Articles Posted in Business Litigation

Published on: May 13, 2023

MIAMI BUSINESS LITIGATION: STRATEGIC CONSIDERATIONS CONCERNING FDUPTA AND FRAUD CLAIMS

Under Florida law accords litigants with two main avenues for recovery of damages in cases of deception or fraud. One option is via the Florida Deceptive and Unfair Trade Practices Act (commonly referred to as FDUPTA), which allows recovery of actual damages plus the legal expense associated with the successful prosecution of the claim. The second option is a common-law claim for fraud. As in any business litigation, there are important strategic considerations whether either or both claims should be asserted. There are advantages and disadvantages to each claim, and they are not mutually exclusive. Peter Mavrick 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.

Claims under FDUPTA have certain advantages and risks when compared to claims of fraud. Stewart Agency, Inc. v. Arrigo Enter., Inc., 266 So.3d 207 (Fla. 4th DCA 2019), explained the elements of a FDUPTA claim: “To bring a FDUPTA claim for damages, a plaintiff must establish three elements: 1) a deceptive act or unfair practice; 2) causation; and 3) actual damages.” In addition, the prevailing party in a FDUPTA can recover its attorneys’ fees. On big potential advantage to a FDUPTA claim is that the prevailing plaintiff can recover its attorneys’ fees from the defendant. At the same time, this also poses a risk to the plaintiff, because if the defendant wins the case, the plaintiff can be liable for the defendant’s attorneys’ fees. This is an important risk to consider. Concerning damages, FDUPTA states in pertinent part: “In any action brought by a person who has suffered a loss as a result of a violation of this part, such person may recover actual damages ….” This is because “[t]he act is intended to protect consumers from unfair or deceptive acts or practices which diminish the value or worth of the goods or services purchased by the consumer.” Urling v. Helms Exterminators, Inc., 468 So.2d 451 (Fla. 1st DCA 1985). Because FDUPTA provides for recovery of only “actual damages,” recovery of other damages, such as consequential damages, is not authorized. As explained in Fort Lauderdale Lincoln Mercury, Inc. v. Corgnati, 715 So.2d 311 (Fla. 4th DCA 1998), FDUPTA, at Florida Statutes Section 501.211, “entitles a consumer to recover damages attributable to the diminished value of the goods or services received, but does not authorize recovery of consequential damages to other property attributable to the consumer’s use of such goods or services.” Florida’s Fourth District Court of Appeal in Maroone Chevrolet, LLC v. Alvarado, 344 So.3d 459 (Fla. 4th DCA 2022), reversed a jury verdict in a FDUPTA claim that went far beyond “actual damages.” Alvarado explained in pertinent part: “Alvarado argues that the loss of his $12,000.00 down payment, as well as various loan, warranty, and other payments, were part of his actual damages. However, down payments and loan payments typically are not included in actual damages because they are considered consequential damages…[Plaintiff Alvarado’s] argument blurred the lines between properly awardable actual damages and the consequential damages he requested. In fact, the trial testimony reveals a variety of monetary figures provided to the jury, none of which proved the diminished value of the Second Truck…There simply was no competent, substantial evidence to support the proper measure of damages, and the jury’s ultimate damage awards pertaining to Count 2 must be reversed.”

Florida law treats fraud claims much differently regarding recovery of attorneys’ fees and the approach to recoverable damages. Concerning recover of attorneys’ fees, fraud claims are governed by what is commonly referred to as the “American rule,” meaning that each party in litigation bear its respective attorneys’ fees. Fraud claims also are governed by a different approach to damages. Florida has developed a “flexibility” theory of damages in cases of fraudulent misrepresentation to assure that an injured party will obtain full compensation for the effect of fraud. An injured party may recover either the out-of-pocket loss or the benefit off the bargain loss. Fourth District Court of Appeal precedent in Martin v. Brown, 566 So.2d 890 (Fla. 4th DCA 1990), explained both theories of damages: “The first standard is the ‘benefit of the bargain’ rule which awards as damages the difference between the actual value of the property and its value had the alleged facts regarding it been true. The second standard is the “out-of-pocket” rule which awards as damages the difference between the purchase price and the real or actual value of the property.” Each measure of damages requires that the jury have evidence of the actual value of the property in question. For example, in Morgan Stanley & Co. v. Coleman, 955 So.2d 1124 (Fla. 4th DCA 2007), the expert did not testify to the actual value of the stock in question, which was a fatal flaw in the fraud action. Without proof of the actual value of the stock, the plaintiff had not proved its damages.

