Let’s talk about non-compete cases and counterclaims.
Although I am based in Fort Lauderdale, I get calls from throughout Florida and beyond. Last week, I got a call from New York. In most instances, the people who call me have just received a cease and desist letter. At this point, the options are pretty straight forward: (1) Do nothing (2) Hire an attorney to send a written response or (3) Sue first for a declaratory judgment. In most instances, option 2 is the most effective. For a somewhat lengthy discussion of the merits of each of these options, please see this video blog post on responding to cease and desist letters.
When I get involved in these disputes, my goal is pretty simple: Resolve the dispute as quickly and efficiently as possible so that my client can move on with his new job or new business venture. Obviously, getting bogged down in non-compete litigation can be ugly, expensive, risky and time-consuming. This is why, in most instances, I will try to resolve the matter out of court. This usually takes the form of a lengthy, written response to the former employer’s cease and desist letter.
When mapping out this response (and the overall strategy for resolving the dispute), possible counterclaims can play an important role. For example: John was employed as a sales executive and left the company to go work for a competitor. One of the reasons why he left the company was because the company was not paying him the agreed-upon commission. John worked for the company for three years and estimates that the company owes him $30,000 in back commission. Some people look at this and think of this as an affirmative defense. And yes, this absolutely is an affirmative defense: The company did not pay commission as agreed and therefore breached the contract. This preemptive breach may operate to relieve John of his obligations under his non-compete agreement. But this is not just an affirmative defense. It also gives rise to counterclaims: Breach of contract and unpaid wages.
The point is that it is important to evaluate all of the tools at your disposal. In responding to a cease and desist letter, crafting your litigation strategy or trying to gain the upper hand in a non-compete dispute, you should always consider the counterclaims. It goes far beyond just a claim for breach of contract or unpaid wages. I have seen a number of cases where there were plausible counterclaims for discrimination or even for wrongful termination in violation of the Florida Whistleblower Act. If faced with the prospect of defending a plausible counterclaim, many companies will think twice and back down.
Jonathan Pollard is a competition lawyer based in Fort Lauderdale, Florida. His office can be reached at 954-332-2380.
