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We previously wrote about two potential laws that might limit enforceability of non-compete agreements. The first law is a proposed Florida statute that would constrain or prohibit restrictive covenants for certain medical professionals. The second law is a Federal Trade Commission rule that would ban most non-compete agreements as unfair competition. Congress is proposing a similar law that would ban most non-compete agreements, called the Workforce Mobility Act (the Act). The relevant wording of the Act, in its present form, is as follows: “…No person shall enter into, enforce, or attempt to enforce a noncompete agreement with any individual who is employed by, or performs work under contract with, such person with respect to the activities of such person in or affecting commerce.  S. 220, 118th Cong. § 3 (2023-2024). 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.

Public agencies and private citizens can enforce the Act. If passed, the Act would make any violation an unlawful unfair and deceptive act or practice under 15 USC § 57a. Id. The Federal Trade Commission, the United States Department of Labor, and the States of the United States would each have authority to enforce the law. Id. Individuals will also have a private cause of action to enforce the Act. Id. They can sue to recover damages (if any) along with attorney’s fees if they are the prevailing party. Id.

The sweeping nature of the Act’s wording will likely have broad effect throughout interstate commerce. However, the Act does not ban all non-compete agreements outright because the definition of “non-compete agreements” is somewhat narrow. Congress defined non-compete agreements as:

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The business judgment rule is a critical feature of the law governing corporations throughout the United States.  The United States Court of Appeals for the Eleventh Circuit, in In re Bal Harbour Club, Inc., 316 F.3d 1192 (11th Cir. 2003), explained that “[t]he business judgment rule is a judicial presumption that corporate officers and directors acted in good faith, even if their actions were ultimately detrimental to the corporation.”  Florida courts adhere to the business judgment rule.  The rule was solidified in English and American common laws over 200 years ago, and was created because directors are usually more qualified to make business decisions than judges.  Royal Harbour Yacht Club Marina Condo. Ass’n, Inc. v. Maresma, 304 So. 3d 1268, 1269 (Fla. 3d DCA 2020); Gerard V. Mantes & Emily S. Fields, The Business Judgment Rule, 99 Mich. B.J. 30 (Jan. 2020).  The business judgment rule applies to corporations, limited liability companies, and not-for-profit companies. See Fla. Stat. Sections 607.0831, 605.04093, and 617.0834.  The business judgment rule can also apply to home owner’s associations in some jurisdictions. See, e.g., Hollywood Towers Condo. Ass’n, Inc. v. Hampton, 40 So. 3d 784 (Fla. 4th DCA 2010) (allowing application of the business judgment rule to condominium associations if the association has contractual or statutory authority to perform the relevant act and the board’s actions were reasonable).  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 business judgment rule insulates corporate officers from personal fiduciary duty liability if they did not abuse their discretion, commit fraud, act in bad faith, or act illegality.  Int’l Ins. Co. v. Johns, 874 F.2d 1447 (11th Cir. 1989).  Corporate officers can apply the business judgment rule if they acted on an informed basis, in the best interests of the company, and observed corporate formalities. In re Fundamental Long Term Care, Inc., 527 B.R. 479 (Bankr. M.D. Fla. 2015). Litigants seeking to defend themselves from claims under the business judgment rule do not need to plead the issue as an affirmative defense because the rule applies presumptively by operation of law. New Horizons Condo. Master Ass’n, Inc. v. Harding, 336 So. 3d 796 (Fla. 3d DCA 2022) (“The rule does not need to be raised in defensive pleadings to shield corporate conduct from judicial review. Instead, it applies presumptively by operation of law.”). The presumption is so strong that some jurisdictions require a plaintiff to rebut it before challenging the corporate officer’s business judgment.  Solomon v. Armstrong, 747 A.2d 1098 (De. Ch. 1999) (“Under the business judgment rule, the burden of pleading and proof is on the party challenging the decision to allege facts to rebut the presumption.”). This is a powerful weapon for officers and directors because it can place the burden of disproof on the plaintiff. See Harding, 336 So. 3d 796 (denying summary judgment because the plaintiff could not prove the business judgment rule did not apply).