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Published on: May 10, 2023

FORT LAUDERDALE BUSINESS LITIGATION: NON-COMPETE AGREEMENTS AND MISAPPROPRIATION OF TRADE SECRETS

By Mavrick Law Firm

Businesses sometimes suffer from disloyal employees who misappropriate trade secrets and confidential information, diverting them to competitors. Such unfair competition can be addressed through contractual claims based on non-compete agreements as well as claims for trade secret misappropriation. Because Florida’s restrictive covenant statute, Florida Statutes Section 542.335, provides strong remedies for businesses, including obtaining a temporary injunction, a non-compete agreement is often the most effective enforcement tool. However, when a disloyal employee transfers trade secrets to a competitor, a claim for trade secret misappropriation is an essential tool for both injunctive relief and recovery of damages. 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 law, and other legal disputes in federal and state courts and in arbitration.

Under Florida’s restrictive covenant statute, Section 542.335(1)(b)(1), a “trade secret” is deemed to be a legitimate business interest to enforce a non-compete covenant. A non-compete agreement that is predicated on protection of a trade secret is accorded a lengthy period of enforcement. The statute provides in pertinent part, at Section 542.335(1)(e): “In determining the reasonableness in time of a postterm restrictive covenant predicated upon the protection of trade secrets, a court shall presume reasonable in time any restraint of 5 years or less and shall presume unreasonable in time any restraint of more than 10 years. All such presumptions shall be rebuttable presumptions.” Obtaining a temporary injunction against a former employee is usually the most effective way to prevent further harm to the business. Problems, arise, however, when employees have given third parties the trade secrets the business needs to protect. In such cases, a trade secret misappropriation claim would be essential to protect the value of the trade secret. A trade secret must retain its secrecy either through protective measures or court action.

The Defend Trade Secrets Act is a federal law allowing a business owner to sue for trade secret misappropriation. The trade secret owner must prove that (1) the plaintiff-business owns the trade secret, (2) the defendant misappropriated the trade secret, and (3) the plaintiff-business suffered damages. As the United States Court of Appeals for the Ninth Circuit explained in InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653 (9th Cir. 2020), “the definition of trade secret consists of three elements: (1) information, (2) that is valuable because it is unknown to others, and (3) that the owner has attempted to keep secret.” In business litigation concerning misappropriation of trade secrets, the plaintiff must identify the trade secrets and prove they exist. In Autodesk, Inc. v. ZWCAD Software Co., 2015 WL 2265479 (N.D. Cal. May 13, 2015), the United States District Court for the Northern District of California explained that a plaintiff “need not ‘spell out the details of the trade secret.'” However, the InteliClear appellate decision makes clear that the plaintiff must at least “describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons…skilled in the trade.” A plaintiff must describe the trade secret with sufficient particularity to permit the defendant “to ascertain at least the boundaries within which the secret lies.” Vendavo, Inc. v. Price f(x) AG, 2018 WL 1456697 (N.D. Cal. March 23, 2018). Identifying trade secrets with sufficient particularity is important because defendants need concrete identification to prepare a rebuttal.

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Published on: April 30, 2023

MIAMI BUSINESS LITIGATION: TRADEMARK INFRINGEMENT AND CONSUMER CONFUSION

By Mavrick Law Firm

Federal law prohibits trademark infringement, which typically is enforced via the Lanham Act. The Lanham Act, at 15 U.S.C. section 1127, defines a trademark as “any word, name, symbol, or device, or any combination thereof,” which is used by a person to “identify and distinguish his or her goods…from those manufactured by others.” As the United States Court of Appeals for the Eleventh Circuit stated in Univ. of Florida v. KPB, Inc., 89 F.3d 773 (11th Cir. 1996),”Section 43(a) of the Lanham Act creates a federal cause of action for unfair competition” in interstate commerce, and “forbids unfair trade practices involving infringement of…trademarks, even in the absence of trademark registration.” The key to liability under the Lanham Act is not simply whether there is unauthorized use of a protected trademark, but whether such use is likely to cause consumer confusion. An important decision from the United States Court of Appeals for the Second Circuit, in B&L Sales Assocs. v. H. Daroff & Sons, Inc., 421 F.2d 352 (2d Cir. 1970), explained that “the federal remedy against trademark infringement is not plenary, and is only available when the plaintiff can show a likelihood of confusion, mistake or deception arising in the market as a result of defendant’s use of the mark registered to plaintiff.” Peter Mavrick 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.

