Confidential business information may be considered a legitimate business interest justifying enforcement of the non-compete clause. Not all information used by a business will be considered valuable confidential business information by a court, particularly if the information can be obtained through the public domain. However, certain compilations of information, even if public, can be considered valuable to a competing business and justify a non-compete agreement. Peter Mavrick is a Fort Lauderdale non-compete attorney. Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.
In the federal court case Estetique Inc. USA v. Xpamed LLC, 2011 WL 4102340 (S.D. Fla. Sept. 15, 2011), Estetique Inc., USA (“Estetique”) sought a preliminary injunction against Defendant Xpamed, LLC (“Xpamed”), a competing business founded by Defendant Mario Guastella (“Guastella”), a former employee of Plaintiff. Estetique alleged that Xpamed, Guastella and Jose Montilla (“Montilla”), another former employee of Estetique who worked for Xpamed, allegedly used Estetique’s confidential customer information to sell similar products to its customers.
Estetique hired defendant Montilla as a member of its sales team, and hired Guastella as a web designer to maintain and design Estetique’ internet presence. Both Montilla and Guastella executed a non-compete agreement, which provided for the protection of Estetique’s proprietary customer lists, marketing, and sales information, a non-compete period of five years post-termination of employment, and a customer non-solicitation period of five years post-termination of employment.
Guastella resigned his employment after a disagreement with his supervisor. Estetique alleged that when Guastella left, he possessed certain confidential information including web server passwords and login information that no other Estetique employee possessed. Estetique did not change the password to its database for several weeks after Guastella left. Estetique alleged that someone from an internet protocol (IP) address belonging to Guastella obtained access to Estetique’s database. Shortly after Guastella left his employment with Estetique, he registered the domain name http://www.Xpamed.com. Xpamed was a company based in Miami, Florida whose main objective was to design, produce, assemble, sell and distribute high-tech equipment for the cosmetic industry worldwide. Xpamed’s website listed for sale spa and beauty equipment that was substantially similar to the equipment sold by Estetique. Montilla was a member of Estetique’s sales force, but his employment was terminated due to alleged poor performance. During his employment with Estetique, Montilla did not have access to Estetique’s database, but was provided with access to lists of customer and prospective customer’s contact information. After his termination, Montilla was hired by Xpamed as a salesperson.
The legal standard for enforcement of a non-compete agreement under Florida law requires a plaintiff to prove: (1) the existence of one or more legitimate business interests justifying the non-compete agreement; and (2) that the contractually specified restraint is reasonably necessary to protect the established interests of the employer. Autonation, Inc. v. O’Brien, 347 F.Supp.2d 1299 (S.D.Fla.2004); Section 542.335, Florida Statutes. Pursuant to Section 542.335, Florida Statutes, a legitimate business interest includes, among other things, valuable confidential business information. Under Florida law, confidential business information has been considered a legitimate business interest that can be protected by a non-compete clause in an employment contract. New Horizons Computer Learning Centers, Inc. v. Silicon Valley, 2003 WL 23654790 (M.D.Fla. Nov.12, 2003). Conversely, “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.” Estetique Inc. USA v. Xpamed LLC, supra.
Estetique contended that its confidential client information qualified as a trade secret or as confidential business information, either of which would be considered a legitimate business interest under Florida law. The district court concluded Estetique did not show that its information is a trade secret under Florida law, but did show that its information was valuable confidential business information. The district court found that though some of the email addresses were available by public searches, the information could have also qualified as having a legitimate business interest in the client goodwill associated with its specific efforts to obtain the information.
The federal district court found that Estetique spent over ten years developing its proprietary customer information. Estetique’s customer information included customer’s names, contact information, and product needs. Estetique compiled this information through in-person meetings, prior sales, seminars and contact through its website. Estetique held that such compilations are valuable for a competing business, who would be saved numerous work hours in obtaining this information and in deciding what to include in the contacts lists, checklists, and procedures which make the competitor appear more professional to the client base. Continental Group, Inc. v. KW Property Mgmt., LLC, 622 F.Supp.2d 1357 (S.D.Fla.2009) (The work and labor expended in compiling the information, plus judgment used in the selection of information, raises the level of information to valuable confidential information in its final compiled form.) The district court granted Estetique’s motion for a preliminary injunction as to its claims for breach of the non-compete and confidentiality agreements.
Peter Mavrick is a Fort Lauderdale non-compete lawyer who also practices non-compete litigation in Palm Beach, Boca Raton, and Miami. This article does not serve as a substitute for legal advice tailored to a particular situation.