Officers and directors should still be careful when discharging fiduciary duties owed to the corporation because the business judgment rule is not a blank check. For example, in DiSorbo v. Am. Van Lines, Inc., 354 So. 3d 530 (Fla. 4th DCA 2023), the court rejected application of the business judgment rule because the corporate officer was an interested party to the relevant transaction. The court therefore determined that the officer should not benefit from the deferential business judgment rule, and instead applied a harsher law relating to conflict-of-interest transactions. Consequently, officers and directors should always endeavor to make decisions on an informed basis, make decisions in the best interests of the company, and observe corporate formalities before undertaking any action on behalf of the company. Davis v. Dorsey, 495 F. Supp. 2d 1162, 1176 (M.D. Ala. 2007) (“If the defendant has engaged the corporation in a conflicting-interest transaction or has usurped a corporate opportunity, the business-judgment rule will not bar a claim based on the duty of care.”).

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In a corporate derivative lawsuit, the shareholder does not have a “direct” injury that is particular to the specific shareholder.  Therefore, a shareholder must turn to a derivative lawsuit. In these lawsuits, the shareholder sues to enforce rights belonging to the corporation for which the corporation itself could have sued for redress. Medkser v. Feingold, 307 Fed. Appx. 262 (11th Cir. 2008). The derivative lawsuit is an exception to the general rule requiring a company to sue on its own behalf. Daily Income Fund, Inc. v. Fox, 464 U.S. 523 (1984). Damages recovered in derivative lawsuits are paid to the corporation rather than shareholder that commenced suit because the shareholder stepped into the shoes of the corporation.  The derivative lawsuit is intended to benefit the corporation and all of its shareholders.  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 “standing” requirement usually prevents a shareholder from suing the corporation it owns a part of (along with the corporation’s officers and directors) for mismanagement because the corporation is usually the party injured by the mismanagement. See Braun v. Buyers Choice Mortgage Corp., 851 So.2d 199 (Fla. 4th DCA 2003) (“The fact that [the shareholder ] may have lost the value of his investment because [the corporation] went out of business is, at best, an indirect injury.”). Standing is a legal concept that ensures a litigant is entitled to have a court decide the merits of his or her dispute. Warth v. Seldin, 422 U.S. 490, (1975). A plaintiff is required to prove its standing as a perquisite to recovering from the defendant. Id. A plaintiff must demonstrate that it suffered an injury that is concrete, particularized, and fairly traceable to the defendant’s action to satisfy the standing requirement. See Koziara v. City of Casselberry, 392 F.3d 1302 (11th Cir. 2004).

Limited circumstances can allow shareholders to sue their own corporation directly. But these circumstances vary state to state. Some states apply a “direct harm” test that examines whether the harm flows to the company first or to the shareholder first.  For example, the California appellate court decision in Shuster v. Gardner, 127 Cal.App.4th 305 (2005), stated in pertinent part that, “a shareholder cannot bring a direct action for damages against management on the theory their alleged wrongdoing decreased the value of his or her stock (e.g., by reducing corporate assets and net worth).” (emphasis in original)). Other states employ a “special injury” test that requires a comparison of plaintiff’s injuries to those suffered by the other shareholders, such as the Alaska court decision in Hanson v. Kake Tribal Corp., 939 P.2d 1320 (Alaska 1997).  Hanson stated in pertinent part that, “[a] plaintiff alleges a special injury and may maintain an individual action if the shareholder complains of an injury distinct from that suffered by other shareholders, or a wrong involving one of the shareholder’s contractual rights as a shareholder.”  A third group of states use a “duty owed” test that examines the statutory and contractual terms to determine whether the duty at issue was owed to the individual shareholder or to the company generally. See, e.g., G&N Aircraft, Inc. v. Boelm, 743 N.E.2d 227 (Ind. 2001), explaining that that (“a direct action may be brought when: it is based upon a primary or personal right belonging to the plaintiff—stockholder…. It is derivative when the action is based upon a primary right of the corporation….”).  And a fourth group of states allow a shareholder to sue directly if the corporation or its directors/officers owe a separate duty to the shareholder under some contractual or statutory right. See Dinuro Investments, LLC v. Camacho, 141 So. 3d 731 (Fla. 3d DCA 2014); Patel v. 2602 Deerfield, LLC, 819 S.E.2d 527 (Ga. Ct. App. 2018) (The shareholder must allege “a wrong involving a contractual right that is independent of any right of the corporation.”). Florida courts apply a combination of tests in the form of the direct harm test, special injury test, and contract test. See Dinuro Investments, LLC, 141 So. 3d 731.

