50 Things Law School May Not Teach You (But Twitter Law School Can)

50 Things Law School May Not Teach You (But Twitter Law School Can)

Twitter is not all bad. One good thing about it is the opportunity for lawyers and law school students to interact. It gives the students a chance to hear what’s going on in the real world of law practice. And it gives lawyers a chance to do what they love best: talk about themselves and their jobs. You might call it “lawsplaining.”

A common law-Twitter trope: the law student expresses anxiety about exams, or interviewing, or student loans, and a snarky lawyer responds with something like, “You think your Property final is hard? Just wait until you’re a lawyer and your boss emails you at 10 pm saying he needs a motion for summary judgment researched, drafted, and on his desk by tomorrow morning!”

Yes, we lawyers tend to lay it on a little thick. So if you’re a law student following lawyers on Twitter, adjust your settings for “associate gallows humor,” “bitter senior partner venting,” and the like. And keep in mind that most of us lawyers like our jobs and the profession, even if we sometimes act like we’d rather have some horrible menial job, like accounting.

Plus, it’s hard to compare the existential dread of law school and the bar exam with the everyday headaches of practicing law. Sure, it can be a pain dealing with difficult clients, demanding bosses, irritable judges, billable hours, or bringing in business. But that’s more of a daily grind, and you get used to it. It’s not the same kind of scary as taking that Secured Transactions exam that will determine whether you will get a job or have to default on your student loans.

Not only that, you have to adjust for the experience and capabilities of the person experiencing the adversity. The Bible says God will not test you beyond what you can bear. Whether you believe that or not, in professional life your ability to handle stress does tend to expand as the tests become more challenging.

I mean, you wouldn’t say to your ten-year-old, “You think fractions are hard? Just wait until you have to get a job and pay a mortgage!” Or maybe you would. But the point is that lawyers shouldn’t try to make law students feel like they’re being wimps for complaining about how tough law school can be.

So, real law school students, take the pearls of wisdom you find on Twitter School of Law with a grain of salt. (Talk about mixed metaphors.)

But still, you can learn a lot from Twitter about what it’s really like to be a lawyer. I have firsthand knowledge of this. Recently I posted this tweet:

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I was serious. In law school, you wouldn’t dream of turning in a paper citing a case that didn’t support the proposition it was cited for. You certainly would not be so careless as to cite a case that said the opposite. So when I was a law student, I would not have expected real lawyers to do that.

But in the real world of litigation, this sort of thing happens more often than you would think.

It was just an offhand comment, but my tweet went viral (at least by my standards). Over 200 retweets, almost 2,000 likes, and over 300 comments.

The comments were really the best part, although some people seemed to misunderstand the question. The question was about what would surprise law school students, not just “what is something about law practice that you would like to gripe about?”

But still, the responses were fun to read. Some were funny, some insightful, and most of them had a nugget of wisdom.

They were so good that I decided to select the top 50. Now, keep in mind, my goal here was to select things that struck me as both true and unexpected. So if you responded with some unparalleled wisdom that didn’t make the cut, maybe I just thought your point would not be that hard for a law student to believe.

As I selected the top 50, I noticed two things. First, there were some discernible recurring themes. Second, most of the comments were, shall we say, a little on the negative side? So, I’ve grouped the responses by theme, and where needed I’ve offered a counterpoint accentuating the positive.

Law school vs. law practice

1. “The practice of law is way more stressful and demanding than the study of law once prickly senior partners, combative opposing counsel, fearsome judges, and difficult clients are part of the picture.” 

2. “Grades don’t matter in practice. Once your in the profession, how well you did means nothing when it comes to how you will do at your job.”

The first response is the typical one I mentioned earlier, although said in a nicer way. And it has a point: practicing law is more demanding than law school, at least in absolute terms. But don’t despair. You have to look at it in relative terms. With more experience under your belt, you’ll be able to handle it. 

And here’s some news that may lighten the load of exams: Law school grades do make a difference in getting that first job offer, of course, and low grades may cut off some elite career paths. But for the most part, nobody is going to care about your law school grades after you get that first job.

BigLaw is great, but . . .

My impression is that BigLaw sucks up most of the recruiting oxygen on law school campuses. Still, as these comments point out, don’t think that working for a big law firm is the only worthwhile career path. 

3. “That some of the best (and happiest) lawyers work for government agencies. They become experts in their fields. And although they won’t get rich, they make a comfortable living, have healthcare and guaranteed retirement, and go home at a reasonable hour.”

4. “That working for a smaller firm can get you way better mentorship sometimes and as such be better for your better for your career in the long run.”

5. “That quite often, the only advantage that a BigLaw firm has over a solo is the ability to marshal large numbers of (hourly billing) attorneys. That the underlying work sometimes is done better by the solo.”

On the other hand, big law firms hire a lot of students out of law school, and that’s where the money is. Plus, as I conceded in my post Should Clients Pay a Premium for Big-Name Law Firms?, most of the superstar lawyers are at the big firms. So it’s only natural that law students focus on them.

Law is messier than you think

6. “That fact patterns aren’t give to you in a neat, digestible format. You must pull the facts from your client and other witnesses (often, on multiple occasions) and organize them yourself.”

7. “That there is not going to be authority providing neat answers to many/most questions you are researching. So many of the issues we have to deal with are in grey areas, and I don’t think law school prepares you for that.”

8. “Managing ambiguity is part of the job. Sometimes, there’s no clear answer or path to recommend to your client.”

9. “The ethical issues that arise are not usually defendants admitting crimes or telling you where the bodies are. They are often relatively small, easy to miss instructions to do something that you might not immediately realize is unethical.”

The theme here is that law–and legal ethics–are messier than your meticulous outlines. On the other hand, you might be surprised how often you find yourself recalling and applying concepts you learned even decades earlier in law school. So those lessons do have value. Just don’t expect them to give a you a definitive answer all the time.

So much work, so little time

10. “That projects that take half a semester in law school you’ll have to do 2-3 every day.”

11. “How little time there is to do a lot of the work.”

It’s true. That motion for summary judgment you spent a semester on in law school? You might have one night to write it. But again, it’s ok. As the amount of work increases, your capacity for doing the work will increase too.

It’s not all sophisticated legal analysis

12. “My assumption in law school that I’d do a lot of talking as a lawyer was correct, but I though more of it would be in the courtroom. In reality, it’s mostly from my office on the phone. Sometimes I feel like I work at a call center. Dozens of calls a day, 30-60 min. ones are common.”

13. “That a strict system of file organization and client contact tracking heads off 90% of potential problems.”

14. “How far basic things like good record keeping and calendaring will get you. You can write amazing briefs, but if you’re always filing them late that’s going to catch up to you.”

15. “Transactional lawyer here. First, the amount of managing a project needed to get a deal done (vs anything having to do with the law). Second, the use of forms.”

16. “You may well spend days, even weeks completing administrative tasks.”

17. “How much of practice isn’t obvious from reading the rules. For example, how do you get the court to actually consider the motion you just filed and rule on it? In federal court, you sit and wait. In state court, you often have to get on a hearing calendar somehow.”

Law school doesn’t teach you much about practical office skills or internal court procedures. I don’t have a problem with that. Law schools focus on teaching substantive areas of law, because that’s what law schools are good at. Just don’t let that make you think you’re going to spend all your time focused on the law.

It takes a village to raise a baby lawyer

18. “Admins run everything, they all talk, and woe to the baby lawyer who runs afoul of the Admin Network.”

19. “The most important person at your law firm is probably a paralegal.”

No, you don’t want the secretaries and legal assistants mad at you. But if you’re lucky (like me), you’ll get to work with some great non-lawyers who will make your work life so much easier.

Respect your elders?

20. “That the amount lawyers charge has little to [do] with their level of skill or competence.”

21. “That a lot of attorneys who have decades of experience over you doesn’t mean they are better or know what they are doing.”

22. “You will come across senior lawyers, some of them prominent and respected, whose affidavits would get a failing grade in law school.”

23. “That the fact that someone has been practicing for a long time does not mean that they know what they are doing.”

Yes, you will discover that the most prominent or most senior lawyers sometimes have mediocre practice skills–or worse. But don’t disrespect the old folks. I have found that I can learn something valuable from almost every experienced lawyer I encounter. And the really good ones can teach you everything you need to know if you pay attention.

Judges

24. “That judges often don’t read one’s impeccably drafted and cite-checked briefs prior to hearings.”