One type of trademark infringement claim available under the Lanham Act is for “false designation of origin,” which prohibits what courts refer to as “passing off” or “palming off” of goods or services. The United States Supreme Court in Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), described a false designation of origin claim as occurring “when a producer misrepresents his own goods or services as someone else’s.” To establish a prima facie case under § 1125(a) of the Lanham Act, a plaintiff must show (1) that the plaintiff had enforceable trademark rights in the mark or name, and (2) that the defendant made unauthorized use of it such that consumers were likely to confuse the two. Precedent from the Eleventh Circuit Court of Appeals, which governs federal courts in Florida, considers seven factors in assessing whether “likelihood of confusion” exists: (1) the type of mark (in short, whether the “relationship between the name and the service or good it describes” is such that the chosen name qualifies as generic, descriptive, suggestive, or arbitrary); (2) the similarity of the marks (based on “the overall impressions that the marks create, including the sound, appearance and manner in which they are used”); (3) the similarity of the goods (“whether the products are the kind that the public attributes to a single source”); (4) the similarity of the parties’ retail outlets, trade channels, and customers (“consider[ing] where, how, and to whom the parties’ products are sold”); (5) the similarity of advertising media (examining “each party’s method of advertising” to determine “whether there is likely to be significant enough overlap” in the respective target audiences such “that a possibility of confusion could result”); (6) the defendant’s intent (determining whether the defendant had a “conscious intent to capitalize on [the plaintiff’s] business reputation,” was “intentionally blind,” or otherwise manifested “improper intent”); and (7) actual confusion (that is, whether there is evidence that consumers were actually confused). Frehling Enters., Inc. v. Int’l Select Group, Inc., 192 F.3d 1330 (11th Cir. 1999).

Business litigation concerning trademark infringement generally centers on whether there is a likelihood of consumer confusion, requiring courts to balance the factors set forth in the Frehling decision. Jellibeans, Inc. v. Skating Clubs of Georgia, Inc., 716 F.2d 833 (11th Cir. 1983), stated in pertinent part: “We note that the district court should not determine whether a likelihood of confusion exists by merely computing whether a majority of the subsidiary facts indicates that such a likelihood exists. Rather, the district court must evaluate the weight to be accorded the individual subsidiary facts and then make its ultimate fact decision.” The most important factors in this analysis are the type of mark and the evidence of actual confusion. Hi-Tech Pharms., Inc. v. Herbal Health Prods., Inc., 132 Fed. Appx. 348 (11th Cir. 2005) (stating that “[t]he type of mark and evidence of actual confusion are the most weighty of considerations”).

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Published on: April 19, 2023

FORT LAUDERDALE BUSINESS LITIGATION: TRADE SECRETS PROTECTED AS A COMPILATION

By Mavrick Law Firm

Under Florida’s version of the Uniform Trade Secrets Act, Florida Statutes Section 688.002(b)(4), a “trade secret” means information, including a formula, pattern, 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.” Trade secret litigation sometimes involves situations where parts of a trade secret are not individually protectable because each of the parts is available to the public. That, however, does not dispose of the entire issue because the trade secret can constitute a “compilation” that is protectable despite the fact that aspects of the trade secret, considered in isolation, fail to qualify as a trade secret. 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 law, and other legal disputes in federal and state courts and in arbitration.

