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Articles Posted in Non-Compete Agreements

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When a former employer seeks an injunction to enforce a non-compete or non-solicitation agreement, it must prove that it will suffer irreparable harm without entry of an injunction.  A party seeking to enforce a non-solicitation provision by injunction does not need to prove that defendant’s specific activities will cause irreparable injury, rather the statute provides that ‘[t]he violation of an enforceable restrictive covenant creates a presumption of irreparable injury to the person seeking enforcement of a restrictive covenant.’” America II Electronics, Inc. v. Smith, 830 So.2d 906 (Fla. 2d DCA 2002); Section 542.335(1)(j), Florida Statutes.  The burden then shifts to the former employee to prove that that there is no irreparable harm. Proof of a former employer’s known financial losses does not necessarily rebut the statutory presumption when the former employee’s breach also damaged the former employer’s longstanding relationships with customers and the protection of its confidential client information. Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Miami, Boca Raton, and Palm Beach, Florida.  Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

An example of this occurred in the case of Variable Annuity Life Ins. Co. v. Hausinger, 927 So. 2d 243 (Fla. 2d DCA 2006). Variable Annuity Life Insurance Co. (VALIC) employed Jeffrey Hausinger (Hausinger) to sell annuity products to Hillsborough County school system employees. Hausinger entered an agreement with a non-solicitation provision that prohibited him from directly or indirectly soliciting any customers assigned to him within one year before his departure, and a  confidentiality provision that prohibited him from disclosing trade secrets, including customer identities and account information, at any time after his termination, and not to disclose or use any confidential and proprietary information for a period of two years after termination.

After Hausinger left his employment with VALIC, he went to work with Merrill Lynch. After Hausinger’s resignation, VALIC discovered that he was soliciting VALIC customers on behalf of Merrill Lynch. VALIC also discovered that during his employment with VALIC, Hausinger downloaded confidential customer information and trade secrets from his VALIC laptop onto a portable flash drive and brought the information with him to Merrill Lynch. VALIC demanded that Hausinger return the information. After VALIC’s demand, Hausinger returned the flash drive and returned over three hundred client files, confidential paperwork, and VALIC forms.

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Confidential business information may be considered a legitimate business interest justifying enforcement of the non-compete clause. Not all information used by a business will be considered valuable confidential business information by a court, particularly if the information can be obtained through the public domain. However, certain compilations of information, even if public, can be considered valuable to a competing business and justify a non-compete agreement. Peter Mavrick is a Fort Lauderdale non-compete attorney.  Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

In the federal court case Estetique Inc. USA v. Xpamed LLC, 2011 WL 4102340 (S.D. Fla. Sept. 15, 2011), Estetique Inc., USA (“Estetique”) sought a preliminary injunction against Defendant Xpamed, LLC (“Xpamed”), a competing business founded by Defendant Mario Guastella (“Guastella”), a former employee of Plaintiff. Estetique alleged that Xpamed, Guastella and Jose Montilla (“Montilla”), another former employee of Estetique who worked for Xpamed, allegedly used Estetique’s confidential customer information to sell similar products to its customers.

Estetique hired defendant Montilla as a member of its sales team, and hired Guastella as a web designer to maintain and design Estetique’ internet presence. Both Montilla and Guastella executed a non-compete agreement, which provided for the protection of Estetique’s proprietary customer lists, marketing, and sales information, a non-compete period of five years post-termination of employment, and a customer non-solicitation period of five years post-termination of employment.

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In Whitby v. Infinity Radio Inc., 951 So.2d 890 (Fla. 4th DCA 2007), Florida’s Fourth District Court of Appeal decided an appeal from a former employee who had lost on summary judgment in Palm Beach Circuit Court.  The trial court had decided in favor of the employer, and against the employee, that the non-compete covenant was enforceable.   The appellate court held that the trial court erred in holding the non-compete covenant enforceable on summary judgment without allowing Appellants to present evidence as to the covenant’s reasonableness and scope.  Peter Mavrick is a Fort Lauderdale non-compete lawyer and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.  The Mavrick Law Firm also represents clients in non-compete litigation and business litigation in Miami, Boca Raton, and Palm Beach.