25. “How many judges were terrible lawyers, then always brag about how great they were once on the bench.”

26. “How absolutely ordinary judges are.”

27. “I was really surprised to hear how much judges talk to other judges about attorneys that appeared in their courtroom. If you were disrespectful or respectful, judges talk to each other about that. A LOT.”

In law school I had an image of judges as the most experienced and esteemed lawyers who went on the bench after successful careers in litigation. The reality is that many judges are judges because they are good at politics, not because they are good at practicing law.

But there are still some really good ones. Given the system we have–elections for state court judges (at least in Texas) and federal appointments based on political connections –it’s a pleasant surprise how many excellent judges there are, especially when you consider they could make 3X more money in private practice (at least).

And regardless of what you think of the judge, follow the rules and be respectful. Word gets around.

Nice guys finish last?

28. “That you will actually get along with, and at times develop friendships with opposing counsel and more surprisingly, it’s almost always a good thing and benefits your client.

29. “Opposing counsel can be an ally. No need for snark. Civility can win.”

30. “How often you end up engaging in respectful conversations with opponents as you resolve disputes! I wish this was featured more in law school to counteract the popular notion that lawyers go around screaming at everyone who doesn’t share their position.”

Finally, some warmer, fuzzier responses. As these tweets indicate, don’t let TV and movies–or a fierce mock trial competition–convince you that the best lawyers treat opposing counsel like dirt.

90% of law practice is showing up?

31. “The awful work product you’ll come across from opposing lawyers, generally. Or the discovery abuse that is never addressed by the court.”

32. “That legal writing assignment that you got a C+ on is probably better quality than 90% of stuff that lawyers file.”

33. “That if you do simple things like show up for court, prepare, answer phone calls from your client, keep up with deadlines, and refrain from actively trying to screw over your client, you will instantly be in the top 10% of lawyers in your city.”

This may be a little exaggerated. But it’s true that after working so hard in law school, you will probably be surprised at how much bad lawyering is out there. So take the job seriously and take care of the fundamentals, and you will already be ahead of the game.

Difficult clients

34. “Sometimes people will be literally angry that you won’t do that legal task for free.”

35. “Despite the fact that you, the lawyer, with your education and practical experiences, are instructing them to do X, they will invariably state that you are wrong and they will do Y. They will then get upset (at you) when Y blows up in their face. Paper your advice folks.”

“Invariably” might be too strong. But you will be surprised how often a client will pay you $400 an hour (or whatever) for your expertise and then want to ignore your advice. On the other hand, it can be very gratifying when a client does trust your advice. 

Will justice be done?

36. “You will lose. You can be right on the law, you can have justice on your side, you can write the most gorgeous brief, opposing counsel can do a lousy job… and the judge can go against you and there’s nothing you can do about it.”

37. “A winning argument is sometimes a losing argument when made by a no-name firm. A losing argument is sometimes a winning argument when made by a silk stocking or local firm.”

Sometimes judges and juries just get it wrong. And sometimes you will lose because of favoritism, not the merits. But overall, if you do your best work for every client, in the long run the overall results will be good.

Discovery, rules, and deadlines

38. “The lack of control over the discovery process by the courts despite the pretty detailed rules re timing and sanctions for ignoring said rules.”

39. “As a litigator: That some courts don’t give a single goddamn about schedules or rules.”

You can learn all the rules for discovery and other pretrial matters, but they’re not set in stone. This was another recurring theme. Still, if you play by the rules and meet your deadlines, you will be in a better position to get good results for your client.

Emotional intelligence > legal intelligence

40. “How much of your job is managing personalities.”

41. “If two people describe a situation completely differently, it doesn’t mean either one is lying. You’ll get much further if you assume both are trying their best, and think hard about how each one could see it that way.”

42. “How often even large ‘sophisticated’ corporate clients make litigation decisions based on emotion (usually pride or arrogance) rather than cold hard reason. Starting out you tend to think this is only how family law clients behave. Decisions still made by people.” [Ok, full disclosure: this was mine.]

It can be frustrating when clients make bad decisions based on emotion. But part of your job as lawyer is to put yourself in the clients’ shoes and understand where they’re coming from. Be glad that your clients are not robots.

Business skills vs. legal skills

43. “This doesn’t apply to every lawyer, but for many: customer service skills >>>>> legal skills.”

44. “Practicing law is not the business of law. You have to know and do both. Hard work does not equate with success.”

45. “A corollary to yours, but there are an awful lot of successful lawyers who are great at business development, handwaving, speechifying, etc., but just really terrible at lawyering.”

46. “The huge amount of time, effort and money to market your practice. And that marketing is almost as important as the practice of law these days.”

47. “Unless you have an amazing mentor/rainmaker who takes you under their wing and transitions clients to you, you need to start networking and building a book from day one. Stellar legal work is not enough.”

Oh man, that last one hit me hard. I was clueless about that sort of thing when I came out of law school. I thought I was just not the “rainmaker” type, so I would focus on doing the client work. But that was unwise.

You will enjoy the practice of law a lot more if you bring in your own clients, and you need to start developing the skills to do that from day one. Law schools are not going to teach those skills, and it would be folly for them to try.

The good news is that you can learn those skills. Find yourself a mentor if you can, or at least follow some rainmakers on Twitter. 

And now for the true wisdom . . .

48. “Wait, law students wouldn’t believe that? What, did they not do article review for their journals?”

49. “Despite depictions in ads and website photos, you would be surprised to learn that lawyers rarely stand around with their arms crossed.”

50. “Some associates take bathroom breaks. Stunning to me. I didn’t go until my 8th year.”

These responses actually made me lol.

See, I told you Twitter isn’t all bad. Now, Facebook? Facebook sucks. 

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IMG_4571Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Be sure to follow his Facebook page @fiveminutelaw. 

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

 

Takedown: How To Protect Your Intellectual Property From Infringement on Social Media

Takedown: How To Protect Your Intellectual Property From Infringement on Social Media

Whether you’re a small business, a multi-national corporation, an entrepreneur, or a social media “influencer,” chances are someone at some point is going to use your content on some kind of social media. You don’t want to just let this go, but at the same time, you don’t want to break the bank hiring a lawyer to send a demand letter every time it happens.

What can you do? Is there any fair, quick, and inexpensive method for addressing these issues?

For blatant infringement, yes. For closer cases, no. Social media platforms just aren’t going to take the time and effort to adjudicate intellectual property disputes between their users and the complainers in any satisfying way.

You’ve got two basic choices when someone uses your intellectual property on social media. Either submit a complaint through the platform’s portal and hope for the best, or have a lawyer send a demand letter and, if it becomes necessary, file a lawsuit. The first option is unlikely to get you what you want, and the second option is time consuming and expensive.

Still, doing nothing is not a good option. So if you’re a business owner or a lawyer who represents businesses, it’s worth your time to understand both the basic legal principles and the practical avenues available.

The first step is to understand the kind of “intellectual property” at issue. Nine times out of ten, if someone is posting your material on social media, it will be either a copyright or trademark issue.

So if you’re going to handle the takedown notice, you will need some understanding of the difference between copyright and trademark. This is important because the standards for copyright infringement and trademark infringement are entirely different, and because you need to select the right portal to submit your notice.

Copyright vs. Trademark

Copyright protects original works of expression. Think novels, poems, movies, TV shows, paintings, sculptures, music recordings, blog posts, just to name a few. For example, if you write and record a song and someone posts a copy of your recording on YouTube, that’s copyright infringement (potentially).

Trademark law, in contrast, protects words, short phrases, logos, and other things that function as source identifiers for goods or services. MCDONALD’S—and the golden arches—are trademarks for fast food restaurants. APPLE is a trademark for smartphones and computers. FIVE MINUTE LAW is a trademark for law blogs.

As with all things in the law, there are borderline cases. Does copying a seven-second clip from an iPhone commercial raise copyright or trademark issues? Law school professors love that kind of stuff.

But most of the time, if someone is using your content, it will be pretty obvious which one it is. Are they using your name or logo in a way that suggests they have some connection to you? Probably trademark. Are they copying some significant portion of a work of expression you created? Probably copyright.

This is an important distinction to figure out up front, because copyright law and trademark law are significantly different. But they do have one thing in common: you don’t have to register to have a valid copyright or trademark, but registration does give you certain additional rights that can be important. More about that later.

Let’s start with copyright, because it’s simpler.

