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Articles Posted in Business Litigation

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Businesses can use non-compete agreements to protect their substantial business relationships with prospective and current customers, patients, or clients. A common issue in business litigation seeking to enforce non-compete agreements is whether a business has a trade secret that qualifies as a legitimate business interest. 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 non-compete agreement cannot be enforced without a court finding that the agreement is supported by a “legitimate business interest” in the non-compete agreement. “Section 542.335 contains a comprehensive framework for analyzing, evaluating and enforcing restrictive covenants in Florida based on an ‘unfair competition’ analysis.” Henao v. Prof’l Shoe Repair, Inc., 929 So. 2d 723 (Fla. 5th DCA 2006). Under Section 542.335, a plaintiff must satify three requirements to enforce a restrictive covenant: (1) the restrictive covenant must be “set forth in writing signed by the person against whom enforcement is sought”; (2) the party seeking to enforce the restrictive covenant “shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant”; and (3) the party seeking to enforce the restrictive covenant “shall plead and prove that the contractually specified restraint is reasonably necessary to protect the legitimate business interest or interests justifying the restriction.” Section 542.335, Florida Statutes.

A business’ trade secret can qualify as a legitimate business interest pursuant to Florida law.  Trade secrets are specifically delineated as legitimate business interests in Section 542.335(1)(b)(1), Florida Statutes. The Florida Uniform Trade Secrets Act (“FUTSA”) defines trade secrets as “information, including a formula, pattern, compilation, program, device, method, technique, or process” that:

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Business litigation often involve claims for trade secret misappropriation under Florida’s Uniform Trade Secret Act (FUTSA). Under certain circumstances, parties in business litigation may be entitled injunctive relief under FUTSA. A plaintiff seeking a temporary injunction to protect its trade secrets must show that there is an actual or likely misappropriation of trade secrets and that the circumstances justify the entry of a temporary injunction. To prevail on a motion for a preliminary or temporary injunction, a plaintiff must show that “(1) irreparable harm will result if the temporary injunction is not entered; (2) an adequate remedy at law is unavailable; (3) there is a substantial likelihood of success on the merits; and (4) entry of the temporary injunction will serve the public interest.” Donoho v. Allen-Rosner, 254 So. 3d 472 (Fla. 4th DCA 2018). Peter Mavrick is a Miami business litigation attorney, and represents clients in business litigation 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.

A plaintiff seeking an injunction must establish that it “(1) that it possessed a trade secret and took reasonable steps to protect its secrecy; and (2) the trade secret was misappropriated, either by one who knew or had reason to know the trade secret was improperly obtained or who used improper means to obtain it.” Mapei Corp. v. J.M. Field Mktg., Inc, 295 So. 3d 1193 (Fla. 4th DCA 2020). Under Florida law, misappropriation of a trade secret occurs “where a person who knows or has reason to know that the trade secret was acquired by improper means acquires the trade secret of another or where a person who has obtained the trade secret by improper means discloses or uses the trade secret of another without express or implied consent.” ACR Elecs., Inc. v. DME Corp., 2012 WL 13005955 (S.D. Fla. Oct. 31, 2012).

In addition, “the information that the plaintiff seeks to protect must derive economic value from not being readily ascertainable by others and must be the subject of reasonable efforts to protect its secrecy. Del Monte Fresh Produce Co. v. Dole Food Co., Inc., 136 F. Supp. 2d 1271 (S.D. Fla. 2001). If the subject information is already known or readily accessible to the public, it typically does not qualify for trade secret protection. Am. Red Cross v. Palm Beach Blood Bank, Inc., 143 F.3d 1407 (11th Cir.1998). “[S]omething that is already readily ascertainable can[not] be misappropriated.” Wound Care Concepts, Inc. v. Vohra Health Services, P.A., 2022 WL 320952 (S.D. Fla. Jan. 28, 2022).