For example, important precedent from Florida’s Third District Court of Appeal in Unistar v. Child, 415 So. 2d 733 (Fla. 3d DCA 1982), decided that a “distillation of” publicly available information was a protectable trade secret. This distillation can include a compilation of publicly available information that, as a compilation, has independent economic value and is maintained as a secret for business purposes. In Penalty Kick Management Ltd. v. Coca Cola Co., 318 F.3d 1284 (11th Cir. 2003), the United States Court of Appeals for the Eleventh Circuit considered the Georgia version of the Uniform Trade Secrets Act, and explained that “[t]he unauthorized use need not extend to every aspect or feature of the trade secret; use of any substantial portion of the secret is sufficient to subject the actor to liability.” The Eleventh Circuit’s Penalty Kick decision substantially relied on the Restatement (Third) of Unfair Competition § 40 cmt. c (1995), a scholarly compendium that distills the state of the law. Courts often find the Restatement to be persuasive authority. The Restatement explains that a defendant is liable for the misappropriation of a trade secret only if the plaintiff can show that the defendant (1) disclosed information that enabled a third party to learn the trade secret or (2) used a “substantial portion” of the plaintiff’s trade secret to create an improvement or modification that is “substantially derived” from the plaintiff’s trade secret. In this regard, the Restatement explains in pertinent part: “There are no technical limitations on the nature of the conduct that constitutes “use” of a trade secret…. As a general matter, any exploitation of the trade secret that is likely to result in injury to the trade secret owner or enrichment to the defendant is a ‘use’…. Thus, marketing goods that embody the trade secret, employing the trade secret in manufacturing or production, [and] relying on the trade secret to assist or accelerate research or development … all constitute “use.” The unauthorized use need not extend to every aspect or feature of the trade secret; use of any substantial portion of the secret is sufficient to subject the actor to liability. Similarly, the actor need not use the trade secret in its original form. Thus, an actor is liable for using the trade secret with independently created improvements or modifications if the result is substantially derived from the trade secret…. However, if the contribution made by the trade secret is so slight that the actor’s product or process can be said to derive from other sources of information or from independent creation, the trade secret has not been “used” for purposes of imposing liability under the rules….” The owner of a trade secret may be injured by unauthorized disclosure of a trade secret as well as by unauthorized use…. Any conduct by the actor that enables another to learn the trade secret … is ‘disclosure’ of the secret.”

Parties in trade secret litigation have to carefully assess what is the trade secret, because often the “whole” can be of greater value than the “sum of the parts.” A Advocacy in litigation over a compilation should emphasize the value of the compilation as distinct from each of its parts. Trade secret can be valuable precisely because it uses publicly available information in a manner where nobody before thought about it in that way.

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Published on: April 16, 2023

MIAMI BUSINESS LITIGATION: NON-COMPETE COVENANTS IN COMMERCIAL LEASES

By Mavrick Law Firm

In Florida, it is common for shopping centers to have leases with “exclusivity covenants” allowing a commercial business the exclusive right to operate its type of business in the shopping center. For example, a shopping center may have a grocery store as an anchor tenant, i.e., a tenant that provides a benefit to the shopping center and its other tenants by attracting customers. Some parties have challenged the legal authority of such restrictive covenants on the grounds that they violate Florida’s restrictive covenant statute, Florida Statutes section 542.335, which regulates when a non-compete covenant can be enforceable. Florida courts have examined the applicability of Florida’s restrictive covenant statute in the context of a commercial shopping centers and whether the statute was designed to apply in that context. Peter Mavrick 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.

In Winn Dixie Stores, Inc. v. Dolgencorp, Inc., 964 So.2d 261 (Fla. 4th DCA 2007), Florida’s Fourth District Court of Appeal overturned summary judgment against grocery store that sought sued the commercial landlord for failure to abide by the restrictive covenant their commercial lease. The covenant required that Winn Dixie be the exclusive grocery store in the shopping center, as its anchor tenant. The appellate court rejected the argument that section 542.335, Florida Statutes, applied to restrictive covenants that run with the land, explaining: “When read in context with the other provisions of section 542.335, subsection (1)(a)’s reference to ‘a restrictive covenant’ does not include real property covenants running with the land. Rather, the section is directed at personal service contracts not to compete. For example, section 542.335(1) refers to ‘contracts that restrict or prohibit competition’ that ‘are reasonable in time.’ Subsections 542.335(1)(d) & (e) set out four rebuttable presumptions a court is to apply to determine the ‘reasonableness in time’ of a ‘postterm restrictive covenant.’ ‘Postterm’ connotes an employment relationship that has terminated, which is the time when one party seeks to enforce a covenant not to compete. ‘Postterm’ is nonsensical when applied to a real property covenant, which typically does not have a stated termination point. Absent a specified term or materially changed conditions, a real property covenant running with the land is without duration … All four presumptions in subsections 542.335(1)(d) & (e) apply to personal service contracts, concerning restrictive covenants sought to be enforced (1) against a former employee, agent, or independent contractor; (2) against a former distributor, dealer, franchisee, or licensee of a trademark or service mark; (3) against a seller of all or part of a business, and (4) to protect trade secrets. None of these presumptions have any application to real property covenants that run with the land.” More recently, Florida’s First District Court of Appeal in Amelia Island Restaurant II, Inc. v. Omni Amelia Island, LLC, 164 So.3d 26 (Fla. 1st DCA 2015), also concluded that Section 542.335, Florida Statutes, did not require invalidation of a commercial lease’s exclusivity provision even though the restrictive covenant in that case did not run with the land. The appellate court questioned the restrictive covenant statute’s applicability to “real property related restrictive covenants, because the law appears directed a personal covenants not to compete.”