Copyright Infringement on Social Media

The paradigmatic case of copyright infringement on social media is a copy of a recorded song posted on YouTube. This is so ubiquitous, I understand the young people don’t even buy music anymore. Why buy when you can just go to YouTube?

Let’s say I post a copy of “Honky Tonk Bodankadonk” on my YouTube channel, That Non-Compete Lawyer. Did I just infringe Trace Adkins’ copyright? The short answer is yes.

And by the way, it doesn’t matter if I include one of those disclaimers like “I do not own the rights to this recording . . .”

I don’t know why this kind of disclaimer became so popular. It has virtually zero legal effect. It’s like robbing a bank but carrying a sign that says “NO THEFT INTENDED.” If anything, it’s evidence that you knew you were infringing the author’s copyright.

But did YouTube infringe Trace’s copyright?

That’s a little more complicated. It’s one thing to hold a small-time litigator liable for copyright infringement. It’s another to hold a multi-billion-dollar social media company responsible. We can’t have that!

Fortunately, we have lobbyists and Congress to thank for passing the Digital Millennium Copyright Act (DMCA) in 1998. Its main purpose is to protect Internet service providers from copyright infringement claims.

The DMCA establishes a “notice-and-takedown” regime that applies to copyright infringement on social media. A social media platform can avoid liability if, “upon notification of claimed infringement,” it “responds expeditiously to remove, or disable access to, the material that is claimed to be infringing or to be the subject of infringing activity.” 17 U.S.C. § 512(c). See also Jon M. Garon, Tidying Up the Internet: Takedown of Unauthorized Content Under Copyright, Trademark, and Defamation Law, 41 Cap. U. L. Rev. 513 (2013).

Naturally, to avail themselves of the protections of the DMCA, all the major social media platforms have dedicated online portals where you can give notice of alleged copyright infringement (if you can successfully identify all the crosswalks in a photo).

For example, this is YouTube’s copyright infringement notice page:

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Of course, that’s not the only way YouTube and other sites police copyright infringement. There is also automated copyright infringement detection. YouTube, for example, has a system called “Content ID” that automatically scans uploaded videos to compare them to its massive database of files submitted by content owners. If people copying and posting your stuff is a recurring issue, consider using the Content ID system to nip infringement in the bud.

Otherwise, you will need to submit a takedown notice. If it’s an obvious case of copying, that will probably be enough to get the infringing copy removed.

In contrast, I doubt that submitting a notice through a routine portal is going to work in less obvious cases. It’s not like YouTube employs a staff of musicologists to sit around trying to figure out if Robin Thicke’s “Blurred Lines” is substantially similar to Marvin Gaye’s “Got To Give It Up” or just has the same basic style.

But for most content creators, the issue is blatant copying, not borderline cases. And in those cases, the notice-and-takedown approach encouraged by the DMCA probably works pretty well.

If anything, notice and takedown may work too well in copyright cases. That’s because not all copying is unlawful. You might have noticed a reference to “fair use” on the YouTube page shown earlier. Fair use is an exception to copyright infringement.

Copyright “Fair Use”

It’s important to understand what fair use is and what it isn’t. It’s not a magic wand to be waved any time someone claims copyright infringement. Rather, fair use refers to various types of copying that the law allows because of their purpose.

And it’s a fuzzy term. That’s because the statute that codifies the fair use doctrine refers to fair use of a copyrighted work “for purposes such as . . .” 17 U.S.C. § 107. Then it lists some non-exclusive examples of fair use: “criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research.” Id.

The statute goes on to provide a list of non-exclusive factors determining whether a particular use of a work is fair use:

  1. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
  2. the nature of the copyrighted work;
  3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
  4. the effect of the use upon the potential market for or value of the copyrighted work.

So let’s say I have a YouTube channel where I review country music albums. If I play 10 seconds of “You Ain’t Much Fun (Since I Quit Drinking)” as part of my review of Toby Keith’s album Boomtown, that’s probably fair use.

I can only say “probably” because, again, fair use is a fuzzy concept in copyright law.

If that bothers you, then you really won’t like trademark law. It’s even fuzzier.

Trademark Infringement on Social Media

It’s not that hard to understand what a trademark is. I gave some obvious examples earlier. It’s harder to understand whether someone else’s use of your trademark is infringing or not. And it can be even more difficult to get a social media site to remove someone’s infringing use of your trademark.

Why is it relatively easy to get a social media platform to remove copyrighted material, but harder to get trademarked content taken down?

Let’s start with the DMCA. It applies to copyright infringement, not trademark infringement. There is no equivalent statute for trademarks. So the legal framework is not as clear when it comes to trademarks.

Still, just as they do for copyright infringement, the major social media platforms have specific portals for owners of trademarks to submit takedown notices. For a helpful list with links to the takedown pages for the biggest players, see How to Protect Your Trademarks on the Top 6 Social Media Platforms.

The thing that really makes trademark harder than copyright is deciding whether the use of a trademark is infringing. Just copying someone’s trademark is not necessarily infringing. Trademark infringement happens when someone uses your trademark—or something similar to it—in a way that creates a likelihood of confusion regarding the source of goods or services.

Remember, the key thing about a trademark is that it is a source identifier.

Let’s consider some simple examples. If I use the word APPLE to sell actual apples, that’s not trademark infringement. That’s a “generic,” non-infringing use of the mark. Similarly, if I tell a new client “don’t worry, you’re in good hands,” I probably haven’t infringed Allstate’s trademark, because I’m just using the phrase in a descriptive sense. In contrast, if I use APPLE to refer to my company’s knockoff laptops, I will probably get a nastygram from some lawyer in Cupertino. That’s trademark infringement.

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My use of the Apple logo in a blog post is an example of “fair use”

But what if I use the famous APPLE computer logo in a blog post about computers? Is that infringement?

This is where it gets harder. It depends on how I use it. If I use the trademark in a way that does not cause source confusion, that is “non-infringing” use. To make this even more complicated, trademark law also refers to some kinds of non-infringing use as “fair use,” which is not the same thing as copyright fair use. And then there are two kinds of trademark fair use, “traditional” and “nominative.”

But let’s not go down that rabbit hole now. Let’s focus on the practical. Assume someone is improperly using your company’s trademark in a way that suggests some sponsorship, affiliation, endorsement, or approval by your company. That creates a “likelihood of confusion,” which equals infringement. What can you do?

Trademark Takedown Notices

As with trademarks, the major social media platforms make it fairly convenient to submit a notice that someone’s content infringes your trademark. See the links in the “Top 6” article cited above.

This is where registration, also mentioned earlier, can be helpful.

Keep in mind, it is the use of a trademark, not registration, that creates trademark rights, and you don’t have to register a trademark to have trademark rights. But as a practical matter, your takedown notice will have a better chance of success if your trademark is registered.

Shannon Montgomery, a lawyer who represents social media influencers, explains this point here. See, social media sites are just not that into evaluating the strength of your claim to an unregistered, “common law” trademark. So check out this video by attorney Aiden Durham to educate yourself on trademark registration.

Unfortunately, even if your trademark is registered, social media platforms are still not that interested in adjudicating trademark disputes. And they make no bones about it. YouTube, for example, says the following on its trademark policy page:

If you are a trademark owner and you believe your trademark is being infringed, please note that YouTube is not in a position to mediate trademark disputes between users and trademark owners. As a result, we strongly encourage trademark owners to resolve their disputes directly with the user who posted the content in question.

Let me translate: don’t bother us with your trademark claim, bother the person who used your trademark.

But there’s good news. YouTube adds this: “Contacting the uploader may resolve things more quickly in a way that is more beneficial to you, the uploader, and the YouTube community.”

Just contact the uploader. That’s easy enough, right? For one thing, every YouTube post includes the name and contact information of the uploader, right? And when you contact the uploader and tell them they need to stop using your trademark, they’re sure to be reasonable and cooperate. What could possibly go wrong?

I’m jk, of course. It never goes like this.

At best you’ll get someone who means well but doesn’t understand trademark law. At worst you’ll get a troublemaker who is openly hostile to your client. So getting people to take down content that infringes your client’s trademark is not simple or easy. And even if you succeed, the same guy may do it again next week. I think the arcade game “Whack-A-Mole” was created just to give trademark lawyers a metaphor to overuse.

No, contacting the infringer is usually not an attractive option. So you submit your trademark complaint through the online portal. What are the chances of success? Let’s use YouTube as an example again.

