FORT LAUDERDALE BUSINESS LITIGATION: CUSTOMER LISTS AND TRADE SECRETS

Some businesses have experienced loss of customer relationships due to former employees taking customer relationships to competitors. The most obvious way to protect against such a situation is to ensure employees sign a restrictive covenant under Florida Statutes Section 542.335, commonly referred to as a non-compete agreement, prohibiting solicitation of customers and competition that diverts the employer’s customers to a competitor. Sometimes, however, businesses do not have a non-compete agreement with their employees. The law of trade secrets can be used, under certain circumstances, to bar use of confidential information, including customer lists, to divert customers to competitors. 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.

Florida’s Second District Court of Appeal, in East v. Aqua Gaming, 805 So.2d 932 (Fla. 2d DCA 2001), explained what is required to prove a customer list is a trade secret. To qualify as a trade secret, there must be evidence that a customer list “was the product of great expense and effort, that it included information that was confidential and not available from public sources, and that it was distilled from larger lists of potential customers into a list of viable customers for [a] unique business.” Customer lists can constitute trade secrets where the lists are acquired or complied through the industry of the owner of the lists and are not just a compilation of information commonly available to the public.

In trade secret litigation, it is often a major issue whether the alleged trade secret owner took appropriate measures to keep the the subject information a secret. Under Florida’s trade secret statute, section 688.002(4)(b), a trade secret owner must make “efforts that are reasonable under the circumstances to maintain its secrecy.” As to this issue, Florida and federal courts will often look at whether the alleged trade secret owner had signed agreements with its employees to protect the company information. In My Energy Monster, Inc. v. Gawrych, 2020 WL 8224616 (M.D. Fla. 12/18/2020), the federal court faulted the business that owned the alleged trade secret for not taking better measures to protect its trade secrets, and stated in pertinent part: “However, the record demonstrates that Gawrych was not required to sign a non-compete agreement, non-solicitation agreement, nor a confidentiality agreement and that non existed for other Energy Monster employees. According to Defendants, all employees at Energy Monster had access to the customer list…Defendants, further state that [t]here [were] no ‘need to know’ employees and Energy Monster never obtained nondisclosure agreements or confidentiality agreements–even after the parties parted ways and Gawrych offered to sign an NDA…Yet Energy Monster seeks to prevent the very action that such agreements are typically designed to prevent.”

Once a business proves its customer list is a trade secret, the business would need to demonstrate that the former employee used the customer list to solicit or divert customers from his former employer. Under Florida law, there is well-established legal precedent from Florida’s Third District Court of Appeal in Unistar Corp. v. Child, 415 So.2d 733 (Fla. 3d DCA 1982), that a former employee may not use for her own advantage customer lists obtained in confidence or containing trade secrets. However, if there is no non-compete agreement, a former employee is free to contact old customers so long as a trade secret customer list is not being used. For example, Templeton v. Creative Loafing Tampa, Inc., 552 So.2d 288 (Fla. 5th CA 1989), held that a former employee could not be enjoined from using his contacts and expertise gained during prior employment where he knew customers on a first-name basis, did not need a “secret” list to find them, and no great expertise was needed to gain the information. Similarly, Mittenzwei v. Industrial Waste Service, Inc., 618 So.2d 328 (Fla. 3d DCA 1993), reversed an injunction prohibiting a former employee from soliciting her former employer’s customers. The appellate court explained that, “[t]he record reveals that Mittenzwei did not rely on any IWS complied list, but rather utilized the relationships she developed over the years. A former employee ‘cannot be precluded from utilizing contacts and expertise gained during [her] former employment, or even customer lists [she herself] develops.” The Mittenzwei decision concluded that, “[i]n the absence of a noncompetition clause, Mittenzwei is free to contact anyone with whom she had an established a relationship while employed by IWS.”

Peter Mavrick is a Fort Lauderdale business litigation lawyer, and represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.