Florida Business Litigation Lawyer Blog

Published on: April 17, 2024

FORT LAUDERDALE BUSINESS LITIGATION: FIDUCIARY DUTY

A fiduciary relationship exists when an individual must act in the interests of another. Watkins v. NCNB Nat’l Bank of Fla., N.A., 622 So.2d 1063 (Fla. 3rd DCA 1993) (“To establish a fiduciary relationship, a party must allege some degree of dependency on one side and some degree of undertaking on the other side to advise, counsel, and protect the weaker party.”). The relationship can form expressly through contract or implicitly based on specific facts and circumstances surrounding the parties’ relationship. First Nat’l Bank & Trust Co. v. Pack, 789 So.2d 411 (Fla. 4th DCA 2001). Although some case-law suggests an employer/employee relationship does not result in the formation of a fiduciary relationship, many authorities stand for the opposite proposition. See Renpak, Inc. v. Oppenheimer, 104 So. 2d 642, 644 (Fla. 2d DCA 1958) (“A mere employee of a corporation generally does not occupy a position of trust and owe a fiduciary duty unless he also serves as its agent.”); infra. In this article, we explore two scenarios where a fiduciary duty is commonly imposed upon employees. Peter Mavrick is a Fort Lauderdale business litigation attorney. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

Employees owe their employer a fiduciary duty of loyalty. Valiant Services Group, LLC v. Commercial Works, Inc., 2022 WL 738471, at *2 (M.D. Fla. Jan. 24, 2022) (“The duty of loyalty is part of a fiduciary duty, and a breach of a duty of loyalty gives rise to a breach of fiduciary duty claim.”). This duty requires the employee to refrain from engaging in disloyal acts of competition with the employer. OPS Int’l, Inc. v. Ekeanyanwu, 672 F. Supp. 3d 1228 (M.D. Fla. 2023) (An employee cannot “engage in disloyal acts in anticipation of his future competition.”). An employee cannot therefore use confidential information acquired during the course of employment to compete against the employer, solicit the employer’s customers, or solicit the employer’s employees. Id. Notwithstanding, employees may make preparations to complete and take with him or her a customer list developed by the employee without violating their duty of loyalty. Fish v. Adams, 401 So. 2d 843 (Fla. 5th DCA 1981) (The “planning of a competing business is not ipso facto a breach of an employee’s duty of loyalty.”); Id. (An “employee may take with him a customer list that he himself has developed.”).

Employees who are also company officers owe their employers additional fiduciary duties. Renpak, Inc., 104 So. 2d 642 (“[C]orporate officers or directors are not precluded, because of the fiduciary nature of their position, from entering into and engaging in another business enterprise similar to but separate from the corporation if they act in good faith and refrain from interference with the business of the corporation.”). The corporate officer owes a duty of loyalty to the company he or she works for as well as a duty of care. McCoy v. Durden, 155 So. 3d 399 (Fla. 1st DCA 2014) (“In short, Florida courts have recognized that corporate officers and directors owe both a duty of loyalty and a duty of care to the corporation that they serve.”). These duties require the officer to act in the best interests of the corporation. Taubenfeld v. Lasko, 324 So. 3d 529 (Fla. 4th DCA 2021). The company’s “shareholders take[ ] precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the stockholders generally.” Id.; see also Cohen v. Hattaway, 595 So. 2d 105 (Fla. 5th DCA 1992) (“Corporate directors and officers owe a fiduciary obligation to the corporation and its shareholders and must act in good faith and in the best interest of the corporation.”). Therefore, an employee who is also a company officer advance company interests even to the detriment of himself or herself.

