Florida Business Litigation Lawyer Blog

Published on: January 22, 2024

MIAMI BUSINESS LITIGATION: FEDERAL TRADE COMMISSION AND NON-COMPETE AGREEMENTS

Nationwide, the body of law regulating non-compete agreements (including non-solicitation covenants, non-circumvention covenants, covenants barring poaching of employees) has been mainly regulated by state statutes as well as court decisions in state and federal courts. Federal law has generally stayed out of the regulation of restrictive covenants. About a year ago, the Federal Trade Commission (FTC), a federal agency regulating commerce and competition law, issued a proposed rule that would ban most non-compete agreements as unfair competition. If promulgated, such a rule would have a significant impact on many businesses and their employees. At this point, the proposed rule is not the law and awaits a final decision. The wording of the proposed draft of the rule is as follows: “It is an unfair method of competition for an employer to enter into or attempt to enter into a non-compete clause with a worker; maintain with a worker a non-compete clause; or represent to a worker that the worker is subject to a non-compete clause where the employer has no good faith basis to believe that the worker is subject to an enforceable non-compete clause. To comply with paragraph (a) of this section,… an employer that entered into a non-compete clause with a worker prior to the compliance date must rescind the non-compete clause no later than the compliance date. Proposed CFR § 910.2. The FTC accepted comment concerning the proposed rule through April 2023, and is expected to make a final decision about the proposed rule sometime in April 2024. 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 effects of the FTC’s proposed rule are probably far reaching based on the FTC’s definition of “noncompete clause.” The FTC defines a noncomplete clause to mean “a contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer.” Proposed CFR § 910.1. This definition includes de facto clauses prohibiting workers from obtaining employment or operating a business after the conclusion of the worker’s employment with an employer. Id. One example of a de facto clause is an overly broad non-disclosure agreement that precludes a former employee from working in the same field as the former employer.

The FTC similarly defined worker broadly. Worker encompasses any natural person who works for an employer. Id. It does not matter whether the worker was paid or unpaid. Id. It does not matter whether the worker was classified as an employee or independent contractor. Id. Any worker qualifies under the proposed rule. Therefore, most, if not all, employment related relationships will fall within the ambit of “worker” for purposes of the proposed rule.

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Published on: January 17, 2024

FORT LAUDERDALE BUSINESS LITIGATION: EVIDENCE REQUIRED TO ESTABLISH TORTIOUS INTERFERENCE

By Mavrick Law Firm

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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Published on: January 11, 2024

FORT LAUDERDALE BUSINESS LITIGATION: DAMAGES UNDER THE FLORIDA DECEPTIVE AND UNFAIR TRADE PRACTICES ACT

By Mavrick Law Firm

Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA) can be a powerful statute because plaintiffs can bring a wide variety of claims due to the expansive nature of what constitutes an unfair method of competition. FDUTPA prohibits “[u]nfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce.” Fla. Stat. § 501.204. A plaintiff needs to allege only that a defendant committed a deceptive act or unfair practice, causation, and actual damages to state a FDUTPA claim. Baptist Hosp., Inc. v. Baker, 84 So. 3d 1200 (Fla. 1st DCA 2012) (providing the elements of a FDUTPA claim). Precedent from the Supreme Court of Florida, in PNR, Inc. v. Beacon Prop. Mgmt, Inc., 842 So.2d 773 (Fla. 2003), expansively defined “unfair practice” to mean an act “that offends established public policy and one that is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” The amorphous nature of “unethical, oppressive, and unscrupulous acts” seemingly provides plaintiffs an almost endless opportunity to assert FDUPTA claims. 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.

FDUTPA can provide plaintiffs with an opportunity to assert unique fact patterns that give rise to a cognizable cause of action. However, a plaintiff asserting a FDUPTA claim must think carefully about its claimed damages to avoid early dismissal.

Claiming actual damages can be a limiting factor to recovering under FDUTPA, despite the expansive definition of “unfair practices.” For example, the plaintiff must prove that a consumer suffered damages based on the definition of unfair practices. Caribbean Cruise Line, Inc. v. Better Bus. Bureau of Palm Beach Cnty., Inc., 169 So. 3d 164 (Fla. 4th DCA 2015). As just stated, the PNR decision defines “unfair practices” to mean acts that are substantially injurious to consumers. This requirement can be problematic if the plaintiff did not directly suffer the injury or engage in a consumer transaction. See Stewart Agency, Inc. v. Arrigo Enterprises, Inc., 266 So. 3d 207 (Fla. 4th DCA 2019) (granting summary judgment because the plaintiff “could not identify any transaction where [the defendant] sold a vehicle with a Takata recall notice without disclosing that information to the consumer”); Leon v. Tapas & Tintos, Inc., 51 F. Supp. 3d 1290 (S.D. Fla. 2014) (dismissing the plaintiff’s complaint for lack of standing because he did not engage in a consumer transaction, i.e. the purchase of goods or services); see also Fla. Stat. § 501.203 (defining consumer to mean “an individual; child,…; business; firm; association; joint venture…”).

