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Under Florida contract law, integration clauses (also known as merger clauses) are important to clearly define the terms of a contract. An integration clause generally limits a contract’s terms to only those that are expressly contained within the written contract. See Vigortone AG Products, Inc. v. PM AG Products, Inc., 316 F. 3d 641 (7th Cir. 2002) (“By virtue of the parol evidence rule, an integration clause prevents a party to a contract from basing a claim of breach of contract on agreements or understandings, whether oral or written, that the parties had reached during the negotiations that eventuated in the signing of a contract but that they had not written into the contract itself.”). Integration clauses can prevent contracting parties from using parol evidence to vary a contract’s terms by adding terms that are not contained within the four corners of the contract. However, some circumstances permit the use of parol even when a contract contains an integration clause. 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.

The presence of a merger clause is not the sole basis for determining whether a contract is fully integrated. Lowe v. Nissan of Brandon, Inc., 235 So. 3d 1021 (Fla. 2d DCA 2018) (“[T]he existence of a merger clause does not per se establish that the integration of the agreement is total.”). A court may allow parol evidence despite the existence of a merger clause when the contract is ambiguous, Jenkins v. Eckerd Corp., 913 So. 2d 43 (Fla. 1st DCA 2005), or when a party claims that they were fraudulently induced to enter into the contract. Fla. Potter Stores of Panama City, Inc. v. Am. Nat’l Bank, 578 So. 2d 801 (Fla. 1st DCA 1991).

The fraudulent inducement exception is limited to instances where the statement inducing fraud is not adequately discussed within the contract and not expressly contradicted by the contract. In Ioannides v. Romagosa, 93 So. 3d 431 (Fla. 4th DCA 2012), a doctor recruited another doctor to join his medical practice by telling the doctor that “his total annual compensation from salary and bonuses would easily exceed $500,000 per year . . . .” The two doctors subsequently entered a written contract explicitly stating the terms of compensation, which included a maximum base salary of $250,000 plus a “production bonus.” The contract contained an integration clause. The doctor who joined the practice quit after two years and filed a fraudulent inducement lawsuit because he was never paid more than $500,000 per year. The defending doctor moved for summary judgment based on the contract’s integration clause, but the motion was denied by the trial court. The Florida Fourth District Court of Appeals reversed and granted summary judgment based on the presence of the integration clause because the doctor’s compensation was “adequately covered” by the written agreement.

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The Court of Appeals of Virginia recently reversed a massive verdict in a trade secret misappropriation case involving two business competitors. In Pegasystems, Inc. v. Appian Corporation, ___ S.E.2d. ____, 2024 WL 3571808 (Va. 2024), the jury returned a verdict of more than $2 billion, the largest trade secret verdict in Virginia history. However, the Court of Appeals of Virginia reversed based on four errors committed by the trial court. Peter Mavrick is a Fort Lauderdale business litigation attorney.  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.

Appian Corporation and Pegasystems, Inc., are competitors that both produce and sell business process management software. Pegasystems hired an outside consultant that worked with Appian to gain access to Appian’s software and study it. Appian discovered Pegasystems’ scheme and filed suit for trade secret misappropriation by claiming Pegasystems unlawfully gained access to its software, incorporated several features of its software into Pegasystems’ own software, and used knowledge of its software’s weaknesses in Pegasystems’ marketing. The case went to trial and the jury returned a verdict of $2,036,860,045 in favor of Appian.

The trial court’s main error was including a jury instruction that improperly shifted the burden of proof for proximate causation of damages to Pegasystems. Appian requested unjust enrichment damages; a common form of damages in trade secret lawsuits that are based on the defendant’s revenues or profits generated from using the ill-gotten trade secret. The relevant jury instruction required Appian to prove trade secret misappropriation, required Appian to establish Pegasystems’ general sales, and then shifted the burden to Pegasystems to prove the portion of its sales that were not attributable to the trade secret misappropriation. The appellate court determined this “framework impermissibly ‘shifted the burden’ to Pega[systems] to prove sales were not related to the wrongdoing and relieved Appian of its burden to prove proximate cause for the misappropriation” because Appian only had to prove enrichment rather than unjust enrichment.

