Evictions and Accelerated Rent: What Commercial Landlords and Tenants Need to Know

In a typical commercial lease, the landlord will reserve the right to accelerate the tenant’s lease obligations in the event of a material default and eviction. This means that, upon issuing a declaration of material default or issuing an eviction notice, the landlord can also seek immediate payment of all future amounts owed under the rental provisions of the lease. However, there are certain exceptions, and the exercise of a landlord’s right to accelerate rent is often fertile grounds for litigation – particularly where the alleged default is in dispute or the tenant has defaulted on its rent obligations due to an inability to pay.

One seemingly-obvious exception is where the lease does not actually include an enforceable accelerated rent provision. Tenants with sufficient leverage may be able to negotiate these provisions out of their agreements, and ambiguity can lead to unenforceability – particularly in archaic lease forms that rely on outdated legalese. In some cases, disputes over accelerated rent will begin with questions of whether there is even a dispute to be had at all.

Another exception exists where the landlord retakes possession of the leased premises for its own account.

The Landlord’s Options Upon Default and Their Impacts on Rent Acceleration

When a tenant defaults under a commercial lease, the landlord has three basic options under Florida law. The landlord can either:

  • Evict the tenant, terminate the lease and take possession of the premises for its own account;
  • Evict the tenant without terminating the lease, and take possession on the tenant’s account; or,
  • Not evict and continue to hold the tenant liable for its contractual obligations under the lease.

Each of these options has its own implications for the acceleration of rent. With the first option, the Florida courts have held that taking possession for the landlord’s own account has the effect of waiving the landlord’s right to accelerated rent. With the third option, the landlord can generally seek to enforce the tenant’s obligation to pay rents accrued, but cannot accelerate the tenant’s future rent obligations. It is the second option where Florida law recognizes a right to accelerate rent (once again, assuming the lease includes an acceleration clause). However, even here, the landlord has an obligation to attempt to re-let the premises; and, once a new tenant has been secured, the defaulting tenant’s accelerated rent obligations are subject to offset by the new tenant’s paid rent.

The risk of rent acceleration for tenants (and the risk of losing the right to accelerate rent for landlords) is a critical issue to consider when facing a potential default under a commercial lease. Mandatory arbitration, jurisdiction and venue, and other pertinent negotiated provisions will also require careful consideration. Tenants may also need to consider the impact of a possible termination or eviction on any other business relationships (such as a franchise agreement) as well.

Speak with a Real Estate Litigation Attorney in Fort Lauderdale, FL

Our real estate attorneys provide experienced representation for commercial landlords and tenants in South Florida. If you are facing a commercial lease dispute and need legal advice, you can call (954) 767-9662 or contact us online to schedule a confidential consultation.

Potential Options for Businesses Struggling to Meet their Contractual Obligations

As a business owner, foreseeing a possible financial shortfall can raise a host of concerns. From failing to make payroll to risking default under a commercial lease or other key contract, in these circumstances there are several issues that require careful prioritization and a proactive approach in order to mitigate any potential business or reputational harm.

Depending upon the circumstances, while there are several concerns to be addressed, there may also be several options available. From a legal perspective (setting aside options such as securing financing or bringing a consulting team on board), some potential options for preventing costly contract breaches include the following:

1. Seek to Renegotiate Key Agreements

One option may be to renegotiate. If your business is facing a default, revisiting the terms of the deal may be preferable to both parties when faced with the alternative of non-payment and potential litigation. Even if a complete renegotiation is not on the table, a landlord or supplier may be willing to delay collection without fully waiving its rights of enforcement.

2. Explore Ways to Cut Unnecessary Costs

Are there contracts you can terminate without penalty that are not business-critical? Alternatively, can you terminate or suspend non-essential services under a managed services or diversified services agreement? While many service and supply contracts include minimum-term commitments, in some industries and under certain contract models, business clients can retain broad termination rights as well.

