Tag Archives: Florida Non-Compete Lawyer

Florida Supreme Court Issues Landmark Noncompete Opinion

September 17, 2017 By in Case Summary, Florida Non-Compete Lawyer, Noncompete Tags: , , , , 1 Comment

It’s been a difficult week in Florida, as the state recovers from Hurricane Irma. But the storm did not deter the Florida Supreme Court from issuing what could be one of the most important opinions in the state’s history regarding Section 542.335, Florida Statutes, the statute governing restrictive covenants. I’m still dealing with hurricane-related issues as my office in Miami prepares to re-open tomorrow, which prevents me from relaying an in-depth analysis. But I wanted to pass along some key takeaways. A more comprehensive analysis will follow in the coming weeks.

This opinion, White v. Mederi Caretenders Visitng Services of Southeast Florida, LLC, resolves a District split on the issue of whether referral sources can constitute a legitimate business interest, a prerequisite under the statute. Referral sources are not included in the statute’s list of protectable business interests, but the statute prefaces that list with the words “includes, but is not limited to.”

I previously wrote about the divergent holdings on this issue. I argued that the Florida Supreme Court should give life to the statute’s “includes, but is not limited to” provision by ruling that referral sources can be a legitimate business interest. The opinion ended up mirroring my analysis, holding that “the subject statute protects a plethora of protected legitimate interests far beyond those listed in the subject statute.” Here are a few key points:

  • This opinion has far-reaching implications beyond cases involving referral sources. It makes clear that courts should engage in industry-specific, context-based analysis to determine whether the plaintiff has a legitimate business interest, regardless of whether that interest is listed in the statute:

The illustrative list guides courts in their interpretation of what types of non-enumerated business interests qualify as legitimate under Section 542.335. However, because the statue protects more business interests than those specifically listed, courts must necessarily engage in fact- and industry-specific determinations when construing non-enumerated interests.

  • The opinion repeatedly references industry-specific determinations. Lawyers attempting to enforce a restrictive covenant should consider what types of industry-specific evidence is necessary to justify the restrictive covenant.
  • The Court also emphasized the purpose of the statute: “preventing unfair competition by protecting critical business interests.” This focus on unfair competition may shift courts’ analysis towards a determination of the unfair advantage provided to the new employer. This was always a consideration on some level, but it may rise in prominence.
  • The opinion also contains language that will likely be cited by defendants: “For an employer to be entitled to protection, there must be special facts present over and above ordinary competition such that, absent a non-competition agreement, the employee will gain an unfair advantage in future competition with the employer.”
  • Lawyers drafting restrictive covenants under Florida law should consider whether it makes sense to include language in which the employee acknowledges the importance of the business interest at issue to the company, particularly when that interest is not enumerated in the statute.

This opinion may embolden companies looking to enforce restrictive covenants. I would not be surprised if this case leads to increased litigation involving alleged business interests outside those listed in the statute. More analysis to come.

A copy of the opinion can be downloaded here.

Bitcoin, Blockchain & Trade Secrets: An Introduction

July 15, 2017 By in Blockchain, Trade secrets Tags: , , , , , 1 Comment

I’m willing to bet that most readers of this blog have heard of Bitcoin. But I’m not sure how many know about the technology it’s based on, called blockchain. If you haven’t heard of blockchain, now’s the time to learn, since it has the potential to be the most transformative technology since the internet.

I’m going to be writing more about blockchain and the unique trade-secrets issues facing the many companies rushing to develop applications and other technology based on blockchain. But first, I want to give a primer for those who haven’t heard of it.

Blockchain is essentially a database that is distributed among a large number of computers on a network. Each computer with access to the blockchain has an identical copy of the database. Here’s a simple example to explain how it works, from this explanatory post that compares blockchain to a “record book”:

To be clear, this isn’t just one record book stored in a central location that is shared by many. There are thousands of copies of this record book, stored on computers all around the world, both home computers and business servers – hence the term “decentralised”. This record book can be used to record many kinds of things, however I’ll use sending and receiving money as the primary example, as it’s the most common one right now.

