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Articles Posted in Non-Compete Agreements

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Plaintiffs often assert the common law cause of action of tortious interference in conjunction with other claims associated with unlawful competition. This is because the elements needed to prove the common law tort frequently use the same or substantially similar facts as those needed to establish breach of a restrictive covenant and other claims of unfair competition. For example, a plaintiff asserting a tortious interference claim must prove the existence of a business relationship between itself and a third person, the defendant’s knowledge about the relationship, the defendant’s intentional and unjustified interference with the relationship that induces the third person not to perform, and damage. Seminole Tribe of Florida v. Times Pub. Co., Inc., 780 So. 2d 310 (Fla. 4th DCA 2001). And a plaintiff asserting breach of a non-compete agreement must similarly prove the defendant breached the non-compete agreement by conducting business with the plaintiff’s customer and damages resulting from business loss. See Fla. Stat. 542.335 (requiring the plaintiff to plead and prove one or more legitimate business interests including the existence of present or prospective customers).  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.

A subtle difference lies with the tortious interference claim that can make it more difficult to establish than other, similar claims. A tortious interference claim requires proof that the defendant  induced cessation of business between the plaintiff and a third party. See Mortgage Now, Inc. v. Guaranteed Home Mortg. Co., Inc., 545 Fed. Appx. 809, 811 (11th Cir. 2013) (“No liability will attach unless it is established that the defendant intended to procure a breach.”). However, other claims typically require the plaintiff to merely establish damages resulting from the severed relationship. See, e.g., Vela v. Kendall, 905 So. 2d 1033, 1035 (Fla. 5th DCA 2005) (awarding “damages for the violation of the restrictive covenant during the two-year period of its viability.”)

The inducement element forces the plaintiff to provide evidence demonstrating the third party would not have severed its relationship with the plaintiff but for the defendant’s conduct. Cedar Hills Properties Corp. v. E. Fed. Corp., 575 So. 2d 673 (Fla. 1st DCA 1991) (To “maintain an action for tortious interference… with contractual rights, a plaintiff must prove that a third party interfered with a contract by ‘influencing, inducing or coercing one of the parties to … breach the contract, thereby causing injury to the other party.’”). Providing inducement evidence can be challenging when the third-party was predisposed to terminating its relationship with the plaintiff.

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The Florida restrictive covenant statute allows employers to restrain employees from working for a competitor so long as the non-competition agreement is supported by a legitimate business interest and is reasonable in time, area, and line of business. Fla. Stat. 542.335. Employees that enter contracts containing non-compete agreements can be prohibited from working for a similar business within a competitive geographic area. For example, doctors that sign employment agreements with the hospitals they work for, can be prohibited from treating their patients after leaving that hospital. See, e.g.,  Ansaarie v. First Coast Cardiovascular Inst., P.A., 252 So. 3d 287 (Fla. 1st DCA 2018) (enjoining a doctor from seeing his former patients associated with the hospital he used to work for). This is true even when patients request treatment from the departing doctor. Peter Mavrick is 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’s Legislature recognized that the state’s strong non-compete laws can prevent patient access to medical treatment about five years ago in 2019. This is especially true in rural areas where choice of medical care providers is limited. Therefore, Florida’s legislature invalided non-compete contracts in certain circumstances relating to licensed physicians. The statute provides that a “restrictive covenant entered into with a physician… who practices a medical specialty in a county wherein one entity employs or contracts with,… all physicians who practice such specialty in that county is” invalid. Fla. Stat. 542.336. The Legislature’s invalidation is however limited to (1) certain physicians (2) possessing a specialty and (3) who are employed by a single employer in a single county. Id. Therefore, many Florida doctors are still prohibited from treating patients even when the patient wants treatment from that particular doctor.

