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Articles Posted in Non-Compete Law

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Any competition by a former employee may injure the business of the former employer. However, the former employer cannot restrain ordinary competition. To be entitled to protection, the former employer must show special facts over and above ordinary competition which show that the former employee would have an unfair advantage without the non-compete agreement. Peter Mavrick is a Miami non-compete lawyer who has extensive experience with non-competition covenant litigation and claims for injunctive relief.

In Passalacqua v. Naviant, Inc., 844 So.2d 792 (Fla. 4th DCA 2003), Naviant, Inc. (“Naviant”) provided “opt-in email marketing services” that claimed its success due to its “unique” high volume marketing methods and techniques. Nicholas Passalacqua (“Passalacqua”) and Matt Sechter (“Sechter”) were hired by Naviant. Passalacqua and Sechter knew each other from their prior work as “cold callers”, i.e. making unsolicited sales calls, selling securities. Naviant required Passalacqua and Sechter to sign an agreement with non-compete and non-disclosure provisions (the “Agreement”).

After working for Naviant for three weeks, Passalacqua resigned to start his own business in the opt-in e-mail marketing industry. Passalacqua joined another person to form E–Mail Analytics, Inc. (“E–Mail Analytics”), which also provided opt-in e-mail services. Shortly thereafter, Sechter resigned from Naviant. Sechter joined E–Mail Analytics and bought Passalacqua’s ownership interest. Passalacqua continued to work for E-Mail Analytics.

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When disputes arise over which version of a non-compete agreement was the final version executed by and binding on the parties, discovery of pre-contract negotiations may become necessary. Parties often retain an attorney for those negotiations. If the attorney involved in the negotiations becomes a witness to the case, attorney-client communications may need to be disclosed to the court.  However, the attorney-client privilege may still be maintained if vigorously protected. Peter Mavrick has substantial experience with non-compete litigation throughout the State of Florida.

In Courville v. Promedco of Southwest Florida, Inc., 743 So.2d 41 (Fla. 2d DCA 1999), Promedco of Southwest Florida, Inc. (“Promedco”) bought the assets of Naples Medical Center, P.A. from Gary C. Courville and William R. Cook (collectively the “Physicians”). Promedco sued the Physicians and alleged that they violated a non-compete agreement contained in one of the documents related to the sale, a split-dollar agreement. Physicians denied executing the version of the non-compete agreement produced by Promedco. Physicians contended that the documents they signed did not have a non-compete agreement that went into effect immediately after the closing, but rather it would go into effect five years later. Physicians filed an affidavit of the attorney who advised them in the transaction to support their claim that the document produced by Promedco was fraudulent.

The attorney’s affidavit stated: (1) the circumstances of the attorney’s retention by the Physicians to advise them concerning the documents for sale of the medical center, (2) that the split-dollar agreement did not contain the same non-compete clause as the one produced by Promedco, and (3) the substance of the negotiations with the medical center’s attorney wherein the final draft of the agreement included a non-compete clause that would not go into effect until five years after the agreement was executed. The attorney’s affidavit also stated that that the Physicians signed the documents on his advice that the subject non-compete would not go into effect until five years after the closing.

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Non-compete provisions in employment contracts are not prohibited so long as such contracts are reasonable in time, area, and line of business. In any action concerning enforcement of a non-compete provision the court considers the terms of the contract as agreed to by the parties. If the non-compete period has expired, a court may not extend the period unless there is an equitable reason to do so. Peter Mavrick has substantial experience with non-compete litigation throughout the State of Florida.

In Vela v. Kendall, 905 So.2d 1033 (Fla. 5th DCA 2005), Quality Assurance Home Delivery (“Quality”), operated a delivery service for various retail stores. Quality entered into an agreement Charles Robert Vela (“Vela”) wherein Vela agreed to provide delivery services for Quality’s delivery clients as an independent contractor. The agreement contained a non-compete provision which restricted Vela from making deliveries for Quality’s clients “for a period of no less than two years from the date of termination.”