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.

Published on: April 12, 2023

FORT LAUDERDALE BUSINESS LITIGATION: NON-COMPETE AGREEMENT LITIGATION IN FEDERAL AND FLORIDA COURTS

By Mavrick Law Firm

Much of non-compete agreement litigation centers on the availability of obtaining a preliminary injunction barring competition. As the United States Court of Appeals for the Eleventh Circuit explained in United States v. Lambert, 695 F.2d 536 (11th Cir. 1983), a preliminary injunction is “an extraordinary and drastic remedy” that is “the exception rather than the rule.” A federal court may grant injunctive relief only if the moving party establishes the following elements: (1) “a substantially likelihood of success on the merits”; “irreparable injury” without an injunction; (3) the movant’s injury outweighs the harm an injunction may cause the opposing party; and (4) an injunction is not “adverse to the public interest.” Siegel v. LePore, 234 F.3d 1163 (11th Cir. 2000) (en banc). Since a preliminary injunction is an extreme remedy, federal courts do not grant it “unless the movant clearly establishes the ‘burden of persuasion’ as to all four requisites.” All Care Nursing Serv., Inc. v. Bethesda Mem’l Hosp., 887 F.2d 1535 (11th Cir. 1989). 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 law, and other legal disputes in federal and state courts and in arbitration.

Concerning the injunction legal element of “irreparable harm,” there is an important conflict between Florida statutory law and case law versus the decisions of federal courts. Florida’s restrictive covenant statute has a presumption of irreparable harm. Florida Statutes, Section 542.335(1)(j), presumes that a person seeking to enforce a valid restrictive covenant suffered irreparable harm. Florida law removes the burden to prove irreparable harm and shifts that legal burden to the nonmovant, who must rebut the presumption. The Supreme Court of Florida in Caprano v. Lanier Bus. Prods., Inc., 466 So.2d 212 (Fla. 1985), explained that this presumption exists “because of the inherently difficult, although not impossible, task of determining just what damage actually is caused by the employee’s breach of the agreement.” The Supreme Court in Caprano emphasized that, “[i]t truly can be said in this type of litigation that relief delayed is relief denied.” The presumption means that “a party seeking to enforce a restrictive covenant by injunction need not directly prove that the defendant’s specific activities will cause irreparable injury.” Am. II Elecs., Inc. v. Smith, 830 So.2d 906 (Fla. 2d DCA 2002). Florida’s Second District Court of Appeal in Fam. Heritage Life v. Combined Ins. Co., 319 So.3d 680 (Fla. 3d DCA 2021), explained that the presumption applies if the restrictive covenant was violated and if it protects a legitimate business interest.

Federal courts, however, often will not apply Florida’s Florida’s presumption of irreparable harm. See, for example, the United States District Court for the Southern District of Florida in S. Wine & Spirits of Am., Inc. v. Simpkins, 2011 WL 124631 (S.D. Fla. Jan. 14, 2011) (Cooke, J.) (concluding that Florida’s presumption of irreparable harm does not apply in federal court). This based in part on Federal Courts interpretation of Rule 65 of the Federal Rules of Civil Procedure (i.e., the federal rule governing injunctions), which “does not place upon the [nonmovant] the burden of coming forward and presenting its case against a preliminary injunction.” Granny Goose Foods, Inc. v. Bhd. of Teamsters & Auto Truck Drivers Loc. No. 70, 415 U.S. 423 (1974). In the view of many federal courts, a presumption of irreparable harm effectively replaces the “equitable discretion” that the United States Supreme Court discussed in important precedent in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006). In eBay Inc., the Supreme Court chided federal courts for abandoning the traditional equity factors in patent infringement claims and for adopting a presumption in favor of injunctions. eBay, Inc. explained that Judges must exercise balance equitable factors (such as the balancing test for Judges to issue injunctions) “consistent with traditional principles of equity.” In Amoco Prod. Co. v. Bill. of Gambell, AK, 480 U.S. 531 (1987), the Supreme Court also stated that a “presumption” of irreparable harm is “contrary to traditional equitable principles.”

