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Articles Posted in Non-Compete Agreements

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It is critical that Florida employers carefully write their non-compete agreements to ensure they are enforceable and prevent employees from performing the types of activities that the employer needs.  Non-compete law in Florida is nuanced and slight deviations in contract wording can sometimes mean the difference between success or failure.  Peter Mavrick is a Miami non-compete attorney, and also advocates for clients in Fort Lauderdale, Boca Raton, and Palm Beach, Florida.  The Mavrick Law Firm represents clients in business litigation, trade secret litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

While non-compete agreements are interpreted pursuant to principles of general contract law, non-compete law is often considered to be a niche area of law.  Non-compete contracts are governed by Florida Statute § 542.335.  This statute limits the enforcement of non-compete agreements in certain areas, inter alia, limiting enforcement in circumstances where the employer has a legitimate business reason for the non-compete agreement (§ 542.335(1)(b)), limiting the enforceable time period (§ 542.335(1)(d)(1)), and barring enforcement of contract terms limiting the court’s ability to enforce attorneys’ fees (§ 542.335(1)(k).

Particular terms in non-compete agreements often have particular meanings.  For example, determining whether the term “solicitation” applies to certain conduct can be deceptively difficult.  Generally, for an activity to qualify as solicitation under the common meaning of the word, there must be a communication coupled with an underlining intention behind that communication.  Solicit, Merriam-Webster (available at: https://www.merriam-webster.com/) (“to approach with a request or plea” or “to urge (something, such as one’s cause) strongly”);  Solicitation, Black’s Law Dictionary (11th ed. 2019) (“an attempt or effort to gain business”).  Whether a non-compete agreement barring “solicitation” bars particular conduct is determined by the general rules of contract interpretation and cases.

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The decision whether to bring a case in federal court or Florida state court can have significant consequences to the disposition of non-compete litigation.  While both federal and Florida will usually apply the same substantive law, the procedure applied differs.  This is particularly pertinent in non-compete litigation.  Florida courts, when considering whether to enjoin a former employee from competing, will not consider particular categories of evidence because of a Florida statute (§ 542.335(g)(1-3).  Federal courts are free of this limitation, and may consider nearly any admissible and relevant evidence.  This distinction can ultimately mean the difference between whether an employee or an employer will prevail in non-compete litigation. Peter Mavrick is a Miami non-compete attorney, and also advocates for clients in Fort Lauderdale, Boca Raton, and Palm Beach, Florida. The Mavrick Law Firm represents clients in business litigation, trade secret litigation, employment litigationtrademark litigation, and other legal disputes in federal and state courts and in arbitration.

Non-compete litigation can be heard in both federal courts and state courts.  While a Florida court almost always has jurisdiction to hear a Florida non-compete case, there are certain requirements before a matter may be heard in federal court.  The primary method by which a federal court would have jurisdiction is that a “federal question” is raised.  This can happen when a non-compete claim is brought along with a trade secret claim under the federal Defend Trade Secrets Act.  18 U.S.C. § 1836, et seq.  While it is technically possible that a federal court can have jurisdiction over the parties because a “diversity of citizenship” between the plaintiff and defendant, this would rarely happen because both a company attempting to enforce a non-compete and the employee will usually qualify as a citizens of Florida.

Federal courts and Florida courts have their own rules of civil procedure.  While the Florida Rules of Civil Procedure were derived in significant part from the federal rules, the differences between them are substantial, and include different pleading and discovery requirements.  There are also differences between federal and Florida courts which do not arise from the differences in procedural rules.  Generally, federal courts have a greater budget and fewer cases, and so may have more time and staff to address complex and nuanced issues.  Federal courts also tend to place more time constraints which are less flexible than their Florida counterpart.

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Preservation of a business’ trade secrets may constitute a legitimate business interest that justifies the enforcement of a non-compete agreement. However, it is vital that a business seeking to enforce the non-compete agreement sufficiently prove the existence of the trade secret. General statements that the business has such valuable information cannot act as a substitute for proof. Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, non-compete agreement litigation, employment litigationtrademark litigation, and other legal disputes in federal and state courts and in arbitration.

An example of this occurred in the case of Gould & Lamb, LLC v. D’Alusio, 949 So. 2d 1212 (Fla. 2d DCA 2007). Gould & Lamb, LLC (Gould & Lamb) and John D’Alusio (D’Alusio) executed an employment agreement that contained a non-compete provision that prohibited D’Alusio from working for a competitor for a two-year period after termination of his employment. Gould & Lamb later terminated D’Alusio’s employment because they eliminated his position from the firm. After an intensive negotiation, Gould & Lamb and D’Alusio entered into a severance agreement.  The severance agreement did not reference the earlier non-compete agreement, but instead referenced a different agreement that the parties entered. D’Alusio filed a lawsuit against Gould & Lamb, seeking a declaration that the severance agreement superceded the non-compete agreement.  Gould & Lamb filed a counterclaim against D’Alusio to enforce the non-compete agreement.

