Excerpt from one of our non compete cases where the enforceability of F.S. 542.335, non-compete law is analyzed under Florida Law
ANALYSIS Under 542.335:
The standard for Injunctive Relief with respect to restrictive covenants requires Plaintiff to plead and prove: (1) the existence of an enforceable contract, including a statutorily-defined “legitimate business reason” supporting each restrictive covenant; (2) Defendants’ intentional breach of the restrictive covenants; and (3) that Plaintiff has no adequate remedy other than Injunctive Relief. Sarasota Beverage Co. v. Johnson, 551 So.2d 503, 508 (Fla.Dist.Ct.App.1989); Fla Stat. § 542.335.
In the instant case, the Plaintiff has an insurmountable mountain to climb in order for it to be able to show that there is the existence of an enforceable contract. Plaintiff must first be able to show that it did not breach any of the terms that induced Mr. Xxxxx into entering into the Non-Compete clause. It will not be possible for Plaintiff to do so because it violated the agreement first by drastically reducing Mr. Xxxxx’s territory, and eliminating his base salary. It is well settled Florida Law that a party is not entitled to enjoin the breach of a contract by another, unless he himself has performed what the contract requires of him so far as possible; if he himself is in default or has given cause for non-performance by Defendant, he has no standing in equity. Having committed the first breach, the general rule is that a material breach of the Agreement allows the non-breaching party to treat the breach as a discharge of his contract liability. If the employer wrongfully refuses to pay the employee his compensation, the employee is relieved of any further obligation under the contract and the employer cannot obtain an Injunction. Northern Trust Investments, N.A. v. Domino, 896 So.2d 880 (Fl, 2005) (affirming denial of temporary injunction) citing: Benemerito & Flores v. Roche, 751 So read the article.2d 91 (Fla.App. 4 Dist., 1999) (affirming denial of temporary injunction. Seaboard Oil Co. v. Donovan, 99 Fla. 1296, 1305, 128 So. 821, 824 (1930) (affirming denial of temporary injunction). See also: In the Matter of Walter W. Thomas, Debtor, 51 B.R. 653, 654 (M.D.Fla.1985). Evidently, Defendant is trying to have it both ways. On one hand, it does not want to abide by the terms of employment agreement between NationsRent and Mr. Xxxxx; while on the other, it seeks to enforce the NationsRent Non-compete clause under F.S. 542.335. Indeed, by Defendant violating the agreement NationsRent had with Mr. Xxxxx, it has voided Mr. Xxxxxs Non-compete Agreement. This prior breach defense trumps Florida Statute 542.335
Second: In order for Plaintiff to be able to show the existence of an enforceable contract, it must be able to show that it has a legitimate business reason to enforce the Non-compete clause. In Hapney v. Central Garage, Inc., 579 So. 2d 127, 131 (Fla. 2d DCA 1991), the Court held that the existence of a legitimate business interest of the employer that required protection was a condition precedent to the validity of a Non-compete covenant. 579 So. 2d at 134. Section 542.335 (2)(a), Florida Statutes, requires that the employer must be engaged in the business that the covenant seeks to protect. If the employer is not in a like business, it has no legitimate interest in protecting against competition in that business. See Premier Assoc. Ltd. v. Loper, 778 N.E. 2d 630, 636 (Ohio Ct. App. 2002) (“an employer which abandons its business may not enforce a covenant not to compete”); Hess v. Gebhard & Co., Inc., 808 A.2d 912, 923 (Pa. 2002). In the instant case, Defendant, in Florida, and under the obligations as codified by F.S. 542.335, is in the business of renting equipment. During the relevant time periods that the Non-compete clause was in force, Mr. Xxxxx only sold equipment. To make matters even more notorious against Defendant, Mr. Xxxxx was only selling skidsteers, tracksteers and mini excavators during the relevant time period. This is important to note because Defendant is in a contract with Bobcat, a third party entity, which restricts Defendant’s ability to sell tracksteers, skidsteers and mini excavators. Indeed, how could Mr. Xxxxx’s limited activities in selling the three aforementioned products in any way handicap Defendant? Plaintiff’s contentions are unfounded. As a matter of fact, they are lies. In Plaintiff’s Complaint, Exhibit C, page 6, Defendant states: “We know that Mr. Xxxxx is in fact soliciting Defendant’s customers, specifically C&D Corporation, Young Communication.” These contentions are clearly refuted by the Affidavits of unbiased witnesses from the above referenced companies. Mr. Terry Crevins, Young Communication’s employee, responsible for ordering equipment clearly refutes this contention (see Attachment B, Cravens Affidavit) and Mr. Terry Dickerson, C&D Construction employee responsible for ordering equipment (see Attachment C, Dickerson Affidavit). In addition to falsely claiming that Mr. Xxxxx violated the restrictive covenants by competing with Defendant, Defendant is also falsely claiming that Mr. Xxxxx disclosed proprietary information such as company lists and prices, and solicited employees. Not only are these statements false and Plaintiff has yet to provide a scintilla of credible evidence, they, even if true, would fail to overcome the legitimate business interest test that would merit enforcement of a restrictive covenant under the Florida Statute. Anyone, at any time, can find out what the prices are. This is no secret. Indeed, anyone can call or stop by any Defendant location and ask for and receive a price quote for a piece of equipment. Moreover, prices are constantly changing. As for these “confidential customers” they are all commonly known throughout the industry. Even a lay-person will be able to ascertain that the industry clients are those that are involved in the construction industry. A cursory review of the local Yellow Pages will provide this information with minimal effort. Indeed, as the Court in Hayden’s Sport Center, Inc. v. Johnson, 441 N.E.2d 927, 109 Ill.App.3d 1140 (Ill.App. 2 Dist., 1982) pointed out, “Information will not be considered a trade secret if its contents are generally known within an industry, fully and completely disclosed by the company through its catalogs or literature disseminated throughout the industry, or disclosed by the products themselves.”
