Articles Posted in Business Litigation

Published on: January 12, 2020

FLORIDA NON-COMPETE AGREEMENTS: UNDEFINED TERMS IN NON-COMPETE AGREEMENTS MAY LIMIT THE PROTECTION AFFORDED BY THE CONTRACT

An undefined term in a non-compete agreement creates an ambiguity in the contract, and therefore uncertainty in a court’s interpretation of the term. When a term is left undefined, Florida law requires courts to give the term its ordinary meaning. Although the terms “compete” and “line of business” may seem self-explanatory, the context in which they are to apply may require further definition. Peter Mavrick is a Miami non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.

In the case of Circuitronix, LLC v. Kapoor, 748 Fed.Appx. 242 (11th Cir. 2018), Sunny Kapoor (“Kapoor”) was the Assistant CEO of Circuitronix, LLC (“Circuitronix”) from October 2012 until his termination in March 2015. Kapoor’s employment was subject to a series of employment agreements. After his termination, Circuitronix filed a lawsuit against Kapoor and alleged that he violated the terms of the parties’ non-compete agreement. Kapoor counterclaimed against employer and Rishi Kukreja (“Kukreja”), its chief executive officer, and alleged breach of employment contract, unlawful retaliation, civil theft and unpaid wages.

The parties resolved their claims in mediation and on December 1, 2015 signed a mediated settlement agreement (“Settlement Agreement”). The Settlement Agreement incorporated the Mediated Settlement Term Sheet by reference and prohibited Kapoor from competing “with Circuitronix, anywhere in the world, for a period of 3 years starting from September 15, 2015.” The non-compete agreement explicitly applied “to all lines of business in which Circuitronix engaged” during the time of Kapoor’s employment. The Settlement Agreement was formally approved by the district court two days later.

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Published on: January 3, 2020

FLORIDA TRADE SECRET AND NON-COMPETE AGREEMENT LITIGATION: TRADE SECRETS MUST BE CLOSELY GUARDED TO BE PROTECTABLE UNDER FLORIDA AND FEDERAL LAW

By Mavrick Law Firm

For a business to be to protect its confidential information as a protectable trade secrets under the Florida Uniform Trade Secret Act, the business must preserve the secrecy of its confidential information. There are no hard and fast rules that must be followed for a business to protect its confidential information as a trade secret. “No single ‘step’ taken to maintain the secrecy of the information secrecy will be determinative; but if the claimant can establish a consistent approach to keeping the information ‘secret’ it will go along way to satisfying this element of the statutory definition.” Gary S. Gaffney and Maria E. Ellison, A Primer on Florida Trade Secret Law: Unlocking the “Secrets” to “Trade Secret” Litigation, 11 U. Miami Bus. L. Rev. 1 (2003). Peter Mavrick is a Fort Lauderdale trade secret attorney, non-compete attorney, and business litigation attorney who represents businesses in trade secret litigation, non-compete agreement litigation, and other business litigation.

A recurring issue in non-compete covenant litigation is whether a trade secret exists and justifies the restrictive covenant. Under Florida Statutes § 542.335(b)2), a non-compete can be based on a legitimate business interest of a trade secret. If a trade secret is a proven legitimate business interest under Florida’s non-compete statute, the consequences are severe for the opposing party due to the expanded time-frame the statute allows to enforce a non-compete. Section 542.335(e), Florida Statutes, provides that “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 5 years or less and shall presume unreasonable in time any restraint of more than 10 years. All such presumptions shall be rebuttable presumptions.” Because Florida law accords protection to genuine trade secrets and because of the potentially lengthy period of a non-compete based on trade secrets, parties in litigation will often scrutinize whether the alleged trade secrets were closely guarded to ensure and maintain their status as protectible trade secrets.

