Modern building.Modern office building with facade of glass
Representing Businesses and Business Owners Contact Us Now!

Articles Posted in Business Litigation

Published on:

Just because parties sign two separate documents or contracts does not mean Florida law actually views these contracts separately. This is significant because rights and liabilities arising from one document may extend to the other. Many business litigation cases in Florida deal with business sales involving actions on a promissory note that usually involve a number of intertwined contracts (such as the purchase agreement and pledge agreements). Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

In Clayton v. Howard Johnson Franchise Sys., Inc., 954 F.2d 645 (11th Cir. 1992), the United States Court of Appeals for the Eleventh Circuit explained that, “where two or more documents are executed by the same parties, at or near the same time and concerning the same transaction or subject matter, the documents are generally construed together as a single contract.” Similarly, in Quix Snaxx, Inc. v. Sorensen, 710 So. 2d 152, 153 (Fla. 3d DCA 1998), Florida’s Third District Court of Appeals stated that, “Where a writing expressly refers to and sufficiently describes another document, the other document, or so much of it as is referred to, is to be interpreted as part of the writing.”  Quix Snaxx involved a settlement agreement between parties requiring them to enter into two distinct agreements: (1) a license agreement with an arbitration clause that outlined geographic limitations as to rights to sell certain vending machines and (2) a purchase order agreement without an arbitration clause that required a party to purchase a certain number of vending machines.  One party sued for a breach of the purchase order agreement and the other sought to compel arbitration based on the license agreement’s arbitration clause.  The court compelled arbitration.  It reasoned that the agreements “were all executed with a span of days, as part of an orchestrated effort to settle pending federal litigation” while the license agreement made reference to the purchase order agreement and its terms.  In the same vein, Collins v. National Fire Insurance Co., 105 So. 2d 190 (Fla. 2d DCA 1958), held that where a written contract refers to and sufficiently describes another document, that other document or so much of it as is referred to may be regarded as a part of the contract and therefore is properly considered in its interpretation.

Because Florida courts can view related contracts that as part of an integrated transaction, this can affect whether an aggrieved party should be filing a compulsory counterclaim.  Florida’s compulsory counterclaim rule, Florida Rule of Civil Procedure 1.170(a), requires claims arising out of the same “transaction or occurrence” to be brought together.  The Supreme Court of Florida’s precedent in Londono v. Turkey Creek, Inc., 609 So. 2d 14  (Fla. 1992), held that courts should apply the “logical relationship test” to determine whether claims arise from the same “transaction or occurrence.”  The measuring stick for “logical relation” is whether the claim “arises out of the same aggregate of operative facts.” The consequence of failing to assert compulsory counterclaims can result in waiver of a compulsory counterclaim.  Claims arising from documents “construed as a single contract” would likely satisfy the “logical relationship test,” because such claims would naturally have the same aggregate of operative facts.  Integrated contracts involve the same parties, having been executed around the same time, and relate to the same transaction. Accordingly, disputes relating to transactions involving multiple related agreements (such as many business sales) must be analyzed and litigated diligently to avoid waiving rights and to ensure all remedies are pursued.

Published on:

In business litigation cases, parties frequently plead the affirmative defense of “mitigation of damages.”  Although commonly referred to as the “duty” to mitigate damages, Florida courts instead refer to this as the doctrine of unavoidable consequences.  This legal doctrine prevents a party from recovering those damages inflicted by a wrongdoer which the injured party “could have avoided without undue risk, burden, or humiliation.”  Restatement (Second) of Contracts, § 350(1).  Precedent from the Supreme Court of Florida in Sys. Components Corp. v. Fla. Dep’t of Transp., 14 So.3d 967 (Fla. 2009), explained that “[t]he doctrine of unavoidable consequences…commonly applies in contract and tort actions…. The doctrine does not permit damage reduction based on what ‘could have been avoided’ through Herculean efforts.  Rather, the injured party is only accountable for those hypothetical ameliorative actions that could have been accomplished through ‘ordinary and reasonable care’ without requiring undue effort or expense.”  Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