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Breach of contract claims benefit from a relatively long statute of limitations. In Florida, a plaintiff has five years to assert a claim for breach of a written contract. Fla. Stat. § 95.11 (providing a five-year statute of limitations for written contracts). The statute of limitations begins to run when the contract is breached. State Farm Mut. Auto. Ins. Co. v. Lee, 678 So. 2d 818 (Fla. 1996) (“A cause of action on a contract accrues and the statute of limitations begins to run from the time of the breach of contract”). This is somewhat unique when contrasted against other claims under Florida law, where statutes of limitation generally begin running when the plaintiff knew or should have known the claim accrued. See, e.g., Wood v. Eli Lilly & Co., 701 So. 2d 344, 347 (Fla. 1997) (The “statute of limitations for DES negligence actions begins to run on the date the plaintiff knew or should have known of his or her injury”); Fla. Stat § 95.031 (“An action founded upon fraud… must be begun… with the period running from the time the facts giving rise to the cause of action were discovered or should have been discovered…”).  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.

Florida’s statute of limitation law seemingly creates a bright line rule for business litigation claims founded on a breach of contract.  Five years after a contract is breached, the plaintiff is time-barred from asserting a claim on that contract. State Farm Mut. Auto. Ins. Co., 678 So. 2d 818. This is true even if damages do not result or become ascertained until some point in the future because the action is founded on the breach of duty and not the consequent injuries. Med. Jet, S.A. v. Signature Flight Support-Palm Beach, Inc., 941 So. 2d 576 (Fla. 4th DCA 2006) (“Florida has followed this general rule that a cause of action for breach of contract accrues at the time of the breach, ‘not from the time when consequential damages result or become ascertained.’”). Fradley v. Dade Cnty., 187 So. 2d 48 (Fla. 3d DCA 1966) (holding that the limitations period begins running from the date of the breach because the “action is founded on the breach of duty and not the consequent injuries”).

The 2008 mortgage foreclosure crisis blurred this bright line. During this period, many homeowners were financially underwater.  They could not afford to pay their mortgages. Banks filed voluminous mortgage foreclosure complaints.  This overwhelmed the judicial system and caused backlogs for the banks and the courts. See Kevin F. Jursinski, The Mortgage Foreclosure Crisis In Florida: A 21st Century Solution, 84 FL Bar Journal 91 (2010).  As a result, many banks did not timely file their contractual foreclosure lawsuits. The judiciary seems to have rescued the banks by allowing them to file their contractual foreclosure actions outside the five-year window, so long as the bank changed the breach date to one that fit inside the limitations period. See Bartram v. U.S. Bank Nat. Ass’n, 211 So. 3d 1009 (Fla. 2016). In return, banks had to forego damages resulting from all unpaid mortgage payments that were owed before the statute of limitations expired. Id. (“As the Fourth District explained, under Singleton, a “new default, based on a different act or date of default not alleged in the dismissed action, creates a new cause of action.”). Id. The Supreme Court of Florida justified the rule because of “‘the unique nature of the mortgage obligation and the continuing obligations of the parties in that relationship,’ an ‘adjudication denying acceleration and foreclosure’ does not bar subsequent foreclosure actions based on separate and distinct defaults.” Id. (quoting Singleton v. Greymar Associates, 882 So. 2d 1004 (Fla. 2004)).