3. Identify Potential Grounds to Pursue Litigation

Is your business struggling because a supplier is failing to uphold its end of the deal? Or, do you have a major client (or multiple clients) that are behind on payment? If your company has rights it is not currently enforcing, it may be time to consider legal action, including possible litigation.

4. Consider Your Options for Bankruptcy

Federal bankruptcy laws provide relief to struggling businesses under prescribed circumstances. Due to its implications, businesses often should consider bankruptcy only as an option of last resort. But, if bankruptcy is your best option, filing under Chapter 7 or Chapter 11 (or another applicable section of the U.S. Bankruptcy Code) can provide necessary relief from unsustainable financial obligations.

5. Consider a Buyout

A fifth option may be to consider a buyout. If a venture capitalist, competitor or other potential suitor believes that it can reverse your company’s fortunes, exploring potential acquisition opportunities may produce viable and favorable solution.

Of course, this list is not exclusive, and each set of business circumstances requires its own unique assessment. If you have questions about your company’s legal options, we encourage you to contact us for a confidential consultation.

Michael L. Feinstein, P.A. | Fort Lauderdale Business Litigation Lawyers

If you would like to speak with a lawyer at our Fort Lauderdale law offices, we encourage you to schedule an initial consultation. To speak with one of our experienced attorneys in confidence, please call (954) 767-9662 or inquire online today.

Incomplete Arbitration Provisions: Can an Arbitration Clause Apply to Only a Portion of a Commercial Dispute?

As a general rule, mandatory arbitration clauses are supposed to consolidate the dispute resolution process and minimize the financial burdens involved. The whole idea behind arbitration is that it is offers a streamlined process without the strictures and protracted timelines of litigation.

But, the benefits of mandatory arbitration presume that the parties’ arbitration clause is enforceable. While there are recognized judicial standards for the enforceability of arbitration clauses, many commercial disputes end up in litigation not over the substantive issues underlying the dispute, but over whether the arbitration clause itself is legally binding.

This was the issue in a recent case that made its way to Florida’s Second District Court of Appeal.

Multiple Agreements Create Question of Which Claims are Subject to Arbitration

In LTCSP-St. Petersburg, LLC, et al. v. Johnnie Earl Robinson (Fla. 2nd DCA Case No. 2D11-3473), the question was whether the parties’ entire dispute – or only a portion of their dispute – was subject to mandatory arbitration. The case involved a surviving husband’s negligence claims against a nursing home for wrongful death.

In order to admit the decedent to the nursing home, the husband signed an admission agreement under the authority of a power of attorney. The admission agreement included a mandatory arbitration provision. While the decedent was subsequently discharged, she was later re-admitted on several occasions, and each time she personally signed an agreement which stated, “THIS AGREEMENT MUST BE SIGNED BY . . . THE SAME PERSON [] WHO SIGNED THE ORIGINAL ADMISSION AGREEMENT, OR A NEW ADMISSION AGREEMENT MUST BE SIGNED.”

The nursing home never required the decedent to sign a new admission agreement, and the husband never signed anything after the initial admission.

As a result, when the husband sued for wrongful death, the question arose: Were the parties required to arbitrate? The nursing home argued that all claims should be arbitrated, while the husband argued that, at most, only claims arising out of the initial visit should be subject to mandatory arbitration.

The Second District Court of Appeal concluded that, based on the limiting language contained in the documents signed by the decedent, the nursing home could only compel arbitration for claims arising out of the initial admission.

While the husband’s filings did not differentiate between the various admissions, it is probably a safe bet that at least a portion of the parties’ substantive dispute will be resolved through litigation.

Lessons Learned: The Importance of Careful Contracting

This case provides an important lesson for commercial parties: If you want to compel arbitration, you need to make sure that all of your contracts: (i) are with the appropriate parties, and (ii) contain appropriate mandatory arbitration language.

Schedule an Initial Consultation at Michael L. Feinstein, P.A.

Michael L. Feinstein, P.A. is a team of experienced business litigation lawyers who represent companies throughout South Florida. If you have questions about the enforceability of a mandatory arbitration clause, or if you need legal representation for a commercial dispute, call our Fort Lauderdale law offices at (954) 767-9662 or contact us online for an initial consultation.

