Articles Posted in Non-Compete Agreements

Published on: September 13, 2023

FORT LAUDERDALE NON-COMPETE AGREEMENTS: LEGITIMATE BUSINESS INTERESTS AND UNFAIR COMPETITION

The Sherman Anti-Trust Act prohibits conspiracies unreasonably restraining trade. A group of competitors cannot enter agreements fixing prices or wages; rigging bids; or allocating customers, workers, or markets. 15 U.S.C. § 1. Consequently, exclusivity contracts and other restrictive covenants reducing competition may violate the Sherman Antitrust Act if they are solely intended to prevent ordinary competition. The Supreme Court of Florida, in White v. Mederi Caretenders Visting Servs., 226 So.3d 744 (Fla. 2017), explained that “[c]ovenants whose sole purpose is to prevent competition per se are void against public policy.” In addition, Florida Statutes Section 542.18 states that, “[e]very contract, combination, or conspiracy in restraint of trade or commerce in this state is unlawful.” In the the White decision, the Supreme Court explained Florida courts will enforce non-compete agreements only to the extent they prevent unfair competition, that is, “there [are] special facts present over and above ordinary competition’ such that, absent a non-competition agreement, the employee would gain an unfair advantage in future competition with the employer.” 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.

This is why Florida’s non-compete statute, Section 542.335, Florida Statutes, requires that non-compete covenants be supported by a legitimate business interest. Fla. Stat. § 542.335 (“Any restrictive covenant not supported by a legitimate business interest is unlawful and is void and unenforceable.”); see also Tri-Cont’l Fin. Corp. v. Tropical Marine Enterprises, Inc., 265 F. 2d 619 (5th Cir. 1959) (“Measured by rules governing such ancillary agreements, the covenant, limited as it is in time and in scope, is, in every respect important here, reasonable in time, territory and extent, and of no further extent than is necessary to protect West India; and that the authorities are almost uniform that such a restriction does not violate the anti-trust laws”).

Florida’s restrictive covenant statute provides a non-exhaustive list of legitimate business interests. The statute specifically references protection of trade secrets, confidential information that does not qualify as trade secret, relationships with existing customers, and relationships with specific prospective customers. Following the statutory requirement to establish a “legitimate busiess interest” to enforce a non-compete agreement, the United States District Court for the Southern District of Florida in Autonation, Inc. v. O’Brien, 347 F. Supp. 2d 1299 (S.D. Fla. 2004), held that “AutoNation… established legitimate business interests justifying the enforcement of [the]… Non–Compete Agreement [because t]he testimony and evidence submitted… demonstrated [the defendant] was exposed to confidential and proprietary information.” Similarly, Florida’s Fourth District Court of Appeal in Hilb Rogal & Hobbs of Florida, Inc. v. Grimmel, 48 So. 3d 957 (Fla. 4th DCA 2010), stated that “HRH proved that it had a legitimate business interest in its substantial relationships with specific existing customers; that the restrictive covenant prohibiting the piracy of those customers was no broader than necessary to protect that interest.” In the White decision, the Supreme Court of Florida held that referral sources also can qualify as a legitimate business interest under the statute. White explained that, “Section 542.335… is non-exhaustive and does not preclude the protection of referral sources; hence, home health service referrals may be a protected legitimate business interests depending on the context and proof adduced.”

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Published on: August 24, 2023

FORT LAUDERDALE BUSINESS LITIGATION: EQUITABLE TOLLING OF STATUTE OF LIMITATIONS FOR NON-COMPETE AGREEMENTS

By Mavrick Law Firm

The expiration of a non-compete period does not necessarily mean the covenant is unenforceable. A former employer may be able to enforce a non-compete against a former employee if the non-compete period expired and the non-compete period was tolled by the former employee’s violation of his restrictive covenant. Restrictive covenants, like non-compete agreements and non-solicitation agreements, must be reasonable in time as a general matter. Non-compete statutes often contain durational periods a restrictive covenant is considered reasonable and unreadable. The enforceable durations are usually based on the relationship between the obligor and obligee. In Florida, courts presume a restraint that is six months or less reasonable if the obligor is an employee and the obligee is an employer. Fla. Stat. § 542.335. The same statute dictates that a restrictive covenant between an employee and employer is presumptively unreasonable after two years. The presumptive enforceable duration increases if the obligor sold his business to the obligee. In that case, a court presumes a restrictive to be reasonable if is three years or less and unreasonable it if is more than seven years. Therefore, restrictive covenants usually contain a provision expressly stating their enforceable duration to ensure compliance with the reasonableness standard and statutory corresponding presumptions. 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.

