Articles Posted in Business Litigation

Published on: April 12, 2023

FORT LAUDERDALE BUSINESS LITIGATION: NON-COMPETE AGREEMENT LITIGATION IN FEDERAL AND FLORIDA COURTS

Much of non-compete agreement litigation centers on the availability of obtaining a preliminary injunction barring competition. As the United States Court of Appeals for the Eleventh Circuit explained in United States v. Lambert, 695 F.2d 536 (11th Cir. 1983), a preliminary injunction is “an extraordinary and drastic remedy” that is “the exception rather than the rule.” A federal court may grant injunctive relief only if the moving party establishes the following elements: (1) “a substantially likelihood of success on the merits”; “irreparable injury” without an injunction; (3) the movant’s injury outweighs the harm an injunction may cause the opposing party; and (4) an injunction is not “adverse to the public interest.” Siegel v. LePore, 234 F.3d 1163 (11th Cir. 2000) (en banc). Since a preliminary injunction is an extreme remedy, federal courts do not grant it “unless the movant clearly establishes the ‘burden of persuasion’ as to all four requisites.” All Care Nursing Serv., Inc. v. Bethesda Mem’l Hosp., 887 F.2d 1535 (11th Cir. 1989). 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.

Concerning the injunction legal element of “irreparable harm,” there is an important conflict between Florida statutory law and case law versus the decisions of federal courts. Florida’s restrictive covenant statute has a presumption of irreparable harm. Florida Statutes, Section 542.335(1)(j), presumes that a person seeking to enforce a valid restrictive covenant suffered irreparable harm. Florida law removes the burden to prove irreparable harm and shifts that legal burden to the nonmovant, who must rebut the presumption. The Supreme Court of Florida in Caprano v. Lanier Bus. Prods., Inc., 466 So.2d 212 (Fla. 1985), explained that this presumption exists “because of the inherently difficult, although not impossible, task of determining just what damage actually is caused by the employee’s breach of the agreement.” The Supreme Court in Caprano emphasized that, “[i]t truly can be said in this type of litigation that relief delayed is relief denied.” The presumption means that “a party seeking to enforce a restrictive covenant by injunction need not directly prove that the defendant’s specific activities will cause irreparable injury.” Am. II Elecs., Inc. v. Smith, 830 So.2d 906 (Fla. 2d DCA 2002). Florida’s Second District Court of Appeal in Fam. Heritage Life v. Combined Ins. Co., 319 So.3d 680 (Fla. 3d DCA 2021), explained that the presumption applies if the restrictive covenant was violated and if it protects a legitimate business interest.

Federal courts, however, often will not apply Florida’s Florida’s presumption of irreparable harm. See, for example, the United States District Court for the Southern District of Florida in S. Wine & Spirits of Am., Inc. v. Simpkins, 2011 WL 124631 (S.D. Fla. Jan. 14, 2011) (Cooke, J.) (concluding that Florida’s presumption of irreparable harm does not apply in federal court). This based in part on Federal Courts interpretation of Rule 65 of the Federal Rules of Civil Procedure (i.e., the federal rule governing injunctions), which “does not place upon the [nonmovant] the burden of coming forward and presenting its case against a preliminary injunction.” Granny Goose Foods, Inc. v. Bhd. of Teamsters & Auto Truck Drivers Loc. No. 70, 415 U.S. 423 (1974). In the view of many federal courts, a presumption of irreparable harm effectively replaces the “equitable discretion” that the United States Supreme Court discussed in important precedent in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006). In eBay Inc., the Supreme Court chided federal courts for abandoning the traditional equity factors in patent infringement claims and for adopting a presumption in favor of injunctions. eBay, Inc. explained that Judges must exercise balance equitable factors (such as the balancing test for Judges to issue injunctions) “consistent with traditional principles of equity.” In Amoco Prod. Co. v. Bill. of Gambell, AK, 480 U.S. 531 (1987), the Supreme Court also stated that a “presumption” of irreparable harm is “contrary to traditional equitable principles.”

