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Articles Posted in Business Litigation

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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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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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A derivative lawsuit is a lawsuit whereby a shareholder of a corporation sues a third party on behalf of the corporation. Any recovery from such lawsuits are the property of the corporation, not the shareholder who brought the lawsuit. Often times, the defendant of a derivative lawsuit will be someone close to the corporation, such as a director or corporate officer, who has allegedly engaged in, or continues to engage in, improper conduct to the detriment of the corporation. However, a shareholder cannot bring a derivative lawsuit whenever he, she, or it wishes. In Florida, derivative lawsuits are governed by § 607.07401, Florida Statutes, stating in pertinent part:

(2) A complaint in a proceeding brought in the right of a corporation must…allege with particularity the demand made to obtain action by the board of directors and that the demand was refused or ignored by the board of directors…

As such, under Florida law, a shareholder must first make a demand to the board of directors to bring the lawsuit. It is only when the board of directors refuses to bring such an action that the shareholder may file the derivative suit. In some cases, however, a shareholder may attempt to circumvent the pre-suit demand requirement by alleging it would be “futile” to bring such a demand to the board of directors. The Fort Lauderdale business litigation attorneys at the Mavrick Law Firm have successfully defended corporate officers and directors in corporate derivative actions.

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Today, many businesses are including arbitration provisions for the resolution of any disputes or controversies that may arise from the contract. This is because arbitration provides a more efficient and less costly alternative to litigation. Despite the existence of such arbitration provisions within business contracts, often times, when a dispute arises, a plaintiff will still file a lawsuit in state or federal court. The Miami arbitration attorneys at the Mavrick Law Firm have extensive commercial arbitration experience and can help businesses dismiss such lawsuits and enforce valid arbitration agreements.

When faced with the scenario supra, it is critical that the first thing the defendant-business does is assert its right to arbitration, most often via a motion to compel arbitration. This is because a party’s right to arbitrate, like any other contractual right, can be waived. Under Florida law, it is well settled that active participation in a lawsuit can waive your right to arbitrate. This was demonstrated by the Fifth District Court of Appeal’s decision Morrell v. Wayne Frier Manufactured Home Ctr., 834 So. 2d 395 (Fla. 5th DCA 2003).

In Morrell, purchasers of a mobile home brought suit against a mobile home sales company. After the purchasers filed their complaint in October 2000, the company answered and asserted affirmative defenses against the purchasers and filed a motion to dismiss the lawsuit, asserting that some of the plaintiff’s did not have standing to bring the lawsuit. The parties thereafter participated in a settlement conference, exchanged discovery, and trial was scheduled to occur during December 10, 2001 docket. However, in September 2001, the company submitted a motion to stay the proceedings and refer the matter to arbitration. On the eve of trial in December 2001, the trial court granted the company’s motion and referred the matter to arbitration. On appeal, the Fifth DCA reversed, explaining that “a party waives its right to arbitration by: (1) actively participating in the lawsuit; or (2) taking action which is inconsistent with the right to arbitrate.” The court found that because the company had already participated in the subject lawsuit, it had waived its right to arbitrate.

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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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Arbitration is an increasingly popular alternative to traditional litigation because arbitration proceedings are faster and more cost effective. Many would-be litigants are incorporating binding arbitration clauses into their agreements for the economic benefits. However, parties who enter agreements with arbitration clauses should consider the conclusive nature of an arbitration proceeding. As arbitration clauses become prevalent in the consumer and commercial context, more and more individuals and businesses will face the reality of an oftentimes-unreviewable arbitration award. The Mavrick Law Firm has significant experience with assessing the validity of arbitration clauses and successfully representing clients in arbitration proceedings.

The Revised Florida Arbitration Code allows parties to arbitration to file a motion to vacate, modify, or correct an award in limited circumstances. See §§ 682.13 – 682.14, Fla. Stat. § 682.13 provides, in part, that a court can vacate an arbitration award only if:

(a) The award was procured by corruption, fraud…(b) There was:1. Evident partiality by an arbitrator …3. Misconduct by an arbitrator prejudicing the rights of a party to the arbitration proceeding; (c) An arbitrator refused to postpone the hearing upon showing of sufficient cause for postponement, refused to hear evidence material to the controversy, …(d) An arbitrator exceeded the arbitrator’s powers;(e) There was no agreement to arbitrate …(f) The arbitration was conducted without proper notice …

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Prospective business purchasers should diligently verify the accuracy of a sellers representations because misrepresentations made by sellers sometimes are inactionable under Florida law. Florida courts routinely apply the doctrine of caveat emptor, otherwise known as the buyer beware doctrine, to preclude misrepresentation claims that arise out of commercial transactions. See Transcapital Bank v. Shadowbrook at Vero, LLC, 2017 WL 3169271, at *4 (Fla. 4th DCA July 26, 2017) (citing Wasser v. Sasoni, 652 So.2d 411, 412 (Fla. 3d DCA 1995) (“[T]he doctrine of caveat emptor, or ‘buyer beware,’ is still the common law rule applied to purchasers” in commercial transactions)). The buyer beware doctrine places the burden of diligence on consumers. Prospective business owners must, at a minimum, try to make an assessment of a seller’s representations concerning the business before purchasing the business. Courts are generally not sympathetic to seemingly imprudent would-be plaintiffs. The Fort Lauderdale office of the Mavrick Law Firm advises businesses sellers and prospective purchasers on issues concerning the sales of businesses.