Trade secrets are defined under § 688.002(4), Florida Statutes, as:

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Published on: December 31, 2019

FLORIDA BUSINESS LITIGATION: CORPORATE OWNERSHIP WHEN NO STOCK CERTIFICATES WERE ISSUED

By Mavrick Law Firm

It is a fundamental premise that ownership of a corporation is evidenced by stock certificates. However, this is not always the case with small, closely held corporations that do not sell stock on a market. Sometimes those corporations do not issue certificates. To accommodate that realty, Florida law allows for the equitable or beneficial ownership of stocks. Indeed, Florida statute section 607.0626 allows issuance of shares of stock without certificates, provided that the articles of incorporation and bylaws do not provide otherwise. The law regarding equitable and beneficial ownership of stocks, however, is grounded in case law. Peter Mavrick is a Fort Lauderdale business litigation attorney who has extensive experience in representing the interests of businesses and business owners.

This concept of stock ownership is an important factor when someone believes that he or she has an ownership interest in a corporation but was not issued shares, and he or she wants to sue the corporation. By showing that the person is an equitable owner of stock, that person may acquire standing to sue the corporation in a derivative action or an action to dissolve the corporation. As Florida’s Third District Court of Appeal explained in Kaplus v. First Continental Corporation, 711 So. 2d 108 (Fla. 3d DCA 1998), “Florida courts have, to date, apparently aligned themselves with these jurisdictions which recognize that strict record ownership is not necessary and that holders of equitable or beneficial interest in shares have standing to sue.”

The determination of whether someone owns stock that was not transferred by certificate is an issue of fact and can become quite complicated. An example is Acoustic Innovations, Inc. v. Schafer, 976 So. 2d 1139 (Fla. 4th DCA 2008). The company Acoustic Innovations was owned by Mr. Miller. One of his employees was Mr. Schafer. While Mr. Schafer was an employee of Acoustic Innovations, Mr. Miller sent him a letter promising to give him thirty percent interest in the corporation upon sale or merger of the company. Mr. Schafer signed the letter. Mr. Miller later terminated Mr. Schafer’s employment and paid him a severance that Mr. Schafer deemed insufficient, due to the letter agreement.

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Published on: December 27, 2019

FLORIDA TRADE SECRET LITIGATION: TRADE SECRET INJUNCTIONS MUST BE SPECIFIC ENOUGH FOR AN ORDINARY PERSON TO UNDERSTAND

By Mavrick Law Firm

Protection of trade secrets and proprietary information from a business’ competitors can be a critical part of owning a company. An injunction may become necessary to stop a competing company from possessing or using those trade secrets for their own benefit. The injunction, however, must be specific enough for the enjoined party to understand what they are no longer allowed to do. Peter Mavrick is a Fort Lauderdale trade secret attorney who represents businesses in trade secret litigation and other business litigation.

In American Red Cross v. Palm Beach Blood Bank, Inc., 143 F. 3d 1407 (11^th Cir. 1998), Palm Beach Blood Bank, Inc. (“Palm Beach”) opened a branch in Miami. Palm Beach hired a person for the Miami Branch, who previously worked for the American Red Cross (“Red Cross”). Palm Beach and Red Cross competed for sponsors and donors. The former employee took a donor list from Red Cross and provided it to Palm Beach. Palm Beach then contacted the persons on Red Cross’ list to recruit its blood donors.

Red Cross filed a lawsuit against Palm Beach and alleged that its donor lists were trade secrets that Palm Beach illegally misappropriated. The district court granted Red Cross’ motion for a temporary restraining order (“TRO”) against Palm Beach. The TRO prohibited Palm Beach from, among other things, “soliciting donations from any Red Cross donor” or “in any way adversely affecting Red Cross’s reputation or goodwill.” The district court held evidentiary hearings on Red Cross’s motion to convert the TRO into a preliminary injunction. Palm Beach moved to modify the TRO to allow Palm Beach to accept donations from persons whom it had not solicited from any Red Cross list. The district court denied the motion to modify the TRO, without explanation. The district court entered a broad preliminary injunction against Palm Beach.