On May 1, 2001, Vela was terminated. Five months after termination, Quality demanded in writing that Vela stop delivery services in violation of the non-compete provision of the agreement. Quality later filed a lawsuit against Vera and sought damages and injunctive relief, including temporary injunctive relief. A non-jury trial was conducted, and the trial court entered judgment in favor of Quality. The judgment awarded damages for violation of the non-compete provision in the employment contract and an injunction against Vera. Vera immediately appealed.

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It has long been recognized that before injunctive relief can be granted a movant must show irreparable injury. Langford v. Rotech Oxygen & Medical Equipment, Inc., 541 So.2d 1267 (Fla. 5th DCA 1989). Many non-compete contracts will contain a provision that stipulates that a violation of the restrictive covenant not to compete would create an irreparable injury. Courts may not find that a stipulation or waiver of this burden of proof is sufficient to justify the entry of an injunction. Peter Mavrick is an experienced business litigation attorney who has substantial experience with non-compete agreements and cases seeking entry of an injunction.

 In Spencer Pest Control Co. of Fla., Inc. v. Smith, 637 So.2d 292 (Fla. 5th DCA 1994), Spencer Pest Control Company (“Spencer”) sued for a temporary and permanent injunction to restrain Lewis E. Smith (“Smith”), its former manager, from violating a noncompete agreement when Smith resigned and accepted employment as a pest control technician with a competing company.

Spencer was in the business of termite control and lawn care. Smith was hired by Spencer, with no prior experience in pest control. Spencer fully trained Smith and promoted him to manager of the Sanford location. Smith was responsible for every aspect of Spencer’s business in Sanford, including its customer base. During his employment with Spencer, Smith executed an employment agreement containing a covenant not to compete which stated, among other things, that in the event of a breach, or threatened breach, of the provisions of the agreement by either party, the non-breaching party would be entitled to an injunction, without bond, to restrain the breaching party from continuing the improper conduct.

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A party seeking a temporary injunction to enforce a non-compete agreement must establish four elements: (1) a likelihood of irreparable harm and the unavailability of an adequate remedy at law; (2) a substantial likelihood of success on the merits; (3) the threatened injury to the petitioner outweighs any possible harm to the respondent, and (4) the granting of a temporary injunction will not disserve the public interest. Avisena, Inc. v. Santalo, 65 So. 3d 14, (Fla. 3d DCA 2011).  The party seeking the injunction has the burden of persuasion of these four elements. Peter Mavrick is a Miami non-compete lawyer who has extensive experience representing clients in non-compete litigation, including cases seeking injunctions.

In Avisena, Inc. v. Santalo, 65 So. 3d 14, (Fla. 3d DCA 2011), Avisena, Inc., (“Avisena”), i.e., the former employer, sued Alberto C. Santalo (“Santalo”), its founder and former president and chief executive officer, along with his new company CareCloud Corporation (“CareCloud”) for alleged violation of a non-compete agreement.  Santalo had previously signed an employment agreement containing non-compete covenant that prohibited competition with his former employer. Santalo’s non-compete period was conditional because it depended on whether he voluntarily quit or instead whether he was terminated and what was the basis for the employment termination.

The employment agreement articulated three reasons that Santalo’s employment may be terminated either by the Avisena or by Santalo. Subsection 5.5 of the employment agreement described termination by Avisena without cause. This subsection stated that Santalo may be terminated by Avisena for any reason or for no reason. Subsection 8.9 of the employment agreement provided varying lengths of non-compete periods depending on which of the three subsections of Section 5 applied. Subsection 8.9 provided that if Santalo were terminated without cause, then the non-compete period would be the twelve-month period following Santalo’s termination from Avisena.

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Florida’s Non-Competition Covenant Statute, § 542.335, permits agreements that restrain competition so long as the agreement meets certain statutory requirements.  One of the statutory requirements is that the party seeking to enforce the non-compete agreement must “plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.” § 542.335(1)(b), Florida Statutes.  One example of a legitimate business interest that could justify a restrictive covenant, is “extraordinary or specialized training.” A restrictive covenant can bar a former employee’s advertising that extraordinary or specialized training; however, it does not necessarily bar the former employee from listing that training as biographical information. Peter Mavrick is a non-compete lawyer who frequently handles cases where enforcement of a non-compete agreement depends on whether there was “extraordinary” or “specialized” training.