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The Private Securities Litigation Reform Act (PSLRA) requires plaintiffs to meet a heightened pleading standard before they can participate in discovery. Congress passed the PSLRA because many plaintiffs filed frivolous securities fraud lawsuits based on minimal facts, and then used the discovery process to manufacture evidence establishing their claims. See Novak v. Kasaks, 216 F.3d 300, 310 (2d Cir. 2000) (“Congress plainly sought to impose a stricter nationwide pleading standard and did so.”). Plaintiffs, in effect, weaponized securities laws. Winer Family Tr. v. Queen, 503 F.3d 319, 326 (3d Cir. 2007) (“One of the purposes of the PSLRA’s heightened pleading requirements is to limit abusive securities class-action suits.”). PSLRA plaintiffs knew they could commence lawsuits with scant facts and subsequently obtain information giving the impression of securities fraud. Id. PSLRA plaintiffs also knew the act of suing was usually enough to force the defendants into settlement because PSLRA lawsuits are extremely expensive and onerous to defend. Id. As a result, Congress required a private securities law plaintiff to present evidence of securities fraud before the parties engaged in pretrial discovery. 15 U.S.C.A. § 78u-4.  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.

A PSLRA plaintiff must allege facts demonstrating the existence of the following elements to be entitled to discovery: “(1) a material misrepresentation (or omission), (2) scienter, i.e., a wrongful state of mind, (3) a connection with the purchase or sale of a security, (4) reliance, often referred to in cases involving public securities markets (fraud-on-the-market cases) as ‘transaction causation,’ (5) economic loss, and (6) ‘loss causation,’ i.e., a causal connection between the material misrepresentation and the loss.” Dura Pharm., Inc. v. Broudo, 544 U.S. 336 (2005) (internal citations omitted and emphasis removed). For allegations regarding material misrepresentations or omissions, the plaintiff must “specify each statement alleged to have been misleading, the reason… why the statement is misleading” and all facts on which any belief was formed (assuming allegations were based on information and belief). 15 U.S.C.A. § 78u-4. And for the scienter component, the plaintiff must particularly allege the “facts giving rise to a strong inference that the defendant acted with the required state of mind.” Id. The scienter allegations must be “cogent” and “compelling” “in light of other explanations.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007).

Discovery is automatically stayed in PSLRA cases unless, and until, the plaintiff alleges the requisite facts to satisfy the PSLRA’s heightened pleading standard. See In re Equifax Inc. Sec. Litig., 2018 WL 3023278 (N.D. Ga. June 18, 2018). The stay is mandated by Congressional statute. 15 U.S.C.A. § 78u-4 (“All discovery and other proceedings shall be stayed during the pendency of any motion to dismiss…”). However, an exception to the discovery stay exists when a party demonstrates discovery is necessary to preserve evidence or to prevent undue prejudice. Id. Undue prejudice occurs when (1) the plaintiffs would be unable to make informed decisions about their litigation strategy due to a rapidly shifting landscape because they are the only major interested party without documents forming the core of their proceedings, In re Bank of Am. Corp. Sec., Derivative, & Employment Ret. Income Sec. Act (ERISA) Litig., 2009 WL 4796169 (S.D.N.Y. Nov. 16, 2009), or (2) the plaintiff lacks access to documents that were previously produced in other lawsuits or to the government. New York State Teachers’ Ret. Sys. v. Gen. Motors Co., 2015 WL 1565462 (E.D. Mich. Apr. 8, 2015). The facts giving rise to both scenarios generally arise infrequently. Therefore, PSLRA defendants usually should not fear engaging in expensive discovery until the plaintiffs satisfy the PSLRA’s heightened pleading standard.