When John wants to send money to Sue, a new line item is created detailing that transaction. This line item then gets sent off to hundreds of other computers who have a copy of the record. Those computers confirm that this transaction is authorised, and ultimately they agree (or disagree) that everything about the transaction is legitimate before giving that line item a tick of approval. It has to match up perfectly on every copy of the record.

Each transaction, here John sending money to Sue, is a “block,” which when added to all the prior blocks forms a kind of “chain.” Hence, blockchain.

Since each computer with access to the blockchain has an identical copy of the database, fraudulent transactions are nearly impossible. If any one computer has a blockchain entry that all of the others don’t recognize, that entry is rejected. Entries are only added if all of the computers with access to the database agree.

The first “app” based on blockchain is Bitcoin, a cryptocurrancy. You can watch a short video that explains Bitcoin here. Bitcoin was the first truly digital currency, which allowed the transfer of money without the need for any centralized institution like a bank. Now there are a number of cryptocurrancies with names like Ether and litecoin.

But blockchain’s potential goes far beyond currencies. It can be used to streamline, simplify, and secure a wide variety of transactions, such as supply-chain management, digitial voting, collecting taxes, and recording real estate transfers and ownership. Essentially, any transaction involving value could be conducted—and improved—on the blockchain. Some think that the entire worldwide financial system will eventually move to blockchain — and I agree. Additionally, developers are using a blockchain platform called Etherium (which also underpins the Ether cryptocurrancy) to create “smart contracts” — essentially programming code that is capable of executing or enforcing contractual terms. This is a powerful, but complicated, concept that I will discuss in more detail in a future post.

Companies large and small are racing to develop new “apps” based on blockchain technologies.  This entire industry is essentially in the research-and-development phase, which means that trade-secrets issues abound. These companies can benefit from tech-savvy lawyers who understand how to protect this rapidly developing information.

This post is a very basic introduction to blockchain. I’m fascinated by the technology and see virtually limitless potential. If you want to learn more, I’d recommend The Internet of Money, an excellent book by Andreas M. Antonopoulos. And stay tuned — I intend to explore the intersection of blockchain and trade secrets here at Protecting Trade Secrets.

Are We Headed for a Landmark Florida Supreme Court Non-Compete Case?

January 6, 2016 By in Case Summary, Florida Non-Compete Lawyer, Noncompete Tags: , , , , 2 Comments

A few months ago, I wrote about a Florida appellate case holding that referral sources qualify as legitimate business interests under Florida’s restrictive covenant statute (Section 542.335, Fla. Stat.). On New Year’s Eve, a different Florida appellate court disagreed, setting up a possible appeal to Florida’s Supreme Court.

In Hiles v. Americare Home Therapy, Inc., Florida’s 5th District Court of Appeals overturned in part a temporary injunction entered against the former employee of a home healthcare company, who had allegedly violated a non-compete agreement. (The case I discussed in my earlier post also involved the home healthcare industry.) The injunction was based on the company’s claimed need to prevent the former employee from soliciting referral sources.

Under the Florida statue, a restrictive covenant is only enforceable if supported by a legitimate business interest. Here, the appellate court held that referral sources are not legitimate business interests.

The court relied on one of the legitimate business interests listed in the statute: “substantial relationships with specific prospective or existing customers, patients, or clients.” Since referral sources are not specific customers or potential customers, this court found that they are not legitimate business interests.

This is faulty logic, since the statute makes clear that the list of legitimate business interests in non-exclusive: “The term ‘legitimate business interest’ includes, but is not limited to” the enumerated items, including substantial relationships with customers.

In the home healthcare industry, it certainly sounds like referral sources are very important to business success. This is likely the case in a number of industries, where business is primarily generated through referral sources. In those industries, a company should be able to protect its referral sources through restrictive covenants.

Given the appellate-court split, there is at least a chance that the Florida Supreme Court will address this issue. If it does, the case could have far-reaching effects. The Florida Supreme Court could take this opportunity to address the definition of “legitimate business interest” under the statute, and clarify what types of legitimate business interests beyond those listed in the statute justify restrictive covenants. This could dramatically alter the way Florida treats restrictive covenants. Stay tuned.

