FORT LAUDERDALE BUSINESS LITIGATION: TRADE SECRET ACT PREEMPTION OF CLAIMS UNDER THE FLORIDA DECEPTIVE AND UNFAIR TRADE PRACTICES ACT

Plaintiffs may be tempted to bring as many causes of action into a legal complaint that the facts may allow. Diversity of causes of action in business litigation can provide the plaintiff with different types of remedies and help a suit endure should a legal defect arise concerning any particular cause of action. However, cases involving the Florida Uniform Trade Secrets Act (FUTSA) can preempt many other related causes of action, including those made under the Florida Deceptive and Unfair Trade Practices Act (FDUTPA). 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.

FUTSA provides a way for owners of trade secrets to sue parties who misappropriate those trade secrets or use those trade secrets. § 688.002, Fla. Stat. Depending upon the defendant’s conduct and culpability, a business litigation plaintiff suing under FUTSA can be awarded damages, exemplary damages, an injunction against use or disclosure of trade secrets, and/or attorneys’ fees.

FDUTPA permits parties to sue for “[u]nfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.” § 501.204(1), Fla. Stat. A plaintiff suing under FDUTPA can claim damages, an injunction, and attorneys’ fees. § 501.211, Fla. Stat.

Because FUTSA and FDUTPA both often involve commerce and competition, these business litigation causes of action may apply to the same case. A person who unfairly competes using the trade secrets of another can appear to violate both statutes. However, FUTSA has a preemption provision which can preempt related causes of action, such as FDUTPA.

(1) Except as provided in subsection (2), ss. 688.001-688.009 displace conflicting tort, restitutory, and other law of this state providing civil remedies for misappropriation of a trade secret.

(2) This act does not affect:

(a) Contractual remedies, whether or not based upon misappropriation of a trade secret;

(b) Other civil remedies that are not based upon misappropriation of a trade secret; or

(c) Criminal remedies, whether or not based upon misappropriation of a trade secret.

§ 688.008, Fla. Stat.

“[I]f the allegations of trade secret misappropriation alone comprise the underlying wrong” in the subject cause of action, then it is preempted by FUTSA. Am. Honda Motor Co., Inc. v. Motorcycle Info. Network, Inc., 390 F. Supp. 2d 1170 (M.D. Fla. 2005). A cause of action is not preempted unless it explicitly states that it is exclusively based upon a misappropriation of trade secrets. See Alphamed Pharm. Corp. v. Arriva Pharm., Inc., 391 F. Supp. 2d 1148 (S.D. Fla. 2005) (“Although there are common factual allegations in Counts V and VII, [plaintiff] is correct that it does not specifically allege that the misappropriation of trade secrets forms the basis of the unfair competition claim. Therefore, the UTSA does not preempt [plaintiff’s] unfair competition claim, and [plaintiff] has stated a claim for common law unfair competition”).

Where the business litigation asserts violations of FDUTPA, such claims are preempted when they arise only from the theft or use of trade secrets. Am. Registry, 2014 WL 12606501 (dismissing FDUTPA claim based on FUTSA preemption where claim was based on allegations defendant used trade secret information to solicit and steal customers); Dev. Techs., LLC v. Valmont Indus., Inc., 2016 WL 7320908 (M.D. Fla. July 18, 2016) (dismissing FDUTPA claim as preempted where plaintiff alleged as part of the claim that Defendants “willfully and maliciously misappropriated [plaintiff’s] Confidential Information and ideas”).

Critically, if the method or manner undertaken to misappropriate a trade secret is independently unlawful, then it is not preempted. As FDUTPA makes deceptive and unfair practices in business transactions unlawful, FUTSA does not preempt FDUTPA when other deceptive and unfair practices are alleged which are independent of the theft or use of trade secrets. Am. Honda Motor Co., Inc. v. Motorcycle Info. Network, Inc., 390 F. Supp. 2d 1170 (M.D. Fla. 2005) (finding dismissal of FDUTPA claim improper when the plaintiff claims that misrepresentation was used to acquire the trade secrets and induced the plaintiff into continuing to do business with defendants, stating, “[i]t appears at this stage that these three claims are not entirely dependent upon the FUTSA claim. Accordingly, because these claims are materially distinct from the misappropriation of trade secrets claim in count one, they are not preempted”); Fin. Info. Techs., Inc. v. iControl Sys., USA, LLC, 8:17-CV-190-T-23MAP, 2018 WL 3391379 (M.D. Fla. June 12, 2018), report and recommendation adopted as modified, 8:17-CV-190-T-23SPF, 2018 WL 4771060 (M.D. Fla. Oct. 3, 2018) (finding that the allegation that misleading statements made to clients to persuade them to change firms are sufficient to distinguish a FDUTPA count from a FUTSA claim for the purposes of preemption).

FUTSA can preempt other business litigation claims asserting theft or use of trade secrets. FDUTPA claims are no exception. To avoid preemption, the FDUPTA cause of action must be based on unfair or deceptive trade practices that are independent of trade secret misappropriation. Peter Mavrick is a Fort Lauderdale business litigation attorney who also practices business litigation in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.