The Whitby decision involved a radio personality who was known on-air as “Jennifer Ross” but whose real name was Elena Whitby.  Whitby had signed an employment agreement that included a non-compete covenant, prohibiting Whitby from appearing on radio or television and from working for any competing business with in 125 miles of the radio station or for 12 months after leaving her employment with the radio station.  In addition, the employment agreement included an exclusivity provision that prevented Whitby from discussing or entering into any agreement with any other entity concerning her present or future services during her employment with the radio station.

Thereafter, a competing radio station approached Whitby “to discuss the possibility of her working as an on-air personality.  Whitby later accepted employment with the competing radio station.  Thereafter, Whitby’s former employer Infinity Radio Inc. (Infinity) sued Whitby and filed an Emergency Motion For Temporary Injunction.  The trial court thereafter denied the Emergency Motion For Temporary Injunction, Infinity appealed that ruling and the appellate court reversed the trial court’s decision in favor of Infinity.

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A party to a non-compete agreement that was breached by the employer, may preempt its enforcement by seeking a declaratory judgment. To be effective, the declaratory action must include all parties who have a right to enforce the non-compete agreement. “[B]efore any proceeding for declaratory relief is entertained all persons who have an ‘actual, present, adverse, and antagonistic interest in the subject matter’ should be before the court.” Fla. Dep’t of Educ. v. Glasser, 622 So.2d 944 (Fla.1993). Section 86.091, Florida Statutes states “[n]o declaration shall prejudice the rights of persons not parties to the proceedings.” Peter Mavrick is a Fort Lauderdale non-compete lawyer and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.  The Mavrick Law Firm also represents clients in non-compete litigation and business litigation in Miami, Boca Raton, and Palm Beach.

An example of this occurred in the case of Reinstein v. Pediatric Gastroenterology, Hepatology & Nutrition of Florida, P.A., 25 So.3d 54 (Fla. 2d DCA 2009).  L. Julio Reinstein, M.D. (Reinstein), purchased an interest in a medical practice (hereinafter the “P.A.”). Dr. McClenathan (McClenathan), the founder of the P.A., retained a majority interest. Reinstein, McClenathan, and the P.A. executed various contracts to memorialize the new practice. The pertinent contracts included: (1) an Operating Agreement; (2) a Stock Transfer Restrictions and Buy–Out Agreement (the Buy–Out Agreement); and (3) a Professional Services Employment Agreement (the Employment Agreement). The Buy-Out Agreement and the Employment Agreement contained non-compete agreements.

Reinstein filed a lawsuit seeking a declaratory judgment that the two noncompete agreements were not enforceable because the P.A. and McClenathan breached the agreements. Reinstein’s employment with the P.A. was subsequently terminated, and he opened a medical practice in the restricted area. The P.A. filed a separate lawsuit seeking injunctive relief and damages against Reinstein and his new medical practice for their alleged violations of the non-compete agreement. The P.A. and McClenathan also moved to enforce the arbitration provisions contained in the agreements. The trial court referred Reinstein’s claims for damages to arbitration and retained the claims relating to the enforceability of the non-compete agreements. The parties went to arbitration, where all of Reinstein’s claims for damages against McClenathan and the P.A. were resolved. The issues relating to the non-compete agreements were the only issues remaining for the trial court to resolve. The trial court consolidated Reinstein’s lawsuit and the P.A.’s lawsuit to decide in one case. McClenathan moved for partial summary judgment, seeking to be dismissed from the litigation. McClenathan contended that he was not the party seeking enforcement of the non-compete agreement, so he should not be named individually in Reinstein’s claims.  The non-compete clause in the Buy-Out Agreement contained a provision that provided, “the [P.A.] or any Shareholder … the right to seek monetary damages … and equitable relief” in the event of a breach of the non-compete agreement. However, the non-compete in the Employment Agreement only gave the P.A. the right to seek damages and equitable relief in the event of a breach.