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Published on: January 6, 2024

MIAMI BUSINESS LITIGATION: PHYSICIAN NON-COMPETE AGREEMENTS

By Mavrick Law Firm

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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Published on: January 5, 2024

FORT LAUDERDALE BUSINESS LITIGATION: DISCOVERY OF TRADE SECRETS IN LITIGATION

By Mavrick Law Firm

A trade secret plaintiff may have to divulge its claimed trade secret with reasonable particularity to the defendant before engaging in discovery because a growing number of courts require trade secret plaintiffs to do so. This rule places the plaintiff in a “Catch-22.” See DeRubeis v. Witten Techs., Inc., 244 F.R.D. 676 (N.D. Ga. 2007) (acknowledging that the plaintiff may be placed in a “Catch-22”, but nonetheless requiring the plaintiff to disclose its trade secrets with reasonable particularity). If the plaintiff limits disclosure to the portion of the trade secret it believes the defendant misappropriated and later discovers the defendant misappropriated the entire trade secret, the plaintiff may be precluded from fully recovering for the defendant’s misappropriation. Conversely, if the plaintiff discloses its entire trade secret and later discovers the defendant only misappropriated limited portions thereof, the plaintiff will have voluntarily disclosed its entire secret unnecessarily to an adverse party. Both situations are problematic. 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.

Parties are normally free to engage in discovery once the complaint is served or after conducting a preliminary discovery conference. See, e.g., Fla. R. Civ. P. 1.280 (e) (The “fact that a party is conducting discovery,… shall not delay any other party’s discovery.”); Fed. R. Civ. P. 26(a)(1)(C) (“A party must make the initial disclosures at or within 14 days after the parties’ Rule 26(f) conference….”). This is generally true even when the defendant moves to stay discovery due to a pending motion to dismiss the complaint. See Montoya v. PNC Bank, N.A., 14-20474-CIV, 2014 WL 2807617 (S.D. Fla. June 20, 2014) (“[D]iscovery stay motions are generally denied except where a specific showing of prejudice or burdensomeness is made or where a statute dictates that a stay is appropriate or mandatory.”). However, a growing number of courts throughout the United States require trade secret plaintiffs to disclose their trade secrets with reasonable particularity before discovery commences to prevent meritless claims. See, e.g., Kalencom Corp. v. Shulman, 2018 WL 1806037 (E.D. La. Apr. 17, 2018) (“[C]ourts routinely require ‘pre-discovery identification’ of [a plaintiff’s] trade secrets to discourage meritless trade secrets claims and abusive discovery into the trade secrets of a competitor.”). This rule is gaining consensus throughout many jurisdictions. See StoneEagle Servs., Inc. v. Valentine, 2013 WL 9554563 (N.D. Tex. June 5, 2013) (citing several cases) (The “growing consensus seems to be in favor of requiring” the plaintiffs “to identify, with reasonable particularity, the alleged trade secrets at issue.”).

Uniformity on the issue does not exist. In Florida for example, state courts tend to agree with the modern trend. See AAR Mfg., Inc. v. Matrix Composites, Inc., 98 So. 3d 186 (Fla. 5th DCA 2012) (A “plaintiff is required to identify with reasonable particularity the trade secrets at issue before proceeding with discovery.”). But Florida federal courts take a different approach. A Florida federal trade secret plaintiff is only required to (1) plausibly show a trade secret was involved and (2) notify the defendant about the material constituting the trade secret at issue. DynCorp Int’l v. AAR Airlift Group, Inc., 664 Fed. Appx. 844 (11th Cir. 2016) (At “the dismissal stage in federal court, the plaintiff need only allege sufficient facts to plausibly show a trade secret was involved and to give the defendant notice of the material it claims constituted a trade secret.”). Therefore, courts within the same state can take different positions on this issue.

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Published on: December 31, 2023

MIAMI BUSINESS LITIGATION: VACATING AN ARBITRATION AWARD

By Mavrick Law Firm

Arbitration is a voluntary process to resolve disputes and is favored by the courts. The Federal Arbitration Act (commonly referred to as the “FAA”) sets forth the requirements for arbitration and rules for judicial review and confirmation of an arbitration decision. Judicial review of commercial arbitration awards is narrowly limited under the FAA. The United States Court of Appeals for the Eleventh Circuit, in Davis v. Prudential Securities, Inc., 59 F.3d 1186 (11th Cir. 1995), explained that the FAA presumes the confirmation of arbitration awards. Earlier precedent from the Eleventh Circuit in Robbins v. Day, 954F.2d 682 (11th Cir. 1992), explained that federal courts should defer to an arbitrator’s decision whenever possible. Under the FAA, 9 U.S.C. Section 10(a), there are four statutory grounds to vacate (i.e., overturn) an arbitration decision: (1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party may have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, an award upon the subject matter submitted was not made. 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.

