Wednesday, February 2, 2011

Florida Case Demonstrates Limits of Legitimate Business Interest Test (Southern Wine v. Simpkins)

Florida is known as a highly pro-employer state, largely because of a comprehensive and detailed statute that makes enforcement of non-compete agreements by way of injunction substantially easier than in other jurisdictions.

Like most states, however, Florida's basic test for enforceability revolves around two basic concepts. First, the employer must present evidence of a legitimate business interest supporting the non-compete. Second, the restraint must be reasonably necessary to protect that interest.

Florida's statute contains a non-exhaustive list of potentially assertable business interests. The usual suspects, provision of confidential information and client relationships, are contained in that list. Another interest that many states recognize, specialized training, is also found within Florida's statute.

The case of Southern Wine and Spirits of America v. Simpkins discusses several of these interests in the context of a preliminary injunction hearing. In that case, Simpkins - a high level executive - resigned from Southern Wine and joined a direct competitor in the wholesale beverage distribution business.

Southern Wine's effort to enjoin Simpkins failed, in part due to the court's discussion of the types of interests Southern Wine was trying to protect through the restraint. The court found that Southern Wine was able to establish that Simpkins received confidential business information through his employment with Southern Wine - particularly information about strategy, marketing, and personnel. Importantly, the court found that the utility or usefulness of such information was likely to be stale in 2 to 6 months.

The court rejected Southern Wine's efforts to assert a protectable interest in its vendor relationships - an interest not mentioned in Florida's statute. As with all distributors, Southern Wine's business model depended on strong relationships both with customers (presumably retail outlets that sell alcoholic beverages) and vendors. The court refused to find that Southern Wine could demonstrate a legitimate business interest in its vendor relationships. Based on the case discussion, it does not appear that Simpkins either was instrumental in developing customer relationships or that Southern Wine believed his new employment posed such a threat.

Finally, the court dismissed Southern Wine's effort to show that Simpkins received specialized or extraordinary training as an employee. In Florida, this interest requires an employer to show that the training went "beyond what is usual, regular, common, or customary in the industry in which the employee is employed." Based on this test, it would seem an employer in Florida must present evidence not just of its own training but also what other firms in the industry offer to their employees. This likely would entail testimony from headhunters or expert witnesses, or perhaps other employees that have worked for several different companies.

As a result of the court's lengthy discussion over what Southern Wine was trying to protect, the court declined to issue a preliminary injunction in its favor. The court noted that the confidential information to which Simpkins had access likely was stale already since he had been absent from Southern Wine for over 6 months.


Court: United States District Court for the Southern District of Florida
Opinion Date: 1/14/11
Cite: Southern Wine and Spirits of America, Inc. v. Simpkins, 2011 U.S. Dist. LEXIS 5762 (S.D. Fla. Jan. 14, 2011)
Favors: Employee
Law: Florida

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