To YouTube’s credit, when you submit a trademark takedown notice by email, you promptly receive a personalized note from “The YouTube Team.” It looks something like this:

 

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In case you missed it on the policy page, this note provides a friendly reminder that “YouTube is not in a position to mediate trademark disputes between users and trademark owners.” You can see where this is going.

Tell your lawyer to prepare the demand letter.

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IMG_4571Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Follow @zachwolfelaw on Instagram to keep up with his latest shenanigans.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

When Is a Forfeiture Clause a Non-Compete?

When Is a Forfeiture Clause a Non-Compete?

Sometimes a Texas non-compete will take the form of forfeiture clause rather than an express prohibition on competing. For example, let’s say a company awards equity ownership to a valued employee, with a clause stating that the employee will forfeit that ownership if he competes. Is that a non-compete? And does it matter whether a court classifies it as a non-compete or something else?

*Disclaimer: This is an issue in a case I’m currently litigating. I said it once before, but it bears repeating: everything in this post is just my personal opinion, not the opinion of my firm or clients. Although in this case, my personal opinion aligns with my client’s position pretty well, so it’s not a big deal.

In my opinion, the answers should be yes, the agreement is a non-compete and no, it does not ultimately matter because either way, the scope of the clause must be reasonable.

But the issue is open to debate, and there are several plausible answers under current Texas case law:

A. The forfeiture clause functions as a non-compete and therefore must meet the requirements of the non-compete statute.

B. The forfeiture clause is not a non-compete because it doesn’t actually prohibit the employee from competing; it just says the employee will forfeit some benefit if he competes.

C. Whether the forfeiture clause is a non-compete depends on the nature of the incentive plan; if it is a non-contributory profit-sharing plan, it probably isn’t a non-compete, but if the employee owns vested shares in the company, it probably is a non-compete.

D. Regardless of whether the forfeiture clause is a non-compete, it must be reasonable to be enforceable.

The bottom line is that the answer is unclear.

So for Texas lawyers who draft non-competes for employers, there are two things to remember. First, putting the non-compete in the form of a forfeiture clause won’t necessarily avoid the requirements of the non-compete statute. Second, regardless of what you call it, a Texas court probably will not enforce a forfeiture clause that functions as an unreasonably broad non-compete. So you might as well make the scope of the discouraged competition reasonable.

If that’s all you need to know, you can skip the rest. If you want to understand why, keep it tuned right here.

Conflicting Cases?

The trouble is that we have two Texas Supreme Court opinions that cut in different directions on this issue.

In Peat Marwick Main & Co. v. Haass, 818 S.W.2d 381, 385 (Tex. 1991), the court held that an agreement that does not expressly prohibit competition but imposes a financial penalty for competition is subject to the requirements of the non-compete statute.

But in Exxon Mobil Corp. v. Drennen, 452 S.W.3d 319, 329 (Tex. 2014), the court said that a forfeiture clause in an employee’s non-contributory profit-sharing plan is not a “covenant not to compete,” reasoning that it does not restrict the employee’s future employment but only makes the employee choose between keeping the profit-sharing and working for a competitor.

There are several plausible ways to interpret these apparently contradictory holdings:

  1. Drennen implicitly overruled Haass, establishing a broad rule that places form over substance by simply asking whether the agreement expressly prohibits competition.
  2. Drennen established a narrow exception to Haass for forfeiture of unvested shares that had been awarded but not yet delivered pursuant to a non-contributory profit-sharing plan; it does not apply to forfeiture of vested shares the employee already owns.
  3. Drennen and Haass can be reconciled based on some other distinguishing factor.
  4. It ultimately doesn’t matter whether Drennen conflicts with Haass, because regardless of whether you call a forfeiture clause a non-compete or not, it still must be reasonable in scope.

In my opinion, no. 1 is the worst interpretation, nos. 2 and 3 are reasonable, and no. 4 is the simplest and best way to reconcile the cases. To understand why, let’s dig into these two cases and see how Texas courts have applied them.

Haass said a clause that functions as a non-compete should be treated as a non-compete

Haass involved an agreement between an accounting firm and one of its partners, Haass. The agreement had a liquidated damages clause requiring Haass to compensate the firm if he withdrew and took clients with him. Id. at 383. Haass left, opened his own firm, and clients followed. Id. at 384. The firm argued that the damages clause was not a non-compete, while Haass contended it operated as a non-compete and therefore had to be reasonable. Id.

The court agreed with Haass that the damages clause was effectively a non-compete. Writing for a 7-2 majority, Justice Gammage acknowledged that the damages clause did not expressly prohibit Haass from providing accounting services to clients of the firm. Rather, the clause provided that if Haas did compete, he had to pay the liquidated damages. Id. at 385.

Surveying case law from other jurisdictions, the Haass court said:

Most courts have analyzed such provisions as restraints on trade sufficiently similar to covenants not to compete to be governed by the same general reasonableness principles in order to be enforceable. Even those courts that have declined to treat such damages provisions as restraints on trade have required them to be reasonable to be enforced.

Id. (internal citations omitted). Noting that the reasonableness test in either case was essentially the same, the court concluded that “the view adopted by most courts, that such covenants should be subject to the same standards as covenants not to compete, is the correct one.” Id.

Haass cited two additional reasons for treating a damages clause as a non-compete. First, the court reasoned that “[i]f the damages provided are sufficiently severe, then the economic penalty’s deterrent effect functions as a covenant not to compete as surely as if the agreement expressly stated that the departing member will not compete.” Id. at 385. “The practical and economic reality of such a provision,” the court said, “is that it inhibits competition virtually the same as a covenant not to compete.” Id. at 385-86.

Second, Haass said treating the damages provision as a non-compete was consistent with the court’s prior cases. Id. at 386 (citing Henshaw v. Kroenecke, 656 S.W.2d 416 (Tex. 1983), and Frankiewicz v. National Comp Associates, 633 S.W.2d 505 (Tex. 1982)).

Applying the reasonableness standard for non-competes, the Haass court went on to hold that the damages clause was overbroad and unenforceable because it imposed an industry-wide exclusion.

Haass established two broad common-sense principles:

First, a contractual provision that does not expressly prohibit competition can still be a non-compete if it imposes a significant financial penalty for competing. The “practical and economic reality” of the clause is more important than the label.

Second, regardless of whether a contractual penalty is classified as a non-compete, it must meet the same reasonableness requirements as a non-compete to be enforced.

Following Haass, Texas courts treated forfeiture clauses as non-competes regardless of how the clauses were worded or labeled.

For example, in Valley Diagnostic Clinic, P.A. v. Dougherty, 287 S.W.3d 151 (Tex. App.—Corpus Christi 2009, no pet.), the forfeiture clause expressly stated that it was not a covenant not to compete, but the court was not persuaded. “Although the provision at issue here is a forfeiture clause and expressly states that it is not a covenant not to compete,” the court said, “the Texas Supreme Court has analyzed such clauses in the same manner as covenants not to compete because they share the same objective—to restrain a former employee from competing against the employer.” Id. at 155.

Drennen said a forfeiture clause triggered by the employee competing is not a non-compete

But then the Texas Supreme Court muddied the waters in Exxon Mobil v. Drennen, 452 S.W.3d 319 (Tex. 2014).

Drennen was an ExxonMobil VP who received restricted stock subject to the terms of an incentive program. Id. at 322. The agreements included both a New York choice-of-law clause and a forfeiture clause allowing ExxonMobil to terminate outstanding stock awards if the employee engaged in “detrimental activity,” which included becoming employed by a competitor. Id.

When Drennen left ExxonMobil and went to work for Hess, another large energy company, ExxonMobil cancelled Drennen’s outstanding restricted stock awards based on his employment by a competitor. Id. at 323. Drennen sued for a declaratory judgment that (1) the detrimental activity clause was a non-compete, (2) the non-compete was unenforceable because it was not limited in time, geographic area, or scope of activity, and (3) therefore ExxonMobil’s purported cancellation of the restricted shares was invalid. Id.

The Houston Court of Appeals held that the forfeiture provision was an unreasonable and unenforceable non-compete and refused to apply New York law because the result would be against fundamental Texas policy. Id.

The Texas Supreme Court disagreed and reversed. The court viewed the forfeiture clause as similar to the provision at issue in Haass. But the court did not interpret Haass as holding that a forfeiture clause is a non-compete. “While we ultimately determined that the provision in Haass was an unreasonable restraint of trade,” the Drennen court said, “we never concluded that the damage provision was, itself, a covenant not to compete.” Id. at 329.

