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Articles Posted in Business Litigation

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Arbitration is a method of dispute resolution which parties may agree to through a pre-dispute contract.  Often, a plaintiff will attempt to avoid the contractual agreement to arbitration because the plaintiff believes that arbitration puts him or her at a strategic disadvantage.  A plaintiff may argue that he or she did not have the capacity to enter into the agreement to arbitrate.  Normally, contracts with children are voidable at the discretion of the child.  A recent case held that a child could be bound by an arbitration agreement, even though he did not have the capacity to be bound by the agreement, because the child fraudulently represented that a legal guardian agreed to a contract with an arbitration agreement.  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 litigationtrade secret litigationtrademark infringement litigation, and other legal disputes in federal and state courts and in arbitrate.

A party cannot be compelled to arbitrate his or her disputes without having agreed to arbitration.  A previous article explored the required consent in arbitration and apparent authority.  A party that does not have the capacity to enter into an arbitration agreement generally cannot be bound by that contract.

Children do not have the same capacity to enter into contracts that people over the age of 18 have.  Particularly, children often have the discretion to rescind a contract.  “The right of an infant to avoid his contract is one conferred by law for his protection against his own improvidence and the designs of others; …. It is the policy of the law to discourage adults from contracting with infants.” Putnal v. Walker, 61 Fla. 720 (Fla. 1911).

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Arbitration can provide Florida businesses with a swift and less costly resolution to a dispute in comparison to litigation.  Arbitration generally benefits the party accused of wrongdoing more than the plaintiff.  Accordingly, a plaintiff will usually have the incentive to try to find a way to avoid the application of an arbitration clause while a defendant will have the incentive to enforce the arbitration clause.  A plaintiff attempting to avoid arbitration may claim that the party entering into the contract with the arbitration clause did not have the authority to enter into an arbitration agreement.  Savvy defendants can Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Fort Lauderdale and Palm Beach.  The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

Normally, “[t]he intent of the parties to a contract, as manifested in the plain language of the arbitration provision and contract itself, determines whether a dispute is subject to arbitration.  Courts generally favor such provisions, and will try to resolve an ambiguity in an arbitration provision in favor of arbitration.”  Jackson v. Shakespeare Found., Inc., 108 So.3d 587 (Fla. 2013).  “Where an agreement to arbitrate has been formed, the court must treat the agreement as ‘valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.’” Larsen v. Citibank FSB, 871 F.3d 1295 (11th Cir. 2017), quoting 9 U.S.C. § 2.  However, a party in business litigation may challenge the enforceability of an arbitration clause by claiming that the party who executed the agreement with the arbitration clause did not have authority to enter into the arbitration agreement.

Generally, a party in business litigation cannot be compelled to arbitrate a dispute without actually agreeing to a contract containing an arbitration clause.  “However, an exception to this general rule exists when the signatory of the arbitration agreement is authorized to act as the agent of the person sought to be bound […].”  Stalley v. Transitional Hosps. Corp. of Tampa, Inc., 44 So. 3d 627 (Fla. 2d DCA 2010).  “Non-signatories may be bound by an arbitration agreement if dictated by ordinary principles of contract law and agency.”  Martha A. Gottfried, Inc. v. Paulette Koch Real Estate, Inc., 778 So.2d 1089 (Fla. 4th DCA 2001).

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Florida law concerning a claim of civil theft is a double-edged sword.   A company that prevails on a business litigation claim of civil theft can be awarded treble damages and attorneys’ fees.  However, a company claiming civil theft risks having to pay the opposing side’s attorney’s fees for failure to prove the required element of “criminal intent.”  Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Fort Lauderale, 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’s civil theft statutes provide a tempting cause of action in business litigation.  A cause of action for civil theft can provide an opportunity for a litigant to be awarded remedies not found in most other causes of action.  Particularly, a party prevailing on its claim of civil theft may recover three times the amount which was stolen as well as the attorneys’ fees expended pursuing the civil theft claim.  § 772.11(1), Florida Statutes (“Any person who proves by clear and convincing evidence that he or she has been injured in any fashion by reason of any violation of [theft statutes] has a cause of action for threefold the actual damages sustained and, in any such action, is entitled to minimum damages in the amount of $200, and reasonable attorney’s fees and court costs in the trial and appellate courts”).

In business litigation, it may often seem as if the opposing party is a thief for what they did.  Civil theft requires that a party prove more than something was wrongfully taken.  To prevail on a claim of civil theft, a plaintiff must prove that the opposing party had the criminal intent to steal.  Rosen v. Marlin, 486 So. 2d 623 (Fla. 3d DCA 1986) (“Under Florida law, a necessary element for establishing the crime of theft is that the defendant had, prior to the commission of the act, an intent to commit a theft”).  This legal principle was discussed in a previous article.  Proving what a person is thinking can be exceptionally difficult.