Sys. Components Corp. further explained that “[t]here is no actual ‘duty to mitigate’ damages, because the injured party is not compelled to undertake any ameliorative efforts.”  Whether the doctrine applies in a given case depends on the facts.  A leading legal treatise on the law of contracts, J.D. Calamari and J.M. Perillo, The Law of Contracts sections 14-16 (1977), discussed limits to this doctrine: “If the relation between the parties is such that the wronged party was legally free to enter into similar contracts with others[,] the fact that subsequent to the breach the wronged party could have or actually has made similar contracts in no way reduces the damages to which he is entitled.”  In Graphic Associates, Inc. v. Riviana Restaurant Corporation, 461 So.2d 1011 (Fla. 4th DCA 1984), Florida’s Fourth District Court of Appeal explained that: “For example, an employee fired improperly cannot sit idly by and then recover his entire salary.  He is required to use reasonable efforts to obtain other suitable employment in order to reduce his damages.  Conversely, a new car dealership theoretically has an unlimited number of cars to sell.  A purchaser who breaches his contract to buy an automobile is not entitled to credit against claimed damages for other sales of automobiles made by the dealer.  The latter situation falls into the category of non-exclusive contracts, an area generally considered as an exception to the requirement of avoiding foreseeable consequences.”  Graphic Associates added that “if Graphic [(the appellant)] could have performed the Riviana contract in addition to all of the contracts which it actually did perform[,] then Riviana is not entitled to claim that some or all of those contracts were substitutes for its contract.  In other words, there would be no diminution of damages.  If performance of the Riviana contract would have precluded Graphic from accepting some or all additional contracts[,] then such potentially excluded contracts are properly considered as substitutes for the Riviana contract and profits therefrom mitigate the damages owed by Riviana to Graphic.”

To preserve its rights, it is essential for the defending party in litigation to assert mitigation of damages as an affirmative defense.  However, under Florida law, if the plaintiff made reasonable efforts to avoid the damages caused by the breach of contract, then the jury award should include reasonable amounts that the plaintiff spent for this purpose.

Published on:

Under Florida law, a “trade secret” must be a “secret” to the extent it is not generally know, and where the owner has taken reasonable efforts to maintain its secrecy.  Florida law (at Section 688.002(4), Florida Statutes) defines a “trade secret” to mean “information, including a formula, pattern, compilation, program, device, method, technique, or process that (a) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”  Florida, as with most states, operates under the Uniform Trade Secrets Act, which sets forth the elements of trade secret protection and legal remedies for misappropriation.  Therefore, the body of law from courts outside of Florida which operate under the Uniform Trade Secrets Act are often persuasive to Florida courts.  Peter Mavrick a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

The burden of proof is on the plaintiff to establish that a trade secret exists and that it is not known in the industry.  Eaton Corp. v. Appliance Valves Corp., 526 F.Supp. 1172 (N.D. Ind. 1981).  The The Fifth Circuit United States Court of Appeals in Cataphote Corp. v. Hudson, 444 F.2d 1313 (5th Cir. 1971), explained that although a trade secret does not require the uniqueness or novelty of a patent, “it must possess at least that modicum of originality which will separate it from everyday knowledge.”   Information which is too generally known to derive value from secrecy is unable to obtain trade secret protection even without disclosure.  For example, the United States District Court for the Southern District of California in Designs Art v. NFL Props., Inc., 2000 WL 1919787 (S.D. Cal. Nov. 27, 2000), held that the idea of a tiger for a logo for the Cincinnati Bengals does not merit trade secret protection because the idea of using the subject of a corporate name as a logo for that entity is generally known.  By contrast, the Fifth Circuit in FMC Corp. v. Varco Int’l, Inc., 677 F.2d 500 (5th Cir. 1982), explained that a process used in manufacturing or developing a product may rise to the level of a trade secret, even if similar products are on the market, as long as the precise method used in the process is not known in the industry.  Whether information is a secret “is a relative concept and requires a fact-intensive analysis.”  Premier Displays & Exhibits v. Cogswell, 2009 WL 8623588 (C.D. Cal. Dec. 23, 2009).

