MIAMI NON-COMPETE AGREEMENTS: JUDGMENTS INCORPORATING ILLEGAL NON-COMPETES MAY BE ENFORCEABLE

Section 542.335 of the Florida Statutes permits non-compete agreements arising from: a) the sale of a business, b) an employment, agency, or independent contractor relationship, c) a licensing relationship, or d) a partnership. Contracts that restrain one from exercising a lawful profession, trade, or business, and that do not fall within the exceptions of the statute are generally void. However, when void non-compete agreement has been incorporated into a final judgment, it may still be enforceable. Peter Mavrick is a Miami non-compete attorney, and also advocates for clients in Fort Lauderdale, Boca Raton, and Palm Beach, 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.

An example of this circumstance occurred in the case of Miller v. Preefer, 1 So. 3d 1278 (Fla. 4th DCA 2009). John W. Miller (Miller) owned and operated numerous restaurant and bar establishments under the “Ale House” name. Miller and nine associated companies filed a lawsuit against Jay Preefer, Richard Preefer, Jay Starr, and other associated companies (Preefer defendants). Miller’s lawsuit against Preefer defendants alleged trademark and service mark infringement based on Preefer defendants’ use of the name “Ale House.” Miller also alleged that Preefer defendants engaged in a pattern of unfair competition by registering various corporate names that included the words “Ale House,” and by utilizing Miller’s business model and menus.

The parties settled the lawsuit and entered a mediated settlement agreement. The parties agreed, among other things, on a non-compete provision that prohibited Miller from conducting a related restaurant business within a specific geographical area of Palm Beach County, Florida for fifty years. The trial court dismissed the lawsuit with prejudice as to all claims. The trial court entered a final judgment of dismissal which incorporated the settlement agreement. Jay Preefer sued Miller and alleged violations of the settlement agreement. Miller filed a counterclaim seeking a declaratory judgment finding that the non-compete was unenforceable. The parties settled the lawsuit and Miller’s counterclaim was dismissed without prejudice (meaning it can be refiled).

Miller then filed a new lawsuit against the Preefer defendants and sought a declaratory judgment finding that the non-compete provision in the settlement agreement was void and unenforceable as an illegal restraint of trade. Miller insisted that the remainder of the settlement agreement was enforceable. Preefer defendants contended that because Miller received the benefit of the agreement for nearly thirteen years, he could not seek to have a portion of the agreement, which was not advantageous to him, declared unenforceable. After a bench trial, the trial court ruled in favor of Preefer defendants, and entered a written final judgment. The trial court denied Miller’s claim for declaratory relief to the extent that Miller sought to have the trial court declare the non-compete invalid. The trial court instead declared that the settlement agreement was valid and enforceable. Miller immediately appealed.

The appellate court analyzed Miller’s appeal in two steps. The appellate court needed to first determine whether the non-compete constituted an illegal restraint of trade. If the non-compete was an illegal restraint on trade, the appellate court needed to determine whether Miller could challenge the illegal non-compete provision many years after it was incorporated into a judgment.

The appellate court held that there was no question that the parties do not satisfy any of the relationship requirements of the non-compete statute. Further, the appellate court held that the non-compete clearly restrained trade and would ordinarily be void and unenforceable. Because the trial court incorporated the settlement agreement into the final order of dismissal, the appellate court must determine the time frame in which it may be challenged. The time frame to challenge the final order is determined by whether the final order “void” or “voidable.” A judgment is void if it is entered when the court does not have jurisdiction over the subject matter of the lawsuit or the person. Sterling Factors Corp. v. U.S. Bank Nat’l Ass’n, 968 So.2d 658 (Fla. 2d DCA 2007). A void judgment may be attacked at any time. M.L. Builders, Inc. v. Reserve Developers, LLP, 769 So.2d 1079 (Fla. 4th DCA 2000). A judgment is voidable if it is defective in some material way, even though the court has jurisdiction. JUDGMENT, Black’s Law Dictionary (11th ed. 2019). To attack a voidable judgment, it must be challenged by a timely appeal from the judgment or by filing a timely motion to set aside the judgment pursuant to Rule 1.540(b), of the Florida Rule of Civil Procedure.

The appellate court found that because the trial court incorporated the settlement agreement into its final judgment, it became part of the judgment irrespective of the illegal non-compete provision. To undo the settlement agreement, or just the non-compete provision, Miller was required to unravel the judgment itself. Because the trial court had jurisdiction over the subject matter of the litigation and personal jurisdiction over the parties, the illegal non-compete provision merely rendered the judgment as voidable. Miller did not appeal or otherwise challenge this voidable final judgment, but instead operated under the settlement agreement, and enjoyed its benefits, for approximately thirteen years. The appellate court held that Miller cannot now collaterally challenge the judgment or the settlement agreement. The appellate court affirmed the trial court’s judgment.

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