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A shareholder wishing to file a derivative suit must generally present that dispute to the board of directors with a demand prior to filing a shareholder’s derivative suit.  The way that this demand process works can vary between the states and can ultimately determine whether a shareholder is able to proceed with a lawsuit.  A recent decision from United States Court of Appeals for the Eleventh Circuit resolved this question by determining that law of the state of incorporation controls the demand requirements on a corporation even in disputes concerning federal law.  Peter Mavrick is a Fort Lauderdale business litigation lawyer, and also represents clients in business litigation in Miami, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

When a disgruntled shareholder for a corporation believes that the corporation should have taken legal action against another entity (including directors, officers, or employees of the company as well as any third-party), that shareholder can initiate a demand that the corporation take action.  The board of directors of that corporation has the opportunity to exercise its business judgment as to whether to take the requested action or to ignore it.  If the corporation refuses to act, the shareholder can sometimes file a derivative lawsuit, which is a type of business litigation where the shareholder steps into the shoes of a corporation and sues on the corporation’s behalf.  The derivative lawsuit can be dismissed if the court finds that the board of directors properly exercised their business judgment.  “The purpose of requiring a precomplaint demand is to protect the directors’ prerogative to take over the litigation or to oppose it.” Kamen v. Kemper Fin. Services, Inc., 500 U.S. 90 (1991).  Under many states’ laws, a shareholder can bypass this demand requirement by showing that the demand would have been futile.  “To the extent that a jurisdiction recognizes the futility exception to demand, the jurisdiction places a limit upon the directors’ usual power to control the initiation of corporate litigation […]. By permitting the shareholder to circumvent the board’s business judgment on the desirability of corporate litigation, the ‘futility’ exception defines the circumstances in which the shareholder may exercise this particular incident of managerial authority.”  Kamen v. Kemper Fin. Services, Inc., 500 U.S. 90 (1991).  Demand futility can usually be found when the decisionmakers are themselves personally interested in the outcome of the subject dispute.

Alternatively, in certain circumstances a shareholder who holds a claim can directly file a lawsuit against the corporation for a right that he himself owns, as opposed to the corporation.  This avenue of business litigation bypasses the requirement to make a demand.  The law concerning whether a board of directors properly exercises its business judgment after receiving a demand as well as the law concerning whether a cause of action should be “direct” or “derivative” varies between the states.  Accordingly, the question as to whether a shareholder will have an opportunity to seek relief in court will depend on which law applies in questions as to the board’s business judgment and whether the shareholder has a direct cause of action.

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Businesses seeking to enforce their non-compete agreements often need to seek a temporary injunction to prevent irreparable harm. Non-compete law is unique because the moving party does not need to provide evidence quantifying the amount of possible damages in order to show irreparable harm.  Under Florida law, the  business instead needs to allege that immeasurable damages would result without a temporary injunction.  Peter Mavrick is a Palm Beach non-compete attorney, and also advocates for clients in Boca Raton, Fort Lauderdale, and Miami, Florida.  Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

An example of this occurred in the case of Data Payment Sys., Inc. v. Caso, 253 So. 3d 53 (Fla. 3d DCA 2018). Data Payment Systems, Inc. (Data Payment), a payment processing company, entered a written sub-office agreement with Ignite Payments, Inc. (“Ignite”), an independent contractor. The sub-office agreement contained a non-compete clause and a confidentiality clause. Juan Marcos Batista (Batista) executed this agreement on behalf of Ignite. Batista and Christopher Caso (Caso) created Onepay LLC (Onepay). Data Payment then entered a sub-office agreement with One-pay with nearly identical non-compete and confidentiality clauses.

During the course of Ignite and Onepay’s work for Data Payment, Caso and Batista were provided access to Data Payment’s confidential information and trade secrets. Caso and Batista allegedly created Ireland Pay LLC (Ireland Pay), a payment processing service in direct competition with Data Payment in violation of the non-compete clause. Data Payment terminated its agreements with Ignite and Onepay because Caso and Bastista allegedly misappropriated Data Payment’s trade secrets to solicit its customers. Caso also allegedly threatened a Data Payment employee with violence.

