On February 7, 2022, a Tampa, Florida federal court cited delay and denied a preliminary injunction to a transportation management company seeking to enforce non-compete agreements against four former employees. In Blue-Grace Logistics LLC v. Fahey, 340 F.R.D. 460 (M.D. Fla. 2022), the district court reinforced that speed and urgency are a must to win a preliminary injunction, because the movant alleges and must prove imminent and irreparable harm. The federal district court also refused to apply Florida’s statutory presumption of irreparable harm to enforce the restrictions, as contrary to federal injunction requirements.
Case Background
Blue-Grace, a Florida-based transportation management company, contracts with independent carriers to haul freight for customers across the country. Blue-Grace hired David Fahey, Mark Fox, Tyler Wilkiel, and Jason Colle (the “Employees”) as carrier sales representatives. By March 2021, the Employees had each resigned and began working at Traffic Tech, Inc.—a competitor. Blue-Grace’s employment agreement contained non-compete, confidentiality and non-disclosure, and non-solicitation provisions. Blue-Grass asserted the restrictive covenants were reasonable to protect legitimate business interests.
Three days after Fahey resigned to work for Traffic Tech on December 1, 2020, Blue-Grace sued him. The litigation became drawn out with numerous motions and moved between state and federal courts. In late October 2021, the case was removed to federal court.
Blue-Grace did not add Colle, Fox, and Wilkiel to the complaint until it filed its final amended complaint on December 3, 2021, one-year after Fahey resigned. Blue-Grace made its last filing with the district court related to its preliminary injunction motion on January 13, 2022. Over thirteen months passed between when Blue-Grace filed its initial lawsuit against Fahey and when Blue-Grace made its final filing with the court seeking a preliminary injunction.
Legal Standard
Preliminary injunctions are extraordinary remedies, and under federal law, a court may grant one only if the moving party establishes:
- A substantial likelihood of success on the merits;
- Irreparable injury without an injunction;
- The moving party’s injury outweighs the harm the injunction may cause the opposing party; and
- The injunction would not be adverse to the public interest.
In turn, to succeed on the merits, Florida Statute §542.335, only allows enforcement of a non-compete or non-solicitation agreement if the movant can establish both the existence of a legitimate business interest and that the restrictions at issue are reasonably necessary to enforce the legitimate business interest. Under the statute, “legitimate business interests” include, but are not limited to, substantial relationships with prospective or existing customers; customer goodwill associated with certain intellectual property or geographic or marketing area; extraordinary or specialized training; valuable confidential information; and trade secrets.
The Court’s Analysis
First, the court had to deal with the choice of law issue before it because Florida law creates a presumption of irreparable harm while federal law does not. Under Section 542.335, “[t]he violation of an enforceable restrictive covenant creates a presumption of irreparable injury to the person seeking enforcement of a restrictive covenant.” There is a presumption of irreparable injury when an employer can show a prima facie case that a former employee violated a restrictive covenant. The onus is then put on the former employee to show that there is no injury or that the injury is irreparable. Under federal law, however, there is no presumption of irreparable harm. The burden is on the moving party to show that the injury is irreparable. Because the presumption under Florida law conflicts with federal law standard that the moving party has the burden to prove irreparable harm, federal law controls. Nonetheless, as the court explained, Blue-Grace’s delays throughout the case rebutted the presumption of irreparable injury.
The defendants did not dispute Blue-Grace’s claims that they violated their employment agreements when they went to work for Traffic Tech. Blue-Graced asserted that the restrictive covenants were to protect its confidential business information, which is a legitimate business interest and, accordingly, creates a presumption of irreparable injury under Florida law.
In response, the defendants pointed to Blue-Grace’s delays throughout the litigation. The court found the defendants to be persuasive. The court reasoned that a preliminary injunction protects a plaintiff’s rights in a speedy and urgent manner before the matter can be resolved on the merits. Thus, the movant must act in a speedy and urgent manner or will negate a showing of irreparable harm. The court pointed to the chronology of the case to call out the delays in Blue-Grace’s litigation strategy. Blue-Grace knew of the defendants’ restrictive covenant violations for at least six months before the final amended motion for preliminary injunction was filed. Blue-Grace’s choices throughout litigations caused delays which, as the defendants argued, rebut the presumption of irreparable harm.
In turn, Blue-Grace did not have much to back up its position that its injury was irreparable. Blue-Grace alleged that, in combination with the Employees going to work for a competitor, the Employees improperly disclosed Blue-Grace’s business processes, practices, trade secrets, and pricing information to third parties, including their new employer Traffic Tech. The court again pointed to Blue-Grace’s litigation strategy, pointing out that if the defendants truly did possess that information, then Blue-Grace would not have delayed litigation as much as it had. Further, Blue-Grace did not rebut the evidence put forward by the defendants. For example, Blue-Grace was not able to counter Fahey’s affidavit that he had not disclosed, used, or reviewed, Blue-Grace’s confidential information since he left the company.
Takeaways
Takeaways for Employer’s Enforcing Non-Competes: You must act with speed and urgency to win a preliminary injunction and enforce restrictive covenants against former employees. In the court’s view, the six-month (at a minimum) delay attributable to Blue-Grace was fatal to their claim of irreparable harm. Also, be ready to prove irreparable harm with convincing, admissible evidence. Blue-Grace provided the court with a modicum of evidence that the harm was irreparable. Often, an employer must consider obtaining this evidence expeditiously and very early in the case to support a prompt injunction motion, versus seeking an injunction with little evidence. Even then, move swiftly to get the injunction heard.
Takeaways for Defending Against Non-Compete Enforcement: Delay, especially unreasonable delay, is an advantage to rebut a preliminary injunction. It is also often advantageous for many reasons to remove a case to federal court, if possible.