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Nationwide, the body of law regulating non-compete agreements (including non-solicitation covenants, non-circumvention covenants, covenants barring poaching of employees) has been mainly regulated by state statutes as well as court decisions in state and federal courts.  Federal law has generally stayed out of the regulation of restrictive covenants.  About a year ago, the Federal Trade Commission (FTC), a federal agency regulating commerce and competition law, issued a proposed rule that would ban most non-compete agreements as unfair competition.  If promulgated, such a rule would have a significant impact on many businesses and their employees.  At this point, the proposed rule is not the law and awaits a final decision.  The wording of the proposed draft of the rule is as follows: “It is an unfair method of competition for an employer to enter into or attempt to enter into a non-compete clause with a worker; maintain with a worker a non-compete clause; or represent to a worker that the worker is subject to a non-compete clause where the employer has no good faith basis to believe that the worker is subject to an enforceable non-compete clause. To comply with paragraph (a) of this section,… an employer that entered into a non-compete clause with a worker prior to the compliance date must rescind the non-compete clause no later than the compliance date.  Proposed CFR § 910.2. The FTC accepted comment concerning the proposed rule through April 2023, and is expected to make a final decision about the proposed rule sometime in April 2024.  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 effects of the FTC’s proposed rule are probably far reaching based on the FTC’s definition of “noncompete clause.” The FTC defines a noncomplete clause to mean “a contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer.”  Proposed CFR § 910.1. This definition includes de facto clauses prohibiting workers from obtaining employment or operating a business after the conclusion of the worker’s employment with an employer. Id. One example of a de facto clause is an overly broad non-disclosure agreement that precludes a former employee from working in the same field as the former employer.

The FTC similarly defined worker broadly. Worker encompasses any natural person who works for an employer. Id. It does not matter whether the worker was paid or unpaid. Id. It does not matter whether the worker was classified as an employee or independent contractor. Id. Any worker qualifies under the proposed rule. Therefore, most, if not all, employment related relationships will fall within the ambit of “worker” for purposes of the proposed rule.

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Plaintiffs often assert the common law cause of action of tortious interference in conjunction with other claims associated with unlawful competition. This is because the elements needed to prove the common law tort frequently use the same or substantially similar facts as those needed to establish breach of a restrictive covenant and other claims of unfair competition. For example, a plaintiff asserting a tortious interference claim must prove the existence of a business relationship between itself and a third person, the defendant’s knowledge about the relationship, the defendant’s intentional and unjustified interference with the relationship that induces the third person not to perform, and damage. Seminole Tribe of Florida v. Times Pub. Co., Inc., 780 So. 2d 310 (Fla. 4th DCA 2001). And a plaintiff asserting breach of a non-compete agreement must similarly prove the defendant breached the non-compete agreement by conducting business with the plaintiff’s customer and damages resulting from business loss. See Fla. Stat. 542.335 (requiring the plaintiff to plead and prove one or more legitimate business interests including the existence of present or prospective customers).  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.

A subtle difference lies with the tortious interference claim that can make it more difficult to establish than other, similar claims. A tortious interference claim requires proof that the defendant  induced cessation of business between the plaintiff and a third party. See Mortgage Now, Inc. v. Guaranteed Home Mortg. Co., Inc., 545 Fed. Appx. 809, 811 (11th Cir. 2013) (“No liability will attach unless it is established that the defendant intended to procure a breach.”). However, other claims typically require the plaintiff to merely establish damages resulting from the severed relationship. See, e.g., Vela v. Kendall, 905 So. 2d 1033, 1035 (Fla. 5th DCA 2005) (awarding “damages for the violation of the restrictive covenant during the two-year period of its viability.”)

The inducement element forces the plaintiff to provide evidence demonstrating the third party would not have severed its relationship with the plaintiff but for the defendant’s conduct. Cedar Hills Properties Corp. v. E. Fed. Corp., 575 So. 2d 673 (Fla. 1st DCA 1991) (To “maintain an action for tortious interference… with contractual rights, a plaintiff must prove that a third party interfered with a contract by ‘influencing, inducing or coercing one of the parties to … breach the contract, thereby causing injury to the other party.’”). Providing inducement evidence can be challenging when the third-party was predisposed to terminating its relationship with the plaintiff.

