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Floirda Non-Compete Agreements: Supplier Relationships

In Florida, non-compete agreements are governed by Florida Statute 542.335. The statute indicates that non-compete agreements can only be used to protect legitimate business interests. Although the statute is not exhaustive, it does spell out a number of such interests. These include relationships with customers.
Many companies suing to enforce non-compete agreements attempt to conflate customer relationships with other types of relationships. Often, companies will seek to use non-compete agreements to protect relationships with suppliers or vedors in the industry.

A good example comes from a fairly recent case, Southern Wine & Spirits v. Simpkins, Case No. 1:2010cv21136 (S.D.F.L. 2010). The case pitted a major wine and spirits distributor against the former head of its California division. One of Southern’s key arguments was that Southern had special relationships with its suppliers (like Diageo or Robert Mondavi). Southern argued that its non-compete agreement should be enforced to prevent Simpkins from interfering with these special supplier relationships.  The court rejected Southern’s argument outright, holding that supplier relationships are fundamentally different than customer relationships. Whereas a customer might do business with one company, and form a truly unique relationship, a supplier occupies an entirely different position in the market. Take the wine industry as an example. In the wine industry, there are a limited number of major suppliers. Those suppliers are well known. And they do business with multiple companies downstream. The relationship between a wine distributor and its upstream supplier simply is not the same as the relationship between a wine distributor and the neighborhood pub that it sells to downstream.

In fact, employers repeatedly have pushed the supplier argument and Florida courts repeatedly have rejected it. In addition to the Southern District’s decision in Simpkins, the Middle District of Florida also has a recent decision rejecting the notion of supplier relationships as a protectable interest. See Concrete Surface Innovations, Inc. v. McCarty, No. 10-568, 2010 WL 1930971 (M.D. Fla. May 13, 2010). In Concrete Surface, the court offered the following reasoning:

“As explained by the parties, Metzger-McGuire and VersaFlex are manufacturers of epoxy that is used in renovations and repairs of concrete, and they are the only two manufacturers of epoxy that Wal-Mart and Sam’s Club will allow the contractors that they hire to use in renovating their stores. Concrete contends that its “substantial relationships” with Metzger-McGuire and VersaFlex are protectable business interests, but as far as the Court can tell these suppliers are vendors of a product that is necessary for some jobs to be awarded but they are not akin to “clients” or “customers.” Indeed, as noted by Floors, Concrete is the customer or client of Metzger-McGuire or VersaFlex-not the other way around.”

The Middle District went on to cite the seminal Florida state court holding on the matter, Bradley v. Health Coal., Inc., 687 So. 2d 329, 334 (Fla. 3d DCA 1997) (finding that trial court erred in enjoining former employee from contacting any of former employer’s suppliers and noting that the presumption of irreparable injury for “direct solicitation of customers” did not extend to “doing business with suppliers”).

As it turns out, Florida has a small but growing body of case law holding that supplier relationships are not akin to customer relationships and, as a result, cannot be protected through non-compete agreements.

Jonathan Pollard is a trial lawyer and litigator based in Fort Lauderdale, Florida.  He focuses his practice on non-compete disputes.  He represents clients in Miami, Fort Lauderdale, Boca Raton, West Palm Beach, Jupiter, Fort Myers, Tampa, and Orlando.

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