Articles Posted in Business Litigation

Published on: June 15, 2020

FORT LAUDERDALE BUSINESS LITIGATION: COMMERCIAL ESPIONAGE AND TRADE SECRET MISAPPROPRIATION

A previous article discussed how it is unlawful under the Florida Uniform Trade Secrets Act (FUTSA) to take a trade secret using “improper means.” As technology has developed, new methods of commercial reconnaissance can make it difficult to determine whether method was lawful acquisition or unlawful espionage. Peter Mavrick is a Fort Lauderdale business litigation lawyer, representing 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.

Under FUTSA, it is unlawful for a business to misappropriate, use, or disclose another’s trade secrets when the business knew or had reason to know that it was acquired through “improper means.” § 688.002(2). While it is clear that “improper means” includes theft and other crimes, it is less obvious when the reconnaissance crosses the line and becomes unlawful. This line is further blurred as technology continues to develop to allow information to be acquired remotely.

In E. I. duPont deNemours & Co. v. Christopher, 431 F.2d 1012 (5th Cir. 1970), the United States Court of Appeals for the Fifth Circuit addressed whether the use of a plane to fly over the construction of a factory was an “improper means” to discover trade secrets. In this important federal court precedent, DuPont held that the use of spy planes was an improper means and explained the legal analysis of trade secret misappropriation:

Continue reading →

Published on: June 12, 2020

FORT LAUDERDALE BUSINESS LITIGATION: DIRECT SHAREHOLDER LAWSUITS AGAINST A CORPORATION

By Mavrick Law Firm

Usually when a shareholder sues a corporation, the shareholder does so by means of a “derivative” action. Derivative means “coming from another.” A derivative action is a lawsuit that a shareholder files on behalf of the corporation against a third party – usually an officer, director or manager of the corporation – because of a loss or malfeasance by that third party that harmed the corporation. However, when a corporation is small and closely held, sometimes the nature of the dispute between a shareholder and the corporation is such that a derivative action is inappropriate, and the shareholder should sue the corporation directly as an individual. If a shareholder makes a mistake with regard to whether to sue derivatively or directly, the shareholder’s lawsuit may be dismissed. Peter Mavrick is a Fort Lauderdale business litigation lawyer, and also represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The 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.

Florida courts have recognized that “as the community of interests between shareholders and their closely held corporation becomes more tightly interwoven, the basis upon which one differentiates derivative from individual actions becomes more critical and, as a consequence, the cases become less self-evident.” Dinuro Investments, LLC v. Camacho, 141 So. 3d 731 (Fla. 3d DCA 2014). The Florida legislature recently addressed the issue of when a shareholder can sue directly as an individual with the passage of Florida Statute section 607.0750. It became law as of January 1, 2020.

Prior to enactment of the statute, Florida courts employed different tests to determine if a shareholder should sue derivatively or directly, but the law was not uniform. As the Third District Court of Appeal noted, “the current Florida doctrine explaining which actions should be maintained directly and which must be brought derivatively is incredibly opaque…” Id.

Continue reading →

Published on: June 12, 2020

MIAMI BUSINESS LITIGATION: TRADE SECRETS ACQUIRED BY IMPROPER MEANS

By Mavrick Law Firm

The Florida Uniform Trade Secrets Act (FUTSA) allows Florida businesses who have had their trade secrets misappropriated to seek damages or an injunction against the perpetrator of the misappropriation. For the acquisition to be an unlawful misappropriation, the confidential information must usually have been acquired through “improper means.” It is lawful for a Florida business to acquire and use another company’s trade secret for itself if it acquired that confidential information through proper means, such as through independent discovery of the trade secret, reverse engineering of the product which uses the trade secret, or through the voluntary disclosure by an owner of the trade secret. Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. The 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.