But what happens when a former employer discovers his or her former employee breached the restrictive covenant (during the restrictive period) after the covenant lapses? Can the covenant still be enforced? The answer is – probably if your state applies the equitable tolling doctrine to restrictive covenants. This doctrine allows the obligor to enforce a restrictive covenant against the obligee after the restrictive period lapses if the obligee breached the covenant during the restrictive period. For example, precedent from Florida’s Fourth District Court of Appeal in Orkin Exterminating Co., Inc. v. Bailey, 550 So. 2d 563 (Fla. 4th DCA 1989), held that “Appellant is entitled to the full duration of the two-year restriction.” The rationale supporting equitable tolling is fairness. In this vein, Florida’s Fourth District Court of Appeal, in Anakarli Boutique, Inc. v. Ortiz, 152 So. 3d 107, 109 (Fla. 4th DCA 2014, explained that “[i]t would be stunningly unfair if the law held that a valid non-compete clause could be nullified because the non-compete period was devoured by the time it took to appeal an erroneous ruling on the interpretation of the clause.” The obligor is entitled to the benefit of what he or she bargained for under the contract, i.e., a prohibition against certain competitive conduct for a limited duration. Capelouto v. Orkin Exterminating Co. of Fla., Inc., 183 So. 2d 532, 534 (Fla. 1966) (“Inasmuch as the appellant had been in competition with the appellee continuously since his resignation, the chancellor must have determined that this was the only way to give the appellee its two competition-free years.”).

All states do not permit equitable tolling because courts are generally prohibited from rewriting private contracts. See Coffee Sys. of Atlanta v. Fox, 227 Ga. 602, 602, 182 S.E.2d 109 (1971) (“The litigation did not toll the one year period so as to provide additional time for enjoining the employe [sic] [because s]uch an extension would in effect rewrite the one year feature of the agreement. Courts do not make contracts for the parties.”). In these states, it is important to include a tolling provision inside the contract. Including this provision could allow a former employer to toll a restrictive covenant post violation even if the state’s common law does not allow for equitable tolling because the parties expressly bargained for tolling. See Gaylord Broad. Co. v. Cosmos Broad. Corp., 746 F.2d 251 (5th Cir. 1984) (“The parties may contractually provide for the tolling of the noncompetition period, if an employee breaches a covenant not to compete and the resulting civil proceedings to enforce the covenant consume more time than the period of the covenant itself.”).

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Published on: August 17, 2023

FORT LAUDERDALE BUSINESS LITIGATION: FLORIDA TRADE SECRETS CLAIMS PREEMPTION

By Mavrick Law Firm

Florida employers who have non-compete agreements may enforce the restrictive covenants based on the legitimate business interest of trade secrets under Florida Statutes Section 542.335(1)(b)(1). Employers may also sue for misappropriation of trade secrets. However, employers sometimes sue former employees for common law claims that are related to misappropriation of company trade secrets. Such common law claims have sometimes faced roadblocks because many state law trade secret statutes preempt or displace all other non-contract claims arising from the trade secret misappropriation. Florida’s trade secret statute, like many others, preempts all potential claims arising from the unauthorized use of a trade secret unless the claim sounds in contract. Fla. Stat. § 688.008 (The Uniform Trade Secrets Act “displace[s] conflicting tort, restitutory, and other law of this state providing civil remedies for misappropriation of a trade secret [except]… contractual remedies”). 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’s Third District Court of Appeal in Digiport, Inc. v. Foram Dev. BFC, LLC, 314 So. 3d 550 (Fla. 3d DCA 2020), provided an analysis of Florida law trade secret preemption. Digiport explained that Florida courts look to the facts alleged in the complaint to determine whether “there are material distinctions between the allegations comprising the additional torts and the allegations supporting the [trade secret claim].” The appellate court determined the plaintiff’s claims were preempted because they were premised on the same allegations and elements as its trade secret claims, stating “[b]oth the trade secret misappropriation claim and the misappropriation of a business idea count are premised upon allegations that [the plaintiff] invested substantial time in creating a novel business idea, the idea was disclosed to [the defendant] in confidence, reasonable measures to protect the secrecy were undertaken, and [the defendant] misappropriated the idea by disclosing its plans to other companies for its own benefit.” Conversely, courts allow claims affiliated with trade secrets to proceed if trade secret misappropriation does not alone comprise the underlying wrong. For example, in Mortgage Now, Inc. v. Stone, 2009 WL 4262877 (N.D. Fla. Nov. 24, 2009), the United States District Court for the Northern District of Florida allowed a claim of civil conspiracy to proceed because the defendant’s acts were unrelated to the misappropriation of trade secrets.