A recent judicial decision issued in the First District Court of Appeal of the State of Florida demonstrates an instance where providing biological information listing that specialized training did not constitute a violation of a non-compete agreement. In Tarantola v. Henghold, 254 So.3d 1110 (Fla. 1st DCA 2018), Dr. Christina Tarantola (“Tarantola”), a dermatologist, entered into a non-compete agreement as part of her employment with the Henghold Practice (“Henghold”). The non-compete agreement restricted Tarantola’s performance of Mohs surgery within a specified geographical area for a two-year period after the termination of her employment. Dr. Tarantola resigned from Henghold in March 2015. Henghold filed a lawsuit alleging that Tarantola breached the non-compete agreement. Henghold also obtained a temporary injunction against Tarantola.

The two-year non-compete period required by the injunction was tolled from October 2015 through September 2016, because Tarantola violated the agreement by performing Mohs surgery in the restricted area. More than three years from the date of Tarantola’s resignation, Tarantola moved to terminate the temporary injunction because even with the “tolling period” extension, the two-year non-compete period had ended. Henghold opposed the motion contending that the non-compete period should be extended another five months, because of an additional violation resulting from improper advertising through Tarantola’s website that was in existence since May 2015.  Tarantola’s website provided biographical information including that she was “Mohs surgery and fellowship trained.”  The trial court determined the website constituted “advertising or marketing activity” of a restricted activity prohibited by the non-compete agreement and extended the injunction 134 days from the date of the order denying Dr. Tarantola’s motion.

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Many employers possess confidential information vital to generating profits. Employers routinely entrust employees with this information to facilitate business operations, but employees often leave their job after a few years to work for a competitor. When this happens, the employee takes the confidential information he or she learned to the next job. The employee might disclose this information to the new employer, and thereby detrimentally affect the former employer’s business. As a result, some employers competing in the same space have joined forces to combat disclosure of their confidential information by agreeing not to solicit each other’s employees, thereby ensuring the employees will remain at the same company. However, these agreements would likely constitute an unlawful restraint on trade under federal law it and may result in significant civil and criminal liability. The Mavrick Law Firm has extensive experience with non-compete agreements and related litigation.

Under the Sherman Act’s prohibition against anti-competitive behavior, an employer cannot lawfully stymie competition by entering agreements with other employers to hinder their employees’ ability to compete in the labor market. Congress declared every contract, trust, or conspiracy restraining trade or commerce illegal. 15 U.S.C. § 1 (“Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States….”). The Sherman Act therefore prevents anti-competitive behavior and courts interpret this statute to prohibit competitors from agreeing not to solicit each other’s customers or fix prices. Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993) (“The law directs itself… against conduct which unfairly tends to destroy competition itself.”); United States v. Topco Associates, Inc., 405 U.S. 596, 608 (1972) (“We think that it is clear that the restraint in this case is a horizontal one, and, therefore, a per se violation of § 1.”); Texaco Inc. v. Dagher, 547 U.S. 1, 5 (2006) (“Price-fixing agreements between two or more competitors… are per se unlawful.”). The Department of Justice has used the Sherman Act to sue several employers who agreed to refrain from competing for each other’s employees.  In one such case, the Department of Justice contended in court filings that the employers “fix[ed] and suppress[ed] employee compensation and to restrict[ed] employee mobility.” In re High–Tech Employee Litig., 856 F. Supp. 2d 1103, 1108-10 (N.D. Cal. 2012). The case settled but opened the door for employees to assert similar private causes of action. For example, in Nitsch v. DreamWorks Animation SKG Inc., an employee sued DreamWorks Animation SKG Inc., The Walt Disney Company, Lucasfilm Ltd., and others claiming they agreed to refrain from actively soliciting each other’s employees and set employee compensation ranges. Nitsch v. DreamWorks Animation SKG Inc., 100 F. Supp. 3d 851, 853 (N.D. Cal. 2015). Although the Nitsch lawsuit was resolved through arbitration, the case is problematic for employers because it sets a precedent for employees who fall within agreements between two or more employers to sue. These lawsuits could negatively affect businesses and business owners because liabilities associated with the Sherman Act can be severe. For instance, an individual can be fined up to one million dollars or imprisoned for up to ten years and a business can be fined up to one-hundred thousand dollars. 15 U.S.C. § 1. In addition, significant class action liability could arise. In re High–Tech Employee Litig., 2011-2509, ECF 1032 (granting class certification). Employers should therefore consider these risks before agreeing with another employer to inhibit employees from participating in the labor market.