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The litigation privilege protects most statements made during the course of litigation in Florida. The litigation privilege has a wide scope and covers many causes of action. The Miami business litigation attorneys of the Mavrick Law Firm represent 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 courts have historically applied the litigation privilege to causes of action for perjury and defamation. Levin, Middlebrooks, Mavie, Thomas, Mayes, & Mitchell, P.A. v. U.S. Fire. Ins. Co., 639 So. 2d 606 (Fla. 1994). In Levin, the Florida Supreme Court expanded the litigation privilege to cover all acts occurring during judicial proceedings, “whether the act involves a defamatory statement or other tortious behavior such as the alleged misconduct at issue, so long as the act has some relation to the proceeding.” The Florida Supreme Court then applied the litigation privilege to a claim of tortious interference with a business relationship.

What about claims for malicious prosecution or abuse of process? Can the litigation privilege negate a litigant’s ability to bring these claims because they are based upon the unlawful use of a legal proceeding against another. See Alamo Rent-A-Car, Inc. v. Mancusi, 632 So. 2d 1352 (Fla. 1994) (explaining that a claim for malicious prosecution is founded on allegations that the defendant maliciously brought a legal proceeding against the plaintiff without probable cause); Della-Donna v. Nova University, Inc., 512 So. 2d 1051 (Fla. 4th DCA 1987) (abuse of process involves the defendant’s improper use of process with ulterior motives). Malicious prosecution inherently involves acts that occurred during the course of litigation. In Debrincat v. Fischer, 217 So. 3d 68 (Fla. 2017), the Supreme Court of Florida determined that the litigation privilege did not apply to malicious prosecution because “[a]pplying the litigation privilege… would eviscerate [the] long-established cause of action.” Because malicious prosecution inherently involves acts that occurred during the course of a judicial proceeding, the litigation privilege would essentially eliminate malicious prosecution as a cause of action. Debrincat v. Fischer, 217 So. 3d 68 (“[M]alicious prosecution could never be established if causing the commencement or continuation of an original proceeding . . . were afforded absolute immunity . . . .”).

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Businesses often enter contracts with vendors, independent contractors, executives, employees, and others. But sometimes, these contracts may be verbal and unformalized. If a dispute arises regarding one of these verbal contracts, it may not be enforceable under the Statute of Frauds. Peter Mavrick is a Fort Lauderdale business litigation attorney.  Peter Mavrick is a Fort Lauderdale business litigation attorney.  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.

The Statute of Frauds is a legal principle requiring certain contracts be in writing to be legally enforceable. The statute can be found at section 725.01, Florida Statutes and contains a list contract subject that must be reduced to writing to be enforceable. The subject matters include certain medical contracts and real estate contracts. Fla. Stat. § 725.01. However, the Statute of Frauds only applies to an “agreement that is not to be performed with the space of one year from the making thereof.”

If a verbal contract is not completed within one year, is it still enforceable? Florida courts established the one-year rule to address this question. The seminal case is Browning v. Poirier, 165 So. 3d 663 (Fla. 2015). In Browning, romantic partners entered into a verbal agreement in 1993 whereby they agreed to pool lottery winnings. One partner won a lottery in 2007, fourteen years after entering the verbal agreement. The other partner sued to enforce the verbal agreement, but the lottery winner argued the verbal agreement was not enforceable because it was not in writing and more than one year had passed since they entered into the verbal agreement. The Florida Supreme Court held that, despite the long passage of time, the contract did not come within the Statute of Frauds because the “contract’s full performance is possible within one year from the inception of the contract.”

