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Section 542.335(1)(d), Florida Statutes, states that a non-compete agreement, in an employment context that exceeds two years is subject to a legal presumption that the non-compete period is unreasonable. An employer may overcome this legal presumption in variety of ways. If the court finds that a longer non-compete period is necessary to protect a legitimate business interest, the non-compete period may be enforced.  An employment non-compete exceeding two years might also be justified if the particular employee is especially important to the business. Peter Mavrick is a Miami non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.

In the case of Avalon Legal Info. Services, Inc. v. Keating, 110 So. 3d 75, 84 (Fla. 5th DCA 2013), Judy B. Schneider (“Schneider”) a paralegal and owner of a business that provided civil process service training and consulting to Florida’s Sheriffs, bifurcated the business and sold the consulting portion to Gerard F. Keating (“Keating”), an attorney who previously acted as the supervising attorney for the business.  Schneider also sold the training and education portion of the business to Avalon Legal Information Services, Inc., a Florida corporation (“Avalon”). Schneider continued to work the consulting contracts with Keating and simultaneously worked for Avalon as an instructor in its training program, as well as co-authored a civil process manual with Avalon’s owner.

On October 1, 2008, Keating and Schneider entered into an independent contractor agreement (“Agreement”). Per the Agreement, Schneider was to continue to perform the same paralegal services for Keating as an independent contractor. The Agreement was to last two years, until September 2010, and was renewable at the parties’ option for an additional two years. The Agreement incorporated a non-compete/non-solicitation covenant. The Agreement permitted Schneider to continue to work as an instructor and manual writer for Avalon. The non-compete covenant prohibited Schneider from competing with and soliciting Keating’s civil process consulting contracts in the State of Florida for three years following the expiration of the Independent Contractor Agreement, i.e. until September 2013.

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Many businesses create new business concepts. A business concept, however, does not automatically evolve from an interesting idea to a legally protected trade secret.  A concept doesn’t need to be built to be protected, but the concept needs enough substance to be economically valuable and for a court to know what it’s protecting. Peter Mavrick is a Fort Lauderdale trade secret lawyer who represents businesses in trade secret litigation and other business litigation.

In the recent federal court case of ActivEngage, Inc. v. Smith, Middle District Court Case No: 6:19-cv-1638-ORL-37LRH, (M.D. Fla. Nov. 5, 2019), Ted Rubin (“Rubin”) and Defendant Todd L. Smith (“Smith”) co-founded ActivEngage, Inc. (“ActivEngage”), a company which provided messaging services, including live call, email, chat, texting, and advertisement services, to car dealerships throughout North America.  Rubin was the President and Smith was the CEO and later worked for ActivEngage in another capacity. Smith also created his own company, 360Converge, as a holding company for new technological ideas. Smith contended that he always presented ideas of value to ActivEngage first.

In 2018, Smith worked on a new product, ActivProspect, a “lead enhancement” product for dealerships.  Rubin and Smith’s relationship collapsed because of disagreements over the direction of ActivEngage. ActivEngage terminated Smith’s employment. Smith also resigned from the Board of Directors but continued to hold a third of ActivEngage’s stock. After Smith’s termination, he began developing new technology in form of a customer relationship management platform (“CRM”) for his company, 360Converge. Rubin discovered that Smith was planning to release a product similar to ActivProspect in December 2018.

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It is not uncommon for parties in a business relationship, such as partners, franchisors and franchisees, and employers and employees, to discover that they cannot agree on their rights with respect to each other.  Sometimes contracts are ambiguous, or the parties never determined how they would address a particular problem that later arises.

Florida law provides a mechanism to resolve such problems by way of declaratory judgment action.  This is a type of lawsuit that seeks clarification of rights rather than money damages.  It is most common in insurance coverage disputes, but also is used in business and employment disputes.  Peter Mavrick is a Miami business litigation lawyer.

Florida Statute § 86.011 allows Florida courts to render judgment on “the existence, or nonexistence: (1) Of any immunity, power, privilege, or right; or (2) Of any fact upon which the existence or nonexistence of such immunity, power, privilege, or right does or may depend, whether such immunity, power, privilege, or right now exists or will arise in the future.”  If a declaratory judgment is sought as to rights provided in a contract, it can be sought “either before or after there has been a breach” of the contract.  Fla. Stat. § 86.031.

