FLORIDA TRADE SECRET LAW: WITHOUT A NON-COMPETE AGREEMENT, AN INJUNCTION PROHIBITING USE OF TRADE SECRETS MAY NOT ENJOIN COMPETITION

The Florida Uniform Trade Secrets Act (“FUTSA”) requires courts to take reasonable steps to preserve the secrecy of trade secrets. Fla. Stat. § 688.006. Injunctive relief may be ordered to preserve trade secrets based on actual or threatened misappropriation, as well as, compelling parties to perform specific acts. Fla. Stat. § 688.003. FUTSA, however, may not be used as a vehicle to restrict competition. In Hatfield v. AutoNation, Inc., 939 So.2d 155 (Fla. 4th DCA 2006), the Florida’s Fourth District Court of Appeal held that FUTSA deals with misappropriation, but not with alleged violations of non-competion agreements. Peter Mavrick is a Fort Lauderdale non-compete lawyer and trade secret lawyer who has extensive experience in trade secret litigation.

An example of this circumstance is the case of Norton v. American LED Technology, Inc., 245 So.3d 968 (Fla. 1st DCA 2018), where American LED Technology, Inc. (“American”) filed a lawsuit against Steve Norton (“Norton”), its former employee. American filed a motion for a temporary injunction based on an alleged violations of FUTSA and of a non-compete agreement. After a hearing on the motion for temporary injunction, the trial court entered an order granting American’s motion based only on the alleged FUTSA violation. The trial court’s order stated that its findings were “separate and independent from any breach of contract claim” and did not make any other reference to the non-compete agreement. The temporary injunction required, among other things, that Norton could not compete with American. Norton immediately appealed.

American contended that Hatfield v. AutoNation, Inc. demonstrated that courts have discretion to restrain competition when granting injunctive relief under FUTSA. In Hatfield, the appellate court affirmed an order granting a temporary injunction that “included a brief respite from employment as part of the court’s fashioning a remedy that would aid [the plaintiff] in minimizing the potential damage by disclosure of time sensitive trade secrets.”

Norton v. American LED Technology, Inc., however, found that the trial court’s order prohibited Norton from engaging “in any business in direct competition with American” for one year or the conclusion of litigation, whichever came first and the injunction contained no geographical limitations on this prohibition. The appellate court did not find one year to be a “brief respite,” like the time period in Hatfield. There was also no evidence that any trade secrets were particularly time sensitive. The appellate court, therefore, reversed the portion of the trial court’s injunction that prohibited Norton from direct competition pursuant to the FUTSA.

Similarly, in Thomas v. Alloy Fasteners, Inc., 664 So.2d 59 (Fla. 5th DCA 1995), the trial court entered a temporary injunction based on an alleged FUTSA violation which barred the defendant from, among other things, contacting or soliciting Alloy Fasteners, Inc.’s (“Alloy”) customers. There was no non-competition agreement between the parties. The appellate court held that the trial court went too far when it ordered Daniel Thomas (“Thomas”), Alloy’s former employee, not to contact or solicit Alloy’s customers. There was no evidence that Thomas used Alloy’s trade secrets to lure Alloy’s customers away. Kevin Wilcox, Alloy’s employee, testified that customer lists were obtained by “telemarketing, phones, making calls…. You get a list, and start making cold calls, and see what the people need for supplies.” The appellate court held that there was nothing secret about this method, because the names were available from public sources and there was no secret as to the class of likely customers. Thomas v. Alloy Fasteners, Inc. held that in the absence of a noncompete contract, Thomas was free to contact old customers. The appellate court stated that “[c]ompetition for business by a competitor is not an actionable interference, even if intentional…. This kind of competition for business is to be expected from former employees who are not bound by a non-compete contract.”

The federal district court in Fortiline, Inc. v. Moody, 2013 WL 12101142 (S.D. Fla. Jan. 7, 2013), distinguished its ruling from Thomas, because Thomas specifically found that “[t]here was no evidence that [the defendant] used trade secrets to lure [the plaintiff’s] customers away….” Conversely, in Fortiline, Inc. v. Moody, there was evidence that the defendants used Fortiline, Inc.’s trade secrets, its customer contact and pricing information, to draw customers away from Fortiline, Inc. and over its competitor, and that this took place while defendants were employees of Fortiline, Inc. The district court found that this was an instance where a former employee actively obtained trade secrets through improper means. Defendant downloaded Fortiline, Inc’s customer data in contravention of Fortiline, Inc.’s rules and policies to benefit a competitor company. The federal court specifically stated that it did not ignore economic policy favoring free competition, rather explained that free competition must be based on fair competition. Fortiline, Inc. v. Moody held that defendants should not be allowed to profit from their wrongdoing at Fortiline, Inc.’s detriment. The court stated that “[t]his is precisely the reason FUTSA and similar Florida statutes regulate participant conduct in the marketplace.”

Peter Mavrick is a Fort Lauderdale non-compete attorney and trade secret attorney. This article does not serve as a substitute for legal advice tailored to a particular situation.