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Florida Non-Compete Agreements: Where Things Stand in 2015

I have said it before (a hundred times) and I will keep saying it until everyone understands:  Florida is the most aggressively pro-non-compete state in the entire country.  This is not just a product of the text of the statute.  In fact, if the non-compete statute – Florida Statutes 542.335 – was faithfully interpreted and applied by courts, it would be a different ballgame.  To be clear: Florida would still fall on the pro-non-compete side of the spectrum.  But we wouldn’t have the sorts of absurd results that we see every day coming out of Florida state courts.

I focus on non-compete and trade secret litigation and have done so for years.  I’ve resolved more than 300 non-compete disputes:  In court, out of court, both sides.  I’ve won non-compete appeals.  Here’s what I see every day:

  • Contract Lens vs. Antitrust Lens:  Non-compete agreements are restraints of trade.  So, before a court can enforce an agreement not to compete, the plaintiff must establish that the non-compete is necessary to protect a legitimate business interest.  Let me be crystal clear:  It doesn’t matter if someone signed a contract.  That’s right.  If the non-compete is unnecessary to protect a legitimate business interest, then it’s an illegal restraint of trade and utterly unenforceable.  Unfortunately, Florida state circuits courts just don’t get it.  Most circuit court judges in the state of Florida linger under the false impression that non-compete cases are all about contracts and people honoring their bargains.  I have been in numerous hearings where the judge’s ruling was ultimately grounded on the fact that the defendants signed a contract—- Basically, all the plaintiff had to do was give lip service to confidential information or customer relationships, and the judge’s decision was made.  It makes me sick.  The information isn’t really confidential.  The customer relationships really aren’t protectable.  But the judges do not care.  If the plaintiff says the magic words (“We have confidential information!  We have substantial customer relationships!”), that’s all the judge needs to launch into a moralistic lecture about how people need to honor their contracts.  In my view, that is utterly inappropriate.  For one thing, these judges completely miss the boat on the restraint of trade angle.  For another thing, judges need to make their decisions based on the law – the actual law, as it is written – not on their gut feeling (or desire to punish somebody who “broke their contract.”).  This leads to what I term the “Bad Actor Problem.”
  • The Bad Actor Problem:  It’s a huge problem.  The judge views the plaintiff as the good guy.  The plaintiff’s lawyer invariably engages in a bunch of bombastic moralizing about the contract (“And isn’t this your signature, Mr. Smith?  And didn’t you agree not to compete?  But now, you’re competing aren’t you!?”).  They do it with such an air of disgust and righteousness.  And you know what?  Based on my conversations with these plaintiffs’ lawyers, I doubt any of them have the first clue about antitrust and restraints of trade.  So, in connection with the prior point, many judges are looking to whack the defendant right from the jump.  The defendant is the bad actor who breached the contract and broke his/her word.  Many judges simply cannot get past this inherent bias and – as a result – fail to engage in any meaningful analysis of the legitimate business interests that may or may not exist.  I’ve been in numerous hearings that went down this way.  The plaintiff beats the contract drum.  We counter by showing that all of their claimed legitimate business interests are bogus:  The supposedly confidential information is widely known.  The customers do business with multiple companies and their are no long term contracts.  The relationships are not substantial.  But no matter what evidence we put on, if the judge is dialed in on the breach of contract point, the hearing doesn’t matter.  It’s just a formality prior to the inevitable injunction.  But it gets worse:
    • Sometimes, you will see the Bad Actor Problem times 10.  For example:  The defendant did take some corporate files or a customer list.  In reality, none of this is valuable, confidential information.  The defendant easily could have obtained the information at issue through publicly available means.  Clearly, the defendant did something wrong (and stupid).  But the fact that the defendant did something wrong shouldn’t transform an unenforceable non-compete agreement into an enforceable one.  Unfortunately, if you couple a judge’s use of the Contract Lens with any evidence of other misconduct (e.g. taking documents), that’s a recipe for a guaranteed injunction (regardless of the actual merits).
  • Irreparable Harm:  Under Florida law, if the case is proceeding in state court, the court must presume irreparable harm.  That presumption is supposed to be rebuttable.  Unfortunately, most Florida state circuit court judges (and even some federal judges) refuse to scrutinize claims of irreparable harm.  They are utterly unwilling to evaluate the presumption and consider whether or not the defendant has rebutted it.  In practice, this is how it goes down:  The (very coached) witness on behalf of the plaintiff takes the stand and says that the plaintiff has irreparable harm.  I’m dead serious.  (Q:  “Ms. Witness, what sort of harm has this caused to the company?  A: “Oh, the damage has been irreparable.  I mean there’s no way we could ever calculate how much harm they’ve caused us.”).  In many cases, that’s all it takes.  And that is not how the system is supposed to work.  Injunctions are supposed to be extraordinary remedies.  But Florida state courts give them out like candy in non-compete cases.  It’s disgusting.

That’s only a partial picture of the landscape re Florida non-compete litigation in 2015.  If you’ve read through all of the foregoing, you’re probably thinking it’s hopeless.  It’s not.  Florida is a tough state for defending non-compete cases, but there some options:

  • Federal Court:  Get into federal court.  Find a way.  Let’s be clear:  There’s not always going to be a way into federal court.  But a good lawyer who has broad experience as a commercial litigator may be able to secure federal court jurisdiction.  Example:  Somebody threatens to sue my client for violation of a non-compete (or tortious interference with a non-compete).  If I can (if there are strong defenses), I’m suing first for a declaratory judgment.  And if there is any hook for federal court jurisdiction, I’ll find it.  Diversity is easy.  But if there’s no diversity, I’m pulling out all the stops.  I’ve sued companies for federal securities law violations so I could bootstrap a declaratory judgment claim to the case and get it in federal court.  It’s worth taking that shot because your odds of defending a non-compete/tortious interference case in federal court are dramatically better than your odds in state court.  In federal court, there’s very little of this bogus, spur of the moment emergency hearing nonsense. Beyond that, the federal bench is stronger than the state bench.  And beyond that, federal procedural law is different (e.g. no presumption of irreparable harm).
  • State Complex Litigation Courts:  If you can’t get into federal court, at the very least, get into the circuit complex litigation or business court.  Not every county has a complex litigation court.  But if the county has one, it’s a viable option.
  • Appeal:  This is a tough one, because the defendant has to deal with being enjoined for 9+ months.  But sometimes, this is the only option.  We’ve done it before – and won – in both state and federal court.  If an improvident injunction is entered and you know you’re going to take an appeal, press for a huge injunction bond.  Demand an evidentiary hearing on the amount of the bond.  Put in evidence that will show how much money the company will lose while enjoined.  All you can do is push for the bond — in the end, the judge will set the bond in whatever dollar amount he/she sees fit.

 

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Jonathan Pollard is a trial lawyer and business litigation attorney based in Fort Lauderdale, Florida. He focuses his practice on competition law and has extensive experience litigating non-compete, trade secret and antitrust claims. He is licensed in all Florida federal and state courts and routinely represents clients in Miami, Fort Lauderdale, West Palm Beach, Fort Myers, Tampa, Orlando and Jacksonville. His office can be reached at 954-332-2380.

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