On March 7, 2019, a group of six United States senators from both sides of the aisle submitted a letter to the Government Accountability Office (GAO) requesting a federal investigation into the use of non-compete agreements on the basis that their widening use in recent years raises concerns about their negative impact on both workers and the national economy.  Specifically, the letter asks the GAO to assess the following three questions:

  1. What is known about the prevalence of non-compete agreements in particular fields, including low-wage occupations?
  2. What is known about the effects of non-compete agreements on the workforce and the economy, including employment, wages and benefits, innovation, and entrepreneurship?
  3. What steps have selected states taken to limit the use of these agreements, and what is known about the effect these actions have had on employees and employers?

Continue Reading U.S. Senators Request Review of Non-Compete Agreements by the Government Accountability Office

shutterstock_78698299In recent weeks, courts almost routinely have been denying preliminary injunctive relief in cases alleging violation of non-compete and similar employment agreements.  Three examples: Burleigh v. Center Point Contractors, 2015 Ark. App. 615 (Oct. 28, 2015); Evans v. Generic Solution Engineering, LLC, Case No. 5D15-578 (Fla. App., Oct. 30, 2015); and Great Lakes Home Health Services Inc. v. Crissman, No. 15-cv-11053 (E.D. Mich., Nov. 2, 2015).

Status of those cases.  In each of those cases, injunctions were denied or, if granted by a lower court, the order was reversed.

Burleigh.  When he was employed in 2012 by Center Point, a general commercial construction company, Burleigh had more than 10 years of experience in construction in northwest Arkansas.  His title was operations manager and estimator.  He signed non-compete (two years, within a radius of 50 miles from Bentonville, Arkansas), non-solicitation, and confidentiality covenants.  In 2014, he resigned and formed, with a friend, a competitor of Center Point.

Center Point sued Burleigh.  His motion to dismiss the complaint was denied, and Center Point sought a preliminary injunction.  The trial court granted the injunction including two additions to the non-compete agreement: (a) the court required Burleigh to give Center Point notice of and details concerning any prospective business activity that would compete with activities in which he was engaged on or before the date he resigned, and (b) Center Point was ordered to post a $50,000 bond.  He appealed.

The Arkansas Appellate Court reversed and remanded.  It held that Center Point failed to demonstrate a likelihood of success on the merits.  According to the court, there was no evidence that Center Point provided Burleigh with any “special training,” “proprietary formulas,” “trade secrets,” “confidential business information,” or “a secret customer list.”  Further, Center Point did not show that he learned anything at Center Point that would give him an unfair advantage in the bidding process.  Therefore, “Center Point did not have a legitimate interest to be protected by agreement, and the non-compete agreement only shielded Center Point from ordinary competition.”

Evans v. Generic.  In order for a former employer to prevail in a suit under Florida law based on a non-competition covenant, enforcement of the covenant must be shown to be necessary in order to protect the former employer’s “legitimate business interests.”  Reaching a decision similar to that in Center Point, the Florida Appellate Court held that the former employer failed to make the requisite showing.

The former employer, Tech Guys, builds online sales and marketing systems.  It does not have employees, preferring instead to retain independent contractors.  One of them was Chinn who had signed a restrictive covenant prohibiting, for two years after termination of his relationship with Tech Guys, work for current or former Tech Guys clients.  While working for Tech Guys, Chinn assisted one of its significant clients, RRI, which had a three-year non-exclusive contract for services.

When Chinn left Tech Guys, he and another ex-Tech Guys independent contractor — but one who had not signed restrictive agreements — formed a competitor.  After RRI’s contract with Tech Guys expired, RRI offered to continue to use Tech Guys (although not exclusively).  The offer was declined.  When RRI became a client of Chinn’s new company, Tech Guys sued Chinn and his company and obtained a preliminary injunction.

The defendants appealed, and the appellate court reversed.  According to the appellate tribunal, the “facts are insufficient to support the trial court’s finding of a substantial business relationship in need of protection.”