Third: In order for Plaintiff to be able to show the existence of an enforceable contract, it must not have “unclean hands.” In the instant case, the Plaintiff has unclean hands because it forced Mr. Xxxxx to deceive customers by offering them a reduced price for the equipment during a specific period of time, and then, without informing the customer, the price would surreptitiously go up after the specific period of time had elapsed. The Court in Bradley v. Health Coalition, Inc., 687 So.2d 329 (Fla. App. 3 Dist., 1997) stated, “If the employer ordered the employee to sell unfit products, or to alter invoices so as to defraud customers, and the employee was forced to resign for refusing to do so, then the employer would have unclean hands and would not be entitled to an Injunction. Pilafian v. Cherry, 355 So.2d 847, 849 (Fla. 3d DCA), (“One who seeks the aid of equity must do so with clean hands.”) (citation omitted), cert. denied, 361 So.2d 834 (Fla.1978); Gupton v. Village Key & Saw Shop, 656 So.2d at 478; Cordis Corp. v. Prooslin, 482 So.2d at 489-90 (Temporary Injunction must not disserve the public interest); § 542.33, Fla. Stat. (1991) (“The court shall not enter an Injunction contrary to the public health, safety, or welfare”); Kendall B. Coffey & Thomas F. Nealon III, supra, at 1132. Clearly, because Defendant does not have clean hands, it can not come now and ask a Federal Court to exercise its equitable powers in favor of a devious company that manipulates the welfare of its customers to serve its bottom line numbers.
Fourth: (But Equally Important): Plaintiff can not show that it has an enforceable Non-compete contract because the limitation period has expired. Pursuant to the written terms of the Non-compete clause, the Non-compete period is for a period of 6 months. The period began on November 30, 2006 and expired on April 30 2007. Consequently, at the present time, any Non-compete period that could have existed, has expired. Plaintiff will contend that the Non-compete clause period will be extended by what was intended in the bargain. However, as a matter of fact, this identical issue was already tackled by the Southern District of Florida which heard Dirienzo v. Defendant (Case 2:07-cv-14058-KMM) concerning an identical Non-compete clause (by the same Plaintiff) during an almost identical time period. Like the instant case, Mr. Dirienzo was hired by NationsRent, entered into a Non-compete clause with NationsRent, and when Defendant took over, Mr. Dirienzo immediately quit his position and admittedly began directly competing with Defendant. For the purposes of the expiration period, this case is identical in facts to the Dirienzo case. In Dirienzo, the Court refused to extend the limitation period, and upheld the Magistrates Order in refusing to extend the limitation period thereof and stated as follows:
“It is well established that Florida case law permits a Non-compete period to be equitably extended to allow for what was intended in the bargain.” Michel Pommier Models, Inc. v. Diel, 886 So.2d 993, 995 (Fla 3rd DCA 2004) (emphasis added). However, it is clear that the remedy and extension are equitable in nature. Id. Such equitable remedies are generally within the discretion of the courts. Further Michele Pommier, recognizes that a court is permitted to equitably extend the injunction period, but the court in that case declined to grant a preliminary injunction. Id. The court in Michele Pommier further recognized that the purpose of a temporary or preliminary injunction is not to resolve disputes, but rather to prevent irreparable harm by maintaining status quo until a final hearing can occur when full relief may be given.” Id. at 995-96. (See Exhibit F attached order).
