MIAMI BUSINESS LITIGATION: NON-COMPETE AGREEMENTS AND “CONFIDENTIAL INFORMATION”

Under Florida law, enforcement of a non-compete agreement requires requires proof of at least one “legitimate business interest.” Fla. Stat. § 542.335 (“The person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.”). A failure to plead or prove the existence of a legitimate interest justifying the non-compete covenant can void its enforcement. Id. (“Any restrictive covenant not supported by a legitimate business interest is unlawful and is void and unenforceable.”). Florida’s non-compete statute specifically references a nebulous legitimate business interest called “valuable confidential business…information.” Florida and federal cases interpreting the meaning of the term “valuable confidential business information” have reached different conclusions depending on the factual context. See Proudfoot Consulting Co. v. Gordon, 576 F.3d 1223 (11th Cir. 2009) (“It is unclear under Florida law when confidential information will justify a broad restriction that prevents an employee from working for a competitor.”). 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.

Some courts have determined that a person possesses valuable confidential business information when the employee is in a position to engage in unfair competition against the former employer. See Autonation v. O’Brien, 347 F. Supp. 2d 1299 (S.D. Fla. 2004). For example, in Open Magnetic Imaging, Inc. v. Nieves–Garcia, 826 So.2d 415 (Fla. 3d DCA 2002) (per curiam), Florida’s Third District Court of Appeal held that the defendant’s knowledge about a confidential database created as part of a confidential strategic marketing plan was a legitimate business interest because a competitor hired the defendant as its marketing representative. By contrast, in Austin v. Mid State Fire Equip. of Cent. Florida, Inc., 727 So.2d 1097 (Fla. 5th DCA 1999), the Florida appellate court refused to enforce the non-compete designed to protect pricing information known to the former employee because the former employee was only a technician that did not “set up service runs or set prices.”

Other courts appear to use a slightly higher standard advocated by the drafters of Florida Statue § 542.335, Senator John Grant and Thomas Steele. Senator Grant and Mr. Steele contend courts should look to the definition of threatened misappropriation used in trade secrets law to determine whether a defendant’s knowledge of confidential information justifies a restrictive covenant. See John A. Grant & Thomas Steele, Restrictive Covenants: Florida Returns to the Original “Unfair Competition” Approach to the 21st Century, 70 Fla. B.J. 53 (Nov. 1996) (hereinafter “Grant & Steele”). Under this approach, Valuable Confidential Information exists when disclosure of the information would be inevitable. Id. At least one Florida decision appears to have enforced a restrictive covenant based on the inevitable disclosure theory. See Proudfoot Consulting Co., 576 F. 3d 1223 (citing Fountain v. Hudson Cush–N–Foam Corp., 122 So.2d 232 (Fla.3d DCA 1960) (finding that employee’s “knowledge of the trade secrets would be so entwined with his employment” that “it would seem logical to assume that his employment by a competitor … would eventually result in a disclosure of this information”)).

Although both theories differ slightly, each seems to share two important characteristics. First, the alleged confidential information in question must be truly valuable. GPS Indus., LLC v. Lewis, 691 F. Supp. 2d 1327 (M.D. Fla. 2010) (holding that valuable confidential business or professional information requires the plaintiff to prove such information “derive[s] economic value from not being readily ascertainable by others who can obtain economic value from their disclosure or use or that they are the subject of reasonable efforts to maintain their secrecy” like a trade secret). Information may have value if it is unique and relevant. Autonation, Inc. v. O’Brien, 347 F. Supp. 2d 1299 (S.D. Fla. 2004) (“However, information that is commonly known in the industry and not unique to the allegedly injured party is not confidential and is not entitled to protection.”); Colucci v. Kar Kare Auto. Group, Inc., 918 So. 2d 431 (Fla. 4th DCA 2006) (“Protectable information includes that which is unique in the industry and confidential.”); Blue-Grace Logistics LLC v. Fahey, 653 F. Supp. 3d 1172 (M.D. Fla. 2023), appeal dismissed, 23-10623-GG, 2023 WL 3691014 (11th Cir. Apr. 12, 2023) (“Blue-Grace makes no argument that the information is still relevant and thus useful in the hands of its competitor. So Blue-Grace again fails to meet its burden of showing that the information is valuable.”). Second, the information must be confidential. See Deloitte & Touche USA LLP v. Lamela, 2007 WL 1114075 (Del. Ch. Apr. 6, 2007) (rejecting a former employer’s attempt to apply non-solicitation clause under Fla. Stat. § 542.335 because the former employer did not allege “with any specificity that [the employee] had access to nonpublic pricing information or strategies of [the former employer] that would give [the employee] an unfair competitive advantage in dealing with” those clients).

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.