It seems Florida’s Legislature understands that the limitations of its 2019 modification are insufficient to enable adequate medical staffing in Florida because the Legislature may be preparing to expand non-compete invalidation. Florida’s House and Senate introduced similar bills that would expand the prohibition on non-competes in the medical space to physicians practicing medicine within any geographic area for any period of time. The proposed language of the new statute from the House is as follows:

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Some employers have confronted the situation where employees have taken corporate trade secrets to use in competition against their former employer, but the employees had not signed a non-compete agreement.  Under Florida law, however, the fact that the former employees did not sign a non-compete agreement is not dispositive concerning whether the business may enforce its trade secrets in court against the former employees and the competing business.  Important precedent from Florida’s Third District Court of Appeal in Unistar Corp. v. Child, 415 So.2d 733 (Fla. 3d DCA 1982), held that “[t]he law will import into every contract of employment a prohibition against the use of a trade secret by the employee for his own benefit, to the detriment of his employer, if the secret was acquired by the employee in the course of his employment.”  Florida’s Uniform Trade Secrets Act, at Florida Statutes Section 688.003(1), states in pertinent part that, “[a]ctual or threatened misappropriation may be enjoined.”  In this vein, All Leisure Holidays Ltd. v. Novello, 202 WL 5832365 (S.D. Fla. Nov. 27, 2012), the United States District Court for the Southern District of Florida held that a non-compete agreement was not necessary to enter a temporary restraining order against a former  employee for misappropriation of trade secrets.  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 law defines the terms “trade secret” to mean information that “derive[s] economic value from not being readily ascertainable by others and [is] the subject of reasonable efforts to protect its secrecy.”  American Red Cross v. Palm Beach Blood Bank, 143 F.3d 1407 (11th Cir. 1998).  This definition includes as trade secrets a “list of customers,” so long as the “owner thereof takes measures to prevent it from becoming available to persons other than those selected by the owner….” Florida Statutes Section 812.081.  The U.S. District Court for the Southern District of Florida in Merrill Lynch, Pierce, Fenner & Smith v. Hagerty, 808 F.Supp. 1555 (S.D. Fla. 1992, explained that “[r]egardless of who compiled the customer list, however, it is clearly protected under [Florida law].”

In unfair competition cases, one significant source of litigation has emanated from employee theft of pricing information to use in competition against the former employer.  Documents containing pricing information have been held to constitute trade secrets under Florida law.  For example, in Sethcot Collection, Inc. v. Drbul, 669 So.2d 1076 (Fla. 3d DCA 1996), the appellate court determined that a confidential active customer list, containing a detailed purchasing history for each entity, qualified as a trade secret entitled to protection by means of an injunction.

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Under Florida law, courts evaluate the enforceability of non-compete agreements based on Florida Statutes Section 542.335 as well as case law interpreting this statute.  Under Section 542.335(1)(b), Florida Statutes, to establish that the contract restricting competition is itself lawful and enforceable, a party must simply “plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.”  Once the party, which is typically a business, has established that the restraint is reasonably necessary to protect the legitimate business interest, the burden shifts to party opposing enforcement of the contract to establish that it is overbroad or otherwise not reasonably necessary.  Balasco v. Gulf Auto Holding, Inc., 707 So.2d 858 (Fla. 2d DCA 1998).   Florida law accords substantially more deference to the scope and duration of a non-compete agreement in the context of sale of a business or its asserts, as distinct from a non-compete agreement solely concerning an employment relationship.  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.

For example, in Avalon Legal Information Services, Inc. v. Keating, 110 So.3d 75 (Fla. 5th DCA 2013), Florida’s Fifth District Court of Appeal decided the proper scope of a non-compete/non-solicitation covenant arising from the purchase of a civil service of process consulting business from a paralegal that sold the business.  The seller of the business (the paralegal) argued to the court that the non-compete/non-solicitation agreement did not protect legitimate business interests in “substantial relationships with existing and prospective clients” and “client goodwill.”  The seller argued there were no “substantial relationships” as part of the business sale because the seller “enjoyed long-standing relationships” with the buyer’s clients.  The appellate court was unpersuaded and ruled against the seller of the business, stating in pertinent part that the seller’s “argument ignores the fact that Keating paid Schneider $200,000 for the consulting business, which included Schneider’s client relationships and goodwill.  Because the purchaser of the assets and goodwill of a business has a legitimate business interest in preventing the seller from servicing former clients, the trial court did not err in finding the non-compete/non-solicitation covenant was supported by a legitimate business interest.”

Although the Avalon decision determined the restrictive covenant was enforceable, the appellate court also determined that the trial court’s injunction was overbroad.  “[T]he restrictive covenant prohibits Avalon from competing for and soliciting Keating’s clients.  The court’s order is overly broad to the extent it enjoined Avalon and Schneider from competing for ‘any sheriffs in Florida’ in the area of civil service consulting, irrespective of whether they were a client of Keating.  The trial court should modify the injunction allow Avalon and Schneider to compete for the remaining sheriffs’ offices with which Keating shares no substantial relationship.”

