FORT LAUDERDALE BUSINESS LITIGATION: THIRD-PARTY LIABILITY FOR BREACH OF NON-COMPETE AGREEMENT

One cornerstone needed to enforce a valid restraint on trade is the requirement to be in writing and “signed by the person against whom enforcement is sought.” Fla. Stat. § 542.335. Courts use this requirement to reject enforcement of restrictive covenants that are not in writing or signed by the enforcee. See Iron Bridge Tools, Inc. v. Meridian Int’l Co., Ltd., USA, 2016 WL 8716673 (S.D. Fla. Feb. 2, 2016) (refusing to enforce the plaintiff’s claim because it hinged on a contract that was “in form and substance, an agreement in the nature of an agreement not to compete” that “was never reduced to a writing in any form”). Based on a plain reading of the statutory text, it seems obvious that one cannot be liable for violating a restrictive covenant he or she did not sign. However, this is not always true. The caselaw surrounding restrictive covenants provide courts with power to enjoin third-parties from helping another violate his or her restrictive covenant even though the third-party never signed the covenant. Infra. Peter Mavrick is a Fort Lauderdale business litigation attorney. 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 law, and other legal disputes in federal and state courts and in arbitration.

Florida juris prudence contains many examples demonstrating that a third-party can be enjoined if he or she helps another violate his or her restrictive covenant. USI Ins. Services of Florida Inc. v. Pettineo, 987 So. 2d 763 (Fla. 4th DCA 2008) (“There is no doubt that a court can enjoin others who were not parties to the non-compete agreement” as long as they “receive notice and have an opportunity to be heard.”). The power to enjoin comes from common law rather than the restrictive covenant statute. Bauer v. DILIB, Inc., 16 So. 3d 318 (Fla. 4th DCA 2009) (At “no time has this court or any other court held that the power to enjoin third parties derives from section 542.335… Florida Statutes.”). Third-party enjoinment was created to prevent a person from violating a restrictive covenant through a strawman. Dad’s Properties, Inc. v. Lucas, 545 So. 2d 926 (Fla. 2d DCA 1989) (“Mr. Lucas cannot be allowed to do indirectly, through his wife and her controlled corporation, that which he covenanted not to do himself.”). Therefore, a third-party who knows about the restrictive covenant and provides substantial assistance to help violate the restriction will be enjoined. LLW Enter., LLC v. Ryan, 2020 WL 2630859 (M.D. Fla. May 4, 2020) (“A cause of action for aiding and abetting requires ‘(1) an underlying violation on the part of the primary wrongdoer; (2) knowledge of the underlying violation by alleged aider and abettor; and (3) the rendering of substantial assistance in committing the wrongdoing by the alleged aider and abettor.”). But the third-party will not be liable for damages. See Bauer, 16 So. 3d 318 (holding that the court could not require the third-party to pay the attorney’s fees of the covenant’s enforcer even though the court could enjoin the third-party from further assistance).

The first Florida case that allowed a third-party to be enjoined for helping violate a restrictive covenant was called W. Shore Rest. Corp. v. Turk, 101 So. 2d 123 (Fla. 1958). In Turk, the court looked to two decisions from the state of Washington. The first decision enjoined a son from helping his father operate a business that competed with the plaintiff in violation of a non-compete and the second decision found there was “overwhelming weight of authority” to enjoin a stranger of a restrictive covenant when he or she aids and abets. Id. (citing Madison v. La Sene, 44 Wash. 2d 546 (Wash. 1954) and Le Maine v. Seals, 47 Wash. 2d 259 (Wash. 1955)). Subsequent legal authorities in Florida rely on Turk to prohibit third-parties from rendering aid or assistance that would violate another’s restrictive covenant (assuming the elements escribed above are met). See, Yours-Temp. Help Services, Inc. v. Manpower, Inc., 377 So. 2d 825 (Fla. 1st DCA 1979) (finding that Turk recognized “a decree of injunction not only binds the parties[’] defendant but also those identified with them in interest, in privity with them, represented by them or subject to their control.”). Therefore, third-parties could become entangled in litigation concerning a restrictive covenant it did not sign if the third-party knows about the covenant and helps another to violate it.

Peter Mavrick is a Fort Lauderdale business litigation lawyer, and represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.