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Articles Posted in Business Litigation

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Spoliation of evidence is a circumstance that may arise in business litigation when one party fails to preserve or intentionally destroys evidence after becoming aware of an imminent lawsuit.  Spoliation is defined as “[t]he intentional destruction, mutilation, alteration, or concealment of evidence [.]” SPOLIATION, Black’s Law Dictionary (11th ed. 2019).  Spoliation issues in business litigation sometimes arise because documents, both in paper and electronic format, are typically important cases in commercial litigation disputes.  Parties sometimes destroy or fail to preserve key documents that are important to determining what are the true facts in the lawsuit.  The range of remedies available for a party who has been aggrieved by another party’s destruction (or spoliation of evidence) depends on the severity of the wrongful act done and the prejudicial effect of the missing evidence.  When a case involves negligent spoliation, courts have utilized adverse evidentiary inferences and adverse presumptions during trial to address the lack of evidence. When a case involves intentional spoliation, courts have often stricken pleadings or entered default judgments. Martino v. Wal–Mart Stores, Inc., 908 So.2d 342 (Fla. 2005).  Peter Mavrick is a Fort Lauderdale business litigation attorney.  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.

In the case of Golden Yachts, Inc. v. Hall, 920 So. 2d 777 (Fla. 4th DCA 2006), William Scott Hall (“Hall”) fell while aboard a boat at Golden Yachts, Inc. (“Golden Yachts”). The boat’s cradle consisted of two “H-frames” manufactured by Water–Land Manufacturing, Inc., a co-defendant, and assembled with wood and hardware that Golden Yachts purchased from Home Depot. After the accident, Golden Yachts stowed the cradle’s component parts next to a storage container. A videographer filmed the boat yard where the cradle was stored. The manufacturer’s sales representative inspected and photographed the damaged boat cradle. About ten days after the accident, Hall’s counsel wrote to Golden Yachts and requested that all material from the cradle be preserved and offered to store the material if Golden Yachts was unwilling or unable. Golden Yachts hired an investigator, who photographed and measured the debris from the boat cradle and interviewed employees and other witnesses to the accident.

Hall and his wife filed a lawsuit against Golden Yachts for negligence and loss of consortium. Hall later amended the complaint to add the manufacturer as a defendant. Two years after the accident, both plaintiffs and the manufacturer requested inspection of the boat cradle debris. Golden Yachts set aside two H-frames that it believed were involved in the accident, but none of the wood or hardware could be located. The experts who previously examined the H-frames, determined that these were not the H-frames that were involved in the accident. Golden Yachts could not explain what happened, why the H-frames were not been securely stored, or how the second pair of damaged H-frames came into its possession. The investigator hired by Golden Yachts also purged his files. The investigator testified that his common business practice was to turn all investigative material over to the hiring party and then discard the records. Golden Yachts denied receiving the investigator’s photographs but produced some copies of some of the photographs. The plaintiffs amended their complaint to include a claim for spoliation of evidence against Golden Yachts. However, the Halls’ first-party spoliation claims were not allowed. The manufacturer then filed a motion for sanctions against Golden Yachts and requested an adverse inference jury instruction. An adverse inference jury instruction informs the jury that potentially self-damaging evidence was in the possession of a party and the party lost or destroyed the evidence. The trial court denied the motion for sanctions but granted the request for an adverse inference jury instruction. The jury found Golden Yachts was completely liable and a final judgment was entered. Golden Yachts immediately appealed.

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Parties involved in a business litigation dispute may sometimes seek extraordinary remedies when they believe the circumstances warrant it.  A party will sometimes seek to enjoin or compel another’s conduct to prevent them from causing irreparable harm through their action or inaction.  In business litigation, one party often tries to get the court to order a party to refrain from a particular action or compel a certain action, such as, for example, a court order allowing one party use of an easement over a parcel of real estate or an order requiring a party to return personal property or real property to an opposing party in litigation.  Courts, however, are limited in their lawful authority to require an opposing party in business litigation to sign a contract.  A recent Florida case has explained that the court cannot require a person to enter into a contract which the person does not desire to enter into, even when the failure to do so would cause extraordinary harm.  Peter Mavrick is a Miami business litigation attorney.  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.