Employers may avoid liability under the Sherman Act by entering bilateral employment contracts with employees that prohibit employees from disclosing confidential information. Florida law allows non-disclosure provisions within employment contracts.  Courts must enforce these provisions if they are in a signed writing; protect a legitimate business interest; and are reasonable in time, area, and line of business. Fla. Stat. § 542.335 (1) (“enforcement of contracts that restrict or prohibit competition during or after the term of restrictive covenants, so long as such contracts are reasonable in time, area, and line of business, is not prohibited”); Fla. Stat. § 542.335 (1)(a)-(b) (“A court shall not enforce a restrictive covenant unless it is set forth in a writing signed by the person against whom enforcement is sought… and the person seeking enforcement of a restrictive covenant [must] plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant”). These non-disclosure employment agreements are less likely to violate the Sherman Act because they are generally considered reasonable. Alders v. Afa Corp. of Florida, 353 F. Supp. 654, 658 (S.D. Fla. 1973) (finding the employer’s restrictive covenant reasonable). In fact, non-disclosure employment agreements may further the Sherman Act’s goals of creating an efficient marketplace by securing a business’ confidential information. Consultants & Designers, Inc. v. butler Service Group, Inc., 720 F. 2d 1553, 1561 (11 Cir. 1983) (“when a practice tends to reduce competition…, but nevertheless operates to make the market more efficient… then it may still be found, under the rule of reason, to further the Sherman Act’s goals in aiding competition.”). An employer employee non-disclosure agreement therefore reduces legal exposure and is more likely to be enforced.

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It is well settled in Florida law that “an employee does not violate his duty of loyalty when he merely organizes a corporation during his employment to carry on a rival business after the expiration of his employment.” Fish v. Adams, 401 So.2d 843 (Fla. 5th DCA 1981). Absent a non-compete agreement, a former employee is free to compete against the former employer.  However, an employee who intends to leave his employment to work for a competing company or to start a competing company must avoid direct and unjustified interference with his/her employer’s business relationships. Peter Mavrick is a non-compete, employment, and business litigation lawyer who has extensive experience with defending against tortious interference lawsuits involving claims of unlawful and unfair competition.

In Harllee v. Prof’l Serv. Indus., Inc., 619 So. 2d 298, 300 (Fla. 3d DCA 1992), Professional Services Industries, Inc. (“PSI”) sued its former employee, John W. Harllee (“Harllee”) and ATEC Associates, Inc. (“ATEC”), a PSI competitor for, inter alia, tortious interference with business relationships and tortious interference with contractual relationships. PSI alleged that Harllee solicited PSI’s customers and employees before Harllee left his employment with PSI. The trial court found that there was no direct evidence that Harllee actively solicited PSI’s customers or his coworkers to work for ATEC.  However, the trial court found that Harllee’s other actions on behalf of ATEC during his employment with PSI, provided evidence of his breach of loyalty to PSI.

The trial found that in May 1987, Harlee contacted ATEC, a PSI competitor who did not have a Florida presence, and agreed to open a Florida office for them.  Harllee began preparations to open the ATEC office while still employed by PSI.  The preparations included opening a Florida bank account, orchestrating the acquisition of office space and telephone listings, and creating a development plan including an organizational chart with the names and salaries of the PSI’s employees that would be necessary to run the new ATEC office. During early June 1987, information leaked out that ATEC was about to open operations in Florida. Several PSI employees gave their resignation notices and left to work for ATEC. The trial court concluded that Harllee’s actions were disloyal and therefore actionable. The trial court entered a judgment against Harllee and ATEC for both counts of tortious interference.  Harllee and ATEC immediately appealed.