Common Issues in Condominium Litigation

For condominium developers and associations, litigation is almost an inevitability. From construction defect litigation and contract disputes to foreclosure actions against homeowners, developers and associations face litigation risks in virtually all aspects of their operations. Here are some of the most common issues and causes of action in condominium litigation:

Construction-Related Condominium Litigation

1. Construction Defects

Construction defects are among the most-common causes of action in condominium litigation. From failure to meet local building code requirements to negligent window or roof installation leading to water intrusion, there are countless construction defects that can lead to costly, and potentially-dangerous, issues.

2. Contract Disputes

Disputes with contractors, subcontractors, engineers, architects and other parties involved in the construction process will often lead to condominium litigation. While payment and performance (or non-performance) disputes are perhaps most common, warranty claims, indemnification claims and other contract-based claims are all common as well.

3. Professional Malpractice

Malpractice is a specific type of negligence-based claim involving allegations of substandard service by architects, engineers and other professionals. When a faulty condominium design leads to structural or other issues, the developer and association may be entitled to seek remedies for professional malpractice.

4. Implied Warranties

In addition to express contractual warranties, condominium construction projects and building materials may be subject to certain implied warranties as well. Assuming that these implied warranties have not been validly disclaimed (which is not always a safe assumption), they can provide additional causes of action for developers and associations.

5. Fraud, Deceptive Trade Practices and Other Claims

Depending upon the circumstances involved, developers and associations can potentially have a variety of other causes of action as well. From fraud and deceptive trade practices to surety bond issues and products liability, when considering legal action against a contractor, subcontractor or other provider, it is critical to assess all potential causes of action and assert the strongest possible case for recovery.

Litigation Involving Condo Associations and Homeowners

1. Responsibility for Common Elements

While condominium declarations should ordinarily include clear provisions regarding liability for common elements, it is not unusual for disputes over the definition of certain common elements to arise.

2. Accountings and Financial Disclosures

Generally speaking, condominium associations are required to provide accountings and certain other financial disclosures to the owners of individual units. Failure to do so, or alleged failure to provide full and accurate disclosure, is a common issue in condo litigation.

3. Liens and Foreclosures

When homeowners fail to pay dues or other amounts due to the association, the association will – subject to the satisfaction of certain conditions – have the right to place a lien on the owner’s unit and eventually foreclose on the property. Developers can face foreclosure actions for unsold units and shelf condominiums as well, often creating complex and challenging situations for associations and residents.

Contact the Fort Lauderdale Real Estate Attorneys at Michael L. Feinstein, P.A.

The attorneys at Michael L. Feinstein, P.A. represent condominium developers, associations and other parties in complex litigation involving properties throughout South Florida. If you are anticipating or facing a dispute and would like to speak with an attorney, please call (954) 767-9662 or contact us online today.

Are You Liable? Understanding Shareholder, Officer and Director Liability

One of the key features of the corporate legal structure is that it provides liability protection for the company’s owners, officers and directors. For legal purposes, the corporation is an independent legal entity – its own “person” – and it exists separately from the real-life people who keep the wheels turning and the money flowing. When the company gets sued, it is the company’s assets that are at risk rather than each individual owner, officer and director having his or her personal finances on the line.

However, this liability protection is not absolute. In fact, there are many circumstances in which individual shareholders, officers and directors can face personal liability in relation to their corporate duties.

Fiduciary Responsibilities of Shareholders, Officers and Directors

Shareholders, officers and directors in for-profit and non-profit entities all owe certain fiduciary obligations to the corporation. In broad terms, these obligations require that decisions be made in the corporation’s best interests, and not with competing interests or ulterior motives in mind. When a shareholder, officer or director breaches his or her fiduciary responsibilities, such action may be deemed a personal act – as opposed to an action on behalf of the company – and this can create exposure to personal liability.

