Does the Restrictive Period Run During the Litigation of a Non-compete Suit?

By: Matt McLauchlin

You’ve worked hard to obtain an injunction for your client to stop a former employee from soliciting your client’s customers.  The court asks you to prepare a proposed order granting injunctive relief.  You want the full restrictive period under your agreement to begin from the date of entry of the injunction.  Your opponent objects, arguing that the restrictive period has been running for many months already and that to impose the full term would be unfair.  What will the court do?  As explained below, the answer is, “it depends.” 

Scenario 1:     You were diligent and prompt in filing an action and pursuing injunctive relief, and the former employee was in violation of the restrictive covenant during the litigation.

While most noncompete cases move extremely quickly by comparison to most lawsuits, sometimes they can proceed more slowly than expected.  Occasionally, former employees purposely seek to stall or drag out the litigation to continue their competitive efforts unabated during the pendency of the litigation.  No matter how long the litigation takes, an employer seeking to enforce its noncompete agreement will want the benefit of the full term of its restrictive covenant regardless of the employee’s delay tactics or the time it takes to obtain injunctive relief. 

If the former employee has been in violation of the restrictive covenant during the litigation, the employer should request that the injunction be for the full term of the restrictive covenant and  begin running as of the date of the injunction order.  If the plaintiff has been both prompt and diligent in pursuing the litigation and seeking injunctive relief, courts should grant this request, as to do otherwise would essentially nullify the non-compete agreement due only to the passage of time necessary to litigate over the question of the former employee’s non-compliance.  

This was the well-reasoned result in Anakarli Boutique, Inc. v. Ortiz, 152 So. 3d 107, 109 (Fla. 4th DCA 2014), where the court explained that “[i]t would be stunningly unfair if the law held that a valid non-compete clause could be nullified because the non-compete period was devoured by the time it took to appeal an erroneous ruling on the interpretation of the clause.”  The court went on to say that “[w]here there has been a delay in the entry of a non-compete injunction enforceable under section 542.335(1)(c), the party seeking to enforce the non-compete clause is entitled to receive the benefit of its bargain, which is the enforcement of the full non-compete period specified in the agreement between the parties.” Id.; see also, Orkin Exterminating Co. v. Bailey, 550 So.2d 563, 565 (Fla. 4th DCA 1989), (reversing and providing that on remand the trial court “must provide that the injunctions shall be for a period of two years from the date of the entry of the amended orders.”); Kverne v. Rollins Protective Servs. Co., 515 So.2d 1320, 1321–22 (Fla. 3d DCA 1987) (trial court committed reversible error in not starting restrictive period upon entry of injunctive relief as the defendant had engaged in the violative competition during the pendency of the litigation); Mut. Benefits Corp. v. Goldenberg, 709 So.2d 204 (Fla. 4th DCA 1998) (reversing trial court and ordering injunction to be extended to afford plaintiff full restrictive period to run from date of injunction’s entry); Capelouto v. Orkin Exterminating Co. of Fla., 183 So.2d 532, 534 (Fla. 1966) (“Appellant argues that he acted swiftly to obtain an adjudication of his rights under the contract and he should not be penalized by extending the restrictive period beyond the time specified in the contract. This argument ignores the fact that appellant has participated in the prohibited activities during the course of the litigation. To agree with appellant would be to nullify, in major part, the effectiveness of such agreements.”);  Xerographics, Inc. v. Thomas, 537 So. 2d 140, 143 (Fla. 2d DCA 1988) (reversing denial of injunction and remanding with instructions for injunction to begin “for a period of one year from the issuance of the trial court's order.”)

Scenario Two:           You delayed in filing your action and/or pursuing injunctive relief.

The above reasoning makes sense when the plaintiff is both prompt and diligent in seeking injunctive relief against the party allegedly violating the noncompete agreement.  However, to the extent an employer has been dilatory in its efforts to enjoin its former employee from competition once it learns of the violation, courts may penalize the employer and allow the running of the restrictive period during the litigation.  This was the result in Sunbelt Rentals, Inc. v. Dirienzo, 487 F. Supp. 2d 1361, 1363-64 (S.D. Fla. 2007) (applying Florida law).  There, the plaintiff did not seek injunctive relief for approximately 3-4 months after knowing of the covenant’s violation.  Id.  The appellate court held that the trial court was within its discretion to refuse to begin the full restrictive period upon entry of injunctive relief.  Id.  It stated that “[a] more reasonable reading [of Florida law] would allow courts, when the circumstances make it appropriate, to equitably extend an injunction, but not require it. This Court holds that the equitable nature of preliminary injunctions and the Supreme Court of Florida's decision in Capelouto permit, but do not require, a court to equitably extend a preliminary injunction to run from the time of entry of the preliminary injunction.”). Id.  A similar result occurred in OneSource Facility Servs., Inc. v. Mosbach, 2008 WL 11430039 at *3 (M.D. Fla. Nov. 20, 2008).  There, the plaintiff filed suit shortly after the beginning of the restrictive period.  However, it did not initially seek a temporary restraining order or preliminary injunction and allowed the restrictive period to expire during the litigation, only first seeking an injunction after the expiration of the restrictive covenant.  Under those circumstances, the court refused to extend the restrictive covenant beyond the period of the agreement, which had now expired. Id.; see also, Vela v. Kendall, 905 So. 2d 1033, 1035 (Fla. 5th DCA 2005) (refusing to extend restrictive period reasoning that the  plaintiff “chose not to seek a temporary injunction during the pendency of this lawsuit, and the non-competition time agreed to by the parties expired well before the trial of this cause.”).

Conclusion

The lesson is this.  If the former employer intends to get the benefit of its bargain, as soon as it learns of the allegedly violative behavior by its former employee, it should promptly file suit.  Once suit is filed, the former employer should not delay in filing a motion for temporary injunctive relief and pursuing that relief diligently.  If it fails to do so, the restrictive period may be found to have run during the pendency of the litigation.