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Published on: April 8, 2023

MIAMI BUSINESS LITIGATION: NON-COMPETE AGREEMENTS BASED ON CONFIDENTIAL OR TRADE SECRET INFORMATION

By Mavrick Law Firm

Under Florida’s non-compete statute, Florida Statutes Section 542.335(1)(b), “[t]he person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.” The term “legitimate business interest” includes trade secrets (as defined in Florida Statutes Section 688.002(4)) and “valuable confidential business or professional information.” Florida and federal courts scrutinize the facts to assess whether the employer has satisfactorily proven the existence of “trade secrets” and “valuable confidential information.” In many cases, businesses seek to enforce non-compete agreements based on alleged trade secret or confidential information that do not qualify as such under the statute. Peter Mavrick a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

To sufficiently plead and prove a legitimate business interest in confidential or proprietary information, an employer must articulate the information it deems confidential or proprietary. Florida’s Fourth District Court of Appeal in Passalacqua v. Navient, Inc., 844 So.2d 792 (Fla. 4th DCA 2003), determined there was no legitimate business interest where the employer failed to “articulate how any activity, method or technique utilized by [the company] was unique or proprietary in any way.” Similarly, the United States District Court for the Middle District of Florida in Lucky Cousins Trucking, Inc. v. QC Energy Res. Texas, LLC, 223 F.Supp.3d 1221 (M.D. Fla. 2016), explained that “[g]eneric allegations do not establish a legitimate business interest.” An employer must prove that the employees could use the information to gain an unfair advantage. As the Passalacqua decision explained, “[g]eneralized statements of concern cannot substitute as proof.” As it relates to alleged trade secrets on which the non-compete agreement is bsed, information commonly known in the industry and not unique to the former employer is not “confidential” and thus not entitled to protection. Keel v. Quality Medical Systems, Inc., 515 So.2d 337 (Fla. 3d DCA 1987).

Under Florida Statutes § 542.335(b)(2), the employer must prove that the employee could use the information to gain an unfair advantage. A great deal of non-compete litigation centers on whether the former employee took advantage of “substantial relationships” with specific customers. In Anich Indus. Inc. v. Raney, 751 So.2d 767 (Fla. 5th DCA 2000), Florida’s Fifth District Court of Appeal explained that, under Florida law, “information commonly known in the industry and not unique to [the] allegedly injured party [is] not ‘confidential’ and thus not entitled to protection.” The appellate court explained in pertinent part: “Anich’s contention that it proved that Raney sought to take advantage of substantial relationships with specific customers also is unsupported by the record from the hearing. Anich asserts that the ‘substantial relationships’ are those developed between the employee and the customer; Raney, on the other hand, submits that the ‘substantial relationships’ are those developed between the employee and the customer…Under either interpretation, however, ‘substantial relationships’ have not been shown. The customers who testified on Anich’s behalf all acknowledged that they made their industrial tool and equipment purchases based primarily on cost and the supplier’s ability to provide the goods quickly. There was little evidence of any exclusive or other kind of relationship that could be construed as ‘substantial’ with the meaning of the statute. Alternatively, under Raney’s interpretation [i.e., the employee’s interpretation], it is obvious that in less than three months with Anich she did not have the opportunity to develop a ‘substantial relationship’ with any of her customers.”

