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The Franchise Memorandum

Florida Court Enforces Franchisor’s Noncompete Agreement
Posted in Noncompetes

The United States District Court for the Middle District of Florida granted U.S. Lawns, Inc.’s request to enjoin its former franchisee, Landscape Concepts of CT, LLC, from competing after termination. U.S. Lawns sought the preliminary injunction enforcing the covenant not to compete pending arbitration of other claims. U.S. Lawns, Inc. v. Landscape Concepts of CT, LLC, No. 6:16-cv-929-Orl-41DAB (M.D. Fla. Oct. 31, 2016). In granting the motion the court found U.S. Lawns had established legitimate business interests in protecting its goodwill, franchise system, relationship with other franchisees, and ability to refranchise the territory. Further, the court found U.S. Lawns showed its noncompetition clause to be reasonable in scope and duration—for two years from the date of termination, Landscape Concepts was enjoined from contacting or servicing any customers that it had serviced within the preceding twenty-four months.

The injunction also required that Landscape Concepts not “communicate, divulge or use for the benefit of any other person or persons, [or] Business Entity any confidential information, knowledge or know-how concerning the systems of operation, services, products, customers, or prospective customers of . . . U.S. Lawns.” Further, Landscape Concepts was barred from “divert[ing] any business to competitors of U.S. Lawns” and from having “any and all contacts with customers, for any purposes whatsoever.” The court also found that the former franchisee’s new corporate entity, which was not a signatory on the franchise agreement, could be bound by the preliminary injunction based on Federal Rule of Civil Procedure 65 as a person “in active concert or participation with” the former franchisee, Landscape Concepts. Finally, the court set the injunction bond at $500,000 based on Landscape Concepts’ estimated lost profits for the two-year period of the injunction.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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