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Published on: April 14, 2024

MIAMI BUSINESS LITIGATION: REMEDIES FOR TRADE SECRET MISAPPROPRIATION

By Mavrick Law Firm

The federal Defend Trade Secrets Act, at 18 U.S.C. sections 1829(3) and (5), broadly defines trade secret misappropriation to include cases of improper use, disclosure, or acquisition of a trade secret. Under the federal trade secret statute, at 18 U.S.C. section 1839(3)(B), states that trade secret information “derives [its] independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by improper means by, another person who can obtain economic value from [that information’s] disclosure or use[.]” The United States Court of Appeals for the Third Circuit, in Oakwood Laboratories LLC v. Thanoo, 999 F.3d 892 (3d Cir. 2021), explained that “[t]he trade secret’s economic value depreciates or is eliminated altogether upon its loss of secrecy when a competitor obtains and uses that information without the owner’s consent.” Similarly, in Storagecraft Tech. Corp v. Kirby, 744 F.3d 1183 (10th Cir. 2014), the federal appellate court discussed damage remedies in a trade secret misappropriation decision and stated in pertinent part: “When someone steals a trade secret an discloses it to a competitor he effectively assumes for himself an unrestricted license in the trade secret. And that bears its cost. After all, what value does a trade secret hold when it’s no longer a secret from the trade?” Federal and state appellate decisions frequently rely on the legal principles that exclusive use of a trade secret confers economic value and misappropriation of the trade secret will destroy the competitive advantage of the trade secret owner. In this regard, precedent from the United States Supreme Court, in Ruckelhaus v. Monsanto Co., 467 U.S. 986 ( 1984), explained that, “[t]he economic value of that property right lies in the competitive advantage over others that [the plaintiff] enjoys by virtue of its exclusive access to the data, and disclosure or use by others of the data would destroy that competitive edge.” Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

The Defend Trade Secrets Act provides a variety of remedies, at 18 U.S.C. section 1836(b)(3)(B), including damages for actual loss, unjust enrichment caused by the misappropriation, or damages measured by the imposition of liability for a reasonably royalty for the misappropriator’s unauthorized disclosure or use of the trade secret. The Supreme Court’s Ruckelhaus precedent explained that, “[w]ith respect to a trade secret, the right to exclude others is central to the very definition of the property interest. Once the data that constitute a trade secret are disclosed to others, or others are allowed to use those data, the holder of the trade secret has lost his property interest in the data.”

The Defend Trade Secrets Act provides legal and equitable remedies beyond only the plaintiff trade secret owner’s “loss of exclusivity” in the trade secret. The federal statute and case law recognize that there can be other, if not fully realized, injuries. For example, the Oakwood Laboratories LLC decision stated in pertinent part: “Aurobindo’s rapid market entry into a sector of the pharmaceutical industry with few competitors may well deprive Oakwood of market share. Utilizing Oakwood’s trade secrets provides Aurobindo a jumpstart in an industry it would otherwise not have competitively joined for another decade. Aurobindo will avoid substantial research and development costs that Oakwood has already invested in its own product development. Those are competitive harms recognized in” the federal statute. Because the federal statute followed many years after the state-law enacted Uniform Trade Secrets Act (which has been adopted my most states in the U.S.) federal courts often find persuasive state law on the issue of damages. For example, in Rohm & Haas Co. v. Adco Chem. Co., 689 F.2d 424 (3d Cir. 1982), the federal appellate court explained that: “New Jersey law states that a company misappropriating a trade secret may lose the benefits of future independent experiments because of the difficulty of determining how much of the improvement is attributable to those independent efforts and how much to the information gained by the wrongdoing…In trying to segregate honest efforts and ill-acquired knowledge, [e]very doubt must be resolved against the parties to a fraudulent act.” Similarly, the United States Court of Appeals for the Fifth Circuit in Bohnsack. v. Varco, L.P., 668 F.3d 262 (5th Cir. 2012), interpreted state trade secret law and explained that: “Damages in misappropriation cases can take several forms: the value that a reasonably prudent investor would have paid for the trade secret; the development costs the defendant avoided incurring through the misappropriation; and a reasonable royalty. This variety of approaches demonstrates the ‘flexible’ approach used to calculate damages for claims of misappropriation of trade secrets.”