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Under Florida law, a restrictive covenant is not enforceable “unless it is set forth in a writing signed by the person against whom enforcement is sought.” Fla. Stat. § 542.335(1)(a).  So, what happens if the written agreement is lost, destroyed or stolen? Generally, the loss or unintentional destruction of a written document does not affect the validity of the transaction of which it is the evidence, or the rights and liabilities of the parties to the instrument. Environmental Services, Inc. v. Carter, 9 So. 3d 1258 (Fla. 5th DCA 2009). Peter Mavrick is a Fort Lauderdale non-compete lawyer who has successfully defended many lawsuits involving non-competition, non-solicitation, and non-disclosure contracts.

In Environmental Services, Inc. v. Carter, Environmental Services, Inc. (“ESI”) sued to enforce a non-solicitation agreement against its former employee, Daniel Lejeune (“Lejeune”). ESI was unable to produce the actual signed agreement or a copy of it. ESI’s witnesses testified that 1) Lejeune was given the non-solicitation agreement to sign as a condition of his employment, and 2) ESI only used one form of the non-solicitation agreement since 2005 (two years prior to Lejeune’s hiring). Lejeune admitted signing a non-solicitation agreement, but he did not recall its terms. The trial court held that it could not determine the precise terms and validity of those terms without an executed copy of the non-solicitation agreement. The trial court declined to enforce the restrictive covenant against Lejeune.  ESI immediately appealed.

The appellate court reversed the trial court’s decision. Environmental Services, Inc. v. Carter held that Florida law does not require the original of a writing in order to admit evidence of its contents.  Parol evidence may be introduced to prove the contents of a contract provided that the proponent provides a satisfactory explanation that the original contract was lost or destroyed. Section 90.954(3), Florida Statutes. The appellate court remanded the case for the trial court to determine if the essential terms of the written agreement could be established through parol evidence, to the satisfaction of the trial court.

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Under Florida law, noncompete agreements signed after July 1996 are governed by Florida Statutes § 542.335.  This statute is the basis for court decisions as to whether any non-competition contract can be enforced in the State of Florida.  Over the years, court decisions have grappled with two related issues: (1) whether a non-compete agreement is “enforceable” and (2) whether and to what extent the non-competition agreement shall be “enforced.”  On first impression, this distinction seems nitpicky and mere wordplay.  However, in the arena of litigation over restrictive covenants and especially in the employment context, this distinction has been important in some cases.  Peter Mavrick is a Fort Lauderdale non-compete lawyer who has successfully defended and prosecuted non-compete litigation for businesses and their owners.

This apparently twisted distinction between the enforceability of noncompetition contracts versus enforcement of an already enforceable restrictive covenant arises from a particular section of Florida’s noncompete statute, section 542.335(g)(1), which states that in determining the enforceability of a non-compete agreement a court “[s]hall not consider any individualized economic or other hardship that might be caused to the person against whom enforcement is sought.”  Courts interpret this section in pari materia, i.e., in context, with another section of Florida’s restrictive covenant statute, section 542.335(1)(j).  Once a covenant against competition is determined by a court to be “enforceable,” the statute sets forth certain rules for enforcement in § 542.335(1)(j) and states in pertinent part: “A court shall enforce a restrictive covenant by any appropriate and effective remedy, including but not limited to, temporary and permanent injunctions.  The violation of an enforceable restrictive covenant creates a presumption of irreparable injury to the person seeking enforcement of a restrictive covenant.”

To determine the “appropriate and effective remedy” for enforcement of an enforceable restrictive covenant, courts maybe required, in certain circumstances, to consider individualized harm to the defendant in non-compete litigation.  In Transunion Risk and Alternative Data Solutions, Inc. v. MacLachlan, 625 Fe.Appx. 403 (11th Cir. 2015), the United States Court of Appeals for the Eleventh Circuit overturned a federal District Judge’s decision to grant an injunction against a former employee in a non-compete case.  The appellate court stated that “the district erred when it applied section 542.335(1)(g) in determining whether a preliminary injunction was an appropriate and effective remedy for the enforceable restrictive covenant [and] … failed to consider any harm that MacLachlan would suffer if the injunction was issued.”  Transunion explained the rationale for its interpretation that § 542.335(1)(g) is directed to “enforceability,” and not “enforcement,” of the restrictive covenant:

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