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The Third District Court of Appeal of Florida recently ruled in Mossucco v. Aventura Tennis, LLC, 39 Fla. L. Weekly D1606 (Fla. 3d DCA July 30, 2014) that a party’s voluntary dismissal of an action without prejudice does not automatically constitute an adjudication that a previously issued temporary injunction during the course of that action was wrongfully entered against the defendants.

A temporary or preliminary injunction is a procedural tool used to maintain the status quo until the case can be decided on the merits.  Typically, the injunction requires a party to refrain from some kind of dangerous, harmful, or damaging conduct that is ongoing or imminent.  Because the entry of a temporary injunction often involves an expedited determination from the court prior to the completion of discovery, Florida courts often describe the temporary injunction as an “extraordinary” or “drastic”  remedy.

To address notions of due process and equity, Florida courts have established a fairly rigorous, four-part test for temporary injunctions.  The party seeking a temporary injunction must demonstrate to the court that:

    1. there is a substantial likelihood of success on the merits;
    2. there is no adequate remedy at law;
    3. irreparable harm will ensue unless the injunction is issued; and
    4. the injunction would serve the public interest.

Wade v. Brown, 928 So. 2d 1260, 1261 (Fla. 4th DCA 2006).

Additionally, the rules of civil procedure require the party seeking an injunction to post a bond in an amount the court deems appropriate to provide sufficient funds to cover the adverse party’s fees and costs if it is later determined that the injunction was wrongfully entered.  Fla. R. Civ. P. 1.610(b).

CASE BACKGROUND

The Mossucco case involved a fairly common temporary injunction scenario, to wit: an alleged breach of a non-compete clause in an employment contract.  Aventura Tennis was a retailer of tennis goods and supplies, and two of its employees, Mossucco and Gonzalez, agreed that they would not work for a competing business while working at Aventura Tennis and for one year after their employment terminated.  Aventura Tennis contended that the two employees opened a kiosk on behalf of one of its direct competitors in violation of the non-compete agreements.  Accordingly, Aventura Tennis filed suit against its two employees seeking both damages and injunctive relief.

Approximately a month after filing the lawsuit, Aventura Tennis filed a motion for temporary injunctive relief to enjoin the employees from operating the kiosk.  After an evidentiary hearing on Aventura Tennis’ motion, the trial court entered separate temporary injunctions that prohibited the employees from working at the kiosk for approximately a year and a half.  The injunctions were conditioned upon Aventura Tennis posting a bond totaling $32,800 to account for the employees’ costs and damages if it was later determined that the injunctions were improperly entered.

The temporary injunctions involving Mossucco and Gonzalez expired by their own terms on October 13, 2011 and December 17, 2011, respectively.  Approximately a year later, on November 29, 2012, Aventura Tennis filed a notice of voluntary dismissal of the case without prejudice.  Within 30 days later, the employees filed a motion with the court seeking damages and attorneys’ fees from the bond posted by Aventura Tennis.  In their motion, the employees argued that Aventura Tennis’ voluntary dismissal of the action constituted an automatic determination that the injunctions were wrongfully entered.  The trial court disagreed and denied the employees’ motion.

The Third District Court of Appeal affirmed the trial court’s ruling and held that “a plaintiff’s voluntary dismissal of its suit without prejudice after it has sought and received a temporary injunction can, but does not automatically, constitute an injunction that the adverse party was ‘wrongfully enjoined.’”  Mossucco v. Aventura Tennis, LLC, 39 Fla. L. Weekly D1606, 1607 (Fla. 3d DCA July 30, 2014) (emphasis in original).  In so holding, the court noted that the general rule in Florida has been that a “dissolution of an injunction upon the merits operates as an adjudication that it was improperly issued.”  Id., quoting Rice v. White, 147 So. 2d 204, 207-07 (Fla. 1st DCA 1962), quoting Nat’l Surety Co. v. Willys-Overland, Inc., 138 So. 24, 25 (Fla. 1931) (emphasis added by court).

However, instead of adopting a bright-line rule for wrongful injunctions upon voluntary dismissal of a case, the Third District Court of Appeal explained that the trial court must examine the “totality of the circumstances” to determine if voluntary dismissal of the action constitutes an adjudication that the adverse party was wrongfully enjoined and thus entitled to recover on the bond.

Using this “totality of the circumstances” standard, the court found that the employees had not met their burden of proof to support their theory of being wrongfully enjoined.  In this regard, the court found it particularly noteworthy that the employees had made no effort to challenge the temporary injunctions – through a motion to dissolve the injunctions, an appeal of the injunctions, or otherwise – until a year and a half after the injunctions were issued and nearly a year after they expired on their own terms.

TAKEAWAYS

There are a number of lessons to be learned from the Mossucco case.  Employers who enforce restrictive covenants against former employees and are awarded injunctions must carefully consider the implications of voluntarily dismissing the case.  An employer who voluntarily dismisses a case may unwittingly create an issue of fact that a previously issued injunction was wrongfully entered, and thus a claim by the employees to recover on the employer’s injunction bond.

Although not discussed in Mossucco, an employer’s voluntary dismissal of a case against an employee may also be tantamount to an adjudication on the merits for purposes of a prevailing party attorneys’ fee clause in a contract or a fee shifting statute.  Alhambra Homeowners Ass'n, Inc. v. Asad, 943 So.2d 316, 318 (Fla. 4th DCA 2006) (“The general rule is that when a plaintiff voluntarily dismisses an action, the defendant is the ‘prevailing party’ within the meaning of statutory or contractual provisions awarding attorney's fees to the ‘prevailing party’ in litigation.”) (numerous cases cited).

Additionally, defendants who have been enjoined need to be proactive in challenging the merits of an injunction because a subsequent voluntary dismissal of the action by the plaintiff, in and of itself, will not automatically equate to a finding that the injunction was wrongfully issued in the first place.

McDonald Hopkins LLC has significant experience representing employers and employees in non-compete, non-solicitation, and other restrictive covenant cases.

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