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A business can seek an injunction to enforce a non-compete agreement before a lawsuit is completed if the business is suffering losses due to the violation of a non-compete agreement.  There are different legal standards for issuance of a temporary injunction, depending on whether the lawsuit and motion occur in federal or state court.  The federal legal standard (1) a substantial likelihood of success on the merits; (2) irreparable injury without the injunction; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest.  Bloedorn v. Grub, 631 F.3d 1218 (11th Cir. 2011).  “Because preliminary injunctions are an extraordinary remedy, this relief is appropriate only if the movant clearly establishes the burden of persuasion on each element.”  Nuvasive, Inc. v. Leduff, 2019 WL 5962658 (M.D. Fla. 2019).  In addition, however, the party who obtains the injunction is required to post a bond.  Posting a bond can be expensive and may impact damages.  As a result, it should be considered when seeking or opposing an injunction.  Peter Mavrick is a Fort lauderdale non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.

When seeking an injunction in federal court, a bond must be posted pursuant to Federal Rule of Civil Procedure 65(c).  The purpose of posting a bond is to redress costs and damages suffered by any party that is wrongfully enjoined.  Although the court has some discretion as to the amount of the bond to be posted, the amount should be enough to cover costs and damages that the enjoined party may suffer.

As an example, in North American Products Corporation v. Moore, 196 F. Supp. 2d 1217 (M.D. Fla. 2002), the District Court for the Middle District of Florida determined that an injunction should be imposed against a former employee of North American Products Corporation and Tru-Cut, a corporation the former employee started after leaving North American Products Corporation.  The former employee proceeded to compete against North American Products Corporation in violation of a non-compete agreement.  After finding that North American Products Corporation met the requirements for imposition of an injunction, the District Court held that a bond had to be posted.  To determine the amount of the bond, an evidentiary hearing was requiredThe District Court looked to the yearly revenues being earned by Tru-Cut and ordered North American Products Corporation to post a bond that would at least satisfy Tru-Cut’s annual projected revenue.  The Court set the bond at $500,000.

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Arbitration can be a useful tool to thwart unwanted litigation, and, therefore, contracting parties often include mandatory arbitration provisions in contracts to discourage unnecessary litigation. See, e.g., Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1412 (2019) (prohibiting employees from asserting a class action arbitration unless the class waived their right to sue in an employment agreement). However, a contracting party may not always want to pursue his/her claim in arbitration due to these same impediments. A unilateral arbitration provision can resolve this conundrum because it requires your counterpart to arbitrate while providing you with the option to seek redress through arbitration or the court system. The enforceability of these unilateral arbitration provisions has been questioned by Florida courts because they lack mutuality or may be unconscionable.  Peter Mavrick is a Fort Lauderdale business litigation attorney who has substantial experience in representing businesses in arbitration.

Florida courts would likely determine that unilateral arbitration provisions are not void for lack of mutuality. Florida’s Fifth District Court of Appeal originally ruled that unilateral arbitration provisions are unenforceable because they lack mutual consideration. R.W. Roberts Cont. Co., Inc. v. St. Johns River Water Manag. 423 So. 2d 630, 633 (5th DCA 1982) (Upholding the trial court’s order denying a motion to compel arbitration because “each severable clause of a contract should have its own consideration or mutual obligation.”). However, the Roberts decision was rejected and overturned because contracting parties never have mutual obligations or remedies at the same time. Rohlfing v. Tomorrow Realty Auction Co. Inc., 528 So. 2d 463 (5th DCA 1988) (“The extent, scope, and application of [the mutuality] concepts were always subject to much disagreement and today can be plainly stated to largely be nothing more than a smoke screen defense… In no real sense is there ever, at any one time, any mutuality of obligation or remedy.”); see also LaBonte Precision, Inc. v. LPI Indus. Corp., 507 So. 2d 1202 (4th DCA 1987) (“Mutuality of remedy in contracts as a requirement has largely disappeared from the law of American jurisdictions.”). Therefore, it is likely that mutuality is not an barrier to enforcing a unilateral arbitration provision. But we urge caution in this regard because there is little law on the subject matter and most authorities emanates from Florida’s Fifth Circuit Court of Appeal. See Avid Engineering, Inc. v. Orlando Marketplace Ltd., 809 So. 2d 1, 3 (5th DCA 2001) (“A reasonable interpretation of the [arbitration] statute is that it allows two or more parties to arbitrate “any controversy,” including those controversies in which only one party has the right to arbitrate.”). It is therefore possible that other districts may disagree and require mutuality before the arbitration provision can be enforced.