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Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA) can be a powerful statute because plaintiffs can bring a wide variety of claims due to the expansive nature of what constitutes an unfair method of competition. FDUTPA prohibits “[u]nfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce.” Fla. Stat. § 501.204. A plaintiff needs to allege only that a defendant committed a deceptive act or unfair practice, causation, and actual damages to state a FDUTPA claim. Baptist Hosp., Inc. v. Baker, 84 So. 3d 1200 (Fla. 1st DCA 2012) (providing the elements of a FDUTPA claim). Precedent from the Supreme Court of Florida, in PNR, Inc. v. Beacon Prop. Mgmt, Inc., 842 So.2d 773 (Fla. 2003), expansively defined “unfair practice” to mean an act “that offends established public policy and one that is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.”  The amorphous nature of “unethical, oppressive, and unscrupulous acts” seemingly provides plaintiffs an almost endless opportunity to assert FDUPTA claims.  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.

FDUTPA can provide plaintiffs with an opportunity to assert unique fact patterns that give rise to a cognizable cause of action. However, a plaintiff asserting a FDUPTA claim must think carefully about its claimed damages to avoid early dismissal.

Claiming actual damages can be a limiting factor to recovering under FDUTPA, despite the expansive definition of “unfair practices.”  For example, the plaintiff must prove that a consumer suffered damages based on the definition of unfair practices. Caribbean Cruise Line, Inc. v. Better Bus. Bureau of Palm Beach Cnty., Inc., 169 So. 3d 164 (Fla. 4th DCA 2015). As just stated, the PNR decision defines “unfair practices” to mean acts that are substantially injurious to consumers.  This requirement can be problematic if the plaintiff did not directly suffer the injury or engage in a consumer transaction. See Stewart Agency, Inc. v. Arrigo Enterprises, Inc., 266 So. 3d 207 (Fla. 4th DCA 2019) (granting summary judgment because the plaintiff “could not identify any transaction where [the defendant] sold a vehicle with a Takata recall notice without disclosing that information to the consumer”); Leon v. Tapas & Tintos, Inc., 51 F. Supp. 3d 1290 (S.D. Fla. 2014) (dismissing the plaintiff’s complaint for lack of standing because he did not engage in a consumer transaction, i.e. the purchase of goods or services); see also Fla. Stat. § 501.203 (defining consumer to mean “an individual; child,…; business; firm; association; joint venture…”).

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The Florida restrictive covenant statute allows employers to restrain employees from working for a competitor so long as the non-competition agreement is supported by a legitimate business interest and is reasonable in time, area, and line of business. Fla. Stat. 542.335. Employees that enter contracts containing non-compete agreements can be prohibited from working for a similar business within a competitive geographic area. For example, doctors that sign employment agreements with the hospitals they work for, can be prohibited from treating their patients after leaving that hospital. See, e.g.,  Ansaarie v. First Coast Cardiovascular Inst., P.A., 252 So. 3d 287 (Fla. 1st DCA 2018) (enjoining a doctor from seeing his former patients associated with the hospital he used to work for). This is true even when patients request treatment from the departing doctor. 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.

Florida’s Legislature recognized that the state’s strong non-compete laws can prevent patient access to medical treatment about five years ago in 2019. This is especially true in rural areas where choice of medical care providers is limited. Therefore, Florida’s legislature invalided non-compete contracts in certain circumstances relating to licensed physicians. The statute provides that a “restrictive covenant entered into with a physician… who practices a medical specialty in a county wherein one entity employs or contracts with,… all physicians who practice such specialty in that county is” invalid. Fla. Stat. 542.336. The Legislature’s invalidation is however limited to (1) certain physicians (2) possessing a specialty and (3) who are employed by a single employer in a single county. Id. Therefore, many Florida doctors are still prohibited from treating patients even when the patient wants treatment from that particular doctor.

