Legal Trickery – Eric A. Parzianello

Business Law News from Michigan and Florida

  • About

    Legal Trickery is a blog devoted to business law news, cases and other developments from Michigan and Florida as well as commentary from its author, Eric Parzianello.
  • Eric Parzianello on LinkedIn

  • Follow me on Twitter

  • Disclaimer

    I'm an attorney but you're not my client unless you've retained me in writing. Please do not rely on this blog for legal advice. You can read Legal Trickery's full disclaimer here. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask me to send you written information about my qualifications and experience.
  • Enter your email address to follow my blog and receive notifications of new posts by e-mail

  • Subscribe

  • Blog Categories

Archive for the ‘Non-Compete Law’ Category

How To Breach An Employment Agreement and Still Enforce Your Former Employee’s Non-Compete

Posted by Eric Parzianello on April 10, 2014

Can non-compete agreements still be enforceable when an employer fails to pay the employee amounts due under the same contract?  A Florida court found that answer to be ‘yes’.

A typical defense of an employee accused of violating a non-competition agreement is that the employer breached some agreement either by failing to pay amounts due under the contract or in some other manner. While this is usually a valid defense which could undermine an injunction enforcing the non-competition provision, careful drafting by the employer can make its prior breach irrelevant.

In the recent Florida case of Richland Towers v. Denton, the trial court found that the employer had not paid bonuses to the employee as required under the employment agreements. The court accepted the argument that this was a prior breach rendering the non-competition covenants unenforceable. The 2nd District Court of Appeals, however, reversed this decision. It found that to “reach this conclusion, the circuit court necessarily had to determine that the parties’ obligations under the contracts were dependent covenants. When a dependent covenant has been breached, the entire contract is virtually destroyed.”

The agreement however had an explicit provision which “trumped” the general rule that covenants are considered dependent.  The agreement provided as follows:

“Covenants Independent. Each restrictive covenant on the part of the Employee set forth in this Agreement shall be construed as a covenant independent of any other covenant or provisions of this Agreement or any other agreement which the Corporation and the Employee may have, fully performed and not executory, and the existence of any claim or cause of action by the Employee against the Corporation, whether predicated upon another covenant or provision of the Agreement or otherwise, shall not constitute a defense to the enforcement by the Corporation of any other covenant.”

Because the covenants were independent, the employer’s prior breach of the agreement was irrelevant to the enforcement of the non-competition provision.

On a separate issue, the Court of Appeals also found that the discontinuation of business by the corporation which signed the agreements was irrelevant: another provision in the agreements provided that the corporation’s affiliates could enforce the non-competition provisions:

“Corporation (and each of the Affiliates comprising the Corporation) shall be deemed to be third party beneficiaries under this Agreement with the right to seek enforcement hereof and make claims hereunder, including but not limited to claims arising under this Section 10.”

The Court of Appeals therefore reversed the denial of the temporary injunction.  This decision is another example that the likelihood of success on a request for an injunction enforcing a non-compete provision depends in large part on the language of the contract.

Eric A. Parzianello
eparzianello@hspplc.com
313-672-7300

 

Advertisements

Posted in Business Litigation, General Employment Law, Non-Compete Law | Tagged: , , , | Leave a Comment »

Florida Physician’s Non-Compete Agreement With Hospital Was About 10 Miles Too Long

Posted by Eric Parzianello on May 5, 2011

How important are 10 extra miles in a non-compete clause? A recently filed case in Lee County, Florida, shows that they can be critically important.

Dr. Eric Eskioglu filed a complaint which alleges that the non-compete clause in his 2006 employment contract with Lee Memorial Hospital is not enforceable. The clause prohibits the doctor from engaging in a neurosurgical practice within a 50-mile radius of Lee Memorial Hospital. Specifically, the clause in his employment contract states:

“Physician shall not engage in the practice of neurosurgery or any related field of medical or surgical practice, within a radius of fifty (50) miles from the LMHS facility located on Cleveland Avenue, Fort Myers, Florida for a period of three (3) years following the date of termination of employment. Physician expressly agrees that this paragraph 10.c. is reasonable.”

Dr. Eskioglu voluntarily resigned from Lee Memorial and his last day of employment was March 18, 2011. Unfortunately, for him, he wants to continue his practice at Physicians Regional Medical Center in Naples, which is a little over 40 miles from Lee Memorial. Among other arguments, the doctor alleges that enforcement of the non-compete clause would harm the public because it would limit the public’s access to services in his neurosurgical specialty.

Unless Lee Memorial Hospital breached the employment contract with Dr. Eskioglu, he will have an uphill battle in attempting to invalidate the non-compete provision. Florida law enforces restrictive covenants if they are reasonable in time, area and line of business and set forth in a writing signed by the party against whom enforcement is sought, and the contractually specified restraint is supported by at least one legitimate business interest justifying the restraint, and reasonably necessary to protect that interest. Envtl. Servs. v. Carter, 9 So. 3d 1258, 1263 (Fla. Dist. Ct. App. 5th Dist. 2009); § 542.335, Fla. Stat.

I will be watching for any resolution of this case.

Posted in Non-Compete Law, Uncategorized | Leave a Comment »

Hiring Your Competitor’s Employee? Undertake a Cost-Benefit Analysis

Posted by Eric Parzianello on November 3, 2010

Are you contemplating stealing away a competitor’s employee for your own company? While you may ultimately not have to pay damages for interfering with your competitor’s business, your defense costs may be significant.

On October 25, 2010, the Florida First District Court of Appeal reversed a trial court’s decision, prior to trial, to dismiss a lawsuit brought by a physician group against a former employee and her new employer. In Southeastern Integrated Med., P. L. (“SIMED”) v. North Florida Women’s Physicians, P. A. (North Florida) , SIMED and Dr. Carroccio entered into a Employment Agreement. Dr. Carroccio agreed to provide professional services to SIMED’s patients as a full-time medical doctor. The parties’ Employment Agreement contained a covenant not to compete which provided that upon termination of employment, “Dr. Carroccio was restricted for two years from providing medical services within a twenty-five mile radius of any SIMED medical office.”

Eleven months into the Employment Agreement, SIMED learned that North Florida solicited Dr. Carroccio to leave SIMED and to work at North Florida despite having knowledge of the Employment Agreement. Dr. Carroccio accepted the offer to work for North Florida and informed SIMED that she was quitting. SIMED sued Dr. Carroccio and North Florida alleging that it suffered damages in the loss of legitimate business interests, including substantial relationships with specific patients.

The trial court found that North Florida’s conduct was not actionable because it had a legitimate, competitive business purpose, “i.e., North Florida was free to compete with SIMED in recruiting physicians to its practice.” The trial court therefore dismissed the complaint. However, the appellate court found that it was improper for the trial court to consider North Florida’s motives in recruiting Dr. Carroccio without hearing evidence on the issue. It therefore sent the case back to the trial court for further proceedings.

While North Florida may ultimately prevail in the trial court, it will have already paid considerable attorney defense costs for the original proceedings in the trial court, then in the appellate court, then back in the trial court and then, perhaps, in the appellate court again. If you’re planning to hire an employee with a non-compete agreement away from a competitor, consult your counsel and develop a cost-benefit analysis. That employee may provide a considerable amount of profit for you. On the other hand, the analysis may conclude that the potential upside does not outweigh the cost of litigation.

Posted in Non-Compete Law, Uncategorized | Leave a Comment »