Articles Posted in Non-Compete Agreements

Published on: July 16, 2023

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

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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Published on: April 8, 2023

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

By Mavrick Law Firm

Under Florida’s non-compete statute, Florida Statutes Section 542.335(1)(b), “[t]he person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.” The term “legitimate business interest” includes trade secrets (as defined in Florida Statutes Section 688.002(4)) and “valuable confidential business or professional information.” Florida and federal courts scrutinize the facts to assess whether the employer has satisfactorily proven the existence of “trade secrets” and “valuable confidential information.” In many cases, businesses seek to enforce non-compete agreements based on alleged trade secret or confidential information that do not qualify as such under the statute. 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 or proprietary information, an employer must articulate the information it deems confidential or proprietary. Florida’s Fourth District Court of Appeal in Passalacqua v. Navient, Inc., 844 So.2d 792 (Fla. 4th DCA 2003), determined 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 “[g]eneric allegations do not establish a legitimate business interest.” An employer must prove that the employees could use the information to gain an unfair advantage. As the Passalacqua decision explained, “[g]eneralized statements of concern cannot substitute as proof.” As it relates to alleged trade secrets on which the non-compete agreement is bsed, information commonly known in the industry and not unique to the former employer is not “confidential” and thus not entitled to protection. Keel v. Quality Medical Systems, Inc., 515 So.2d 337 (Fla. 3d DCA 1987).

Under Florida Statutes § 542.335(b)(2), the employer must prove that the employee could use the information to gain an unfair advantage. A great deal of non-compete litigation centers on whether the former employee took advantage of “substantial relationships” with specific customers. In Anich Indus. Inc. v. Raney, 751 So.2d 767 (Fla. 5th DCA 2000), Florida’s Fifth District Court of Appeal explained that, under Florida law, “information commonly known in the industry and not unique to [the] allegedly injured party [is] not ‘confidential’ and thus not entitled to protection.” The appellate court explained in pertinent part: “Anich’s contention that it proved that Raney sought to take advantage of substantial relationships with specific customers also is unsupported by the record from the hearing. Anich asserts that the ‘substantial relationships’ are those developed between the employee and the customer; Raney, on the other hand, submits that the ‘substantial relationships’ are those developed between the employee and the customer…Under either interpretation, however, ‘substantial relationships’ have not been shown. The customers who testified on Anich’s behalf all acknowledged that they made their industrial tool and equipment purchases based primarily on cost and the supplier’s ability to provide the goods quickly. There was little evidence of any exclusive or other kind of relationship that could be construed as ‘substantial’ with the meaning of the statute. Alternatively, under Raney’s interpretation [i.e., the employee’s interpretation], it is obvious that in less than three months with Anich she did not have the opportunity to develop a ‘substantial relationship’ with any of her customers.”

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Published on: March 11, 2023

MIAMI BUSINESS LITIGATION: ENFORCING NON-COMPETE AGREEMENT BASED ON “EXTRAORDINARY OR SPECIALIZED TRAINING”

By Mavrick Law Firm

Florida law specifies, at Florida Statutes section 542.335, how and when a restrictive covenant (such as a non-compete agreement or non-solicitation agreement) may be enforced against a current or former employee. In a lawsuit to enforce an agreement that restricts or prohibits competition during or after the term of the restrictive covenants, section 542.335(1)(b) states that “[t]he person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.” Proving a “legitimate business interest” is crucial in a non-compete case because the statute states that “[a]ny restrictive covenant non supported by a legitimate business interest is unlawful and is void and unenforceable.” Under the statute, the term “legitimate business interest” includes “extraordinary or specialized training.” Many businesses have tried to enforce non-compete agreements based on “extraordinary or specialized training,” when in injunction proceedings Florida courts have determined the training to be insufficient. In such cases, courts have allowed the former employee to compete against the former employer on the grounds that this constitutes ordinary competition, not unfair competition. 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.

Important precedent from the Supreme Court of Florida in White v. Mederi Caretenders of Southeast Florida, LLC, 226 So.3d 774 (Fla. 2017), explained that Florida’s non-compete statute is designed to prevent only unfair competition, not all competition. The White decision explained that, “[f]or an employer to be entitled to protection [against competition], ‘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 future competition with the employer.” Florida’s Second District Court of Appeal in Hapney v. Cent. Garage, Inc., 579 So.2d 127 (Fla. 2d DCA 1991), described “extraordinary training” in pertinent part: “that which goes beyond what is usual, regular, common, or customary in the industry in which the employee is employed. The rationale is that if an employer dedicates time and money to the extraordinary training and education of an employee, whereby the employee attains a unique skill or an enhanced degree of sophistication in an existing skill, then it is unfair to permit that employee to use those skills to the benefit of a competitor when the employee has contracted not to do so. The precise degree of training or education which rises to the level of a protectible interest will vary from industry to industry and is a factual determination to be made by the trial court. Needless to say, skills which may be acquired by following the directions in the box or learned by a person of ordinary education by reading a manual do not meet the test.” Based on this definition, the appellate court in Hapney concluded that Hapney did not receive extraordinary training because the training provided to him merely “extended his airconditioning installation and repair skills to include cruise control units and cellular telephones.”