Examples of actions that can constitute breaches of corporate fiduciary responsibilities include:

  • Engaging in conflict-of-interest transactions
  • Improper use or disclosure of inside information
  • Misappropriation of corporate assets
  • Misuse of corporate authority
  • Neglect of corporate duties

The specifics of these examples can vary widely. For example, while the directors of a condominium or homeowners’ association could face legal action based upon an alleged failure to fairly and equally apply the governing rules of the association, officers in large publicly-traded corporations will often face shareholder lawsuits alleging regulatory shortcomings and other violations that negatively impact the performance of the company’s stock. In small privately-held companies, shareholders can face liability in disputes that involve issues ranging from financial mismanagement to operation of competing businesses.

Indemnification and Insurance

While direct personal liability in these cases is a possibility, shareholders, officers and directors will often have two layers of protection available. The first is what is known as, “indemnification.” It is commonplace for corporations to cover (i) the costs of defending against, and (ii) any settlements or judgements resulting from, lawsuits against shareholders, officers and directors in their individual capacities. The second layer of protection is insurance. Director and officer (“D&O”) policies can cover these individuals directly or reimburse the company for satisfying its indemnification obligations, while general liability coverage and certain other types of insurance may provide protection as well.

Of course, there are exceptions. For example, indemnification obligations and insurance policies will typically exclude claims based upon fraud or personal profiting. Shareholder, officer and director liability claims can quickly become extraordinarily complex, and individuals facing potential liability will benefit greatly from experienced legal representation.

Speak with a Business Litigation Attorney in Fort Lauderdale, FL

With offices in Fort Lauderdale, the attorneys at Michael L. Feinstein, P.A. represent individuals and corporate entities in litigation throughout South Florida. If you are facing a dispute and would like to discuss your options, call (954) 767-9662 or contact us online to schedule a confidential consultation today.

Understanding “Pay-If-Paid” and “Pay-When-Paid” Construction Contracts

When are contractors required to pay their subcontractors? While this sounds like a simple question, determining the answer in any particular case can present unexpected challenges, and the timing of contractors’ payment obligations is a frequent issue in construction contract litigation.

“Pay-If-Paid” vs. “Pay-When-Paid”

In many cases, the issue arises out of the parties’ disagreement over whether their agreement’s payment clause is a “pay-if-paid” or a “pay-when-paid” provision. With a “pay-if-paid” provision, the general contractor is not under an obligation to pay unless and until it receives payment from the property owner (assuming the provision is properly drafted and legally enforceable). If the contractor does not get paid, then neither does the subcontractor—the entire payment risk rests with the subcontractor. This is typically reflected in contract language stating that payment from the property owner is a “condition precedent” to payment of the subcontractor, and an acknowledgement that the subcontractor is not relying on the contractor’s credit for payment.

By contrast, when a construction contract includes a “pay-when-paid” clause, the risk of non-payment ultimately shifts to the contractor. These clauses typically state that the subcontractor must be paid within a specific timeframe after payment from the property owner, or within an alternate timeframe if no such payment is received. This type of provision is clearly much more favorable to the subcontractor, although pay-when-paid clauses (or questions about whether a contract establishes pay-if-paid or pay-when-paid liability) also have a greater tendency to lead to litigation.

Related Issues in Contractor-Subcontractor Litigation

When analyzing contractors’ payment obligations and subcontractors’ payment rights, the parties will typically have a number of other issues to contend with as well. For example, in a typical contractor-subcontractor payment dispute, some of the key questions will include:

  • Does the payment clause contain a hybrid of pay-if-paid and pay-when-paid language? If so, what does this mean for the parties’ dispute?
  • If the parties’ contract has a pay-when-paid clause, when is the subcontractor entitled to seek payment from an unpaid general contractor?
  • Has the subcontractor satisfactorily performed under the contract? Or, is the contractor within its rights to withhold payment regardless of whether the agreement contains a pay-if-paid or pay-when-paid provision?
  • Is the property owner within its rights to withhold payment from the contractor? If so, what does this mean for the subcontractor?
  • If the property owner is improperly withholding payment, what remedies does the subcontractor have available? Can it take legal action against the property owner directly? Does it have the contractual authority to compel legal action by the contractor?

