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Articles Posted in Non-Compete Agreements

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The Florida Uniform Trade Secrets Act (“FUTSA”) requires courts to take reasonable steps to preserve the secrecy of trade secrets. Fla. Stat. § 688.006. Injunctive relief may be ordered to preserve trade secrets based on actual or threatened misappropriation, as well as, compelling parties to perform specific acts. Fla. Stat. § 688.003.  FUTSA, however, may not be used as a vehicle to restrict competition. In Hatfield v. AutoNation, Inc., 939 So.2d 155 (Fla. 4th DCA 2006), the Florida’s Fourth District Court of Appeal held that FUTSA deals with misappropriation, but not with alleged violations of non-competion agreements. Peter Mavrick is a Fort Lauderdale non-compete lawyer and trade secret lawyer who has extensive experience in trade secret litigation.

An example of this circumstance is the case of Norton v. American LED Technology, Inc., 245 So.3d 968 (Fla. 1st DCA 2018), where American LED Technology, Inc. (“American”) filed a lawsuit against Steve Norton (“Norton”), its former employee.  American filed a motion for a temporary injunction based on an alleged violations of FUTSA and of a non-compete agreement. After a hearing on the motion for temporary injunction, the trial court entered an order granting American’s motion based only on the alleged FUTSA violation. The trial court’s order stated that its findings were “separate and independent from any breach of contract claim” and did not make any other reference to the non-compete agreement. The temporary injunction required, among other things, that Norton could not compete with American. Norton immediately appealed.

American contended that Hatfield v. AutoNation, Inc. demonstrated that courts have discretion to restrain competition when granting injunctive relief under FUTSA. In Hatfield, the appellate court affirmed an order granting a temporary injunction that “included a brief respite from employment as part of the court’s fashioning a remedy that would aid [the plaintiff] in minimizing the potential damage by disclosure of time sensitive trade secrets.”

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An undefined term in a non-compete agreement creates an ambiguity in the contract, and therefore uncertainty in a court’s interpretation of the term. When a term is left undefined, Florida law requires courts to give the term its ordinary meaning.  Although the terms “compete” and “line of business” may seem self-explanatory, the context in which they are to apply may require further definition.  Peter Mavrick is a Miami non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.

In the case of Circuitronix, LLC v. Kapoor, 748 Fed.Appx. 242 (11th Cir. 2018), Sunny Kapoor (“Kapoor”) was the Assistant CEO of Circuitronix, LLC (“Circuitronix”) from October 2012 until his termination in March 2015. Kapoor’s employment was subject to a series of employment agreements. After his termination, Circuitronix filed a lawsuit against Kapoor and alleged that he violated the terms of the parties’ non-compete agreement. Kapoor counterclaimed against employer and Rishi Kukreja (“Kukreja”), its chief executive officer, and alleged breach of employment contract, unlawful retaliation, civil theft and unpaid wages.

The parties resolved their claims in mediation and on December 1, 2015 signed a mediated settlement agreement (“Settlement Agreement”). The Settlement Agreement incorporated the Mediated Settlement Term Sheet by reference and prohibited Kapoor from competing “with Circuitronix, anywhere in the world, for a period of 3 years starting from September 15, 2015.” The non-compete agreement explicitly applied “to all lines of business in which Circuitronix engaged” during the time of Kapoor’s employment. The Settlement Agreement was formally approved by the district court two days later.

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For a business to be to protect its confidential information as a protectable trade secrets under the Florida Uniform Trade Secret Act, the business must preserve the secrecy of its confidential information.  There are no hard and fast rules that must be followed for a business to protect its confidential information as a trade secret.  “No single ‘step’ taken to maintain the secrecy of the information secrecy will be determinative; but if the claimant can establish a consistent approach to keeping the information ‘secret’ it will go along way to satisfying this element of the statutory definition.” Gary S. Gaffney and Maria E. Ellison, A Primer on Florida Trade Secret Law: Unlocking the “Secrets” to “Trade Secret” Litigation, 11 U. Miami Bus. L. Rev. 1 (2003). Peter Mavrick is a Fort Lauderdale trade secret attorney, non-compete attorney, and business litigation attorney who represents businesses in trade secret litigation, non-compete agreement litigation, and other business litigation.

A recurring issue in non-compete covenant litigation is whether a trade secret exists and justifies the restrictive covenant.  Under Florida Statutes § 542.335(b)2), a non-compete can be based on a legitimate business interest of a trade secret.  If a trade secret is a proven legitimate business interest under Florida’s non-compete statute, the consequences are severe for the opposing party due to the expanded time-frame the statute allows to enforce a non-compete.  Section 542.335(e), Florida Statutes, provides that “In determining the reasonableness in time of a postterm restictive covenant predicated upon the protection of trade secrets, a court shall presume reasonable in time any restraint 5 years or less and shall presume unreasonsble in time any restraint of more than 10 years.  All such presumtions shall be rebuttable presumptions.”  Because Florida law accords protection to genuine trade secrets and because of the potentially lengthy period of a non-compete based on trade secrets, parties in litigation will often scrutinize whether the alleged trade secrets were closely guarded to ensure and maintain their status as protectible trade secrets.