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Florida’s non-compete statute, Section 542.335, Florida Statutes, accords broad protection in favor of a business seeking to prevent former employees from competing with the business via goodwill with customers with whom the former employee dealt during his employment.  In this regard, section 542.335(1)(b)(3) expressly considers a “legitimate business interest” to include “[s]ubstantial relationships with specific prospective or existing customers, patients, or clients.”  Under Florida law, however, in the absence of a non-soliciation agreement or non-compete agreement, a former employee cannot be precluded from using contacts and expertise he gained from employment with his former employer.   Businesses have sometimes tried to bar former employees from competing for customers when the employee never even signed a non-compete or non-soliciation agreement.  In such cases, businesses have argued that the customers are part of a “trade secret” and are confidential.  Florida’s Second District Court of Appeal, in Templeton v. Creative Loafing Tampa, Inc., 552 So.2d 288 (Fla. 2d DCA 1989), held in pertinent part that: “The only arguably secret information on the advertiser list was the contact person.  However, the testimony shows that appellant knows all of these persons on a first name basis as a result of his experience working for Music and that he did not need a secret list to enable him to ascertain their identity.  Appellant cannot be precluded from utilizing contacts and expertise gained during his former employment.”  Peter Mavrick is 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 appellate courts distinguish between customer lists that are the product of great expense and effort, that are distillations of larger lists, or include information that is not available from public sources.  Under appropriate circumstances, such customer lists can qualify as trade secrets.  However, an employee’s mental knowledge of customer relationships, as per prior employment, generally will not qualify for protection as a trade secret.  Precedent from the Supreme Court of Florida, in Pure Foods, Inc. v. Sir Sirloin, Inc., 84 So.2d 51 (Fla. 1956), stated in pertinent part: “We do not think the circumstances in this case justify further exploration of the law on that subject or a condemnation of appellee’s erstwhile employees because they undertook to sell to customers whom they had come to know during their former employment.  Both corporations were wholesalers and their products were sold to retailers of food such as restaurants and ‘drive-ins.’  Certainly, the names of such concerns were easily obtainable from classified telephone directories and like sources, and surely the employees of appellee who became owners of an interest in the appellant-corporation could not be precluded from attempting to sell all customers whom they had known in their former positions.”  Florida’s Fifth District Court of Appeal, in Fish v. Adams 401 So.2d 843 (Fla. 5th DCA 1981), has taken these legal principles a step further, explaining that “an employee may take with him a customer list he himself has developed.”  How broadly courts will interpret this wording from Fish v. Adams will likely depend on the factual details, including how intricate and valuable was the customer list the employee took and used after leaving his employment with the business.  It is important to emphasize that when the employer-employee relationship does not include a restrictive covenant barring competition or solicitation, it can be an uphill battle to bar an employee’s dealing with his former employer’s customers.

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.

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The plain terms of a contract control the parties’ course of conduct for all matters subject to that contract’s terms. See Maher v. Schumacher, 605 So.2d 481 (Fla. 3d DCA 1992) (holding that the plain meaning of the contractual language used by the parties controls). The Court is prohibited from rewriting contract terms. Pol v. Pol, 705 So. 2d 51, 53 (Fla. 3d DCA 1997) (“It is well established that a court cannot rewrite the clear and unambiguous terms of a voluntary contract.”). However, non-complete law contains a powerful exception allowing courts to disregard the well- pronounced prohibition against rewriting contracts. Courts can “blue-pencil” (i.e., Judicially modify) provisions of non-compete agreements when they do not conform to the requirements of Florida’s restrictive covenant statute, Section 542.335, Florida Statutes. In doing so, blue pencil laws breathe life into an otherwise invalid contractual provision. The blue pencil exception can be an important tool for those attempting to obtain relief under a contractual provision that violates the restrictive covenant statute.  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.

A court’s ability to “blue-pencil” a restrictive covenant is limited to modifying the scope of the provision to bring it within the ambit of non-compete law. See White v. Mederi Caretenders Visiting Services of Se. Florida, LLC, 226 So. 3d 774 (Fla. 2017) (Courts are commanded to “modify, or blue pencil, a non-competition agreement that is overbroad, overlong, or otherwise not reasonably necessary to protect the legitimate business interest.”). The court can only narrow a restrictive covenant to the extent needed to protect the plaintiff’s established legitimate business interests. Id. (noting that courts can modify overbroad restrictive covenants to “grant only the relief reasonably necessary to protect such interest”). Courts can shorten a restrictive covenant that is too long in duration, may curtail the geographical scope to a more limited area, or may constrain the subject matter to particular legitimate business interests. Id.

