FORT LAUDERDALE NON-COMPETE AGREEMENTS: EMPLOYEE’S PERSONAL CUSTOMER RELATIONSHIPS MAY NOT EXCUSE SOLICITATION

Companies often hire experienced sales and business development professionals to expand their business. A non-solicitation provision in an employment contract is intended to prevent post-termination solicitation of clients with whom the business has substantial relationships. When an employee brings clients to a company, it is important to distinguish whether the employee had a prior business or personal relationship with the client, and whether it is part of the employee’s job to develop and maintain client relationships. Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, non-compete agreement litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

In the case of Hilb Rogal & Hobbs of Florida, Inc. v. Grimmel, 48 So. 3d 957 (Fla. 4th DCA 2010), Hilb Rogal & Hobbs of Florida, Inc. (HRH) was an insurance broker who hired Mark Grimmel (Grimmel) as a producer to service its existing customers and to generate new customers. Grimmel signed an employment agreement with HRH, which included a non-piracy clause that prohibited Grimmel from soliciting HRH’s customers following termination of his employment. Four years after Grimmel resigned to operate his own competing insurance brokerage firm, Egis Insurance Advisors (Egis).

HRH filed a lawsuit for injunctive relief and damages against Grimmel and Egis. HRH alleged that Grimmel violated the non-piracy covenant in his employment agreement with HRH by misappropriating business from HRH to Egis. HRH also filed an emergency motion for a temporary injunction, requesting that the court prohibit Grimmel from soliciting, accepting business from, and continuing to do business with HRH’s customers. Also, HRH sought to enjoin Grimmel from using confidential or trade secret information. HRH obtained an ex-parte order (made without the other party’s awareness) granting a temporary injunction against Grimmel and posted a bond. Grimmel moved to dissolve the injunction and a hearing was held before a magistrate. The magistrate issued a Report and Recommendation proposing that the temporary injunction be dissolved. HRH filed its exceptions to the general magistrate’s report and requested a hearing. The trial court held a hearing and entered an order denying HRH’s exceptions, granting the motion to dissolve the temporary injunction, and ratifying and approving the general magistrate’s Report and Recommendation. HRH immediately appealed.

The party seeking enforcement of the non-compete agreement must present a prima facie case that the non-compete restrictions are reasonably necessary to protect its legitimate business interests. Section 542.335, Florida Statutes. The opposing party then has the burden of proving the non-compete restrictions are overbroad, overlong, or otherwise not reasonably necessary to support the restriction. A “legitimate business interest” includes “substantial relationships with specific prospective or existing customers … or clients.” Section 542.335, Florida Statutes. HRH’s employment agreement provided in pertinent part, “Employee recognizes that over a period of many years the Employer (as defined in paragraph 4) has developed, at considerable expense, relationships with, and knowledge about, Customers and Prospective Customers which are legitimate business interests and constitute a major part of the value of the Employer.” The general magistrate’s report held that HRH did not provide competent evidence of what can be construed as a legitimate business interest when applied to the action HRH was seeking to enjoin. The general magistrate concluded that the evidence demonstrated that every customer was brought to HRH by Grimmel and that they sought Grimmel because of who he was and not because he worked for HRH. The general magistrate concluded that HRH did not have a substantial likelihood of success to show it has a substantial relationship with these customers.

The appellate court disagreed and stated that even though Grimmel brought these customers into HRH, Grimmel was HRH’s employee and that was what his job entailed. As a sales producer for HRH, it was his job to find customers. The appellate court further stated that even though Grimmel was acquainted with some of these people before he worked for HRH, he did not have a prior business relationship with them. “[T]he right to prohibit the direct solicitation of existing customers’ is a legitimate business interest, and a covenant not to compete which includes a non-solicitation clause is breached when a former employee directly solicits customers of his former employer.” Atomic Tattoos, LLC v. Morgan, 45 So.3d 63 (Fla. 2d DCA 2010).

The general magistrate found that each of the representatives of the management groups solicited Grimmel. However, Environmental Services, Inc. v. Carter, 9 So.3d 1258 (Fla. 5th DCA 2009), held that “where former clients initiate contacts with employees at their new place of business… ‘solicitation’ can include a transaction in which the employee was proactive, regardless of whether the customer or employee initiated the transaction.” Under HRH’s employment agreement, Grimmel was prohibited from both soliciting and accepting an invitation from a known customer for the purpose of providing prohibited services. The appellate court concluded that the general magistrate incorrectly applied the law and the contract to the facts, thus making her finding of no legitimate business interest clearly erroneous.

The appellate further held that the general magistrate erred in finding that the public interest would not be served by maintaining the injunction. Hilb Rogal & Hobbs of Florida, Inc. v. Grimmel held that, “[t]he fact that the customers will have to use a different insurance broker does not make the enforcement of this agreement against public policy.” The appellate court concluded that the trial court also erred in adopting the Report and Recommendation because HRH proved, among other things, that it had a legitimate business interest in its substantial relationships with specific existing customers and that Grimmel solicited and serviced those customers contrary to the terms of the agreement. The appellate court reversed the trial court’s order granting the motion to dissolve the temporary injunction.

Peter Mavrick is a Fort Lauderdale non-compete lawyer who also practices in Palm Beach, Boca Raton, and Miami-Dade. This article does not serve as a substitute for legal advice tailored to a particular situation.