Exceptions to the buyer beware doctrine exist. Purchasers may be able to prevail in misrepresentation claims if they can prove that: 1) a trick was employed to prevent the purchaser from making independent inquiry; 2) the purchaser did not have an equal opportunity to become apprised of the misrepresented fact; and, 3) the seller disclosed some facts but failed to disclose the whole truth. Transcapital Bank, 2017 WL 3169271, at *5.  However, the exceptions do not apply to commercial transactions between sophisticated parties. See Wasser v. Sasoni, 652 So. 2d at 413 (“where the parties are equally sophisticated, and have an equal opportunity to discover a defect…a negligent purchaser is not justified in relying upon a misrepresentation which is obviously false, and ‘which would be patent to him if he had utilized his opportunity to make a cursory examination or investigation’”). Courts expect relatively sophisticated buyers to use their acumen to screen out deceptive tactics.

If prospective purchasers have any doubt regarding the viability of the buyer beware doctrine, the Fourth District Court of Appeal’s recent decision in Transcapital Bank v. Shadowbrook at Vero, LLC, is instructive. The court found that the buyer beware doctrine entitled the defendants to a judgment as a matter of law on the plaintiffs’ fraudulent misrepresentation claim. See 2017 WL 3169271, at *5 (“Even if … defendants … misrepresented the property’s appraised value, such a misrepresentation would not be actionable under the doctrine of [buyer beware] in the absence of … fraudulent means in preventing a prospective purchaser from making an examination of the property under consideration”).  Therefore, prospective purchasers have a duty to protect themselves when evaluating the representations of the seller of a business.  Moreover, if purchasers have doubts about the validity of a seller’s claims, they may want to protect their interests by avoiding certain contractual terms that could prevent a misrepresentation claim. See Wasser v. Sasoni, 652 So. 2d at 413 (holding that contractual provisions such as “integration clauses … are recognized as valid defenses to claims of fraud [ and misrepresentation]” when there is no evidence that the contract induced by fraud.) Moreover, fraud can be difficult to prove as “there must be evidence of ‘the [speaker’s] knowledge that the representation is false.” MDVIP, Inc. v. Beber, 42 Fla. L. Weekly D1248 (Fla. 4th DCA May 31, 2017). In sum, purchasers who do not make best efforts to evaluate a business do so at their own peril.

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The Florida Deceptive and Unfair Trade Practices Act (FDUTPA), § 501.201 et seq., Florida Statutes, is a remedial statute intended “to protect the consuming public and legitimate business enterprises from those who engage in unfair methods of competition, or unconscionable, deceptive, or unfair acts or practices in the conduct of any trade or commerce.” § 501.202(2), Fla. Stat.  Rollins, Inc. v. Butland, 951 So. 2d 860 (Fla. 2d DCA 2006), defines a deceptive practice as “one that is likely to mislead” and an unfair practice as “one that offends established public policy” and/or “is immoral, unethical, oppressive, unscrupulous or substantially injurious.”  The explicit wording of FDUTPA and its interpretations by Florida courts are purposefully broad and intended to help protect consumers and businesses against a wide range of deceitful or unfair trade practices.  However, the broad wording and interpretations of FDUTPA could also be harmful to businesses, as they provide an avenue for customers and/or competitors adversely affected by lawful trade practices to bring meritless lawsuits.  A perfect example is when a party brings a FDUTPA claim against a business based on pre-suit communications threatening potential litigation, such as a demand letter or a cease and desist letter.  It is common practice for businesses to send such pre-suit communications as an attempt to curb another party from further engaging in conduct that is either violating the law or some other obligation the party owes to the business without the need for costly litigation.  This is useful in situations that include, inter alia, when a former employee is violating a non-compete agreement, when a party to a contract fails to fulfill his or her contractual obligations, or when a party is infringing on a business’s trademark or interfering with advantageous business relationships.  Despite the practicality of using these pre-suit communications, the recipients typically view it as harassing and threatening conduct forming the basis of FDUTPA claims.

One way businesses can defend against and dismiss these meritless FDUTPA claims is by invoking immunity under the Noerr-Pennington doctrine.  The foundation of Noerr-Pennington immunity arises from the First Amendment’s right to petition and it is traditionally utilized to shield a defendant from antitrust liability for resorting to litigation to obtain an anticompetitive result from the court.  Nevertheless, McGuire Oil Co. v. Mapco, Inc., 958 F.2d 1552 (11th Cir. 1992), extended the doctrine to protect “pre-litigative and litigative activities” from claims for unfair trade practices.

Based on the Eleventh Circuit’s reasoning in McGuire Oil Co., Florida federal courts have consistently applied Noerr-Pennington immunity to dismiss actions based on pre-suit communications.  PODS Enterprises, Inc. v. ABF Freight Sys., Inc., 100 U.S.P.Q.2d 1708 (M.D. Fla. 2011), and Atico Intern. USA, Inc. v. LUV N’ Care, Ltd., 2009 WL 2589148 (S.D. Fla. Aug. 19, 2009), both dismissed FDUTPA claims based on pre-litigation letters, holding that pre-suit demand and cease and desist letters are “immunized” under Noerr-Pennington.  Similarly, Rolex Watch U.S.A., Inc. v. Rainbow Jewelry, Inc., 2012 WL 4138028 (S.D. Fla. Sept. 19, 2012), applied Noerr-Pennington to dismiss a defendant’s FDUTPA counterclaim based on pre-suit threats of litigation and alleged injuries it sustained in having to defend against the plaintiff’s trademark infringement suit.  Another example, Marco Island Cable, Inc. v. Comcast Cablevision of S., Inc., 2006 WL 1814333 (M.D. Fla. July 3, 2006), granted partial summary judgment to the defendant for a FDUTPA claim based on pre-suit letters threatening to sue to enforce defendant’s exclusivity contracts.  These cases are just a few examples of how courts have applied the Noerr-Pennington doctrine to help business defend against meritless FDUTPA lawsuits.

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