FORT LAUDERDALE NON-COMPETE AGREEMENTS: WHEN COURTS ARE AUTHORIZED TO REFORM A CONTRACT

A party may seek to reform (change the terms of a contract) a contract when there is erroneous term in the wording of the contract, which was the product of a mutual mistake (made by both parties), a unilateral mistake (made by one party), or inequitable conduct by one party in making the contract. Florida law authorizes a court to reform a contract to conform to the parties’ intent for the agreement. Peter Mavrick is a Fort Lauderdale non-compete attorney, and also represents clients in non-compete disputes in Miami, Boca Raton, and Palm Beach, Florida. Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

An example of this was addressed in the case of Resouluna 4840, LLC v. Palceski, 2019 WL 7482222 (M.D. Fla. Sept. 5, 2019), Resouluna 4840, LLC (“Plaintiff”), a medical spa, employed Rachel Palceski (“Palceski”). When Palceski became a full-time employee for Plaintiff, she signed an employment agreement with a one-year non-competition provision. One year later, Plaintiff and Palceski negotiated a new employment agreement. Palceski contended she would not sign an agreement with a non-competition provision that was more than six months in duration. Palceski changed the proposed non-competition provision to six months, signed it, and returned it. Plaintiff contended that it was unaware of this change until after Palceski’s employment ended. Plaintiff never signed the new employment agreement, but Palceski continued to work for Plaintiff for approximately two months after signing and returning it. Palceski resigned from her employment with Plaintiff. More than six months later, Palceski went back to work for her former employer. Plaintiff filed a lawsuit against Palceski for soliciting Plaintiff’s customers in violation of the employment agreement. Plaintiff also filed a motion for a preliminary injunction.

In federal court, the party seeking a preliminary injunction must show, “(1) it has a substantial likelihood of success on the merits; (2) irreparable injury will be suffered unless the injunction issues; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest.” Forsyth Cty. v. U.S. Army Corps of Eng’rs, 633 F.3d 1032 (11th Cir. 2011). “A preliminary injunction…‘is an extraordinary and drastic remedy not to be granted unless the movant clearly establishes the burden of persuasion as to the four requisites.’” Llovera v. Fla., 576 F. App’x 894 (11th Cir. 2014).

Plaintiff contended that Palceski committed fraud by surreptitiously changing the non-compete period from one year to six months. Plaintiff argued that because of Palceski’s act, the Court should reform the contract to the original one-year term. Florida courts have the authority to reform contracts to make them conform to the true intent of the parties. “Florida courts have consistently held that where a mistaken writing is the product of the parties’ mutual mistake, or unilateral mistake on the part of one party and inequitable conduct by the other, the writing should be reformed to accurately reflect the parties’ agreement.” Smith v. Royal Auto. Grp., 675 So. 2d 144 (Fla. 5th DCA 1996). Plaintiff did not assert that a mutual mistake occurred. Rather, Plaintiff asserted that Palceski’s act of changing the non-competition provision from one year to six months was sufficiently inequitable as to warrant reformation.

The trial court found that the evidence established that Palceski informed Plaintiff that she would only agree to a six-month non-competition provision. There was no evidence to support a conclusion that Palceski engaged in any fraudulent or inequitable conduct. The trial court held that Plaintiff appeared to be on notice of Palceski’s position and failed to review the non-competition provision of Palceski’s signed agreement. Plaintiff’s failure to review the agreement before it consummated the employment agreement through performance was insufficient to establish entitlement to reformation of the contract. The trial court held that Plaintiff did not met its burden to establish a substantial likelihood of success on the merits regarding its reformation argument.

The trial court further held that Plaintiff did not establish a substantial likelihood of success on the merits regarding its breach of contract claim. While it appeared that Palceski and Plaintiff entered a valid employment agreement which contained a six-month non-competition provision, Plaintiff failed to show that Palceski violated her non-competition provision. Palceski contended that she did not begin providing services for a competitor until her return from maternity leave, which was more than six months after she left her employment with Plaintiff. Similarly, Plaintiff failed to present any credible evidence to establish that Palceski solicited Plaintiff’s clients. The non-solicitation provision was similarly limited to six months. Plaintiff provided no evidence that any solicitation occurred within that six-month period.

Based on the record before the court, it appeared that Palceski fully complied with her six-month non-competition provision, and therefore, there was no violation for the Court to enjoin. Plaintiff failed to establish a substantial likelihood of success on the merits as to Palceski, and the motion for preliminary injunction against her was denied.

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