In addition to the four statutory grounds for vacatur, federal case law has identified several non-statutory grounds to vacate an arbitration award. For example, Ainsworth v. Skurnick, 960 F.2d 939 (11th Cir. 1992), explained that a federal court may vacate an arbitration award if the award is “arbitrary and capricious.” Delta Air Lines, Inc. v. Air Line Pilots Ass’n, Int’l, 861 F.2d 665 (11th Cir. 1988), determined that a court may vacate an arbitrator’s award when it is contrary to “public policy.” Montes v. v. Shearson Lehmon Brothers, Inc., 128 F.3d 1456 (11th Cir. 1997), held that the court may overturn the arbitration award if it was made in manifest disregard for the law.

Federal courts narrowly construe the “manifest disregard for the law” basis for vacating an arbitration award. The Montes decision explained that this ground for vacating an arbitration award requires clear evidence that the arbitrator was “conscious of the law and deliberately ignore[d] it.” A showing that the arbitrator merely misinterpreted, misstated, or misapplied the law is insufficient. Federal courts rarely determine that arbitration awards warrant vacatur based on the manifest disregard of the law standard set forth in Montes. For example, Univ Commons-Urbana, Ltd. v. Universal Constructors, Inc., 304 F.3d 1331 (11th Cir. 2002), did not overturn the arbitration award based on the arbitrator’s alleged disregard of the law, stating in pertinent part that, “we have no indication of the arbitrators’ reasons for [their award], and thus, we have no reason to believe that they disregarded the law in doing it.” Similarly, Brown v. ITT Consumer Fin. Corp., 211 F.3d 1217 (11th Cir. 2000), determined that even if the arbitrator applied the wrong legal standard, the appellant did not show that “that this alleged error was intentional or that the arbitrator made a conscious decision not to follow the appropriate legal standard.” Scott v. Prudential Securities, Inc., 141 F.3d 1007 (11th Cir. 1998), held that the appellant’s arguments did not “approach the type of disregard for the law that we found in Montes” and the record and briefs showed “nothing more than a disagreement over the application of the law not its manifest disregard.”

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Published on: December 28, 2023

FORT LAUDERDALE BUSINESS LITIGATION: EMPLOYEE THEFT OF TRADE SECRETS

By Mavrick Law Firm

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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Published on: December 17, 2023

MIAMI BUSINESS LITIGATION: ADMISSION OF EXPERT TESTIMONY AT TRIAL

By Mavrick Law Firm

In many business litigation cases, the issue of damages is an important issue at trial. For many cases, the parties will have expert witness on the issue of damages. Precedent from the United States Supreme Court in Daubert v. Merrell Dow Pharmaceuticals, Inc., 113 S.Ct. 2786 (1993), held that the “Frye standard,” i.e., the long dominant legal standard that “expert” testimony must have “general acceptance” in the scientific community or other relevant areas of knowledge, was no longer the legal standard for admitting expert testimony in evidence. The Supreme Court stated in pertinent part: “The merits of the Frye test have been much debated, and scholarship on its proper scope and application is legion. Petitioners’ primary attack, however is not on the content but on the continuing authority of the rule. They contend that the Frye test was superseded by the adoption of the Federal Rules of Evidence. We agree…The drafting history makes no mention of Frye, and a rigid ‘general acceptance’ requirement would be at odds with the ‘liberal thrust’ of the Federal Rules of Evidence…Frye made ‘general acceptance’ the exclusive test for admitting expert scientific testimony. That austere standard, absent from, and incompatible with, the Federal Rules of Evidence, should not be applied in federal trials.” 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 law has codified the Daubert legal standard in the Florida evidence code. Section 90.702, Florida Statutes, allows expert testimony when “scientific, technical, or other specialized knowledge will assist the trier of fact in understanding the evidence or in determining a fact in issue.” Florida’s First District Court of Appeal, in May v. State, 326 So.3d 188 (Fla. 1st DCA 2021), explained that “Florida courts allow expert testimony if it will help the factfinder understand evidence or determine a fact in issue, but only if: ‘(1) The testimony is based upon sufficient facts or data; (2) [t]he testimony is the product of reliable principles and methods; and (3) [t]he witness has applied the principles and methods reliably to the facts of the case.'” In Vitiello v. State, 281 So.2d 554 (Fla. 5th DCA 2019), Florida’s Fifth District Court of Appeal explained that “[v]igorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence…These tools remain the ‘appropriate safeguards,’ and not ‘wholesale exclusion,’ where the basis for expert testimony meets the standards set forth by the rules of evidence.”