Courts have held that reasonable efforts to maintain secrecy include “advising employees of the existence of a trade secret, limiting access to a trade secret on ‘need to know basis,’ and controlling plant access.”  Courtney Temp. Serv., Inc. v. Leonel Camacho, 222 Cal.App.3d 1278 (1990).  A trade secret will be protected from disclosure to the owner’s competitor even in the absence of a written agreement.  Salisbury II, 735 F.Supp. 1545 (M.D. Ga. 1988).  The critical issue to secrecy is that reasonable measures are in place that will retain secrecy within the organization, including measures to avoid public disclosure, inadvertent disclosure, and intentional disclosure, as well as efforts to limit who in the organization has access to the trade secrets and on what terms.

Published on:

Florida appellate courts will scrutinize the method employed in calculating damages in business litigation, because this involves a pure question of law.  Precedent from the Supreme Court of Florida in W.W. Gay Mech. Contractor, Inc. v. Wharfside Two, Ltd., 545 So.2d 1348 (Fla. 1989) held that, generally, a business seeking to recover lost profits “must prove that 1) the defendant’s action caused the damage and 2) there is some standard by which the amount of damages may be adequately determined.”  In applying the second prong, Florida’s Fourth District Court of Appeal in HCA Health Servs. of Fla., Inc. v. Cyberknife Ctr. of the Treasure Coast, LLC, 204 So.3d 469 (Fla. 4th DCA 2016), held that “[e]vidence pertaining to loss of income or gross receipts, without specific evidence concerning expenses, is inadequate to prove lost profits.”   Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

Florida appellate courts have denied recover of lost profits where the proof at trial where the plaintiff merely presents prof of lost income or gross receipts, but not profits.  In this vein, E.T. Legg & Assocs. v. Shamrock Auto Rentals, Inc., 386 So.2d 1273 (Fla. 3d DCA 1980), explained in pertinent part that, “[a]s to the damages, the only evidence presented pertained to income or gross receipts, not profits, and testimony concerning expenses did not establish specific dollar amounts.  The evidence was therefore inadequate to prove lost profits.”  Similarly, Florida’s Second District Court of Appeal in Bass Venture Corporation v. Devom, LLC, 342 So.3d 821 (Fla. 2d DCA 2022), explained that “the trial evidence was insufficient as a matter of law to support the award of lost profits because it addressed only revenues from the relevant time period, not expenses–or, consequently, profits.”

Florida law does not require a party to establish lost profits with “absolute exactness.” The failure to do so will not defeat recovery.  Federal precedent from the United States Court of Appeals for the Fifth Circuit in Nat’l Papaya Co. v. Domain Indus., 592 F.2d 813 (5th Cir. 1979), has been persuasive authority in Florida appellate courts, including Florida’s Third District Court of Appeal in Del Monte Fresh Produce Co. v. Net Results, Inc., 77 So.3d 667 (Fla. 3d DCA 2011), holding that “an inability to establish the amount of lost profits with absolute exactness will not defeat recovery” and “the contervailing rules require ‘reasonable certainty’ in the proof of those damages and the assumptions underlying them.”  In other words, “[d]amages cannot be based upon speculation or guesswork, but must have some reasonable basis in fact.”  Smith v. Austin Dev. Co., 538 So.2d 128 (Fla. 2d DCA 1989).

Published on:

Florida law specifies, at Florida Statutes section 542.335, how and when a restrictive covenant (such as a non-compete agreement or non-solicitation agreement) may be enforced against a current or former employee. In a lawsuit to enforce an agreement that restricts or prohibits competition during or after the term of the restrictive covenants, section 542.335(1)(b) states that “[t]he person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.”  Proving a “legitimate business interest” is crucial in a non-compete case because the statute states that “[a]ny restrictive covenant non supported by a legitimate business interest is unlawful and is void and unenforceable.”  Under the statute, the term “legitimate business interest” includes “extraordinary or specialized training.”  Many businesses have tried to enforce non-compete agreements based on “extraordinary or specialized training,” when in injunction proceedings Florida courts have determined the training to be insufficient.  In such cases, courts have allowed the former employee to compete against the former employer on the grounds that this constitutes ordinary competition, not unfair competition.  Peter Mavrick a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

