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Non-compete and non-solicitation provisions, otherwise known as “restrictive covenants,” have become increasingly more common in employment agreements.  The West Palm Beach non-compete attorneys at the Mavrick Law Firm have extensive experience dealing with restrictive covenants in a wide array of industries, including the medical industry.  Although these non-compete covenants are meant to protect a former employer’s alleged legitimate business interests, they can also interfere with certain public policy issues, such as a patient’s right to continuity of care with their own physician.  Unlike some states, Florida law has not yet specifically recognized the patient’s right to continue treatment with his or her physician as a consideration when determining whether to enforce restrictive covenants in the medical industry.  Thus, if a physician leaves a medical group under the cloud of a non-compete or non-solicitation agreement, the physician will often be precluded from contacting his or her patients to continue treatment at the new employer.  This raises an important issue: will a physician be in violation of the non-compete covenant if a patient voluntarily seeks out the physician to continue his or her care?  The West Palm Beach non-compete attorneys at the Mavrick Law Firm were recently confronted with this issue at trial and know that this would not be considered direct solicitation based on the Second District Court of Appeal’s holding in Lotenfoe v. Pahk, 747 So. 2d 422 (Fla. 2d DCA 1999).

In Lotenfoe, a physician challenged a temporary injunction that precluded him from competing with his former employer.  The physician’s employment agreement contained the following restrictive covenant:

Employee [Lotenfoe] agrees that on the termination of his employment for any reason, and for a period of five (5) years thereafter, he will not directly or indirectly act in a professional capacity that competes in a substantial degree with the employer [Pahk] within the area of Highlands County, Florida…

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Competitive bidding is common for many businesses, including construction companies, supply companies, and retail providers, among others.  In most cases, an entity will solicit bids from competing bidders through a request for proposal (RFP) and will award a contract to the most attractive bid, which can depend on several factors.  Although competitive bidding can lead to great for results for the entity soliciting the bids and for the bidder ultimately chosen, it can also leave the unsuccessful bidders resentful.  In some cases, the losing bidder may attempt to bring an action for tortious interference with a business relationship against a person or entity they believe may have interfered with their bid.  However, the Fort Lauderdale business litigation attorneys at the Mavrick Law Firm have extensive experience defending against claims for tortious interference, and, based on such experience, know that these claims will generally be unsuccessful.

To prevail on a tortious-interference claim, the plaintiff must prove “(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.” Ethan Allen, Inc. v. Georgetown Manor, Inc., 647 So.2d 812 (Fla.1994).  Pursuant to the Southern District of Florida’s ruling in Duty Free Americas, Inc. v. Estee Lauder Companies, Inc., 946 F. Supp. 2d 1321 (S.D. Fla. 2013), the plaintiff is the factual scenario supra will likely be unable to demonstrate a protected business relationship sufficient to justify a claim for tortious interference.

Duty Free involves the competitive bidding process for airport duty-free stores.  Duty-free operators, such as the plaintiff Duty Free Americas, Inc. (“DFA”), generally secure space to operate duty-free stores in a particular airport via competitive bidding.  Defendant, Estee Lauder Companies, Inc. (“ELC”), is the largest manufacturer of beauty products sold in duty-free stores. Prior to June 2008, DFA and ELC had a healthy business relationship.  However, beginning in June 2008, ELC announced it would be raising its pricing, causing DFA to object and refuse to further sell ELC products.  DFA subsequently discovered that ELC ultimately did not raise its prices, and thus tried to mend its relationship with ELC, but ELC refused to continue doing business with DFA.

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To have legal recourse for the misappropriation of a trade secret under Florida law, a plaintiff must: (1) prove the existence of a trade secret; (2) prove that it took reasonable measures to protect the trade secret; and (3) demonstrate that the trade secret was misappropriated. See Del Monte Fresh Produce Co. v. Dole Food Co., Inc., 136 F. Supp. 2d 1271 (S.D. Fla. 2001). The Florida Uniform Trade Secrets Act (the “Act”) protects a party’s trade secrets from “misappropriations.” Section 688.002 of the Act defines misappropriation as:

(a) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

(b) Disclosure or use of a trade secret of another without express or implied consent by a person who:

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Florida’s Uniform Trade Secrets Act, Fla. Stat. Sections 688.001-688.009 (the “Act”), prohibits the misappropriation of a business’ trade secrets even if the business does not have a non-disclosure or similar agreement with the disclosing party. Misappropriation generally includes the improper possession of, or the disclosure of, a trade secret: “misappropriation” is fully defined in section 688.002, Fla. Stat. A business’ use of a non-compete agreement or non-disclosure agreement is the best way for a business to comprehensively protect its legitimate business interests in its trade secrets. However, even if a business does not have a valid non-compete agreement with an employee or a non-disclosure agreement with anyone, the Act prohibits the misappropriation of trade secrets and, where applicable, compensates the injured party for the theft and disclosure of its trade secrets. See Unistar Corp. v. Child, 415 So. 2d 733, 735 (Fla. 3d DCA 1982) (“lack of an agreement not to disclose a trade secret is not critical on the question of whether a plaintiff may enjoin [or seek damages for] its infringement”). If you have a trade secret litigation issue, the Fort Lauderdale trade secret litigation lawyers at the Mavrick Law Firm are here to assist you.

Section 688.003 of the Act allows Florida courts to enjoin a disclosing-party’s misappropriation of a trade secret. If the disclosing-party threatens to misappropriate the trade secret or actually does, the disclosing-party may be prevented from doing so. See Barberio-Powell v. Bernstein Liebstone Associates, Inc., 624 So. 2d 383, 384 (Fla. 4th DCA 1993) (“We recognize that a threatened misappropriation of trade secrets may be enjoined”). Section 688.003 of the Act provides that “[a]ctual or threatened misappropriation [of a trade secret] may be enjoined … for a … reasonable period of time in order to eliminate commercial advantage that otherwise would be derived from the misappropriation.  Thus, even if a business believes that its trade secrets are being misappropriated, or that they will be, a court can prevent the act as long as there are facts present to support an injunction. See Unistar Corp., 415 So. 2d at 734. Moreover, such injunctions can be in effect for as long as the trade secret is commercial advantageous.

In addition to injunctive relief, section 688.004 (1) of the Act allows injured businesses to recover damages for misappropriation so long as the injured party establishes that the misappropriation actually injured it. The Act does not authorize awards of nominal damages. See Alphamed Pharm. Corp. v. Arriva Pharm., Inc., 432 F. Supp. 2d 1319, 1335 (S.D. Fla. 2006) (citing Milgrim on Trade Secrets § 15.01 (“It is fundamental that even if defendant’s actual or threatened wrongful use is established, plaintiff must nonetheless establish that such use is to plaintiff’s detriment”)). However, the Act does enable plaintiffs to recover damages for the actual loss caused by the misappropriation.  Actual losses “need only be “caused by” the misappropriation.” Premier Lab Supply, Inc. v. Chemplex Indus., Inc., 94 So. 3d 640, 646 (Fla. 4th DCA 2012). Thus, plaintiffs can measure their damage computations under a variety of methods: such as lost profits using a market share analysis, disgorgement of profits, unjust enrichment, or some other form of measurement that is casually linked to the misappropriation. Premier Lab Supply, Inc. 94 So. 3d at 645. The Act also allows for exemplary/punitive damages for “willful and malicious misappropriations” for “an amount not exceeding twice any award made under subsection (1).”688.004 (2), Fla. Stat.

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It has become common practice for businesses to include arbitration provisions within agreements.  Arbitration provides businesses a more efficient and less costly alternative to expensive, time-consuming litigation.  Normally, arbitration provisions are drafted very broadly to cover all disputes or controversies that could arise between the contractual parties, commonly using the wording “arising from” or “relating to” the contract or agreement.  Thus, anyone who signs an agreement containing such a provision will usually be required to proceed with arbitration if a contractual dispute occurs.  Often times, however, a dispute will arise and the complaining party will wish to proceed in court rather than being compelled to participate in arbitration.  To circumvent arbitration, the complaining party will attempt to argue that the contract is not valid for some reason, i.e. lack of consideration or arguing that the contract was procured by fraud.  Based on these arguments, the complaining party will assert that the contract, as well as the arbitration provision contained therein, is not enforceable.  Nevertheless, the Fort Lauderdale business litigation attorneys at the Mavrick Law Firm have defeated such arguments by arguing that courts, at both the state and federal levels, have concluded that attacking the validity of a contract does not remove a party from the scope of an arbitration provision contained therein.

