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Articles Posted in Business Litigation

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In business litigation, Florida courts will not enforce an agreement if the agreement is unconscionable. Under Florida law, “before a court may hold a contract unconscionable, it must find that it is both procedurally and substantively unconscionable.” Gainesville Health Care Ctr., Inc. v. Weston, 857 So. 2d 278 (Fla. 1st DCA 2003). It is therefore important for businesses to understand that its negotiation process and substantive contract terms may be scrutinized by Florida courts in breach of contract actions if a defense of unconscionability is raised. 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 concept of unconscionability does not mean, however, that a court will relieve a party of his obligations under a contract because he has made a bad bargain containing contractual terms which are unreasonable or impose an onerous hardship on him.” Gainesville Health Care Ctr., Inc. v. Weston, 857 So. 2d 278 (Fla. 1st DCA 2003). “It is only where it turns out that one side or the other is to be penalized by the enforcement of the terms of a contract so unconscionable that no decent, fair-minded person would view the ensuing result without being possessed of a profound sense of injustice, that equity will deny the use of its good offices in the enforcement of such unconscionability.’” Steinhardt v. Rudolph, 422 So. 2d 884 (Fla. 3d DCA 1982).

Under Florida law, courts will only find a contract to be unconscionable if it is both procedurally and substantively unconscionable. Bellsouth Mobility LLC v. Christopher, 819 So. 2d 171 (Fla. 4th DCA 2002). However, while both elements must be present, they do not have to be present to the same degree. Basulto v. Hialeah Auto., 141 So. 3d 1145 (Fla. 2014). In Basulto, Florida’s Supreme Court held that court should use a “sliding scale” approach when both procedural and substantive unconscionability are present to some degree. This sliding scale analysis employs “a balancing approach . . . allowing one prong to outweigh another provided that there is at least a modicum of the weaker prong.” SHEDDF2-FL3, LLC v. Penthouse S., LLC, 314 So. 3d 403 (Fla. 3d DCA 2020). “The more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to conclude that the term is unenforceable, and vice versa.” 12550 Biscayne Condo. Ass’n, Inc. v. NRD Investments, LLC., 46 Fla. L. Weekly D2401 (Fla. 3d DCA Nov. 10, 2021).

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Expectation damages or “benefit of the bargain” damages are one way to measure damages for breach of contract claims in business litigation. Under Florida law, where there is a “total breach of contract,” the alleged non-breaching party can elect to seek recovery of “expectation damages” or “reliance damages” resulting from the breach of contract. Expectation damages aim to place the non-breaching party in the same position as they would have been if the contract was actually performed. 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.

If “there is a total breach of contract, the non-breaching party may affirm the contract, insist upon the benefit of his bargain, and seek damages that would place him in the position he would have been in had the contract been completely performed.” 24 Hr Air Serv., Inc. v. Hosanna Cmty. Baptist Church, Inc., 322 So. 3d 709 (Fla. 3d DCA 2021). “Under this benefit-of-the-bargain theory, ‘the proper measure of damages would be either the reasonable cost of completion, or the difference between the value the repair would have had if completed and the value of the repair that has been thus far performed.” Tubby’s Customs, Inc. v. Euler, 225 So. 3d 405 (Fla. 2d DCA 2017).

Where performance is rendered impossible by the breach, the non-breaching party “may elect between reliance damages (those costs and expenses of preparing to perform, the recovery of which will place the recipient in the position it occupied before entering into the contract) or lost profits (the benefit of the bargain or ‘expectation interest’).” Del Monte Fresh Produce Co. v. Net Results, Inc., 77 So.3d 667 (Fla. 3d DCA 2011). If a party elects to pursue expectation damages, they can only recover profits “which would have been possible only if the contract would have been fully performed by the [non-breaching party].” Pathway Fin. v. Miami Int’l Realty Co., 588 So. 2d 1000 (Fla. 3d DCA 1991).

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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. A common issue concerning trade secret claims is whether the alleged trade secret was wrongfully acquired through improper means. 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). 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.

