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Articles Posted in Business Litigation

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Contracts often include exculpatory provisions, usually known as “limitation of liability” clauses. An exculpatory clause typically relieves one party of liability for damages they may cause to the other party during the execution of the contract. A party will usually limit its liability to the amounts it would have been paid under the contract. When a party includes an exculpatory clause that disclaims all liability from its failure to perform the contract, it raises a question of whether the clause is enforceable. Because the party has no enforceable obligation to perform its contract, then it has not really agreed to do anything.  Courts may find this clause renders the entire contract to be “illusory” and unlikely to be enforceable.  Peter Mavrick is a Miami business litigation attorney, 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 infringment litigation, and other legal disputes in federal and state courts and arbitration.

In Pier 1 Cruise Experts v. Revelex Corp., 929 F.3d 1334 (11th Cir. 2019), Pier 1 Cruise Experts (“Pier 1”)  hired Revelex Corp. (“Revelex”) to build a customized website. The parties entered into a service agreement. The service agreement had an exculpatory clause, which stated, in pertinent part:

Revelex shall not be liable … for any direct, special, indirect, incidental, consequential, punitive, exemplary or any other damages regardless of kind or type (whether in contract, tort (including negligence), or otherwise), including but not limited to loss of profits, data, or goodwill, regardless of whether Revelex knew or should have known of the possibility of such damages…. Customer waives any and all claims, now known or later discovered, that it may have against Revelex and its licensors and vendors arising out of this agreement and the services.

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This article is part two of a three-part series discussing how employers may successfully challenge class certification of lawsuits seeking overtime and minimum wages.  The federal Fair Labor Standards Act (FLSA) sets forth a unique procedure of “collective actions,” instead of “class actions.”  A collective action requires cumbersome procedures to get putative plaintiffs to join the lawsuit and person seeking to join the case must file with the court a written consent to join the case.  29 U.S.C.A. § 216(b) (“No employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought”).  Peter Mavrick is a Fort Lauderdale employment attorney and a Miami employment attorney who defends the interests of businesses and business owners in employment law disputes, including lawsuits demanding wages and damages from alleged employment discrimination and retaliation.

At the initial stage of an FLSA collective action, a court will consider whether to grant “conditional certification.”  Conditional certification is a legal decision that will allow a plaintiff’s lawyer to seek discovery of other possible plaintiffs, and invite potential plaintiffs to join the lawsuit.  This is a very important threshold legal decision, and strategically an employer will want to work to persuade the Judge to refuse conditional certification.  A court will grant conditional certification if a plaintiff demonstrates a reasonable basis to believe that: (1) there are other employees of the Defendant who desire to opt-in and (2) that these other employees are “‘similarly situated’ with respect to their job requirements and with regard to their pay provisions.” Dybach v. State of Fla. Dep’t of Corrs., 942 F.2d 1562 (11th Cir.1991); see Calderone v. Scott, 838 F.3d 1101 (11th Cir. 2016) (“To maintain an opt-in collective action under § 216(b), plaintiffs must demonstrate that they are ‘similarly situated”).  The employee-plaintiff has “the burden of demonstrating a reasonable basis for crediting [his] assertions that aggrieved individuals existed in the broad class that [he] proposed.”  Haynes v. Singer Co., Inc., 696 F.2d 884 (11th Cir.1983).  Opt-in plaintiffs “need show only that their positions are similar, not identical, to the positions held by the putative class members.” Hipp v. Liberty Nat’l Life Ins. Co., 252 F.3d 1208 (11th Cir. 2001).  While there is no bright line test in determining whether plaintiffs are sufficiently similar, the more legally significant differences that exist among the opt-in plaintiffs, the less likely it is that the court will determine that the group of employees is similarly situated.  Anderson v. Cagle’s, 488 F.3d 945 (11th Cir. 2007).

A plaintiff must also show that there are other employees who wish to opt-in to the suit before a collective action may be certified.  Dybach v. State of Fla. Dep’t of Corr., 942 F.2d 1562 (11th Cir.1991).  In making this showing, a plaintiff cannot rely on speculative, vague, or conclusory allegations.  Alvarez v. Sun Commodities, Inc., 12-60398-CIV, 2012 WL 2344577 (S.D. Fla. June 20, 2012).  An employer may prevail and avoid conditional certification by providing affidavits which are not sufficiently rebutted by the plaintiff’s affidavits.  Grayson v. K Mart Corp., 79 F.3d 1086 (11th Cir.1996); Kubiak v. S.W. Cowboy, Inc., 2014 WL 2625181 (M.D. Fla. June 12, 2014) (an employer may prevail on decertifying the class by showing that only a relatively small proportion of members of a class wish to opt-in).  The Mavrick Law Firm has successfully defended attempted collective actions by proving to federal and state Judges that the plaintiffs have not presented sufficient evidence that there is a true class of similarly situated plaintiffs.

