A Court’s Order Must Comply With The Restrictive Covenant It Seeks To Enforce

Florida’s 5th District Court of Appeal affirmed an injunction enforcing a non-compete/non-solicitation restrictive covenant but remanded, finding that the injunction was overbroad for including language not found in the covenant.  Avalon Legal Information Services, Inc. v. Keating, Case No. 5D12-78 (Fla. 5th DCA, March 8, 2013) (available here).  Avalon Legal Information, Services, Inc. (“Avalon”) and Judy Schneider appealed the trial court’s order temporarily enjoining them in accordance with a non-competition/non-solicitation agreement with Gerard F. Keating (“Keating”).  Avalon challenged the order.  The Appellate Court affirmed the injunction, but remanded the case for the trial court to modify the wording of the order.

Schneider worked as a paralegal for an attorney who provided civil service of process training and consulting to Florida sheriffs up until 2003 when that attorney retired.  Schneider purchased the business from the attorney and hired Keating to act as the supervising attorney.  Schneider then sold the consulting part of the business to Keating and sold the training and education portion of the business to George Kent, president and CEO of Avalon.  Keating and Schneider worked together until 2008, when they entered into an independent contractor agreement.  Under that agreement, Schneider was going to perform the same paralegal tasks for Keating for a period of two years, ending in September 2010.  The agreement included a non-compete/non-solicitation clause which prohibited Schneider from competing with and soliciting Keating’s civil process contracts in Florida for three years following the expiration of her agreement (September 2013).

In September 2010, Schneider committed to working exclusively for Avalon.  Avalon sent out a solicitation letter to all of Florida’s sheriffs’ offices advertising Schneider’s employment and Avalon’s new services.  In order to prevent Keating from losing clients, Keating and Kent sent a joint letter to the sheriffs’ offices explaining that Avalon did give legal advice.  However, Keating lost 16 sheriffs’ offices as a result of Avalon’s solicitation letter.  Keating sued Avalon, Kent, and Schneider alleging direct competition and solicitation.  The trial court granted a temporary injunction against Avalon and Schneider, but not to Kent.

In order to enforce a restrictive covenant through an injunction, the covenant must fall within the requirements of Florida Statute § 542.335, which explains how to analyze, evaluate, and enforce restrictive covenants in contracts.  “Among the prerequisites to enforceability, the statute requires that the restrictive covenant be in writing and signed by the person against whom enforcement is sought; be reasonable in time, area, and line of business (i.e., scope); and be reasonably necessary to protect one or more legitimate business interests.”  Avalon, Slip Op. P. 7.  Once this is established, then opposing party has the burden of showing that the restraint is overbroad, overlong, or not reasonably necessary.

First, the Appellate Court found that the evidence clearly supported a finding that Schneider violated the non-compete/non-solicitation covenant, which created a presumption of irreparable injury to Keating.  Second, the Court agreed with the trial court’s contention that the covenant protected Keating’s legitimate business interests of substantial relationships with clients and the clients’ goodwill.  The Court also agreed with the trial court that the covenant was not overbroad because it only restricted Schneider from servicing any past or current clients of Keating, leaving Schneider free to compete with Keating for new clients.  Third, the Court affirmed the trial court’s holding that the three year term in the covenant was reasonable.  The reason for the three year term was that the business contracts entered into in 2008, when Keating and Schneider signed the independent contractor agreement, were set to expire in 2012, thereby giving Keating a one year period to renew his contracts with those clients.  Finally, the Court found no merit in Avalon and Schneider’s claim that the covenant was unenforceable for contravening public policy, because Avalon and Schneider were unable to establish any error by the trial court on this claim.

The Court found that even though the covenant was enforceable, the injunction enforcing the covenant was overly broad.  The Court remanded for the trial court to clarify the language because the injunction restricted Schneider from performing tasks that were not included in the language of the covenant.  In addition, while the covenant restricted Avalon and Schneider from competing for and soliciting Keating’s clients, the injunction prevents them from competing for “any sheriffs in Florida” regardless of whether they were a client of Keating.  “The trial court should modify the injunction to allow Avalon and Schneider to compete for the remaining sheriffs’ offices with which Keating shares no substantial relationship.”  Avalon, Slip Op. P. 12.

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