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Published on: December 22, 2019

FLORIDA NON-COMPETE AGREEMENTS: ATTORNEY’S FEES AND COSTS MAY NOT BE AWARDED FOR AIDING AND ABETTING VIOLATION OF NON-COMPETE AGREEMENTS

By Mavrick Law Firm

It is common in lawsuits regarding non-compete agreements for plaintiffs to sue the new enterprise started by the former employee or the company that hires the former employee, i.e. a third party. Plaintiffs seek to enjoin these third parties from aiding and abetting the violation of the non-compete, as well as, hold them liable for damages, attorney’s fees and costs. Section 542.335(1)(k) states that a court may award attorney’s fees and costs to the prevailing party in any action seeking enforcement of, or challenging the enforceability of, a non-compete agreement. Third parties who aid and abet former employees in violation of a non-compete agreement, however, may not be subject to an award attorney’s fees and costs under the statute. Although the third parties may have aided and abetted the former employee in violating the non-compete agreement, they are not parties to the contract. As such there may not be legal authority to support an award of attorney’s fees against the third parties. Peter Mavrick is a Fort Lauderdale non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.

An example of this circumstance is the case of Bauer v. DILIB, Inc., 16 So. 3d 318, 319–22 (Fla. 4th DCA 2009), where DILIB, INC., d/b/a Incredibly Edible Delites (hereinafter “DILIB”) and two employees entered into non-compete agreements which stated, in pertinent part, that for two years after the employees’ last date of employment, they would not compete with the DILIB’s business. The employees later terminated their employment and were hired a few months later by Denise Bauer (“Bauer”), a competitor.

DILIB filed a lawsuit against the former employees and Bauer. DILIB also filed a motion for a temporary injunction to prevent the employees from violating the non-compete agreement, and to enjoin Bauer from aiding and abetting their violation. Additionally, DILIB pled entitlement to recover its attorney’s fees and costs from the two employees and Bauer. Section 542.335(1)(k) of the Florida Statutes provides in pertinent part, that, “[i]n the absence of a contractual provision authorizing an award of attorney’s fees and costs to the prevailing party, a court may award attorney’s fees and costs to the prevailing party in any action seeking enforcement of, or challenging the enforceability of, a restrictive covenant.”

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Published on: December 15, 2019

FLORIDA BUSINESS LITIGATION: FLORIDA AND FEDERAL COURTS BROADLY INTERPRET AMBIGUOUS ARBITRATION CONTRACTS IN FAVOR OF REQUIRING ARBITRATION

By Mavrick Law Firm

Businesses often prefer to resolve their disputes by arbitration rather than litigation. When two parties who have entered into an agreement to arbitrate their disputes, that agreement to arbitrate is usually enforceable by either party. Frequently, one party may renege on its agreement to arbitrate for strategic reasons and attempt to avoid arbitrating the dispute in Court. The Federal Arbitration Act (“FAA”) and its Florida counterpart, the Florida Revised Uniform Arbitration Act (“FRUAA”), have been interpreted to give preferred treatment to agreements to arbitrate. As a result, it is particularly difficult for litigants to avoid arbitration. Peter Mavrick is a Fort Lauderdale business litigation attorney who has extensive experience in representing the interests of businesses and business owners in arbitration.

“An agreement to arbitrate is an agreement to proceed under arbitration and not under court rules.” Suarez–Valdez v. Shearson/American Express, Inc., 858 F.2d 648 (11th Cir. 1988). Florida businesses have strong incentives to enforce agreements to arbitrate. Arbitration can be swifter and less costly than traditional litigation. Parties in arbitration generally have less power to seek potentially costly and invasive discovery on the other party. “[A] party’s ability to take depositions and to propound discovery requests is generally much more limited in arbitration than it is under the Florida or the federal civil rules.” Green Tree Servicing, LLC v. McLeod, 15 So. 3d 682 (Fla. 2d DCA 2009).