The Dirienzo court also analyzed Capelouto v. Orkin Exterminating Co., 183 So.2d 532 (Fla. 1996) and determined that the equitable nature of Preliminary Injunction under 542.335 does not require a Court to equitably extend the limitation period. Instead, it is left at the discretion of the Court. The Dirienzo Court specifically found that the “Verifiable, concrete harm occasioned by Defendant’s employment at [competitor] is very little.” (The Dirienzon Court has subsequently dismissed Defendant’s case). Because in the instant case Mr. Xxxxx wasn’t even competing in the same business as Defendant, we are curious to hear how Defendant intends to show this “incredible harm it is stating Mr. Xxxxx is costing,” much less, show that this Court has Diversity Jurisdiction based on damages exceeding $75,000.
Next, if Plaintiff is somehow able to overcome the non-existence of the Non-compete clause, it must next establish that Mr. Xxxxx intentionally breached the restrictive covenants. This is another insurmountable task that Defendant has the burden of meeting. As previously stated, Mr. Xxxxx left his employment to work for Highland Turf and Tractor, an entity which does not compete with Defendant. After about 3 months with this company, Mr. Xxxxx went to work for FCR as a salesperson. At no time during the limitation period did Mr. Xxxxx perform similar duties or functions as he had done at Defendant. How then can Mr. Xxxxx be charged with intentional breach of a restrictive covenant? Mr. Xxxxx had more than reasonable believe that his Non-compete was not enforceable due to Defendant’s prior breach and unclean hands as well as the fact that he was not taking away any customers of Defendant due to the fact that he was selling different, non-competing products.
Next, under the requirements of F.S. 542.335 the Plaintiff has the burden to show that it has no adequate remedy other than Injunctive Relief. A District Court may grant, as directed by F.S. 542.335, Injunctive Relief if the movant shows the following: (1) substantial likelihood of success on the merits; (2) irreparable injury will be suffered unless the injunction issues; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest. All Care Nursing Service, Inc. v. Bethesda Memorial Hospital, Inc., 887 F.2d 1535, 1537 (11th Cir.1989) (citing Baker, 856 F.2d at 169 (citing Jefferson County, 720 F.2d at 1519)). In this Circuit, “[a] preliminary injunction is an extraordinary and drastic remedy not to be granted unless the movant clearly established the ’burden of persuasion’ ” as to the four requisites. 2 Id. (citations omitted). As aforeshown, Defendant can not show a substantial likelihood of success on the merits; as a matter of fact, given its prior breach, unclean hands, and lack of legitimate business interest, it can’t even show a good faith basis for filing this lawsuit.
Additionally, this Court is required to weigh the potential damage to the movant with the proposed damage the injunction will have on Mr. Xxxxx. Indeed, Defendant is not suffering any damages. However, if this Court would grant this Injunction, Mr. Xxxxx’s damages will be devastating to him and his family. For starters, Mr. Xxxxx’s family would loose their health insurance, and income. Unfortunately, Mr. Xxxxx currently lives on a paycheck by paycheck basis, and his credit is maximized. Therefore, any loss of income at this stage will have dire consequences including loss of their home, and his ability to provide sustenance to his family.
Moreover, despite Plaintiff’s unsolicited use of the word “Emergency” in front of its Motion for Injunctive relief, there is no evidence of emergency, or even a heed to emergency. As a matter of fact, upon consecutive requests by Defendant, this Court granted a postponement to Defendant’s request for postponement of the “Emergency” hearings. The use of the word “Emergency” should not be taken lightly, and it is an abuse of Defendant’s attorney’s discretion to use it as such. In an emergency, it would be imprudent to take any actions that prevent the emergency from being handled. On the first request for a postponement of the hearing, Defendant asked for a postponement because one of its many attorneys had another hearing to go to. The second request came because Defendant’s attorneys were going to give sexual harassment training. Indeed, Defendant’s attorney’s are mocking the use of the word “Emergency” and violating the Middle District’s Rule 3.01(e) concerning Emergency Motions and thereby should be sanctioned, and Defendants Motion for Injunctive Relief denied.
Finally, Defendant has failed to comply with F.S. 542.335 (1) (j) which requires Defendant to post a bond. This same requirement can be found in Rule 65(c), Fed.R.Civ.P. See BellSouth Telecom., Inc. v. McImetro Access Transmission Servs., LLC, 425 F.3d 964, 970-71 (11th Cir. 2005). Despite Defendant having this burden, it has failed to provide such bond.
November 2, 2012
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