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). 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).

Florida courts routinely find that trade secrets may be acquired through improper means when a business’ employee copies or extracts electronic information before their employment ends. For example, in Pharmerica, Inc. v. Arledge, the United States District Court for the Middle District of Florida held that the defendant “misappropriated those trade secrets by duplicating and copying them and/or sending them to his home computer or personal email account and deleting them from the [plaintiff’s] computers.” 2007 WL 865510 (M.D. Fla. Mar. 21, 2007). The Court considered the fact that the defendant “copied almost all of his electronic files from his work computer” just two days before he resigned from his position with his former employer. The trade secrets and proprietary information involved the former employer’s distribution and operational plans, quality control programs, and—most importantly—the former employer’s pricing details for major corporate clients that represented at one-third of the company’s total revenues.

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In business litigation, courts will enforce non-solicitation agreements against a business’ former employee to protect the business’ substantial customer relationships. Section 542.335, Florida Statutes governs the enforceability of customer non-solicitation agreements. Like other restrictive covenants in Florida, the non-solicitation clause must be: (1) reasonable in time, area, and line of business, (2) supported by a legitimate business interest, and (3) reasonably necessary to protect such interest. A business can utilize a non-solicitation clause to protect its legitimate business interests in its substantial relationships with existing or prospective customers. 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.

The right to prohibit the direct solicitation of existing customers is a legitimate business interest protected under Florida law. Atomic Tattoos, LLC v. Morgan, 45 So. 3d 63 (Fla. 2d DCA 2010). Indeed, non-solicitation provisions in employment contracts are sometimes necessary to protect an employer’s substantial relationships with its current and prospective customers. Milner Voice and Data, Inc. v. Tassy, 377 F. Supp. 2d 1209 (S.D. Fla. 2005). Florida courts routinely enforce non-solicitation agreements to preclude former employees from soliciting a business’ customers and disclosing the former employer’s confidential materials, such as pricing information. Austin v. Mid State Fire Equipment of Cent. Fla., Inc., 727 So. 2d 1097 (Fla. 5th DCA 1999).

The restrictive covenants must also be reasonable in time, area, and line of business. Hilb Rogal & Hobbs of Fla., Inc. v. Grimmel, 48 So. 3d 957 (Fla. 4th DCA 2010). Florida courts presume that covenants containing time restrictions of five years or less are reasonable. Section 542.335(e), Florida Statutes. Florida courts will uphold a non-solicitation agreement that does not specify a geographic restriction where the remainder of the agreement’s restrictions are otherwise narrow. Envtl. Servs., Inc. v. Carter, 9 So. 3d 1258 (Fla. 5th DCA 2009).

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A party’s trade secrets are one of the categories of legitimate business interests protected by Florida’s non-compete statute, Section 542.335. Courts will enforce non-compete agreements to protect a party’s legitimate business interests if the interest qualifies as a trade secret under Florida law. In business litigation arising from a non-compete agreement, a common issue is whether the party enforcing the non-compete has a qualifying trade secret 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 litigation, and other legal disputes in federal and state courts and in arbitration.

Under Florida law, a trade secret consists of information that: (1) derives economic value from not being readily ascertainable by others and (2) is the subject of reasonable efforts to maintain its secrecy. Section 688.002(f), Florida Statutes. A business’ information that is generally known or readily accessible to third parties cannot qualify for trade secret protection. Bestechnologies, Inc. v. Trident Envtl. Sys., Inc., 681 So. 2d 1175 (Fla. 2nd DCA 1996). Moreover, an employer may not preclude a former employee from “utilizing contacts and expertise gained during his former employment.” Templeton v. Creative Loafing Tampa, Inc., 552 So. 2d 288 (Fla. 2nd DCA 1989). A plaintiff seeking enforcement of non-compete agreement bears the burden of demonstrating both that the specific information it seeks to protect is secret and that it has taken reasonable steps to protect this secrecy. Am. Red Cross v. Palm Beach Blood Bank, Inc., 143 F.3d 1407 (11th Cir. 1998).