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Separation agreements commonly include releases of liability for employers and employees to avoid litigation for any claims that may have been asserted by either party. The presence of a release in the separation agreement does not necessarily relieve the employee of non-compete, non-solicitation, and confidentiality clauses from a prior agreement. Peter Mavrick is a Fort Lauderdale non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.  The Mavrick Law Firm also represents clients in non-compete litigation and business litigation in Miami, Boca Raton, and Palm Beach.

An example of this occurred in the recent case of Accuform Mfg., Inc. v. Nat’l Marker Co., 8:19-CV-2220-T-33AEP, 2020 WL 1674577 (M.D. Fla. Jan. 13, 2020), report and recommendation adopted, 8:19-CV-2220-T-33AEP, 2020 WL 634416 (M.D. Fla. Feb. 11, 2020). Accuform Manufacturing Inc. (“Accuform”) entered an employment agreement with Bradford Montgomery (“Montgomery”), Peter Bloniarz (“Bloniarz”), John Donati (“Donati”), Rebecca Longo (“Longo”) (collectively “Defendants”). The employment agreement contained non-competition, non-solicitation, and confidentiality clauses.  Accuform was later acquired by Justrite Manufacturing Company, LLC (“Justrite”). The acquisition resulted in consolidation of several departments which eliminated many jobs at the company. Accuform gave Montgomery, Bloniarz, and Donati a choice to assume a new role at Justrite or sign a separation agreement (“Separation Agreement”). Montgomery, Bloniarz, and Donati departed from Accuform and signed a Separation Agreement.

The terms of the Separation Agreement detailed certain benefits in exchange for the release of any claims against Accuform. Defendants were then hired by National Marker Company (“National Marker”), a competitor of Accuform. Accuform filed a lawsuit and a motion for a preliminary injunction against the Defendants for violation of the non-compete, non-solicitation, and confidentiality clauses. Accuform argued that preliminary injunctive relief was necessary because (a) Montgomery, Bloniarz, and Longo solicited and continued to solicit Accuform customers in violation of the employment agreements; (b) Montgomery, Bloniarz, Longo and Donati, breached and continued to breach the employment agreements by soliciting current Accuform employees to work for National Marker; and (c) all Defendants misappropriated, disclosed, and used Accuform’s confidential business information and continued to do so in violation of the confidentiality clauses of the employment agreements.

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Companies are fictional entities that can only act through their agents. So logically, if a company is bound by a non-compete agreement, then it may also be enforced against the company’s officers. In other words, if a signatory company’s officer opens up a new company for the purpose of competing in a way that violates the non-compete agreement, then both the officer and the new company may be enjoined. Peter Mavrick is a Miami non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.  The Mavrick Law Firm also represents clients in non-compete litigation and business litigation in Fort Lauderdale, Boca Raton, and Palm Beach.

As example of this circumstance occurred in Sexual MD Sols., LLC v. Wolff, 20-20824-CIV, 2020 WL 2197868 (S.D. Fla. May 6, 2020). Sexual MD Solutions, LLC (“SMDS”), a marketing company, was founded by Mark White (“White”). Mr. White devoted a substantial amount of time and money to develop the GAINSWave program. The purpose of GAINSWave program was to market a high-frequency, low intensity shock wave therapy (“ESWT”) to the medical community. SMDS developed training courses for physicians and physicians’ assistant groups to provide training in the treatment, but more importantly in the sales, marketing and operational aspects of selling the treatment. The trade secrets and confidential information developed by SMDS included opportunity analyses, marketing techniques, sales strategies, comparison data, pipelines, lead-generation strategies, customer/client lists and data, business plans and training videos.

SMDS hired key influencers to promote the treatment and bought certain key words that would cause its advertisements to feature prominently in internet searches. The promotion drove potential clients to the website, where consumers could find a local provider that offered the treatment. Providers who paid SMDS a monthly subscription were listed on the website. The more traffic the website received, the more valuable the SMDS subscription became. SMDS required physicians and physician’s assistants who wanted access to SMDS’ proprietary information to sign a confidentiality and non-compete agreement (“SDMS Agreement”). Medical providers who signed the SDMS Agreement and paid a monthly fee, were given access to SMDS’s Portal. SMDS’ Portal contains all materials related to SMDS’s proprietary methods, the turnkey business strategies and the contents of the business.