Contact the Fort Lauderdale Construction Lawyers at Michael L. Feinstein, P.A.

As you can see, the issues in contractor-subcontractor payment disputes can quickly generate complex disputes with high stakes for all parties involved. At Michael L. Feinstein, P.A., we have extensive experience resolving construction contract disputes through negotiations, alternative dispute resolution (ADR) proceedings, and state and federal litigation. If you are facing a potential dispute and would like to speak with an attorney at our offices in Fort Lauderdale, please call (954) 767-9662 or contact us online today.

What Contractors and Property Owners Need to Know about Surety Bonds

For construction projects of all sizes, surety bonds are important instruments that help protect property owners and lenders against the risk of non-performance by their contractors. General contractors can also use surety bonds to help avoid delays and defaults when their subcontractors fail to perform. Despite playing a central role in the bid and build processes for real estate developments throughout South Florida, many aspects of surety bonds are commonly misunderstood. Here is an overview of some of the key facts contractors and property owners need to know:

1. There are three primary types of surety bonds.

“Surety bond” is an umbrella term that encompasses several different types of bonds. In the context of construction, there are three primary types of surety bonds:

  • Bid Bonds – As their name suggests, bid bonds help protect property owners during the competitive bidding process. If the contractor who is awarded the project either fails to negotiate the contract or provide the required payment and performance bonds, the bid bond provides financial protection against the owner’s ensuing losses.
  • Performance Bonds – A performance bond provides assurance that the primary contractor will complete the project on time, according to specification and on budget. If a contractor fails to perform, the property owner can call upon the surety to either provide financial assistance to the contractor or replace the contractor without financial impact to the owner.
  • Payment Bonds – Payment bonds provide assurance that general contractors will pay their subcontractors, suppliers and employees. Property owners and lenders will frequently require payment bonds in order to prevent delays, work stoppages, liens and other issues from arising during construction.

2. A surety bond is not a substitute for insurance coverage.

Surety bonds mitigate the risk of contractual non-performance during construction projects. Insurance coverage mitigates the risk of loss from uncontrollable and unforeseen events. Surety bonds and insurance serve different purposes, and one is not a substitute for the other. Likewise, the different types of surety bonds provide protection under different scenarios, and none provide blanket protection for all construction contract-related disputes.

3. Surety bonds may or may not be mandatory.

While it is generally within the parties’ discretion whether to require surety bonds for private construction projects (public-sector projects are a different animal), lending, bidding and construction contracts will frequently require surety bonds. Parties to construction-related agreements should be sure to carefully review the terms and ensure that any bond requirements can be met.

4. Surety bonds do not guarantee litigation-free construction projects.

Finally, while bid, performance and payment bonds are intended to reduce the likelihood of costly disputes, it is not unusual for parties to major construction projects to find themselves in litigation concerning surety bonds. Questions concerning default of performance obligations, timing of payment obligations, sureties’ indemnification obligations and a wide range of other issues can all lead to multi-party construction litigation.

Michael L. Feinstein, P.A. | Fort Lauderdale Trial Litigation Attorney

If you are facing a dispute involving a surety bond and would like to discuss your options with an experienced construction litigation attorney, contact the Fort Lauderdale law offices of Michael L. Feinstein, P.A. To schedule a confidential initial consultation, please call (954) 767-9662 or get in touch online today.

Indemnification, Representations and Warranties: “Boilerplate” Terms that Play a Central Role in Business Litigation

What are the most important terms in a commercial contract? Different people have different perspectives, but most attorneys will tell you that it is actually the way that the terms in the contract work together that is most critical to protecting parties’ interests in the event of a dispute.

This is especially true with regard to the legal terms – the “boilerplate” that usually appears after the substantive provisions of the contract. When it comes to mitigating risk and apportioning liability, the indemnification, representation and warranty provisions of a contract will usually take on a central role in informing the parties’ strategies for commercial litigation.