Shark Tank and College Football Non-Competes

December 17, 2015 By in Florida Non-Compete Lawyer, Noncompete, Trade Secrets In the News, Uncategorized Tags: , , , , , , , , , , , , Leave a comment

Two recent stories show why all companies should at least consider implementing non-compete agreements or other restrictive covenants.

First, here’s a link to a short interview with Shark Tank’s Robert Herjavec, talking about his first company. Unbeknown to Robert, his sales manager had set up a side business, to which he funneled half of Robert’s customers. Robert only found out because another employee broke down and told him during her exit interview.

Robert finishes the interview with good advice: “The minute you hire the first employee, you have to be careful.”

We don’t know if the sales manager had signed a non-compete or non-solicitation agreement. Such an agreement could have given Robert far better legal options.

Also, Robert trusted that his employees would be loyal. While it’s obviously good to trust your employees, it’s far better to trust and also have them sign appropriate restrictive covenants.

I also read about how an assistant coach of the Arkansas Razorbacks football team left for the University of Georgia. Bret Bielema, Arkansas’ head coach, was not happy. Apparently, his recently hired coaches signed non-compete agreements that prohibited them for coaching for other SEC schools. But the coach who had left had been hired earlier, and he did not have a non-compete.

Of course, Arkansas should have had its coaches sign non-competes from the outset. And once they decided to require new coaches to sign one, they should have at least attempted to have the older coaches sign as well.

These stories show how non-compete agreements can have value across diverse industries. It’s worth speaking with an attorney to figure out whether your company can benefit from implementing restrictive covenants, or improving existing agreements.

 

Florida Loves Non-Compete Agreements

December 3, 2015 By in Advice, Case Summary, Noncompete, Trade secrets, Uncategorized Tags: , , , , , , , , , , , , , , Leave a comment

Florida’s restrictive-covenant statute, Section 542.335, is one of the most employer-friendly in the country. A recent case from Florida’s Fourth District Court of Appeal, Transunion Risk and Alternative Data Solutions, Inc. v. Reilly, shows how this statute favors an employer trying to enforce a restrictive covenant against a former employee. A copy of the opinion can be downloaded below.

This opinion is short on facts, but the plaintiff sued the defendant for violating a non-compete agreement and sought a temporary injunction. At the injunction hearing, the trial court ruled in the defendant’s favor after the plaintiff finished its case in chief, before the defendant put on any evidence.

The appellate court reversed. First, it looked at the likelihood of irreparable injury, citing the statute’s presumption of irreparable injury that arises when the plaintiff shows a violation of an enforceable restrictive covenant. Here, the appellate court reversed because the defendant did not present evidence:

As the trial court’s ruling was issued before Reilly presented any evidence, Reilly could not have met his burden of presenting evidence overcoming the presumption.

This doesn’t sound right. A defendant should have the right to rebut this presumption simply by cross-examining the plaintiff’s witnesses. That’s what the trial court apparently thought happened here. But the presumption so strongly favors the plaintiff that this appellate court was unwilling to allow the defendant to rebut it without putting on affirmative evidence.

The trial court also concluded that the plaintiff had an adequate remedy at law. But the appellate court reversed this finding, noting that even when a plaintiff has suffered actual money damages,

the continued breach of a non-compete agreement threatens a former employer’s goodwill and relationships with its customers, and nothing short of an injunction would prevent this loss.

This finding essentially eliminates the adequate-remedy-at-law prong of the injunction analysis in restrictive-covenant cases.

Finally, the appellate court reversed the trial court’s finding that the plaintiff had not demonstrated a substantial likelihood of success on the merits. On this point, the appellate court relied on the trial court’s “implied finding” that the defendant violated a restrictive covenant. So once a court finds that the defendant breached, the plaintiff has automatically shown a substantial likelihood of success.

This case shows how Florida’s restrictive-covenant statute provides employers with the upper hand in litigation. As a result, these agreements are a very effective tool for protecting proprietary information and trade secrets. All Florida companies should consult with an attorney to determine whether to implement these types of agreements.

Transunion Risk and Alternative Data Solutions, Inc. v. Reilly

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