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Business litigation often involves contractual disputes between employers and employees concerning the enforceability of non-compete agreements or other restrictive covenants. Under Florida law, a contractual non-compete restriction cannot be used solely as a tool to eliminate competition or merely to prevent an employee from working with a competing employer in any capacity. When a breach-of-contract action is based upon enforcement of a restrictive covenant, the plaintiff must plead and prove specific elements to establish that the restrictive covenant is a valid restraint of trade. Rauch, Weaver, Norfleet, Kurtz & Co., Inc. v. AJP Pine Island Warehouses, Inc., 313 So. 3d 625 (Fla. 4th DCA 2021). “[T]he term ‘restrictive covenants’ includes all contractual restrictions upon competition, such as noncompetition/nonsolicitation agreements, confidentiality agreements, exclusive dealing agreements, and all other contractual restraints of trade.” Henao v. Prof’l Shoe Repair, Inc., 929 So. 2d 723 (Fla. 5th DCA 2006). 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.

“Section 542.335 contains a comprehensive framework for analyzing, evaluating and enforcing restrictive covenants in Florida based on an ‘unfair competition’ analysis.” Henao v. Prof’l Shoe Repair, Inc., 929 So. 2d 723 (Fla. 5th DCA 2006). Under Section 542.335, a plaintiff must satify three requirements to enforce a restrictive covenant: (1) the restrictive covenant must be “set forth in writing signed by the person against whom enforcement is sought”; (2) the party seeking to enforce the restrictive covenant “shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant”; and (3) the party seeking to enforce the restrictive covenant “shall plead and prove that the contractually specified restraint is reasonably necessary to protect the legitimate business interest or interests justifying the restriction.” § 542.335, Fla. Stat.

Restrictive covenants are unlawful, void, and unenforceable if they are not supported by a legitimate business. “[T]he determination of whether an activity qualifies as a protected legitimate business interest under [Section 542.335] is inherently a factual injury, which is heavily industry – and context-specific.” White v. Mederi Caretenders Visiting Servs. of Se. Fla., LLC, 226 So. 3d 774 (Fla. 2017). “Section 542.335 provides a list of ‘legitimate business interests,’ but it specifically states that the list is not exclusive.” Infinity Home Care, L.L.C. v. Amedisys Holding, LLC, 180 So. 3d 1060, 1063 (Fla. 4th DCA 2015). Section 542.335 protects the following legitimate business interests: trade secrets; valuable confidential business or professional information that otherwise does not qualify as trade secrets; substantial relationships with specific or existing customers, patients, or clients; customer, patient, or client goodwill associated with an ongoing business or professional practice, a specific geographic location, or a specific marketing or trade area; and extraordinary or specialized training.

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The Lanham Act is a federal statute that protects businesses from various types of unfair competition, including trademark infringement. In business litigation, the Lanham Act permits trademark owners to sue other businesses or individuals for violating their trademark rights. The Lanham Act provides that “[w]hen a violation of any right of the registrant of a mark … shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled . . . subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.” Hard Candy, LLC v. Anastasia Beverly Hills, Inc., 921 F.3d 1343 (11th Cir. 2019). Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients 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, employment litigation, and other legal disputes in federal and state courts and in arbitration.

In addition to monetary damages, the Lanham Act also permits courts the “power to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, to prevent the violation of any right of the registrant of a mark registered in the Patent and Trademark Office or to prevent a violation under subsection (a), (c), or (d) of 15 U.S.C. § 1125.” In “exceptional cases” in business litigation, a prevailing party can also be awarded attorneys’ fees under the Lanham Act. The Lanham Act, thus “provides a broad menu of remedies to a plaintiff claiming infringement” of its trademarks. Hard Candy, LLC v. Anastasia Beverly Hills, Inc., 921 F.3d 1343 (11th Cir. 2019).

In “ordinary trademark infringement actions . . . complete injunctions against the infringing party are the order of the day.” SunAmerica Corp. v. Sun Life Assurance Co. of Can., 77 F.3d 1325 (11th Cir. 1996). This is typically the case because Courts “the public deserves not to be led astray by the use of inevitably confusing marks,” and injunctive relief is the surest way to prevent future harm. Angel Flight of Ga., Inc. v. Angel Flight Am., Inc., 522 F.3d 1200 (11th Cir. 2008). Indeed, Courts consider that “injunctive relief is the quintessential form of equitable remedy; it does not entitle a plaintiff to a jury trial.” Hard Candy, LLC v. Anastasia Beverly Hills, Inc., 921 F.3d 1343 (11th Cir. 2019).