The leading authority for this principle is the 1967 United States Supreme Court decision in Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967).  In Prima Paint, the plaintiff brought an action seeking to rescind a contract based on fraud in the inducement.  The contract contained an arbitration provision, and the Supreme Court held that the plaintiff’s action for fraud was undoubtedly encompassed by the broad wording of the arbitration provision.  In so holding, the court reasoned that if the alleged fraud related to the arbitration clause itself, then a court should resolve the issue. But if the fraud in inducement related to the whole contract which contained an agreement to arbitrate, that issue should be resolved by arbitration.

Although Prima Paint was decided under federal law, Florida courts have found its reasoning persuasive and have extended Prima Paint’s holding to contracts formed and executed in Florida.  For example, in Simpson v. Cohen, 812 So. 2d 588 (Fla. 4th DCA 2002), the Florida Fourth District Court of Appeal cited Prima Paint when holding that “[c]ontract language agreeing to arbitrate ‘[a]ny controversy or claim arising out of or relating to this Agreement, or breach thereof ’ has been found to be broad enough to encompass a claim that the execution of an agreement itself was procured by fraud…The fraud in the inducement claim arises from the contract and relates to the other claims that the arbitrator must determine.”

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The Mavrick Law Firm regularly represents entrepreneurs who open businesses in industries in which they were formerly employees.  As such, often times we are confronted with covenants not to compete signed by the entrepreneur when he or she was employed with his or her former employer.  The covenants not to compete, also known as restrictive covenants, will usually restrict the entrepreneur from competing with the former employer for a certain time period and within a specific geographic area.  The Miami non-compete attorneys at the Mavrick Law Firm have, on several occasions, successfully defended entrepreneurs from lawsuits seeking to enforce such covenants.  In some of these cases, the entrepreneur/former employee may be able to file a counterclaim alleging a violation of the Fair Labor Standards Act (“FLSA”) against his or her former employer based on the employer’s failure to pay overtime or minimum wages.  What the entrepreneur may not know is that not only may he or she be able to recover any wages that were not paid under the FLSA, he or she may also prevent the enforcement of a restrictive covenant by the employer.

The idea that a violation of the FLSA can prevent against a former employer’s enforcement of a restrictive covenant comes from two separate principles.  The first principle was discussed by the Florida Fourth District Court of Appeal in Northern Trust Investments, N.A. v. Domino, 896 So. 2d 880, 882 (Fla. 4th DCA 2005), stating in pertinent part:

A party is not entitled to enjoin the breach of a contract by another, unless he himself has performed what the contract requires of him so far as possible; if he himself is in default or has given cause for nonperformance by defendant, he has no standing in equity…Having committed the first breach, the general rule is that a material breach of the Agreement allows the non-breaching party to treat the breach as a discharge of his contract liability. If the employer wrongfully refuses to pay the employee his compensation, the employee is relieved of any further obligation under the contract and the employer cannot obtain an injunction.

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There are many important differences between employees and independent contractors that businesses must consider before contracting to hire one or the other. Some of these differences include, but are not limited to, the following:

1. Independent contractors are not subject to federal or state labor and employment laws like employees are;

2. The procedure for hiring independent contractors is different from employee hiring practices;

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The Miami labor and employment attorneys at the Mavrick Law Firm have, on multiple occasions, successfully defended business from suits by current or former employees seeking unpaid overtime wages under the Fair Labor Standards Act (“FLSA”). In FLSA overtime wage cases, it is common for a plaintiff to allege that they worked a certain number of hours off the clock per week, and are thus entitled to be compensated for such work. These types allegations can create significant problems for employers who do not keep accurate records of the work performed by employees. According to the Eleventh Circuit in Jackson v. Corr. Corp. of Am., 606 Fed. Appx. 945, 952 (11th Cir. 2015):

It is well established that an employee bringing a claim for unpaid overtime wages must initially demonstrate that she performed work for which she was not properly compensated. However, it is the employer’s duty to keep records of the employer’s wages, hours, and other conditions and practices of employment. For that reason, in situations where the employer has failed to keep records or the records cannot be trusted, the employee satisfies her burden of proving that she performed work without compensation if she produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference.

