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MDFL Denies Injunction in Call Center Non-Compete & Trade Secret Case

A call center and telecommunications company recently failed in its bid for a preliminary injunction in a non-compete case pending in the United States Court for the Middle District of Florida.  The Company, Sarasota-based Viable Resources (“the Company”) is an Avaya business partner or reseller.  Its principal line of business is reselling Avaya products and services.  In 2006, the Company hired Karen Belyea (“KB”) as an entry-level computer telephone integration developer.  In that capacity, she signed an Employment Agreement (“the Agreement”).  In relevant part, the Agreement contained various confidentiality provisions and a 2-year non-compete that prohibited her from working in a “materially similar” role.  Significantly, the Agreement provided for Washington choice of law.  Belyea resigned in October 2015 and went to work for a competitor, Hayes e-Government Resources (“Hayes”) a month later.

In September 2016, the Company sued KB in Sarasota County state court alleging breach of the non-compete, theft of trade secrets under the Florida Uniform Trade Secrets Act, tortious interference and unjust enrichment. Viable Resources then filed a Verified Compliant for Injunctive Relief and Damages. The Complaint alleged four counts: breach of contract, violation of the Florida Uniform Trade Secrets Act, tortious interference with business relations, and unjust enrichment.  KB promptly removed the case to Tampa Federal Court (rightfully so).

In challenging the Company’s application for a preliminary injunction, KB argued that (1) that the non-compete was unenforceable for lack of consideration (2) that the Company failed to establish any irreparable harm because she wasn’t dealing with any of the same customers and (3) that the Company failed to put forward ay evidence that she was using the Company’s trade secrets.  The Court largely agreed.

First, under Washington law, KB had numerous defenses to enforcement of the non-compete.  The most obvious defense was lack of consideration. KB argued that she signed the non-compete roughly three months after first becoming employed by the Company.  At that time, she did not receive any additional consideration for the non-compete.  Remember, different states have drastically different rules governing consideration and non-compete agreements.  Florida treats continued employment as adequate consideration.  But Washington doesn’t.  Under Washington law, the Agreement was likely unenforceable for lack of consideration.  This alone was enough to defeat the breach of contract claim.

Second, the Court quickly disposed of the trade secret claim.  The Court found that the Company had not always taken adequate steps to protect its trade secrets and, beyond this, that some of the claim trade secrets weren’t actually trade secrets at all.  In part, the Company argued that specialized skills and training imparted to its employees (including KB) constituted trade secrets.  This is absurd.  Basically, having lost on the non-compete (which might protect an extraordinary investment in training or education), the Company tried to refashion this (weak sauce) interest as a trade secret.  The Company also pushed for application of the inevitable disclosure doctrine, arguing that KB had been privy to certain proprietary information (such as pricing data) and could disclose this in her new job.  The Court wasn’t buying any of this.

Next, the Court quickly disposed of the tortious interference and unjust enrichment claims.  The Court held that while Hayes and Viable shared some customers, KB hadn’t done anything tortious to interfere with those relationships.  On unjust enrichment, the Court found that the claim was predicated on the three other claims that the Company had already lost.  Having failed to make out a substantial likelihood of success on the merits, the Company was not entitled to an injunction.

Beyond this, the Court held that the Company failed to establish irreparable harm.  Instead, the Company pointed largely to past harm and speculative harm, neither of which were good enough to carry its burden.

The Takeaways: 

1. Choice of law matters:  In this case, choice of law was dispositive on the non-compete claim.  If Florida law applied instead of Washington law, we’re in much different territory.  Then, the failure of consideration defense wouldn’t apply and we’d have to address the merits of whether or not Plaintiff had a legitimate business interest.

2. Get into federal court:  Whenever you are defending a non-compete, trade secret, tortious interference or unfair competition dispute in Florida state court, if you have the opportunity to remove the case to federal court, you’d better do it.  Many Florida state court judges are quick to label the defendant a bad actor and issue an injunction rather than actually work through and apply the relevant law – this is especially true in non-compete and trade secret cases.  Get the case into federal court and your chances of prevailing (and having the law properly applied) go up dramatically.

3. Inevitable disclosure doctrine:  The plaintiff here was clearly pushing for the court to apply some version of the inevitable disclosure doctrine (“The defendant had access to our trade secrets, she has them in her head and she will inevitably use them against us.”).  Florida case law on inevitable disclosure is mixed but the doctrine is probably still available in extraordinary circumstances.

The case is Viable Res., Inc. v. Belyea, 2016 WL 7334285 (M.D. Fla. Dec. 1, 2016).

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