Indemnification, Representations and Warranties

Let’s start with an overview of the basic terminology. While these terms tend to get thrown around (and are often used interchangeably), indemnification, representations and warranties are all distinct legal concepts that have their own unique and important implications:

  • Indemnification – An indemnification obligation is a duty for one contracting party to take on the other contracting party’s third-party liability. Take, for example, a subcontractor’s agreement to cover a general contractor for claims by the property owner arising out of the subcontractor’s negligence. This is a classic example of an indemnification obligation.
  • Representations – A representation is (or is supposed to be) a statement of fact. Contractual representations are intended to allow the parties to rely on their respective understandings of the present circumstances when entering into the agreement. For example, “ABC, Inc. has all necessary licenses to perform its obligations under this agreement,” is an example of a common type of representation that frequently appears in construction agreements and other commercial contracts.
  • Warranties – While representations reflect present circumstances, warranties are promises about the future. “ABC, Inc. will comply with all applicable laws and regulations in performing its obligations under this agreement.” Unlike the representation example above, this example of a common warranty provision focuses on the parties’ expectations following contract execution.

Ambiguity in Contract “Boilerplate” Can Lead to Litigation

Indemnification, representation and warranty provisions must all be carefully drafted taking into consideration how they could affect one another. For example, consider a contract that includes these two provisions:

  • “ABC, Inc. will comply with all applicable laws and regulations in performing its obligations under this agreement.”
  • “XYZ Corp. will indemnify ABC, Inc. for all third-party claims arising out of this agreement.”

What if ABC, Inc. gets sued because it violates the law? Would XYZ Corp. still be required to indemnify? What does it mean for a claim to “arise out of” the parties’ contract? These are all very real – and very common – questions that can easily lead to costly disputes. When commercial parties run into issues that implicate the terms of their written agreements, understanding what these agreements say (and don’t say) in is the first step toward making an informed decision about pursuing litigation.

Speak with a Business Litigation Attorney in Fort Lauderdale, FL

With offices in Fort Lauderdale, Michael L. Feinstein, P.A. represents commercial parties in complex business litigation throughout South Florida. If you are facing a commercial contract dispute and would like to discuss your situation with an attorney, call (954) 767-9662 or contact us online to schedule an initial consultation.

Do You Have a Claim for Trademark Infringement?

If your business is like most, it relies heavily on brand recognition to attract new customers and develop the consumer loyalty required to sustain long-term and profitable growth. In short, your name matters, and if a competitor begins using your name (or something very similar to it) to cut into your business, you are right to be considering legal action to protect your investment in your brand’s development.

This is the world of trademark infringement. In legal terms, a trademark is “any word, name, symbol, or design . . . used in commerce to identify and distinguish the goods of one manufacturer or seller from those of another and to indicate the source of the goods.” Apple, Samsung, Google, Twitter, Coca-Cola – these are all trademarks that are protected under federal law.

Understanding Your Company’s Trademark Rights

Of course, famous brands like these are not the only ones that are protected. Any individual or company can adopt and register a trademark, and even local shops and small businesses can have a legitimate interest in securing exclusive trademark rights. In fact, as a small business, securing (and enforcing) trademark rights can be critical, since infringement by a direct competitor with deep pockets or a savvy marketing plan could easily lead your customer base astray.

Importantly, if you use a brand name or logo in the marketplace (and you are not infringing someone else’s rights), you have protectable trademark rights even if you have not registered your company’s trademark with the U.S. Patent and Trademark Office (USPTO). While USPTO registration affords several key benefits, it is not a requirement to file a claim for trademark infringement.