Trade secrets are defined under § 688.002(4), Florida Statutes, as:

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It is common in lawsuits regarding non-compete agreements for plaintiffs to sue the new enterprise started by the former employee or the company that hires the former employee, i.e. a third party.  Plaintiffs seek to enjoin these third parties from aiding and abetting the violation of the non-compete, as well as, hold them liable for damages, attorney’s fees and costs. Section 542.335(1)(k) states that a court may award attorney’s fees and costs to the prevailing party in any action seeking enforcement of, or challenging the enforceability of, a non-compete agreement. Third parties who aid and abet former employees in violation of a non-compete agreement, however, may not be subject to an award attorney’s fees and costs under the statute. Although the third parties may have aided and abetted the former employee in violating the non-compete agreement, they are not parties to the contract. As such there may not be legal authority to support an award of attorney’s fees against the third parties. Peter Mavrick is a Fort Lauderdale non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.

An example of this circumstance is the case of Bauer v. DILIB, Inc., 16 So. 3d 318, 319–22 (Fla. 4th DCA 2009), where DILIB, INC., d/b/a Incredibly Edible Delites (hereinafter “DILIB”) and two employees entered into non-compete agreements which stated, in pertinent part, that for two years after the employees’ last date of employment, they would not compete with the DILIB’s business. The employees later terminated their employment and were hired a few months later by Denise Bauer (“Bauer”), a competitor.

DILIB filed a lawsuit against the former employees and Bauer. DILIB also filed a motion for a temporary injunction to prevent the employees from violating the non-compete agreement, and to enjoin Bauer from aiding and abetting their violation. Additionally, DILIB pled entitlement to recover its attorney’s fees and costs from the two employees and Bauer. Section 542.335(1)(k) of the Florida Statutes provides in pertinent part, that, “[i]n the absence of a contractual provision authorizing an award of attorney’s fees and costs to the prevailing party, a court may award attorney’s fees and costs to the prevailing party in any action seeking enforcement of, or challenging the enforceability of, a restrictive covenant.”

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Section 542.335(1)(d), Florida Statutes, states that a non-compete agreement, in an employment context that exceeds two years is subject to a legal presumption that the non-compete period is unreasonable. An employer may overcome this legal presumption in variety of ways. If the court finds that a longer non-compete period is necessary to protect a legitimate business interest, the non-compete period may be enforced.  An employment non-compete exceeding two years might also be justified if the particular employee is especially important to the business. Peter Mavrick is a Miami non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.

In the case of Avalon Legal Info. Services, Inc. v. Keating, 110 So. 3d 75, 84 (Fla. 5th DCA 2013), Judy B. Schneider (“Schneider”) a paralegal and owner of a business that provided civil process service training and consulting to Florida’s Sheriffs, bifurcated the business and sold the consulting portion to Gerard F. Keating (“Keating”), an attorney who previously acted as the supervising attorney for the business.  Schneider also sold the training and education portion of the business to Avalon Legal Information Services, Inc., a Florida corporation (“Avalon”). Schneider continued to work the consulting contracts with Keating and simultaneously worked for Avalon as an instructor in its training program, as well as co-authored a civil process manual with Avalon’s owner.

On October 1, 2008, Keating and Schneider entered into an independent contractor agreement (“Agreement”). Per the Agreement, Schneider was to continue to perform the same paralegal services for Keating as an independent contractor. The Agreement was to last two years, until September 2010, and was renewable at the parties’ option for an additional two years. The Agreement incorporated a non-compete/non-solicitation covenant. The Agreement permitted Schneider to continue to work as an instructor and manual writer for Avalon. The non-compete covenant prohibited Schneider from competing with and soliciting Keating’s civil process consulting contracts in the State of Florida for three years following the expiration of the Independent Contractor Agreement, i.e. until September 2013.

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It is not uncommon for parties in a business relationship, such as partners, franchisors and franchisees, and employers and employees, to discover that they cannot agree on their rights with respect to each other.  Sometimes contracts are ambiguous, or the parties never determined how they would address a particular problem that later arises.

Florida law provides a mechanism to resolve such problems by way of declaratory judgment action.  This is a type of lawsuit that seeks clarification of rights rather than money damages.  It is most common in insurance coverage disputes, but also is used in business and employment disputes.  Peter Mavrick is a Miami business litigation lawyer.