Let’s pause on that point. Drennen’s interpretation of Haass is strained at best. The Haass opinion expressly stated that a forfeiture clause should be judged by the same reasonableness standard as a non-compete and then applied that standard to the forfeiture clause at issue. Haass, 452 S.W.3d at 385-87. The reasoning of Haass was that a forfeiture clause that functions as a non-compete should be treated as a non-compete. For Drennen to say that Haass never actually held that a forfeiture clause is a non-compete seems like an academic distinction.

But that was not the worst part. Drennen went on to say the following:

There is a distinction between a covenant not to compete and a forfeiture provision in a non-contributory profit-sharing plan because such plans do not restrict the employee’s right to future employment; rather, these plans force the employee to choose between competing with the former employer without restraint from the former employer and accepting benefits of the retirement plan to which the employee contributed nothing. See Dollgener v. Robertson Fleet Servs., Inc., 527 S.W.2d 277, 278–80 (Tex. Civ. App.—Waco 1975, writ ref’d n.r.e.). Whatever it may mean to be a covenant not to compete under Texas law, forfeiture clauses in non-contributory profit-sharing plans, like the detrimental-activity provisions in ExxonMobil’s Incentive Programs, clearly are not covenants not to compete.

Id. at 329 (emphasis added).

This sort of thing bothers me. The court pretends the issue is easy, cites one Waco case from 1975, and then gets the answer wrong.

In my view, a forfeiture clause conditioned on the employee competing is obviously a non-compete and should be treated as such. But even if I’m wrong, the Drennen court at least should have acknowledged there is a reasonable disagreement on the issue. Heck, three justices on the Court of Appeals ruled the other way, citing Haass in support of holding that the forfeiture clause was a non-compete. Is Drennen saying they’re just morons?

My beef is not so much with the result. It’s the way Drennen gets there. The court could have acknowledged that there are two reasonable arguments, discussed both sides of the issue, and then explained which argument it found more persuasive and why.

Instead, Drennen simply made the statement quoted above and then said “we hold that, under Texas law, this provision is not a covenant not to compete.” Id. 329.

But to the court’s credit, it added this important qualification: “Whether such provisions in non-contributory employee incentive programs are unreasonable restraints of trade under Texas law, such that they are unenforceable, is a separate question and one which we reserve for another day.” Id.

That statement is important because it acknowledges that a forfeiture clause, even if it is not a non-compete, may still be an unenforceable restraint of trade. Keep in mind, section 15.05 of the Texas Business and Commerce Code provides that all contracts in restraint of trade or commerce are unlawful. The Texas non-compete statute provides an exception to that rule for non-competes that meet the requirements of the statute.

So, Drennen leaves open the argument that, even if a forfeiture clause is not a non-compete, an unreasonably broad forfeiture clause is an unenforceable restraint of trade.

Buc-ee’s follows Haass and interprets Drennen narrowly

Drennen also leaves open the argument that a clause requiring forfeiture of vested shares the employee already owns is a non-compete subject to the requirements of the non-compete statute.

This distinction finds support in the one case Drennen cited for the distinction between a forfeiture clause and a non-compete, Dollgener v. Robertson Fleet Services, Inc., 527 S.W.2d 277 (Tex. App.—Waco 1975, writ ref’d n.r.e.).

Dollgener, decided long before enactment of the non-compete statute, held that a forfeiture provision in a noncontributory profit-sharing trust was not a covenant not to compete. Id. at 278-80. Thus, like Drennen, Dollgener did not involve forfeiture of vested shares the employee had already earned.

The Houston Court of Appeals recently applied this very distinction in Rieves v. Buc-ee’s, Ltd., 532 S.W.3d 845 (Tex. App.—Houston [14th Dist.] 2017, no pet.), a case I wrote about here. The court held that an agreement that imposes a severe economic penalty on an at-will employee for quitting must meet the reasonableness requirements for non-competes, even if the agreement does not expressly prohibit competition. Id. at 851. Quoting Haass, the Buc-ee’s court reasoned that the “practical and economic reality” of such a contractual penalty is that it inhibits employee mobility in virtually the same manner as a non-compete. Id.

The employer in Buc-ee’s cited Drennen for the proposition that a forfeiture provision is not a non-compete, but the Court of Appeals rejected this argument. Characterizing Drennen as a “choice-of-law case,” the Buc-ee’s court distinguished Drennen as involving “cancellation of future payments of unvested stock options that had been awarded but not delivered to Drennen, an ExxonMobil vice president, under a non-contributory profit-sharing plan.” Buc-ee’s, 532 S.W.3d at 852. One critical distinction was that “Drennen did not involve ExxonMobil seeking the return of Drennen’s salary or any stock options that had already vested.” Id. (emphasis added).

So, Buc-ee’s also supports the argument that Drennen does not apply to a contract requiring forfeiture of vested shares the employee already owns. This is interpretation no. 2 outlined above. It reconciles Haass and Drennen based on whether the forfeiture involves equity ownership interests that have already vested.

Is this the right way to reconcile Haass and Drennen? As a practical matter, we won’t know the answer until the Texas Supreme Court addresses the issue. When it is unclear whether two cases conflict or can be reconciled based on some distinguishing factor, the answer really depends on how the third case treats them. And we don’t have that case yet.

But we don’t need that third case to know that regardless of whether a forfeiture clause is classified as a non-compete or not, it must be reasonable. An unreasonably broad forfeiture clause would be an unenforceable restraint of trade. Haass and Drennen seem to agree on that point.

So, if an employer wants to use a forfeiture clause to discourage employees from competing, the lawyer who drafts the agreements should at least include reasonable limitations on the scope of competition that triggers the forfeiture. The safer course is to assume the clause will be treated like a non-compete, and to include reasonable limitations on time, geographic area, and scope of activity restrained.

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IMG_4571Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Follow @zachwolfelaw on Instagram to keep up with his latest shenanigans.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

 

 

Five Minute Law Goes to the Movies

Five Minute Law Goes to the Movies

Two movies resonated with me in 2019. They were both about music, not law. And yet . . .

One was Yesterday, about a struggling British singer-songwriter who somehow becomes the only person who remembers the Beatles, my favorite rock band. The other was Blinded By the Light, about a working-class Pakistani kid in England whose world is shaken by the music of Bruce Springsteen, which I also like.

Britain, rock music, big life changes. I sense a theme.

Mind you, these are not my votes for the “best” films of 2019. I don’t see enough films to give an educated opinion on that. Plus, I go to “movies,” not films.

No, Yesterday and Blinded By the Light were not the best films of 2019, but they both touched a nerve with me. So I decided to ask why—what was it about these two movies?—and to see if the answer could teach me anything about being a lawyer.

But don’t worry, no spoilers.

Yesterday

It would be tempting to dismiss Yesterday as just a lightweight romantic comedy, but it’s more than that. For one thing, you have to admit the premise is pretty good.

The trailer sets it up well: struggling musician Jack Malik crashes his bike during a worldwide power outage. When he gets out of the hospital, his friend and manager—who just happens to be an attractive young woman who secretly loves him—gives him a new guitar. He starts strumming it and singing. “Yesterday, all my troubles seemed so far away, now it looks as though they’re here to stay, oh I believe in yesterday.”

His manager is astonished. “Oh my . . . when did you write that?” she says.

“I didn’t write it, Paul McCartney wrote it, the Beatles,” he says, half annoyed.

Another friend replies, “who?”

The rest of the screenplay practically writes itself. Talk about “imposter syndrome.”

By the end, Jack learns two lessons: the “success” you crave isn’t always what it’s cracked up to be, and the love you really need is sometimes right in front of you.

The second lesson is of course standard rom-com fare, but Yesterday executes better than most. And of course, Jack singing various Beatles hits throughout doesn’t hurt.

But the “twist” in Yesterday elevates it from an ordinary Hollywood romantic comedy to something with real emotional pull. I won’t give it away.

I will say this. There is only one time in Yesterday when we hear the actual Beatles performing. The closing credits start, and we hear a familiar voice backed by piano. “Hey Jude, don’t make it bad . . .”

Standard Beatles lore says Paul McCartney wrote “Hey Jude” originally as “Hey Jules” for Julian Lennon, John’s son. John was leaving his first wife Cynthia for Yoko, and Paul was trying to comfort Julian. “Hey Jude” never mentions divorce, but I think the song resonates because it has that energy. On the surface, it’s a sing-along rock anthem, but it has a bittersweet edge. “Take a sad song, and make it better.”

