Articles Posted in Non-Compete Agreements

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.

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.

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.

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.

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.

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.

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.