Preemption is a powerful tool that may apply to claims involving the use of information that does not qualify as a trade secret. K3 Enterprises, Inc. Saspwski, 2021 WL 8363506 *9 (S.D. Fla. Nov. 19, 2021), explained that, “[a]ccording to the majority view, non-FUTSA, non-contractual civil misappropriation claims do constitute conflicting law under Florida Statute § 688.008(1) and are preempted at the motion to dismiss stage.”) (internal quotations omitted). Similarly, another federal district court in American Registry, LLC v. Hanaw, 2014 WL 12606501, *6 (M.D. Fla. July 16, 2014), stated in pertinent part that, “[t]he Court finds that the FUTSA preempts all non-contract claims based on the misappropriation of confidential and/or commercially valuable information even if the information does not constitute a trade secret under the FUTSA.”

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Published on: August 6, 2023

MIAMI BUSINESS LITIGATION: WHERE VIOLATIONS OF NON-COMPETE AGREEMENTS CAUSE DEMISE OF A BUSINESS

By Mavrick Law Firm

A former employee cannot avoid non-compete obligations by causing the demise of the business to whom he or she owes the obligation. Florida law requires the business that intends to enforce the restrictive covenant to establish a legitimate business interest justifying the restriction. Florida Statutes Section 542.335(c) states in pertinent part that, “[a] person seeking enforcement of a restrictive covenant…shall plead and prove that the contractually specified restraint is reasonably necessary to protect the legitimate business interest or interests justifying the restriction.” 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.

These “legitimate interests” include trade secrets; valuable confidential business or professional information that otherwise does not qualify as trade secrets; substantial relationships with specific prospective or existing customers; extraordinary or specialized training; and customer goodwill associated with an ongoing business, trade name, trademark, service mark, “trade dress,” a specific geographic location, or a specific marketing area. Once a former employer satisfies his burden of establishing that the covenant is supported by the existence of one or more legitimate business interests, the party refusing to comply has the burden of demonstrating the restraint is “overbroad, overlong, or otherwise not reasonably necessary to protect the established legitimate business interest or interests.”

Some former employees caught red-handed violating their non-compete agreements have tried to justify their actions by contending the court should not enforce a non-compete when the former employer’s business is no longer operational. See USI Ins. Services of Florida Inc. v. Pettineo, 987 So. 2d 763, 766 (Fla. 4th DCA 2008) (“Section 542.335, however, allows an enforcing party to establish prima facie the enforceability of the agreement itself, after which the party opposing enforcement can raise “as a defense the fact that the person seeking enforcement no longer continues in business in the area or line of business that is the subject of the action to enforce the restrictive covenant”). This argument can be effective when the business ended for reasons having nothing to do with the violations of the non-compete covenant. For example, the United States District Court for the Southern District of Florida, in Chen v. Cayman Arts, Inc., 2011 WL 3903158 (S.D. Fla. Sept. 6, 2011), refused to enforce a restrictive covenant because the plaintiff employer “has not suggested any reason that its purported trade secrets remain a legitimate business interest following [the plaintiff’s] dissolution.”). Similarly, in Wolf v. James G. Barrie, P.A., 858 So. 2d 1083 (Fla. 2d DCA 2003), Florida’s Second District Court of Appeal stated explained that enforcement of a restrictive covenant “requires that the employer must be engaged in the business that the covenant seeks to protect.”