Important precedent from the Supreme Court of Florida in White v. Mederi Caretenders of Southeast Florida, LLC, 226 So.3d 774 (Fla. 2017), explained that Florida’s non-compete statute is designed to prevent only unfair competition, not all competition.  The White decision explained that, “[f]or an employer to be entitled to protection [against competition], ‘there must be special facts present over and above ordinary competition’ such that, absent a non-competition agreement, ‘the employee would gain an unfair advantage in future competition with the employer.”  Florida’s Second District Court of Appeal in Hapney v. Cent. Garage, Inc., 579 So.2d 127 (Fla. 2d DCA 1991), described “extraordinary training” in pertinent part: “that which goes beyond what is usual, regular, common, or customary in the industry in which the employee is employed.  The rationale is that if an employer dedicates time and money to the extraordinary training and education of an employee, whereby the employee attains a unique skill or an enhanced degree of sophistication in an existing skill, then it is unfair to permit that employee to use those skills to the benefit of a competitor when the employee has contracted not to do so.  The precise degree of training or education which rises to the level of a protectible interest will vary from industry to industry and is a factual determination to be made by the trial court.  Needless to say, skills which may be acquired by following the directions in the box or learned by a person of ordinary education by reading a manual do not meet the test.”  Based on this definition, the appellate court in Hapney concluded that Hapney did not receive extraordinary training because the training provided to him merely “extended his airconditioning installation and repair skills to include cruise control units and cellular telephones.”

In a later appellate decision, Dyer v. Pioneer Concepts, Inc., 667 So.2d 961 (Fla. 2d DCA 1996), held that an employer did not have a protectible interest due to “specialized training” where the evidence showed the employee, Dyer, received training in stripping floors and the use of equipment leased to grocery stores.  The employer also trained Dyer via attendance of seminars on development of interpersonal skills, hiring and firing techniques, and repairing equipment.  The appellate court in Dyer concluded that this type of training was insufficient under Florida Statutes section 542.335 to qualify as a “legitimate business interest.”

Published on:

The Computer Fraud and Abuse Act (sometimes referred to as the “CFAA”), 18 U.S.C. § 1030, is a federal law that prohibits access a computer and obtaining information without authorization or by exceeding authorized access.  The statute (at section 1030(a)(2)(C)) states that whoever “intentionally accesses a computer without authorization or exceeds authorization and thereby obtains … information from any protected computer[,] if the conduct involved an interstate or foreign communication … shall be punished.”  Although the CFAA is mainly a criminal statute, it also has a civil remedies applicable to business and employment litigation.  The statute (at 18 U.S.C. § 1030(g)) states that “any person who suffers damage or loss [as a result of a violation] … may maintain a civil action … for compensatory damages and injunctive relief or equitable relief.”  Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

A great deal of court litigation has been fought over whether the CFAA applies to situations where an employee was fully authorized to access and obtain certain information over a computer network, and then uses that network access for an illicit purpose such as for a competitor’s benefit.  Employers have argued that its employees are authorized to use their work computers only conducting company business, not for the benefit of a competitive business venture.  A problem with the CFAA is that the statute does not define the ambiguous wording “without authorization.”  Federal courts have a split in authority concerning whether an employee with an improper purpose may be held civilly liable under the CFAA for acquiring computer information that is otherwise permitted to the employee in the course of his employment.

One line of authority has relied on the Restatement (Second) of Agency § 112, which explains that “[t]he authority of an agent terminates if, without knowledge of the principal, he acquires [an] adverse interest or if he is otherwise guilty of a serious breach of loyalty to the principal.”  Courts following this line of authority have concluded there is a CFAA violation when an employee misuses his authority to access information on the employer’s computer network to to benefit someone other than the employer.  For example, in Int’l Airport Centers, L.L.C. v. Citrin, 440 F.3d 418 (7th Cir. 2006), the United States Court of Appeals For The Seventh Circuit held that “Citrin violated [the CFAA because] his authorization to access the laptop terminated when, having already engaged in misconduct and decided to quit IAC in violation of his employment contract, he resolved to destroy files that incriminated himself and other files that were also the property of his employer, in violation of the duty of loyalty that agency law imposes on an employee.”  Similarly, in a trade secret misappropriation lawsuit, the federal district court in Shurgard Storage Centers, Inc. v. Safeguard Self Storage, Inc., 119 F.Supp.2d 1121 (W.D. Wash. 2000), concluded the employer properly stated a claim under the CFAA against an employee who had “full access” to the employer’s computers, but who used that access to misappropriate trade secrets to benefit a competitor.