Gould & Lamb requested that the court reform the severance agreement to incorporate the noncompete provisions of the earlier contract. Reformation is a legal doctrine that is applied to correct a defective writing to accurately reflect the true terms agreed to by the parties. Providence Square Assn v. Biancardi, 507 So. 2d 1366 (Fla. 1987). To allege a claim for reformation, a plaintiff must allege that: 1) there was a written agreement, 2) there was a defect in the writing due to mutual mistake, fraud or misrepresentation, and 3) proof by clear and convincing evidence. Providence Square Assn v. Biancardi, supra. The trial court found there was no mistake of fact or inequitable conduct by D’Alusio that would support reformation of the severance agreement. The trial court concluded that the noncompete agreement did not survive.

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Noncompete agreements sometimes designate the laws of other states to govern the parties’ contractual obligations, even if the agreement is made in Florida. This is known as a choice of law provision. When these choice-of-law provisions are valid and enforceable, they can have significant repercussions on the results of noncompete litigation.  Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, non-compete agreement litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

Many corporations and limited liability companies throughout the United States are incorporated or organized under Delaware law, even though they may have no particular connection to Delaware.  This is because there are several benefits that medium to large sized business can enjoy from Delaware incorporation.  For example, intra-corporate disputes for Delaware corporations are adjudicated by the Delaware Court of Chancery which is a judicial body designed to quickly and effectively resolve such matters without a jury.  Because of the attractiveness of Delaware incorporation, many corporations will often choose Delaware as a choice of law in their contracts.  As a result, Florida courts will often adjudicate disputes under Delaware law.

When applying foreign law in Florida, courts “maintains the traditional distinction between substantive and procedural matters.”  Siegel v. Novak, 920 So. 2d 89 (Fla. 4th DCA 2006).  “Generally, when confronted by a choice of law problem, a court will apply foreign law when it deals with the substance of the case and will apply the forum’s law to matters of procedure.”  Siegel v. Novak, 920 So. 2d 89 (Fla. 4th DCA 2006).  This can be a critical issue when employers seek injunctions in non-compete matters.  Florida courts will apply Florida law as it relates to the procedural issues, such as whether a temporary injunction should be issued, and foreign choice of law for the substantive law questions associated with that analysis, such as the element of whether there is a likelihood of success on the merits.

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Florida employers who seek to protect their client lists from misappropriation by former employees will often need to show that the client list was a trade secret.  This is important even when the former employee is subject to a non-compete agreement.  This is because non-compete agreements cannot be enforced without a “legitimate business interest,” and the existence of a trade secret qualifies as a “legitimate business interest.”  Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, non-compete agreement litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

A non-compete agreement cannot be enforced without a court finding that the agreement is supported by a “legitimate business interest” in the non-compete agreement.  Importantly, the existence of a trade secret can qualify as a legitimate business interest pursuant to Florida’s noncompete law.  Trade secrets are specifically delineated as legitimate business interests in Section 542.335(1)(b)(1), Florida Statutes.

The term “trade secret” is often associated with secret formulas like the ingredients of Coca-Cola or WD-40.  However, nearly any type of information can qualify as a trade secret as long as it qualifies as one under either the Florida Uniform Trade Secrets Act (FUTSA) or the federal Defend Trade Secrets Act (DTSA).  Particularly, FUTSA defines trade secrets as:

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Companies often hire experienced sales and business development professionals to expand their business. A non-solicitation provision in an employment contract is intended to prevent post-termination solicitation of clients with whom the business has substantial relationships. When an employee brings clients to a company, it is important to distinguish whether the employee had a prior business or personal relationship with the client, and whether it is part of the employee’s job to develop and maintain client relationships. Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, non-compete agreement litigation,  employment litigationtrademark litigation, and other legal disputes in federal and state courts and in arbitration.

In the case of Hilb Rogal & Hobbs of Florida, Inc. v. Grimmel, 48 So. 3d 957 (Fla. 4th DCA 2010), Hilb Rogal & Hobbs of Florida, Inc. (HRH) was an insurance broker who hired Mark Grimmel (Grimmel) as a producer to service its existing customers and to generate new customers. Grimmel signed an employment agreement with HRH, which included a non-piracy clause that prohibited Grimmel from soliciting HRH’s customers following termination of his employment. Four years after Grimmel resigned to operate his own competing insurance brokerage firm, Egis Insurance Advisors (Egis).