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Published on: July 16, 2023

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

By Mavrick Law Firm

Under Florida law, restrictive covenants are generally unenforceable under Florida law as restraints on trade. Section 541.18, Florida Statutes, states that “[e]very contract, combination or conspiracy in restrain of trade or commerce in this state is unlawful.” Precedent from the Supreme Court of Florida in White v. Mederi Caretenders Visiting Servs. of Se. Fla, LLC, 226 So.3d 774 (Fla. 2017), held that “covenants ‘whose sole purpose is to prevent competition per se'” are “void against public policy.” But, under Florida Statutes Section 542.335(1), where such covenants are set forth in writing, “reasonable in time, area, and line of business,” and “supported by a legitimate business interest” they are not prohibited. The Supreme Court in the White decision explained that for a non-compete agreement or other restrictive covenant to be enforceable, “‘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 the future competition with the employer.'” Confidential information can qualify as a legitimate business interest, but in many cases courts have found businesses’ designations of information as “confidential” is unfounded and therefore does not qualify as a legitimate business interest. 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 information, the employer must articulate the information that it deems confidential. For example, in Passalacqua v. Naviant, Inc., 844 So.2d 792 (Fla. 4th DCA 2003), Florida’s Fourth District Court of Appeal found 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 “information commonly known in the industry and not unique to [the] allegedly injured party [is] not ‘confidential’ and thus not entitled to protection.”

Florida’s restrictive covenant statute, at Florida Statutes Section 542.335(b), requires not only that the information is truly “confidential,” but it must also be “valuable.” An employer must prove that the employee could use the information to gain an unfair advantage, and the employer must prove this with specific factual evidence. In the Passalacqua case, the appellate court determined that the allegedly “confidential” information was not valuable, and explained in pertinent part: “Hirsch did not articulate how any activity, method or technique utilized by Naviant was unique or proprietary in any way. Nor did he give any reason to believe that the manual was anything but a compilation of widely known and commonly used sales and marketing techniques. Naviant failed to prove, through Hirsch or otherwise, anything which even approximates a ‘legitimate business interest’ as defined in the statute, section 542.335(1)(b), Florida Statutes.” In Passalacqua, the employer failed to meet its legal burden of proof, but its case weakened further when the employee presented counter-evidence. The appellate court explained that: “Although not required to disprove Naviant’s conclusory and unsubstantiated claims of proprietary information, appellants presented detailed and uncontroverted testimony and other evidence showing that there was nothing unique about Naviant’s operations, sales methods or other aspects of its business that anyone with their history of making unsolicited sales calls (“cold calling”) does not know.”

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Published on: June 11, 2023

MIAMI BUSINESS LITIGATION: REMEDIES FOR BREACH OF NON-COMPETE AGREEMENT

By Mavrick Law Firm

In Florida, an injunction is the generally favored remedy in cases of breach of a non-compete agreement. The Supreme Court of Florida in Miller Mechanical, Inc. v. Ruth, 300 So.2d 11 (Fla. 1974), explained that in cases of breach of a restrictive covenant, “[t]he Court may award damages for breach of contract but the normal remedy is to grant an injunction…This is so 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.” In its Miller Mechanical decision, the Supreme Court reversed the trial court’s refusal to enjoin the defendant, stating in pertinent part: “The trial court in this case determined that part of the contract was unreasonable, refused to enjoin the defendant and awarded only nominal damages because the plaintiff had been unable to prove damages. It is precisely because damages are so difficult to show that injunctive relief becomes a favored remedy. The trial court should have determined what length of time would have been reasonable under all of the circumstances and granted an injunction for that period of time.” 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.

Although injunctions are the typical remedy in non-compete litigation, parties may recover damages with sufficient proof. Generally, the aggrieved party in a breach of a noncompetition agreement case seeks lost profits as the measure of damages. Lost profits, however, are not the only recoverable damages. In Camel Investments, Inc. v. Webber, 468 So.2d 340 (Fla. 1st DCA 1985), Florida’s First District Court of Appeal stated that the measure of damages is “the actual damages suffered as a result of the breach[.]” Under Florida law, “[t]here are two generally recognized methods of proving lost profits: (1) the before and after theory and (2) the yardstick test.” G.M. Brod & Co., Inc. v. U.S. Home Corp., 759 F.2d 1526 (11th Cir. 1985). Florida’s Second District Court of Appeal in 4 Corners Insurance, Inc. v. Sun Publications of Florida, Inc., 5 So.3d 780 (Fla. 2d DCA 2009), explained that “[t]he yardstick test is generally used when a business has not been established long enough to compile an earnings record that would sufficiently demonstrate lost profits. This test compares the profits of the business “‘that are closely comparable to the plaintiff’s.'” The yardstick test is often employed when the plaintiff “is driven out of business before he is able to compile an earnings record sufficient to allow estimation of profits.” By contrast, under the “before and after theory,” the Fifth Circuit in Lehrman v. Gulf Oil Corporation, 500 F.2d 659 (5th Cir. 1974), explained that the plaintiff needs to present proof that compares “the plaintiff’s profit record prior to the violation with that subsequent to it.” However, a plaintiff’s method of proof may not strictly adhere to either method. Relying on United States Supreme Court precedent in Story Parchment Co. v. Paterson Parchment Co., 282 U.S. 555 (1931), Lehrman explained that, “while damages may not be determined by mere speculation or guess, it will be enough if the evidence show(s) the extent of the damages as a matter of just and reasonable inference, although the result be only approximate.”