Pursuant to FUTSA, the misappropriation of a trade secret through improper means is unlawful. The manner of acquisition of trade secret is a critical question in determining whether there has been unlawful misappropriation. Generally, if one knows or has reason to know that information was acquired through improper means, the use or disclosure of that information is unlawful. FUTSA defines misappropriation to mean:

(a) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

Continue reading →

Published on: June 7, 2020

FORT LAUDERDALE NON-COMPETE AGREEMENTS: DECLARATORY JUDGMENT CLAIMS MUST INCLUDE ALL AFFECTED PARTIES

By Mavrick Law Firm

A party to a non-compete agreement that was breached by the employer, may preempt its enforcement by seeking a declaratory judgment. To be effective, the declaratory action must include all parties who have a right to enforce the non-compete agreement. “[B]efore any proceeding for declaratory relief is entertained all persons who have an ‘actual, present, adverse, and antagonistic interest in the subject matter’ should be before the court.” Fla. Dep’t of Educ. v. Glasser, 622 So.2d 944 (Fla.1993). Section 86.091, Florida Statutes states “[n]o declaration shall prejudice the rights of persons not parties to the proceedings.” Peter Mavrick is a Fort Lauderdale non-compete lawyer and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings. The Mavrick Law Firm also represents clients in non-compete litigation and business litigation in Miami, Boca Raton, and Palm Beach.

An example of this occurred in the case of Reinstein v. Pediatric Gastroenterology, Hepatology & Nutrition of Florida, P.A., 25 So.3d 54 (Fla. 2d DCA 2009). L. Julio Reinstein, M.D. (Reinstein), purchased an interest in a medical practice (hereinafter the “P.A.”). Dr. McClenathan (McClenathan), the founder of the P.A., retained a majority interest. Reinstein, McClenathan, and the P.A. executed various contracts to memorialize the new practice. The pertinent contracts included: (1) an Operating Agreement; (2) a Stock Transfer Restrictions and Buy–Out Agreement (the Buy–Out Agreement); and (3) a Professional Services Employment Agreement (the Employment Agreement). The Buy-Out Agreement and the Employment Agreement contained non-compete agreements.

Reinstein filed a lawsuit seeking a declaratory judgment that the two noncompete agreements were not enforceable because the P.A. and McClenathan breached the agreements. Reinstein’s employment with the P.A. was subsequently terminated, and he opened a medical practice in the restricted area. The P.A. filed a separate lawsuit seeking injunctive relief and damages against Reinstein and his new medical practice for their alleged violations of the non-compete agreement. The P.A. and McClenathan also moved to enforce the arbitration provisions contained in the agreements. The trial court referred Reinstein’s claims for damages to arbitration and retained the claims relating to the enforceability of the non-compete agreements. The parties went to arbitration, where all of Reinstein’s claims for damages against McClenathan and the P.A. were resolved. The issues relating to the non-compete agreements were the only issues remaining for the trial court to resolve. The trial court consolidated Reinstein’s lawsuit and the P.A.’s lawsuit to decide in one case. McClenathan moved for partial summary judgment, seeking to be dismissed from the litigation. McClenathan contended that he was not the party seeking enforcement of the non-compete agreement, so he should not be named individually in Reinstein’s claims. The non-compete clause in the Buy-Out Agreement contained a provision that provided, “the [P.A.] or any Shareholder … the right to seek monetary damages … and equitable relief” in the event of a breach of the non-compete agreement. However, the non-compete in the Employment Agreement only gave the P.A. the right to seek damages and equitable relief in the event of a breach.

Continue reading →

Published on: June 4, 2020

FORT LAUDERDALE BUSINESS LITIGATION: RESCISSION OF A CONTRACT

By Mavrick Law Firm

Florida businesses may seek rescission of a contract in certain circumstances when the contract was entered into because of fraud, accident, or a mistake of facts. To preserve the legal right to invoke the remedy of rescission, when the basis for rescission is discover must immediately reject any further benefits under the contract and must usually offer to restore the other party to the same position that it was in prior to entering into the contract. Peter Mavrick is a Fort Lauderdale business litigation attorney, and also represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The 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.