Generally, business contracts are no different from any other type of contracts: they govern the terms of the relationship between the contracting entities which are enforceable by law.  Under Florida law, “[c]ontracts are voluntary undertakings, and contracting parties are free to bargain for—and specify—the terms and conditions of their agreement.” Okeechobee Resorts, L.L.C. v. E Z Cash Pawn, Inc., 145 So. 3d 989 (Fla. 4th DCA 2014).

Courts have consistently found that the freedom for a person or company to associate with others and agree to be bound by the agreed-upon terms of that association are important rights which the government cannot interfere with except the most extraordinary circumstances. “[I]t is a matter of great public concern that freedom of contract be not lightly interfered with.” City of Largo v. AHF-Bay Fund, LLC, 215 So. 3d 10 (Fla. 2017). “The right to contract is one of the most sacrosanct rights guaranteed by our fundamental law” Miles v. City of Edgewater Police Dep’t/Preferred Governmental Claims Sols., 190 So. 3d 171 (Fla. 1st DCA 2016).   “The right to make contracts … is both a liberty and property right and is within the protection of the guaranties against the taking of liberty or property without due process of law.”

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Florida companies often transact business outside the State of Florida and abroad.  When those transactions go wrong, it can be important for both strategic and convenience reasons for the litigation to occur in Florida.  Peter Mavrick is a Fort Lauderdale business litigation lawyer.  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.

In the seminal precedent Venetian Salami Co. v. Parthenais, 554 So. 2d 499 (Fla. 1989), the Supreme Court of Florida stated in pertinent part:

In determining whether long-arm jurisdiction is appropriate in a given case, two inquiries must be made. First, it must be determined that the complaint alleges sufficient jurisdictional facts to bring the action within the ambit of the statute; and if it does, the next inquiry is whether sufficient “minimum contacts” are demonstrated to satisfy due process requirements.

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The judicial remedies for victims of trademark infringement  vary depending upon the intentions of the infringer. A Florida business which has been victimized by a malicious counterfeiter can seek lost profits, treble damages, attorneys’ fees, and other remedies. By contrast, a company which accidentally violated trademark law has significantly less exposure. A recent United States Supreme Court precedent, in Romag Fasteners, Inc v. Fossil, Inc., 140 S. Ct. 1492 (2020), settled whether “lost profits” is an available remedy for unintentional trademark infringement.  Peter Mavrick is a Miami business litigation lawyer.  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 makes it unlawful for a party to sell goods which appear to originate from a trademark holder. Specifically,

(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which–

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A previous article discussed how it is unlawful under the Florida Uniform Trade Secrets Act (FUTSA) to take a trade secret using “improper means.”  As technology has developed, new methods of commercial reconnaissance can make it difficult to determine whether method was lawful acquisition or unlawful espionage.  Peter Mavrick is a Fort Lauderdale business litigation lawyer, representing 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.

Under FUTSA, it is unlawful for a business to misappropriate, use, or disclose another’s trade secrets when the business knew or had reason to know that it was acquired through “improper means.”  § 688.002(2).  While it is clear that “improper means” includes theft and other crimes, it is less obvious when the reconnaissance crosses the line and becomes unlawful.  This line is further blurred as technology continues to develop to allow information to be acquired remotely.

In E. I. duPont deNemours & Co. v. Christopher, 431 F.2d 1012 (5th Cir. 1970), the United States Court of Appeals for the Fifth Circuit addressed whether the use of a plane to fly over the construction of a factory was an “improper means” to discover trade secrets.  In this important federal court precedent, DuPont held that the use of spy planes was an improper means and explained the legal analysis of trade secret misappropriation:

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Usually when a shareholder sues a corporation, the shareholder does so by means of a “derivative” action.  Derivative means “coming from another.”  A derivative action is a lawsuit that a shareholder files on behalf of the corporation against a third party – usually an officer, director or manager of the corporation – because of a loss or malfeasance by that third party that harmed the corporation.  However, when a corporation is small and closely held, sometimes the nature of the dispute between a shareholder and the corporation is such that a derivative action is inappropriate, and the shareholder should sue the corporation directly as an individual.  If a shareholder makes a mistake with regard to whether to sue derivatively or directly, the shareholder’s lawsuit may be dismissed. 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.