Published on:

Parties to contracts sometimes include a “liquidated damages” provision, i.e., a certain financial amount in the event of a triggering event specified in the contract.  Liquidated damages provisions seek to ensure compliance with the parties bargain when damages would be difficult to determine from the parties’ vantage when they sign the contract.  As Miami’s Third District Court of Appeal explained in Gables v. Choate, 792 So.2d 520 (Fla. 3d DCA 2001), “Florida law recognizes that where damages are not clearly ascertainable, parties to a contract may agree to a predetermined amount of damages that will flow from a breach of the contract.”  Under Florida law, “[l]iquidated damages arising from breach of contract are appropriate when (1) damages from the breach of are not readily ascertainable, and (2) the sum stipulated is not grossly disproportionate to the damages reasonably expected to follow from the breach.”  Resnick v. Uccello Immobilien GMBH, Inc., 227 F.3d 1347 (11th Cir. 2000).  Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

Florida law does not permit a liquidated damages clause in a contract that operates as a “penalty,” i.e., a mere punitive measure.   An excessive liquidated damages provision, however, is not necessarily a penalty.  In Secrist v. Nat’l Service Industries, Inc., 395 So.2d 1280 (Fla. 3d DCA 1981),  the appellate court explained that “[t]he fact that the liquidated damages may be excessive at the time of breach does not lead to the conclusion that the liquidated damages clause is a penalty and therefore not enforceable.”  In its Resnick decision, the United States Court of Appeals for the Eleventh Circuit explained “liquidated damages are inappropriate when they serve only to punish the breaching party.”   Resnick explained that where a liquidated damages provision contains “two separate and distinct parts,” any one of which is excessive, a court may properly enforce the provision found not to be excessive.

Florida courts have considered situations where a settlement agreement contains incorporates a trigger provision requiring the full amount of a default or consent judgment, and whether such a provision may be determined to be an unenforceable penalty, as opposed to a valid liquidated damages sum.  For example, Florida’s Fifth District Court of Appeal evaluated this issue in Crosby Forrest Prods., Inc. v. Byers, 623 So.2d 565 (Fla. 5th DCA 1993).  There, the plaintiff sued defendant for nonpayment of a contract for goods sold in the amount of $89,922.65.  The parties thereafter signed a settlement agreement containing a stipulation that defendants “owed [plaintiff] $93,899.91”, i.e., an extra amount for attorneys’ fees, costs, and interest.  As an incentive to timely pay under the settlement agreement, the defendants were required to “pay [plaintiff] $80,000” in a series of “installments.”  The contract provided, however, that “[i]n the event of a default of any payment” the court would have the authority to “immediately … enter judgment against [defendants] for any sums remaining unpaid on the amount stipulated to be due,” i.e., the stipulated amount of $93,899.91.  Unfortunately, the defendants made only three payments under the settlement agreement, but failed to make the fourth payment.  On appeal, the defendants argued that “the portion of the [settlement agreement] requiring [defendants] to pay the remaining balance of the original $93,899.91[,] rather than the balance of the $80,000,” was an unenforceable “penalty.”  They contended that “damages for the breach” of the settlement agreement were “the agreed upon amount of $80,000 less payments made,” which was “readily ascertainable,” and therefore the higher stipulated amount was improper.  The District Court of Appeal in Byers rejected the defendants’ argument and reversed the trial court’s vacatur of the liquidated damages award.  Byers held that the parties lawfully bargained for the higher amount, explaining that “the larger amount payable upon default represents a legitimate amount … [that] is not a subterfuge for usury or an unconscionable premium.”  The appellate court explained that this did not violate any public policy, and instead  “enforcement of such a provision” could “encourage settlement of lawsuits.”

