Temporary Injunctions - Careful what you ask for. You might get it.

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You have a business dispute. Either the seller of the business you bought is directly competing against you after the closing or an ex-employee has gone to work for the competition taking trade secrets with him. First, hopefully you have a signed a Non-Compete Agreement.

Now you have to evaluate certain risks in asking for a preliminary injunction.

One of the first things I am asked as part of bringing suit in such situations is how fast I can get emergency injunctive relief. An injunction is a court order which, in this case, prohibits the competition against you that is breaching the Non-Compete Agreement.

But you'll also be suing for damages. And that is where you have to be careful. The arguments for your damages claim and for your injunction typically will not be that different. As a result, if you lose your emergency motion for temporary injunction, you may be giving the other side a victory if the court finds the likelihood of you prevailing is not high enough to grant you the injunction.

So the down side is that since you are also suing for damages, you have to really think about whether a court order on an injunction will help in the long run. If the acts the defendant is engaging in don't really extend the harm significantly or threaten to put you out of business, then the risk of an adverse temporary injunction hearing may not be worth it.

Even worse, this scenario may occur after you win a temporary injunction. If the defendant thinks the injunction order is unfair, the defendant can take it up on appeal and if successful, you have the same problem and the possibility of paying for their legal fees after your own fees spent on the appeal. Just as a Non-Compete Agreement can't be overbroad (such as being for an unreasonable number of years or a geographic region that is too large), so too can a trial court's order be overbroad.

The elements you must prove to win a preliminary injunction are:

1) you will suffer irreparable harm unless the order is granted;

2) there is no adequate remedy at law (money damages can't pay for the harm being done);

3) you have a substantial likelihood of winning your underlying damages claim; and

4) public interest supports granting the temporary injunction.

Appellate courts have reversed entry of temporary injunctions where they are vague and overbroad. A business was sued that provided orthopedic physicians and their practices with administrative support for worker's compensation prescription claims receivables.

The temporary injunction was reversed since it had no time restriction and prohibited "soliciting any [physician] practices which are current or prospective clients" of the plaintiff. Anyone could be a prospective client so you can see the problem. The case is 4UORTHO, LLC v. Practice partners, Inc., Physician Wellness Products, LLC, et. al., 18 So.3d 41 (Fla. 4th DCA 2009).

In Zupnik v. All Fla. Paper, Inc., 997 So. 2d 1234 (Fla. 3d DCA 2008), All Florida Paper sued Zupnik, an ex-employee and his new employer Dade Paper, to stop them from breaching his non-competition agreement and to prevent them from misappropriation of trade secrets. This case is important because it shows that the appellate court can render its own opinion of a Non-Compete Agreement and doesn't have to rely on what the trial court found.

All Paper Florida lost on the Non-Compete enforcement against Zupnik. Though he remained employed by All Paper Florida for an additional two years after his employment contract of two years expired, the appellate court ruled he was only an at-will employee. As such no new employment agreement was created. Meanwhile, the non-competition period was only for 12 months after the initial two year period expired.

All Paper Florida further lost on their misappropriation of trade secrets claim against Dade Paper. The appeals court found that All Florida Paper did not prove Dade Paper misappropriated any specific trade secret information related to any All Florida Paper customer. As such, All Florida Paper failed to establish the third element, a likelihood of success on the merits.

For All Paper Florida, it seems winning their temporary injunction was all in all a disaster. It is hard to say if the case would have settled before such devastating rulings would have affected their case. Make sure you think through the pros and cons of a preliminary injunction before going after one.

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About this Entry

This page contains a single entry by Nickolas C. Ekonomides published on May 5, 2013 7:41 PM.

Non-US Outlet and Franchise Disclosure was the previous entry in this blog.

Can a Franchisee Sue a Franchisor For a Bad Answer to: How Much Money Can I Make? is the next entry in this blog.

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