Chandra v. Gadodia

• Decision Date: 20 November 1992
• Docket Number: No. 91-2016,91-2016
• Citation: 610 So.2d 15
• Parties: 1992-2 Trade Cases P 70,048, 17 Fla. L. Week. D2603 Rajiv CHANDRA, M.D., et al., Appellants, v. Gopal GADODIA, M.D., et al., Appellees.
• Court: Florida District Court of Appeals

Page 15

610 So.2d 15

1992-2 Trade Cases P 70,048, 17 Fla. L. Week. D2603

Rajiv CHANDRA, M.D., et al., Appellants, v. Gopal GADODIA, M.D., et al., Appellees.

No. 91-2016.

District Court of Appeal of Florida Fifth District.

Nov. 20, 1992.

Rehearing Denied Dec. 29, 1992.

Susan E. Trench of Goldstein & Tanen, P.A., Miami, for appellants.

Michael H. Kahn, Melbourne, for appellees.

PETERSON, Judge.

Appellants, Rajiv Chandra, M.D., and Medical Specialists and Consultants, Inc. (hereinafter collectively called "Chandra"), appeal the denial of their requests for preliminary injunctions. Chandra sought enforcement of noncompetition agreements contained in two separate employment contracts with Gopal Gadodia, M.D., and Shashin Desai, M.D. (hereinafter called "employees"). We reverse and remand for further proceedings.

Employees responded to Chandra's advertisement seeking internal medicine and cardiology specialists to assist in and expand the operation of a busy medical practice which Chandra had developed over a period of five years in Brevard County. Neither of the employees had ever been to Brevard County before, and Chandra paid their travel expenses for an interview and an inspection of the area. When they accepted the job offer, Chandra also paid for their moving expenses.

Two separate employment contracts were executed prior to the term of employment. Differences in the terms of the contracts between the two employees are unimportant for purposes of this appeal. Included in the provisions were noncompetition agreements which recited that $10,000 of the agreed compensation was for the noncompetition provisions and that, for two years after termination of employment, employees could not practice internal medicine or cardiology in Brevard County or in five of the hospitals located there.

After only five and six months of employment, respectively, both employees simultaneously resigned by letter which indicated dissatisfaction with and disapproval of Chandra's method of operations. The letters also expressed dissatisfaction with Chandra's demand for a higher purchase price for investment in the medical practice than had been set forth in the employment agreements. Additionally, they complained that the noncompetition agreements were unreasonable because, contrary to what Chandra had led them to believe, the practice was not county-wide, and, of the five hospitals listed in the noncompetition agreements, Chandra had privileges in only one.

After resigning, the employees brought actions for rescission of the employment contracts, for damages for fraud and for injunctive relief to prevent Chandra from enforcing the noncompetition agreements. Chandra responded, inter alia, by asking for enforcement of the noncompetition agreements, together with a preliminary injunction.

The trial court denied Chandra's request for a preliminary injunction. In doing so, however, it stated that, based on the law as it existed prior to June 28, 1990, the effective date of the 1990 amendment to section 542.33(2)(a), Florida Statutes (1989), it would have granted an injunction in Chandra's favor. See, e.g., Capraro v. Lanier Business Products, Inc., 466 So.2d 212 (Fla.1985). The trial court denied injunctive relief based on Hapney v. Central Garage, Inc., 579 So.2d 127 (Fla. 2d DCA 1991), review denied, 591 So.2d 180 (Fla.1991), which held that the June 29, 1990, amendment applied retroactively to contracts already in existence. While the trial court felt constrained to follow Hapney, it noted its disagreement with the conclusion reached in Hapney that the amendment to the statute should be applied retroactively.

Section 542.33(2)(a), prior to the amendment, provided:

[O]ne who is employed as an ... employee may agree with his employer to refrain from carrying on or engaging in a similar business and from soliciting old customers of such employer within a reasonably limited time and area ... so long as such employer continues to carry on a like business therein. Said agreements may, in the discretion of a court of competent jurisdiction, be enforced by injunction.