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Parties to a contract with an arbitration agreement will often litigate the issue of whether the arbitration provision covers the parties’ dispute.  Because arbitration is a different method of dispute resolution than court litigation, the distinguishing traits of arbitration can tactically benefit one party more than the other.  Parties will often have the incentive to challenge whether arbitration is proper.  Whether a dispute should be arbitrated is generally governed by the particular wording of the arbitration agreement.  Accordingly, the scope of the arbitration agreement can have a significant impact on the ultimate resolution of the case.  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.

Parties involved in business litigation often challenge whether the dispute is properly arbitrable.  While federal and state law governs the interpretation and enforcement of arbitration agreements, arbitration is fundamentally a creature of contract.  Which disputes are arbitrable is ultimately controlled by the provisions found in the parties’ contract.  “The intent of the parties to a contract, as manifested in the plain language of the arbitration provision and contract itself, determines whether a dispute is subject to arbitration.  Courts generally favor such provisions, and will try to resolve an ambiguity in an arbitration provision in favor of arbitration.”  Jackson v. Shakespeare Found., Inc., 108 So. 3d 587 (Fla. 2013).  A previous article explored how courts will evaluate contract provisions that agree to arbitrate disputes “arising out of” or “related to” the agreement.  Another article described how third-party beneficiaries to a contract may seek to compel arbitration of a dispute.

“Disputes arise in many and varied contexts and the mere coincidence that the parties in dispute have a contractual relationship will ordinarily not be enough to mandate arbitration of the dispute.” Seifert v. U.S. Home Corp., 750 So. 2d 633 (Fla. 1999).  “An agreement to arbitrate, arising out of a contractual obligation, is essentially a question of law regarding the construction of that contract.”  Steritech Group, Inc. v. MacKenzie, 970 So. 2d 895 (Fla. 5th DCA 2007).  “[T]he determination of whether an arbitration clause requires arbitration of a particular dispute necessarily ‘rests on the intent of the parties.’” Seifert v. U.S. Home Corp., 750 So. 2d 633 (Fla. 1999). “The general rule is that where an arbitration agreement exists between the parties, arbitration is required only of those controversies or disputes which the parties have agreed to submit to arbitration.” Miller v. Roberts, 682 So.2d 691 (Fla. 5th DCA 1996).   “Only those claims which the parties have agreed are arbitrable may be subject to arbitration.”  Regency Group, Inc. v. McDaniels, 647 So. 2d 192 (Fla. 1st DCA 1994).

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Consumers who receive an inferior product or service than what was advertised are certainly harmed by false advertising, but they may not have the incentive to sue or take action against the company issuing false advertisements.  False advertising can have a far greater impact on competitors.  A business that engages in false advertising can damage its competitors by using false advertising to portray itself as a better value.  An aggrieved business can initiate business litigation against its competitor for false advertising under the Lanham Act, common law unfair competition, and the Florida Deceptive and Unfair Trade Practices Act (FDUTPA).  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.

Advertising can be an effective method for companies to show potential consumers the qualities of their products.  Businesses have the incentive to present their products in the best possible light and may exaggerate the traits of their product. In business litigation over the legal effect of “opinion statements,” such as the qualifier that something is the “best value,” “finest,” and “high quality,” Florida courts generally consider such terminology as being lawful puffery.  A previous Mavrick Law Firm article discussed lawful puffery in greater detail.  By contrast, statements about specific qualities of a product which are demonstrably false can be unlawful.

Each of these laws requires that the plaintiff show a deceptive act by a competitor.  Specifically, to prevail on a Lanham Act claim for false advertising, an aggrieved business must show that “(1) the ads of the opposing party were false or misleading, (2) the ads deceived, or had the capacity to deceive, consumers, (3) the deception had a material effect on purchasing decisions, (4) the misrepresented product or service affects interstate commerce, and (5) the movant has been—or is likely to be—injured as a result of the false advertising.”  Johnson & Johnson Vision Care, Inc. v. 1-800 Contacts, Inc., 299 F.3d 1242 (11th Cir. 2002).  “Unfair competition under Florida common law requires ‘deceptive or fraudulent conduct of a competitor and likelihood of consumer confusion.’”  Webster v. Dean Guitars, 955 F.3d 1270 (11th Cir. 2020).  To prevail in business litigation under FDUTPA, a plaintiff must also show that a “deceptive act or unfair practice” caused damages.  City First Mortg. Corp. v. Barton, 988 So. 2d 82 (Fla. 4th DCA 2008).