Great Lakes Home.  Great Lakes is a home-health and hospice provider.  Crissman was vice-president for operations and planning in Michigan.  At the time of her employment, she signed non-competition, non-solicitation, and confidentiality covenants.  Pursuant to the agreements, she promised that for two years after termination, she would not divert or attempt to divert from Great Lakes business opportunities in any county where Great Lakes was Medicare-certified on the date she was employed by Great Lakes.

Eighteen months after leaving Great Lakes, Crissman accepted a position with a competitor.  Her responsibilities included work in various states but not in any county where Great Lakes does business.  Great Lakes sued her and sought a preliminary injunction.  Judge Rosen authored a detailed must-read opinion, clearly laying out Michigan law on the subject and explaining in detail why injunctive relief was denied.

Confidentiality.  Great Lakes contended the court could presume that Crissman disclosed Great Lakes’ confidential information.  Crissman rebutted the presumption by submitting a signed and sworn denial that she had made any improper disclosures and describing in detail the firewall established with her new employer that precluded any disclosures.

Non-compete.  Great Lakes argued that Crissman was liable for non-compete covenant violations because of her employment by a competitor that was servicing areas where Great Lakes operated.  There was no allegation that Crissman, personally, violated the covenant.  The parties agreed that her new employer did provide services competitive to those offered by Great Lakes even though there was no evidence that she participated.  The court concluded that Great Lakes’ interpretation of the covenant would preclude her “from working in any capacity, in any location, with a competitor as defined in the Agreement” (emphasis in the original).  That interpretation was held to violate Michigan law which provides that “‘non-competition agreements must be tailored so that the scope of the agreement is no greater than is reasonably necessary to protect the employer’s legitimate business interests’” (quoting from an earlier Michigan district court case but adding the emphasis).

Extension of the non-compete agreement.  Judge Rosen observed that enforcement of the non-compete agreement would require extending its duration since, by its terms, it expired in August 2015.  Although conceding that Great Lakes had been diligent in seeking injunctive relief, he pointed to Michigan law restricting extension of such covenants to “the most extreme circumstances.”  Here, he held, there was “no clear ‘flouting’ of the Agreement or bad faith.”  Accordingly, Great Lakes had failed to demonstrate a likelihood of success on the merits.

Takeaways.  These cases, and other similar recent decisions, indicate that courts are reluctant to enter preliminary injunctions for alleged violations of employment agreements.  Even if the non-compete time period and geographic area are reasonable, a mere showing that the ex-employee went to work for a competitor during that period and within that area may no longer be sufficient.  Rather, the moving party seemingly will have to demonstrate clearly that the ex-employee him- or herself caused damages by poaching significant customers, hiring away invaluable workers, or disclosing highly confidential information.

 

A Florida franchisee executed a franchise agreement (FA) containing a non-compete provision and a Pennsylvania forum selection clause.  Following termination of the FA, the former franchisee’s wife opened a similar business in another part of Florida.  The franchisor filed suit in Pennsylvania against the former franchisee and his wife, and they moved to dismiss or, alternatively, to transfer the case to Florida.  The motion was denied.  AAMCO Transmissions, Inc. v. Romano, Civ. Ac. No. 13-5747 (E.D. Pa., 8/21/14).

Summary of the Case

An AAMCO Transmissions FA prohibited competition by the franchisee within 10 miles of any AAMCO franchise for two years from the date of termination.  The FA required that any litigation regarding the FA take place in Pennsylvania where AAMCO is headquartered.  Prior to expiration of the FA, the franchisee and AAMCO entered into a termination agreement.  It gave the franchisee a complete release except with respect to a few identified surviving provisions such as the non-compete, but the forum selection clause was not mentioned.  Shortly after termination, the franchisee’s wife opened a competitive shop 100 miles from the former shop but approximately two miles from another AAMCO franchisee.  AAMCO sued the franchisee and his wife in Pennsylvania.  Without success, they asserted that the forum selection clause did not survive the termination, that the covenant’s geographic restriction was unreasonable, and that venue was inconvenient. 

