United States: What Is The Standard For Temporary Injunction To Enforce A Non-Compete Agreement?

Introduction

Litigants seeking to enforce non-compete agreements often do so by filing motions for temporary injunction. In Florida, a party seeking a temporary injunction must plead and prove four elements: "(1) the likelihood of irreparable [injury], (2) the unavailability of an adequate remedy at law, (3) a substantial likelihood of success on the merits, and (4) that a temporary injunction will serve the public interest." DePuy Orthopaedics, Inc., v. Waxman, 95 So.3d 928 (Fla. 1^st DCA 2012), citing Envtl. Servs., Inc. v. Carter, 9 So.3d 1258, 1261 (Fla 5^th DCA 2009); see also, Masters Freight, Inc. v. Servco, Inc., 915 So.2d 666, 666 (Fla. 2d DCA 2005). The First District in DePuy considered an appeal from a trial court order denying a motion for temporary injunction. On appeal, the First District reversed the trial court, finding that the party enforcing the non-compete agreement established each of the prerequisites needed for a temporary injunction. DePuy at 940. The DePuy decision is helpful as it shows how the court considered each of the requirements for an injunction in the context of a non-compete agreement.

Background

The employer in DePuy manufactured and sold orthopedic products. The employee in DePuy entered into an employment agreement with the employer that contained a non-compete clause with a two year duration. Id. at 932. Years after entering into the non-compete agreement, the employee began working for a new employer and calling on customers of the old employer. Id. at 932-33. Upon learning that the employee was calling on its customers, the employer filed a complaint alleging the employee violated the agreement. The employer also filed an emergency motion for temporary injunction. Id. at 933.

Substantial Likelihood of Success on the Merits

On appeal, the First District considered whether the employer had established a substantial likelihood of success on the merits. In doing so, the court looked at Fla. Stat. § 542.335 which addresses the enforceability of a non-compete agreement. The court found that at trial, the employer "presented unrebutted evidence that it had legitimate business interests justifying the non-compete covenants." DePuy at 938. Further, the court found that the employer presented evidence at trial that its substantial relationships with existing customers were damaged due to the actions of the employee and that the non-compete agreement was reasonably necessary to protect its legitimate business interestsId. at 939. Based on these factors, the court found that the employer established a substantial likelihood of success on the merits. Id.

Likelihood of Irreparable Injury

In considering the second factor for injunction, irreparable injury, the court in DePuy again turned to Florida's non-compete statute, Fla. Stat. § 542.335. Section 542.335(1)(j) provides in relevant part "[t]he violation of an enforceable restrictive covenant creates a presumption of irreparable injury to the person seeking enforcement of a restrictive covenant ..." Once a party establishes by prima facie evidence that the non-compete agreement has been violated, section 542.335(1)(j) shifts the burden to the opposing party to show the absence of injury. DePuy at 939, citing Variable Annuity Life Ins. Co. v. Hausinger, 927 So.2d 243, 245 (Fla 2d DCA 2006)(finding that Florida's non-compete statute operates to create a presumption of irreparable injury to the employer and shifts the burden to the employee to show a lack of injury. The party seeking to enforce the non-compete therefore does not have to directly prove that the breaching party's activities will cause irreparable harm if not enjoined). As to the second factor, irreparable injury, the court in DePuy found that the employer presented prima facie evidence that the employee violated the non-compete agreement and that the employee failed to show an absence of injury. Id. at 939.

Unavailability of an Adequate Remedy at Law

Next, the DePuy court considered whether the employer had established the unavailability of an adequate remedy of law. The court found that any continued breach of the non-compete agreement by the employee could further damage the employer's goodwill and relationships with its customers. Id. at 940. Further, the court recognized that "nothing short of an injunction would prevent this loss." Id., citing Variable Annuity Life Ins. Co. v. Hausinger, 927 So.2d 243, 245 (Fla. 2d DCA 2006)(finding that "[t]he focus of preliminary injunctive relief is on maintaining long standing relationships and preserving the goodwill of a company built up over the course of years of doing business ...")

The Public Interest in Issuing an Injunction

The final factor considered by the First District in DePuy was whether issuance of an injunction enforcing a non-compete agreement was contrary to public interest. Id. at 940. Again, the court turned to Fla. Stat. § 542.335 for guidance. Under section 542.335(1)(i), if a trial court refuses to enforce a non-compete agreement based on public policy grounds, it "must specifically articulate an overriding public policy reason" to justify the refusal to enforce the agreement. Having found that the employer satisfied all of the requirements for issuance of a temporary injunction, the First District in DePuy found that the trial court committed reversible error in denying the injunction. Id. at 940.

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