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Non-compete agreements are often drafted with broad provisions to prevent a business’s former employee from competing for its customers for a period of time. To be enforceable non-compete agreements must be based on a legitimate business interest, such as trade secrets, confidential information, and substantial customer relationships. However, a legitimate business interest must be harmed by the act that is allegedly violating the non-compete agreement. For example, if a sales person is barred from competing against its former employer, the agreement may not be enforceable to bar the worker from holding such a non-sales position because it may not harm a legitimate business interest.  Peter Mavrick is a Palm Beach non-compete attorney and business litigation lawyer who has substantial experience with non-compete litigation, including injunction proceedings.  The Mavrick Law Firm also practices non-compete litigation and business litigation in Fort Lauderdale, Boca Raton, and Miami.

In the case of Thyssenkrupp Elevator Corp. v. Hubbard, 2:13-CV-202-FTM-29, 2013 WL 5929132, (M.D. Fla. Nov. 4, 2013), ThyssenKrupp Elevator Corporation (ThyssenKrupp) provided components, systems, and customized service programs for elevators, escalators, and moving walks. Larry Hubbard, Jr. (Hubbard) was hired by ThyssenKrupp’s predecessor, General Elevator Sales and Service, Inc. (GESS). Hubbard signed GESS’s Employment Agreement, as a condition of his employment. GESS’s Employment Agreement contained non-compete and non-solicitation provisions which for a period of 2 years, prohibited Hubbard from providing a product or service which  “resembles” or competes with a product or service he was involved with for GESS; and prohibited Hubbard from soliciting GESS’s customers.

GESS merged with ThyssenKrupp, leaving ThyssenKrupp as the surviving company. Hubbard later argued that his Employment Agreement was not transferred along with the stock to ThyssenKrupp, resulting in its exclusion from the merger. Hubbard asserted that ThyssenKrupp did not have standing to enforce the Employment Agreement because his Employment was not specifically included in the merger agreements. The trial court disagreed because the merger included all assets of GESS, whether disclosed in a prior transaction or not.

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Courts generally have discretion as to whether to grant an injunction to enforce a non-compete agreement. That discretion, however, does not allow courts to avoid enforcing a valid non-compete agreement which has been breached. Peter Mavrick is a Boca Raton non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.  The Mavrick Law Firm also practices non-compete litigation and business litigation in Fort Lauderdale, Palm Beach, and Miami.

An example of this occurred in Sarasota Beverage Co. v. Johnson, 551 So. 2d 503 (Fla. 2d DCA 1989), where the trial court denied a motion for temporary injunction because enforcement of the non-compete agreement would cost the former employee his livelihood. Sarasota Beverage Company (SBC), was a wholesale beer distributor in Sarasota and Manatee Counties and employed Donald Johnson (Johnson) as a route deliveryman. When Johnson began his employment with SBC, he signed a non-compete agreement, which applied to Sarasota and Manatee Counties. After Johnson resigned his employment, he accepted similar employment with Robert Blaikie & Sons, Inc. (Blaikie), a competitor wholesale beer distributor operating in Sarasota, Charlotte, and Lee Counties. Johnson’s initial delivery route with Blaikie was in Sarasota County. Because SBC sent a certified letter to Blaikie advising it that Johnson was in violation of the non-compete agreement. Blaikie ignored SBC. SBC filed a lawsuit seeking to enforce the non-compete agreement and moved for a preliminary injunction. At the evidentiary hearing on the motion for preliminary injunction, there was undisputed evidence that Blaikie assigned Johnson a delivery route primarily located in Charlotte County, but only after SBC filed the lawsuit. Johnson continued to service an account in Sarasota County in direct violation of the non-compete agreement.