Applicability of the Non-Compete and Forum Selection Clauses to a Non-Signatory

Robert, the franchisee, owned and operated an automotive maintenance and repair shop in Hollywood, Florida.  After the FA was terminated, his wife Linda opened a similar shop in Stuart, Florida, less than 10 miles from another AAMCO franchise.  In support of their motion to dismiss, Robert and Linda contended that he did not own or operate her shop, and she did not sign the non-compete.  The court cited several cases holding that a non-signatory to a covenant who is “closely related” to a signatory is entitled to the agreement’s benefits but also bound by its obligations.  Moreover, (a) AAMCO alleged that Linda was Robert’s agent in his franchised business in Hollywood, and (b) documents attached to the complaint indicated that they jointly own and operate the Stuart facility.  At the motion to dismiss stage, the trial judge said, it must be assumed that Linda also is subject to the covenant.

Survival of the Forum Selection Clause

The termination agreement contained a broad release with only a few specified exceptions.  One was the non-compete.  However, since the forum selection clause was not listed as an exception, the defendants argued that it did not survive the termination.  The trial judge disagreed.  She cited a half-dozen cases from around the country holding that if a non-compete continues after a contract termination, a forum selection clause does as well.  Further, the dispute obviously related to the FA which stated expressly that any legal “proceedings which arise out of or are connected in any way with this Agreement” must take place in a Pennsylvania court.  Finally, the judge observed that there was no evidence of a clear intent to make the clause inapplicable.

Geographic Restriction

Under Pennsylvania law, according to the judge, “Unreasonableness of the geographic scope of a non-compete is an affirmative defense on which the [defendants] bear the burden of proof.”  Further, “because reasonableness is a fact-intensive inquiry, it should not be determined on the pleadings unless the unreasonableness is clear from the face of the complaint.”  Decisions within the Eastern District of Pennsylvania are split concerning the reasonableness of AAMCO’s 10-mile restriction.  So, the court denied, without prejudice to renewal later, the motion to dismiss based on that restriction.

Inconvenient Forum

The defendants pointed out that they were appearing pro se because they could not afford a lawyer, and that litigating in Pennsylvania would be prohibitively expensive.  They emphasized that the relevant events occurred, and the witnesses and records are located, in south Florida.  That argument failed to carry the day because of the forum selection clause, the FA’s choice of Pennsylvania law, and the location of AAMCO’s headquarters.  The judge said the financial burden on the defendants litigating in Pennsylvania is no greater than the burden on AAMCO if it must litigate in Florida.

Takeaways

Not surprisingly, persons who are “closely related” to the signer of a non-compete can be held equally bound by it.  Further, the judge’s conclusion that venue was proper in Pennsylvania, because AAMCO is headquartered there and the FA selected Pennsylvania as the forum state, was predictable. 

More significant is the court’s refusal to transfer the case to Florida. This case teaches that a court may choose to deny defendants’ well-supported motion to transfer to a “more convenient forum” where the plaintiff chooses to sue in the state referenced in a contractual forum selection clause and has a significant relationship with that state.

By Joshua Salinas and Jessica Mendelson

A Florida District Court of Appeal recently confirmed that plaintiffs in trade secret misappropriation cases must identify their trade secrets with reasonably particularity before conducting discovery. AAR Mfg., Inc. v. Matrix Composites, Inc., No. 5D11–3802, 2012 WL 3870419 (Fla.App. 5 Dist., 2012). The Court of Appeal, however, rejected the notion that, as a threshold matter, the plaintiff was also required to prove the existence of its trade secrets.

Plaintiff Matrix Composites, Inc., manufactures and designs carbon fiber composites for the aviation, medical, and space industries. For example, these critical composite structures are used in F22 fighter jets and are extremely useful for stealth and weight reduction.  (Also check out this great video from Matrix’s website about the use of composites in fighter jets).