After entering into a contract, a Florida business may discover something that reveals that it was a mistake to enter into the contract. “Courts of equity will rescind an instrument based upon fraud, accident[,] or mistake.” Bass v. Farish, 616 So. 2d 1146 (Fla. 4th DCA 1993). Rescission allows a business to essentially undo a contract. The remedy of rescission allows a Florida business to return to the same position it was in before entering into the contract in certain circumstances. “The prime object of rescission is ‘to undo the original transaction and restore the former status’ of the parties.” Billian v. Mobil Corp., 710 So. 2d 984 (Fla. 4th DCA 1998).

Under Florida law, a business cannot receive the benefit of a contract while simultaneously repudiating that same contract. A party to a contract can waive its right to rescission if it “retains the benefits of a contract after discovering the grounds for rescission.” Mazzoni Farms, Inc. v. E.I. DuPont De Nemours & Co., 761 So. 2d 306 (Fla. 2000). To obtain rescission, a party to a contract must show that it, “with reasonable promptness, denied the contract as binding upon him and that thereafter he was consistent in his course of disavowal of it.” Rood Co. v. Board of Pub. Instruction, 102 So.2d 139 (Fla.1958); Steinberg v. Bay Terrace Apartment Hotel, Inc.,375 So.2d 1089 (Fla. 3d DCA 1979) (“[T]he remedy of rescission is clearly not favored by the courts, particularly when the complaining party has failed to promptly deny the contract as binding upon him and failed to follow a course of conduct manifesting a disavowal of it”). By staying silent or acting as if the contract is still in effect, the party seeking rescission “will be bound by the contract in the same manner as if the [basis for rescission] had not occurred.” Rood Co. v. Board of Pub. Instruction, 102 So.2d 139 (Fla.1958). AVVA-BC, LLC v. Amiel, 25 So. 3d 7 (Fla. 3d DCA 2009) (refusing rescission when purchase of business where landlord did not accept assignment but the business continued to operate).

Continue reading →

Published on: June 3, 2020

MIAMI BUSINESS LITIGATION: TRADE SECRET DOES NOT NECESSARILY REQUIRE A CONFIDENTIALITY AGREEMENT

By Mavrick Law Firm

Trade secrets and confidential information can lose protection under the Florida Uniform Trade Secrets Act (FUTSA) when they are disclosed to third parties. One way to maintain protection of this information under FUTSA, is by entering into a confidentiality agreement with the third parties that will receive the information. When trade secrets or confidential information is disclosed to employees without a confidentiality agreement, the information does not necessarily lose trade secret protection. Peter Mavrick is a Miami business litigation lawyer who represents clients in trade secret litigation in Miami, Fort Lauderdale, Boca Raton, and Palm Beach.

A company seeking to protect its confidential information under FUTSA must show that the confidential information at issue was “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” See § 688.002(4)(b), Florida Statutes. Disclosing information to third parties can defeat the requisite element of secrecy under either FUTSA when the party given the confidential information is not informed of the confidential nature of the information or otherwise has no obligation to keep the information confidential. “Disclosing the ‘information to others who are under no obligation to protect the confidentiality of the information defeats any claim that the information is a trade secret.’” M.C. Dean, Inc. v. City of Miami Beach, Florida, 199 F. Supp. 3d 1349 (S.D. Fla. 2016). The underlying principle behind this rule is that something cannot be a trade secret if it is freely shared with outsiders.

“This necessary element of secrecy is not lost, however, if the holder of the trade secret reveals the trade secret to another ‘in confidence, and under an implied obligation not to use or disclose it.’” Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974); see Advantor Sys. Corp. v. DRS Tech. Services, Inc., 678 Fed. Appx. 839 (11th Cir. 2017) (“[T]rade secret protection is not lost when a company shares its trade secrets with an entity that has a duty to maintain the secrecy or limit access to the disclosed document”).

Continue reading →

Published on: May 31, 2020

MIAMI BUSINESS LITIGATION: DECEPTIVE AND UNFAIR TRADE PRACTICES AND “PASS-THROUGH” CHARGES

By Mavrick Law Firm

The Florida Deceptive and Unfair Trade Practices Act (FDUTPA) provides a means for customers to sue a business which deceptively charges additional fees. When a business conducts itself in an unlawful, unfair, or deceptive manner to its own customers, the business’ competitor may also assert a FDUTPA claim for the harm that these practices indirectly cause. Peter Mavrick is a Miami business litigation attorney, and represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. The 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.