Published on:

The State of Florida enacted Florida Statutes Section 542.335 to allow non-compete agreements where there is a “legitimate business interest.” Two frequently cited “legitimate business interests” are confidential information and trade secrets.  In an employment context, a non-compete agreement based on “[v]aluable confidential business or professional information” (referenced in Florida Statutes Section 542.335(1)(b)(2)), Florida law presumes as “reasonable” a post-employment restriction of six months or less and presumes as “unreasonable” a restriction of more than two years.  For trade secrets, however, Florida law is far more generous.  Florida Statutes Section 542.335(1)(3) vastly expands the presumption of reasonable duration as being up to five years and presumes an unreasonable duration to be more than ten years.  Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

In some cases, restrictive covenants on allegedly “confidential” or “trade secret” information that does not qualify as such.  Fundamentally, Florida and federal law require that confidential and trade secret information be subject to efforts that are reasonable under the circumstances to maintain secrecy.  To ensure information is treated in a confidential manner, courts expect, at a minimum, that there are limits on employee access to the information as well as password protecting the computer network on which the information resides.  VAS Aero Servs., LLC v. Arroyo, 860 F.Supp.2d 1349 (S.D. Fla. 2012) (explaining that these measures are influential in reasonably securing trade secrets).  The employer, however, must ensure that the allegedly confidential or trade secret information is handled in a confidential or secret manner.  This includes preventing employees from storing putative confidential or trade secret information on their personal cellphone or laptop computers.  For example, the federal district court in Diamond Power Int’l, Inc. v. Davidson, 540 F.Supp.2d 1322 (N.D. Ga. 2007), found it significant that the plaintiff business failed to prevent its employees from transferring a file, allegedly constituting a trade secret, to their personal computers.  Similarly, the United States Court of Appeals for the Eleventh Circuit in Yellowfin Yachts, Inc. v. Barker Boatworks, LLC, 898 F.3d 1279 (11th Cir. 2018), held there was no viable trade secret under the Florida Uniform Trade Secrets Act because the employer (i.e., Yellowfin) did not deploy reasonable measures to ensure its information was kept secret.   The appellate court explained in pertinent part that: “Indeed, Barker refused to sign an employment agreement which stated that he would, among other things, keep all Yellowfin trade secrets in confidence.  Further, Yellowfin neither marked the Customer Information as confidential nor instructed Barker to secure information on his personal devices.  And when Barker left Yellowfin, the company did not request that Barker return or delete any of the information.”

Where employers are unable to prove they had an explicit understanding with their employees that certain information is confidential, Florida law sometimes allow protection based on an implied confidential relationship between the employer and employees.  However, the U.S. Court of Appeals for the Eleventh Circuit in Bateman v. Mnemonics, Inc., 79 F.3d 1532 (11th Cir. 1996), explained that “[a]lthough Florida law recognizes implied confidential relationships sufficient to trigger trade secret liability” the appellate court expressed it is “wary of any trade secret claim predicated on the existence of” such a relationship. The Yellowfin Yachts decision rejected the employer/plaintiff’s contention that its “general verbal statements warning employees not to share its Confidential Information with third parties” was adequate to establish that company information was truly kept confidential.  The appellate court explained that: “In sum, with mere verbal statements that the Customer Information should not be given to outsiders, Yellowfin relinquished the information to Barker, who refused to sign a confidentiality agreement, with no instruction to him as to how to secure the information on his cellphone or personal laptop.  In doing so, Yellowfin effectively abandoned all oversight in the security of the Customer Information.  Accordingly, the District Court did not err in determining that no reasonable jury could find that Yellowfin employed reasonable measures to secure the information.”

Published on:

Florida law recognizes the doctrine of caveat emptor in commercial transactions.  Florida and some other jurisdictions understand this legal doctrine to mean “buyer beware,” thereby imposing on buyers in commercial real property transactions the legal obligation to investigate what they are buying.  Florida’s Fourth District Court of Appeal in Transcapital Bank v. Shadowbrook at Vero, LLC, 226 So.3d 856 (Fla. 4th DCA 2017), explained that Florida courts continue to apply the caveat emptor doctrine, which “places the duty to examine and judge the value and condition of the property solely on the buyer and protects the seller from liability for any defects.”  There are, however, three exceptions to this legal doctrine: “1) where some artifice or trick has been employed to prevent the purchaser from making an independent inquiry; 2) where the other party does not have an equal opportunity to become apprised of the fact; and 3) where a party undertakes to disclose facts and fails to disclose the whole truth.”  Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