The case arose when Matrix sued a competitor, AAR Manufacturing, in Florida state court alleging misappropriation of trade secrets pertaining to various product molding processes.

During discovery, Matrix requested certain documents from AAR pertaining to AAR’s trade secrets. AAR filed a motion for a protective order to prevent the discovery of its own trade secrets on grounds that discovery could not continue until Matrix first identified its own trade secrets with reasonable particularity. The trial court denied AAR’s motion for the protective order, finding Matrix had identified its own trade secrets with reasonable particularity. Accordingly, the trial court ordered AAR to produce the requested discovery documents to Matrix within sixty days.

AAR petitioned the District Court of Appeal of Florida, Fifth Circuit for relief from the order denying its motion for the protective order. In particular, AAR argued that the trial court failed to make a “threshold finding” that Matrix’s allegedly misappropriated trade secrets actually existed before ordering AAR to disclose its own trade secrets.

The Court of Appeal denied AAR’s petition in part. The court recognized that, in trade secret misappropriation cases, a plaintiff is required to identify its trade secrets with reasonable particularly before proceeding with discovery. (See Del Monte Fresh Produce Co. v. Dole Food Co., 148 F.Supp.2d 1322 (SD. Fla. 2001).

The Court of Appeal, however, rejected the notion that the trial court was required to make a “threshold finding” regarding the existence of trade secrets in misappropriation. Specifically, the Court of Appeal rejected any “threshold finding” requirement that may derived from the recent Revello case. (See Revello Medical Management, Inc. v. Med-Data Infotech USA, Inc. 50 S.3d 678, 679 Fla. 2d DCA 2010) (stating that prior to proceeding with discovery in trade secret cases, “[t]he plaintiff must, as a threshold matter, establish that the trade secret exists”).

This case is significant because the Florida Court of Appeal has set the record straight with respect to the pre-discovery requirements for trade secrets misappropriation cases. Florida does not have a pre-discovery trade secret identification statute (see e.g. California Code of Civil Procedure § 2019.210), but this procedure is well established through Florida case law. It appears that the 2010 Revello case overly expanded these pre-discovery requirements to add a threshold finding that trade secrets exist. The Court of Appeal used the instant decision to eliminate any further confusion regarding pre-discovery trade secret identification.

By Marcus Mintz

In a recent case filed in the United States District Court for the Northern District of Florida, Mainline Information Systems, Inc. v. Fordham, No. 11-137, 2011 WL 2938435 (N.D. Fl. July 21, 2011), the plaintiff sought a preliminary injunction against an individual defendant for tortious interference with business relationships and for misappropriation of trade secrets. Plaintiff provides integrated IT solutions for businesses and other related products and services. Plaintiff contended that the defendant was soliciting more than 20 of its employees directly, and an additional 14 employees indirectly, to terminate their employment relationships with plaintiff and join a competing company. Plaintiff also argued that defendant was seeking to misappropriate its trade secrets through the solicitation of its employees.

The district court denied plaintiff’s motion for preliminary injunction because plaintiff failed to demonstrate a “substantial likelihood” that plaintiff would prevail on the merits of either of its two claims, for tortious interference or misappropriation of trade secrets. At bottom, the court found that plaintiff had run into court without the evidence to support its claims. The court specifically found that plaintiff introduced no witnesses to testify at the preliminary injunction hearing and only presented two affidavits in support of its application for injunctive relief. One such affidavit was dismissed as “threadbare” in that it only asserted that the allegations of the complaint were true and correct. The second affidavit was made by one of plaintiff’s senior vice presidents who stated that defendant had, directly and indirectly, solicited plaintiff’s employees. Neither affidavit was sufficient to meet plaintiff’s burden to obtain a preliminary injunction, particularly in light of the evidence put forth by the defendant that contradicted plaintiff’s claims.