Customer lists may constitute trade secrets that are protected as a legitimate business interest under Florida’s non-compete statute. As such, parties regularly seek to enforce non-compete agreements by claiming their customer lists qualify as trade secrets. In such business litigation actions, courts must decide whether the alleged trade secret information is the result of a party’s great expense and effort. East v. Aqua Gaming, Inc., 805 So. 2d 932 (Fla. 2nd DCA 2001). Information that is commercially available or easily accessible to the public will not typically qualify as a trade secret as a matter of law. However, information that is “distilled” from public information may qualify as a trade secret, depending on the expense and efforts taken by the compiling party. For example, a customer list consisting of names pulled from a public directory may not constitute a trade secret. By contrast,  a list of customers based on a public directory that contains the customer’s buying history may be protected under Section 542.335, Florida Statutes. Sethscot Collection, Inc. v. Drbul, 669 So. 2d 1076 (Fla. 3d DCA 1996).

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Contractual disputes often arise from issues surrounding the sale of a business, including whether the previous business owner’s restrictive covenants are assignable to and enforceable by the successor owner.  “An assignment is a transfer of all the interests and rights to the thing assigned.” Lauren Kyle Holdings, Inc. v. Heath-Peterson Constr. Corp., 864 So. 2d 55 (Fla. 5th DCA 2004). Under Florida law, a successor business owner can enforce a restrictive covenant against a third party only if the restrictive covenants expressly authorize enforcement by assignees or successors of the original party. 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.

Florida law expressly allows assignment of non-compete covenants. However, Florida law also limits the enforcement of a restrictive covenants by an assignee or successor to situations where assignability of the restrictive covenant is expressly defined by contract. Section 542.335(1)(f)(2), Florida Statutes provides, in pertinent part:

(1) Notwithstanding s. 542.18 and subsection (2), enforcement of contracts that restrict or prohibit competition during or after the term of restrictive covenants, so long as such contracts are reasonable in time, area, and line of business, is not prohibited. In any action concerning enforcement of a restrictive covenant:

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One of the main issues in trade secret litigation is whether the business can prove the statutory element that there was a “misappropriation” of its trade secrets. To qualify for protection under Florida Uniform Trade Secrets Act (“FUTSA”) and the federal Defend Trade Secrets Act (“DTSA”), an employer must prove its trade secrets were acquired wrongfully through improper means. For liability to attach under the DTSA and FUTSA, the information must be the fruit of this wrongful acquisition, which is commonly referred to as “misappropriation.” 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.

The federal trade secrets statute, 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 the Act 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). The definition of “improper means” under FUTSA includes “breach or inducement of a breach of a duty to maintain secrecy.” Fla. Stat. § 688.002(1).

Federal courts in the Eleventh Circuit regularly find that trade secrets are acquired through improper means when a former employee downloads a former employer’s trade secret information before resigning. For example, in Fortiline, Inc. v. Moody, the United States District Court for the Southern Distrit of Florida found “ample evidence to suggest that [the defendants] acquired [plaintiff’s] trade secrets through improper means” when a defendant “removed [plaintiff’s] customer contact and pricing information from the company server to his laptop hard drive, and used this information to solicit customers for [his new company] while working for [the plaintiff].” 2013 WL 12101142 (S.D. Fla. Jan. 3, 2013). Fortiline held that “FUTSA allows courts to issue injunctions to prevent actual or threatened misappropriation of trade secrets, whether or not a non-compete agreement restricts post-employment competition.” The Fortiline Court ultimately enjoined the defendant from soliciting customers after it was shown that Moody copied his former employer’s trade secrets from company laptops onto his own personal storage devices, which was determined through forensic examination.

