Most of the calls I receive in my Fort Lauderdale office are from people who have just received a cease and desist letter from a law firm that represents their former employer. You know the story. They worked for one company, moved on to another company and are now being accused of violating their non-compete agreements. These letters generally tend to be filled with a bunch of boilerplate threats and dramatic flair. They have subject lines like, “Re: Blatant Violation of Your Legal Obligations.” They ramble on at length about trade secrets and confidential information (much of which is not even at issue). But they have to say something! They have to make a credible threat. When someone gets one of these letters, they generally have four options: (1) Quit your new job (2) Do nothing and let the chips fall where they may (3) Hire an attorney to write a letter in response to the cease and desist letter or (4) Hire an attorney to sue your former employer first. The fourth option – suing first in a preemptive strike – is the focus off this post.
As with all cases and disputes, the best strategy will depend on the specific facts and circumstances of your situation. If you are in an incredibly weak position on the facts and the law, then it may be best for you to simply sit tight and see what happens. Your former company may decide that litigation is simply not worth the time and expense. Then again, you may have been a high-ranking employee at your former company, with access to company information that truly is confidential, proprietary or even a trade secret. In that instance, yes, your former employer will probably sue you if you do not respond to the cease and desist letter. In that instance, the best strategy may be to immediately hire a lawyer and try to negotiate some favorable resolution with the other side. Say the non-compete agreement was written to cover 3 years. Maybe you can agree to some type of settlement that involves paying the company; shortening the duration; agreeing to leave the market and sit on the bench for a while; certain assurances; etc. But these two options – quitting your job or doing nothing – are the types of options that are available when you are in a weak position. What do you do when you have the facts and the law on your side? What do you do when you are in a position to beat the non-compete agreement and have it declared invalid or unenforceable?
You sue first. I only recommend this strategy to a small number of clients and prospective clients. Those clients are in a very strong position. For most of them, a year or more has already elapsed since they left their former employer. Likewise, the employer’s arguments about confidential information and customers have glaring weaknesses and are subject to attack. In these limited circumstances, it is possible to sue first for what is called a declaratory judgment. Essentially, you are asking the court to declare the non-compete agreement invalid or unenforceable. To be candid, this can be a risky strategy. There is no guarantee that you will prevail. And you will have to pay the costs and attorneys fees for filing the case. But, if you do prevail, there is a strong likelihood that you will be able to recover those costs and fees either under (1) a provision in your employment contract / non-compete agreement or (2) the Florida non-compete statute 542.335.
If the facts warrant it, you sometimes take an even more aggressive posture. You can pursue both a claim for a declaratory judgment and other causes of action predicated on your former employer’s anticompetitive conduct. While there is no claim that is perfectly applicable to an attempt to enforce a bogus non-compete agreement, there are some causes of action that are helpful. If you strike first, you may want to consider including a claim for tortious interference with contract or tortious interference with prospective economic advantage. If you are legally working for a new employer and your old employer is interfering with your new employment relationship and causing you actual damages, then that is actionable. If you are working with clients in the industry and your old employer is interfering with those relationships, that, too, is actionable.
There are other reasons to file first, but those involve certain ultra-specific legal scenarios that probably are not relevant here. For instance, if the parties to the dispute come from multiple states, and one of those states is California, then you may want to strike first and file in California (where non-compete agreements are unenforceable). Or if you want to litigate the case in a particular forum – say Miami or Fort Lauderdale – and you can establish venue and jurisdiction there. As I said– ultra specific scenarios that probably are not relevant here.
The bottom line: If you are faced with a possible non-compete lawsuit, but you are in a strong position on the merits, you may want to consider suing first and seeking a declaratory judgment.
Jonathan Pollard is a trial lawyer and litigator based on Fort Lauderdale, Florida. He focuses his practice on defending non-compete and trade secret claims. Jonathan routinely represents doctors, corporate executives and other high level employees who are switching companies, or, who have started their own ventures. Beyond litigation, Jonathan advises employees, companies and business owners regarding restrictive covenant issues in connection with employment contracts, separation agreements, hiring decisions, the purchase or sale of business interests and the execution of commercial leases. Jonathan has been interviewed about non-compete issues by reporters from INC Magazine, the BBC and The Tampa Bay Times. In addition to his background in non-compete and trade secrets work, Jonathan has broad experience as a competition lawyer, generally, and has litigated numerous cases under both the Sherman and Lanham Acts. He is licensed in all Florida federal and state courts and routinely represents clients in Miami, Fort Lauderdale, West Palm Beach, Fort Myers, Tampa, Orlando and Jacksonville. His office can be reached at 954-332-2380. For more information, visit http://www.pollardllc.com.