Florida Statute § 86.011 allows Florida courts to render judgment on “the existence, or nonexistence: (1) Of any immunity, power, privilege, or right; or (2) Of any fact upon which the existence or nonexistence of such immunity, power, privilege, or right does or may depend, whether such immunity, power, privilege, or right now exists or will arise in the future.”  If a declaratory judgment is sought as to rights provided in a contract, it can be sought “either before or after there has been a breach” of the contract.  Fla. Stat. § 86.031.

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A business can seek an injunction to enforce a non-compete agreement before a lawsuit is completed if the business is suffering losses due to the violation of a non-compete agreement.  There are different legal standards for issuance of a temporary injunction, depending on whether the lawsuit and motion occur in federal or state court.  The federal legal standard (1) a substantial likelihood of success on the merits; (2) irreparable injury without the injunction; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest.  Bloedorn v. Grub, 631 F.3d 1218 (11th Cir. 2011).  “Because preliminary injunctions are an extraordinary remedy, this relief is appropriate only if the movant clearly establishes the burden of persuasion on each element.”  Nuvasive, Inc. v. Leduff, 2019 WL 5962658 (M.D. Fla. 2019).  In addition, however, the party who obtains the injunction is required to post a bond.  Posting a bond can be expensive and may impact damages.  As a result, it should be considered when seeking or opposing an injunction.  Peter Mavrick is a Fort lauderdale non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.

When seeking an injunction in federal court, a bond must be posted pursuant to Federal Rule of Civil Procedure 65(c).  The purpose of posting a bond is to redress costs and damages suffered by any party that is wrongfully enjoined.  Although the court has some discretion as to the amount of the bond to be posted, the amount should be enough to cover costs and damages that the enjoined party may suffer.

As an example, in North American Products Corporation v. Moore, 196 F. Supp. 2d 1217 (M.D. Fla. 2002), the District Court for the Middle District of Florida determined that an injunction should be imposed against a former employee of North American Products Corporation and Tru-Cut, a corporation the former employee started after leaving North American Products Corporation.  The former employee proceeded to compete against North American Products Corporation in violation of a non-compete agreement.  After finding that North American Products Corporation met the requirements for imposition of an injunction, the District Court held that a bond had to be posted.  To determine the amount of the bond, an evidentiary hearing was requiredThe District Court looked to the yearly revenues being earned by Tru-Cut and ordered North American Products Corporation to post a bond that would at least satisfy Tru-Cut’s annual projected revenue.  The Court set the bond at $500,000.

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An employee’s reasonable belief that a particular territory is outside of the scope of a non-compete clause does not necessarily grant him/her license to work for a competitor in violation of the employment agreement. Peter Mavrick is a Miami non-compete lawyer who has extensive experience in representing the interests of businesses and business owners.

In Proudfoot Consulting Company, v. Gordon, 576 F.3d 1223 (11th Cir. 2009), Proudfoot Consulting Company (“Proudfoot”) entered an employment agreement with Derrick Gordon (“Gordon”) containing a non-compete, non-solicitation and a confidentiality clause (“non-compete clauses”). The non-compete clauses prohibited Gordon for a six-month period after termination of his employment, from doing the following: (1) working for a direct competitor or client of Proudfoot, (2) contacting Proudfoot’s clients and soliciting Proudfoot’s employees, and (3) using, disclosing, or retaining Proudfoot’s confidential information. Proudfoot was a management consulting firm that provided consulting services in the United States and Canada. Gordon was a Project Manager who was responsible for achieving results for clients, obtaining repeat business, and convincing clients to provide referrals and serve as a reference. During his employment with Proudfoot, Gordon had access to and received information in various forms about Proudfoot’s clients, projects, operations and confidential business information (including without limitation, hard copy manuals, training sessions and reviews of company projects).

In June 2006, Gordon resigned his employment with Proudfoot and immediately went to work for Highland, a direct competitor.  Proudfoot filed a lawsuit seeking an injunction and damages. After a bench trial, the trial court held that each of the non-compete clauses were enforceable under Florida law. The trial court entered an injunction prohibiting Gordon from working for Highland and from soliciting Proudfoot’s clients and employees for a period of six months. The injunction was entered over a year and a half after Gordon began working at Highland. The trial court found that Gordon’s continuous work for Highland justified tolling the six-month restrictive period, pursuant to the tolling provision in the non-compete clause. Gordon immediately appealed.

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Contracts that restrict or prohibit competition during or after the term of employment are enforceable, “so long as such contracts are reasonable in time, area, and line of business…” Florida Statute § 542.335. A non-compete provision that prohibits a doctor from seeing any patients from medical practice that formerly employed him/her, is not overbroad, provided that the geographic area of the limitation is reasonable. Peter Mavrick is a Miami non-compete lawyer and employment litigation lawyer who has significant experience in non-compete litigation, including injunction proceedings.

