On March 8, 2013, the Fifth District issued an opinion addressing several issues relevant to non-compete litigation. See, Avalon Legal Information Services, Inc. v. Keating, No. 5D12-78, Slip Op. (Fla. 5th DCA Mar. 8, 2013). The employer in Keating provided consulting services for various sheriffs agencies throughout Florida. These services included training sheriffs on the proper techniques for service of process. During the course of her employment, the employee in Keating signed a non-compete agreement which prohibited her from competing with and soliciting the employer's civil process contracts throughout Florida. Id. at *2. The non-compete agreement lasted for three years following the expiration of the employment agreement. Id.
Once the employment contract expired, the employee elected not to renew. A few weeks after the employee's departure, however, the employer received a copy of a solicitation letter sent from the employee to all sixty-seven sheriffs' offices throughout Florida. Id. The employer in Keating did not immediately seek to enforce the terms of the non-compete agreement. Instead, the employer sent letters to its current customers explaining that it still intended to provide civil process consulting services to its customers. Despite its efforts, over the next year the employer lost sixteen contracts with sheriffs' offices. Id.
The employer in Keating filed a sworn complaint for temporary and permanent injunctive relief, an accounting, tortuous interference with contractual relationships and attorney's fees. After filing the complaint, that employer filed a motion for temporary injunction. Id. The court scheduled a hearing on the motion for temporary injunction during which the only testimony that was presented was that of the employer. Id. The trial court ultimately granted an injunction for the employer and enforced the terms of the non-compete agreement. The employee appealed and the Fifth District heard the matter on appeal. Id. at *3.
The Keating opinion is helpful in several respects. In the decision, the Fifth District considers each of the employee's defenses to the enforcement of the non-compete agreement. The court also considers whether the bond set by the trial court was appropriate. This post, however, will focus on the evidence the Fifth District considered in ruling on the appeal. By considering the evidence presented, readers receive a better understanding of those facts courts consider relevant when asked to enforce a non-compete agreement.
On page 2 of the opinion, the Fifth District begins its analysis by noting that the employer testified as to why he had the employee sign the non-compete agreement. Like many employers, the employer in Keating testified that he enjoyed a great deal of customer goodwill and loyalty from his clients and he did not want to compete against the employee for these customers. Id. at 2. Next, the employer testified as to why he believed the employee was competing against the employer. By sending the solicitation letter, the employer testified that he believed the employee was competing against him by offering his client similar services but at a lower price. The employer further testified that despite his efforts to solidify his relationships with his customers, the employer received eighteen cancellations from existing customers following the solicitation letter. Id.
The employer's loss of customers resulted in a $55,000 loss in revenue from the time the employee left through the time the employer commenced suit to enforce the non-compete agreement. Id. at *2. The employer offered as evidence the cancelled contracts that resulted from the employee's solicitation. The employer also testified that it was hard to quantify what his future damages would be for future contract terminations. Id. at *3. Finally, the employer offered into evidence a copy of the former employee's contract which the employee was offering to prospective customers. The employee's contract showed that the employee was offering "consultation/research on civil process matters in conjunction with sheriff's in-house legal counsel." Id.
In considering the appeal, the Fifth District in Keating affirmed the injunction entered by the trial court, yet remanded with instructions for the trial court to modify the injunction to the extent it was overly broad. Opinion at *6. What is interesting about Keating is the evidence the appellate court found significant in making its ruling. The court first considered why the employer entered into the non-compete agreement – to protect customer goodwill and loyalty. Next, the court looked at evidence supporting the employer's claim that the employee breached the agreement by competing for the employer's existing and future customers. Finally, the court considered the extent of harm caused by the employee's breach and the documents the employee relied upon to solicit the employer's customers. Ultimately, the court found the restrictive covenant enforceable as the employee was "unable to establish any error as to the grounds for temporary injunction." Id.
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