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Florida law generally requires that a party post a “bond” before a Judge will enter an injunction order that prohibits the opposing party from competing in violation of a non-compete agreement.  The purpose of requiring a bond as a condition to issuance of a temporary injunction is to provide a sufficient funds to cover the adverse party’s damages, including attorney’s fees and costs, in the event the court later determines that the injunction was wrongfully issued. Richard v. Behavorial Healthcare Options, Inc. 647 So.2d 976 (Fla. 2d DCA 1994).  Generally, the court hears the former employee’s testimony providing a good faith estimate of what his or her foreseeable damages would be if the injunction is later found to be wrongfully entered. The bond amount generally constitutes the limits of the adverse party’s recovery if the injunction is found to be wrongfully entered, therefore, the bond initially set by the court constitutes the court’s determination of the foreseeable damages based on the good faith representations of the parties. Parker Tampa Two, Inc. v. Somerset Dev. Corp., 544 So.2d 1018 (Fla.1989). Peter Mavrick is a Fort Lauderdale, Miami, and Palm Beach non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.

In Montville v. Mobile Medical Industries, Inc., 855 So.2d 212 (Fla. 4th DCA 2003), Phyllis Montville (“Montville”) and Maxine Starnes (“Starnes”) signed a non-compete and non-solicitation agreements with their employer Mobile Medical Industries, Inc. (“MMI”) (the “non-compete agreements”). The non-compete agreements provided that after their employment was terminated, Montville and Starnes were prohibited from competing with MMI and soliciting MMI’s personnel or referral sources for a twelve-month period. Subsequently, Starnes resigned, and Montville was fired, allegedly for cause.

MMI filed a lawsuit against Montville and Starnes for an injunction to enforce the non-compete agreement and for damages.  MMI alleged that both Montville and Starnes assisted a competitor in forming a new, competing home health care business in Palm Beach County, and solicited MMI’s personnel and its referral sources. At the bond hearing, Montville testified she earned approximately $300,000 per year while working for MMI, but she had not worked since being fired. Montville also testified that she continued to receive her base salary from MMI. Starnes testified that she was earning $75,000 per year in her new position as Administrator for the competitor. The trial court granted a temporary injunction that enjoined Montville from competition and solicitation for the twelve-month period of her agreement, and enjoined Starnes from competition for a period three months, and from soliciting MMI’s personnel or referral sources for a period of six months. The periods ran from the date of the order. MMI was required to post a $50,000 bond. Montville and Starnes immediately appealed.

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Florida law permits parties in litigation to issue offers of judgment and demands for judgment/proposals for settlement to their adversaries in litigation.  If the opposing party accepts the offer, this will typically conclude litigation between the parties.  If the opposing party refuses, and the offering party prevails by more than 25%, then the offering party will be entitled to a judgment in its favor for the attorneys’ fees it has incurred since the date that the offer was made.  Florida businesses that seek to take advantage of this rule must consider the nuances of the rule to make best use of it.  Peter Mavrick is a Miami business litigation attorney who represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringment litigation, and other legal disputes in federal and state courts and arbitration.

Florida Statute 768.79 and Rule 1.442 of the Florida Rules of Civil Procedure set forth the applicable rules regarding offers of judgment/proposals for settlement. The award of attorneys’ fees is mandatory when the offer of judgment complies with both § 768.79, Florida Statutes, and Florida Rules of Civil Procedure Rule 1.442.  See Anderson v. Hilton Hotels Corp., 202 So. 3d 846 (Fla. 2016) (“The mandatory language of section 768.79 reinforces the notion that a proper offer automatically creates that entitlement, unless the offer is made in bad faith […] [t]hus, an offer that complies with section 768.79 and Rule 1.442 creates a ‘mandatory right’ to collect attorneys’ fees”).

Section 768.79(1) Florida Statutes, provides:

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This article is part of a three-part series discussing the ways that employers may defend against measures taken by employee-plaintiffs who sue their employers to bring in additional plaintiff-employees into the lawsuit.  Part one of this series defines and distinguishes between Fair Labor Standards Act (FLSA) collective actions and class action claims.  Part two describes how an employer may defend against an attempt to bring an FLSA collective action.  Part three describes how employers may counter an employee-plaintiff’s attempt to certify a class of employees for a class action suit.  Peter Mavrick is a Fort Lauderdale employment attorney who defends the interests of businesses and business owners in employment law disputes, including lawsuits demanding wages and damages from alleged employment discrimination or retaliation.