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A company that successfully has its mark registered with the USPTO does not have immunity from other trademark owners claiming infringement.  A trademark owner with a higher priority may nevertheless sue under the Lanham act if it can show that there is a “likelihood of confusion” between the two marks.  Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Fort Lauderdale and Palm Beach.  The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

The Lanham Act permits trademark owners to sue other companies for violating their trademark rights.  15 U.S.C.A. § 1114(1) (“Any person who shall, without the consent of the registrant use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive […] shall be liable in a civil action [however] the registrant shall not be entitled to recover profits or damages unless the acts have been committed with knowledge that such imitation is intended to be used to cause confusion, or to cause mistake, or to deceive”).  To prevail on such a claim, “a plaintiff must demonstrate (1) that its mark has priority and (2) that the defendant’s mark is likely to cause consumer confusion.”  Frehling Enterprises, Inc. v. Int’l Select Group, Inc., 192 F.3d 1330 (11th Cir. 1999).

In business litigation concerning the issue of whether there is sufficient “likelihood of confusion” between two marks to support a claim of trademark infringement, federal courts analyze seven factors.  These factors include the“(1) type of mark, (2) similarity of mark, (3) similarity of the products the marks represent, (4) similarity of the parties’ retail outlets and customers, (5) similarity of advertising media used, (6) defendant’s intent and (7) actual confusion.”  Lone Star Steakhouse & Saloon, Inc. v. Longhorn Steaks, Inc., 122 F.3d 1379 (11th Cir. 1997).  “Of these factors, the type of mark and the evidence of actual confusion are the most important in this circuit.”  Dieter v. B & H Indus. of Sw. Florida, Inc., 880 F.2d 322 (11th Cir. 1989).  There is no “bright line” test setting forth the quantum of evidence of confusion to warrant a finding of trademark infringement.  Rather, the court “must take into consideration the circumstances surrounding each particular case.”  Lone Star Steakhouse & Saloon, Inc. v. Longhorn Steaks, Inc., 122 F.3d 1379 (11th Cir. 1997).

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The Families First Coronavirus Response Act (CARES Act) requires that employers permit their employees to have paid leave in certain circumstances related to the COVID-19 pandemic.  While the FFCRA is mandatory for qualifying businesses, the burden of this law is offset because employers receive a dollar-for-dollar tax credit for the wages paid pursuant to the act. Peter Mavrick is a Fort Lauderdale employment attorney, who defends businesses and their owners against employment law claims in South Florida. Such claims in include alleged employment discrimination and retaliation as well as claims for overtime wages and other related claims.

The CARES Act amended the Family Medical Leave Act (FMLA) to require employers to permit their employees to take paid leave in certain situations.  While the FMLA normally only applies to employers of at least 50 employees, the CARES Act applies to employers of “fewer than 500 employees.”  29 U.S.C. § 2620(a)(1)(B).  Employers of fewer than 50 employees may be exempt “when the imposition of such requirements would jeopardize the viability of the business as a going concern.”  29 U.S.C. § 2620 (a)(3)(B).  Such an employer may be exempt if the enforcement of the act would cause a business to no longer have positive cash flow or there are not sufficient workers to operate the business at a minimal capacity.  29 C.F.R. § 826.40.  The requirements for paid leave expire December 31, 2020, though the statute may be amended depending on the state of the pandemic as this deadline approaches.  29 U.S.C. § 2612 (a)(1)(F).

Generally, under this employment law, employers must provide paid leave to covered employees who are unable to work for particular COVID-19 related reasons.  To qualify, an employee must be employed for at least the previous 30 calendar days.  29 U.S.C. § 2620(a)(1)(A)(i).  There are two types of paid leave under the FFCRA.  The first is for employees that cannot work because he or she actually has or may have COVID-19.  This leave is limited to two weeks.  The second is for employees that cannot work because childcare facilities are not open.  These employees are permitted up to twelve weeks of paid leave.

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Disgruntled purchases of goods or services may later claim fraud by asserting that they relied on untrue statements made by the selling company when deciding to make the purchase.  However, a purchaser generally may not rely on a statement that qualifies as “puffery.”  A statement is puffery if it is merely a statement of opinion and does not otherwise contain a statement of objective fact.  Sometimes the line between a statement of opinion and a statement of an objective fact can be blurry Peter Mavrick is a Fort Lauderdale business litigation lawyer, and also represents clients in business litigation in Miami, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

A company may defend against business litigation claims that it misrepresented its products or services by asserting that the statements are mere “puffery.”  Puffery is the “expression of an exaggerated opinion—as opposed to a factual misrepresentation—with the intent to sell a good or service.” Black’s Law Dictionary (10th ed. 2014).  The puffery doctrine recognizes that purchasers should expect that sellers will exaggerate the quality of their goods or services and that the purchaser should be expected to form their own opinions.