“Hey Jude” is also deceptively simple in musical terms. Its secret weapon consists of two small harmonic turns. The first is the little descending piano riff that happens right before “so let it out and let it in.” The chord changes from F to F7, introducing a slight dissonance that naturally resolves to B flat in the next bar. I think of it as a musical way of saying, “ok, things are getting more complicated, but here’s a bright new chord!”

The second harmonic device happens in the “nah nah nah” chorus. In the second bar, Paul introduces a chord that never appeared up to that point: E flat. The song is in the key of F, so E flat is technically in a different—but closely related—key. (I know a little about harmony from playing in jazz band in high school and college; more about that later.) You may know nothing about music theory, but trust me, that E flat is the hook that brings you back.

As “Hey Jude” played at the end of Yesterday, I sat there in the theater with my ten-year-old son and listened to the whole thing, extended coda and all. He prodded me like “are we going now,” but I just had to soak it in.

Later, in the car, we were talking about how much we liked the movie. Then my son asked, “is John Lennon still alive?”

The childlike innocence of his question hit me like a ton of bricks. “Uh, no. No, buddy, he was killed,” I said. Then he said, “Daddy, are you crying?”

What was it about Yesterday that put me in that state? Sure, I’m a sucker for the Beatles angle. But I think the bigger thing is that I relate to Jack. He has some talent, but he’s never going to be a great singer or songwriter in his own right. By the end of the movie, he figures that out, and he’s ok with it. He learns what really matters.

I’m never going to be some famous trial lawyer, but I do a good job for my clients, and I have a loving family, so I’m ok with that.

Family plays more prominently in Blinded By the Light. And like Yesterday, it almost made me cry. But for a different reason.

Blinded By the Light

The strength of Blinded By the Light is that it works on many levels. High school student Javed Khan is a second-generation Pakistani immigrant living in Luton, England in the 1980s. He has multiple problems: evading racist bullies, his family struggling to make ends meet after his father is laid off, trying to make his tradition-bound father understand that he wants to be a writer, and of course, the age-old problem of adolescent boys everywhere: girls.

Different people can relate to these problems in different ways: immigrants facing racism, kids facing expectations of parents, parents trying to make a life for their kids, to name a few.

But Javed’s biggest problem is more philosophical. It’s a problem most adolescents experience in some way at some time: a yearning to understand what life is really about. A feeling that “there must be more to life than this.”

Enter Bruce Springsteen. Javed’s Sikh friend, Roops, loans Javed a Springsteen cassette at school, and it changes his life. The music simultaneously provides both an escape from his problems and inspiration for confronting them. These songs, born an ocean away in New Jersey, speak to teenage Javed like nothing else.

This got me thinking, what was my equivalent of Javed’s Bruce Springsteen as a teenager? The Beatles seemed like an obvious candidate. It was the first popular music I really listened to, on scratched-up albums my parents owned. Funny thing though, my parents had plenty of other albums. What is it about the Beatles that instantly grabs kids from a young age? There has to be some kind of magic in those songs.

But as much as I love the Beatles, that was a love born before I was a teenager. I will never experience the Beatles the way my parents did when they were in high school in 1964. There is no obsession quite like an adolescent obsession.

So what was mine? It wasn’t the Beatles, and it wasn’t Springsteen himself. I was three when Born to Run came out, 12 when Born in the U.S.A. was released. I liked Springsteen’s songs and still do, but I was a little on the young side to be swept away by tales of working-class angst and melancholy nostalgia for the glory days.

Was there anyone I loved as a teenager the way Javed loved Bruce? The closest thing I could think of was U2.

I was 12 when The Unforgettable Fire came out, with its signature songs “Pride (In the Name of Love)” and “Bad.” I bought the record, “Pride” was in heavy rotation on MTV, and then Live Aid happened when I was 13. Bono singing “Bad” at Live Aid was my Woodstock.

But things really exploded when a little album called The Joshua Tree came out in 1987. It swept through David Crockett High School and countless others like wildfire. It was political, spiritual, and unlike anything else at the time. Every song was memorable. It was almost like a group of record executives got together and said, how can we get this kid in suburban Texas hooked on this Irish rock band?

Of course, that sort of formulaic approach doesn’t actually work, as the movie Yesterday shows. Like the great Beatles albums, The Joshua Tree worked because it had great songs and it was real.

Still, as much as I loved U2—and some other rock bands in the 80s—they didn’t change my life. As I thought about it, I realized that U2 was just music I liked. It wasn’t what the Boss was for Javed.

Then it hit me. My “Bruce Springsteen” was not a particular artist at all. It was a genre of music. It was jazz. Jazz music was the thing that changed my teenage world.

This was the result of three fortuitous forces: a strong public school band program, my parents, and a young trumpeter from New Orleans who came on the scene at almost the precise moment I started 6th grade band.

Greetings From Garrison Park

I started learning the cornet at Cunningham Elementary School in middle-class south Austin in September 1983. The next month, Wynton Marsalis released his second jazz album for Columbia, Think of One, with its scorching opening track “Knozz-Moe-King” (“No Smoking”). Earlier that summer Marsalis had released an album playing the Haydn and Hummel concertos, which I would soon learn was the benchmark repertoire for classical trumpet.

Screen Shot 2020-01-02 at 9.09.19 PM

Luckily, my parents were pretty hip about music. I mean, my dad used to listen to reggae on these old reel-to-reel tapes, and my mom was a Philip Glass fan. She quickly became aware of Marsalis and bought his two 1983 releases. She also bought the definitive jazz album, Kind of Blue by Miles Davis.

From that point on, it was all over. I still loved the Beatles. I still loved my 80s rock bands. But jazz was it. Nothing could compete with jazz. It was serious, like classical music, but cool, like rock music wanted to be.

In the summer of 1985, I switched from cornet to trumpet when my parents, seeing I was serious about practicing, bought me a brand-new Yamaha trumpet from the Reitz Music store near Ben White Boulevard and Manchaca Road (the store is gone, but I still have the trumpet).

That same summer, before I started 8th grade at Roy Bedichek Junior High, Wynton Marsalis released Black Codes (From the Underground). Then the band on Think of One and Black Codes broke up when saxophonist Branford Marsalis and pianist Kenny Kirkland decided to go on the road with some rock guy who had just left a band called the Police.

I later read that this was a trying time for Wynton. But his band was rejuvenated when he found a young piano player named Marcus Roberts, who was blind but could play the piano like nobody’s business. That led to the album that really solidified my fascination with jazz: J Mood.

The front and back cover of J Mood said it all. The front had a modern, abstract image of a trumpet player by African-American artist Romare Bearden. The back cover had liner notes by the incomparable and idiosyncratic Stanley Crouch, and black and white photos of each member of the quartet, in suits and ties.

Looking at that back cover, I had the same feeling Javed must have had when he saw Springsteen in his sleeveless denim jacket. These were the coolest men I had ever seen.

I remember my mom looking at it and saying, “those look like some serious jazz guys.” And the music. Oh man, the music. I wouldn’t start to understand the theory of it until later, but I knew it sounded good, and different.

Screen Shot 2020-01-02 at 9.10.02 PM

You have to understand, this was unlike anything happening in pop culture in 1986. The number 1 song that year was “That’s What Friends Are For.”

And Wynton led me to past jazz greats: Miles, of course (who, ironically, feuded with Marsalis). But also other household names of jazz like Monk, Trane, Bird, Dizzy, Clifford Brown. Even much older ones that probably sounded corny to my teenage peers: Louis Armstrong and Duke Ellington. But I loved the Hot Fives and Live at Newport.

At the same time that I was digging this music, I was learning to play it (sort of) through my high school jazz band and programs like All-City Jazz Band. I learned that jazz had its own secret language. “C major seven sharp 11.” “Mixolydian.” “Two-five-one.” I jammed on the chords on a cheesy Casio keyboard.

Just like the magnetic pull of Springsteen in Blinded By the Light, I think part of the attraction of jazz was that it was somehow alien and counter-cultural, despite really being so authentically American. The fact that other people didn’t get it was a plus.  Appreciating jazz gave you admission to an exclusive club, one united not by race, nationality, age, or religion, but by love and understanding of the music. You could walk into an actual jazz club in Japan, and when the bass player starts in with the opening vamp of “Night In Tunisia,” you would know what to play without speaking a word of Japanese.