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Published on: April 10, 2024

FORT LAUDERDALE BUSINESS LITIGATION: TRADE SECRET PRIVILEGE

By Mavrick Law Firm

Sometimes litigants are asked to disclose trade secret information during the course of a lawsuit. These litigants usually object claiming the privilege of trade secret. See, e.g., Fla. Stat. § 90.506 (“A person has a privilege to refuse to disclose, and to prevent other persons from disclosing, a trade secret owned by that person if the allowance of the privilege will not conceal fraud or otherwise work injustice.”). However, the trade secret privilege is not absolute. Auto Owners Ins. Co. v. Totaltape, Inc., 135 F.R.D. 199 (M.D. Fla. 1990) (“The trade secret privilege is, however, not absolute under Florida law and the court may order production if the balance tips in favor of promoting the interests of facilitating the trial and doing justice as opposed to the interests of the claimant in maintaining secrecy.”). A court can compel the disclosure of trade secret information to another litigant; even if that litigant is a party opponent or competitor. Peter Mavrick is a Fort Lauderdale business litigation attorney. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

The trade secret privilege was designed to prevent a party from obtaining valuable information that could be used to advantage itself or disadvantage the disclosing party. Freedom Newspapers, Inc. v. Egly, 507 So. 2d 1180 (Fla. 2d DCA 1987) (“The purpose underlying the trade secrets privilege established by section 90.506 is to prohibit a party to a suit from obtaining valuable information that could be used to its own advantage….”). To assert the privilege, the party resisting disclosure must prove the information qualifies as a trade secret and that harm will result if the information is disclosed. Am. Exp. Travel Related Services, Inc. v. Cruz, 761 So. 2d 1206 (Fla. 4th DCA 2000). The court usually inspects the information in a private in-camera setting to ensure trade secret information is not unnecessarily divulged. GCTC Holdings, LLC v. Tag QSR, LLC, 346 So. 3d 700 (Fla. 2d DCA 2022). If the resisting party satisfies his initial burden, the requesting party must show reasonable need for the information. Id. The court weighs the requesting party’s need against the resisting party’s interest in maintaining the information’s confidentiality. Lewis Tree Serv., Inc. v. Asplundh Tree Expert, LLC, 311 So. 3d 206 (Fla. 2d DCA 2020). The court will also determine whether safeguards can be implemented to prevent the requesting party from disclosing or using the information. GCTC Holdings, LLC, 346 So. 3d 700. Safeguards usually come in the form of a confidentiality order. Id.

Asserting a trade secret privilege is more difficult when the lawsuit pertains to the defendant’s trade secret misappropriation. Pursuing a trade secret misappropriation claim generally waives the right to claim a trade secret privilege because an ultimate issue in the case is whether the information qualifies as a trade secret. Del Monte Fresh Produce Co. v. Dole Food Co. Inc., 148 F. Supp. 2d 1322 (S.D. Fla. 2001) (“By bringing a claim under the Uniform Trade Secrets Act, and thereby placing the trade secrets at issue, Del Monte essentially has waived its right to assert the trade secret privilege.”). “In order to ascertain whether trade secrets exist, the information at issue must be disclosed.” Lovell Farms, Inc. v. Levy, 641 So. 2d 103 (Fla. 3d DCA 1994). However, the disclosure requirement does not necessarily mean a trade secret plaintiff has no protection. Courts can still require information to be exchanged under a confidentiality order or limit disclosure to only the information that is relevant to the dispute. See Ecometry Corp. v. Profit Ctr. Software, Inc., 2007 WL 9706934, at *5 (S.D. Fla. Mar. 15, 2007) (To “the extent that Interrogatory number 9 calls for the divulgence of trade secrets or confidential information, this Court ORDERS that PCS maintain the confidential nature of such information.”); Owners Ins. Co. v. Armour, 303 So. 3d 263 (Fla. 2d DCA 2020) (“Even though the disclosure of various types of information can result in irreparable harm, including material protected by privilege, trade secrets, or work product, the baseline test for discovery is always relevance to the disputed issues of the underlying action.”).