Employees suing for their wages may attempt to sue on behalf of both themselves and other similarly situated employees.  For claims under the FLSA, former employees sometimes file lawsuits seeking to sue on behalf of other employees as a “collective action.” In other words, the plaintiff seeks to bring other former or current employees into the lawsuit. For claims in other areas of law, such as under the Florida Minimum Wage Act, an employee may bring a “class action,” which is a process by which all similarly situated employees are included in the suit unless they choose to opt-out.  The collective action and class action lawsuits seek to join more employee-plaintiffs into a lawsuit than would have otherwise joined it without the certification of a class.   The more employees who are plaintiffs, the greater the exposure to the Florida business.   A Florida business and their owners are not defenseless against a collective or class action because the employer can demonstrate to the court that the collective or class actions are not proper.  The Mavrick Law Firm has successfully defended Florida businesses from their employees improperly bringing collective and class actions against them.

Both collective actions, under 29 U.S.C. 216(b), and class actions, under Fed.R.Civ.P. Rule 23(b)(3), give “plaintiffs the advantage of lower individual costs to vindicate rights by the pooling of resources” and allow for “efficient resolution in one proceeding of common issues of law and fact arising from the same alleged [unlawful] activity.” Hoffmann–La Roche, Inc. v. Sperling, 493 U.S. 165 (1989).  Both collective and class actions accomplish this through different means.  When a collective action is first certified under the FLSA, court allow the plaintiff-employee, under supervision of the Judge, to send to all potential members of the class an offer to opt-in to the litigation.  This obviously makes it more likely that employee-plaintiffs will join the lawsuit.  By contrast, in a Rule 23 “class action,” all qualifying persons automatically become members of the class unless they opt-out of the action.  See Fed.R.Civ.P. Rule 23(c)(2)(B)(v). As the federal Eleventh Circuit Court of Appeals, which governs federal court decisions in the State of Florida, explained in the case Calderone v. Scott, 838 F.3d 1101 (11th Cir. 2016), “[t]his ‘opt-out’ requirement is what makes a Rule 23(b)(3) class action a ‘fundamentally different creature’ than a § 216(b) collective action, which depends for its “existence … on the active participation of [class members].”

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Florida law governing non-compete agreements imposes specific requirements for a contractual “assignment” provision to be considered valid.  Florida Statutes Section 542.335(1)(f)(2) requires assignment of a non-compete provision to be expressly authorized by the contract in order to be enforced by an employer’s assignees or successors. Florida courts interpret the plain meaning of the wording of an assignment clause to determine whether the third-party’s rights to enforce the non-compete agreement are subsumed within the clause.  Contractual assignment provisions are typical in the sale and purchase of business assets.  A buyer of the assets of a business will typically demand a non-compete agreement restricting the seller or another key employee from competing in some limited way against the buyer of the business assets.  Such a restrictive covenant is typically in tandem with a bargain for a higher selling price for the business assets. The parties to the asset sale transaction recognize that the non-compete agreement will enhance the likelihood of a successful and profitable business transition from seller to buyer.  Accordingly, assignment clauses that allow the buyer to “stand in the shoes” of the seller of the assets regarding a non-compete agreement with a key employee are critical to buyer getting the benefit of the bargain.  Peter Mavrick is a Fort Lauderdale, Palm Beach, and Miami non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.

In Patel v. Boers, 68 So.3d 380 (Fla. 5th DCA 2011), David Boers, DDS (“Boers”) sold his dental practice to Yagnabala Patel, DDS (“Patel”), and assigned the Provider Agreement he entered with Thomas Cheng, DMD (“Cheng”). The Provider Agreement contained a non-compete covenant.  Cheng continued to work for Patel for nearly one year after she purchased Boers’ dental practice. Cheng subsequently left Patel’s employment. Patel contended that Cheng committed numerous violations of the non-compete covenant.  Patel filed a lawsuit against Cheng seeking, among other things, an injunction to enforce the non-compete provision.

