RESTRICTIVE PERSONAL COVENANTS VS. RESTRICTIVE REAL COVENANTS

Generally, under Florida statutory law, restrictive covenants, e.g., non-competition covenants, must be signed by the person against whom the covenant will be enforced. A restrictive covenant cannot be enforced against an individual who did not sign the restrictive covenant.

In Winn-Dixie Stores, Inc. v. Dolgencorp, Inc., 964 So. 2d 261 (Fla. 4th DCA 2007), Winn-Dixie Stores, Inc. (“Winn-Dixie”) entered into a lease with a landlord that granted Winn-Dixie the exclusive right to sell groceries at a particular shopping plaza. The restrictive covenant in the lease stated that other stores in the plaza could sell groceries only if they did not devote more than 500 square feet to those groceries. Thereafter, Dolgencorp, Inc. (“Dolgencorp”) leased a location at the plaza and devoted more than 500 square feet to grocery items. Winn-Dixie sued to enforce the restrictive covenant. Dolgencorp argued that because it never signed the restrictive covenant, the covenant could not be enforced against Dolgencorp under Florida law. While the trial court agreed with Dolgencorp, the appellate court found that the restrictive covenant was enforceable against Dolgencorp even though Dolgencorp never signed the covenant. The appellate court’s decision is rooted in the distinction between personal covenants and real covenants.

A personal covenant is a provision in a contract that creates personal contractual obligations. For example, a restrictive covenant contained in an employment agreement is a personal covenant. On the other hand, a real covenant is a provision contained in transaction involving real property—for example, a restrictive covenant contained in a lease of real property. Generally, if a real covenant touches and involves the land and was meant to bind all subsequent purchasers of the land, then the real covenant is said to “run with the land” and will bind all subsequent purchasers or lessees of the land who had notice of the covenant.

The appellate court in Winn-Dixie Stores, Inc. found that the covenant contained in Winn-Dixie’s lease “ran with the land.” The restrictive covenant touched and involved the land because it affected the mode and enjoyment of the land. The restrictive covenant also was meant to bind all subsequent purchasers and lessees because the lease contained a provision stating that “it is a covenant running with the land.” Winn-Dixie Stores, Inc., 964 So. 2d at 264. Finally, because Dolgencorp is an experienced commercial tenant with 7,800 stores in 32 states, “Dolgencorp had reason to know of the existence of Winn-Dixie’s restrictive covenant,” and therefore had sufficient notice. Winn-Dixie Stores, Inc., 964 So. 2d at 266. Because the restrictive covenant was a real covenant that ran with the land, it could be enforced against Dolgencorp even though Dolgencorp never signed the restrictive covenant.

More recently, Big Lots Stores, Inc. attempted a similar argument against Winn-Dixie’s enforcement of its restrictive covenants in Winn-Dixie Stores, Inc. v. Dolgencorp, LLC, 2014 U.S. App. LEXIS 4143 (11th Cir. Mar. 5, 2014). The federal appellate court, applying Florida law, held that because Winn-Dixie’s restrictive covenant was a real covenant that ran with the land, courts can “enforce a covenant running with the land against non-signatory co-tenants.” Winn-Dixie Stores, Inc., 2014 U.S. App. LEXIS 4143, at *73.

The above cases serve as a reminder that Florida law on restrictive covenants recognizes a distinction between personal covenants and real covenants. While restrictive personal covenants must be contained in a writing signed by the person against whom the covenant will be enforced, restrictive real covenants that run with the land can be enforced against co-tenants who have not signed the restrictive covenant.

Peter T. Mavrick has successfully represented many businesses in trade secret and non-competition covenant litigation. This article is not a substitute for legal advice tailored to a particular situation. Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311; Email: peter@mavricklaw.com.