Trial judges play the role of an evidentiary “gatekeeper” along with advocacy by legal counsel for the parties. Florida appellate courts are deferential to the decisions of trial judges concerning the admission or rejection of expert testimony. The Supreme Court of Florida, in Salazar v. State, 991 So.2d 365 (Fla. 2008), explained that appellate courts will affirm their decisions “unless no reasonable person would adopt the trial court’s view.” For example, in May v. State, the appellate court affirmed the trial Judge’s decision to exclude an expert witness’ testimony based, in part, on the defendant’s failure to satisfy the “reliable method” prong of the Daubert standard: “Magill did not use a reliable method…Magill created his own method. He applied GAAP and a ‘reasonableness’ test…Yet Magill never explained what this reasonableness test was or why it negated Bryant’s analysis…[T]he trial court repeatedly pressed Magill to clarify his methodology, yet those explanations led to less clarity and more confusion. May cites no authority for Magill’s method, and we have found none either. Plus, if the parties needed accounting training just to understand Magill’s method, it follows that his testimony would not ‘assist the trier of fact in understanding the evidence or in determining a fact in issue’ [under Florida Statutes Section 90.702]…At bottom, we affirm because the trial court correctly performed its gatekeeping function in barring Magill’s testimony.”

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Published on: December 9, 2023

MIAMI BUSINESS LITIGATION: DISCLOSURE OF TRADE SECRETS IN COURT PROCEEDINGS

By Mavrick Law Firm

Florida law has a statutory privilege concerning disclosure of trade secrets in a lawsuit. Florida Statutes Section 90.506 states in pertinent part: “A person has a privilege to refuse to disclose, and to prevent other persons from disclosing, a trade secret owned by that person if the allowance of the privilege will not conceal fraud or otherwise work injustice. When the court directs disclosure, it shall take the protective measures that the interests of the holder of the privilege, the interests of the parties, and the furtherance of justice require. The privilege may be claimed by the person or the person’s agent or employee.” In American Expres Travel Related Svcs., Inc. v. Cruz, 761 So.2d 1206 (Fla. 4th DCA 2000), Florida’s Fourth District Court of Appeal explained that “[w]hen trade secret privilege is asserted as the basis for resisting production, the trial court must determine whether the requested production constitutes a trade secret; if so, the court must require the party seeking production to show reasonable necessity for the requested materials. The burden is on the party resisting discovery to show “good cause” for protecting or limiting discovery by demonstrating that the information sought is a trade secret or confidential business information and that disclosure may be harmful…If production is then ordered, the court must set forth its findings.” 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.

This determination will usually require that the trial court conduct an in camera inspection, i.e., the trial Judge reviews the subject documents to determine whether they contain trade secrets, and sometimes an evidentiary hearing. The issue of in camera review is an important procedural safeguard. A great deal of appellate litigation has occurred when trial courts did not review the allegedly “trade secret” documents before allowing the opposing party to review them. For example, in Salick Health Care, Inc. v. Spunberg, 722 So.2d 944 (Fla. 4th DCA 1998), the appellate court determined that the trial court departed from the essential requirements of law when it compelled production of documents alleged to be proprietary and confidential trade secret information, without first conducting an in camera hearing and inspection and making specific findings of fact concerning the trade secret objections. Trade secret litigation often involves highly technical information in the context of head-to-head competitors, making it essential for the trial court to conduct either in camera review or hold an evidentiary. In Beck v. Dumas, 709 So.2d 501 (Fla. 4th DCA 1998), the appellate court addressed whether certiorari review should lie when a lower court, upon a motion to compel production, required production of a source code, design documentation, and other technical information alleged to be computer trade secrets, without first conducting an in camera inspection or evidentiary hearing. The Beck decision explained: “The question before us is whether the court departed from the essential requirements of law by ordering [Petitioner] to disclose its trade secret without first conducting either an in camera inspection or an evidentiary hearing. We think so, given the sophisticated and highly technical nature of the requested materials. The broad judicial discretion which the trial court enjoys in ruling on discovery matters of this type cannot properly be exercised in a vacuum or on a mere whim. The court needs sufficient insight into the relevant factors which must be weighed before deciding the competing interests of the respective parties. Conceivably, on a matter with which the court is familiar and which is not the subject of a genuine factual dispute, argument of counsel might well suffice. But here the matters were of a highly technical nature, and the court candidly acknowledged its lack of familiarity with the requested materials. Under the circumstances, and given the inherent nature of advocacy, the court needed more than the argument of [Respondent’s]’ counsel that he “needed” the materials upon which to base its decision to override [Petitioner’s] statutory privilege against disclosure.”

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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Published on: December 6, 2023

FORT LAUDERDALE BUSINESS LITIGATION: SALE OF BUSINESS THAT INCLUDES A NON-COMPETE COVENANT

By Mavrick Law Firm

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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