United States: Challenging Florida Non-Compete Agreements: Lack Of Competition

Often an employer seeks to enforce a non-compete agreement against a former employee, arguing that the employee is competing with the employer in violation of a non-compete agreement. Similar arguments are made by the purchaser of a business against a prior owner. Invoking Fla. Stat. 542.335, the employer often argues that the employee's actions harm one of the statute's enumerated legitimate business interests (i.e. customer relationships, trade secrets, etc.). One issue that should never be overlooked in non-compete litigation, however, is whether the employee is actually competing with the employer. This issue – whether a party to a non-compete agreement engaged in competition – was before the court in D'Agostino v. Lethal Performance, Inc., 958 So. 2d 605 (Fla. 4th DCA 2007).

D'Agostino involved an individual who co-founded an internet business, Lethal Performance, Inc., which sold automotive parts. As co-founder of the company, D'Agostino signed a shareholder agreement containing a non-compete clause restricting him from getting involved in any business "which sells products and/or performs any of the various programs and services performed or rendered by" the internet. The non-compete agreement ran for three years following the shareholder's departure from the company. Id. at 606.

After leaving the company, D'Agostino started another company, D'Agostino Racing, that distributed automobile parts and operated an installation facility. The trial court entered an order restricting the types of parts D'Agostino Racing could install as part of the new business venture. On appeal, the Fourth District reversed, finding that Lethal Performance failed to establish that D'Agostino violated the non-compete agreement by installing its type of automobile parts.

The take away from the D'Agostino decision is simple – before looking at whether or not there is a legitimate business interest at issue, first determine whether competition exists. Many non-compete agreements define the scope or meaning of "competition". It is helpful to see whether the act purporting to violate the non-compete agreement satisfies its own definition of competition.

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