The change this new club brought for me was mostly internal. It’s not like I started wearing a beret, smoking cigarettes, and calling people “cats.”

And just as Javed didn’t decide to join a rock band, I didn’t decide to become a professional jazz musician. Jazz didn’t alter my career path, but it did open up a whole new world.

So I get Javed and his obsession with Bruce Springsteen.

I’m Not Half the Man I Used to Be

But Javed is not the character I really related to in Blinded By the Light. No, it was Javed’s father, Mr. Khan.

With a character like Mr. Khan, there is a risk of stereotyping to the point of caricature. He’s the familiar first-generation immigrant patriarch. He is mainly concerned with making money. He enforces traditional values within his family. He wants his daughters to marry well. He wants his son to “follow the Jews,” stay at the top at school, and pursue a practical, lucrative career. He doesn’t understand why his son would want to be a penniless writer, and he certainly doesn’t appreciate American rock and roll.

But one scene in particular gives Mr. Khan some depth. After losing his factory job, he’s in the kitchen of his modest row house with his wife. The children are not present. He breaks down and tells his wife he has failed their family. As the outwardly submissive Mrs. Khan comforts him, we see who the real pillar of the family is. And we finally see Mr. Khan’s vulnerability.

Any parent who has lost a job or faced a career setback can relate.

And that, I think, holds the key to the elusive lesson of these movies for my profession. If you want to reach people with your story, they have to relate to the story. This is something good trial lawyers know.

But it’s a little more complicated than that. Different parts of a story will resonate with different people. If you’re not that into the Beatles, the scene where Jack’s friends think he wrote “Yesterday” won’t mean as much. You may get it, but you won’t feel it.

And if you’re like me—a white guy who was born in the USA—you may understand Mr. Khan’s feeling of failure and find it moving. But you may not feel it as deeply as an immigrant who faced racism and poverty while struggling to provide a better life for his children.

This means you’ve got to adjust for your audience. That’s the lesson.

On the other hand, Yesterday and Blinded By the Light show that some themes are universal. Everybody’s got a hungry heart, and I still haven’t found what I’m looking for, but all you need is love.

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IMG_4571Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. His wife claims that scene in Blinded By the Light made him cry, not “almost cry,” but he does not recall that.

This post is dedicated to Mr. Z and Mr. Wylie.

Merry Christmas from Five Minute Law

Merry Christmas from Five Minute Law

Christmas time is here.

Happiness and cheer.

But my time entries call, so I’m sorry y’all, no non-compete tips to share.

Christmas time is here.

Blog posts everywhere.

But not for me, I’m taking this week off, look for more great posts next year!

Merry Christmas, everybody! And also Hanukkah Sameach!

IMG_4571

Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Follow @zachwolfelaw on Instagram to keep up with his latest shenanigans.

Thanks to all my Fivers for making 2019 the best year yet for Five Minute Law. I really appreciate every view, like, share, and even feedback IRL. Look for 2020 to be even bigger and better!

 

The Problem With Non-Competes

The Problem With Non-Competes

A Texas non-compete litigator points out the biggest problems with the way non-competes work in practice

There are too many non-competes, the non-competes are too broad, and judges are too willing to enforce them with injunctions.

That’s it. That’s the tweet.

But this is a blog, not Twitter, so I’ll elaborate.

I’m not the only one worried about non-competes. The American Constitution Society (ACS) recently released an Issue Brief titled “No Exit: Understanding Employee Non-Competes and Identifying Best Practices to Limit Their Overuse” (November 2019). It covers the traditional legal framework governing non-competes, explores why an increasing number of workers are subject to them, summarizes recent legislative responses, and explores non-legislative approaches to combating the overuse of non-competes.

The ACS takes a dim view of the widespread use of non-competes, especially for lower-level employees like janitors and sandwich makers. “Taken in the aggregate,” the brief argues, “such widespread limitations on employee mobility have demonstrable, negative consequences for wages and innovation.”

At the federal level, the ACS brief reports, the proposed Workforce Mobility Act of 2019 would ban the use of non-competes, with some limited exceptions permitting non-competes for owners or senior executives in the sale of a business or dissolution of a partnership. The bill has some bipartisan support, but passage “seems far from assured.” The issue brief concludes that policymakers in most states “should consider adopting stronger measures to discourage employer overuse of non-competes.”

The ACS brief approaches non-compete reform with an obvious pro-worker orientation. As a lawyer who represents both employers and employees in non-compete disputes and litigation, I have more of a practitioner’s perspective. And as a Texas non-compete lawyer, I don’t expect any significant change in the law soon.

But my experience handling non-compete cases tells me that some common-sense reforms are overdue in the Lone Star State.

Here are the five biggest practical problems with non-competes that I’ve learned from handling Texas non-compete cases.

Disclaimer: This is, like, just my opinion, man. So you’re not allowed to cite this post against me if I’m trying to get an injunction against your client.

1. In the vast majority of cases an employee non-compete is not really bargained for.

Imagine this scenario. Dawn Davis is a single mom and a legal assistant at a big law firm in Dallas. She makes good money, but the hours are long, and her bosses are jerks. She finds an opportunity for a new career in sales: Paula Payne Windows offers her a job selling windows in the construction industry. There are only two problems: it’s for less money, initially, and she has to move to another city. Still, Dawn is ready for a change, so she accepts the offer.

Dawn scrapes together enough money to pay a deposit on a new apartment in a decent school district, packs everything in a U-Haul, and moves her two kids, a cat, and a turtle to Cedar Park. The next Monday, she shows up for work. “We’re so excited that you’re joining us,” her boss Paula Payne says, “I’ll just need you to sign a few documents, and then we can get you started on this prospect list.”

You see where this going.

We all know Dawn’s non-compete is not bargained-for in any meaningful way. What’s she going to do, say “I’m sorry I can’t sign this,” decline the job, and start looking for some other way she’s going to pay next month’s bills? She could do that in theory, but in practice she’s going to do what countless other Texas employees do in similar situations: sign the documents.

Unfortunately for Dawn, there won’t be any getting out of the non-compete. It may be unenforceable for other reasons, but not because it wasn’t bargained for. “Did anyone put a gun to your head and say you have to sign this agreement,” the lawyer for Paula Payne Windows will ask Dawn in her deposition years later. Unless Dawn can testify to some extreme circumstance like that, a Texas judge is not going to rule that the non-compete is void based on duress, unconscionability, or some similar defense.

This scenario is typical. I’ve handled a lot of non-compete matters, and it’s common for the employee not to see the non-compete until it’s practically too late. And even when the employee gets the non-compete agreement before accepting the job, it’s rare that there is actually any bargaining over the non-compete. See, e.g., TENS Rx, Inc. v. Hanis, No. 09-18-00217-CV, 2019 WL 6598174 (Tex. App.—Beaumont Dec. 5, 2019, no pet. h.) (mem. op.) (employee claimed she had reservations about the non-compete but signed it because the employer said it was just a formality).

Ok, but so what? Doesn’t the “no bargaining” objection prove too much? Yes, employees sign non-competes agreements that are not really bargained for, one could argue, but that’s true of all kinds of things at-will employees agree to, like binding arbitration. Yet we generally enforce those things. Why should non-competes be different?

Well, for one thing, it’s not just the interests of the employee at stake. It’s also the interests of customers and the public. Generally, employee mobility is a good thing for the economy. It’s a big reason we have the at-will employment rule in the first place.

One way you could fix the “no bargaining” problem is to require employers to give advance written notice that a job offer includes a non-compete. The ACS brief reports that some states have already enacted rules like this. But I can see this kind of rule leading to all kinds of complications.

There’s a simpler way to fix this problem: prohibit non-competes for at-will employees. You could still allow non-competes in the sale of a business, where the non-compete is actually bargained for, and it makes economic sense to give the buyer a way to acquire the goodwill of the business. The proposed federal legislation has an exception for this.

But this solution does not seem politically feasible in Texas at the moment. More about that later.

2. Employee non-competes hurt the employer by shifting its focus to the wrong thing.

The second problem with employee non-competes in practice is a little counter-intuitive: they hurt the employer.

The best form of non-compete is a happy employee who doesn’t want to leave. Successful entrepreneurs cite keeping employees happy as a key reason for success. If you require employees to sign non-competes, you’re feeding a mindset that focuses on the wrong thing, restricting employees, instead of the right thing, keeping your high performers happy.

Business owners will say I’m being naïve, but as I said in The Most Effective Form of Non-Compete in Texas, if you think a non-compete is going to keep your best people from leaving, who is being naïve?