The puffery doctrine has wide applicability in business litigation.  Generally, statements which qualify as puffery cannot support a plaintiff’s claim of misrepresentation, fraud, a violation of the Florida Deceptive and Unfair Trade Practices Act, and other similar causes of action.  Recent cases have also applied the doctrine of puffery to investor lawsuits under Rule 10b-5.  Carvelli v. Ocwen Fin. Corp., 934 F.3d 1307 (11th Cir. 2019) (holding the doctrine’s applicability under Rule 10b-5 within the Eleventh Circuit Court of Appeals, explaining “[e]xcessively vague, generalized, and optimistic comments—the sorts of statements that constitute puffery—aren’t those that a ‘reasonable investor,’ exercising due care, would view as moving the investment-decision needle—that is, they’re not material”).

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Businesses often execute non-compete agreements separate from but contemporaneously with an employment agreement. When the employment agreement contains an arbitration provision, but the non-compete agreement does not, parties can dispute whether the non-compete agreement is arbitrable. Further, it becomes more complicated if the non-compete agreement contains wording that suggests that disputes must be litigated in court. Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Miami, Boca Raton, and Palm Beach, Florida.  Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

An example of this occurred in the case of Hedden v. Z Oldco, LLC, 44 Fla. L. Weekly D2631 (Fla. 2d DCA Oct. 30, 2019). Terry P. Hedden, Jr. (Hedden) sold his business to Z Oldco, LLC’s predecessor (Z Oldco) and agreed to become an employee for one year to assist with the transition of the business and maintain customer goodwill. Hedden entered into a Compensation Agreement and a Non-Compete Agreement. The Compensation Agreement governed the terms of the parties’ relationship and provided for the payment of a two-million-dollar bonus, to be paid out in intervals based on the success of the business, with the balance paid upon termination of Hedden’s employment. Payment of this bonus was conditioned upon Hedden’s continued compliance with the Non-Compete Agreement. The Non-Compete Agreement prohibited Hedden from operating a similar business for two years following termination of his employment.

Almost five years after termination of Hedden’s employment, Hedden sent Z Oldco a letter demanding payment of the bonus due under the Compensation Agreement. Z Oldco filed a declaratory judgment action, seeking a determination as to whether: (1) Hedden violated the Non-Compete Agreement (Count I); (2) the bonus was due to Hedden under the Compensation Agreement if he was in violation of the Non-Compete Agreement (Count II); and (3) whether the terms of the Compensation Agreement had been fulfilled such that payment of the Exit Bonus was due to Hedden (Count III). Hedden moved to compel arbitration pursuant to the arbitration clause of the Compensation Agreement.

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The “opposition clause” of Title VII of the Civil Rights Act of 1964 prevents covered employers from retaliating against employees because they oppose a practice which is unlawful under the Act.  Accordingly, an employer can be liable for terminating an employee for complaining about allegedly discriminatory conduct.  A recent en banc case with the United States Court of Appeals for the Eleventh Circuit has affirmed the boundaries of the opposition clause and concluded that an employer need not tolerate an employee’s unreasonable opposition activities that interfere with her job.  Peter Mavrick is a Fort Lauderdale employment attorney, who defends businesses and their owners against employment law claims. Such claims in include alleged employment retaliation as well as claims for overtime wages and other related claims.

Title VII makes it unlawful for qualified employers to discriminate against employees on the basis of the employees’ race, color, religion, sex, or national origin.”  42 U.S.C. § 2000e-2(a)(2).  An employee is protected from retaliation by the employer when he participates in a proceeding concerning claims under Title VII, or, opposes an employment practice which he reasonably believes to be in violation of Title VII.  The anti-retaliatation provision of Title VII states that “[i]t shall be an unlawful employment practice for an employer to discriminate against [an employee], because he has opposed any practice made an unlawful employment practice by this subchapter, or because he has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under this subchapter.” 42 U.S.C.A. § 2000e-3(a).