A unilateral arbitration provision may not be unconscionable depending on the facts and circumstances giving rise to the provision. A contract provision is unconscionable when it is procedurally and substantively unconscionable. See Belcher v. Kier, 558 So.2d 1039 (Fla. 2d DCA 1990); Complete Interiors v. Behan, 558 So.2d 48 (Fla. 5th DCA 1990). Procedural unconscionability exists when the parties’ bargaining power impacts their ability to know and understand the disputed contract terms. Kohl v. Bay Colony Club Condo., Inc., 398 So. 2d 865, 868 (Fla. 4th DCA 1981) (defining procedural unconscionability as “absence of choice” due to the parties “respective bargaining powers”, “education”, and “intelligence”). Substantive unconscionability exists when the terms of the contract are so unreasonable and unfair that is would shock the conscious. Woebse v. Health Care & Ret. Corp. of Am., 977 So. 2d 630, 632 (Fla. 2d DCA 2008) (“Substantive unconscionability requires an assessment of whether the contract terms are so outrageously unfair as to ‘shock the judicial conscience.”) (internal quotations omitted). Some courts have found that unilateral arbitration provisions are always substantively unconscionable to some degree. See Palm Beach Motor Cars Ltd. Inc. v. Jeffries, 885 o. 2d 990. 992 (4th DCA 2004) (“Some substantive unconscionability was present in the arbitration agreement in this contract.”); Bellsouth Mobility LLC v. Christopher, 819 So. 2d 171 173 (4th DCA 2002) (“Moreover, the substance of the arbitration provision seems unduly unfair. Although customers are bound to arbitration, Bellsouth still has the option of pursuing court action in some instances, including the collection of a debt.”); Prieto v. Healthcare & Ret. Corp. of Am., 919 So. 2d 531, 533 (Fla. 3d DCA 2005) (finding that the contract was procedurally unconscionable and the arbitration provision was substantively unconscionable). However, other courts have found that no unconscionability (substantive or procedural) exists in unilateral arbitration provisions. See Avid Engineering, Inc., 809 So. 2d 1, 5 (5th DCA 2001) (the court ruled that the unilateral arbitration provision was not unconscionable because the contracting parties were sophisticated entities with relatively equal bargaining power that negotiated at arm’s length and each modified many terms).

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An employee’s reasonable belief that a particular territory is outside of the scope of a non-compete clause does not necessarily grant him/her license to work for a competitor in violation of the employment agreement. Peter Mavrick is a Miami non-compete lawyer who has extensive experience in representing the interests of businesses and business owners.

In Proudfoot Consulting Company, v. Gordon, 576 F.3d 1223 (11th Cir. 2009), Proudfoot Consulting Company (“Proudfoot”) entered an employment agreement with Derrick Gordon (“Gordon”) containing a non-compete, non-solicitation and a confidentiality clause (“non-compete clauses”). The non-compete clauses prohibited Gordon for a six-month period after termination of his employment, from doing the following: (1) working for a direct competitor or client of Proudfoot, (2) contacting Proudfoot’s clients and soliciting Proudfoot’s employees, and (3) using, disclosing, or retaining Proudfoot’s confidential information. Proudfoot was a management consulting firm that provided consulting services in the United States and Canada. Gordon was a Project Manager who was responsible for achieving results for clients, obtaining repeat business, and convincing clients to provide referrals and serve as a reference. During his employment with Proudfoot, Gordon had access to and received information in various forms about Proudfoot’s clients, projects, operations and confidential business information (including without limitation, hard copy manuals, training sessions and reviews of company projects).

In June 2006, Gordon resigned his employment with Proudfoot and immediately went to work for Highland, a direct competitor.  Proudfoot filed a lawsuit seeking an injunction and damages. After a bench trial, the trial court held that each of the non-compete clauses were enforceable under Florida law. The trial court entered an injunction prohibiting Gordon from working for Highland and from soliciting Proudfoot’s clients and employees for a period of six months. The injunction was entered over a year and a half after Gordon began working at Highland. The trial court found that Gordon’s continuous work for Highland justified tolling the six-month restrictive period, pursuant to the tolling provision in the non-compete clause. Gordon immediately appealed.

