Monday, July 17, 2006

ENFORCEMENT OF NONCOMPETITION COVENANTS AGAINST BUYER OF BUSINESS [FLORIDA]

A typical aspect of a sale of a business is that the SELLER agrees to not compete with the buyer in a geographic area or with existing customers of the seller for a period of time. Fla.Stats. §542.335 provides a framework for when such covenants will be enforceable.

Under a prior statute, Florida case law [Flatley v. Forbes, 483 So.2d 483 (Fla. 2d DCA 1986)]held that such covenants by a BUYER of a business were not enforceable, since there was no applicable exception for a buyer's covenant under Florida's limits on restraints of trade. This issue recently came up again when a buyer of a business promised not to go after the business of the Walt Disney World Company and its affiliates for 10 years, which business was retained by the seller.

The Appeals Court reexamined the issue, since the applicable statute had been rewritten after the Flatley case. The newer statute specifically addresses the enforcement of such covenants when made by a seller, but is silent as to buyer covenants. Nonetheless, the 5th District Court of Appeals held that such covenants when made by a BUYER can be enforceable.
Case: Henao v. Professional Shoe Repair, Inc. and Restrepo, 5th District. Case No. 5D05-2348. Opinion filed May 26, 2006.
Post a Comment