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A frequent issue in business litigation is whether restrictive covenants in an employment contract are enforceable. “Florida statutory law (as a matter of public policy) does not allow a party to enforce a restrictive covenant unless it proves that enforcement is necessary to protect its legitimate business interests.” Evans v. Generic Sol. Eng’g, LLC, 178 So. 3d 114 (Fla. 5th DCA 2015). Generally, a “legitimate business interest must represent an investment by the employer and must enable unfair competition if misappropriated.” IDMWORKS, LLC v. Pophaly, 192 F. Supp. 3d 1335 (S.D. Fla. 2016). Florida’s non-compete statute, Section 542.335, includes a non-exhaustive list of examples of legitimate business interests, one of which is a party’s “extraordinary or specialized training.” 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.

Under Florida law, “a ‘legitimate business interest’ is an identifiable business asset that constitutes or represents an investment by the proponent of the restriction such that, if that asset were misappropriated by a competitor (i.e., taken without compensation), its use in competition against its former owner would be “unfair competition.” White v. Mederi Caretenders Visiting Servs. Of Se. Fla, LLC, 226 So. 3d 774 (Fla. 2017). Indeed, the Supreme Court of Florida has held that a “legitimate business interest is a business asset that, if misappropriated, would give its new owner an unfair competitive advantage over its former owner.” White v. Mederi Caretenders Visiting Servs. Of Se. Fla, LLC, 226 So. 3d 774 (Fla. 2017). An employer can enforce a non-compete agreement if “there [are] 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.’” Passalacqua v. Naviant, Inc., 844 So.2d 792 (Fla. 4th DCA 2003).

Training an employee constitutes a legitimate business interest protectable by Florida law when the training rises to the level of being specialized or extraordinary. Training is classified as extraordinary when it exceeds ‘what is usual, regular, common, or customary in the industry in which the employee is employed.’” Dyer v. Pioneer Concepts Inc., 667 So. 2d 961 (Fla. 2d DCA 1996). The special training must go above and beyond “what would be common or typical in the industry.” Autonation Inc. v. O’Brien, 347 F. Supp. 2d 1299 (S.D. Fla. 2004). A business’ optional training will “not constitute a legitimate business interest sufficient to justify injunctive relief.” Austin v. Mid State Fire Equip. of Cent. Florida, Inc., 727 So. 2d 1097 (Fla. 5th DCA 1999). As such, Florida courts have found no legitimate business interest where an employee “was not required to attend the various training seminars and only ‘popped in and out’ of the meetings.” Autonation Inc. v. O’Brien, 347 F. Supp. 2d 1299 (S.D. Fla. 2004).

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The Lanham Act is a federal statute that protects businesses from various types of unfair competition, including trade dress infringement. The term “trade dress” is defined as “the total image of a product . . . [that] may include features such as size, shape, color or color combinations, textures, graphics, or even particular sales techniques.” Epic Metals Corp. v. Souliere, 99 F.3d 1034 (11th Cir. 1996). Trade dress infringement claims often arise in business litigation between businesses that produce, design, or use similar products. Businesses can sue for trade dress infringement under the Lanham Trademark Act when the relevant features of the business’ product are non-functional. 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.

The term trade dress refers to “the appearance of a product when that appearance is used to identify the producer.” Dippin’ Dots, Inc. v. Frosty Bites Distribution, LLC, 369 F.3d 1197 (11th Cir. 2004). “‘Trade [d]ress’ involves the total image of a product and may include features such as size, shape, color . . . , texture, graphics, or even particular sales techniques.” AmBrit, Inc. v. Kraft, Inc., 812 F.2d 1531 (11th Cir. 1986). To prevail on a claim for trade dress infringement, a party must prove that: “(1) the product design of the two products is confusingly similar; (2) the features of the product design are primarily non-functional; and (3) the product design is inherently distinctive or has acquired secondary meaning.” Dippin’ Dots, Inc. v. Frosty Bites Distribution, LLC, 369 F.3d 1197 (11th Cir. 2004).

