MIAMI NON-COMPETE AGREEMENT: UNCLEAN HANDS

Unclean hands is an equitable defense akin to fraud. Cong. Park Off. Condos II, LLC v. First-Citizens Bank & Tr. Co., 105 So. 3d 602 (Fla. 4th DCA 2013). “It is a self-imposed ordinance that closes the doors of a court of equity to one tainted with inequitableness or bad faith relative to the matter in which he seeks relief.” Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806 (1945). The defense is designed to discourage unlawful activity. Original Great Am. Chocolate Chip Cookie Co. v. River Valley Cookies, Ltd., 970 F.2d 273 (7th Cir.1992). The Miami business litigation attorneys of the Mavrick Law Firm represent 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.

Sneaky and deceitful conduct generally qualifies as unclean hands. Courts have stated that “[e]quity will stay its hand where a party is guilty of conduct condemned by honest and reasonable men. Unscrupulous practices, overreaching, concealment, trickery or other unconscientous conduct are sufficient to bar relief.” Hensel v. Aurilio, 417 So. 2d 1035 (Fla. 4th DCA 1982). However, the mere establishment of condemnable conduct is not sufficient to prevail on the defense because additional elements must be satisfied. The party asserting the defense must also prove reliance on the conduct, relation to the litigation, and a resulting injury. McIntosh v. Hough, 601 So. 2d 1170 (Fla. 1992).

The unclean hands defense can be used to defend against the enforcement of restrictive covenants like non-compete agreements to the extent the plaintiff seeks equitable relief. However, prevailing on the defense can be difficult. In Technomedia Sols., LLC v. Scopetto, 2013 WL 6571558 (M.D. Fla. Dec. 13, 2013), the defendant argued the restrictive covenant could not be enforced against her because the defendant’s former employer tried interfering with her employment with a competitor. The former employer’s attorney sent a letter to the competitor to advise it about the former’s employer’s non-compete agreement with the defendant. The court rejected the unclean hands defense because the letter did not demonstrate interference. One example of a potential successful use of the unclean hands in a restrictive covenant lawsuit can be found in Bradley v. Health Coal., Inc., 687 So. 2d 329 (Fla. 3d DCA 1997). In Bradley, the former employee argued his former employer could not enforce the restrictive covenant because it ordered the former employee to sell unfit products and alter invoices to defraud customers. This forced the employee to resign because he refused to comply with the former employer’s directives. The appellate indicated these facts could give rise to the successful application of an unclean hands defense directed the trial court to consider the issues.

Litigants can be creative when asserting an unclean defense because defendants are not limited to matters between the plaintiff and the defendant. Privity is not an essential element of the equitable defense. Quality Roof Servs., Inc. v. Intervest Nat. Bank, 21 So. 3d 883 (Fla. 4th DCA 2009). Therefore, the defense may be asserted by a defendant claiming the plaintiff acted toward a third party with unclean hands with respect to the matter in litigation. Yost v. Rieve Enters., Inc., 461 So.2d 178 (Fla. 1st DCA 1984) (“There is no bar to applying the doctrine of unclean hands to a case in which both the plaintiff and the defendant are parties to a fraudulent transaction perpetrated on a third party.”). For example, in Quality Roof Servs., Inc. v. Intervest Nat. Bank, 21 So. 3d 883 (Fla. 4th DCA 2009), the defendant asserted an unclean hands defense based on the inaction of a third-party. The defendant alleged the plaintiff should not be granted a foreclosure because an insurance company failed to distribute insurance proceeds to the defendant, which would have allowed the defendant to pay the plaintiff and prevented the foreclosure. The Court allowed this defense to stand even though the conduct pertained to the inaction an insurer rather than the plaintiff.

The Miami business litigation lawyers of the Mavrick Law Firm also represent 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.