FORT LAUDERDALE NON-COMPETE AGREEMENTS: TRADE SECRETS AS A LEGITIMATE BUSINESS INTEREST

Preservation of a business’ trade secrets may constitute a legitimate business interest that justifies the enforcement of a non-compete agreement. However, it is vital that a business seeking to enforce the non-compete agreement sufficiently prove the existence of the trade secret. General statements that the business has such valuable information cannot act as a substitute for proof. Peter Mavrick is a Fort Lauderdale non-compete attorney, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, non-compete agreement litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

An example of this occurred in the case of Gould & Lamb, LLC v. D’Alusio, 949 So. 2d 1212 (Fla. 2d DCA 2007). Gould & Lamb, LLC (Gould & Lamb) and John D’Alusio (D’Alusio) executed an employment agreement that contained a non-compete provision that prohibited D’Alusio from working for a competitor for a two-year period after termination of his employment. Gould & Lamb later terminated D’Alusio’s employment because they eliminated his position from the firm. After an intensive negotiation, Gould & Lamb and D’Alusio entered into a severance agreement. The severance agreement did not reference the earlier non-compete agreement, but instead referenced a different agreement that the parties entered. D’Alusio filed a lawsuit against Gould & Lamb, seeking a declaration that the severance agreement superceded the non-compete agreement. Gould & Lamb filed a counterclaim against D’Alusio to enforce the non-compete agreement.

Gould & Lamb requested that the court reform the severance agreement to incorporate the noncompete provisions of the earlier contract. Reformation is a legal doctrine that is applied to correct a defective writing to accurately reflect the true terms agreed to by the parties. Providence Square Assn v. Biancardi, 507 So. 2d 1366 (Fla. 1987). To allege a claim for reformation, a plaintiff must allege that: 1) there was a written agreement, 2) there was a defect in the writing due to mutual mistake, fraud or misrepresentation, and 3) proof by clear and convincing evidence. Providence Square Assn v. Biancardi, supra. The trial court found there was no mistake of fact or inequitable conduct by D’Alusio that would support reformation of the severance agreement. The trial court concluded that the noncompete agreement did not survive.

Gould & Lamb further contended that D’Alusio breached or threatened to breach the non-compete and severance agreements by disclosure of its proprietary secrets. The trial court did not find sufficient evidence to support that contention. On the contrary, the trial court found that Gould & Lamb breached one of the terms of the severance agreement, by failing to timely pay the final installment payment of D’Alusio’s severance agreement. The trial court entered a final judgment in favor of D’Alusio. Gould & Lamb immediately appealed.

On appeal, Gould & Lamb contended that the trial court should have enforced its non-compete agreement, because the company demonstrated the existence of legitimate business interests, including trade secrets as defined in Section 688.002, Florida Statutes. A party seeking to enforce a noncompete clause is required to “plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.” Section 542.335, Florida Statutes. The statute lists five nonexclusive items that qualify as a legitimate business interest, such as valuable confidential business or professional information, substantial relationships with specific customers or clients, and trade secrets. According to Section 688.002 of the Florida Statutes, trade secrets are defined as:

[I]nformation, including a formula, pattern, compilation, program, device, method, technique, or process that:

(a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Gould & Lamb’s counterclaim for injunctive relief alleged that during his employment, D’Alusio was provided access to the company’s proprietary information, including training manuals, customer lists, marketing processes, and production forms, techniques and processes. Gould & Lamb contended that this information constituted trade secrets as defined by the statutes. Gould & Lamb also contended that D’Alusio knew the identities of the firm’s top clients and the percentage of the firm’s income attributable to each client segment, which would permit him to target those clients. The trial court heard the evidence and concluded that Gould & Lamb did not prove the existence of trade secrets or that the non-compete was reasonably necessary to protect the legitimate business interests of Gould & Lamb. The appellate court agreed with the trial court and held that “[g]eneralized statements of concern cannot substitute for proof.”

Peter Mavrick is a Fort Lauderdale non-compete lawyer who also practices in Palm Beach, Boca Raton, and Miami-Dade. This article does not serve as a substitute for legal advice tailored to a particular situation.