As a practical matter, most businesses obtain injunctions to arrest continuous harm from breaches of restrictive covenants. Purchasers of businesses often pay a premium for the value inherent in barring the seller from competing against the newly purchased business. In cases where a business has been purchased and the seller is breaching its non-compete agreement, the seller might lose a substantial benefit of its bargain and therefore seek an injunction as well as recovery of damages.

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Published on: May 21, 2023

MIAMI BUSINESS LITIGATION: DEFEATING TRADE SECRETS AND NON-COMPETE CLAIMS BASED ON CUSTOMER LISTS

By Mavrick Law Firm

Many non-compete agreements contain covenants asserting that the employer business has protectible trade secrets. A contractual provision where the parties agree, ex ante, that the employer will have (or actually has) a “trade secret” does not thereby mean the employer will have (or has) a trade secret in the future. As Florida’ Fourth District Court of Appeal explained in Zodiac Records Inc. v. Choice Environmental Services, 112 So.3d 587 (Fla. 4th DCA 2013), “[w]e note that a former employer’s customer relationships do not automatically qualify as trade secrets, even if a party’s restrictive covenant attempts to characterize them as such.” 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.

Florida Statutes Section 688.002(4), states in pertinent part: “‘Trade secret’ means 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.” Precedent from Florida’s Second District Court of Appeal in East v. Aqua Gaming, 805 So.2d 932 (Fla. 2d DCA 2001), states that to qualify as a trade secret, there must be evidence that a customer list “was the product of great expense and effort, that it included information that was confidential and not available from public sources, and that it was distilled from larger lists of potential customers into a list of viable customers for [a] unique business.”

Employers often seek to premise restrictive covenants on the existence of trade secrets because Florida’s restrictive covenant statute thereby extends the allowable duration of a non-compete covenant. Under § 542.335(1)(d)(1), an employment agreement that is not based on trade secrets is presumed reasonable for only six months or less and presumed unreasonable when it extends beyond two years. By contrast, Florida’s restrictive covenant statute, at § 542.335(1)(e), extends the presumption of reasonableness to up to five years when actual trade secrets underlie the non-compete agreement and presumes a duration in excess of ten years as unreasonable.

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Published on: May 10, 2023

FORT LAUDERDALE BUSINESS LITIGATION: NON-COMPETE AGREEMENTS AND MISAPPROPRIATION OF TRADE SECRETS

By Mavrick Law Firm

Businesses sometimes suffer from disloyal employees who misappropriate trade secrets and confidential information, diverting them to competitors. Such unfair competition can be addressed through contractual claims based on non-compete agreements as well as claims for trade secret misappropriation. Because Florida’s restrictive covenant statute, Florida Statutes Section 542.335, provides strong remedies for businesses, including obtaining a temporary injunction, a non-compete agreement is often the most effective enforcement tool. However, when a disloyal employee transfers trade secrets to a competitor, a claim for trade secret misappropriation is an essential tool for both injunctive relief and recovery of damages. 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.

Under Florida’s restrictive covenant statute, Section 542.335(1)(b)(1), a “trade secret” is deemed to be a legitimate business interest to enforce a non-compete covenant. A non-compete agreement that is predicated on protection of a trade secret is accorded a lengthy period of enforcement. The statute provides in pertinent part, at Section 542.335(1)(e): “In determining the reasonableness in time of a postterm restrictive covenant predicated upon the protection of trade secrets, a court shall presume reasonable in time any restraint of 5 years or less and shall presume unreasonable in time any restraint of more than 10 years. All such presumptions shall be rebuttable presumptions.” Obtaining a temporary injunction against a former employee is usually the most effective way to prevent further harm to the business. Problems, arise, however, when employees have given third parties the trade secrets the business needs to protect. In such cases, a trade secret misappropriation claim would be essential to protect the value of the trade secret. A trade secret must retain its secrecy either through protective measures or court action.