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Business litigation often involves disputes between a corporate entity and its equity owners. In Florida, the corporation and the limited liability company are two common types of corporate entities. The owners of a corporation are known as shareholders, and the owners of a limited liability company are known as members. Florida law requires a shareholder or member to show direct harm and special injury to maintain a direct action against the company. Otherwise, the equity holder must pursue their claims derivatively as a shareholder or member to recover damages on behalf of the company. However, “Florida courts also recognize an exception to the [two-prong] test when an individual member or manager owes a ‘specific duty’ to another member or manager apart from the duty owed to the company.” Dinuro Investments, LLC v. Camacho, 141 So. 3d 731 (Fla. 3d DCA 2014). This special duty may arise under contractual or statutory mandates. Peter Mavrick is a Miami business litigation attorney, and 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, employment law, and other legal disputes in federal and state courts and in arbitration.

Florida Courts have recognized that “[t]here are two major, often overlapping exceptions to the general rule that a shareholder cannot sue for injuries to his corporation: (1) where there is a special duty, such as a contractual duty, between the wrongdoer and the shareholder, and (2) where the shareholder suffered an injury separate and distinct from that suffered by the shareholders.” Harrington v. Batchelor, 781 So. 2d 1133 (Fla. 3d DCA 2001). The special duty exception may still apply even if the alleged injury impacted all equity holders in the same way. Florida courts have held that, “[w]here the wrongful acts are not only wrongs against the corporation but are also violations by the wrongdoer of a duty arising from contract or otherwise, and owing directly to the shareholders, individual shareholders can sue in their own right.”

In Harrington v. Batchelor, Florida’s Third District Court of Appeal specifically recognized that “a shareholder can sue [directly] for breach of [a] contract to which he is a party, even if he has not suffered an injury separate and distinct from that suffered by other shareholders.” 781 So. 2d 1133 (Fla. 3d DCA 2001). In Harrington, a shareholder of a bankrupt-airline business brought suit against two other shareholders for breach of shareholder agreement. The plaintiff alleged that one of the shareholders rejected actual offers to buy the company and ultimately failed to use their best efforts to sell the airline. As a result, the plaintiff claimed the shareholders violated the shareholder agreement by causing the airline to enter into transactions that were never submitted to the board of directors for approval. On appeal, Harrington concluded that the suit could be brought individually based on parties’ shareholder agreement, and that there was no need to prove separate and distinct injury.

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The Lanham Act is a federal statute that protects businesses from various types of unfair competition, including trademark infringement. In business litigation, the Lanham Act permits trademark owners to sue other businesses or individuals for violating their trademark rights. To prevail on a claim of trademark infringement, a plaintiff must show: (1) that its marks were entitled to protection, and (2) that the defendant used marks that were either identical with the plaintiff’s marks, or so similar that they were likely to confuse consumers. The “likelihood of confusion occurs when a later user uses a trade-name in a manner which is likely to cause confusion among ordinarily prudent purchasers or prospective purchasers as to the source of the product.” Wreal, LLC v. Amazon.com, Inc., 38 F.4th 114 (11th Cir. 2022). In business litigation, the issue of whether a likelihood of confusion exists is typically a question of fact. Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients 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, employment litigation, and other legal disputes in federal and state courts and in arbitration.

Courts must consider the following factors when determining whether a likelihood of confusion exists with respect to the use of a trade mark:

  • distinctiveness of the mark alleged to have been infringed;
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Claims for fraudulent inducement are common in business litigation. In an action for fraudulent inducement,  the “plaintiff must show that the fraudulent act induced the formation of contract between the parties.” GlobeTec Const., LLC v. Custom Screening & Crushing, Inc., 77 So. 3d 802 (Fla. 3d DCA 2011). The elements of fraud in inducement include representation of material fact that is knowingly false and intentionally made to induce the other party to do an act from which he suffers damage. Lou Bachrodt Chevrolet, Inc. v. Savage, 570 So. 2d 306 (Fla. 4th DCA 1990). Under Florida law, “[i]t is a fundamental proposition that a contract induced by fraud is voidable.” Lance Holding Co. v. Ashe, 533 So. 2d 929 (Fla. 5th DCA 1988). Peter Mavrick is a Miami business litigation attorney, and 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, employment law, and other legal disputes in federal and state courts and in arbitration.

