Colucci v. Kar Kare Automotive Group, Inc.

• Decision Date: 25 January 2006
• Docket Number: No. 4D05-1759.,No. 4D05-2148.,4D05-1759.,4D05-2148.
• Citation: 918 So.2d 431
• Parties: Richard J. COLUCCI, Appellant, v. KAR KARE AUTOMOTIVE GROUP, INC., Appellee.
• Court: Florida District Court of Appeals

918 So.2d 431

Richard J. COLUCCI, Appellant, v. KAR KARE AUTOMOTIVE GROUP, INC., Appellee.

No. 4D05-1759.

No. 4D05-2148.

District Court of Appeal of Florida, Fourth District.

January 25, 2006.

COPYRIGHT MATERIAL OMITTED

William H. Pincus of the Law Offices of William H. Pincus, West Palm Beach, for appellant.

Denise J. Bleau and H. Michael Munuz of Buckingham, Doolittle & Burroughs, LLP, Boca Raton, for appellee.

TAYLOR, J.

Richard J. Colucci appeals a preliminary injunction entered in favor of Kar Kare Automotive Group, Inc., that prohibits him from competing anywhere in the United States for a period of five years. Kar Kare alleged that Colucci breached a covenant not to compete by conducting business in the State of Florida. The trial court granted Kar Kare's motion for a preliminary injunction on the ground that the parties agreed to a covenant not to compete that was subsequently amended to prohibit competition anywhere in the United States for a period of five years. We conclude that the trial court erred in finding that Kar Kare had a legitimate business interest upon which to base a valid covenant not to compete. Because there was no valid covenant not to compete, Kar Kare could not prove the necessary elements of a temporary injunction.

On March 4, 1999, the parties entered into a purchase agreement whereby Colucci transferred 100 percent ownership in his business, "A to Z Imprint Supply, Inc.," a Massachusetts corporation, to Kar Kare, and simultaneously became an employee of Kar Kare. Subsequently, on March 31, 1999, Colucci and Kar Kare entered into a Non-Competition Agreement, which included a covenant not to compete that precluded Colucci, for a period of five years from the date of termination of his employment with Kar Kare, from supplying automotive sales aids anywhere in the United States. Notably, the covenant explicitly provided for a "carve-out," an exception allowing Colucci to conduct business within one hundred miles of his home in Florida.

After approximately eight months with Kar Kare, Colucci terminated his employment. On December 17, 1999, Kar Kare sent a letter to Colucci reflecting an agreement reached by telephone ("Letter Agreement"). By the terms of the agreement, Colucci and Kar Kare terminated Colucci's employment relationship. The agreement provided:

The parties agree there is in full force and effect a "Non-Competition Agreement" between them dated as of March 31, 1999. They further agree as a condition of this Agreement that ... all conditions contained [in the "Covenant Not to Compete"] shall remain in full force and effect unless modified by this Agreement. Further the term of all terms and conditions shall be extended to expire March 31, 2007. The Employee further agrees not to compete in any way whatsoever with any business of the Employer that exists at the time of the execution of this Agreement. This Agreement by the Employee not to compete, shall apply anywhere in the United States of America and shall restrict the Employee from competing with the Employer in any way, including acting as an individual salesperson and as further described in the "Non-Competition Agreement" referenced herein.

In consideration for this agreement, Colucci was to receive $50,000.

In September/October 2001, Colucci and Kar Kare entered into a Settlement Agreement as a result of disputes regarding alleged breaches by both parties. By the terms of the Settlement Agreement, Colucci agreed that the Non-Competition Agreement of March 1999¹ would "remain in full force and effect." The Settlement Agreement further stated that "[t]he only obligations or claims surviving the signing of this agreement shall be those obligations still existing under the Covenant Not to Compete signed by Colucci, the Commercial Promissory Note, Limited Guarantees signed by E[dward] Bonanni and J[ohn] Bonanni, and the Second Trust Deed signed by Kar Kare in favor of Colucci, as well as the terms and conditions set forth in this Settlement Agreement." The settlement agreement made no reference to the Letter Agreement.

On February 8, 2005, Kar Kare filed a Verified Complaint for Temporary and Permanent Injunctive Relief and Damages against Colucci. The complaint alleged that as part of the sale of his business, Colucci entered into a "Non-Competition Agreement," the terms of which restricted him from "either directly or indirectly, carry[ing] on or engag[ing]" in business related to the supplying of automotive sales aids for a period of five years. Kar Kare alleged that Colucci breached the Non-Competition Agreement by conducting business with Kar Kare's customers. Kar Kare requested a temporary and permanent injunction prohibiting Colucci from further violating the Non-Competition Agreement.