FDUTPA is a Florida statute that permits litigants to sue if they were damaged from “[u]nfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce.” § 501.204, Florida Statutes. “An unfair practice is ‘one that ‘offends established public policy’ and one that is ‘immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.’” PNR, Inc. v. Beacon Prop. Mgmt., Inc., 842 So. 2d 773 (Fla. 2003). “[D]eception occurs if there is a ‘representation, omission, or practice that is likely to mislead the consumer acting reasonably in the circumstances, to the consumer’s detriment.” Millennium Communications & Fulfillment, Inc. v. Office of the Attorney Gen., 761 So.2d 1256 (Fla. 3d DCA 2000). “A deceptive or unfair trade practice constitutes a somewhat unique tortious act because, although it is similar to a claim of fraud, it is different in that, unlike fraud, a party asserting a deceptive trade practice claim need not show actual reliance on the representation or omission at issue.” State, Office of Attorney Gen., Dept. of Legal Affairs v. Commerce Commercial Leasing, LLC, 946 So. 2d 1253 (Fla. 1st DCA 2007). “The issue when considering a claim under the Act is whether the alleged practice was ‘likely to deceive a consumer acting reasonably in the same circumstances.’” Id.

One type of potentially deceptive practice is “pass-through” charges. Florida businesses will often apply separate charges in addition to the agreed upon price at the point of sale or in an invoice, or otherwise disguise the basis for a charge. Sales tax is the most common pass-through charge, but a business can charge the customer for nearly any expense. There is nothing inherently unlawful about these types of charges; however, the charge must be accurately presented to the consumer and not otherwise be contrary to the parties’ contract. An example of a deceptive practice may be when businesses portray fabricated charges as pass-through business expenses, but then keep the monies for themselves. E.g. Bowe v. Pub. Storage, 1:14-CV-21559-UU, 2014 WL 12029270 (S.D. Fla. July 2, 2014) (finding that it is a violation of FDUTPA for a company to portray an insurance charge as if it was being sent to the insurer, when in fact much of it was being retained). Such charges can trick consumers into believing that the price of a product or service is lower than what it truly is or that the additional charges are universally incurred in the industry like a tax.

Continue reading →

Published on: May 29, 2020

FORT LAUDERDALE BUSINESS LITIGATION: DECEPTIVE AND UNFAIR TRADE PRACTICES AND “PASS-THROUGH” CHARGES

By Mavrick Law Firm

Another article discusses how a business can lawfully sue a competitor under the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) when the competitor issues deceptive charges against its own customers. Several recent cases have explained that whether a charge is unlawfully deceptive is highly dependent on the exact language of the charge. Minor nuances as to the way a charge is phrased can make the difference between conduct that is unlawfully deceptive under FDUTPA and conduct which is legitimate and lawful. Peter Mavrick is a Fort Lauderdale business litigation lawyer, and also represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The 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.

A company may violate FDUTPA by issuing charges to its customers which deceptively appear to be taxes or fees that are being passed to the customer. Charges such a service charges, filing fees, and sales tax may properly be passed to the customer as long as those charges accurately reflect what they are for and paid for that purpose. As an example, a company may not charge a customer for a sales tax when the product or service purchased is not actually subject to sales tax.

Generally, a company cannot portray a charge as being a pass-through expense when the moneys paid are being retained by the company. Latman v. Costa Cruise Lines, N.V., 758 So. 2d 699 (Fla. 3d DCA 2000) (“We […] conclude that where the cruise line bills the passenger for port charges but keeps part of the money for itself, that is a deceptive practice under FDUTPA. Reliance and damages are sufficiently shown by the fact that the passenger parted with money for what should have been a ‘pass-through’ port charge, but the cruise line kept the money”); Harrison v. Lee Auto Holdings, Inc., 45 Fla. L. Weekly D1038 (Fla. 1st DCA Apr. 29, 2020) (finding that charging a fee which appears to be a fee paid to the government, when some of that money was in fact retained as profit, is unlawful).

