FORT LAUDERDALE BUSINESS LITIGATION: ENFORCING NON-COMPETE AGREEMENTS TO PROTECT TRADE SECRETS

A party’s trade secrets are one of the categories of legitimate business interests protected by Florida’s non-compete statute, Section 542.335. Courts will enforce non-compete agreements to protect a party’s legitimate business interests if the interest qualifies as a trade secret under Florida law. In business litigation arising from a non-compete agreement, a common issue is whether the party enforcing the non-compete has a qualifying trade secret as a legitimate business interest. Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

Under Florida law, a trade secret consists of information that: (1) derives economic value from not being readily ascertainable by others and (2) is the subject of reasonable efforts to maintain its secrecy. Section 688.002(f), Florida Statutes. A business’ information that is generally known or readily accessible to third parties cannot qualify for trade secret protection. Bestechnologies, Inc. v. Trident Envtl. Sys., Inc., 681 So. 2d 1175 (Fla. 2nd DCA 1996). Moreover, an employer may not preclude a former employee from “utilizing contacts and expertise gained during his former employment.” Templeton v. Creative Loafing Tampa, Inc., 552 So. 2d 288 (Fla. 2nd DCA 1989). A plaintiff seeking enforcement of non-compete agreement bears the burden of demonstrating both that the specific information it seeks to protect is secret and that it has taken reasonable steps to protect this secrecy. Am. Red Cross v. Palm Beach Blood Bank, Inc., 143 F.3d 1407 (11th Cir. 1998).

Customer lists may constitute trade secrets that are protected as a legitimate business interest under Florida’s non-compete statute. As such, parties regularly seek to enforce non-compete agreements by claiming their customer lists qualify as trade secrets. In such business litigation actions, courts must decide whether the alleged trade secret information is the result of a party’s great expense and effort. East v. Aqua Gaming, Inc., 805 So. 2d 932 (Fla. 2nd DCA 2001). Information that is commercially available or easily accessible to the public will not typically qualify as a trade secret as a matter of law. However, information that is “distilled” from public information may qualify as a trade secret, depending on the expense and efforts taken by the compiling party. For example, a customer list consisting of names pulled from a public directory may not constitute a trade secret. By contrast, a list of customers based on a public directory that contains the customer’s buying history may be protected under Section 542.335, Florida Statutes. Sethscot Collection, Inc. v. Drbul, 669 So. 2d 1076 (Fla. 3d DCA 1996).

As one example, in Int’l Hair & Beauty Sys., LLC v. Simply Organic, Inc., the United States District Court for the Middle District of Florida granted plaintiff’s motion for preliminary injunction against its former technical director (Mr. Pinto) and his new employer for misappropriation of company trade secrets and to enforce non-compete and non-solicitation agreements. 2011 WL 5360098 (M.D. Fla. Sep. 26, 2011). While employed with plaintiff’s salon, Pinto “had access to contact management lists including clients, customers and potential customers” of plaintiff’s hair salon. Months after his employment with plaintiff ended, Pinto obtained, from another former employee of plaintiff, “a list of hair salons and beauty supply stores” that contained several “salons that were utilizing products of Plaintiff.” The list was subsequently forwarded by Pinto to his new employer and incorporated into their marketing materials. This list included “salon names, personal contacts at the salons, telephone numbers, e-mail addresses, and notes regarding communications with customers,” which were comprised of “information regarding orders and feedback from customers about products they had purchased.”

Moreover, the list also included “customers’ significant contact information, such as full names, cellular phone numbers, addresses, salon name, and personal and work e-mail addresses. He stated that the lists also “contain customers’ order tendencies, such as how often and what they order.” Simply Organic stated “it is clear that the list contains information not readily ascertainable by the general public.” Int’l Hair & Beauty Sys., LLC v. Simply Organic, Inc., 2011 WL 5360098 (M.D. Fla. Sep. 26, 2011). The Court did not address Pinto’s assertion that he did “not know whether the former employee had access to the information even after leaving the company or whether the password and login information had ever been changed.” However, Simply Organic ultimately enforced the non-compete agreement because the customer list information overall qualified as a trade secret.

Peter Mavrick is a Fort Lauderdale business litigation lawyer, and represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.