The trial court denied the motion for preliminary injunction and made factual findings, which stated, in pertinent parts:

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Prior material breach is a defense to a contractual claim when an employer breached an essential term of the contract.  The effect of this defense against enforcement of the non-compete agreement is that the employee can be released from his or her obligations under the contract. Because sexual harassment is strongly prohibited by both Florida and federal law, an employee may claim that sexual harassment may also constitute a material breach of the non-compete agreement. This issue also may arise when an employee claims to be constructively discharged from his or her employment because of alleged sexual harassment by a company officer or employee. Peter Mavrick is a Boca Raton non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.

An example of this defense occurred in the case of Harrison v. Palm Harbor MRI, Inc., 703 So. 2d 1117, 1119 (Fla. 2d DCA 1997), in which Kathy D. Harrison (“Harrison”) worked for Palm Harbor MRI, Inc. (“Palm Harbor”) soliciting doctors to use Palm Harbor’s MRI equipment. Harrison signed a non-compete agreement during her employment with Palm Harbor. According to Harrison, the President of Palm Harbor sexually harassed her, which resulted in Harrison’s eventual resignation. She then was hired by Gulf to Bay Diagnostics, where she performed the same job duties soliciting doctors to use Gulf to Bay Diagnostics’s MRI equipment.

Palm Harbor contended that Harrison’s employment with Gulf to Bay Diagnostics was a violation of the noncompete agreement and filed a lawsuit against her seeking an injunction. At the evidentiary hearing on the injunction, Harrison did not present any evidence, but admitted that she had signed the non-compete agreement. She contended, however, that she had solicited business for Gulf to Bay Diagnostics because she considered the non-compete agreement void as a result of the sexual harassment of her by Palm Harbor’s President. The trial court rejected this argument and held that the sexual harassment claim did not void the non-compete agreement. The trial court further stated that there were other remedies for sexual harassment. Based on Harrison’s admission that she signed the non-compete agreement and her violation of it by soliciting MRI business for Gulf to Bay Diagnostics, the trial court entered a temporary injunction against her. Harrison immediately appealed.

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Prior breach is a common defense to a lawsuit to enforce a confidentiality provision (similar to a non-compete agreement). Generally, a material (essential) breach of an agreement allows the non-breaching party to treat the breach as a complete discharge of his or her contractual liability. In re: Walter M. Thomas, Debtor, 51 B.R. 653 (M.D. Fla. 1985). However, if the material term is considered independent of the other terms of the agreement, the prior breach defense may not apply. 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.

An example, in the case of Taylor v. Genesee & Wyoming Inc., 3:13-CV-1250-J-39MCR, 2015 WL 12683821 (M.D. Fla. Sept. 25, 2015), RailAmerica, Inc. (“RailAmerica”) hired Jennifer Taylor (“Ms. Taylor”) to work as a paralegal for the then-new general counsel of RailAmerica. RailAmerica’s private equity owner subsequently commenced in an effort to sell the company. RailAmerica offered Ms. Taylor who was identified as a “key employee,” a transition agreement (the “Agreement”) to induce her to remain with the company.

The Agreement stated that Ms. Taylor would receive certain “special severance benefits” if the company was sold and if Ms. Taylor was “adversely impacted by the transaction within twelve (12) months following the closing date.” The Agreement defines the term “adversely impacted” as Ms. Taylor’s “termination of employment” upon one of several possible conditions, including “any material reduction in title, duties, authorities, or responsibilities.” The “special severance benefits” under the Agreement included a lump-sum severance benefit equal to Ms. Taylor’s annual salary, an annual bonus, COBRA benefits for the period of time that severance benefits were paid, and certain unvested shares (the “Benefits”). The Agreement included a confidentiality provision, which prohibited disclosure of the terms and conditions of the Agreement. It further provided that Ms. Taylor’s breach of the Agreement could have resulted in loss of her Benefits. The Agreement further stated that the “Benefits will expire when [the sale is concluded] or on December 31, 2013, whichever first occurs, although the confidentiality provisions shall survive.” Genesee & Wyoming, Inc. (“GWI”) acquired RailAmerica.

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