FLORIDA NON-COMPETE AND TRADE SECRET LITIGATION: FAILURE TO PROVE DAMAGES CAN DEFEAT LAWSUIT

To protect their trade secrets and other valuable confidential information, former employers have sued former employees for breach of their non-compete agreements, along with additional causes of action. The factual basis for these additional causes of action and damages therefrom, are typically based on the same factual allegations that form the action for breach of the non-compete agreement. When the former employer fails to provide competent evidence to prove damages arising from the acts alleged in the primary cause of action, then these additional causes of action may not survive a former employee’s motion for summary judgment to obtain dismissal of the lawsuit. Peter Mavrick has extensive experience with litigation regarding non-compete agreements and misappropriation of trade secrets and other confidential information.

In the case of Crom, LLC v. Preload, LLC, 2019 WL 1440907 (N.D. Fla. Mar. 31, 2019), Plaintiff Crom, LLC (“Crom”) filed a lawsuit against its former employee, Phuong Bacon (“Bacon”), to enforce a non-compete agreement and for damages caused by Bacon’s alleged breach of an employment contract. Crom also sued Bacon for breach of her common law duty of loyalty. Crom sued Bacon’s subsequent employer, Preload, LLC (“Preload”), for alleged tortious interference with Crom’s business relationship with Bacon, civil conspiracy, and unfair competition. All of Crom’s claims stemmed from allegations that Bacon misappropriated trade secrets and confidential information when she went to work for Preload, Crom’s competitor. Defendants filed a motion for summary judgment to obtain dismissal of Crom’s lawsuit.

Crom built prestressed concrete tanks (“PCT”) to store liquids, most often water or wastewater. Crom’s corporate representative testified that Crom’s “internal design procedures” and expertise from a design standpoint are what distinguish Crom from other companies. Preload, the competitor involved in this lawsuit, commonly would bid against Crom for PCT design and construction projects in the Southeastern United States. It was undisputed that there were few companies that bid for these projects. In addition to its PCT work, Preload was developing another tank design, a Liquefied Natural Gas (“LNG”) storage tank. It was undisputed that Crom did not build or design LNG tanks, and that LNG tanks are subject to a separate industry design code. Crom argued, however, that an LNG tank can be built with a PCT option, and in that instance, the code requires the LNG tank to be designed in accordance with the same specifications, which are also used in PCTs.

Bacon worked as an engineer on Crom’s PCT design team. Bacon gained all of her experience and specialized knowledge regarding prestressed concrete and PCT design from Crom. At the end of March 2016, she left to work for Preload on its design of LNG tanks using prestressed concrete. Crom filed this lawsuit in June 2016, after Bacon went to work for Preload. Crom alleged that Bacon’s employment with Preload violated her non-compete agreement with Crom. Crom argued that Bacon misappropriated Crom’s trade secrets and other confidential information when she went to Preload; and that Preload encouraged the breach and interfered with Crom’s business relations to gain an unfair advantage in the PCT market.

Crom contended Preload’s employment of Bacon gave Preload an unfair advantage that caused Crom damages in the form of lost profits. Crom argued that, since Bacon began working with Preload, Preload reduced its bid prices on available projects. Crom contended that it lost four subcontract bids for prestressed concrete tank projects because of Preload’s low bids. Crom also argued that it lost profits on two other projects, even though Crom won the bid, because its profit margin was reduced due to Preload’s reduced bidding in the market. Crom asserted the theory that the only reason that Preload could have suddenly reduced its PCT bid prices, was because Preload was using confidential information from Bacon.

Crom’s allegations of misappropriation of confidential information were based on Crom’s speculation that there was a causal link between Bacon’s employment, design experience or knowledge of Crom’s programs and Preload’s lower bids on PCT projects. The district court concluded that there was no evidence to suggest that Bacon was involved in Preload’s PCT bidding process on these projects, and even assuming her knowledge of Crom’s PCT design programs could have been revealed to Preload, there was no basis for a reasonable inference that this knowledge would have reduced Preload’s bids or prices.

In addition, Bacon and Preload presented uncontroverted evidence that, on two projects, Crom was not the second lowest bidder and thus would not have won the bid even in Preload’s absence. The federal court held that there was no issue of fact from which it could be inferred that Crom’s alleged losses were attributable to Bacon’s employment with Preload. The district court granted defendants’ motion for summary judgment as to Crom’s claims for misappropriation of confidential information, breach of duty of loyalty, tortious interference, unfair competition and civil conspiracy based on Crom’s lack of evidence of misappropriation of confidential information and damages. The federal court denied Bacon and Preload’s motion for summary judgment on Crom’s claim seeking injunctive relief for breach of the non-compete agreement because there were genuine issues of material fact in dispute regarding the alleged breach of the covenant.

Peter Mavrick practices non-competition covenant and trade secret litigation in Broward, Miami-Dade, and Palm Beach Counties, Florida. This article does not serve as a substitute for legal advice tailored to a particular situation. Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311.