Blue penciling laws can create perverse incentives for employers and similarly situated parties to draft overbroad provisions they know have little chance of being enforceable. Employers may force their employees to agree to overbroad restrictive covenants to intimidate employees and make them believe they cannot compete in any respect. Employers may believe there is little risk in drafting an overbroad restrictive provision because a court will probably blue-pencil the provision if enforcement is necessary. Therefore, employers could face little risk in purposefully drafting an onerous overbroad restrictive covenant.

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Corporations routinely require their employees to enter restrictive covenants (including non-solicition and non-compete agreements) protecting the business from unfair competition. However, employees often live and reside in states that are different from the company’s place of incorporation and principal place of business. This trend has grown in recent years as some companies have moved toward a fully remote work environment. The corporation’s ability to enforce its restrictive covenants may be hampered or become more complicated where state laws governing enforcement of restrictive covenants vary.  This article explores a sampling of contradictory restrictive covenant laws and how one might address those contradictions upfront to help ensure a restrictive covenant agreement remains enforceable.  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.

Some states, like Florida, have strong restrictive covenant laws codified by statute. Florida permits non-compete agreements when they are supported by one or more “legitimate business interests” and reasonable in time and scope to protect the business. See Fla. Stat. § 542.335 (“The person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.”). Other states, like Pennsylvania, rely on caselaw to enforce restrictive covenants. See, e.g., Socko v. Mid-Atl. Sys. of CPA, Inc., 2014 PA Super 103, 99 A.3d 928, 935 (2014), aff’d, 633 Pa. 555, 126 A.3d 1266 (Penn. 2015) (permitting enforcement of a restrictive convent when the employee “receive[s] actual valuable consideration” and the restriction is reasonably limited in time and territory). Application of case law can be amorphous thereby making it more difficult to enforce the covenant or predict outcomes. See Insulation Corp. of Am. v. Brobston, 446 Pa. Super. 520, 529, 667 A.2d 729, 733 (Penn. 1995) (adding more stringent requirements to enforce a post-employment restrictive covenant). Yet other states like Minnesota prohibit enforcement of most restrictive covenant agreements. Minn. Stat. Ann. § 181.988 (“Any covenant not to compete contained in a contract or agreement is void and unenforceable”).

Companies can insert choice of law provisions in their restrictive covenant agreements to provide some definiteness as to which state’s laws apply. These provisions pre-select the application of a particular state’s laws, usually to the exclusion of all other state laws.  Choice of law provisions, however, are not always enforceable. For example, in Florida, a choice of law provision will not be enforced when its application would violate Florida’s public policy.  In Snelling & Snelling, Inc. v. Reynolds, 140 F. Supp. 2d 1314 (M.D. Fla. 2001), the United States District Court for the Middle District of Florida analyzed a restrictive covenant that selected Pennsylvania as the governing law.  The court explained that, “[s]ince Snelling has indicated its intention for the governing law, Pennsylvania law will govern the dispute between the parties, as long as that law is not against the public policy of the forum state.”   Florida courts analyze the laws of the chosen state as contrasted against Florida law, to determine whether the laws of both states contradict each other.  Snelling explained that the court “must determine whether Pennsylvania law governing non-compete covenants is contrary to Florida’s public policy.”  If a contradiction exists, further analysis would be conducted to determine whether there is a violation of Florida’s public policy.  Other states may construe choice of law provisions differently or enforce them differently.

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Florida Statutes Section 95.11(2)(b) states in pertinent part that, “[a] legal action on an action on a contract, obligation, or liability founded on a written instrument” is five years.  This statute of limitations governs breach of written contracts in business litigation.  Florida law imposes a type of “statute of frauds” in cases involving non-compete contracts, because Florida Statutes Section 542.335(1)(a) states that “[a] court shall not enforce a restrictive covenant unless it is set forth in a writing signed by the person against whom enforcement is sought.”  Issues concerning statutes of limitations sometimes arise in arbitration proceedings, which are legally sanctioned proceedings involving private judges with the consent of the parties.  In such proceedings, arbitrators sometimes do not follow the law.  Unlike the decisions made by state and federal trial courts, decisions made in arbitration often are not reviewable in appellate courts.  Indeed, some arbitration companies have expanded “private” statutes of limitation that exceed the limits of Florida law.  The question arises, when Florida law governs the parties’ contract, can an arbitrator lawfully refuse to abide by the statute of limitations concerning cases of breach of a written contract, including a non-compete contract?  Peter Mavrick is 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.

