USI INS. SERVICES OF FLORIDA, INC. v. PettineoUSI INS. SERVICES OF FLORIDA, INC. v. Pettineo
James E. Zloch of Wicker, Smith, O‘Hara, McCoy & Ford, P.A., Fort Lauderdale, for appellees Frank Pettineo and Pettineo Insurance Agency, Inc.
Martin B. Woods of Stearns, Weaver, Miller, Weissler, Alhadeff & Sitterson, P.A., Fort Lauderdale, for appellees Dawn Matricardi and Carl Sallade.
The buyer of an insurance agency appeals an order denying its request for a temporary injunction to enforce a non-compete agreement. It argues the trial court relied upon the wrong version of the applicable statute and case law that pre-dated the statute‘s amendment of July 1, 1996, to reach its decision. We agree and reverse.
The seller and primary focus of the injunctive relief sold his insurance agency to the buyer by way of an Asset Purchase Agreement executed in May 2006. The Agreement provided for payment of $1,000,000 at closing and an employment arrangement by which the buyer would pay the seller a salary plus fifty percent commission. The Agreement calculated annual commission payments as part of the purchase price, the aggregate of which was capped at $4,500,000. The Agreement provided for the sale and transfer of interest in “all of Seller‘s Client Accounts” and “any Goodwill” relating to those accounts “or otherwise to the Business.” The assets included the seller‘s client lists and related confidential information.
A non-compete provision in the Agreement required the seller to refrain from directly or indirectly carrying on a business that provides any insurance-related services within a specified territory for five years.1 A confidentiality provision prohibited the seller from disclosing confidential information; and a non-solicitation provision precluded the seller from soliciting or providing services to any client of the buyer.
During his tenure as an employee, the seller voiced his concern about perceived deficiencies in the way the buyer serviced clients. Worried that this would result in a loss of clients and commissions, the seller approached the buyer and re-negotiated a reduced, accelerated pay-out totaling $2.2 million.
The parties executed an amendment to the Agreement, which reaffirmed the non-compete provision and acknowledged that payment of the additional consideration constituted “full consideration for [the parties‘] respective Restrictive Covenants, and associated Goodwill included in the Acquired Assets.” The amendment deleted a provision that appeared in the original Agreement, which prevented the buyer from taking action adversely affecting the seller‘s “ability to earn Annual [commission] Payments.”
Subsequently, the buyer altered its business strategy and no longer issued policies under a certain minimum dollar amount. Those smaller policies were referred to other entities. The seller e-mailed himself his entire “book of business.” The next day, the buyer fired the seller.
The seller filed an action against the buyer for breach of his employment agreement. The buyer filed a counter-claim against the seller and third-party claims against the new agency established by the seller and two of the seller‘s former employees who assisted him in reviving his insurance business. The buyer requested a temporary injunction to enforce the non-compete provision.
The trial court denied the buyer‘s request for a temporary injunction. It is from this order that the buyer appeals. We reverse.
Relying on case law applying the superseded section 542.33, Florida Statutes (1995), the trial court incorrectly required the buyer to establish that it remained in “a like business” to carry its initial burden of proving the existence of a legitimate business interest. See Wolf v. James G. Barrie, P.A., 858 So. 2d 1083, 1085 (Fla. 2d DCA 2003).
To establish that the agreement itself is lawful and enforceable, a party must simply “plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.”
Any violation of an enforceable agreement gives rise to a presumption of irreparable injury, and shifts the burden to the party opposing enforcement to establish the absence of such injury.
Section 542.335 provides a non-exhaustive list of legitimate business interests, including “[s]ubstantial relationships with specific prospective or existing customers” and goodwill associated with an “ongoing business or professional practice” or “specific geographic location.”
We emphasize the important distinction between a non-compete provision in an asset purchase agreement and one that is incidental to an employment agreement. In the former, the non-compete provision is part and parcel of the sale of the business. In the latter, it is an incidental condition of employment. See Kroner v. Singer Asset Fin. Co., 814 So. 2d 454, 456 (Fla. 4th DCA 2001). As a purchaser of the assets and goodwill of a business, the buyer has a legitimate business interest in preventing the seller from servicing even former clients who are currently not seeking a policy large enough to meet the new minimum dollar amount established by the buyer. W. Shore Rest. Corp. v. Turk, 101 So. 2d 123, 128 (Fla. 1958) (The “purchaser
The seller cannot sustain his defense that USI no longer operates in the pertinent “line of business.”
Because the buyer established that the non-compete provision was reasonably necessary to protect its legitimate business interest, the trial court should have temporarily enjoined the seller.
The trial court also erred by denying the temporary injunction against the seller‘s former employees because they had not signed the restrictive covenant in the Asset Purchase Agreement. “There is no doubt that a court can enjoin others who were not parties to the non-compete agreement” as long as they “receive notice and have an opportunity to be heard.” Leighton v. First Universal Lending, LLC, 925 So. 2d 462, 465 (Fla. 4th DCA 2006); see
Reversed and remanded for entry of a temporary injunction.
STEVENSON and GROSS, JJ., concur.