Whether a particular dispute should be arbitrated depends on what the parties agreed to arbitrate. “The intent of the parties to a contract, as manifested in the plain language of the arbitration provision and contract itself, determines whether a dispute is subject to arbitration. Courts generally favor such provisions, and will try to resolve an ambiguity in an arbitration provision in favor of arbitration.” Jackson v. Shakespeare Found., Inc., 108 So. 3d 587 (Fla. 2013).

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Published on: December 13, 2019

FLORIDA TRADE SECRET LITIGATION: CLAIMS OF TRADE SECRET MISAPPROPRIATION MAY PREEMPT FILING ALTERNATIVE CLAIMS

By Mavrick Law Firm

Plaintiffs in litigation often allege as many types of claims as are applicable to the facts of their case. This practice essentially allows a party to plead alternative claims for different types of relief based on the same nucleus of facts. Under Florida law, a trade secret claim may preempt, i.e. supersede or displace, pleading alternative claims that are not materially different from a plaintiff’s claims for misappropriation of trade secrets. Lawsuits that include such alternative claims may be subject to dismissal. Peter Mavrick is a Fort Lauderdale trade secret lawyer who represents businesses in trade secret litigation and other business litigation.

In Sentry Data Systems, Inc. v. CVS Health, 361 F.Supp.3d 1279 (S.D. Fla. 2018), Sentry Data Systems, Inc. (“Sentry”) was a developer and provider of information technology systems that assisted certain hospitals and hospital-like entities—which the parties refer to as “covered entities”—in monitoring compliance with a federal drug pricing program, the 340B Program. Sentry developed tracking software to assist covered entities in managing their prescription inventory, tracking reimbursements and rebates, and maintaining records of eligible drugs and patients. A covered entity may contract with several “contract pharmacies” to dispense its 340B Program-eligible drugs. Sentry and 340B administrators like it, provided tracking software to their covered entity customers and serve as a conduit of information between the covered entity and the contract pharmacy.

CVS Pharmacy, Inc. (“CVS”) is one of these contract pharmacies. Sentry worked directly with CVS to develop contracts between CVS and covered entities, improve CVS’s operational procedures, and develop proprietary software programs for CVS. During this process, CVS was given a “front-row seat to Sentry’s core business model and internal business methods …,” and signed several confidentiality, non-disclosure, and non-compete agreements. As part of this arrangement with CVS, Sentry also worked with Wellpartner, Inc. (“Wellpartner”), a competitor 340B administrator, to provide CVS with operational and software support for administering CVS’s side of the 340B Program where Wellpartner served as the 340B administrator. Wellpartner and Sentry also entered into several non-disclosure and confidentiality agreements.

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Published on: December 8, 2019

FLORIDA NON-COMPETE AGREEMENTS: A NON-COMPETE THAT EXCEEDS TWO YEARS MAY BE JUSTIFIED BY THE INTEREST PROTECTED AND THE IMPORTANCE OF THE FORMER EMPLOYEE

By Mavrick Law Firm

Section 542.335(1)(d), Florida Statutes, states that a non-compete agreement, in an employment context that exceeds two years is subject to a legal presumption that the non-compete period is unreasonable. An employer may overcome this legal presumption in variety of ways. If the court finds that a longer non-compete period is necessary to protect a legitimate business interest, the non-compete period may be enforced. An employment non-compete exceeding two years might also be justified if the particular employee is especially important to the business. Peter Mavrick is a Miami non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.

In the case of Avalon Legal Info. Services, Inc. v. Keating, 110 So. 3d 75, 84 (Fla. 5th DCA 2013), Judy B. Schneider (“Schneider”) a paralegal and owner of a business that provided civil process service training and consulting to Florida’s Sheriffs, bifurcated the business and sold the consulting portion to Gerard F. Keating (“Keating”), an attorney who previously acted as the supervising attorney for the business. Schneider also sold the training and education portion of the business to Avalon Legal Information Services, Inc., a Florida corporation (“Avalon”). Schneider continued to work the consulting contracts with Keating and simultaneously worked for Avalon as an instructor in its training program, as well as co-authored a civil process manual with Avalon’s owner.