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Published on: April 8, 2023

MIAMI BUSINESS LITIGATION: NON-COMPETE AGREEMENTS BASED ON CONFIDENTIAL OR TRADE SECRET INFORMATION

By Mavrick Law Firm

Under Florida’s non-compete statute, Florida Statutes Section 542.335(1)(b), “[t]he person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.” The term “legitimate business interest” includes trade secrets (as defined in Florida Statutes Section 688.002(4)) and “valuable confidential business or professional information.” Florida and federal courts scrutinize the facts to assess whether the employer has satisfactorily proven the existence of “trade secrets” and “valuable confidential information.” In many cases, businesses seek to enforce non-compete agreements based on alleged trade secret or confidential information that do not qualify as such under the statute. Peter Mavrick 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.

To sufficiently plead and prove a legitimate business interest in confidential or proprietary information, an employer must articulate the information it deems confidential or proprietary. Florida’s Fourth District Court of Appeal in Passalacqua v. Navient, Inc., 844 So.2d 792 (Fla. 4th DCA 2003), determined there was no legitimate business interest where the employer failed to “articulate how any activity, method or technique utilized by [the company] was unique or proprietary in any way.” Similarly, the United States District Court for the Middle District of Florida in Lucky Cousins Trucking, Inc. v. QC Energy Res. Texas, LLC, 223 F.Supp.3d 1221 (M.D. Fla. 2016), explained that “[g]eneric allegations do not establish a legitimate business interest.” An employer must prove that the employees could use the information to gain an unfair advantage. As the Passalacqua decision explained, “[g]eneralized statements of concern cannot substitute as proof.” As it relates to alleged trade secrets on which the non-compete agreement is bsed, information commonly known in the industry and not unique to the former employer is not “confidential” and thus not entitled to protection. Keel v. Quality Medical Systems, Inc., 515 So.2d 337 (Fla. 3d DCA 1987).

Under Florida Statutes § 542.335(b)(2), the employer must prove that the employee could use the information to gain an unfair advantage. A great deal of non-compete litigation centers on whether the former employee took advantage of “substantial relationships” with specific customers. In Anich Indus. Inc. v. Raney, 751 So.2d 767 (Fla. 5th DCA 2000), Florida’s Fifth District Court of Appeal explained that, under Florida law, “information commonly known in the industry and not unique to [the] allegedly injured party [is] not ‘confidential’ and thus not entitled to protection.” The appellate court explained in pertinent part: “Anich’s contention that it proved that Raney sought to take advantage of substantial relationships with specific customers also is unsupported by the record from the hearing. Anich asserts that the ‘substantial relationships’ are those developed between the employee and the customer; Raney, on the other hand, submits that the ‘substantial relationships’ are those developed between the employee and the customer…Under either interpretation, however, ‘substantial relationships’ have not been shown. The customers who testified on Anich’s behalf all acknowledged that they made their industrial tool and equipment purchases based primarily on cost and the supplier’s ability to provide the goods quickly. There was little evidence of any exclusive or other kind of relationship that could be construed as ‘substantial’ with the meaning of the statute. Alternatively, under Raney’s interpretation [i.e., the employee’s interpretation], it is obvious that in less than three months with Anich she did not have the opportunity to develop a ‘substantial relationship’ with any of her customers.”

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Published on: April 2, 2023

MIAMI BUSINESS LITIGATION: DEFENSE AGAINST TRADE SECRET MISAPPROPRIATION BASED ON “MODIFICATION OR IMPROVEMENT”

By Mavrick Law Firm

Under the Federal Defend Trade Secrets Act as well as the Uniform Trade Secret Act adopted by many states, unauthorized use of trade secret information and unauthorized acquisition or disclosure of trade secret information may constitute misappropriation. The legal concept of “misappropriation” includes not only the wholesale pirating of an idea, but also the unauthorized utilization of an idea as a starting point or guide in developing a process, or as a means to understand what pitfalls to avoid. The United States Court of Appeals for the Seventh Circuit in Mangren Research & Dev. Corp. v. Nat’l Chemical Co., Inc., 87 F.3d 937 (7th Cir. 1996), explained that “the use of another’s trade secret is liable even if he uses it with modifications or improvements upon it effected by his own efforts, so long as the substance of the process used by the actor is derived from the other’s secret.” Peter Mavrick 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.