In Transcapital, the buyer of a condominium was informed that the property was worth $14.8 million and, in support, was shown two prior notes supporting this valuation.  The buyer thereafter sued, and at trial the seller presented evidence that the buyer never asked for the actual appraisal and since it only purchased some of the units, some of which were in poor condition, the appraisal value was less than the orally represented amount.  At the close of the buyer’s case, the seller argued the property value was an opinion which could not form the basis of a fraud claim. The jury found for the buyer.  The appellate court reversed the jury verdict because of the caveat emptor doctrine.  The appellate court held that “the fraud claim could not survive a motion for directed verdict” because “[n]one of the exceptions to caveat emptor appl[ied].”  The buyer was able to inspect the property before the closing, could have obtained its own appraisal, and purchased the property without physically viewing the appraisal.  The buyer presented no evidence showing that the seller resorted to some fraudulent means in preventing the buyer from making an examination of the property.

Similarly, in Agrobin, Inc. v. Botanica Dev. Associates, Inc., 861 So.2d 445 (Fla. 3d DCA 2003), Miami’s Third District Court of Appeal held that, in the context of the doctrine of caveat emptor, that “a sophisticated  purchaser of commercial property who agreed to an ‘as is’ purchase contract, had ample opportunity to conduct inspections, and could have discovered an alleged defect through the exercise of ordinary diligence, may be disgruntled, but does not have a cause of action for fraud.”

Published on:

Not every written contract is sufficiently comprehensive to address potential fraud claims. Under Florida law, however, a well-drafted written contract can bar a business litigation claim for fraud that essentially covers the same territory as the contract. Florida’s Fourth District Court of Appeal in Mac-Gray Servs., Inc. v. DeGeorge, 913 So.2d 630 (Fla. 4th DCA 2005), held that “[a] party cannot recover in fraud for alleged oral misrepresentations that are adequately covered or expressly contradicted in a later written contract.   Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

In Mac-Gray, the buyers entered  into a contract with the seller for the purchase of laundry equipment.  Before signing the contract, the seller’s agent allegedly told the buyers “that they were ‘pretty much guaranteed’ to make money as soon as the business opened.”  The written contract, however, contained provisions that the seller did not guarantee any income or profits and that the buyers were not relying on the seller’s expertise or representations.  The buyers delayed opening the business, and thereafter quickly sold what had become an unprofitable business.  To recoup their losses, the buyers sued the sellers for fraudulent inducement of the contract.  The buyers alleged the seller’s agent did not tell them they could lose money in the startup period and did not tell them that the seller had been involved in failed laundromats.  The appellate court held that the fraud claim for damages was barred because the contract “negate[d] the fraudulent inducement claim” and did not guarantee profitability.

To attempt to prevent claims of fraud, contracts sometimes contain what are called “as is” clauses.  However, not every “as is” clause is prophylactic.  Such clauses sometimes are not comprehensive and do not bar fraud claims.  Effective “as is” clauses are well-considered, extensive, and detailed.  For example, in Florida Holding 4800, LLC v. Lauderhill Mall Investment, LLC, 317 So.3d 121 (Fla. 4th DCA 2021),  the appellate court affirmed dismissal of a Broward County lawsuit claiming fraud.  In Florida Holding, the contract had comprehensive “as is” provisions.  They expressly stated that (1) “Seller makes absolutely no warranties, representations or covenants to Buyer whatsoever regarding the [p]roperty or the condition or quality thereof”; (2) “Buyer represents that it is purchasing the [p]ropery in its ‘As Is’ condition and based solely on Buyer’s own inspection, investigation and evaluation”; (3) “neither Seller nor any agent of Seller has made any representation or warranty, express or implied, oral or written, concerning the [p]roperty or which have induced Buyer to execute this Contract”; and (4) upon closing, Buyer “shall be deemed to have waived, relinquished and released Seller … from and against any and all claims.”  The appellate court explained that these provisions “clearly negate Buyer’s claim for damages, including the fraud claims.”  Similarly, Giallo v. New Piper Aircraft, Inc., 855 So.2d 1273 (Fla. 4th DCA 2003), held that, “[a]ssuming for purposes of argument that the oral statement is fraudulent, a party cannot recover for fraudulent oral representations which are covered in or contradicted by a later written agreement.”

Contact Information