Cheng filed a motion to dismiss the injunction claim, arguing that Patel lacked standing to enforce the restrictive covenant because the Provider Agreement did not comply with the requirements of Section 542.335(1)(f)(2), Florida Statutes. Section 542.335(1)(f)(2) provides in pertinent part:

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Contract termination can sometimes be necessary even when there has been no wrongdoing by any party. Unanticipated circumstances for one party can frustrate the purpose of the contract or render performance of a contract impractical.  The Mavrick Law Firm’s recent, related article addressed the legal excuse of “impossibility” when contractual obligations become impossible to perform (for example, the COVID-19 related “shelter-in-place” orders which prohibits activities such as the hosting an event in public). This article discusses the similar Florida law defenses of “frustration of purpose” and “impracticability.” Peter Mavrick is a Miami business litigation attorney who represents businesses in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringment litigation, and other legal disputes federal and state courts and arbitration.

The affirmative defenses of frustration of purpose and impracticability have the common principle that if the risk was foreseeable at the inception of the contract, then these defenses may not be applicable.  As Florida’s Fifth District Court of Appeal explained in the case of Genuinely Loving Childcare, LLC v. Bre Mariner Conway Crossings, LLC, 209 So.3d 622 (Fla. 5th DCA 2017), if the intervening event was reasonably foreseeable before entering the contract and could have been controlled by the terms of the contract, Florida courts will not allow a party to excuse its contractual performance and instead hold the party liable for a breach of contract. Unlike the doctrine of impossibility, the contractual duties do not need to be impossible to perform

The “frustration of purpose” legal defense may excuse performance of a contract when the overall purpose of the contract has been frustrated or negated by an unanticipated changed circumstance. .  For example, in Hilton Oil Transport v. Oil Transport Co., S.A., 659 So.2d 1141 (Fla. 3d DCA 1995), Florida’s Third District Court of Appeal in Miami held that the doctrine of commercial frustration applied to certain events but not other events that were the subject of the lawsuit, depending on whether the “intervening event” was reasonably foreseeable to the parties and should have been addressed by the contract.  The appellate court explained that Hilton Oil Transport (“Hilton”) entered into an agreement for its barge to haul asphalt to Honduras. Hilton employed Oil Transport Co. S.A. (“OTC”) to lease its tugboat to tow Hilton’s barge for part of the voyages. During one of the voyages, the Honduran local government detained the barge and tugboat due to the alleged possibility of the asphalt boiling over onto the shore. About one week later, a severe storm came through and destroyed the barge.  OTC filed a lawsuit against Hilton for failure to pay its invoice in breach of their charter agreement. Hilton raised the defense of commercial frustration of the charter agreement. The trial court found in favor of OTC. Hilton appealed and contended that the trial court’s award of the entire sixteen-month charter was in error because its charter was commercially frustrated by both the detention of the barge and tugboat, as well as the subsequent destruction by the storm.

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Forum selection clauses are contract provisions intended to assign the forum where any disputes under the contract will be resolved, such as Broward County or Miami-Dade County, Florida. While signatories to the contract have agreed to be bound to the forum selected in the agreement, it is not always evident whether non-signatories will be bound. Non-compete lawsuits often involve non-signatory parties, such as the employee’s new employer and related parties.  Peter Mavrick is a Fort Lauderdale, Palm Beach, and Miami  non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.

An example of this circumstance occurred in East Coast Karate Studios, Inc. v. Lifestyle Martial Arts, LLC, 65 So. 3d 1127 (Fla. 4th DCA 2011). A martial arts business hired an employee to work in its Broward County location and had the employee sign a non-compete agreement. The non-compete agreement prohibited the employee from engaging in the same business in Broward County or within a twenty-five mile radius of Broward County for two years from the date of termination of his employment. The agreement also contained a mandatory forum selection clause which required Broward County to be the “exclusive” forum for any case or controversy arising either directly or indirectly, under or in connection with the non-compete agreement. The employee also agreed not to contest or challenge the jurisdiction or venue of the court. The employee subsequently resigned and immediately began working for a martial arts business in Delray Beach. The new employer was located within a twenty-five mile radius of Broward County. The new employer’s managing member was the employee’s wife.

The employee, his wife, and the new employer filed a declaratory judgment lawsuit in Palm Beach County. They sought a declaration that the non-compete agreement was unenforceable. The former employer moved to transfer venue from Palm Beach County to Broward County. The former employer’s motion to transfer was based on the non-compete agreement’s mandatory forum selection clause. The employee, his wife, and the new employer contended that Palm Beach was the appropriate venue because: the employee and his wife resided in Palm Beach County; the new employer’s business address was in Palm Beach County; and the employee’s wife and the new employer were not bound by the mandatory forum selection clause because they did not sign the non-compete agreement.

