FORT LAUDERDALE BUSINESS LITIGATION: RESTRICTIVE COVENANTS MUST BE REASONABLY NECESSARY TO PROTECT

A party seeking to enforce a restrictive covenant must plead and prove the existence of at least one legitimate business interest justifying enforcement of the restrictive covenant. Fla. Stat. § 542.335. That same party must also “plead and prove that the contractually specified restraint is reasonably necessary to protect the legitimate business interest or interests justifying the restriction.” If a litigant successfully proves the restraint is reasonably necessary to protect a legitimate business interest, the party opposing “enforcement has the burden of establishing that the contractually specified restraint is overbroad, overlong, or otherwise not reasonably necessary to protect the established legitimate business interest or interests.” A judicial decision that does not follow this rubric is subject to reversal on appeal. See Surgery Ctr. Holdings, Inc. v. Guirguis, 318 So. 3d 1274 (Fla. 2d DCA 2021) (reversing the trial court because it “failed to specifically consider whether those two restrictive covenants were ‘reasonably necessary to protect the legitimate business interest or interests justifying the restriction.’”). 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.

The burden shifting approach discussed above is consistent with Florida Supreme Court law rejecting restrictive covenants whose sole purpose is to block ordinary competition. White v. Mederi Caretenders Visiting Services of Southeast 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.”). Florida law dictates that “there must be special facts present over and above ordinary competition such that, absent a non-competition agreement, the employee would gain an unfair advantage in future competition with the employer.”

Deciding the issue of reasonable necessity can be simple at times. Courts will hold that a party does not have a reasonable need to protect a legitimate business interest when the plaintiff cannot establish it possess a legitimate business interest. Gould & Lamb, LLC v. D’Alusio, 949 So. 2d 1212 (Fla. 2d DCA 2007) (approving the trial court’s conclusion the plaintiff “did not prove the existence of trade secrets or that restraint was reasonably necessary to protect the legitimate business interests.”). This makes sense for obvious reasons. A plaintiff should not be given protections if it does not have anything to protect.

A defendant can demonstrate a restrictive covenant is not reasonably necessary to protect a legitimate business interest if the plaintiff no longer operates in the particular line of business. The defendant in USI Ins. Services of Florida Inc. v. Pettineo, 987 So. 2d 763 (Fla. 4th DCA 2008) made this argument without success. The defendant argued the plaintiff was no longer in the line of business because the plaintiff restructured the types of insurance policies it would sell and those it would refer to other insurance agents. Although the plaintiff did not currently sell insurance to same class of persons, the court determined the plaintiff was still operating in the line of business because it was still an insurance broker. Therefore, the plaintiff had a reasonable need to protect its business from unlawful competition in the insurance industry.  Perhaps the outcome would have been different if the plaintiff stopped selling insurance altogether, declared Chapter 7 bankruptcy, or started selling non-insurance related products.

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.