On October 1, 2008, Keating and Schneider entered into an independent contractor agreement (“Agreement”). Per the Agreement, Schneider was to continue to perform the same paralegal services for Keating as an independent contractor. The Agreement was to last two years, until September 2010, and was renewable at the parties’ option for an additional two years. The Agreement incorporated a non-compete/non-solicitation covenant. The Agreement permitted Schneider to continue to work as an instructor and manual writer for Avalon. The non-compete covenant prohibited Schneider from competing with and soliciting Keating’s civil process consulting contracts in the State of Florida for three years following the expiration of the Independent Contractor Agreement, i.e. until September 2013.

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Published on: December 4, 2019

FLORIDA TRADE SECRET LITIGATION: AN IDEA OR CONCEPT REQUIRES SUFFICIENT SUBSTANCE TO QUALIFY AS A PROTECTED TRADE SECRET

By Mavrick Law Firm

Many businesses create new business concepts. A business concept, however, does not automatically evolve from an interesting idea to a legally protected trade secret. A concept doesn’t need to be built to be protected, but the concept needs enough substance to be economically valuable and for a court to know what it’s protecting. Peter Mavrick is a Fort Lauderdale trade secret lawyer who represents businesses in trade secret litigation and other business litigation.

In the recent federal court case of ActivEngage, Inc. v. Smith, Middle District Court Case No: 6:19-cv-1638-ORL-37LRH, (M.D. Fla. Nov. 5, 2019), Ted Rubin (“Rubin”) and Defendant Todd L. Smith (“Smith”) co-founded ActivEngage, Inc. (“ActivEngage”), a company which provided messaging services, including live call, email, chat, texting, and advertisement services, to car dealerships throughout North America. Rubin was the President and Smith was the CEO and later worked for ActivEngage in another capacity. Smith also created his own company, 360Converge, as a holding company for new technological ideas. Smith contended that he always presented ideas of value to ActivEngage first.

In 2018, Smith worked on a new product, ActivProspect, a “lead enhancement” product for dealerships. Rubin and Smith’s relationship collapsed because of disagreements over the direction of ActivEngage. ActivEngage terminated Smith’s employment. Smith also resigned from the Board of Directors but continued to hold a third of ActivEngage’s stock. After Smith’s termination, he began developing new technology in form of a customer relationship management platform (“CRM”) for his company, 360Converge. Rubin discovered that Smith was planning to release a product similar to ActivProspect in December 2018.

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Published on: December 3, 2019

FLORIDA BUSINESS LITIGATION: THE PRACTICAL USE OF DECLARATORY JUDGMENT LAWSUITS

By Mavrick Law Firm

It is not uncommon for parties in a business relationship, such as partners, franchisors and franchisees, and employers and employees, to discover that they cannot agree on their rights with respect to each other. Sometimes contracts are ambiguous, or the parties never determined how they would address a particular problem that later arises.

Florida law provides a mechanism to resolve such problems by way of declaratory judgment action. This is a type of lawsuit that seeks clarification of rights rather than money damages. It is most common in insurance coverage disputes, but also is used in business and employment disputes. Peter Mavrick is a Miami business litigation lawyer.

Florida Statute § 86.011 allows Florida courts to render judgment on “the existence, or nonexistence: (1) Of any immunity, power, privilege, or right; or (2) Of any fact upon which the existence or nonexistence of such immunity, power, privilege, or right does or may depend, whether such immunity, power, privilege, or right now exists or will arise in the future.” If a declaratory judgment is sought as to rights provided in a contract, it can be sought “either before or after there has been a breach” of the contract. Fla. Stat. § 86.031.

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