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Under Florida law, the tort of abuse of process involves the use of criminal or civil legal process against another primarily to accomplish a purpose for which it was not designed.  Florida’s Third District Court of Appeal in Cline v. Flagler Sales Corp., 207 So.2d 709 (Fla. 3d DCA 1968), discussed the elements abuse of process and stated in pertinent part, “[i]n an action for abuse of process it is not essential to show a termination of the proceeding in favor of the person against whom the process was issued and used, or to show want of probable cause or malice.  The cause of action consists of the willful or intentional misuse of process; a willful and intentional misuse of it for some wrongful or unlawful object, or ulterior purpose not intended by the law to effect.”  Abuse of process is sometimes confused with the tort of malicious prosecution, which is a distinct cause of action.  A leading legal treatise, Prosser on Torts, 3rd Ed., Ch. 23, Misuse of Legal Procedure, section 115, page 877, explained that: “Thus if the defendant prosecutes an innocent plaintiff for a crime without reasonable grounds to believe him guilty, it is malicious prosecution; if he prosecutes him with such grounds to extort payment of a debt, it is abuse of process.”  The Miami business litigation attorneys of the Mavrick Law Firm represent 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 the years since the Cline appellate decision, Florida jurisprudence further developed what is required to establish an abuse of process.  Bothmann v. Harrington, 458 So.2d 1163 (Fla. 3d DCA 1984), explained that abuse of process  requires “a use of the process for an immediate purpose other than that for which it is designed…’Legal malice’ is presumed to exist if the plaintiff establishes that the process has been used for an improper purpose.”   However, “[t]here is no abuse of process, however, when the process is used to accomplish the result for which it was created, regardless of an incidental or concurrent motive of spite or ulterior purpose. In other words, the usual case of abuse of process involves some form of extortion…Even a pure spite motive is not sufficient where process is used only to accomplish its intended purpose.”  Relying on W. Prosser, Handbook of the Law of Torts § 121  (4th ed. 1971), Brothmann added that: “Some definite act or threat not authorized by the process, or aimed at an objective not legitimate in the use of the process, is required; and there is no liability where the defendant has done nothing more than carry out the process to its authorized conclusion, even though with bad intentions.  The improper purpose usually takes the form of coercion to obtain a collateral advantage, not properly involved in the proceeding itself, such as the surrender of property or the payment of money, by the use of process as a threat or club.  There is, in other words, a form of extortion, and it is what is done in the course of negotiation, rather than the issuance or any formal use of the process, itself, which constitutes the tort.”  Express or implied extortion sometimes occurs in, inter alia, employment and commercial litigation.

Although the tort of abuse of process often is tied to a form of extortion, it is not an element of the claim.  Florida’s Fourth District Court of Appeal, in Della-Donna v. Nova University, Inc., 512 So.2d 1051 (Fla. 4th DCA 1987), explained in pertinent part that: “For a plaintiff to establish a cause of action for abuse of process, it must be proved that the defendant made illegal, improper, or perverted use of process; that the defendant had ulterior motives or purposes in exercising such illegal, improper, or perverted use of process; and that as a result of such action on the part of the defendant, the plaintiff suffered damage…[T]he tort of abuse of process is concerned with the improper use of process after it issues.”

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Developments regarding the Federal Trade Commission’s (FTC) prohibition of non-compete agreements continue. Recently, a court in the Eastern District of Pennsylvania denied a motion for preliminary injunction to prevent enforcement of the ban in ATS Tree Services, LLC v. FTC, Case No. 2:24-CV-01743, 2024 WL 3511630 (E.D. Pa., July 23, 2024). This decision conflicts with Ryan LLC v. FTC, Case No. 3:24-CV-00986 (N.D. Tex., July 3, 2024), wherein the court granted a preliminary injunction preventing enforcement of the ban. Peter Mavrick is a Fort Lauderdale business litigation attorney.  Peter Mavrick is a Fort Lauderdale business litigation attorney.  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 denying the motion for preliminary injunction, the court in ATS Tree Services, LLC found that the plaintiff did not establish irreparable harm or the likelihood of success on the merits. 2024 WL 3511630. The plaintiff argued, among other things, that the FTC rule would cause it to suffer irreparable harm because the plaintiff’s employees could immediately leave employment to work for a competitor thereby depriving the plaintiff of the benefits of the training it provided its employees. The plaintiff also claimed it would be irreparably harmed because there was a risk its employees would expose the employer’s confidential information to a competitor once they left the company. However, the court rejected both arguments. The argument regarding deprivation of training benefits was rejected because it was too speculative. The plaintiff did not provide any evidence that its employees would actually leave to work for a competitor. The argument regarding disclosure of confidential information was rejected because The FTC’s non-compete ban does not apply to non-disclosure agreements.