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As the world strives to persevere through the COVID-19 pandemic and the resulting economic fallout, it may become impossible for many Florida businesses to comply with their business contracts.  Businesses may be able to cancel those contracts if they contain a “force majeure” clause. Force majeure clauses are contractual terms which remove liability for natural and unavoidable catastrophes that interrupt the expected course of events and restrict parties from fulfilling contractual obligations. Typical force majeure clauses address global catastrophic events, such as acts of war, environmental catastrophe, riots or civil unrest, or complete unavailability of supply. Absent a force majeure clause, parties alternatively may be able to avoid liability by asserting the defense of “impossibility” to excuse their failure to perform on the basis that performance of the contract impossible.  Peter Mavrick is a Miami business litigation attorney with extensive experience in defending and prosecuting the interests of businesses in court proceedings and arbitration.

Generally, when a party to a contract fails to perform under the contract, they become liable for damages. Force majeure clauses are intended to excuse performance under a contract if calamity causes performance to become impossible or impractical, and that calamity could not have practically been predicted or prevented.  Essentially, a force majeure clause is an agreement that allocates the risk of calamity away from the victim.  For example, if a hurricane demolishes a factory overnight, such a calamity might excuse the performance under the contract for that company.  The company may have to return the money paid by the purchasers but will not be on the hook for the damages for all of purchases that it failed to fulfill.  Force majeure clauses may also only temporarily suspend performance, requiring the party to perform under the contract as soon as the calamity has passed.

Force majeure clauses “will generally only excuse a party’s nonperformance if the event that caused the party’s nonperformance is specifically identified.” ARHC NVWELFL01, LLC v. Chatsworth at Wellington Green, LLC, 18-80712, 2019 WL 4694146 (S.D. Fla. Feb. 5, 2019). An example of an exception to this general rule occurred in Devco Dev. Corp. v. Hooker Homes, Inc., 518 So. 2d 922 (Fla. 2d DCA 1987) where the court found that excessive rain qualified as “any other condition” within the force majeure clause, which excused the delayed construction of a home.

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Non-compete agreements often prohibit competition with other companies that are “similar to” or “competitive with” their own company. The wording of a non-compete covenant, however, can sometimes be understood to refer to the method of the business as opposed to the products or services being sold.  Under Florida law, a non-compete agreement that prohibits doing business with direct sales companies (such as door-to-door sales, home party sales, etc.) may be enforceable to protect a legitimate business interest. Peter Mavrick is a Miami non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.

An example of this circumstance occurred in the federal court case PartyLite Gifts, Inc. v. MacMillan, 895 F.Supp.2d 1213 (M.D. Fla. 2012), where Plaintiff, PartyLite, Inc. (“PartyLite”), filed a lawsuit against Defendant, Tarie MacMillan (“MacMillan”), claiming breach of the parties’ non-compete, non-solicitation, and non-disclosure agreements.  PartyLite sold candles and related home products to consumers through the “home party plan” method of direct sales. Independent contractors known as “Consultants” demonstrated products and accepted orders for PartyLite’s products. All PartyLite Consultants, including MacMillan, signed a form Consultant Agreement which incorporated by reference certain policies and procedures contained in the PartyLite’s Policies and Procedures. PartyLite’s Policies and Procedures included terms and conditions wherein the Consultant agreed: 1) not to promote or sell other products or services or recruit for other companies or other business activities at PartyLite Shows, meetings or other events, 2) if the Consultant represented another company or participated in other business activities outside PartyLite, that any information, printed materials or other items obtained through association with PartyLite be kept separate and not used to solicit, promote, market or sell at or for any non-PartyLite activity, and 3) to keep PartyLite information confidential.

MacMillan advanced to the highest-level recognized by PartyLite, specifically that of “Senior Regional Vice President.” After her promotion to “Senior Regional Vice President,” PartyLite and MacMillan entered into a Leader Commitment Agreement (the “Leader Agreement”). The Leader agreement expanded the terms of the Consultant Agreement and included a provision wherein MacMillan agreed that during the term of the Leader Agreement and after the term ends and thereafter, she would not solicit or otherwise attempt to persuade any PartyLite Consultant or Leader to sell, resell or promote products of any other direct sales company, or to cease to be a Consultant or Leader of the Company. The Leader Agreement allowed MacMillan to accept employment and participate in other activities without PartyLite’s approval provided those activities do not violate the Leader Agreement and did not involve “selling, reselling, promoting products, or actively representing other direct sales companies that are similar to or competitive with the Company.” MacMillan worked as a Leader for PartyLite for several years after executing the Leader Agreement.

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