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Published on: April 6, 2024

MIAMI BUSINESS LITIGATION: PROVING INFRINGMENT OF AN UNREGISTERED TRADEMARK

By Mavrick Law Firm

A trade mark is any word, name, symbol, or device, that is used by a person to identify and distinguish his or her goods from a competitor’s goods. 15 U.S.C.A. § 1127. Registering a trademark with the United States Patent and Trademark Office constitutes prima facie evidence that the trademark is valid and provides constructive notice to all others that the trademark is already owned by another. 15 U.S.C. § 1115. These benefits foreclose many defenses one may assert to defeat a trademark infringement lawsuit. 15 U.S.C. § 1072. However, an unregistered trademark is still valid and enforceable against infringers. Iancu v. Brunetti, 588 U.S. 388 (2019) (“The owner of an unregistered mark may still use it in commerce and enforce it against infringers.”). Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

Federal law provides the owner of an unregistered trademark with a cause of action to sue for infringement of that mark. A person shall be liable for infringement of an unregistered trademark if he or she:

“uses… any word, term, name, symbol, or device [in connection with any goods or services, or any container for goods]… which— (A) is likely to cause confusion, or… mistake, or to deceive… as to the origin… of his or her goods, services, or commercial activities by another person, or (B) …misrepresents the nature, characteristics, qualities, or geographic origin of his or her goods, services, or commercial activities.

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Published on: April 3, 2024

FORT LAUDERDALE BUSINESS LITIGATION: THIRD-PARTY LIABILITY FOR BREACH OF NON-COMPETE AGREEMENT

By Mavrick Law Firm

One cornerstone needed to enforce a valid restraint on trade is the requirement to be in writing and “signed by the person against whom enforcement is sought.” Fla. Stat. § 542.335. Courts use this requirement to reject enforcement of restrictive covenants that are not in writing or signed by the enforcee. See Iron Bridge Tools, Inc. v. Meridian Int’l Co., Ltd., USA, 2016 WL 8716673 (S.D. Fla. Feb. 2, 2016) (refusing to enforce the plaintiff’s claim because it hinged on a contract that was “in form and substance, an agreement in the nature of an agreement not to compete” that “was never reduced to a writing in any form”). Based on a plain reading of the statutory text, it seems obvious that one cannot be liable for violating a restrictive covenant he or she did not sign. However, this is not always true. The caselaw surrounding restrictive covenants provide courts with power to enjoin third-parties from helping another violate his or her restrictive covenant even though the third-party never signed the covenant. Infra. Peter Mavrick is a Fort Lauderdale business litigation attorney. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

Florida juris prudence contains many examples demonstrating that a third-party can be enjoined if he or she helps another violate his or her restrictive covenant. USI Ins. Services of Florida Inc. v. Pettineo, 987 So. 2d 763 (Fla. 4th DCA 2008) (“There is no doubt that a court can enjoin others who were not parties to the non-compete agreement” as long as they “receive notice and have an opportunity to be heard.”). The power to enjoin comes from common law rather than the restrictive covenant statute. Bauer v. DILIB, Inc., 16 So. 3d 318 (Fla. 4th DCA 2009) (At “no time has this court or any other court held that the power to enjoin third parties derives from section 542.335… Florida Statutes.”). Third-party enjoinment was created to prevent a person from violating a restrictive covenant through a strawman. Dad’s Properties, Inc. v. Lucas, 545 So. 2d 926 (Fla. 2d DCA 1989) (“Mr. Lucas cannot be allowed to do indirectly, through his wife and her controlled corporation, that which he covenanted not to do himself.”). Therefore, a third-party who knows about the restrictive covenant and provides substantial assistance to help violate the restriction will be enjoined. LLW Enter., LLC v. Ryan, 2020 WL 2630859 (M.D. Fla. May 4, 2020) (“A cause of action for aiding and abetting requires ‘(1) an underlying violation on the part of the primary wrongdoer; (2) knowledge of the underlying violation by alleged aider and abettor; and (3) the rendering of substantial assistance in committing the wrongdoing by the alleged aider and abettor.”). But the third-party will not be liable for damages. See Bauer, 16 So. 3d 318 (holding that the court could not require the third-party to pay the attorney’s fees of the covenant’s enforcer even though the court could enjoin the third-party from further assistance).

