Henao v. Professional Shoe Repair, Inc.

929 So. 2d 723, 2006 Fla. App. LEXIS 8244, 2006 WL 1459553
CourtDistrict Court of Appeal of Florida
DecidedMay 26, 2006
Docket5D05-2348
StatusPublished
Cited by13 cases

This text of 929 So. 2d 723 (Henao v. Professional Shoe Repair, Inc.) is published on Counsel Stack Legal Research, covering District Court of Appeal of Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Henao v. Professional Shoe Repair, Inc., 929 So. 2d 723, 2006 Fla. App. LEXIS 8244, 2006 WL 1459553 (Fla. Ct. App. 2006).

Opinion

929 So.2d 723 (2006)

Jose O. HENAO, Appellant,
v.
PROFESSIONAL SHOE REPAIR, INC. and Luis A. Restrepo, Appellee.

No. 5D05-2348.

District Court of Appeal of Florida, Fifth District.

May 26, 2006.

*724 Mario A. Garcia, of Mario A. Garcia, P.A., Orlando, for Appellant.

Luis A. Gonzalez, of L.A. Gonzalez Law Offices, and Darren M. Soto of D. Soto Law Offices, P.A., Orlando, for Appellees.

PLEUS, C.J.

This appeal from an order granting a motion for judgment on the pleadings presents the question of whether a complaint which seeks enforcement of a covenant not to compete, executed by the buyer of a business in favor of the seller, states a viable cause of action. We hold that it does.

According to the amended complaint, Jose Henao and Luis Restrepo were in the business of repairing footwear. At one time, Henao and Restrepo were equal shareholders in Professional Shoe Repair, Inc. ("PSR"). PSR had a lucrative contract with Walt Disney World Company ("Disney contract"). In October 1999, Henao and Restrepo entered into a stock purchase agreement whereby Henao sold his 50% interest in PSR to Restrepo for $28,000. Under the terms of the stock purchase agreement, Restrepo, as buyer, assigned all rights, title and interest in the Disney contract to Henao, the seller.

The amended complaint continues that the Disney contract was assignable with Disney's consent and that Disney executed a new contract under the same terms and conditions as the previous one, substituting Henao's firm, Shoe Repair, USA, for PSR.

The stock purchase agreement included the following covenant not to compete at Article IV:

4.0 The Buyer [Restrepo] agrees that for a period of ten (10) years from the closing date, the Buyer will not engage, directly or indirectly, either as a principal, agent, proprietor, shareholder, director, officer, or employee, or participate in the ownership, management, operation, or control or have any interest of any nature whatsoever in any organization, incorporation, partnership, firm, or business engaged in footwear repairs and/or the sales of related accessories to Walt Disney World Company, or any other subsidiaries, or related entitles and corporations.

Henao alleges that the buyer, Restrepo, and PSR, breached this provision by soliciting and performing footwear repair services on behalf of Disney to his detriment. Henao included counts alleging breach of *725 the stock purchase agreement, intentional interference with an advantageous business and/or contractual relationship, and for injunctive relief.

The defendants convinced the trial court that the covenant not to compete is void and unenforceable against Restrepo as an illegal restraint of trade.

Standard of Review

The standard of appellate review of a decision to grant a motion for judgment on the pleadings is de novo. Syvrud v. Today Real Estate, Inc., 858 So.2d 1125, 1129 (Fla. 2d DCA 2003). A motion for judgment on the pleadings is governed by the same legal test as a motion to dismiss for failure to state a cause of action. Domres v. Perrigan, 760 So.2d 1028 (Fla. 5th DCA 2000).

Florida Law Governing Enforcement of Non-Compete Covenants

This case presents a somewhat atypical covenant not to compete situation — one in which the buyer of a business, as opposed to the seller, agrees not to engage in any business with one of the clients of the business, whom the parties agreed the seller could retain for himself. The defendants argue that the decision in Flatley v. Forbes, 483 So.2d 483 (Fla. 2d DCA 1986), holds that under section 542.33, Florida Statutes (1983), a covenant prohibiting the buyer of a business from competing with the seller is unenforceable.

Flatley involved the sale of a Pasco County dental practice owned by Dr. Flatley to Dr. Forbes. The contract contained a covenant expressly barring Dr. Forbes from practicing, for five years, dentistry in Pinellas County where Dr. Flatley continued to practice dentistry. Upon learning of Dr. Forbes' plan to develop a practice in Pinellas County, Dr. Flatley filed a complaint seeking a declaratory judgment enforcing the anti-competition covenant. Dr. Forbes countered that the covenant was void and unenforceable by reason of section 542.33, Florida Statutes, and the trial court agreed, entering summary judgment in favor of Dr. Forbes.

The Second District affirmed. The court began by explaining that "at common law, contracts which hindered one's right to follow one's calling and support one's self and family were considered invalid as against public policy." 483 So.2d at 484. Indeed, section 542.18, Florida Statutes (1983), stated (and continues to state) the general rule in Florida that contracts in restraint of trade are unlawful. The court then noted that section 542.33 provides for recognition of a limited class of covenants not to compete. While in certain situations, the seller of a business may agree, as part of the consideration for the transaction, not to compete with the buyer, section 542.33[1] did not recognize agreements whereby the buyer agrees not to compete with the seller. Id. at 485. The court stated that:

a fundamental difference exists between the matter at hand and one in which the *726 seller of the assets and goodwill of a business promises as part of the consideration received from the sale to forebear from competing with the buyer. In the latter circumstance, the buyer is entitled to the full benefit of the bargain, i.e. the preservation of customers and the ability to enter the field of competition unimpaired by the adverse influence of the seller's mercantile presence [citation omitted]. That reasoning, however, is not applicable to the setting in which the buyer agrees not to compete with the seller.

483 So.2d at 485.

The Flatley court continued:
We are not willing to construct exceptions that would further undercut the common law principle. That is a matter coming wholly within the contemplation and action of the Legislature.

Id.

The Flatley decision thus is based on a literal reading of section 542.33(1) that all restraints of trade are illegal and unenforceable unless clearly within the narrow exceptions contained in subsections (2) and (3). Section 542.33, however, was repealed with respect to restrictive covenants entered into or having an effective date on or after July 1, 1996, as a result of enactment, in 1996, of section 542.335, Florida Statutes, entitled "Valid restraints of trade or commerce." Since the agreement containing the covenant not to compete here was entered into in 1999, section 542.335 and not section 542.33, applies in considering its enforceability. See generally, Cooper v. Thomas Craig & Co., LLP, 906 So.2d 378 (Fla. 2d DCA 2005).

Section 542.335 contains a comprehensive framework for analyzing, evaluating and enforcing restrictive covenants in Florida based on an "unfair competition" analysis. See John A. Grant & Thomas Steele, Restrictive Covenants: Florida Returns to the Original "Unfair Competition" Approach to the 21st Century, 70 Fla. B.J. 53, 53-56 (Nov. 1996). According to this review, co-authored by the legislation's Senate sponsor, the term "restrictive covenants" includes all contractual restrictions upon competition, such as noncompetition/nonsolicitation agreements, confidentiality agreements, exclusive dealing agreements, and all other contractual restraints of trade. Id. at 54.

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Bluebook (online)
929 So. 2d 723, 2006 Fla. App. LEXIS 8244, 2006 WL 1459553, Counsel Stack Legal Research, https://law.counselstack.com/opinion/henao-v-professional-shoe-repair-inc-fladistctapp-2006.