First DCA Holds Non-Compete Covenants are Transferable Even Under General Assignment of Rights

In today’s business environment, businesses merge and sever with unprecedented frequency. Because change in business ownership is so common, questions may arise as to what rights and obligations a business has into previously agreed-to covenants. A recent case from the First Circuit Court of Appeals gave some good news to such businesses. In DePuy Orthopaedics, Inc. v. Waxman, et al. 2012 WL 3138681 (Fla. 1st DCA, Aug. 3, 2012), the District Court held that non-compete agreements entered into between a distributor and its sales representatives were enforceable where the agreements were properly assigned under a sale of the distributor’s intangible assets. The case is significant because it holds that a mere general assignment of rights and obligations is sufficient to effectuate a transfer of enforcement rights; no formal assignment is needed.

The plaintiff, a manufacturer of orthopedic products, purchased all of the assets of one of its distributors. At the time of the sale, the distributor employed a number of sales representatives who had signed non-compete agreements. When the sales representatives began working for a new employer, they called accounts in the territories covered under the non-compete agreements. The manufacturer experienced a drop in sales with those accounts, and the manufacturer’s relationship with its customers was damaged. The manufacturer brought suit against sales representatives that were bound under a non-compete agreement, arguing that the non-compete agreements were transferable as intangible assets that could be sold. The manufacturer also filed an emergency motion for a temporary injunction barring the sales representatives from violating the non-compete agreements.

In holding for the plaintiff manufacturer, the Court held that Florida Statute s. 542.335 permitted the assignment and transfer of non-compete covenants. The Court also held that the employment agreements entered into between the distributor and sales representatives did not require a formal assignment to effectuate a transfer because the plain language in the agreements provided that such rights would be transferred to the distributor’s assigns and successors. The Court concluded that the continued breach of the non-compete covenants would result in irreparable harm to the manufacturer, warranting a temporary injunction against such activity.

Chaired by Brett J. Schneider, our Labor and Employment Law Group has extensive experience drafting non-compete and confidentiality agreements that comply with Federal, State and local law. Where disputes arise, the Group represents our clients in litigation to enforce or defeat such agreements. Our Litigation Division has prosecuted and defended a wide variety of business dispute issues in the areas of business torts and contractual disputes.

Categories: Labor and EmploymentLitigationContracts
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Author(s): Brooke P. Dolara