerce,” this statute must be construed in conjunction with Florida’s well-regarded rule prohibiting “restraint[s] of trade or commerce” because both are contained within same statutory scheme. The non-compete statute serves as an exception to Fla. Stat. § 542.18. See Fla. Stat. § 542.335 (“Notwithstanding s. 542.18… enforcement of contracts that restrict or prohibit competition during or after the term of restrictive covenants, so long as such contracts are reasonable in time, area, and line of business, is not prohibited.”). Therefore, limited restraints serving a legitimate business interest can be valid. White v. Mederi Caretenders Visiting Services of Se. Florida, LLC, 226 So. 3d 774 (Fla. 2017) (“Section 542.335 does not protect covenants ‘whose sole purpose is to prevent competition per se’ because those contracts are void against public policy.”). This is why pleading and proving the existence of the legitimate business interest is paramount to successfully asserting a claim for breach of a non-compete agreement. See Fla. Stat. § 542.335 (“The person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.). A company challenged the enforceability of a commission sharing agreement that lasted in perpetuity by claiming the agreement violated Florida’s statute prohibiting restraints on trade and commerce. See Capital Wealth Advisors, LLC v. Capital Wealth Advisors, Inc., 335 So. 3d 164 (Fla. 2d DCA 2021). The agreement required an insurance company to pay its insurance agent commissions when the company sold insurance products through a network of referral sources cultivated by the agent. The commission agreement survived termination of the parties’ relationship and lasted forever. The insurance company argued the agreement was void because it was an unfair restraint on trade or commerce. The court rejected the company’s argument because alleged unfairness does not make it an unlawful restraint of trade or commerce. The agreement merely required the company to split commissions, which did not operate as a barrier to one’s ability to sell insurance products in the market. The agreement also did not negatively affect consumers’ ability to procure insurance products because the company and the agent could freely compete for the same business. Therefore, the agreement was not an unlawful restraint on trade.

The Fort Lauderdale 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.