Trademark Infringement: A “Likelihood of Confusion”

In trademark infringement litigation, the question is whether one company (the “junior” trademark user) has created a likelihood of confusion in the marketplace by using a trademark that is “confusingly similar” to a “senior” owner’s trademark. The courts examine a number of different factors in assessing whether there is a likelihood of confusion, including:

  • The strength of the senior user’s trademark
  • The proximity (similarity or relatedness) of the senior and junior users’ products or services
  • The likelihood that either user will expand into the other’s product or service lines
  • The senior and junior users’ respective marketing channels
  • The similarity of the trademarks in question
  • The types of products or services sold under the trademarks and the degree of sophistication among relevant consumers
  • The junior user’s intent in selecting its mark (i.e. did it intend to profit from the senior user’s brand recognition)
  • Any evidence of actual confusion

Infringement can quickly cause significant harm to a trademark owner’s market position and goodwill, and the law accounts for this by providing for preliminary injunctive relief in appropriate circumstances. If you believe that a competing business may be infringing your company’s trademark, taking action quickly can be critical to protecting your rights and limiting the negative consequences for your business.

Speak with a Business Litigation Attorney at Michael L. Feinstein, P.A.

With offices in Fort Lauderdale, Michael L. Feinstein, P.A. represents businesses throughout South Florida in trademark infringement litigation. To discuss your case with one of our attorneys, call (954) 767-9662 or request a consultation online today.

Should You Take Legal Action to Enforce a Non-Compete?

Florida’s non-compete statute is more employer-friendly than the comparable laws in most other states. In fact, the law is so employer-friendly that companies outside of the state will frequently choose Florida law to govern their employment agreements. In declining to enforce one of these “choice of law” provisions, an out-of-state court recently wrote that Florida’s non-compete law was “offensive” to the state’s policy of limiting non-compete enforcement in order to protect individuals’ employability.

So, you are a Florida employer, and you have an employment contract in place that includes a non-compete clause. Should you use it?

Enforceability Requirements for Florida Non-Competes

While Florida’s non-compete law favors enforceability, there are still limits as to the restrictions employers can impose on their employees. The law states:

“[E]nforcement of contracts that restrict or prohibit competition . . . [and] are reasonable in time, area, and line of business, is not prohibited. . . . The person seeking enforcement of a restrictive covenant [must also] prove the existence of one or more legitimate business interests justifying the restrictive covenant.”

As a result, there are four preliminary questions that need to be answered when assessing the enforceability of a non-competition clause under Florida law:

  • Is the duration of the non-compete reasonable?
  • Is the geographic scope of the non-compete reasonable?
  • Is the non-compete limited to the relevant line(s) of business?
  • Does the employer have a “legitimate business interest” for imposing competitive restrictions on the employee?

If the answer to each of these questions is “Yes,” and if the covenant is reasonably necessary to protect the employer’s legitimate business interest, then the covenant should be enforced. In fact, under Florida law, once an employer establishes a prima facie case for the necessity of the competitive restriction (i.e. the employer pleads all of the necessary elements for enforceability), then the burden shifts to the employee to prove that the covenant is too long in duration, overbroad or otherwise unenforceable.

While the Florida courts have established certain general principles regarding the assessment of non-compete clauses (i.e. clauses with a duration over two years will generally be subject to greater scrutiny), each circumstance is unique, and each employer has the opportunity to present its case for enforceability in court. If carefully drafted with an eye toward satisfying the law’s requirements, a non-compete will generally be enforceable under Florida law.

Practical Considerations for Non-Compete Enforcement

Of course, setting aside the strictly-legal considerations, there are certain practical considerations involved in taking a non-compete to court. Do you want to devote the necessary time and resources to litigate? Will it harm your company’s public image or ability to attract talent if it public record that you have sued a former employee? Oftentimes, alternatives will be available, and understanding why an employee violated a non-compete (was it intentional or inadvertent) and reminding the employee of his or her contractual obligations can pave the way for a non-litigious, non-public resolution.

Contact the Fort Lauderdale Law Offices of Michael L. Feinstein, P.A.

Michael L. Feinstein, P.A. is a trial litigation law firm that represents businesses in non-compete and other contract disputes. If you would like to discuss taking action to enforce a non-compete with an attorney at our offices in Fort Lauderdale, please call (954) 767-9662 or contact us online today.