In a later appellate decision, Dyer v. Pioneer Concepts, Inc., 667 So.2d 961 (Fla. 2d DCA 1996), held that an employer did not have a protectible interest due to “specialized training” where the evidence showed the employee, Dyer, received training in stripping floors and the use of equipment leased to grocery stores. The employer also trained Dyer via attendance of seminars on development of interpersonal skills, hiring and firing techniques, and repairing equipment. The appellate court in Dyer concluded that this type of training was insufficient under Florida Statutes section 542.335 to qualify as a “legitimate business interest.”

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Published on: February 25, 2023

FORT LAUDERDALE BUSINESS LITIGATION: NON-COMPETE AGREEMENTS BASED ON TRADE SECRETS AND CONFIDENTIAL INFORMATION

By Mavrick Law Firm

The State of Florida enacted Florida Statutes Section 542.335 to allow non-compete agreements where there is a “legitimate business interest.” Two frequently cited “legitimate business interests” are confidential information and trade secrets. In an employment context, a non-compete agreement based on “[v]aluable confidential business or professional information” (referenced in Florida Statutes Section 542.335(1)(b)(2)), Florida law presumes as “reasonable” a post-employment restriction of six months or less and presumes as “unreasonable” a restriction of more than two years. For trade secrets, however, Florida law is far more generous. Florida Statutes Section 542.335(1)(3) vastly expands the presumption of reasonable duration as being up to five years and presumes an unreasonable duration to be more than ten years. 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.

In some cases, restrictive covenants on allegedly “confidential” or “trade secret” information that does not qualify as such. Fundamentally, Florida and federal law require that confidential and trade secret information be subject to efforts that are reasonable under the circumstances to maintain secrecy. To ensure information is treated in a confidential manner, courts expect, at a minimum, that there are limits on employee access to the information as well as password protecting the computer network on which the information resides. VAS Aero Servs., LLC v. Arroyo, 860 F.Supp.2d 1349 (S.D. Fla. 2012) (explaining that these measures are influential in reasonably securing trade secrets). The employer, however, must ensure that the allegedly confidential or trade secret information is handled in a confidential or secret manner. This includes preventing employees from storing putative confidential or trade secret information on their personal cellphone or laptop computers. For example, the federal district court in Diamond Power Int’l, Inc. v. Davidson, 540 F.Supp.2d 1322 (N.D. Ga. 2007), found it significant that the plaintiff business failed to prevent its employees from transferring a file, allegedly constituting a trade secret, to their personal computers. Similarly, the United States Court of Appeals for the Eleventh Circuit in Yellowfin Yachts, Inc. v. Barker Boatworks, LLC, 898 F.3d 1279 (11th Cir. 2018), held there was no viable trade secret under the Florida Uniform Trade Secrets Act because the employer (i.e., Yellowfin) did not deploy reasonable measures to ensure its information was kept secret. The appellate court explained in pertinent part that: “Indeed, Barker refused to sign an employment agreement which stated that he would, among other things, keep all Yellowfin trade secrets in confidence. Further, Yellowfin neither marked the Customer Information as confidential nor instructed Barker to secure information on his personal devices. And when Barker left Yellowfin, the company did not request that Barker return or delete any of the information.”

Where employers are unable to prove they had an explicit understanding with their employees that certain information is confidential, Florida law sometimes allow protection based on an implied confidential relationship between the employer and employees. However, the U.S. Court of Appeals for the Eleventh Circuit in Bateman v. Mnemonics, Inc., 79 F.3d 1532 (11th Cir. 1996), explained that “[a]lthough Florida law recognizes implied confidential relationships sufficient to trigger trade secret liability” the appellate court expressed it is “wary of any trade secret claim predicated on the existence of” such a relationship. The Yellowfin Yachts decision rejected the employer/plaintiff’s contention that its “general verbal statements warning employees not to share its Confidential Information with third parties” was adequate to establish that company information was truly kept confidential. The appellate court explained that: “In sum, with mere verbal statements that the Customer Information should not be given to outsiders, Yellowfin relinquished the information to Barker, who refused to sign a confidentiality agreement, with no instruction to him as to how to secure the information on his cellphone or personal laptop. In doing so, Yellowfin effectively abandoned all oversight in the security of the Customer Information. Accordingly, the District Court did not err in determining that no reasonable jury could find that Yellowfin employed reasonable measures to secure the information.”

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Published on: January 28, 2023

MIAMI BUSINESS LITIGATION: NON-COMPETE AGREEMENT AS PART OF BUYING A BUSINESS

By Mavrick Law Firm

An important consideration when buying a business, whether via a stock purchase agreement or an asset purchase agreement, is whether the seller will take the sale proceeds and start a new, competing business. Typically, the seller would have a competitive advantage in competition with the new buyer of the business, due to such matters as customer goodwill, positive name recognition in the industry, and know-how concerning the operation of the business. Accordingly, many buyers of businesses will demand a non-compete covenant to bar the seller (or his agents) from competing against the buyer within a reasonable geographic scope and time-period. Florida law is deferential to such non-compete covenants in the context of a business purchase. Peter Mavrick is a Miami business litigation attorney, and represents clients in business litigation 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 law, at Section 542.335(1)(d)(3), Florida Statutes, states in pertinent part:

“In the case of a restrictive covenant sought to be enforced against the seller of all or a part of:

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