Southern Wine And Spirits Of Am. Inc v. Simpkins
| Decision Date | 14 January 2011 |
| Docket Number | Case No. 10-21136-Civ-COOKE/BANDSTRA |
| Parties | SOUTHERN WINE AND SPIRITS OF AMERICA, INC. Plaintiff v. THEODORE SIMPKINS, Defendant |
| Court | U.S. District Court — Southern District of Florida |
THIS MATTER is before me on the Plaintiff's Motion for Preliminary Injunction. I have reviewed the Parties' arguments, the record, and the relevant legal authorities. For the reasons explained in the order, the Plaintiff's Motion for Preliminary Injunction is denied.
This case is about the reasonableness of a restrictive covenant not to compete in an employment setting and whether that covenant should be enforced by preliminary injunction until the case is tried on the merits. The Plaintiff, Southern Wine & Spirits of America, Inc., alleges that the Defendant, Theodore Simpkins, has breached a restrictive covenant not to compete and is now seeking a preliminary injunction to enforce that covenant.
Southern Wine is a wholesale distributor of wine, and other alcoholic and non-alcoholic products. It is one of the Nation's largest wholesale distributors of wine, spirits and beer, operating in thirty states including Florida and California. Theodore Simpkins is a former high-ranking executive of Southern Wine. Mr. Simpkins worked for Southern Wine for almost 40 years.
In 1983, Southern Wine relocated Mr. Simpkins from Florida to California to help grow the California division of the business. He has lived in California since then. From 2005 to 2010 Mr. Simpkins received approximately $39 million in salary and bonus compensation averaging approximately $7.8 million per year. In 2008, Mr. Simpkins had less than two years remaining on his existing employment contract. Concerned for his future, he asked Southern Wine's owners to extend his contract for five more years with the same economic terms. The owners agreed to the extension but would not give the same economic terms. Instead of continuing to pay him a guaranteed annual bonus, the agreement was changed to allow for a bonus that would be paid only at the discretion of the owners.
The new agreement also contained an expanded restrictive covenant providing that, for five years after the termination of the agreement, Mr. Simpkins would not participate in any "Restricted Business Activity, " as defined in the agreement, in any part of the United States or its territories or possessions. "Restricted Business Activities" ranged from wholesale sale of alcoholic and nonalcoholic beverages to soliciting away Southern Wine employees. The contract was presented as a take-it-or-leave-it option. Before signing the agreement, Mr. Simpkins consulted with an attorney who he believed to be "independent counsel, " but who was, in fact, Southern Wine's own labor and employment attorney. Nonetheless, on March 1, 2008, acting upon counsel's advice, he signed the new employment agreement.
On April 5, 2010, without prior notice to the Plaintiff, Mr. Simpkins terminated his employment at Southern Wine and, on the next day, joined Young's Market Company in an executive level position. Young's Market is one of Southern Wine's top competitors in California. Southern Wine alleges that Mr. Simpkins breached the restrictive covenant when he joined Young's Market and, by either indirect or direct means, solicited away Southern Wine employees. Southern Wine further alleges that he will continue to breach the agreement to its irreparable detriment if he is not ordered to stop. Southern Wine now asks this Court to issue a preliminary injunction to preclude Mr. Simpkins' activities in this regard at least until the time of trial in April 2011. In opposition, Mr. Simpkins asserts that his employment with Young's Market is not in breach of his agreement, that he has not solicited employees or vendors away from Southern Wine, and that the restrictive covenant itself is presumptively unreasonable. He further maintains that enforcement of the restrictive covenant, either by way of preliminary injunction or final order, will effectively end his ability to work in the only career has known for the past 40 years and force him into an early, and unwanted, retirement.