Chapter 90-216, Section 1, Laws of Florida, amended section 542.33(2)(a) on June 28, 1990, by adding the following:

However, the court shall not enter an injunction contrary to the public health, safety, or welfare or in any case where the injunction enforces an unreasonable covenant not to compete or where there is no showing of irreparable injury. However, use of specific trade secrets, customer lists, or direct solicitation of existing customers shall be presumed to be an irreparable injury and may be specifically enjoined. In the event the seller of the goodwill of a business, or a shareholder selling or otherwise disposing of all his shares in a corporation breaches an agreement to refrain from carrying on or engaging in a similar business, irreparable injury shall be presumed.

We likewise disagree with the above conclusion reached in Hapney, reverse the trial court's refusal to grant Chandra's request for a temporary injunction, and respectfully reach conflict with Hapney for the reasons discussed below.

In Capraro, 466 So.2d 212, the supreme court approved the holding of the fourth district that, where an employee breaches a covenant not to compete, irreparable injury is presumed and does not have to be proven. At the same time, the supreme court disapproved of Uni-Chem Corporation of Florida, Inc. v. Maret, 338 So.2d 885 (Fla. 3d DCA 1976), which held that:

Notwithstanding statutory right to injunctive relief, upon proof of a valid covenant not to compete said statutory provision does not negate the necessity of showing irreparable harm as a prerequisite to the granting of a temporary injunction. Wilson v. Sandstrom, 317 So.2d 732 (Fla.1975).

Id. at 887 (citation omitted).

Justice Overton dissented in Capraro because there had been no showing of necessity, irreparable harm, or legal damages as a prerequisite to issuing the injunction. Capraro, 466 So.2d at 214 (Overton, J., dissenting). Further, Justice Overton disapproved the use of an injunction to enforce an unreasonable covenant not to compete. Id. at 213. Justice Overton urged the legislature to modify or repeal section 542.12 to require the courts to use proper equitable principles when injunctive relief is sought to enforce noncompetition agreements.

This court's decision in Sentry Insurance v. Dunn, 411 So.2d 336 (Fla. 5th DCA 1982), review denied, 419 So.2d 1196 (Fla.1982), also used the rule of law later adopted by Capraro. In Sentry Insurance, this court relied upon Silvers v. Dis-Com Securities, Inc., 403 So.2d 1133 (Fla. 4th DCA 1981), in which the fourth district held that irreparable injury need not be alleged or proven in cases involving the violation of a covenant not to compete since injury was presumed from the violation. Silvers also held that, in seeking injunctive relief to enforce a noncompetition covenant, it is "necessary only to allege: (a) The contract (b) The [former employee's] intentional direct and material breach thereof. (c) No adequate remedy except by injunctive relief." Silvers, 403 So.2d at 1136.

In Hapney, the majority held that the trial court erred in enforcing by injunction an agreement between the employee, an auto and truck air conditioning mechanic, and the employer, an auto and truck air conditioning repair shop. The contract prohibited the employee from offering similar products or services for a period of three years in a multicounty area. The pertinent part of the agreement indicated that it was designed to restrain competition as opposed to protecting trade secrets, customer lists, and solicitation of employer customers. The majority held, inter alia, that, to obtain an injunction, an employer must plead and prove a legitimate business interest to be protected as the foundation of a covenant not to compete. Further, the Hapney majority held that a covenant not to compete which prohibits competition per se violates public policy. The court recognized protection of trade secrets and customer lists, and prevention of direct solicitation of existing customers as legitimate business interests per se subject to protection.

The Hapney majority concluded that Capraro and the second district's previous en banc opinion in Sarasota Beverage Co. v. Johnson, 551 So.2d 503 (Fla. 2d DCA 1989), conditioned the granting of an injunction on the existence of a "valid" contract, the validity of which was dependent upon whether the contract protected a legitimate business interest. In an attempt to distinguish Capraro, the Hapney majority noted that "Capraro deals with presumptions and burden of proof, not the validity of the underlying contract."...