MEDICAL EQUIPMENT RENTAL COMPANY, MEDICAL EQUIPMENT REPAIR COMPANY, ADVANCED CARDIAC SYSTEMS, INC., AND KENNETH PERDUE, INDIVIDUALLY, APPELLANTS,
v.
RONALD TARR AND H. JOANN WRIGHT, APPELLEES
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This case addresses whether a contractual provision requiring liquidated damages of $100,000 for breach of a non-compete/trade secret protection agreement is an enforceable liquidated damages clause or an unenforceable penalty. The court reversed summary judgment, holding that disputed questions of fact regarding whether damages were readily ascertainable at contract formation and whether the amount would be unconscionable precluded summary judgment.
The court reversed, holding that summary judgment was premature because: (1) whether damages from breach were readily ascertainable at contract formation is a fact question that cannot be resolved on summary judgment when the breach could involve trade secrets resulting in unknown damages; and (2) if the provision is deemed liquidated damages, whether the amount is unconscionable and unreasonable is another fact question for the trial court.
[1] A partial summary judgment on a count that sets forth a cause of action separate and distinct from other counts is final and subject to plenary appeal.
[2] A contract clause is a penalty if damages flowing from a breach are readily ascertainable at the time the contract is executed.
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Join FLexlaw to unlock all legal intelligence“[W]hether a clause in a contract is one for liquidated damages or a penalty depends upon whether or not the damages flowing from a breach are readily ascertainable at the time the contract is executed. If the damages are ascertainable on the date of the contract, the clause is a penalty and unenforceable; if they are not so ascertainable, the clause is truly one for liquidated damages and enforceable”
Establishes the controlling legal test distinguishing between enforceable liquidated damages and unenforceable penalties.
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Join FLexlaw to unlock all legal intelligenceAppellees contracted with appellants' medical equipment companies agreeing that if they used or disclosed information regarding repair of medical equi…
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DOWNEY, Judge.
By petition for rehearing appellees have pointed out that we are as guilty of premature action in this case as the trial court was found to be in our opinion of January 4, 1985. We concede our error, grant the petition for rehearing, withdraw our opinion of January 4, 1985, and in its stead issue the following opinion:
This is a non-final appeal, pursuant to Florida Rule of Appellate Procedure 9.130(a)(3)(C)(iv), from an order granting the plaintiffs-appellees a partial summary judgment. Since the trial court granted a partial summary judgment as to count five, which sought rescission of the contracts in question, and that count sets forth a cause of action separate, distinct and independent of the other counts, the summary judgment is final and subject to plenary appeal. Mendez v. West Flagler Family Association, Inc., 303 So. 2d 1 (Fla.1974). Accordingly, we will treat this as a plenary appeal.
Appellees brought suit against appellants in five counts arising out of a business relationship wherein appellees contracted that before, during or after termination of their employment with the appellant corporations they would be liable for liquidated damages in the event they used or caused to be used information regarding repair of certain medical equipment. A sample of one of the provisions of said contract is footnoted in the margin.1 In counts one and two appellees2 claim damages for failure of appellants to return leased medical equipment. In counts three and four appellees claim damages for fraud and violations of section 607.157, Florida Statutes (1983). In count five Tarr seeks rescission of two agreements (see sample in footnote one). The trial court granted a summary judgment for appellees, finding that each agreement contained “an unconscionable penalty rather than liquidated damages.” We reverse.
The applicable rule in the determination of liquidated damages versus a penalty is set forth in Bruce Builders, Inc. v. Goodwin, 317 So. 2d 868, 869 (Fla. 4th DCA 1975) as follows:
[WJhether a clause in a contract is one for liquidated damages or a penalty depends upon whether or not the damages flowing from a breach are readily ascertainable at the time the contract is executed. If the damages are ascertainable on the date of the contract, the clause is a penalty and unenforceable; if they are not so ascertainable, the clause is truly one for liquidated damages and enforceable; however, if subsequent circumstances demonstrate it would be unconscionable to allow the seller to retain the sum in question as liquidated damages, equity may relieve against the forfeiture.
For aught we find in the record it would appear that breach of the agreement regarding the equipment in question could well involve trade secrets resulting in unknown damages. Therefore, the contract provision may be one for liquidated damages rather than a penalty. Furthermore, if the provision should ultimately be held to be one for liquidated damages, the question of whether the amount provided is unreasonable and unconscionable is another fact question to be decided by the trial court. Thus, summary judgment was premature.
Accordingly, we reverse the order appealed from and remand the cause for further proceedings.
REVERSED and REMANDED.
ANSTEAD, C.J., concurs.
HURLEY, J., dissents without opinion.
. If before, during, or after termination of my employment, either direct or by contract, with Medical Equipment Repair Company, and/or Advanced Cardiac Systems, I use, divulge, or cause to be used any information regarding the repair of pressure transducers I agree that irreparable damage will result to said companies and I agree that I will be liable for damages of not less than One hundred thousand dollars ($100,-000.00) to be paid on demand by me or any future employer to whom I may divulge information regarding the repair of transducers.
. Wright is only a nominal appellee.
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Redd v. Talley, 584 So. 2d 616 (Fla. 1st DCA 1991)…submitted on a monthly basis, and mutually agreed upon by the parties. After further difficulties between them, appellant, some five years later, attempted to repudiate this release based upon alleged duress. . Medical Equipment Rental Co. v. Tarr, 467 So. 2d 459 (Fla. DCA 1985). . Rule 9.110(k), Florida Rules of Appellate Procedure, provides that if a partial summary judgment totally disposes of an entire case as to a party, it must be appealed within thirty days if it is to be appealed at all.…
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Casavan v. Land O'Lakes Realty, Inc., 542 So. 2d 371 (Fla. 5th DCA 1989)…, 73 So. 2d 393, 401 (Fla.1954); Multitech Corp. v. St. Johns Bluff Investment Corp., 518 So. 2d 427, 432 (Fla. 1st DCA 1988); Osceola County v. Bumble Bee Construction, Inc., 479 So. 2d 310 (Fla. 5th DCA 1985); Medical Equipment Rental Co. v. Tarr, 467 So. 2d 459, 460 (Fla. 4th DCA 1985); Berndt v. Bieberstein, 465 So. 2d 1264 (Fla. 2d DCA 1985); McNorton v. Pan American Bank of Orlando, 387 So. 2d 393, 396 (Fla. 5th DCA 1980), rev. denied, 392 So. 2d 1377 (Fla.1981), and cases cited therein. .Section 83.56…
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City OF OPA Locka v. Hill, 590 So. 2d 952 (Fla. 3d DCA 1991)…e, the counts involved are separate and distinct from those which remain pending, so as to permit review at this time under Fla.R.App.P. 9.130(a)(3)(C)(iv).” Gates, 393 So. 2d at 587 n. 1 (citation omitted). Accord Medical Equip. Rental Co. v. Tarr, 467 So. 2d 459 (Fla. 4th DCA 1985). Here, unlike Gates, the pending counts are not separate and distinct from the counts decided in the order on appeal. See Mendez v. West Flagler Family Ass’n, Inc., 303 So. 2d 1 (Fla.1974). For these reasons, the appeal should be…
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Join FLexlaw to unlock all legal intelligenceAuthorities Cited
- Mendez v. W. Flagler Fam. Ass'n, Inc., 303 So. 2d 1 (Fla. 1974)
- Bruce Builders, Inc. v. Goodwin, 317 So. 2d 868 (Fla. 4th DCA 1975)