In contrast to the plaintiff, the defendant testified at the hearing and denied contacting the majority of the employees that plaintiff claimed were solicited by the defendant. The defendant also presented evidence from several of the purportedly solicited individuals who stated they were never contacted by defendant. Based on the foregoing evidence put forth by defendant, which directly contradicted plaintiff’s second affidavit, the court denied the motion for preliminary injunction as it related to tortious interference. Similarly, because no evidence was presented regarding defendant’s use of any trade secrets, the preliminary injunction was also denied as to defendant’s misappropriation claim.

The court’s brief ruling is an instruction to would-be litigants that argument by itself is insufficient to obtain injunctive relief in Florida’s district courts.

White Wave International, Inc. filed an action in Florida against Lindsay Lohan, Lorit LLC, a company she has an indirect ownership interest in, and several other defendants arising out of a certain Confidentiality Agreement Between Firms (“CABF”) between White Wave and Lorit. It was alleged by White Wave that the CABF provided Lohan, Lorit and the other defendants with a time-limited opportunity to examine and obtain samples of White Wave’s product. It was further alleged that although Lorit made an offer to purchase the product from White Wave, the parties were unable to agree on a purchase price and the relationship was terminated. White Wave’s action arose, it alleged, when Lorit, Lohan and another defendant introduced a product which was claimed to contain the nearly identical ingredients as White Wave’s product.

White Wave’s complaint included five counts including breach of contract, theft of trade secrets (under the Uniform Trade Secrets Act), civil conspiracy, intentional interference with contract and deceptive and unfair trade practices. Lohan moved to dismiss the complaint as against her on the basis of lack of personal jurisdiction (notably, the action had been dismissed as against 3 other defendants previously on similar grounds).

Lohan argued that the court lacked personal jurisdiction over her because she did not have sufficient contacts with the State of Florida with respect to the facts that gave rise to the complaint, specifically regarding the CABF, Lorit or its business. White Wave argued that Lohan communicate with Florida citizens “through the internet” regarding Lorit’s product, and that consequently her physical presence in Florida was not necessary to confer jurisdiction.  Essentially, that her “telephonic, electronic, or written communications into Florida” regarding Lorit’s product were enough to invoke long-arm jurisdiction.

The court dismissed the action as against Lohan, finding that none of the activity prescribed to her by White Wave satisfied Florida’s long-arm statute (subparagraphs (1)(a) through (h) of § 48.193 of the Florida Statutes).  Although the court agreed that “… a defendant does not have to be physically present in the state to commit a tort under § 48.193(1)(b)” and further that “[t]he Eleventh Circuit has consistently applied [a] broader construction of section (1)(b)”,  it further held that the cases in which the Eleventh Circuit has applied section (1)(b) to foreign torts causing injury within Florida, the conduct was directed at Florida residents, corporations, or property, and the harm was felt exclusively or primarily in Florida.  Because the alleged tortious act was the misappropriation of White Wave’s trade secrets, a misappropriation alleged to have occurred outside the State, the alleged tortious act was not directed at Florida residents, corporations or property and thus could not be used to invoke the long-arm statute.

As to the allegation that Lohan committed a tortious act within Florida “by making telephonic, electronic, or written communications” into the State, to wit her “internet communications” promoting Lorit’s product, the court found that the cause of action alleged, misappropriation of trade secrets, did not arise from said internet communications. Consequently the court ruled that the “tortious conduct” occurred outside of the state, and the damage alleged were insufficient to satisfy Florida’s long-arm statute.

The court similarly rejected plaintiff’s argument that its civil conspiracy claim satisfied the long-arm statute.  White Wave argued that the long-arm statute conferred personal jurisdiction over an alleged conspirator where any other co-conspirator committed an act in Florida in furtherance of the conspiracy. The court found that the complaint failed to allege sufficient facts from which it could be reasonably inferred that the defendants, including Lohan, “…were part of a conspiracy either engineered in Florida or pursuant to which a tortious act in furtherance was committed in Florida.”