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Published on: April 2, 2023

MIAMI BUSINESS LITIGATION: DEFENSE AGAINST TRADE SECRET MISAPPROPRIATION BASED ON “MODIFICATION OR IMPROVEMENT”

By Mavrick Law Firm

Under the Federal Defend Trade Secrets Act as well as the Uniform Trade Secret Act adopted by many states, unauthorized use of trade secret information and unauthorized acquisition or disclosure of trade secret information may constitute misappropriation. The legal concept of “misappropriation” includes not only the wholesale pirating of an idea, but also the unauthorized utilization of an idea as a starting point or guide in developing a process, or as a means to understand what pitfalls to avoid. The United States Court of Appeals for the Seventh Circuit in Mangren Research & Dev. Corp. v. Nat’l Chemical Co., Inc., 87 F.3d 937 (7th Cir. 1996), explained that “the use of another’s trade secret is liable even if he uses it with modifications or improvements upon it effected by his own efforts, so long as the substance of the process used by the actor is derived from the other’s secret.” Peter Mavrick a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

In business litigation seeking to prove trade secret misappropriation, a plaintiff will usually need to rely on circumstantial evidence. In SI Handling Systems, Inc. v. Heisley, 753 F.2d 1244 (3d Cir. 1985), the federal appellate court explained that “[m]isappropriation and misuse can rarely be proved by convincing direct evidence. In most cases plaintiffs must construct a web of perhaps ambiguous circumstantial evidence from which the trier of fact may draw inferences which convince him that it is more probable than not that what plaintiffs allege happened did in fact take place. Against this often delicate construct of circumstantial evidence there frequently must be balanced defendants and defendants’ witnesses who directly deny everything.” For this reason, “[r]arely will the plaintiff in a misappropriation of trade secrets case discovery the ‘needle’ in his opponent’s ‘haystack” of documents. Nor is it likely that plaintiff’s counsel will enjoy the ‘Perry Mason moment’ when the defendant’s chef executive officer buckles under the weight of cross examination and admits that his company has misappropriated the plaintiff’s trade secret.” Savor , Inc. v. FMR Corp., 2004 WL 1965869 (Sup. Ct. Del. 2004) (interpreting Delaware version of Uniform Trade Secret Act).

Particularly when they rely on circumstantial evidence to prove their cases, plaintiffs sometimes make strategic mistakes in how they present trade secret misappropriation cases. Plaintiffs have confronted problems where they insist a trade secret is comprised of all elements of its alleged secret, and that none of the elements can be separated from the whole. In such cases, plaintiffs must establish misappropriation of the entire trade secret to prevail. In this regard, the United States District Court in New Jersey explained in Vital State Canada, Ltd. v. Dreampak, LLC, 303 F.Supp.2d 516 (D.N.J. 2003), that an “assertion that the trade secret is a combination of the elements is crucial…since it means that to prove use of the trade secret, [plaintifF] must prove use of each and every element in combination.”

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Published on: March 29, 2023

FORT LAUDERDALE BUSINESS LITIGATION: INTEGRATED CONTRACTS AND COUNTERCLAIMS

By Mavrick Law Firm

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

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

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

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Published on: March 22, 2023

FORT LAUDERDALE BUSINESS LITIGATION: MITIGATION OF DAMAGES IN CASES OF BREACH OF CONTRACT

By Mavrick Law Firm

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

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

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

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Published on: March 19, 2023

MIAMI BUSINESS LITIGATION: PROVING TRADE SECRETS AND MEASURES TO RETAIN SECRECY

By Mavrick Law Firm

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

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

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

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Published on: March 16, 2023

FORT LAUDERDALE BUSINESS LITIGATION: PROOF OF DAMAGES AT TRIAL

By Mavrick Law Firm

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

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

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

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Published on: March 11, 2023

MIAMI BUSINESS LITIGATION: ENFORCING NON-COMPETE AGREEMENT BASED ON “EXTRAORDINARY OR SPECIALIZED TRAINING”

By Mavrick Law Firm

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

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

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

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Published on: March 8, 2023

FORT LAUDERDALE BUSINESS LITIGATION: THE COMPUTER FRAUD AND ABUSE ACT

By Mavrick Law Firm

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

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

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

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Published on: March 4, 2023

MIAMI BUSINESS LITIGATION: VALID LIQUIDATED DAMAGES PROVISIONS IN CONTRACTS

By Mavrick Law Firm

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

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

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

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