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Contracts that restrict or prohibit competition during or after the term of employment are enforceable, “so long as such contracts are reasonable in time, area, and line of business…” Florida Statute § 542.335. A non-compete provision that prohibits a doctor from seeing any patients from medical practice that formerly employed him/her, is not overbroad, provided that the geographic area of the limitation is reasonable. Peter Mavrick is a Miami non-compete lawyer and employment litigation lawyer who has significant experience in non-compete litigation, including injunction proceedings.

In Supinski v. Omni Healthcare, P.A., 853 So. 2d 526 (Fla. 5th DCA 2003) Dr. Edward Supinski (“Dr. Supinski”) was recruited by Omni Healthcare, P.A. (“Omni”) for the company’s medical practice in Brevard County, Florida. Dr. Supinski was relocated from Ohio to Florida for the position with Omni.  Omni was a physician owned multi-specialty practice operating in central and southern Brevard County, and the Melbourne area. Omni and Dr. Supinski negotiated an employment agreement (“contract”) with a two-year duration, which automatically renewed unless terminated by either party 180 days before the termination date. The contract contained a non-compete provision that barred Dr. Supinski from competing with Omni within a ten-mile radius of Omni’s offices in Brevard County, for two years after termination of his employment. The contract also contained a non-solicitation provision that barred Dr. Supinski from soliciting Omni’s patients and employees.

Omni assisted Dr. Supinski in becoming credentialed by various managed care organizations, helped him gain staff privileges at hospitals, hired his staff, advertised his practice, and aided him in establishing a patient base. About one month before the end of the initial two-year term of the contract, Dr. Supinski sent Omni a letter stating that he would not renew his employment agreement.  Immediately after the termination of his employment with Omni, Dr. Supinski opened his new practice four miles from the Omni office where he previously worked. Omni filed a lawsuit against Dr. Supinski for breach of contract, failure to provide the minimum notice of non-renewal, and violation of the non-compete provision. Omni sought an injunction against Dr. Supinski, pursuant to Florida Statute § 542.335.

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This article is the second in a two-part series on contractual “merger” or “integration” clauses (the terms merger and integration are used interchangeably).  Integration/merger clauses purport to define a contract as being limited to only what is contained in the written document signed by the parties.  This can help ensure that neither party will later claim that he was promised something as part of the deal, but that promise was not actually written into the contract terms.  Under Florida law, merger clauses are enforceable and effective ways to ensure that the parties are in complete accord as to the terms of their agreement.  Integration clauses, however, are not ironclad and there are some limitations.  Peter Mavrick is a Fort Lauderdale business litigation attorney and Miami business litigation attorney who has extensive experience with breach of contract lawsuits and related claims.

In the context of a case involving a non-compete contract, Environmental. Services, Inc. v. Carter, 9 So. 3d 1258 (Fla. 5th DCA 2009), gave great weight to an integration/merger clause that provided in pertinent part, “[t]his Agreement constitutes the complete agreement between the parties with respect to the subject matter contained herein and revokes and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral.”  Environmental Servs. v. Carter, 9 So. 3d 1258 (Fla. 5th DCA 2009) (emphasis added). Environmental Services, Inc. v. Carter found that, “[a]lthough the existence of a merger clause does not conclusively establish that the integration of the agreement is total, it is a highly persuasive statement that the parties intended the agreement to be totally integrated and generally works to prevent a party from introducing parol evidence to vary or contradict the written terms” and “the merger clause precludes the consideration of other documents to vary the terms of the agreement.”

“That [a contract] contained a merger clause is not determinative; the law remains that ‘the existence of a merger clause does not per se establish that the integration of the agreement is total.’”  Lowe v. Nissan of Brandon, Inc., 235 So. 3d 1021 (Fla. 2d DCA 2018).  There are three types of claims concerning the completeness of an agreement that may survive a merger clause: allegations that terms are missing from patently incomplete and ambiguous agreements, allegations concerning an agreement unrelated to the agreement at issue, and allegations that there is fraud in the inducement concerning a party’s motivation to sign the contract based on representations of the opposing party.