It seems Florida’s Legislature understands that the limitations of its 2019 modification are insufficient to enable adequate medical staffing in Florida because the Legislature may be preparing to expand non-compete invalidation. Florida’s House and Senate introduced similar bills that would expand the prohibition on non-competes in the medical space to physicians practicing medicine within any geographic area for any period of time. The proposed language of the new statute from the House is as follows:

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A trade secret plaintiff may have to divulge its claimed trade secret with reasonable particularity to the defendant before engaging in discovery because a growing number of courts require trade secret plaintiffs to do so. This rule places the plaintiff in a “Catch-22.” See DeRubeis v. Witten Techs., Inc., 244 F.R.D. 676 (N.D. Ga. 2007) (acknowledging that the plaintiff may be placed in a “Catch-22”, but nonetheless requiring the plaintiff to disclose its trade secrets with reasonable particularity). If the plaintiff limits disclosure to the portion of the trade secret it believes the defendant misappropriated and later discovers the defendant misappropriated the entire trade secret, the plaintiff may be precluded from fully recovering for the defendant’s misappropriation. Conversely, if the plaintiff discloses its entire trade secret and later discovers the defendant only misappropriated limited portions thereof, the plaintiff will have voluntarily disclosed its entire secret unnecessarily to an adverse party. Both situations are problematic.  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.

Parties are normally free to engage in discovery once the complaint is served or after conducting a preliminary discovery conference. See, e.g., Fla. R. Civ. P. 1.280 (e) (The “fact that a party is conducting discovery,… shall not delay any other party’s discovery.”); Fed. R. Civ. P. 26(a)(1)(C) (“A party must make the initial disclosures at or within 14 days after the parties’ Rule 26(f) conference….”). This is generally true even when the defendant moves to stay discovery due to a pending motion to dismiss the complaint. See Montoya v. PNC Bank, N.A., 14-20474-CIV, 2014 WL 2807617 (S.D. Fla. June 20, 2014) (“[D]iscovery stay motions are generally denied except where a specific showing of prejudice or burdensomeness is made or where a statute dictates that a stay is appropriate or mandatory.”). However, a growing number of courts throughout the United States require trade secret plaintiffs to disclose their trade secrets with reasonable particularity before discovery commences to prevent meritless claims. See, e.g., Kalencom Corp. v. Shulman, 2018 WL 1806037 (E.D. La. Apr. 17, 2018) (“[C]ourts routinely require ‘pre-discovery identification’ of [a plaintiff’s] trade secrets to discourage meritless trade secrets claims and abusive discovery into the trade secrets of a competitor.”). This rule is gaining consensus throughout many jurisdictions. See StoneEagle Servs., Inc. v. Valentine, 2013 WL 9554563 (N.D. Tex. June 5, 2013) (citing several cases) (The “growing consensus seems to be in favor of requiring” the plaintiffs “to identify, with reasonable particularity, the alleged trade secrets at issue.”).

Uniformity on the issue does not exist. In Florida for example, state courts tend to agree with the modern trend. See AAR Mfg., Inc. v. Matrix Composites, Inc., 98 So. 3d 186 (Fla. 5th DCA 2012) (A “plaintiff is required to identify with reasonable particularity the trade secrets at issue before proceeding with discovery.”). But Florida federal courts take a different approach. A Florida federal trade secret plaintiff is only required to (1) plausibly show a trade secret was involved and (2) notify the defendant about the material constituting the trade secret at issue. DynCorp Int’l v. AAR Airlift Group, Inc., 664 Fed. Appx. 844 (11th Cir. 2016) (At “the dismissal stage in federal court, the plaintiff need only allege sufficient facts to plausibly show a trade secret was involved and to give the defendant notice of the material it claims constituted a trade secret.”). Therefore, courts within the same state can take different positions on this issue.

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