"A preliminary injunction is an extraordinary and drastic remedy not to be granted unless the movant clearly establishes the 'burden of persuasion.'" In re Jotan, 229 B.R. 218 (Bankr. M.D. Fla. Nov. 25, 1998) citing McDonald's v. Robertson, 147 F.3d 1301, 1306 (11th Cir. 1998). The grant or denial of such an extraordinary remedy is a decision within the sole discretion of the district court. Carillon Importers, Ltd. v. Frank Pesce Int'l Group, Ltd., 112 F.3d 1125, 1126 (11th Cir. 1997). To meet the burden of persuasion for granting a preliminary injunction the movant must establish: (1) a substantial likelihood of success on the merits; (2) that irreparable injury will be suffered unless the injunction issues; (3) the threatened injury to the movant is greater than any damage the proposed injunction may cause the opposing party; and (4) the injunction, if issued, would not disserve the public interest. Id.
The employment agreement at issue contains an "applicable law" clause, selecting Florida law to govern the terms of the agreement. Mr. Simpkins has contested the enforceability of that clause on the grounds that the contract was made in California, wholly performed in California, and that California has a strong public policy against the enforcement of restrictive non-compete covenants. On November 10, 2010, pursuant to Plaintiffs motion to stay, the Superior Court of California for Alameda ruled that the agreement's forum selection clause is reasonable and should be enforced. The effect of this ruling is that the State of California has determined that it does not have an interest in enforcing its public policy against the enforcement of restrictive non-compete covenants as it pertains to this non-compete agreement. Accordingly, the agreement's choice of law provision will be honored.
City of Jacksonville v. Naegele Outdoor Adver. Co., 634 So. 2d 750, 753 (Fla. Dist. Ct. App. 1994). Under Florida law, an employer seeking to enforce a restrictive covenant must prove (1) the existence of one or more legitimate business interests justifying the covenant and (2) that the contractually specified restraint is reasonably necessary to protect the established business interest of the employer. Fla. Stat. § 542.335(1)(b) (2010). The term "legitimate business interests" includes, but is not limited to: valuable confidential business information, substantial relationships with prospective or existing customers or clients, and extraordinary or specialized training. Id.
"Information that is commonly known in the industry and not unique to the allegedly injured party is not confidential and is not entitled to protection." Autonation, Inc. v. O 'Brien, 347 F. Supp. 2d. 1299, 1304 (S.D. Fla. 2004). However, "when an employee has access to confidential business information crucial to the success of an employer's business, that employer has a strong interest in enforcing a covenant not to compete." Proudfoot Consulting Co. v. Gordon, 576 F.3d 1223, 1234 (11th Cir. 2009).
There is a substantial likelihood that Southern Wine will succeed in showing that it has a legitimate business interest in protecting the confidential business information that Mr. Simpkins had access to while at Southern Wine. In Proudfoot the court found the plaintiff to have a legitimate business interest in its confidential business information justifying enforcing a covenant not to compete. There, the confidential information included information about the employer's clients, its general operations, pricing information, training materials, and methods for providing its services. It was not decisive whether the employee had ever used the information or intentionally breached the agreement's confidentiality clause. In fact, the court called it a mistake to assume that an employer's interest in its confidential information justifies enforcement of a non-compete covenant only if the employer can establish that the employee breached the confidentiality clause of the agreement. Proudfoot, 576 F.3d at 1234 (11th Cir. 2009). The court explained that it was sufficient that the former employee, by working with a competitor, endangered the confidential information he received while working with his former employer. Id.
While at Southern Wine Mr. Simpkins had access to information of much the same type as that described in Proudfoot. He had access to Southern Wine's personnel files and staffing strategies, annual vision and strategy plans, pricing information, supplier agreements and marketingstrategies, and method of business requirements. He also attended meetings that were reserved for only the most senior level managers at Southern Wine. Moreover, the CEO of Young's Market admitted that the internal financial statements to which Mr. Simpkins had access while at Southern Wine are confidential and would confer a competitive advantage onto another competitor. While it may be true that such information in the wholesale alcohol industry becomes stale after two to six months, the weight of current authority and the possibility of Mr. Simpkins could use the information to give his new employer a possible unfair advantage presents a substantial likelihood that Southern Wine will be able to establish a legitimate business interest in the confidential information to which he had access.
Florida Statute section 542.335(1)(b)(3) provides that proof of a legitimate business interest...
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