The court also denied the plaintiff’s request for an injunction prohibiting enforcement of the ban against non-compete agreements.  The court determined that the plaintiff was not likely to succeed on the merits. The court determined the FTC had authority to engage in substantive rulemaking or its authority was not limited to procedural rulemaking. 2024 WL 3511630. The court analyzed the language of Section 6 of the FTC Act, which allows the FTC to “make rules and regulations for the purpose of carrying out the provisions of this chapter.” 15 U.S.C. § 46. The ATS court stated Section 6 does not explicitly limit the FTC’s rulemaking authority to only procedural rulemaking. In addition, the court analyzed Section 5 of the FTC Act, which allows the FTC to “prevent persons, partnerships, or corporations . . . from using unfair methods of competition . . . .” 15 U.S.C. § 45. Use of the word “prevent” inherently contemplates substantive rulemaking. 2024 WL 3511630. This holding contradicts the reasoning in Ryan LLC, which determined the FTC did not have substantive rulemaking authority. Ryan LLC, 2024 WL 3297524. Ryan LLC characterized Section 6 as a “housekeeping” statute.

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If you are in a business dispute involving several persons acting in concert with one another, you could have a claim for civil conspiracy. The “gist of a civil conspiracy [claim] is not the conspiracy itself, but the underlying civil wrong” that is the focus or purpose of the conspiracy. Tejera v. Lincoln Lending Servs., LLC, 271 So. 3d 97 (Fla. 3d DCA). Therefore, civil conspiracy claim can be an effective tool to bring a civil action against every bad actor in a business dispute. 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.

The elements for a civil conspiracy claim are (1) a conspiracy between two or more parties; (2) to do an unlawful act or a lawful act through unlawful means; (3) the doing of some overt act in furtherance of the conspiracy; and (4) damage to the plaintiff resulting from the conspiracy. Walters v. Blankenship, 931 So. 2d 137 (Fla. 5th DCA 2006). The wrongful act giving rise to a civil conspiracy claim usually must be a tort. Rushing v. Bosse, 652 So. 2d 869 (Fla. 4th DCA 1995).

There are various examples of business disputes which could give rise to civil conspiracy claims. One example could involve a breach of fiduciary duty claim against a former executive who was assisted by others in breaching his or her fiduciary duty. Accord Blatt v. Green, Rose, Kahn & Piotrkowski, 456 So. 2d 949 (Fla. 3d DCA 1984) (allowing a claim of civil conspiracy against a law firm and its lawyer based on breach of fiduciary duty imposed for Florida probate code). The co-conspirators do not need to owe fiduciary duties to the former employer because they only need to have assisted one person who did owe those fiduciary duties in breaching them. See Logan v. Morgan, Lewis, & Bockius LLP, 350 So. 3d 404 (Fla. 2d DCA 2022) (allowing a civil conspiracy claim against law firm for aiding law firm’s client, an accounting firm, to breach the client’s fiduciary duty). Another example of a claim for civil conspiracy in a business dispute could involve tortious interference with a contract or business relationship. See Am. Diversified Ins. Servs., Inc. v. Union Fidelity Life Ins. Co., 439 So. 2d 904 (Fla. 2d DCA 1983) (holding that complaint stated cause of action for civil conspiracy based on tortiously interfering with company’s business relationships). The conspirers do not need to have interfered with the contract or business relationship directly because they need only help the main tortfeasor interfere.

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In a derivative shareholder action where corporate waste is alleged, it might be prudent to ask the court to appoint a receiver to take control of the corporation. Tampa Waterworks Co. v. Wood, 121 So. 789 (Fla. 1929) (holding that a shareholder can request a court of equity to appoint a receiver to manage the affairs of a corporation). A “receiver” is a neutral person appointed by a court to protect and preserve property during litigation. See Knickerbocker Trust Co. v. Green Bay Phosphate Co., 56 So. 699 (Fla. 1911). A court exercises its powers to appoint a receiver with great circumspection. “A receiver may be appointed to wind up affairs of a corporation or manage and operate its business when actual fraud, or mismanagement amounting to fraud upon the right of a minority stockholder or creditor which [may] reasonably portend imminent danger of loss of corporate assets and seriously threaten corporate existence, is clearly established.” McAllister Hotel v. Schatzberg, 40 So. 2d 201 (Fla. 1929).  Peter Mavrick is a Fort Lauderdale business litigation attorney.  Peter Mavrick is a Fort Lauderdale business litigation attorney.  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.

