In a major victory for Pollard PLLC and its clients, the Firm has successfully defeated Properties of the Villages’ bid for a preliminary injunction. The facts of the case are laid out at length in a previous post. To briefly summarize: POV sued several former real estate agents to enforce non-compete agreements. POV claimed that enforcement of the non-compete restrictions was necessary to protect its confidential information and customer relationships.
Throughout the litigation, POV did nothing to develop these arguments. There were several depositions taken. And a POV executive provided a declaration regarding the company’s alleged legitimate business interests. But POV was never able to get specific about exactly what allegedly confidential and proprietary information was at issue. Or, about what customer relationships were in jeopardy.
Ultimately, POV hung its hat on customer relationships. At a preliminary injunction hearing before the Magistrate Judge, the Magistrate sought to ascertain what customers – or types of customers – were plausibly at issue. This was because POV’s allegations were short on specifics. As the Magistrate saw it, there were generic prospective customers, customers currently in the pipeline, and then former customers who may have purchased real estate from a certain agent in the past. POV had not alleged theft of any current business/customers. Instead, their allegations focused on the general market and customers who may have done business with the Company in the past. After the hearing, the Magistrate recommended that POV’s Motion for Preliminary Injunction be denied. Simply stated, POV had not established any legitimate business interest to justify enforcement.
POV objected to the Magistrate’s Report & Recommendations. POV filed a “Notice of Supplemental Authority” containing Florida state trial court decisions involving non-compete agreements (including one such decision that was 30+ years old). Then, POV sought to submit a second declaration from a key executive (who had already submitted one declaration and sat for a deposition). POV argued that the Magistrate had created a “new test” for evaluating enforceability of restrictive covenants in the real estate context.
On Wednesday, October 7th, the District Judge rejected POV’s argument in its entirety and adopted the Magistrate’s holding in full. Some highlights from the Court’s order (which is also linked below, for those who wish to read the entire order):
On customer relationships: “To briefly summarize, Florida law does not protect all customer relationships—past, present, and future. Florida law protects only “substantial” relationships with specific existing or prospective customers. See Florida Statutes §542.335; see also IDMWORKS, LLC v. Pophaly, 192 F. Supp. 3d 1335, 1340 (S.D. Fla. 2016) (articulating substantial customer relationship test based on Florida case law and holding that movant cannot ignore the term “substantial”); Evans v. Generic Sol. Eng’g, LLC, 178 So. 3d 114, 117 (Fla. 5th DCA 2015) (holding that no substantial relationship existed where plaintiff did not have an exclusive contract with the customer or a reasonable expectation that it would continue to provide services to the customer after its contract expired). Notably, Florida law does not protect former customers unless there is evidence of an agreement for future work.
See Envtl. Servs., Inc. v. Carter, 9 So. 3d 1258, 1265 (Fla. 5th DCA 2009).”
On confidential information: “The Court also agrees that Plaintiff did not establish how its documents were unique or proprietary, or how Defendants unfairly used any purported proprietary information to compete against Plaintiff.”
On efforts to supplement the record after a Magistrate’s Report: “Finally, Plaintiff’s Motion for Leave to File Declaration is denied because it is nothing more than a hindsight attempt to bolster the evidence. As Defendants point out, Plaintiff submitted a declaration of its Director of Sales, Mr. Sundeep Gulati, in support of its Renewed Motion for Preliminary Injunction. Mr. Gulati was deposed, in addition to a number of other witnesses. Yet, Plaintiff seeks to introduce another declaration of Mr. Gulati under seal. Plaintiff does not establish a reasonable basis to reopen the evidence after the Magistrate Judge conducted an evidentiary hearing and after the Magistrate Judge issued his Report and Recommendation.”
Some Takeaways
- Between 1990 and approximately 2010, courts in Florida and elsewhere issued a number of decisions in non-compete cases that are legally/analytically incorrect. Unfortunately, this gave rise to a climate of all non-compete enforcement all the time. Courts throughout the state started issuing preliminary injunctions in non-compete cases at an alarming rate. In federal cases, this is particularly confounding given the rigorous nature of Rule 65’s test for issuance of a preliminary injunction (in the 11th Circuit, that comes from Siegel).
- Over the past decade, many courts have recognized this problem and begun to reign in non-compete use and abuse. One of the reasons why it has taken so long for the law to change is a failure of advocacy (on the defense side). When I began litigating non-compete cases a decade ago, I noticed that relatively few lawyers on the defense side were making arguments about antitrust and legitimate business interests. Instead, I routinely saw folks defending these cases with what I consider technical or “gotcha” arguments. It was rare to see defendants and their counsel fully embracing the antitrust/no legitimate business interest theory. But it’s hard to truly fault them for that. Because I consider myself a scholar of the law, have reasonably strong credentials, have a track record of significant decisions, make good arguments, and have the law on my side —- But there have been numerous times in my career when judges told me point blank that they had no clue why I was talking about antitrust, or, after hearing my argument, brush it aside because “We enforce non-compete agreements all the time.” And, over the years, plenty of opposing counsel have openly laughed at me and mocked, telling me I am delusional because “We enforce non-compete agreements all the time.” So, in all fairness, I cannot fault folks who may not be willing to take a stand on an issue like this. Because it’s complicated. Often, it’s ugly. It’s stressful. You take your fair share of losses even when you are right on the law. You make powerful enemies. And lots of people will regard you as an idiot who is tilting at windmills and should just shut up, stop fighting for a cause, and go do something else. For my part, I remain steadfast in my mission and firm in my belief that those who can fight this sort of fight — must.
The case remains pending in the United States District Court for the Middle District of Florida.
Order Denying Preliminary Injunction (MDFL)
Jonathan Pollard is a competition lawyer based in Fort Lauderdale, Florida and the founder of Pollard PLLC. The firm has extensive experience litigating complex non-compete, trade secret, and unfair competition matters. Pollard PLLC can be reached at 954-332-2380.