Precedent from the Supreme Court of Florida, in Raymond James Financial Services, Inc. v. Phillips, 126 So.3d 186 (Fla. 2013), has addressed this question in the context of a tort claim before the National Association of Securities Dealers.  In Raymond James, an investment firm required its clients (the investors) to sign an agreement to arbitrate all disputes arising out of the handling of their investments.  The issue in the case was not the validity of the arbitration agreement, but rather whether Florida’s statute of limitations that is applicable to a “civil action or proceeding” applies to arbitration proceedings.  The investors asserted that the statute of limitations applied only to judicial actions and thus did not limit the time in which to assert their arbitration claims.  The Supreme Court of Florida held that the term “proceeding” as used in the statutory provision that barred any proceeding unless begun within the applicable statute of limitations, was a broad term that encompassed arbitration proceedings.

The Supreme Court’s Raymond James decision imposed an important check on arbitration proceedings, which are usually given leeway to make decisions without significant judicial review.  The Raymond James decision relied on Black’s Law Dictionary, which defines a “tribunal” as a “[c]ourt or other  adjudicatory body.”  The Supreme Court explained in pertinent part: “The term adjudicatory refers back to adjudication, which is defined as both ‘[t]he legal process of resolving a dispute,’ as well as ‘the process of judicially deciding a case’…In addition, an arbitrator would fall under the definition of an adjudicator, which Black’s Law Dictionary defines as ‘[a] person whose job is to render binding decisions’…Arbitration is clearly within the meaning of the term adjudication since the parties to an arbitration are engaging ‘[t]he legal process of resolving a dispute’ by seeking redress from an ‘adjudicatory body.’  Moreover, an arbitrator is an adjudicator who has the authority and obligation to render a binding decision and resolve the parties’ dispute.  Accordingly, a review of the common usage of the terms uses…supports our conclusion that the term ‘proceeding’ as used in section 95.011 [Florida Statutes], is a broad term that includes arbitration.”

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Some businesses have experienced loss of customer relationships due to former employees taking customer relationships to competitors.  The most obvious way to protect against such a situation is to ensure employees sign a restrictive covenant under Florida Statutes Section 542.335, commonly referred to as a non-compete agreement, prohibiting solicitation of customers and competition that diverts the employer’s customers to a competitor.  Sometimes, however, businesses do not have a non-compete agreement with their employees.  The law of trade secrets can be used, under certain circumstances, to bar use of confidential information, including customer lists, to divert customers to competitors.  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 Second District Court of Appeal, in East v. Aqua Gaming, 805 So.2d 932 (Fla. 2d DCA 2001), explained what is required to prove a customer list is a trade secret.  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.”  Customer lists can constitute trade secrets where the lists are acquired or complied through the industry of the owner of the lists and are not just a compilation of information commonly available to the public.

In trade secret litigation, it is often a major issue whether the alleged trade secret owner took appropriate measures to keep the the subject information a secret.  Under Florida’s trade secret statute, section 688.002(4)(b), a trade secret owner must make “efforts that are reasonable under the circumstances to maintain its secrecy.”  As to this issue, Florida and federal courts will often look at whether the alleged trade secret owner had signed agreements with its employees to protect the company information.  In My Energy Monster, Inc. v. Gawrych, 2020 WL 8224616 (M.D. Fla. 12/18/2020), the federal court faulted the business that owned the alleged trade secret for not taking better measures to protect its trade secrets, and stated in pertinent part: “However, the record demonstrates that Gawrych was not required to sign a non-compete agreement, non-solicitation agreement, nor a confidentiality agreement and that non existed for other Energy Monster employees.  According to Defendants, all employees at Energy Monster had access to the customer list…Defendants, further state that [t]here [were] no ‘need to know’ employees and Energy Monster never obtained nondisclosure agreements or confidentiality agreements–even after the parties parted ways and Gawrych offered  to sign an NDA…Yet Energy Monster seeks to prevent the very action that such agreements are typically designed to prevent.”

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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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