On March 11, 2005, an evidentiary hearing was held on Kar Kare's motion for injunction. Both parties testified to their understanding of the Non-Competition Agreement and the Letter Agreement. Colucci stated that he believed the Letter Agreement simply extended the period of the Covenant Not to Compete by two years—for which he received $50,000—but that it did not affect the carve-out. Consistent with this understanding, Colucci has limited his business to the carve-out. Edward Bonanni, CEO and President of Kar Kare, testified that the purpose of the Letter Agreement was to "pay[] $50,000 for [Colucci] to retire from the business until 2007, period." He further stated that he did not think the Settlement Agreement had any impact on the Letter Agreement.

The trial court issued an order granting Kar Kare's emergency motion for preliminary injunction. The court found that the parties entered into a Non-Competition Agreement whereby Colucci would not compete with Kar Kare for five years. By its terms, the Covenant Not to Compete contained in the Non-Competition Agreement prohibited Colucci from competing anywhere in the United States, with the exception of a 100 mile radius from Colucci's home in Florida. Kar Kare paid Colucci $25,000 in consideration for the Covenant Not to Compete. The court further found that, when Colucci's employment was terminated in Fall 1999, the parties entered into the Letter Agreement. The court found Colucci has been conducting his business within 100 miles of his home since 2003.

The court concluded that "Kar Kare proved the existence of restrictive covenants set forth in the Non-Competition Agreement and the Letter Agreement dated December 17, 1999" that prohibit Colucci from using the name, "A to Z Imprints," and competing with Kar Kare through 2007. Further, the court found Kar Kare to have proved the existence of legitimate business interests that justify the restrictive covenants and the violation of such covenants. The court held that the "obvious import of the Letter Agreement was to broaden the scope of the Non-Competition Agreement in exchange for greater consideration paid to Colucci."

The court noted that the Settlement Agreement was not introduced into evidence, but that even if it had been introduced, the agreement "did not credibly suggest ... a modification to the Non-Competition Agreement or the Letter Agreement" such that the 100-mile carve-out was still effective. Thus, the court concluded, Kar Kare had a substantial likelihood of success on the merits of its claim, and the court ordered a temporary injunction.

At a May 2, 2005 hearing on Colucci's motion to dissolve, the trial court took testimony on the Settlement Agreement. The court held that the unambiguous intent of the Settlement Agreement was to preserve the Covenant Not to Compete as amended by the Letter Agreement. It further held that even if the Settlement Agreement could be construed as ambiguous, parol evidence nevertheless supported the existence of the amended covenant. The court denied Colucci's motion.

This court reviews temporary injunctions for abuse of discretion. Stephan Co. v. Faulding Healthcare (IP) Holdings, Inc., 844 So.2d 676, 678 (Fla. 4th DCA 2003); see Raulerson v. Mitchell, 916 So.2d 891 (Fla. 4th DCA 2005). The Florida Supreme Court has stated that "[t]he scope of review [of injunctions] is limited. As a general rule, trial court orders are clothed with a presumption of correctness and will remain undisturbed unless the petitioning party can show reversible error." Smith v. Coalition to Reduce Class Size, 827 So.2d 959, 961 (Fla. 2002) (quoting Operation Rescue v. Women's Health Ctr., 626 So.2d 664, 670 (Fla. 1993)).

The supreme court further noted the distinction in the type of review employed when an order rests on factual, as opposed to legal, grounds:

To the extent it rests on factual matters, an order imposing a permanent injunction lies within the sound discretion of the trial court and will be affirmed absent a showing of abuse of discretion.... To the extent it rests on purely legal matters, an order imposing an injunction is subject to full, or de novo, review on appeal.

Id.

Thus, this court must apply a "hybrid" standard of review. To the extent the trial court's order is based on factual findings, we will not reverse unless the trial court abused its discretion; however, any legal conclusions are subject to de novo review.

Colucci asserts that the Settlement Agreement reinstated the parties' original covenant not to compete, which contained the carve-out. The court below based its determination of the enforceability of the restrictive covenant on its interpretation of the Non-Competition Agreement, the Letter Agreement, and the 2001 Settlement Agreement. This court reviews de novo the trial court's interpretation of these agreements. See Maleki v. Hajianpour, 771 So.2d 628, 630-31 (Fla. 4th DCA 2000).

By the terms of the Non-Competition Agreement, the parties agreed that Colucci would refrain from competing with Kar Kare for five years, with the exception of business conducted within the 100-mile carve-out. When the parties parted ways in Fall 1999, they executed...