HRH filed a lawsuit for injunctive relief and damages against Grimmel and Egis. HRH alleged that Grimmel violated the non-piracy covenant in his employment agreement with HRH by misappropriating business from HRH to Egis. HRH also filed an emergency motion for a temporary injunction, requesting that the court prohibit Grimmel from soliciting, accepting business from, and continuing to do business with HRH’s customers. Also, HRH sought to enjoin Grimmel from using confidential or trade secret information. HRH obtained an ex-parte order (made without the other party’s awareness) granting a temporary injunction against Grimmel and posted a bond. Grimmel moved to dissolve the injunction and a hearing was held before a magistrate. The magistrate issued a Report and Recommendation proposing that the temporary injunction be dissolved. HRH filed its exceptions to the general magistrate’s report and requested a hearing. The trial court held a hearing and entered an order denying HRH’s exceptions, granting the motion to dissolve the temporary injunction, and ratifying and approving the general magistrate’s Report and Recommendation. HRH immediately appealed.

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When the wording of a contractual provision is confusing or ambiguous, courts must interpret the contract in a rational manner. Some examples of vague contractual provisions include, “during business hours” and time frames with no clear anchor date, i.e. “within six months of commencement.” The courts generally agree that where one interpretation of a contract would be absurd and another would be consistent with reason and probability, the contract should be interpreted in the rational manner. American Med. Int’l, Inc. v. Scheller, 462 So.2d 1 (Fla. 4th DCA 1984). Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

In the case of BKD Twenty-One Mgmt. Co. v. Delsordo, the appellate court addressed the interpretation of a lease agreement.  At the center of the business litigation was a dispute over the meaning of the term “Establishment.” The plaintiff contended that the term “Establishment” meant “ruling class” or “controlling group” and therefore referred to “the folks running the retirement community.” The defendants contended that “Establishment” meant “place of business.” The appellate court agree with the defendants’ interpretation. BKD Twenty-One Mgmt. Co. v. Delsordo held that “…where one interpretation of a contract would be absurd and another would be consistent with reason and probability, the contract should be interpreted in the rational manner.” The appellate court held that in the context of a commercial lease agreement, the term “Establishment” necessarily meant “an institution or place of business.” Even though there are other definitions of the term “establishment,” the appellate court found that none of those alternative definitions would make sense in for a lease agreement concerning a business. Courts must consider the contractual provision within the context of the overall contract.  The appellate court rejected plaintiff’s argument that the capitalization of the term “Establishment” in the lease meant that the term was referring to a “ruling class” or “the folks running the retirement community.” There were many key terms in the lease were capitalized, so the appellate court held that the capitalization of the term Establishment in the contract did not mean that the contract was referring to the “ruling class.”

“A true ambiguity does not exist merely because a contract can possibly be interpreted in more than one manner. Indeed, fanciful, inconsistent, and absurd interpretations of plain language are always possible.” American Med. Int’l, Inc. v. Scheller. It is the duty of the trial court presiding over business litigation to prevent such interpretations. For example, in the case of Sorota v. Belmat, Inc., 819 So. 2d 975 (Fla. 4th DCA 2002), the contract stated that the tenant was responsible for paying the utilities it uses in connection with the leased premises, but only its pro-rata share of those charges. The appellate court held that though it was not spelled out in the agreement, it was clear that by “pro-rata share” of the bill, the drafters intended that the tenant pay only for those utilities it actually used. The appellate court concluded that no other interpretation would make sense. Sorota v. Belmat, Inc. held that “contracts should be interpreted so as to avoid an absurd result.”

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This article is the second of a two-part series concerning the enforcement of noncompete agreements when the former employee claims that his former employer engaged in illegal conduct.  Part I explored the enforceability of contracts which contain illegal terms.  This, Part II, addresses how allegations of illegal conduct can affect noncompete agreements particularly.  As shown below, illegal conduct does not negate the enforcement of a noncompete agreement when unless the “legitimate business interest” supporting the noncompete agreement was illegal or there was a sufficient public policy reason to not enforce the noncompete agreement.  Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, non-compete agreement litigation,  employment litigationtrademark litigation, and other legal disputes in federal and state courts and in arbitration.