In Supinski v. Omni Healthcare, P.A., 853 So. 2d 526 (Fla. 5th DCA 2003) Dr. Edward Supinski (“Dr. Supinski”) was recruited by Omni Healthcare, P.A. (“Omni”) for the company’s medical practice in Brevard County, Florida. Dr. Supinski was relocated from Ohio to Florida for the position with Omni.  Omni was a physician owned multi-specialty practice operating in central and southern Brevard County, and the Melbourne area. Omni and Dr. Supinski negotiated an employment agreement (“contract”) with a two-year duration, which automatically renewed unless terminated by either party 180 days before the termination date. The contract contained a non-compete provision that barred Dr. Supinski from competing with Omni within a ten-mile radius of Omni’s offices in Brevard County, for two years after termination of his employment. The contract also contained a non-solicitation provision that barred Dr. Supinski from soliciting Omni’s patients and employees.

Omni assisted Dr. Supinski in becoming credentialed by various managed care organizations, helped him gain staff privileges at hospitals, hired his staff, advertised his practice, and aided him in establishing a patient base. About one month before the end of the initial two-year term of the contract, Dr. Supinski sent Omni a letter stating that he would not renew his employment agreement.  Immediately after the termination of his employment with Omni, Dr. Supinski opened his new practice four miles from the Omni office where he previously worked. Omni filed a lawsuit against Dr. Supinski for breach of contract, failure to provide the minimum notice of non-renewal, and violation of the non-compete provision. Omni sought an injunction against Dr. Supinski, pursuant to Florida Statute § 542.335.

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Florida employers that seek to enforce Florida non-compete agreements outside the state of Florida cannot presume that out-of-state courts will enforce the agreement as that agreement would have been enforced in Florida.  Florida’s non-compete law, § 542.335, Florida Statutes, is considered by many to be the most “pro-employer” in the nation.  Other states may refuse to enforce key parts of a Florida non-compete agreement if enforcing the agreement would violate that state’s public policy.  Florida employers should be aware of the potential limitations to enforcement that their non-compete agreements face outside the state of Florida.  Peter Mavrick is a Fort Lauderdale non-compete lawyer who has extensive experience with non-competition covenant litigation.

In analyzing how a court outside the state of Florida will likely enforce a Florida non-compete agreement, a Florida employer must consider whether the non-Florida court will enforce any non-compete agreement at all.  States may choose not to enforce an agreement based upon that state’s public policy.  California, Montana, North Dakota, and Oklahoma rarely enforce non-compete agreements ancillary to employment, if at all, and would not likely enforce any employee non-compete agreements within their borders regardless of how it is drafted.  See Signature MD, Inc. v. MDVIP, Inc., CV 14-5453 DMG SSX, 2015 WL 3988959 (C.D. Cal. Apr. 21, 2015) “[T]he enforcement of these non-compete clauses is also objectively baseless, at least as to their enforcement in California, as California law expressly voids [employee non-compete] contracts”).

Some non-Florida courts will enforce non-compete agreements, but will not enforce the Florida choice-of-law if the court considers Florida law to be against that state’s public policy.  M/S Bremen v. Zapata Off–Shore Co., 407 U.S. 1 (1972) (permitting courts to refuse to enforce a choice-of-law provision if doing so would be against the forum’s state’s public policy). Non-Florida courts often take issue with the Florida law that requires courts to not consider the hardship of an employee when determining whether to enforce an employer’s non-compete agreement. e.g. Brown & Brown, Inc. v. Johnson, 25 N.Y.3d 364, 368, 34 N.E.3d 357 (2015) (Florida non-compete law is “truly obnoxious” and contrary to New York policy because of “Florida’s nearly-exclusive focus on the employer’s interests, prohibition against narrowly construing restrictive covenants, and refusal to consider the harm to the employee”); see also Carson v. Obor Holding Co., LLC, 734 S.E.2d 477 (Ga. Ct. App. 2012) (Finding Florida non-compete law to be contrary to Georgia law, in part because “Florida law allows a court to consider only the legitimate business interests of the party seeking to enforce the covenant” when “modifying overly-broad restrictive covenants”); Brown & Brown, Inc. v. Mudron, 887 N.E.2d 437 (Ill. App. Ct. 2008) (finding that Illinois public policy is contrary to Florida’s because it is too employer-focused); Unisource Worldwide, Inc. v. S. Cent. Alabama Supply, LLC, 199 F. Supp. 2d 1194 (M.D. Ala. 2001) (Refusing to enforce Florida non-compete law because Florida does not consider the hardship to the employee); see § 542.335 (g)(1), Fla. Stat. (“In determining the enforceability of a restrictive covenant, a court [s]hall not consider any individualized economic or other hardship that might be caused to the person against whom enforcement is sought”).

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