Over the past several years, we have witnessed an explosion in non-compete litigation. This conclusion is not only based on anecdotal evidence, but also on hard numbers. In fact, just recently, the Wall Street Journal ran an article titled Litigation Over Non-Compete Clauses is Rising, and backed up this claim with compelling statistics. The following considerations apply when defending non-compete cases in Florida, although some of these principles are broadly applicable to defending non-compete cases anywhere:
(1) Get out of State Court: If at all possible, get out of state court and into federal court. I say this for a number of reasons. First, in my experience, the process of litigating and defending a case, and particularly a complex non-compete case, is simply more suited to federal court. Every seasoned lawyer understands this. So if you can, get out of dodge.
But there are other reasons why you would rather defend the case in federal court: For example, Florida’s non-compete statute, F.S. 542.335 provides for a presumption of irreparable harm. Ok, let’s unpack this:
In many non-compete cases, the plaintiff will seek a temporary restraining order or preliminary injunction to prevent the defendant from using confidential information, soliciting clients, treating patients, etc. At both the state and federal level, courts evaluate the same basic factors in weighing a request for a preliminary injunction: (1) the movant’s likelihood of success (2) the threat of irreparable harm absent the injunction and (3) the public interest. In federal court, even when sitting in diversity, federal procedural law applies. That means an injunction cannot be issued under Rule 65 unless the movant affirmatively makes a showing of these factors. In contrast, under Florida state law, the court can presume irreparable harm when its faced with the breach of a valid non-compete agreement. There may be some cases going both ways on this, but the weight of authority, at least in Florida, holds that a federal court sitting in diversity will not use 542.335 to presume irreparable harm. The upshot of all this? It’s easier to get a preliminary injunction in a non-compete case in state court.
Another reason why federal law is more favorable: In my view, there is a more well-developed body of federal law governing the issuance of preliminary injunctions, the federal framework is significantly tighter, the requirements that the movant must meet are more well-defined, etc. For instance, in the Eleventh Circuit (which includes all of Florida’s federal courts, i.e., Southern District of Florida, Middle District of Florida, Northern District of Florida), there are more clear-cut standards at play: Suppose the Plaintiff, ABC Corporation, sues John Smith for violating his non-compete agreement and seeks a preliminary injunction. In support of its motion for a preliminary injunction, ABC Corporation submits several declarations alleging that Smith had access to confidential information, Smith is soliciting their customers, etc. In response, Smith files a motion opposing their request for a preliminary injunction and submits several declarations challenging ABC’s factual assertions. If we are in state court, anything could happen: The court could hold a hearing, listen to legal argument, not take any live testimony from witnesses, and still enter a preliminary injunction. But in federal court? Technically, that cannot happen. Under Eleventh Circuit authority, when you have a preliminary injunction situation where the parties bitterly dispute the facts, the court must hold an evidentiary hearing and allow testimony from both sides. This may not seem that significant to some, but it is very helpful. It’s an extra layer, an extra barrier between the defendant and an injunction that could have disastrous consequences.
So, if you have diversity, you immediately need to remove the case to federal court. Granted, this may not be possible. If you do not have diversity jurisdiction, then you’re locked into state court and you just have to fight the case there. If you are lucky enough to be in Broward County, you should immediately seek to have the case transferred to the complex litigation unit, which is run much like federal court. Granted, state law will still apply, including the presumption of irreparable harm and other state procedural law, but the case likely will proceed along a more standard, orderly course.
The next post will cover (2) Consider a Declaratory Judgment.
Jonathan Pollard is a competition lawyer based in Fort Lauderdale, Florida. He is licensed in all Florida federal and state courts and routinely represents clients in Fort Lauderdale, Miami, West Palm Beach, Boca Raton, Fort Myers, Tampa, Orlando, Jacksonville, and Sarasota. His office can be reached at 954-332-2380
954-332-2380.