Thus, if an employer fails to keep accurate time records, it can be on the hook for work performed by an employee “off the clock,” so long as the employee produces sufficient evidence that the work was actually done. The Miami employment lawyers at the Mavrick Law Firm have extensive experience with these types of situations and know that a recent decision out of the Fifth Circuit limits an employee’s ability to recover damages for such work allegedly done “off the clock.”

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Arbitration proceedings, and their outcomes, are generally not subject to the interference or review of a court. However, Section 682.031 of the Revised Florida Arbitration Code allows courts to issue and review provisional remedies that involve parties to on ongoing arbitration proceeding. Provisional remedies can protect an arbitration-party to the same extent that the party would be protected in a traditional civil action. Provisional remedies are equitable in nature and include attachment, garnishment, replevin, and temporary injunctions such as temporary restraining orders or preliminary injunctions. The Fort Lauderdale commercial arbitration attorneys at the Mavrick Law Firm have significant experience with assessing the validity of arbitration clauses and successfully representing clients in arbitration proceedings.

If a party to an arbitration proceeding meets the statutory legal standard of “good cause” and files a motion with the court prior to the time when an arbitrator is “appointed, authorized, and able to act,” the court may enter an order for provisional remedies. The statutory purpose of the “provisional remedies” is to protect a party to an arbitration proceeding to the same degree that the party would have been protected in traditional litigation. See section 682.031(1). On the other hand, if an arbitrator is “appointed, authorized and able to act,” and can provide a timely and adequate provisional remedy, the court cannot interfere with the arbitrator’s proceedings. An arbitrator may tailor remedies to the extent “necessary to protect the effectiveness of the arbitration proceeding and to promote the fair and expeditious resolution of the controversy.” Section 682.031(2). Accordingly, if a party waits until the arbitrator is empowered to preside over the proceeding, the arbitrator will have the ultimate discretion for issuing such orders. However, if an arbitrator cannot timely enter a provisional remedy on an urgent matter or if the arbitrator lacks the authority to provide such a remedy, a party to arbitration may file a motion with the court for a provisional remedy. Section 682.031 provides one of the extremely limited circumstances when a court is authorized to usurp an arbitrator’s authority.

In stark contrast to the high degree of deference that is usually paid to an arbitrator’s ruling, courts review provisional remedy awards de novo before they are confirmed. Awards for provisional relief are only confirmed if the court determines that “the award satisfies the legal standards for awarding a party injunctive or equitable relief.” Section 682.081, Fla. Stat. Traditional arbitration awards are usually confirmed even when the arbitrator makes errors of fact or law. See Schnurmacher, 542 So. 2d at 1329 (“An award of arbitration may not be reversed on the ground that the arbitrator made an error of law”). Furthermore, the award is still subject to being vacated, modified, or corrected under sections 682.13 or 682.14, Fla. Stat. (For more information on vacating, modifying, or correcting arbitration awards, see the Mavrick Law Firm’s earlier article,FLORIDA COURTS HAVE LIMITED AUTHORITY TO MODIFY ARBITRATION AWARDS.) Thus, provisional remedies present a rare opportunity for judicial intervention in, and review of, arbitration proceedings.

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Florida’s Non-Competition Covenant Statute, Section 542.335, lays out the requirements for enforceable restrictive covenants. One of the main requirements pursuant to subsection (b) of the statute is that the party seeking to enforce the restrictive covenant must plead and prove the existence of one or more “legitimate business interests” justifying the restrictive covenant. The Miami non-compete attorneys at the Mavrick Law Firm have, on several occasions, successfully defended entrepreneurs from lawsuits seeking to enforce such covenants. Subsection (b) provides a list of potential legitimate business interests that could justify the existence a restrictive covenant, stating in pertinent part:

The term “legitimate business interest” includes, but is not limited to:

1. Trade secrets, as defined in s. 688.002(4).

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