Florida courts have recognized that “as the community of interests between shareholders and their closely held corporation becomes more tightly interwoven, the basis upon which one differentiates derivative from individual actions becomes more critical and, as a consequence, the cases become less self-evident.”  Dinuro Investments, LLC v. Camacho, 141 So. 3d 731 (Fla. 3d DCA 2014).  The Florida legislature recently addressed the issue of when a shareholder can sue directly as an individual with the passage of Florida Statute section 607.0750.   It became law as of January 1, 2020.

Prior to enactment of the statute, Florida courts employed different tests to determine if a shareholder should sue derivatively or directly, but the law was not uniform.  As the Third District Court of Appeal noted, “the current Florida doctrine explaining which actions should be maintained directly and which must be brought derivatively is incredibly opaque…”  Id. 

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The Florida Uniform Trade Secrets Act (FUTSA) allows Florida businesses who have had their trade secrets misappropriated to seek damages or an injunction against the perpetrator of the misappropriation.  For the acquisition to be an unlawful misappropriation, the confidential information must usually have been acquired through “improper means.”  It is lawful for a Florida business to acquire and use another company’s trade secret for itself if it acquired that confidential information through proper means, such as through independent discovery of the trade secret, reverse engineering of the product which uses the trade secret, or through the voluntary disclosure by an owner of the trade secret.  Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Fort Lauderdale, 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.

Pursuant to FUTSA, the misappropriation of a trade secret through improper means is unlawful.  The manner of acquisition of trade secret is a critical question in determining whether there has been unlawful misappropriation.  Generally, if one knows or has reason to know that information was acquired through improper means, the use or disclosure of that information is unlawful.  FUTSA defines misappropriation to mean:

(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

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A party to a non-compete agreement that was breached by the employer, may preempt its enforcement by seeking a declaratory judgment. To be effective, the declaratory action must include all parties who have a right to enforce the non-compete agreement. “[B]efore any proceeding for declaratory relief is entertained all persons who have an ‘actual, present, adverse, and antagonistic interest in the subject matter’ should be before the court.” Fla. Dep’t of Educ. v. Glasser, 622 So.2d 944 (Fla.1993). Section 86.091, Florida Statutes states “[n]o declaration shall prejudice the rights of persons not parties to the proceedings.” Peter Mavrick is a Fort Lauderdale non-compete lawyer and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.  The Mavrick Law Firm also represents clients in non-compete litigation and business litigation in Miami, Boca Raton, and Palm Beach.

An example of this occurred in the case of Reinstein v. Pediatric Gastroenterology, Hepatology & Nutrition of Florida, P.A., 25 So.3d 54 (Fla. 2d DCA 2009).  L. Julio Reinstein, M.D. (Reinstein), purchased an interest in a medical practice (hereinafter the “P.A.”). Dr. McClenathan (McClenathan), the founder of the P.A., retained a majority interest. Reinstein, McClenathan, and the P.A. executed various contracts to memorialize the new practice. The pertinent contracts included: (1) an Operating Agreement; (2) a Stock Transfer Restrictions and Buy–Out Agreement (the Buy–Out Agreement); and (3) a Professional Services Employment Agreement (the Employment Agreement). The Buy-Out Agreement and the Employment Agreement contained non-compete agreements.

Reinstein filed a lawsuit seeking a declaratory judgment that the two noncompete agreements were not enforceable because the P.A. and McClenathan breached the agreements. Reinstein’s employment with the P.A. was subsequently terminated, and he opened a medical practice in the restricted area. The P.A. filed a separate lawsuit seeking injunctive relief and damages against Reinstein and his new medical practice for their alleged violations of the non-compete agreement. The P.A. and McClenathan also moved to enforce the arbitration provisions contained in the agreements. The trial court referred Reinstein’s claims for damages to arbitration and retained the claims relating to the enforceability of the non-compete agreements. The parties went to arbitration, where all of Reinstein’s claims for damages against McClenathan and the P.A. were resolved. The issues relating to the non-compete agreements were the only issues remaining for the trial court to resolve. The trial court consolidated Reinstein’s lawsuit and the P.A.’s lawsuit to decide in one case. McClenathan moved for partial summary judgment, seeking to be dismissed from the litigation. McClenathan contended that he was not the party seeking enforcement of the non-compete agreement, so he should not be named individually in Reinstein’s claims.  The non-compete clause in the Buy-Out Agreement contained a provision that provided, “the [P.A.] or any Shareholder … the right to seek monetary damages … and equitable relief” in the event of a breach of the non-compete agreement. However, the non-compete in the Employment Agreement only gave the P.A. the right to seek damages and equitable relief in the event of a breach.