In Florida, in an action for fraudulent inducement, the party must . . . show (1) a false statement of a material fact; (2) that the defendant knew or should have known was false; (3) that was made to induce the plaintiff to enter into a contract; and (4) that proximately caused injury to the plaintiff when acting in reliance on the misrepresentation. Bradley Factor, Inc. v. United States, 86 F. Supp. 2d 1140 S.D. Fla. 2000). Florida law provides for an election of remedies in fraudulent inducement cases: rescission, whereby the party repudiates the transaction, or damages, whereby the party ratifies the contract. A prerequisite to rescission is placing the other party in status quo. “Generally, a contract will not be rescinded even for fraud when it is not possible for the opposing party to be put back into his pre-agreement status.” Florida Evergreen Foliage v. E.I. Dupont De Nemours & Co., 336 F. Supp. 2d 1239 (S.D. Fla. 2004).

A contract that was procured by a materially false statement, while still legally considered valid, is ultimately voidable and does not automatically trigger the performance of the defrauded party. Where misrepresentation of the character or essential terms of a proposed contract occurs, assent to the contract is impossible. Cancanon v. Smith Barney, Harris, Upham & Co., 805 F.2d 998 (11th Cir. 1986). Indeed, the Eleventh Circuit Court of Appeals has expressly held that a contract induced by fraud is voidable by the defrauded party. Nat’l Union Fire Ins. Co. of Penn. v. Carib Aviation, Inc., 759 F.2d 873 (11th Cir. 1985). In Oceanic Villas, Inc. v. Godson, Florida’s Supreme Court recognized “the rule to be that fraud in the procurement of a contract is ground for rescission and cancellation of a contract.” 148 Fla. 454 (1941).

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Business litigation in Florida often involves claims for trade secret misappropriation under Florida’s Uniform Trade Secret Act (FUTSA) or the Defend Trade Secrets Act (DTSA). For liability to attach under DTSA or FUTSA, the trade secret information must be the fruit of a wrongful acquisition or misappropriation. Misappropriation of a trade secret occurs “where a person who knows or has reason to know that the trade secret was acquired by improper means acquires the trade secret of another or where a person who has obtained the trade secret by improper means discloses or uses the trade secret of another without express or implied consent.” ACR Elecs., Inc. v. DME Corp., 2012 WL 13005955 (S.D. Fla. Oct. 31, 2012). In business litigation involving an employment relationship, misappropriation may occur during the employment or after an employees’ employment terminates. 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 litigation, and other legal disputes in federal and state courts and in arbitration.

The DTSA defines “misappropriation” to include “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 “disclosure or use of a trade secret of another without express or implied consent” in specified circumstances. 18 U.S.C. § 1839(5). “Improper means” under DTSA includes “theft, bribery, misrepresentation, [and] breach or inducement of a breach of a duty to maintain secrecy,” but excludes “reverse engineering, independent derivation, or any other lawful means of acquisition.” 18 U.S.C. § 1839(6). Meanwhile, the definition of “improper means” under FUTSA also includes “breach or inducement of a breach of a duty to maintain secrecy.” Fla. Stat. § 688.002(1). While the general definitions of a trade secret are identical under FUTSA and DTSA, a court’s analysis under each statute is substantially equivalent. Compulife Software Inc. v. Newman, 959 F.3d 1288 (11th Cir. 2020). Actions may be “improper” for trade-secret purposes even if not independently unlawful. Compulife Software Inc. v. Newman, 959 F.3d 1288 (11th Cir. 2020).

Florida courts routinely find that trade secrets may be acquired through improper means after an employment relationship ends. Federal courts within the Eleventh Circuit Court of Appeals must review the facts surrounding the alleged misappropriation on a case-by-case basis. For example, in Int’l Hair & Beauty Sys., LLC v. Simply Organic, Inc., the United States District Court in and for the Middle District of Florida granted plaintiff’s motion for preliminary injunction against the business’ former technical director for misappropriation of company trade secrets and to enforce non-compete and non-solicitation agreements. 2011 WL 5360098 (M.D. Fla. Sep. 26, 2011). During his employment, the Simply Organic defendant “had access to contact management lists including clients, customers and potential customers” of plaintiff’s hair salon. Months after his employment ended, the former employee then obtained, from another former employee of plaintiff, “a list of hair salons and beauty supply stores” that contained several “salons that were utilizing products of Plaintiff.”