The authority of a receiver is determined by the court. The court should allocate the receiver’s authority by describing the authority parameters in its order appointing the receiver. However, the trial court cannot provide the receiver overly broad authority to act on behalf of the corporation. See MB Plaza, LLC v. Wells Fargo Bank, Nat’l Ass’n, 72 So. 3d 205 (Fla. 2d DCA 2011) (stating that trial court granted too broad of authority to receiver, including authority to market and sell commercial property in foreclosure proceeding). A court should limit a receiver’s authority to the necessary issue at hand.

It is not uncommon for a court to confer the receiver with authority to manage the affairs of the corporation. The receiver can therefore market and sell the corporation’s property under certain circumstances. While “[a] sale by a receiver is ordinarily improper, . . . there are instances in which a sale by a receiver is expedient and proper.” Fugazy Travel Bureau, Inc. v. State by Dickinson, 188 So. 2d 842 (Fla. 4th DCA 1966). Sales commenced by a receiver are permitted when “the character of the property or the surrounding circumstances are such as to render a sale necessary for the adequate protection of the rights of the parties.” A sale should be closely watched by the court, and will only be approved if the sale is for at least the reasonable value of the property. For example, in Bailey v. Treasure, 462 So. 2d 537 (Fla. 4th DCA 1985), the court refused to approve of the sale of orange groves where the receiver did not present evidence of the reasonableness of the price.

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Florida law provides a mechanism to forcibly dissolve corporations if that corporation is paralyzed by internal disputes between shareholders or board members. The mechanism can provide some frustrated shareholders an option to rid themselves of the asset and move on. 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.

The relevant Florida statute regarding court-ordered corporate dissolutions is section 607.1430, Florida Statutes. The statute enables a court to order dissolution in several circumstances. When shareholder bring a corporate dissolution lawsuit, the court can order dissolution in the following circumstances:

  • When the directors are deadlocked in the management of the corporate affairs, the shareholders are unable to break the deadlock, and (1) irreparable injury to the corporation is threatened or being suffered, (2) the business and affairs of the corporation can no longer be conducted to the advantage of the shareholders generally because of the deadlock, or (3) both.
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The Federal Trade Commission (FTC) controversially issued a final rule banning most non-compete agreements. This rule severely impedes the ability of businesses to protect their legitimate business interests such as customer relationships, goodwill, confidential business information, and trade secrets. However, the FTC’s rule is facing legal challenges from different directions. Last week we wrote about a direct legal challenge and the Northern District of Texas’ injunction prohibiting enforcement of the rule. Ryan LLC v. FTC, Case No. 3:24-CV-00986-E, 2024 WL 3297524 (N.D. Tex., July 3, 2024). This week we examine a potential future indirect challenge to the FTC’s rule based on the Supreme Court Loper Bright Enterprises v. Raimondo, __ S. Ct. __, 2024 WL 3208360 (2024) decision eliminating Chevron deference. As discussed more fully below, Loper Bright effectively removed a tool the FTC could have used to enforce its non-compete ban. Peter Mavrick is a Fort Lauderdale business litigation attorney.  Peter Mavrick is a Fort Lauderdale business litigation attorney.  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.

The Supreme Court established the legal doctrine known as Chevron deference in the case Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Chevron deference required court to be highly deferential to agency regulations. It established a two-step process a court must employ when determining whether to rely on an agency regulation. First, the court must determine “whether Congress has spoken to the precise question at issue.” This is done by reviewing the clarity of the relevant statute at issue. Second, if “the statute is silent or ambiguous with respect to the specific issue”, then the court must defer to an agency regulation when it “is based on a permissible construction of the statute.” This holding shifts power away from the executive branch of government and the agencies associated therewith in favor of the judicial branch of government.

In practice, Chevron essentially determined that agency regulations are binding precedent. In fact, courts have used Chevron as the foundation to enforce FTC regulations. See Mattox v. FTC, 752 F.2d 116 (5th Cir. 1985) (finding that FTC regulations regarding Hart-Scott-Rodino Act entitled to Chevron deference); Nat’l Automobile Dealers Ass’n v. FTC, 864 F. Supp. 2d 65 (D.D.C., May 22, 2012) (holding that FTC regulation regarding Fair Credit Reporting Act was entitled to Chevron deference). Therefore, FTC could have attempted to rely on Chevron to enforce its non-compete ban before Loper Bright.

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