The first Florida case that allowed a third-party to be enjoined for helping violate a restrictive covenant was called W. Shore Rest. Corp. v. Turk, 101 So. 2d 123 (Fla. 1958). In Turk, the court looked to two decisions from the state of Washington. The first decision enjoined a son from helping his father operate a business that competed with the plaintiff in violation of a non-compete and the second decision found there was “overwhelming weight of authority” to enjoin a stranger of a restrictive covenant when he or she aids and abets. Id. (citing Madison v. La Sene, 44 Wash. 2d 546 (Wash. 1954) and Le Maine v. Seals, 47 Wash. 2d 259 (Wash. 1955)). Subsequent legal authorities in Florida rely on Turk to prohibit third-parties from rendering aid or assistance that would violate another’s restrictive covenant (assuming the elements escribed above are met). See, Yours-Temp. Help Services, Inc. v. Manpower, Inc., 377 So. 2d 825 (Fla. 1st DCA 1979) (finding that Turk recognized “a decree of injunction not only binds the parties[’] defendant but also those identified with them in interest, in privity with them, represented by them or subject to their control.”). Therefore, third-parties could become entangled in litigation concerning a restrictive covenant it did not sign if the third-party knows about the covenant and helps another to violate it.

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Published on: March 30, 2024

MIAMI BUSINESS LITIGATION: TORTIOUS INTERFERENCE CLAIMS

By Mavrick Law Firm

Tortious interference is a common business tort whereby the defendant unlawfully interferes with the plaintiff’s business relationship or contractual relationship. The elements of tortious interference are:

(1) the existence of a business relationship [or contractual relationship] between the plaintiff and a third person, not necessarily evidenced by an enforceable contract, under which the plaintiff has legal rights; (2) the defendant’s knowledge of the relationship; (3) an intentional and unjustified interference with the relationship by the defendant which induces or otherwise causes the third person not to perform; and (4) damage to the plaintiff resulting from the third person’s failure to perform.

Seminole Tribe of Florida v. Times Pub. Co., Inc., 780 So. 2d 310 (Fla. 4th DCA 2001). Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

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Published on: March 27, 2024

FORT LAUDERDALE BUSINESS LITIGATION: TRADE SECRET PROOF

By Mavrick Law Firm

Proving the existence of a trade secret in a court of law is no easy feat. The trade secret’s proponent has the burden of establishing the specific information he or she seeks to protect. Am. Red Cross v. Palm Beach Blood Bank, Inc., 143 F.3d 1407 (11th Cir. 1998) (“In a trade secret action, the plaintiff bears the burden of demonstrating both that the specific information it seeks to protect is secret and that it has taken reasonable steps to protect this secrecy.”). The proponent must prove it has a “a formula, pattern, compilation, program, device, method, technique, or process that” derives independent economic value from not being generally known to other persons and is the subject of reasonable secrecy efforts. Fla. Stat. § 688.002. In this article, we explore circumstances where the trade secret proponent has, and has not, met its burden of proof. Peter Mavrick is a Fort Lauderdale business litigation attorney. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