When employees sue and claim that they were retaliated against because of a “protected activity,” employment lawyers should generally defend by showing that the allegedly retaliatory conduct occurred for a legitimate, non-discriminatory reason.  An “employer may fire an employee for a good reason, a bad reason, a reason based on erroneous facts, or for no reason at all, as long as its action is not for a discriminatory reason.”  Nix v. WLCY Radio/Rahall Communications, 738 F.2d 1181 (11th Cir.1984).  For the employee’s claims to survive, he must show that the employer’s reasoning is pretext for an intention to retaliate. “[A] reason is not pretext for [retaliation] ‘unless it is shown both that the reason was false, and that [retaliation] was the real reason.’” Springer v. Convergys Customer Mgmt. Grp. Inc., 509 F.3d 1344 (11th Cir. 2007).  “Provided that the proffered reason is one that might motivate a reasonable employer, an employee must meet that reason head on and rebut it, and the employee cannot succeed by simply quarreling with the wisdom of that reason.” Chapman v. AI Transp., 229 F.3d 1012 (11th Cir. 2000).

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The business judgment rule can shield directors of corporations, members of limited liability companies, and associations from liability against claims of negligent management.  The business judgment rule is designed to prevent courts from “Monday morning quarterbacking” the decisions made by those in control of organizations merely because the plaintiff does not like the outcome of a decision.  These decisionmakers may be liable, however, if a plaintiff can show that the decision-maker breached the duty of loyalty to the organization or when the decision-maker does not follow its own rules in making the decision.  Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Fort Lauderdale and Palm Beach.  The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

The business judgment rule prevents courts from scrutinizing the reasoned and legitimate exercise of discretion by an organization’s decision-makers.  “Courts have properly decided to give directors a wide latitude in the management of the affairs of a corporation provided always that judgment, and that means an honest, unbiased judgment, is reasonably exercised by them.”  Royal Harbour Yacht Club Marina Condo. Ass’n, Inc. v. Maresma, 45 Fla. L. Weekly D612 (Fla. 3d DCA Mar. 18, 2020).  “In Florida, corporate directors generally have wide discretion in the performance of their duties and a court […] will not attempt to pass upon questions of the mere exercise of business judgment, which is vested by law in the governing body of the corporation.”  Lake Region Packing Ass’n, Inc. v. Furze, 327 So. 2d 212 (Fla. 1976).

“The rule’s essential premise is that ‘absent any wrongdoing, the board’s business decisions should not be fodder for in-depth ex post legal scrutiny.’”  Int’l Ins. Co. v. Johns, 874 F.2d 1447 (11th Cir. 1989).  Consequently, courts analyzing whether the business judgment rule applies will look to the moment that the decision was made and not what occurred afterwards.  Miller v. Homeland Prop. Owners Ass’n, Inc., 284 So. 3d 534 (Fla. 4th DCA 2019) (“And we must look to the circumstances surrounding the Association’s exercise of that judgment as they existed when the action was taken, not five years later”).

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Under Florida law, every contract has a duty of good faith and fair dealing.  A party to a contract generally cannot subvert the very purpose of a contract through an improper exercise of its discretion.  A party does not violate the duty of good faith and fair dealing, however, when the parties expressly contemplated the method by which the party would exercise its discretion and the party complied with that method.  Peter Mavrick is a Fort Lauderdale business litigation lawyer, and also represents clients in business litigation in Miami, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

Essentially, the contractual duty of good faith makes it unlawful for a contracting party to violate the spirit of the contract by improperly exercising discretion in a way that is not contradicted by the agreement.  “[E]very contract includes an implied covenant that the parties will perform in good faith.”  Cty. of Brevard v. Miorelli Eng’g, Inc., 703 So. 2d 1049 (Fla. 1997).  “[T]he implied covenant of good faith and fair dealing is designed to protect the contracting parties’ reasonable expectations.” Speedway SuperAmerica, LLC v. Tropic Enterprises, Inc., 966 So. 2d 1 (Fla. 2d DCA 2007).  “[W]here the terms of the contract afford a party substantial discretion to promote that party’s self-interest, the duty to act in good faith nevertheless limits that party’s ability to act capriciously to contravene the reasonable contractual expectations of the other party.”  Cox v. CSX Intermodal, Inc., 732 So.2d 1092 (Fla. 1st DCA 1999).  For example, the covenant of good faith and fair dealing can prevent a landlord from unreasonably withholding his consent to assign a lease when the terms of the lease only permit assignment upon the written consent of the landlord. Fernandez v. Vazquez, 397 So.2d 1171 (Fla. 3d DCA 1981) (holding that it may be a violation of the duty of good faith for a landlord to withhold consent for leverage in contract negotiations).

