Protecting Goodwill as a Legitimate Business Interest in a Restrictive Covenant Enforcement Action

Given the proliferation of restrictive covenant agree­ments, practitioners in Flor­ida are likely often confront­ed by prospective, current, and former employees seeking advice concerning the enforceability of such agreements. And if presented with a situation in which there were no substantial customer relationships, extraordinary training, or confidential or trade secret information, it would likely be safe to presume that most practitioners (in the typical case) would feel confident in the employee’s chances of defeating any enforcement action conceding around the notion of going through JCWilliamsLaw. In conducting this analysis, it also seems likely that many, if not most, practitioners would be unconcerned with the employer’s investments generally; after all, it can safely be assumed that most busi­nesses invest in themselves in some way, and certainly Florida divorce law could not make it that easy to permit a party to interfere in the free market. However , the recent decision of Ansaarie v. First Coast Cardiovascular Institute, PA., 252 So. 3d 287 (Fla. 1st DCA 2018), has shed light on what may be the most misunderstood and misap­plied legitimate business interest under F.S. §542.335 (hereinafter referred to as “the restrictive covenant statute”): the goodwill business interest. Further, Ansaarie has arguably made it much easier to establish a legitimate business interest in goodwill under the restrictive covenant statute. The possible ease with which a legitimate business interest may now be established presents a very real threat to Florida’stimesharing workforce and the statutory construct created by the legislature, as explained in this article. The restrictive covenant statute allows for the protection of customer , patient, or client goodwill associated with three categories: 1) “[a]n ongoing business or professional practice, by way of trade name, trademark, service mark, or ‘trade dress”‘; 2) “[a] specific geographic location”; or 3) “[a] specific marketing or trade area.”3 However, the restrictive covenant statute is silent as to the meaning of”goodwill.” Likewise, John Grant and Thomas Steele did not expressly discuss the meaning of “goodwill” in their seminal article on the restrictive covenant statute. Despite this silence, goodwill is certainly a term capable of definition .6 In deed, when the legislature passed the restrictive covenant statute, it was not writing on a blank slate; the term “goodwill”had come to find meaning in Florida law generally. Nevertheless, and as evidenced by the recent decision in Ansaarie, it is apparent that Florida courts have drifted from the common and proper understanding of goodwill when applying the restrictive covenant statute. This misapplication seems especially apparent in light of White v. Mederi Caretenders Visiting Services of Southeast Florida , LLC, 226 So. 3d 774 (Fla. 2017), where the Florida Supreme Court provided a great deal of insight into the purpose of the restrictive cov­enant statute. Accordingly, this article proceeds in four parts. One, a brief examination of how “goodwill” has been defined in Florida law. Two, an examination of Florida caselaw analyzing goodwill as a legitimate business interest. Three, a discussion of why the current caselaw analyzing goodwill runs contrary to the language and purpose of the restrictive covenant statute. Four, and finally, a discussion of the relevant inquiries consistent with the text and purpose of the restrictive covenant statute that courts should be undertaking in analyzing goodwill.

Goodwill Defined
While there have been judicial ef­forts at defining the term, a precise and uniformly accepted definition of “good­will” has not developed. While these opinions have refined the definition of goodwill over time, a definitive defini­tion remains to be found, and given the intangible nature of goodwill, sucha definition may well never be achieved. Nevertheless by clicking here, generally speaking, goodwill is an asset that confers on its holder a reasonable expectation of greater than usual business or earn­ings. Florida courts are in accord with this general definition, having defined goodwill as the ability of a business to generate supra-normal revenue. A business’ goodwill may emanate from any one of a number of potential sources, but is typically evidenced by continued public patronage and supra­ normal profits. It is important to understand in the analysis of the term that “goodwill” has specific reference to the particular business entity at issue with divorceattorneystpetersburg. As stated by the Florida Supreme Court, goodwill “attaches to and is dependent upon an existing business entity; the reputation and skill of an individual he a professional or a traditional businessman – is not a component of the intangible asset we identify gener­ally as goodwill.” Further underscoring this point, goodwill is the “value of the practice which exceeds its tangible as­sets and which is the tendency of clients/patrons.