MIAMI BUSINESS LITIGATION: PRESUMPTION OF IRREPARABLE INJURY IN NON-COMPETE LAWSUITS

Florida’s non-compete statute states in pertinent part, at Florida Statutes § 542.335(1)(j), that “[t]he violation of an enforceable restrictive covenant creates a presumption of irreparable injury.” There is a divergence, however, in the application of this presumption between Florida state courts and federal courts. Florida state courts routinely apply this presumption when the plaintiff proves violation of restrictive covenant (such as violations of covenants against competition, solicitation of customers, solicitation of employees, etc.). By contrast, federal courts generally take a much different approach. The United States Supreme Court in Amoco Prod. Co. v. Vill. Of Gambell, 480 U.S. 531 (1987), explained that presumptions of irreparable harm are “contrary to traditional [federal] equitable principles.” Peter Mavrick is a Miami business litigation lawyer, and represents clients in business litigation 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 United States Court of Appeals for the Eleventh Circuit, discussed application of this presumption in Vital Pharmaceuticals, Inc. v. Alfieri, 23 F.4th 1282 (11th Cir. 2022), including whether to follow Florida’s statutory presumption or follow earlier precedent barring such a presumption. The federal appellate court’s decision in Vital Pharmaceuticals referenced earlier Eleventh Circuit precedent in Proudfoot Consulting Co. v. Gordon, 567 F.3d 1223 (11^th Cir. 2009), which treated non-compete, non-solicitation, and “client non-compete” provisions, and a “clause concerning confidential information” in the same agreement as four separate restrictive covenants and permitted a universal presumption of irreparable harm because the defendant “breached all four [r]estrictive [c]ovenants.” However, the appellate court distinguished this case law because Vital Pharmaceuticals (Vital) did not prove that its former employee had breached her non-disclosure covenant by disclosing confidential information or by soliciting Vital’s clients about whom she held confidential information. In reversing a preliminary injunction that the federal trial court had previously issued against Vital’s former employee, the appellate court explained that without proof that Vital’s former employee breached the non-disclosure covenant, “[t]he district court abused its discretion when it applied the presumption of irreparable harm.”

The appellate court explained that without the benefit of that presumption, “Vital did not establish, as it was required to, that it was ‘likely to suffer irreparable harm in the absence of preliminary relief’ prohibiting [Vital’s former employee] … from disclosing or using its confidential information.” Vital failed to “identify any actually confidential and specific [Vital] information that is being or could be utilized by” by Vital’s former employee to unfairly compete against Vital.

Vital tried to pivot to an alternate argument that “[i]f competitors acquire[d][its] protected information, they would gain an unfair competitive advantage in the market.” The Eleventh Circuit rejected this argument, explaining that it is “remote [and] speculative,” not “actual and imminent.”

Ultimately, Vital Pharmaceuticals determined that the facts of the case did not warrant application of the presumption. Vital did not plead or argue that its former employee breached the non-disclosure provision. In addition, the evidence established that this information would be of little use to Vital’s smaller competitors.

The concurring opinion in Vital Pharmaceuticals provided a deep analysis of federal court precedent and other legal authorities, as to whether “federal procedure” including “traditional federal equity practice” applies in diversity cases (i.e., cases in federal court where the opposing parties reside in different states) to determine whether a preliminary injunction was properly issued. The concurring opinion concluded that Eleventh Circuit precedent in Ferrero v. Associated Materials Inc., 923 F.2d 1441 (11th Cir. 1991), holding that federal cases on the law of equity (including whether such case law allows statutory presumptions of irreparable harm in the issues of injunctions in non-compete cases) “remains good law,” i.e., binding legal precedent. Nevertheless, the full appellate court panel did not decide this issue. It remains to be seen whether the Eleventh Circuit will, in the future, determine whether Florida’s explicit statutory presumption of irreparable harm will be enforced in federal courts.

Peter Mavrick is a Miami business litigation attorney, 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.