In business litigation seeking to prove trade secret misappropriation, a plaintiff will usually need to rely on circumstantial evidence. In SI Handling Systems, Inc. v. Heisley, 753 F.2d 1244 (3d Cir. 1985), the federal appellate court explained that “[m]isappropriation and misuse can rarely be proved by convincing direct evidence. In most cases plaintiffs must construct a web of perhaps ambiguous circumstantial evidence from which the trier of fact may draw inferences which convince him that it is more probable than not that what plaintiffs allege happened did in fact take place. Against this often delicate construct of circumstantial evidence there frequently must be balanced defendants and defendants’ witnesses who directly deny everything.” For this reason, “[r]arely will the plaintiff in a misappropriation of trade secrets case discovery the ‘needle’ in his opponent’s ‘haystack” of documents. Nor is it likely that plaintiff’s counsel will enjoy the ‘Perry Mason moment’ when the defendant’s chef executive officer buckles under the weight of cross examination and admits that his company has misappropriated the plaintiff’s trade secret.” Savor , Inc. v. FMR Corp., 2004 WL 1965869 (Sup. Ct. Del. 2004) (interpreting Delaware version of Uniform Trade Secret Act).

Particularly when they rely on circumstantial evidence to prove their cases, plaintiffs sometimes make strategic mistakes in how they present trade secret misappropriation cases. Plaintiffs have confronted problems where they insist a trade secret is comprised of all elements of its alleged secret, and that none of the elements can be separated from the whole. In such cases, plaintiffs must establish misappropriation of the entire trade secret to prevail. In this regard, the United States District Court in New Jersey explained in Vital State Canada, Ltd. v. Dreampak, LLC, 303 F.Supp.2d 516 (D.N.J. 2003), that an “assertion that the trade secret is a combination of the elements is crucial…since it means that to prove use of the trade secret, [plaintifF] must prove use of each and every element in combination.”

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Published on: March 29, 2023

FORT LAUDERDALE BUSINESS LITIGATION: INTEGRATED CONTRACTS AND COUNTERCLAIMS

By Mavrick Law Firm

Just because parties sign two separate documents or contracts does not mean Florida law actually views these contracts separately. This is significant because rights and liabilities arising from one document may extend to the other. Many business litigation cases in Florida deal with business sales involving actions on a promissory note that usually involve a number of intertwined contracts (such as the purchase agreement and pledge agreements). 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 law, and other legal disputes in federal and state courts and in arbitration.

In Clayton v. Howard Johnson Franchise Sys., Inc., 954 F.2d 645 (11th Cir. 1992), the United States Court of Appeals for the Eleventh Circuit explained that, “where two or more documents are executed by the same parties, at or near the same time and concerning the same transaction or subject matter, the documents are generally construed together as a single contract.” Similarly, in Quix Snaxx, Inc. v. Sorensen, 710 So. 2d 152, 153 (Fla. 3d DCA 1998), Florida’s Third District Court of Appeals stated that, “Where a writing expressly refers to and sufficiently describes another document, the other document, or so much of it as is referred to, is to be interpreted as part of the writing.” Quix Snaxx involved a settlement agreement between parties requiring them to enter into two distinct agreements: (1) a license agreement with an arbitration clause that outlined geographic limitations as to rights to sell certain vending machines and (2) a purchase order agreement without an arbitration clause that required a party to purchase a certain number of vending machines. One party sued for a breach of the purchase order agreement and the other sought to compel arbitration based on the license agreement’s arbitration clause. The court compelled arbitration. It reasoned that the agreements “were all executed with a span of days, as part of an orchestrated effort to settle pending federal litigation” while the license agreement made reference to the purchase order agreement and its terms. In the same vein, Collins v. National Fire Insurance Co., 105 So. 2d 190 (Fla. 2d DCA 1958), held that where a written contract refers to and sufficiently describes another document, that other document or so much of it as is referred to may be regarded as a part of the contract and therefore is properly considered in its interpretation.