The Defend Trade Secrets Act is a federal law allowing a business owner to sue for trade secret misappropriation. The trade secret owner must prove that (1) the plaintiff-business owns the trade secret, (2) the defendant misappropriated the trade secret, and (3) the plaintiff-business suffered damages. As the United States Court of Appeals for the Ninth Circuit explained in InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653 (9th Cir. 2020), “the definition of trade secret consists of three elements: (1) information, (2) that is valuable because it is unknown to others, and (3) that the owner has attempted to keep secret.” In business litigation concerning misappropriation of trade secrets, the plaintiff must identify the trade secrets and prove they exist. In Autodesk, Inc. v. ZWCAD Software Co., 2015 WL 2265479 (N.D. Cal. May 13, 2015), the United States District Court for the Northern District of California explained that a plaintiff “need not ‘spell out the details of the trade secret.'” However, the InteliClear appellate decision makes clear that the plaintiff must at least “describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons…skilled in the trade.” A plaintiff must describe the trade secret with sufficient particularity to permit the defendant “to ascertain at least the boundaries within which the secret lies.” Vendavo, Inc. v. Price f(x) AG, 2018 WL 1456697 (N.D. Cal. March 23, 2018). Identifying trade secrets with sufficient particularity is important because defendants need concrete identification to prepare a rebuttal.

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Published on: April 16, 2023

MIAMI BUSINESS LITIGATION: NON-COMPETE COVENANTS IN COMMERCIAL LEASES

By Mavrick Law Firm

In Florida, it is common for shopping centers to have leases with “exclusivity covenants” allowing a commercial business the exclusive right to operate its type of business in the shopping center. For example, a shopping center may have a grocery store as an anchor tenant, i.e., a tenant that provides a benefit to the shopping center and its other tenants by attracting customers. Some parties have challenged the legal authority of such restrictive covenants on the grounds that they violate Florida’s restrictive covenant statute, Florida Statutes section 542.335, which regulates when a non-compete covenant can be enforceable. Florida courts have examined the applicability of Florida’s restrictive covenant statute in the context of a commercial shopping centers and whether the statute was designed to apply in that context. 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 Winn Dixie Stores, Inc. v. Dolgencorp, Inc., 964 So.2d 261 (Fla. 4th DCA 2007), Florida’s Fourth District Court of Appeal overturned summary judgment against grocery store that sought sued the commercial landlord for failure to abide by the restrictive covenant their commercial lease. The covenant required that Winn Dixie be the exclusive grocery store in the shopping center, as its anchor tenant. The appellate court rejected the argument that section 542.335, Florida Statutes, applied to restrictive covenants that run with the land, explaining: “When read in context with the other provisions of section 542.335, subsection (1)(a)’s reference to ‘a restrictive covenant’ does not include real property covenants running with the land. Rather, the section is directed at personal service contracts not to compete. For example, section 542.335(1) refers to ‘contracts that restrict or prohibit competition’ that ‘are reasonable in time.’ Subsections 542.335(1)(d) & (e) set out four rebuttable presumptions a court is to apply to determine the ‘reasonableness in time’ of a ‘postterm restrictive covenant.’ ‘Postterm’ connotes an employment relationship that has terminated, which is the time when one party seeks to enforce a covenant not to compete. ‘Postterm’ is nonsensical when applied to a real property covenant, which typically does not have a stated termination point. Absent a specified term or materially changed conditions, a real property covenant running with the land is without duration … All four presumptions in subsections 542.335(1)(d) & (e) apply to personal service contracts, concerning restrictive covenants sought to be enforced (1) against a former employee, agent, or independent contractor; (2) against a former distributor, dealer, franchisee, or licensee of a trademark or service mark; (3) against a seller of all or part of a business, and (4) to protect trade secrets. None of these presumptions have any application to real property covenants that run with the land.” More recently, Florida’s First District Court of Appeal in Amelia Island Restaurant II, Inc. v. Omni Amelia Island, LLC, 164 So.3d 26 (Fla. 1st DCA 2015), also concluded that Section 542.335, Florida Statutes, did not require invalidation of a commercial lease’s exclusivity provision even though the restrictive covenant in that case did not run with the land. The appellate court questioned the restrictive covenant statute’s applicability to “real property related restrictive covenants, because the law appears directed a personal covenants not to compete.”

Peter Mavrick is a Miami business litigation lawyer, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.

Published on: April 12, 2023

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

By Mavrick Law Firm

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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