The court also rejected the argument that personal jurisdiction over Lohan could be established by the breach of contract provision of the Florida long-arm statute because the CABF was between White Wave and Lorit, and Lohan was only, at best under the facts alleged in the complaint, a member of the limited liability corporation. Consequently, the court found that she could not be personally liable for any liability of the limited liability corporation under the facts alleged, and therefore, jurisdiction under under the Florida long-arm statute failed there as well. As a result, the court did not reach Lohan’s due process arguments.

White Wave may decide to pursue its suit against Lohan in another forum where she is subject to personal jurisdiction, such as California.

Jerry Powers, the founder of Miami’s successful magazine, Ocean Drive, has sued the purchaser of the business and now-publisher of the magazine, Niche Media Holdings, LLC (“Niche Media”)  seeking a declaratory judgment that the non-compete restrictions contained in the parties’ asset purchase agreement (“APA”) and the employment agreement he entered into following the sale do not (a) prevent Powers from helping inner-city youth publish their own magazine (Inspire, Enrich & Empower or IE2) as part of a non-profit effort and (b) prevent Powers from working in the luxury magazine world after November 1, 2009.   In the 126-page complaint, including exhibits, Powers alleges that there are inconsistencies in the provisions of the APA and his employment agreement, but that under the APA, his restrictive covenants cease as of November 1, 2009.  Niche Media, according to the complaint, contends that the restrictive covenants last until February 17, 2011 — a rather significant difference in time.  In support of his theory, Powers points to the provision in the employment agreement that says that terms of the APA are controlling if there is any conflict between the APA and the employment agreement.

In the complaint, Powers claims that he filed suit based on the “intermeddling” of Niche Media in his efforts to publish IE2.  Indeed, Powers claims that Niche Media threatened to sue to stop the publication of IE2. 

The parties’ dispute has attracted some media attention with the Miami Herald  and Law360 reporting on it.  The interest may derive in part from the charity involved in publishing IE2, Overtown Youth Center, is supported by Alonzo Mourning Charities.  Alonzo Mourning is a retired NBA star who played for the Miami Heat.  

Yet, without so much as an opposing brief being filed by Niche Media, the day after filing, the Court denied Powers’s request for emergency relief.  The Court rejected the emergency nature of the brief, saying

the Complaint and Motion fail to set out in detail good cause of the necessity of expedited procedures, as required in an emergency motion.  Finally, the Court notes that the Complaint does not clearly allege a case or controversy that is ripe for adjudication, specifically as to the request for declaratory and injunctive relief regarding the expiration of the non-competition and non-solicitation provisions. 

This early of a set-back in a case of this sort may not bode well for Powers.  And, solely in my opinion (of course), Powers may need to be considering amending his complaint to avoid a motion to dismiss based on the Court’s statements in her order.

On July 30, 2009, the Eleventh Circuit reversed a district court decision granting over $1.6 million in damages to a former employer, but upheld an injunction against the former employee, enforcing a non-compete agreement. In Proudfoot Consulting Co. v. Gordon, No. 09-14075, Judge Trager issued an opinion finding that a non-compete agreement that prevented a former Project Director from competing in North America and any other territory to which the employee had been assigned during his employment for six months following his employment was enforceable under Florida law.

As Project Director, the former employee, Gordon, managed client relationships and was the most senior employee who had routine client contact. One of his duties was to attend weekly meetings that reviewed all of Proudfoot’s North American projects. In addition, Gordon visited Canada once on behalf of Proudfoot. After resigning from Proudfoot, Gordon immediately began working for a direct competitor, the Highland Group, but Gordon worked exclusively in Canada for the first six months of his employment. After joining the Highland Group, Gordon secured a substantial project for the Highland Group from a client that did business with Proudfoot’s European sister company.

The Court of Appeals affirmed the district court’s finding that Gordon violated the non-compete agreement and that the non-compete was reasonable in its geographic scope, which was found to cover the United States, Mexico, Canada, and Europe. The scope was reasonable because Proudfoot conducts operations and markets itself in those territories, Gordon visited one client project in Canada, and Gordon attended weekly meetings that discussed Proudfoot’s North American projects. The district court rejected Gordon’s argument that he had a good-faith belief that working in Canada did not violate the agreement. The Court held that the district court’s injunction that was entered against Gordon, preventing him, for six months, from working for the Highland Group and from soliciting Proudfoot’s clients and employees was proper.