Because Florida courts can view related contracts that as part of an integrated transaction, this can affect whether an aggrieved party should be filing a compulsory counterclaim. Florida’s compulsory counterclaim rule, Florida Rule of Civil Procedure 1.170(a), requires claims arising out of the same “transaction or occurrence” to be brought together. The Supreme Court of Florida’s precedent in Londono v. Turkey Creek, Inc., 609 So. 2d 14 (Fla. 1992), held that courts should apply the “logical relationship test” to determine whether claims arise from the same “transaction or occurrence.” The measuring stick for “logical relation” is whether the claim “arises out of the same aggregate of operative facts.” The consequence of failing to assert compulsory counterclaims can result in waiver of a compulsory counterclaim. Claims arising from documents “construed as a single contract” would likely satisfy the “logical relationship test,” because such claims would naturally have the same aggregate of operative facts. Integrated contracts involve the same parties, having been executed around the same time, and relate to the same transaction. Accordingly, disputes relating to transactions involving multiple related agreements (such as many business sales) must be analyzed and litigated diligently to avoid waiving rights and to ensure all remedies are pursued.

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Published on: March 22, 2023

FORT LAUDERDALE BUSINESS LITIGATION: MITIGATION OF DAMAGES IN CASES OF BREACH OF CONTRACT

By Mavrick Law Firm

In business litigation cases, parties frequently plead the affirmative defense of “mitigation of damages.” Although commonly referred to as the “duty” to mitigate damages, Florida courts instead refer to this as the doctrine of unavoidable consequences. This legal doctrine prevents a party from recovering those damages inflicted by a wrongdoer which the injured party “could have avoided without undue risk, burden, or humiliation.” Restatement (Second) of Contracts, § 350(1). Precedent from the Supreme Court of Florida in Sys. Components Corp. v. Fla. Dep’t of Transp., 14 So.3d 967 (Fla. 2009), explained that “[t]he doctrine of unavoidable consequences…commonly applies in contract and tort actions…. The doctrine does not permit damage reduction based on what ‘could have been avoided’ through Herculean efforts. Rather, the injured party is only accountable for those hypothetical ameliorative actions that could have been accomplished through ‘ordinary and reasonable care’ without requiring undue effort or expense.” 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 law, and other legal disputes in federal and state courts and in arbitration.

Sys. Components Corp. further explained that “[t]here is no actual ‘duty to mitigate’ damages, because the injured party is not compelled to undertake any ameliorative efforts.” Whether the doctrine applies in a given case depends on the facts. A leading legal treatise on the law of contracts, J.D. Calamari and J.M. Perillo, The Law of Contracts sections 14-16 (1977), discussed limits to this doctrine: “If the relation between the parties is such that the wronged party was legally free to enter into similar contracts with others[,] the fact that subsequent to the breach the wronged party could have or actually has made similar contracts in no way reduces the damages to which he is entitled.” In Graphic Associates, Inc. v. Riviana Restaurant Corporation, 461 So.2d 1011 (Fla. 4th DCA 1984), Florida’s Fourth District Court of Appeal explained that: “For example, an employee fired improperly cannot sit idly by and then recover his entire salary. He is required to use reasonable efforts to obtain other suitable employment in order to reduce his damages. Conversely, a new car dealership theoretically has an unlimited number of cars to sell. A purchaser who breaches his contract to buy an automobile is not entitled to credit against claimed damages for other sales of automobiles made by the dealer. The latter situation falls into the category of non-exclusive contracts, an area generally considered as an exception to the requirement of avoiding foreseeable consequences.” Graphic Associates added that “if Graphic [(the appellant)] could have performed the Riviana contract in addition to all of the contracts which it actually did perform[,] then Riviana is not entitled to claim that some or all of those contracts were substitutes for its contract. In other words, there would be no diminution of damages. If performance of the Riviana contract would have precluded Graphic from accepting some or all additional contracts[,] then such potentially excluded contracts are properly considered as substitutes for the Riviana contract and profits therefrom mitigate the damages owed by Riviana to Graphic.”

To preserve its rights, it is essential for the defending party in litigation to assert mitigation of damages as an affirmative defense. However, under Florida law, if the plaintiff made reasonable efforts to avoid the damages caused by the breach of contract, then the jury award should include reasonable amounts that the plaintiff spent for this purpose.

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