“[T]here are two limitations on [claims of a breach of the contractual duty of good faith]: (1) where application of the covenant would contravene the express terms of the agreement; and (2) where there is no accompanying action for breach of an express term of the agreement.” QBE Ins. Corp. v. Chalfonte Condo. Apartment Ass’n, Inc., 94 So. 3d 541 (Fla. 2012).  Accordingly, the duty of good faith must “relate to the performance of an express term of the contract and is not an abstract and independent term of a contract which may be asserted as a source of breach when all other terms have been performed pursuant to the contract requirements.” Ins. Concepts & Design, Inc. v. Healthplan Servs., Inc., 785 So.2d 1232 (Fla. 4th DCA 2001); Johnson Enter. of Jacksonville, Inc. v. FPL Group, Inc., 162 F.3d 1290 (11th Cir. 1998) (“[G]ood faith requirement does not exist ‘in the air’. Rather, it attaches only to the performance of a specific contractual obligation”).  “Allowing [a party] to pursue the claim for breach of duty of good faith where no enforceable executory contractual obligation on [other party’s] part remained would add an obligation to the contract which was not negotiated by the parties and not in the contract.”  Hosp. Corp. of Am. v. Florida Med. Ctr., Inc., 710 So. 2d 573 (Fla. 4th DCA 1998).  Parties can avoid potential claims of the breach of the covenant of good faith and fair dealing by expressly agreeing to the method by which discretion may be exercised or providing terms which indicate that the party has complete discretion to take such an action.

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Florida and Maryland’s non-compete laws are protective of business interests in customer relationships and goodwill.  Due to the advent of remote working capabilities, there are often cases when the non-compete laws of more than one state may be implicated.  For example, a Florida employee may work in Florida for a company based in Maryland, and sign a non-compete agreement that contains an explicit provision requiring that Maryland law controls any disputes between employer and employee.  In the context of employment law, the Florida law and Maryland law differ in contract interpretation and the burdens created by non-compete agreements on employees. Florida courts have found that a non-compete clause, itself, must be reasonably necessary to protect the established interests of the business. These subtle differences can impact the determination by the courts. Maryland courts have held that the enforcement of a non-compete clause must show, among other things, that the agreement is “no wider in scope and duration than is reasonably necessary to protect the employer’s interests.” CytImmune Scis., Inc. v. Paciotti, 2016 WL 3218726 (D. Md. June, June 10, 2016). Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Miami, Boca Raton, and Palm Beach, Florida.

Florida courts tend to limit their review to the wording of non-compete contracts for indications of the parties’ intent. “In construing contracts, the court’s concern is to determine the intention of the parties from the language used, objects to be accomplished, other provisions in the Contract which might shed light upon the question, and circumstances under which it was entered into.”  Bal Harbour Shops, Inc. v. Greenleaf & Crosby Co., Inc., 274 So. 2d 13 (Fla. 3rd DCA 1973). Generally, parol evidence (evidence of prior or contemporaneous negotiations and agreements that contradict, modify, or vary the contractual terms of a written contract) is admissible only to clarify ambiguous terms of contract in order to ascertain the parties’ intent. O’Neill v. Scher, 997 So. 2d 1205 (Fla. 3d DCA 2008) (Court could not indulge in modification of the unambiguous express terms).

Maryland courts use the “objective theory of contract interpretation” to determine “from the language of the agreement itself what a reasonable person in the position of the parties would have meant at the time it was effectuated.” Dennis v. Fire & Police Emp’rs’ Ret. Sys., 390 A.2d 737 (Md. 2006). Dennis held that the test is not what the parties to the contract intended it to mean, but what a reasonable person in the parties’ position would have thought it to mean. In the case of Highland Consulting Group, Inc. v. Soule, 2020 WL 1272516 (S.D. Fla. March 17, 2020), the district court, applying Maryland law, addressed whether the defendant complied with the contractual requirement to return the company’s property upon termination of employment. The former employee returned the property to the company only in response to a discovery request in the lawsuit.  Soule held that no reasonable person could have interpreted the phrase “[u]pon termination of employment,” to be satisfied only after a lawsuit was filed and only in response to a discovery request.  Soule considered this unambiguous phrase in by what a reasonable person in the parties’ shoes would have thought this phrase in the contract to mean. This standard is more arbitrary than the Florida standard, because it can encompass the subjective viewpoint of the trier of fact.

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