However, the Court of Appeals reversed the district court’s award of over $1.6 million in damages, plus attorneys’ fees, to Proudfoot because Proudfoot did not establish that it would have secured the project that Gordon solicited for the Highland Group, but for Gordon’s breach. The Court held that Proudfoot, thus, did not show that it suffered any financial loss due to Gordon’s actions.

In Zupnik v. All Florida Paper, Inc., No. 3DO8-1371, 2008 WL 5412090 (Fla. 3rd D.C.A. Dec. 31, 2008), the Florida Court of Appeals for the Third Circuit reversed a trial court’s entry of a temporary injunction against Stewart Zupnik and Dade Paper & Bag Company. The Court’s reasoning was that the restrictive covenants in question had expired and All Florida Paper did not provide evidence of misappropriation. The facts of the case are as follows:

Zupnik is a sales representative with experience selling paper and janitorial products to customers in the food industry. On March 14, 2004, Zupnik signed an Agreement with All Florida that stated that the "employment shall be for a term of two years." The Agreement gave Zupnik the option to remain with All Florida as an at-will employee if he so elected within 72 hours of the expiration of the two-year term. The Agreement also contained a one-year non-compete and five-year non-disclosure of confidential information provisions, both of which were triggered post-employment by the termination of the term of employment.

After the expiration of the two-year term, Zupnik formed his own company – South Florida Paper Products – and conducted negotiations with Dade Paper & Bag Company as a potential supplier. All Florida subsequently alleged that Zupnik shared confidential information with Dade Paper in a meeting at a local restaurant. At an evidentiary hearing, the only evidence that All Florida offered of such a disclosure was testimony from a private investigator that: (1) Zupnik appeared to give Dade Paper operations manager William Baltzell a folder; and (2) Zupnik and Baltzell had All Florida invoices at the table..

The trial court enforced the non-compete provision and also found that Zupnik had shared trade secrets and confidential information with Dade Paper. The Third Circuit Court of Appeals reversed, holding that the non-compete and non-disclosure restrictions expired at the end of the two-year term. The expiration of the two-year term did not constitute a "termination" to trigger the post-employment restrictions. The Court of Appeals also overturned the trial court’s finding that Zupnik and Dade Paper misappropriated trade secrets and confidential information. The Court of Appeals held that All Florida did not show that its invoices and pricing information were confidential or that defendants misappropriated pricing information.

In this breach of employment contract and misappropriation of trade secrets case, plaintiff moved to compel production of e-mails from defendant’s personal Yahoo! account.

Plaintiff contended that Defendant used this specific e-mail account to engage in the activities upon which this entire lawsuit is based. Defendant claimed that he could not produce these e-mails, because they had been destroyed by Yahoo!. However, the defendant offered only a copy of a generic response from Yahoo! about deactivating accounts.  The court declined to accept defendant’s explanation that production was “impossible,” particularly given the important evidentiary value of the e-mails and the “feeble offering” by defendant in support of the contention. Indeed, the Court indicated that it “will not accept Defendant’s position that [defendant] cannot produce these emails until assurance is given from an executive at Yahoo! responsible for such tasks that this request is indeed impossible.”

In addition, the court held that defendant’s representation that he was being “completely truthful” when he did not identify the account, because he knew it would be impossible to ultimately produce these e-mails, to be sanctionable: “It will figure largely into the sanctions ultimately awarded in this matter if it is learned that Defendant’s failure to identify this account earlier is the cause of the alleged impossibility.”  The court stated the particular sanctions awarded would depend on the outcome of defendant’s efforts to obtain the documents, and what was revealed by these efforts as to defendant’s actions, if any, that resulted in spoilation of evidence or other more serious discovery violations.