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Florida businesses may seek rescission of a contract in certain circumstances when the contract was entered into because of fraud, accident, or a mistake of facts.  To preserve the legal right to invoke the remedy of rescission, when the basis for rescission is discover must immediately reject any further benefits under the contract and must usually offer to restore the other party to the same position that it was in prior to entering into the contract. Peter Mavrick is a Fort Lauderdale business litigation attorney, 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.

After entering into a contract, a Florida business may discover something that reveals that it was a mistake to enter into the contract.  “Courts of equity will rescind an instrument based upon fraud, accident[,] or mistake.”  Bass v. Farish, 616 So. 2d 1146 (Fla. 4th DCA 1993).  Rescission allows a business to essentially undo a contract.  The remedy of rescission allows a Florida business to return to the same position it was in before entering into the contract in certain circumstances.  “The prime object of rescission is ‘to undo the original transaction and restore the former status’ of the parties.”  Billian v. Mobil Corp., 710 So. 2d 984 (Fla. 4th DCA 1998).

Under Florida law, a business cannot receive the benefit of a contract while simultaneously repudiating that same contract.  A party to a contract can waive its right to rescission if it “retains the benefits of a contract after discovering the grounds for rescission.” Mazzoni Farms, Inc. v. E.I. DuPont De Nemours & Co., 761 So. 2d 306 (Fla. 2000).  To obtain rescission, a party to a contract must show that it, “with reasonable promptness, denied the contract as binding upon him and that thereafter he was consistent in his course of disavowal of it.”  Rood Co. v. Board of Pub. Instruction, 102 So.2d 139 (Fla.1958); Steinberg v. Bay Terrace Apartment Hotel, Inc.,375 So.2d 1089 (Fla. 3d DCA 1979) (“[T]he remedy of rescission is clearly not favored by the courts, particularly when the complaining party has failed to promptly deny the contract as binding upon him and failed to follow a course of conduct manifesting a disavowal of it”).  By staying silent or acting as if the contract is still in effect, the party seeking rescission “will be bound by the contract in the same manner as if the [basis for rescission] had not occurred.” Rood Co. v. Board of Pub. Instruction, 102 So.2d 139 (Fla.1958).  AVVA-BC, LLC v. Amiel, 25 So. 3d 7 (Fla. 3d DCA 2009) (refusing rescission when purchase of business where landlord did not accept assignment but the business continued to operate).

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Trade secrets and confidential information can lose protection under the Florida Uniform Trade Secrets Act (FUTSA) when they are disclosed to third parties. One way to maintain protection of this information under FUTSA, is by entering into a confidentiality agreement with the third parties that will receive the information.  When trade secrets or confidential information is disclosed to employees without a confidentiality agreement, the information does not necessarily lose trade secret protection.  Peter Mavrick is a Miami business litigation lawyer who represents clients in trade secret litigation in Miami, Fort Lauderdale, Boca Raton, and Palm Beach.

A company seeking to protect its confidential information under FUTSA must show that the confidential information at issue was “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”  See § 688.002(4)(b), Florida Statutes.  Disclosing information to third parties can defeat the requisite element of secrecy under either FUTSA when the party given the confidential information is not informed of the confidential nature of the information or otherwise has no obligation to keep the information confidential. “Disclosing the ‘information to others who are under no obligation to protect the confidentiality of the information defeats any claim that the information is a trade secret.’” M.C. Dean, Inc. v. City of Miami Beach, Florida, 199 F. Supp. 3d 1349 (S.D. Fla. 2016).  The underlying principle behind this rule is that something cannot be a trade secret if it is freely shared with outsiders.

“This necessary element of secrecy is not lost, however, if the holder of the trade secret reveals the trade secret to another ‘in confidence, and under an implied obligation not to use or disclose it.’”  Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974); see Advantor Sys. Corp. v. DRS Tech. Services, Inc., 678 Fed. Appx. 839 (11th Cir. 2017) (“[T]rade secret protection is not lost when a company shares its trade secrets with an entity that has a duty to maintain the secrecy or limit access to the disclosed document”).

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