Most litigation over restrictive covenants are resolved at the conclusion of the temporary injunction hearing. At that stage, the trial judge has made a decision whether the plaintiff is substantially likely to succeed on the merits of the case. The parties usually are motivated to settle the case at that point. However, in some cases a party seeks to recover damages at a trial on the merits. This sometimes happens in cases where a party has incurred large losses and seeks to collect damages arising from the defendant’s breach of contract. Florida law recognizes that “[t]he measure of damages for a breach of a non-competition agreement is the actual damages suffered as a result of the breach, which is generally loss of profits.” Camel Invs., Inc. v. Webber, 468 So. 2d 340 (Fla. 1st DCA 1985) (citing 54 Am.Jur.2d, Monopolies, section 579 (1971)). 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.
“Generally, the aggrieved party in a breach of noncompetition agreement case seeks lost profits as the measure of damages.” Moon v. Med. Tech. Assocs., Inc., No. 8:13-CV-02782-EAK, 2015 WL 1227499 (M.D. Fla. Mar. 17, 2015) (citing Camel Investments, Inc. v. Webber, 468 So.2d at 342). “Lost profits, however, are not the only recoverable damages; the measure of damages is ‘the actual damages suffered as a result of the breach[.]’” Moon at *2 (citing Collier v. Crane Inspection and Certification Bureau, Inc., 382 So.2d 424 (Fla.Dist.Ct.App.1980)). “There 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) (quoting Lehrman v. Gulf Oil Corporation, 500 F.2d 659 (5th Cir.1974)). “The before and after theory compares the plaintiff’s profit record prior to the violation with that subsequent to it.” Lehrman. 500 F.2d at 667. The yardstick test is often employed when a plaintiff “is driven out of business before he is able to compile an earnings record sufficient to allow estimation of profits.” Id. Where a party was not driven out of business and has compiled record of earnings to allow an estimation of profits, the “before and after theory” of lost profits damages is applicable.
Under Florida law, to recover lost profits “[t]he party must prove that 1) the defendant’s action caused the damage and 2) there is some standard by which the amount of damages may be adequately determined. Katz Deli of Aventura, Inc. v. Waterways Plaza, LLC, 183 So. 3d 374 (Fla. 3d DCA 2013) (citing W.W. Gay Mech. Contractor, Inc. v. Wharfside Two, Ltd., 545 So.2d 1348 (Fla.1989). “The projected profits cannot be mere speculation or conjecture, but the inability to prove a precise damages amount will not prevent a plaintiff from recovering so long as it is clear that some loss resulting from the defendant’s actions is certain. Id. (internal citations omitted). “Lost profits must be established with a reasonable degree of certainty and must be a natural consequence of the wrong. Sostchin v. Doll Enterprises, Inc., 847 So. 2d 1123, 1128 (Fla. 3d DCA 2003). The party seeking lost profit damages must “provide competent evidence sufficient to satisfy the mind of a prudent impartial person as to the amount of profits lost as a result” of the wrongdoing. Id. (citing North Dade Community Development Corp. v. Dinner’s Place, Inc., 827 So.2d 352 (Fla. 3d DCA 2002)).
Peter Mavrick is a Fort Lauderdale business litigation lawyer, and represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.