Business litigation under the Lanham Act focuses on protecting trade dress for a product’s non-functional features. Epic Metals Corp. v. Souliere, 99 F.3d 1034 (11th Cir. 1996). Indeed, “trade dress protection may not be claimed for product features that are functional.” TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23 (2001). “There is no bright line test for functionality.” Dollar Only Wholesale, LLC v. Transnational Foods, Inc., 2014 WL 11944275 (S.D. Fla. Apr. 23, 2014). “[T]he person who asserts trade dress protection has the burden of proving that the matter sought to be protected is not functional.” 15 U.S.C. § 1125(a)(3). The issue of functionality is treated as a question of fact. Epic Metals Corp. v. Souliere, 99 F.3d 1034 (11th Cir. 1996).

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Parties generally have a duty to mitigate their damages under Florida law. A party’s “failure to mitigate” its damages is a defense commonly raised in employment litigation. “The doctrine of avoidance consequences, commonly referred to as a duty to mitigate damages, prevents a party from recovering those damages inflicted by a wrongdoer which the injured party could have avoided without undue risk, burden, or humiliation.” Graphic Associates, Inc. v. Riviana Restaurant Corp., 461 So. 2d 1011 (Fla. 4th DCA 1984). A party’s failure to mitigate its damages is an affirmative defense that can be raised by businesses against former employees. Frederick v. Kirby Tankships, Inc., 205 F.3d 1277 (11th Cir. 2000). Peter Mavrick is a Fort Lauderdale employment attorney, who defends businesses and their owners against employment law claims, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach.  Such claims include alleged employment discrimination and retaliation as well as claims for overtime wages and other related claims.

The failure to mitigate is a prevalent defense in Title VII employment cases. Successful claimants bringing Title VII discrimination claims are typically entitled to backpay. Title VII specifically provides that “[i]nterim earnings or amounts earnable with reasonable diligence by the person or persons discriminated against shall operate to reduce the back pay otherwise allowable.” 42 U.S.C. § 2000e–5(g)(1). “[I]n calculating a back pay award, the trial court must determine what the employee would have earned had she not been the victim of discrimination, and must subtract from this figure the amount of actual interim earnings.” Richardson v. Tricom Pictures & Productions, Inc., 334 F. Supp. 2d 1303 (S.D. Fla. 2004). To establish the affirmative defense of a Title VII claimant’s failure to mitigate damages, the defendant employer “must show that a claimant did not make reasonable efforts to obtain comparable work, or that comparable work was available and the claimant did not seek it out.” Sennello v. Reserve Life Ins. Co., 667 F. Supp. 1498 (S.D. Fla. 1987). Indeed, the “employer must show that the claimant failed to exercise reasonable diligence to locate other suitable employment and maintain a suitable job once it is located.” Richardson v. Tricom Pictures & Productions, Inc., 334 F. Supp. 2d 1303 (S.D. Fla. 2004). If “an employer proves that the employee has not made reasonable efforts to obtain work, the employer does not have to establish the availability of substantially comparable employment.” Weaver v. Casa Callardo, Inc., 922 F.2d 1515 (11th Cir. 1991).

A Title VII claimant seeking front or backpay “must make a reasonable and good-faith effort to mitigate her damages.” Richardson v. Tricom Pictures & Productions, Inc., 334 F. Supp. 2d 1303 (S.D. Fla. 2004). To do so, the claimant must seek employment “substantially equivalent” to the position from which she was terminated. Reiner v. Family Ford, Inc., 146 F. Supp. 2d 1279 (M.D. Fla. 2001). “Substantially equivalent employment is employment that affords virtually identical promotional opportunities, compensation, job responsibilities, working conditions, and status to those available to employees holding the position from which the Title VII claimant has been discriminatorily terminated.” E.E.O.C. v. Joe’s Stone Crab, Inc., 15 F. Supp. 2d 1363 (S.D. Fla. 1998). Once accepted, the claimant must also “make reasonable and good faith effort to retain the job.” Sennello v. Reserve Life Ins. Co., 667 F.Supp. 1498 (S.D. Fla. 1987).

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