Premier Lab Supply, Inc. v. Chemplex Indus., Inc., 10 So. 3d 202 (Fla. 4th DCA 2009), is an example of the trade secret proponent satisfying its burden of proof. Id. (“Based on his testimony concerning the unique and specialized nature of the machine’s design, the jury could have found that the design of Chemplex’s machine derived an economic benefit from not being generally known to or readily ascertainable by others.”). In Premier Lab Supply, Inc., the proponent presented evidence that the trade secret machine was unique and not readily ascertainable by others because it was invented by the proponent and his father. Id. The machine was not readily ascertainable by others because it used intricate calculations and a timing chain with a counter. Id. The proponent demonstrated the value of the machine by explaining the difficulty he faced in experimenting with the precise measurements and ratios to obtain the desired result. Id. The proponent further explained that competitor machines are inferior because users cannot obtain desired measurements. Id.

Contrast Premier Lab Supply, Inc. with RX Sols., Inc. v. Express Pharmacy Services, Inc., 746 So. 2d 475 (Fla. 2d DCA 1999) and Yellowfin Yachts, Inc. v. Barker Boatworks, LLC, 898 F.3d 1279 (11th Cir. 2018). In RX Sols., Inc., the plaintiff claimed it developed a cardless online claims system. RX Sols., Inc., 746 So. 2d 475. However, the evidence demonstrated the system was not unique to the plaintiff because the program was developed by a South Carolina company and incorporated within the plaintiff’s online system. Id. In Yellowfin Yachts, Inc., the plaintiff claimed its customer list was a trade secret. Yellowfin Yachts, Inc., 898 F.3d 1279. The Court rejected this claim for two reasons. First, the central components of the customer list were publicly available because the customers were boaters required by statute to register their vessels. Id. The state’s Public Records Act required the state to openly provide registration information such as the registrants’ name and address to those who inquired. Id. A person could then use the Internet or White Pages to find the remainder of the customers’ contact information. Id. Second, the customer information was not confidential because the plaintiff failed to protect it. Id. The plaintiff encouraged its employees to save the customer information to their personal laptops and smartphones thereby destroying any potential for secrecy. Id.

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Published on: March 23, 2024

MIAMI BUSINESS LITIGATION: THIRD-PARTY BENEFICIARY TO CONTRACT

By Mavrick Law Firm

Standing is a legal concept requiring the litigant bringing the lawsuit to have a sufficient stake in the outcome of the controversy that enables the litigant to judicially resolve the controversy. Jamlynn Invs. Corp. v. San Marco Residences of Marco Condo. Ass’n, 544 So. 2d 1080 (Fla. 2d DCA 1989). The standing concept imposes a requirement that the claim be brought by someone who is recognized in law as a “real party in interest.” Brady v. P3 Group (LLC), 98 So. 3d 1206 (Fla. 3d DCA 2012). Contracting parties are generally deemed to be the real parties in interest, and can therefore, sue each other for breach of the underlying contract. Metropolitan Life Ins. Co. v. McCarson, 467 So. 2d 277 (Fla. 1985) (“Unless a person is a party to a contract, that person may not sue—or, for that matter, be sued—for breach of that contract where the non-party has received only an incidental or consequential benefit of the contract.”) However, one does not always need to be a contracting party to possess the standing needed to sue to enforce a contract’s terms. Third-party beneficiaries to a contract possess the requisite standing to sue to enforce a contract even though they are not themselves parties to the contract. Jim Macon Bldg. Contractors, Inc. v. Lake Cnty., 763 So. 2d 1223 (Fla. 5th DCA 2000) (“The right of an intended third-party beneficiary to sue under a contract is recognized in Florida…”). Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

A third-party contractual beneficiary is one who is specifically intended to be a beneficiary of the contract. Morgan Stanley DW Inc. v. Halliday, 873 So. 2d 400 (Fla. 4th DCA 2004). The contract must “clearly express an intent to primarily and directly benefit the third[-]party or a class of persons to which that party belongs.” Id. Both contracting parties must intend to benefit the third-party. Caretta Trucking, Inc. v. Cheoy Lee Shipyards Ltd., 647 So. 2d 1028 (Fla. 4th DCA 1994) (It “must be shown that both contracting parties intended to benefit the third party. It is insufficient to show that only one party unilaterally intended to benefit the third party.”). Florida’s Supreme Court has long that:

Where a contract shows its clear intent and purpose to be a direct and substantial benefit to third parties, and not merely that third parties might be benefited by it, or that third parties are indirectly or incidentally benefited by it, the third parties who are directly and substantially benefited by the performance of the contract may maintain an action for its breach under the statute as the real parties in interest. If a direct and substantial benefit accrues to persons severally, and they are the real parties in interest, they may maintain an action severally.

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Published on: March 20, 2024

FORT LAUDERDALE BUSINESS LITIGATION: NON-COMPETE BURDENS

By Mavrick Law Firm

“Florida law … contains a comprehensive framework for analyzing, evaluating and enforcing restrictive covenants contained in employment contracts.” Vital Pharmaceuticals, Inc. v. Alfieri, 23 F. 4th 1282, 1291 (11th Cir. 2022) (quotation and citation omitted). This framework includes a burden shifting approach between the restrictive covenant’s enforcer and enforcee that provides each party with an opportunity the negate the other’s position. Below we explore the framework’s burden shifting approach and each parties’ ability to use those burdens to their advantage. Peter Mavrick is a Fort Lauderdale business litigation attorney. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

The restrictive covenant’s enforcer has the initial burden of pleading and proving that the restrictive covenant is supported by one or more legitimate business interests justifying the restrictive covenant. Fla. Stat. § 542.335. These legitimate business interests are identified by statute in a non-exhaustive list and include the protection of trade secrets, valuable confidential business information that does not qualify as a trade secret, substantial relationships with specific prospective or existing customers, and customer good will. Id; Alonso-Llamazares v. Int’l Dermatology Research, Inc., 339 So. 3d 385 (Fla. 3d DCA 2022) (“Section 542.335(1)(b) sets forth a non-exhaustive list of legitimate business interests that may justify the restrictive covenant sought to be enforced.”). The initial requirement that the enforcer plead and prove the existence of a legitimate business interest may present the enforcee with his or her first opportunity to thwart enforcement. If the enforcee can demonstrate the enforcer failed to prove the existence of a legitimate business interest, the court cannot enforce the restrictive covenant. See Blue-Grace Logistics LLC v. Fahey, 653 F. Supp. 3d 1172 (M.D. Fla. 2023), appeal dismissed, 2023 WL 3691014 (11th Cir. Apr. 12, 2023) (granting summary judgment against the enforcer because it “repeatedly speaks of ‘confidential’ and ‘proprietary’ information, but it never explains exactly what that information is or what makes it proprietary or confidential. Even where it describes the information with slightly more detail, it fails to explain the information’s value”).

The enforcer must also plead and prove that the restrictive covenant is reasonably necessary to protect the legitimate business interest asserted. Fla. Stat. § 542.335. This presents the enforcee with his or her second opportunity to thwart enforcement of the restrictive covenant if the enforcee can prove the covenant does not reasonably protect the legitimate business interest. For example, maybe the confidential information the enforcer is trying to protect has no utility in the hands of a competitor. See Blue-Grace Logistics LLC, 653 F. Supp. 3d 1172 (granting summary judgment because the plaintiff failed to show that the purported confidential information “was still relevant ‘given fluctuations in the industry,’ which Blue-Grace’s corporate representative agreed led to rate changes and customers having to rebid their freight”). Or maybe, the enforcer no longer conducts business with the customer it is trying to protect. IDMWORKS, L.L.C. v. Pophaly, 192 F. Supp. 3d 1335 (S.D. Fla 2016) (rejecting the plaintiff’s request to enforce a non-compete agreement because a “company cannot successfully claim a protectable business interest in a relationship with a former customer”). These are just two ways the enforcee can demonstrate that the enforcer failed to meet its second burden.