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It is a common mistake in trade secret litigation for the company seeking protection for its trade secrets to fail to explain what trade secrets it wishes to protect.  Courts require that plaintiffs describe their trade secret with a certain degree of particularity.  Failing to do that can be fatal to trade secret claims. 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.

In business litigation alleging trade secret misappropriation, plaintiffs often focus on how a trade secret was misappropriated rather than what was misappropriated.  A trade secret  case is not like a regular civil theft or other misappropriation case.  How a party lost its trade secret is less important than what was taken.  Unlike other theft-related torts, “misappropriation” under the Florida Uniform Trade Secret Act also includes circumstances when a party simply possesses the trade secret material.  § 688.002(2) (defining trade secrets misappropriation to include possession of the material in certain circumstances).  A plaintiff does not merely have to prove that confidential information was stolen, it must also prove that what was stolen qualifies as a trade secret under Florida or federal law.  Particularly, trade secret is defined under Florida law as “information, including a formula, pattern, compilation, program, device, method, technique, or process that [d]erives 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 [i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”  § 688.002 (4), Florida Statutes.

Plaintiffs in business litigation asserting theft of a trade secret must be able to show that what was taken is valuable because it is secret.  The plaintiff must also show acted reasonably in trying to keep its information secret.  A litigant that fails to adequately explain what its trade secret is will inherently fail to prove that what was misappropriated qualifies as a trade secret.  “In order to ascertain whether trade secrets exist, the information at issue must be disclosed.”  Lovell Farms, Inc. v. Levy, 641 So. 2d 103 (Fla. 3d DCA 1994); Revello Med. Mgmt., Inc. v. Med-Data Infotech USA, Inc., 50 So. 3d 678 (Fla. 2d DCA 2010) (“The plaintiff must, as a threshold matter, establish that the trade secret exists. To do so, it must disclose the information at issue”).  “[I]t is insufficient to describe the trade secrets by generic category, such as the components of the night vision devices to which the alleged trade secrets relate. Rather, [plaintiff] must identify the specific characteristics of each trade secret, such as a particular drawing, process, procedure or cost/pricing data. It must also describe with reasonable particularity all of its trade secrets, including those involving “business methods, know-how, machines, manufacturing process and procedure, marketing information, pricing data, product designs and manufacturing information […].”  Knights Armament Co. v. Optical Sys. Tech., Inc., 254 F.R.D. 463, (M.D. Fla. 2008).

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Often, a member of a limited liability company can sue another member for a breach of an operating agreement in a corporate “derivative action” rather than in a “direct action” against the other member.  This is because the victim is often the limited liability company, not the individual member.  Aggrieved members of limited liability companies sometimes try to sue directly because the remedies allow them to recover from the wrongdoing instead of the corporation.  Thus, whether a lawsuit is properly a “direct action” or “derivative action” can be a critical strategic issue.  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.

Whether the business litigation is a “direct action” or “derivative action” can have significant repercussions as to the recovery.  A member of an LLC who successfully sues the company directly can generally recover all their damages.  By contrast, a member suing derivatively generally can benefit only from the proportionate increase in value that the derivative lawsuit brings.  This is because the company is the real plaintiff in a derivative lawsuit, even though it may be controlled by an individual member.  Miami’s Third District Court of Appeal explained in pertinent part: “[w]hether a particular action may be brought as a direct suit or must be maintained as a derivative suit can be a confusing inquiry. After all, a member or shareholder with a personal stake in a company or corporation necessarily sustains a loss when the company loses value, and determining which types of loss are directly compensable by direct suit requires fine lines to be drawn. These distinctions are even more difficult to draw for closely held corporations and LLCs, which typically have fewer individuals that possess an ownership interest, because claims of mismanagement or self-dealing become a zero-sum game in which one party profits from the company’s loss, while the other is harmed due to the company’s reduced value.”  Dinuro Investments, LLC v. Camacho, 141 So. 3d 731 (Fla. 3d DCA 2014).

A previous article discussed how the law governing whether the lawsuit properly qualifies as a “derivative action” or a “direct action” is usually based on the law of the state of incorporation. In the State of Florida, whether a member of a limited liability company can sue directly is determined under the Florida Revised Limited Liability Company Act.  A member can directly sue a LLC for “[a]n actual or threatened injury that is not solely the result of an injury suffered or threatened to be suffered by the limited liability company” § 605.0801(2)(a), Fla. Stat.  Additionally, a member can sue for “[a]n actual or threatened injury resulting from a violation of a separate statutory or contractual duty owed by the alleged wrongdoer to the member, even if the injury is in whole or in part the same as the injury suffered or threatened to be suffered by the limited liability company.”  § 605.0801(2)(b), Fla. Stat.

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

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

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

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

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

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

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

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

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

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