Noncompete agreements are contracts and are affected by all of the general principles of contract law.  However, noncompete agreements are a unique type of contract which has special provisions governing it.  Generally, noncompete agreements are unlawful unless they comply with the requirements listed in § 542.335, Florida Statutes.  Particularly, a “person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.”  § 542.335(b), Florida Statutes.  The statute specifically describes that “trade secrets,” “valuable confidential business […] information,” “substantial relationships with specific prospective or existing customers,” “customer […] goodwill” associated with the sale of a business or a particular geographical or market area,” and “extraordinary or specialized training.”  § 542.335 (1)-(5), Florida Statutes.  While the vast majority of cases involve these particular categories of “legitimate business interests,” courts will consider other types of legitimate business interests which are not listed.  White v. Mederi Caretenders Visiting Services of Southeast Florida, LLC, 226 So.3d 774 (Fla. 2017) (holding that referral sources may be legitimate business interests even though they are not listed in § 542.335).

The phrase “legitimate business interest” may sound as if the business seeking to enforce the noncompete agreement must be a “legitimate business.”  This is not the way that the statute is worded nor how cases interpret it.  Instead, the concern is whether there is a legitimate business interest in enforcement of the noncompete, specifically.  § 542.335(c), Florida Statutes (“A person seeking enforcement of a restrictive covenant also shall plead and prove that the contractually specified restraint is reasonably necessary to protect the legitimate business interest or interests justifying the restriction”).

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Former employees who are accused of breaching their noncompete agreements with their former employer sometimes try to claim that the former employer engaged in illegal conduct, and thus, a noncompete agreement cannot be enforced.  While there are certain types of unlawful conduct which a court may cite to justify the denial of request for a temporary injunction, the range of illegal conduct which would justify such a denial is very narrow.  Most allegations of illegal conduct will not influence whether a restrictive covenant should be enforced, even if the allegations are true.  This article is the first of a two-part series.  This article addresses contracts which are unenforceable because they are unlawful, while the second article addresses allegations of unlawful activity within the context of a noncompete agreement.  Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach.  The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, employment litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

Often, parties defending against business litigation will use everything at their disposal to influence their opponent into giving up.  This can include making allegations of illegal conduct to argue that a noncompete agreement is unenforceable.  Generally, Florida companies may enforce their contracts regardless if they have also performed an “illegal” action.

A contract which is itself illegal, however, is usually unenforceable.  “[A] party generally may not seek to enforce an illegal contract.”  P.C.B. P’ship v. City of Largo, 549 So. 2d 738 (Fla. 2d DCA 1989); Harris v. Gonzalez, 789 So. 2d 405 (Fla. 4th DCA 2001) (“A contract which violates a provision of the constitution or a statute is void and illegal, and, will not be enforced in our courts”).

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A non-compete period may not be tolled because an employee is called for active military duty. While an employee may not be denied reemployment on account of a person’s performance of military duty, under the Uniformed Services Employment and Reemployment Rights Act of 1994, 38 U.S.C. § 4311, a court may consider the fact that the employee was not competing when serving his or her military duties. Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, non-compete agreement litigation,  employment litigationtrademark litigation, and other legal disputes in federal and state courts and in arbitration.

An example of this circumstance occurred in the case of SCI Funeral Services of Florida, Inc. v. Henry, 839 So. 2d 702 (Fla. 3d DCA 2002). Anel Henry (Henry) was employed by SCI Funeral Services of Florida, Inc. (SCI) as a sales department group leader. He signed a non-compete agreement with SCI, which prohibited him from competing with SCI for a period of twelve months after his employment had been terminated for any reason, with or without cause. Henry later became the subject of SCI’s investigation of a sexual harassment claim. SCI temporarily suspended his employment while they conducted their investigation. Henry was also on reserve duty with the United States Army.  During the suspension, he was called up for military service in Panama. Henry received a phone call from a SCI employee to warn him that SCI’s sales manager was terminating his employment.

Henry received orders from the Army extended his tour of duty to total about one year. After Henry returned from service in Panama, he requested to resume employment, but SCI refused. Henry then applied for work with Woodlawn Park Cemetery Company (Woodlawn), a competitor of SCI. Woodlawn offered Henry a job, which would begin in the following month. SCI’s counsel sent a letter to the Henry, with a copy to Woodlawn, that threatened a lawsuit for violation of the non-compete agreement.  SCI contended that SCI did not formally terminate Henry until his return from military duty, therefore the twelve-month period began when he came back from Panama rather than when he left about twelve months earlier. Woodlawn terminated Henry’s employment due SCI’s threats to enforce the non-compete agreement. SCI, however, never filed suit to enforce the non-compete agreement.

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