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Florida employers that seek to enforce Florida non-compete agreements outside the state of Florida cannot presume that out-of-state courts will enforce the agreement as that agreement would have been enforced in Florida.  Florida’s non-compete law, § 542.335, Florida Statutes, is considered by many to be the most “pro-employer” in the nation.  Other states may refuse to enforce key parts of a Florida non-compete agreement if enforcing the agreement would violate that state’s public policy.  Florida employers should be aware of the potential limitations to enforcement that their non-compete agreements face outside the state of Florida.  Peter Mavrick is a Fort Lauderdale non-compete lawyer who has extensive experience with non-competition covenant litigation.

In analyzing how a court outside the state of Florida will likely enforce a Florida non-compete agreement, a Florida employer must consider whether the non-Florida court will enforce any non-compete agreement at all.  States may choose not to enforce an agreement based upon that state’s public policy.  California, Montana, North Dakota, and Oklahoma rarely enforce non-compete agreements ancillary to employment, if at all, and would not likely enforce any employee non-compete agreements within their borders regardless of how it is drafted.  See Signature MD, Inc. v. MDVIP, Inc., CV 14-5453 DMG SSX, 2015 WL 3988959 (C.D. Cal. Apr. 21, 2015) “[T]he enforcement of these non-compete clauses is also objectively baseless, at least as to their enforcement in California, as California law expressly voids [employee non-compete] contracts”).

Some non-Florida courts will enforce non-compete agreements, but will not enforce the Florida choice-of-law if the court considers Florida law to be against that state’s public policy.  M/S Bremen v. Zapata Off–Shore Co., 407 U.S. 1 (1972) (permitting courts to refuse to enforce a choice-of-law provision if doing so would be against the forum’s state’s public policy). Non-Florida courts often take issue with the Florida law that requires courts to not consider the hardship of an employee when determining whether to enforce an employer’s non-compete agreement. e.g. Brown & Brown, Inc. v. Johnson, 25 N.Y.3d 364, 368, 34 N.E.3d 357 (2015) (Florida non-compete law is “truly obnoxious” and contrary to New York policy because of “Florida’s nearly-exclusive focus on the employer’s interests, prohibition against narrowly construing restrictive covenants, and refusal to consider the harm to the employee”); see also Carson v. Obor Holding Co., LLC, 734 S.E.2d 477 (Ga. Ct. App. 2012) (Finding Florida non-compete law to be contrary to Georgia law, in part because “Florida law allows a court to consider only the legitimate business interests of the party seeking to enforce the covenant” when “modifying overly-broad restrictive covenants”); Brown & Brown, Inc. v. Mudron, 887 N.E.2d 437 (Ill. App. Ct. 2008) (finding that Illinois public policy is contrary to Florida’s because it is too employer-focused); Unisource Worldwide, Inc. v. S. Cent. Alabama Supply, LLC, 199 F. Supp. 2d 1194 (M.D. Ala. 2001) (Refusing to enforce Florida non-compete law because Florida does not consider the hardship to the employee); see § 542.335 (g)(1), Fla. Stat. (“In determining the enforceability of a restrictive covenant, a court [s]hall not consider any individualized economic or other hardship that might be caused to the person against whom enforcement is sought”).

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This article is part one in a two-part series of articles on contractual “merger” or “integration” clauses, which purport to limit the terms of a contract to the terms contained in the written document signed by the parties.  This can help ensure that neither party will later claim that he was promised something as part of the deal, but that promise was not actually written into the contract terms.  Under Florida law, merger clauses are enforceable and effective ways to ensure that the parties are in complete accord as to the terms of their agreement.  Integration clauses, however, are not ironclad and there are some limitations.

A merger clause will not prevent a court from considering whether additional terms were intended when the contract contains a patent ambiguity.  Additionally, a merger clause will not prevent a party from claiming that she entered into the agreement only due to the fraud of the other party.  Peter Mavrick is a Broward County business litigation lawyer who has extensive experience in representing the interests of businesses and business owners.

Florida courts generally will not allow litigants to enter evidence to modify the clear terms of a written contract.  This legal principle is called the “parol evidence rule.”  The Supreme Court of Florida in Florida Moss Products Co. v. City of Leesburg, 112 So. 572 (Fla. 1927), explained the parol evidence rule as follows:

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