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Business litigation in Florida often involves disputes between corporate entities and the persons with ownership interests in such entities. Two of the more common corporate ownership structures in Florida are the corporation and the limited liability company. The owners of a corporation are known as shareholders, and the owners of a limited liability company are known as members. In Florida, there are certain requirements a shareholder or member must first satisfy to have direct standing to sue and recover damages on their own behalf. Otherwise, the individual must pursue their claims derivatively as a shareholder or member on behalf of the company. To have direct standing under Florida law, an individual must show direct harm and special injury to maintain a direct action. Peter Mavrick is a Miami business litigation attorney, and 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, employment law, and other legal disputes in federal and state courts and in arbitration.

Under Florida law, “an action may be brought directly only if (1) there is a direct harm to the shareholder or member such that the alleged injury does not flow subsequently from an initial harm to the company and (2) there is a special injury to the shareholder or member that is separate and distinct from those sustained by the other shareholders or members.” Dinuro Investments, LLC v. Camacho, 141 So. 3d 731 (Fla. 3d DCA 2014). “[A] stockholder may bring a suit in his own right to redress an injury sustained directly by him, and which is separate and distinct from that sustained by other stockholders.” Citizens National Bank of St. Petersburg v. Peters, 175 So. 2d 54 (Fla. 2d DCA 1965).

Under the direct harm prong, Courts must examine “whether the harm from the alleged wrongdoing flows first to the company and only damages the shareholders or members due to the loss in value of their respective ownership interest in the company, or whether the harm flows ‘directly’ to the shareholder or member in a way that is not secondary to the company’s loss.” Strazzulla v. Riverside Banking Co., 175 So. 3d 879 (Fla. 4th DCA 2015). The court must then “compare the individual’s harm to the company’s harm.” Only when the damages are unrelated to the damages sustained by the company and when the company would have no rights to recover in its own action can the shareholder bring a direct suit.  Strazzulla v. Riverside Banking Co., 175 So. 3d 879 (Fla. 4th DCA 2015).

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In business litigation, business records are admissible as an exception to the hearsay rule under Federal Rule of Evidence 803(6). This “business records exception” permits parties in business litigation to admit into evidence certain business records that are kept in the regular course of business. Business records are often play a key role in business litigation discovery. 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 litigation, and other legal disputes in federal and state courts and in arbitration.

To establish that the business records exception applies to any document, the evidence must first show that the underlying document is authentic under Rule 901.  United States v. Dreer, 740 F.2d 18 (11th Cir. 1984). The authentication burden is a light burden. United States v. Lebowitz, 676 F.3d 1000 (11th Cir. 2012). Second, the evidence must show that the authenticated document meets the requirements of Rule 803(6).  United States v. Dreer, 740 F.2d 18 (11th Cir. 1984). An authenticated document is admissible as a business record if it “was made at or near the time by – or from information transmitted by – someone with knowledge”; if it “was kept in the course of a regularly conducted activity”; and if “making the record was a regular practice of that activity.” Fed. R. Evid. 803(6)(A)-(C).

The “proponent must [also] establish that it was the business practice of the recording entity to obtain such information from persons with personal knowledge and the business practice of the proponent to maintain the records produced by the recording entity.” U.S. v. Bueno-Sierra, 99 F.3d 375 (11th Cir. 1996). The proponent “could establish those requirements through ‘the testimony of the [record] custodian or other qualified witness,’ or by means of an out-of-court certification procedure established by rule or statute.” In re Int’l Mgmt. Assocs., LLC, 781 F.3d 1262 (11th Cir. 2015). A “qualified witness” is someone who “can credibly testify that it was the practice of the producing business to maintain the records as provided in Rule 803(6).” Cellar Law Organization, Inc. v. Sony Pictures Television Inc., 2014 WL 12580515 (S.D. Fla. April 12, 2014). “[R]ule 803(6) requires the testimony of a custodian or other qualified witness who can explain the record-keeping procedure utilized.” United State v. Garnett, 122 F.3d 1016 (11th Cir. 1997).

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