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Published on: March 16, 2024

MIAMI BUSINESS LITIGATION: TORTIOUS INTERFERENCE WITH BUSINESS RELATIONSHIPS

By Mavrick Law Firm

In the absence of a non-compete agreement, Florida law prohibits tortious interference with certain business relationships. The Supreme Court of Florida, in Tamiami Trail Tours, Inc. v. Cotton, 463 So.2d 1126 (Fla. 1985), explained that the elements of a claim for tortious interference with a business relationship are “(1) the existence of a business relationship…(2) knowledge of the relationship on the part of the defendant; (3) an intentional and unjustified interference with the relationship by the defendant; and (4) damage to the plaintiff as a result of the breach of the relationship.” A protected business relationship need not be evidenced by an enforceable contract. In Landry v. Hornstein, 462 So.2d 844 (Fla. 3d DCA 1985), Florida’s Third District Court of Appeal explained in pertinent part: “An action for intentional interference is appropriate even though it is predicated on an unenforceable agreement, if the jury finds that an understanding between the parties would have been completed had the defendant not interfered…A mere offer to sell, however, does not, by itself, give rise to sufficient legal rights to support a claim of intentional interference with a business relationship.” In other words, “an action for intentional interference with a business relationship will lie if the parties’ understanding would have been completed if the defendant had not interfered.” Charles Wallace Co. v. Alternative Copier Concepts, Inc., 583 So.2d 396 (Fla. 2d DCA 1991). Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

Important precedent from the Supreme Court of Florida, in Ethan Allen, Inc. v. Georgetown Manor, Inc., 647 So.2d 812 (Fla. 1995), held that “a plaintiff may properly bring a cause of action alleging tortious interference with present or prospective customers but no cause of action exists for tortious interference with a business’s relationship to the community at large…As a general rule, an action for tortious interference with a business relationship requires a business relationship evidenced by an actual and identifiable understanding or agreement which in all probability would have been completed if the defendant had not interfered.” In reaching its decision, the Supreme Court found the Landry decision persuasive. In Landry, a pharmacist who rented premises for his drugstore entered into negotiations, with his landlord’s permission, with a prospective purchaser to sell the pharmacist’s business and to assign the pharmacy lease. However, when the landlord told the prospective buyer that the landlord was “going to get rid of” the pharmacist and that the landlord would rent the premises directly to the buyer, the negotiations stopped between the pharmacist and the prospective buyer. Thereafter, the prospective buyer leased the drugstore from the landlord. The pharmacist then sued the landlord for tortious interference with a business relationship. The appellate court in Landry found a business relationship existed between the pharmacist and the prospective buyer, explaining: “[T]he negotiations had progressed beyond the stage of a mere offer, to an understanding between [the pharmacist and the prospective buyer] for the sale of the business and assignment of the lease, transactions which would have been consummated had [the landlord] not interfered. Evidence disclose that [the landlord]…had undertaken their own negotiations with [they buyer] regarding the rental of the drugstore premises while [the buyer and the pharmacist] were still involved in negotiations.” In Ethan Allen, the Supreme Court explained that the plaintiff, Georgetown, was entitled to damages reasonably flowing from Ethan Allen’s interference with existing relationships. Ethan Allen also qualified its decision, stating that Georgetown’s “relationship with its past customers was not one upon which a claim for tortious interference could be based. Georgetown had no identifiable agreement with its past customers that they would return to Georgetown to purchase furniture in the future. The mere hope that some of its pas customers may choose to buy again cannot be the basis for a tortious interference claim.” The Supreme Court recognized, however, that there are situations where a plaintiff may have valid tortious interference claim based on the plaintiff’s reasonable expectation of future business from a recurring practice of performing work for certain clients. Such a scenario would be distinguishable from a situation of a retail furniture dealer, like Georgetown, with tens of thousands of past customers who may or not return for future furniture purchases.

Peter Mavrick is a Miami business litigation lawyer, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.