Continue reading →

Published on: May 22, 2020

MIAMI BUSINESS LITIGATION: BREACH OF CONTRACT AND “APPARENT AUTHORITY”

By Mavrick Law Firm

Florida businesses are responsible for the contractual obligations arising from agreements that the business authorized their employees to enter. In certain circumstances, however, a Florida business can be responsible for contractual obligations even when the employees lacked actual authority to agree to the contract. The legal doctrine of “apparent authority” can apply to make a contract binding on the company under certain circumstances giving an employee the appearance of authority to bind a company to a contract. Peter Mavrick is a Miami business litigation attorney, and also represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. The 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.

Corporations and limited liability companies can only act by and through their authorized agents, such as employees or company officers. An employee of a company can only act with the authority that he or she has been given. “As a general rule, a principal may be held liable for the acts of its agent that are within the course and scope of the agency.” Roessler v. Novak, 858 So. 2d 1158, 1161 (Fla. 2d DCA 2003). Sometimes, an employee of a company will exceed the authority given to her and enter into unauthorized contracts which purport to bind the company.

Even if the company had never actually given its employee the authority to enter into a contract, that company may still be responsible for the obligations in the contract if the company allowed or caused conditions that gave the appearance to an outside party that the employee had the authority to enter into the contract. “Under Florida law, actual authority is not necessarily a precondition of an agency relationship.” Borg-Warner Leasing, a Div. of Borg-Warner Acceptance Corp. v. Doyle Elec. Co., Inc., 733 F.2d 833 (11th Cir. 1984). “An agent’s authority need not be conferred in express terms, but may be implied or apparent under justifying circumstances.” All Seasons Condo. Ass’n, Inc. v. Patrician Hotel, LLC, 274 So. 3d 438 (Fla. 3d DCA 2019).

Continue reading →

Published on: May 18, 2020

PALM BEACH NON-COMPETE AGREEMENTS: NON-COMPETE AGREEMENTS MAY NOT BAR ORDINARY COMPETITION

By Mavrick Law Firm

Non-compete agreements are often drafted with broad provisions to prevent a business’s former employee from competing for its customers for a period of time. To be enforceable non-compete agreements must be based on a legitimate business interest, such as trade secrets, confidential information, and substantial customer relationships. However, a legitimate business interest must be harmed by the act that is allegedly violating the non-compete agreement. For example, if a sales person is barred from competing against its former employer, the agreement may not be enforceable to bar the worker from holding such a non-sales position because it may not harm a legitimate business interest. Peter Mavrick is a Palm Beach non-compete attorney and business litigation lawyer who has substantial experience with non-compete litigation, including injunction proceedings. The Mavrick Law Firm also practices non-compete litigation and business litigation in Fort Lauderdale, Boca Raton, and Miami.

In the case of Thyssenkrupp Elevator Corp. v. Hubbard, 2:13-CV-202-FTM-29, 2013 WL 5929132, (M.D. Fla. Nov. 4, 2013), ThyssenKrupp Elevator Corporation (ThyssenKrupp) provided components, systems, and customized service programs for elevators, escalators, and moving walks. Larry Hubbard, Jr. (Hubbard) was hired by ThyssenKrupp’s predecessor, General Elevator Sales and Service, Inc. (GESS). Hubbard signed GESS’s Employment Agreement, as a condition of his employment. GESS’s Employment Agreement contained non-compete and non-solicitation provisions which for a period of 2 years, prohibited Hubbard from providing a product or service which “resembles” or competes with a product or service he was involved with for GESS; and prohibited Hubbard from soliciting GESS’s customers.

GESS merged with ThyssenKrupp, leaving ThyssenKrupp as the surviving company. Hubbard later argued that his Employment Agreement was not transferred along with the stock to ThyssenKrupp, resulting in its exclusion from the merger. Hubbard asserted that ThyssenKrupp did not have standing to enforce the Employment Agreement because his Employment was not specifically included in the merger agreements. The trial court disagreed because the merger included all assets of GESS, whether disclosed in a prior transaction or not.

Continue reading →