Still, I get it. I represent employers too, and I understand why they want employees to sign non-competes. It is frustrating to pour time, effort, and money into developing your employees, their skills and knowledge, and their goodwill with customers or clients, only to see them leave as soon as they get a better offer. Sometimes there is even a strong sense of personal betrayal, which is only natural.

So I’m not saying employers should never require non-competes, nor am I saying non-competes should never be enforced (under current law). Confession: I have drafted non-competes for employees to sign and have even sued employees for breaking non-competes. [audience gasp]

On balance, though, an employer is better off focusing on employee retention than drafting an impenetrable non-compete.

Similarly, I’m not sure enforcement of non-competes is the “pro-business” position. When people say enforcing non-competes is pro-business, keep in mind there are usually two businesses in a non-compete dispute: the first employer and the second employer. The employee is usually going from one business to the other. Is it really “pro-business” to tell the second business it can’t hire the employee?

This is before we even get to the problem of the non-compete’s effect on the employee.

3. The cost of litigation has a chilling effect on employees challenging unreasonable non-competes.

Here’s how it usually goes down. Dawn Davis quits her job at Paula Payne Windows and starts up her own windows company. Paula Payne gets worried that Dawn is going to take customers and cut into Paula’s profits, so she has her lawyer send Dawn a nastygram. The letter demands that Dawn refrain from competing with Paula Payne for three years, as her non-compete requires.

What is Dawn to do? Her best option is to work something out in a settlement. Maybe the compromise is that Dawn agrees not to do business with certain customers. Or maybe she agrees to pay Paula Payne 25% of her profits from those customers for a year.

But what if Paula Payne plays hardball and says no, comply with your non-compete or we’re going to sue you and get an injunction to stop you from selling windows?

“What should I do?” Dawn asks her lawyer, Maria Reynolds. “Well this non-compete is clearly overbroad,” Reynolds tells her, “but if we have to go to court it’s going to be expensive.” “How expensive?” Dawn says. “I’m going to need a deposit of $10,000,” Reynolds says, “and that might be enough to get through the temporary injunction hearing in the first month.”

Variations on this scenario happen all the time. The cost of litigating a non-compete case is usually as much, or more, of a settlement factor than the substantive issues.

The cost of litigating tends to give the employer an advantage over the employee in a non-compete dispute. The employer usually has more money, and the employee more to lose. If the employer loses the temporary injunction round, it loses some attorneys’ fees and probably some profits from customers that follow the employee. If the employee loses, she pays attorneys’ fees and has to look for a new job. In the words of Private Hudson, “game over, man.”

The ACS report calls this the “in terrorem” effect of an overbroad non-compete (quoting venerable law professor Harlan Blake). I call it leverage.

Of course, the cost of litigation is also a factor for the company trying to enforce the non-compete, and the problem of litigation expense driving settlement is not exclusive to non-compete cases.

But there is something different about a non-compete lawsuit: it affects the rights of third parties. Namely, the customers.

4. Judges don’t give enough weight to the interests of the customers, who never signed any non-compete.

You know, the customers? They are the ones who pay for the goods or services. Without them, there would be no sales for the parties to the non-compete to fight over.

Well, what if I told you that Texas law allows a judge to enter an injunction against a customer, who never agreed to any non-compete, prohibiting the customer from doing business with an employee who did sign a non-compete?

No way, you would say. This is a free country. A judge can’t just order someone to comply with an agreement they never signed.

Of course, this is precisely the effect of an injunction that enforces an employee’s non-compete. Let’s say you’re Biff Henderson, a residential builder who has bought windows from Dawn Davis for seven years. The judge signs a temporary injunction against Dawn—and “all others acting in concert” with her—prohibiting her from doing business with any of the customers she served at Paula Payne Windows. That is effectively the same as the judge ordering Biff not to do business with Dawn.

I’ve seen a lot of non-compete cases, and I can tell you three things that are usually true about customers.

First, they didn’t sign any non-compete.

Second, customers usually want to keep buying stuff from the person they’ve been buying stuff from. They certainly don’t want a judge telling them they can’t buy from that person anymore.

Third, customers don’t want to get entangled in a lawsuit and spend money on legal fees. In theory, a customer could intervene in a non-compete lawsuit to protect its right to do business with who it wants. But who’s going to do that? Biff may love Dawn, but probably not enough to spend thousands of dollars on legal fees so he can keep buying windows from her.

The net result is that the system has to rely on the employee to speak for the customer in the non-compete lawsuit. And the employee’s lawyer will usually try to do so.

But in my experience, judges don’t give the interests of the customers enough weight. It even seems like some judges consider it routine to grant an injunction to enforce a non-compete.

They forget that an injunction is supposed to be an “extraordinary” remedy.

5. Judges don’t take the “irreparable injury” requirement seriously enough.

One of the traditional common-law requirements for a temporary injunction is irreparable injury. Irreparable means harm that cannot be adequately compensated by damages. In theory, this requirement applies to a temporary injunction enforcing a Texas non-compete. See Cardinal Health Staffing Network, Inc. v. Bowen, 106 S.W.3d 230, 241 (Tex. App.—Houston [1st Dist.] 2003, no pet.) (rejecting argument that proof of irreparable injury is not required in a non-compete case).

But the irreparable injury rule is quite elastic, and the Texas Courts of Appeals review temporary injunctions on an “abuse of discretion” standard. The end result is that trial courts can apply the rule as strictly or loosely as they want, and they will rarely be reversed.

So you get two basic views of applying the irreparable injury rule. The “loose” view starts from the general proposition—stated in many Texas cases—that damages are only “adequate” when they would be as convenient and efficient as an injunction. Then it adds the proposition that the loss of customer goodwill is inherently difficult to measure by a dollar amount. The result is that judges with this view will almost routinely grant a temporary injunction if there is evidence that the employee is taking the employer’s customers.

The “strict” view calls BS on the “no adequate remedy” argument. In your garden variety non-compete case, the financial harm to the employer is the loss of sales. It’s not that hard to measure the employer’s lost profits resulting from the loss of sales. Lost profits damages can compensate for that. You’ve got to have something more than that, the strict view says, to establish that the harm is irreparable.

Both views can find support in the case law. But as should be obvious by now, I personally find the strict view more persuasive. I’ve already covered one reason above: the loose view doesn’t give enough weight to the interests of the customers.

But there’s an even more fundamental problem with the loose interpretation of irreparable injury: it ignores the irreparable injury resulting to the employee if the judge gets is wrong.

Keep in mind, a temporary injunction is not a final ruling on the merits. The parties are entitled to obtain discovery and present their best evidence at a full-blown trial. So at the temporary injunction hearing, the judge is sort of “guessing” at the employer’s likelihood of success at trial.

The problem is that the risks of guessing wrong are asymmetrical.

Here’s what I mean. If the trial court guesses wrong and denies a temporary injunction, the employer still has a remedy. Even if a bunch of customers run off with Dawn Davis while the lawsuit against her is pending, Paula Payne Windows can have the last laugh by seeking lost profits damages at trial.

But if the trial court guesses wrong and grants a temporary injunction, Dawn is out of luck. Worst case, her new employer Real Cheap Windows may decide it just has to let her go. Then she’s going to be looking for another job. It won’t matter if it turns out she was right that the non-compete was unenforceable; Dawn won’t get compensated for missing out on the sales she could have made absent the injunction.

Here’s another way to look at it. Even if the employer turns out to be right, the employee’s violation of the non-compete could be considered an “efficient breach.” The law should allow parties to breach a contract, the efficient breach theory says, as long as the non-breaching party can be compensated by damages.

That’s kind of the point of the irreparable injury rule in the first place, isn’t it?

Conclusion

I come out generally on the same side as the ACS issue brief. We need to reign in non-competes more in Texas. But it does not appear politically feasible that this will happen in the current Texas legislature. That means it’s up to Texas judges to give more weight to the interest of customers and to take the irreparable injury rule more seriously. This can be done without changing the Texas non-compete statute. It only requires applying the statute with common sense and some awareness of the way non-competes actually work in practice.

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IMG_4571Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Follow @zachwolfelaw on Instagram to keep up with his latest shenanigans.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

Should Clients Pay a Premium for Big-Name Law Firms?

Should Clients Pay a Premium for Big-Name Law Firms?

A totally objective and unbiased analysis by a practicing small-firm lawyer

I have many friends and acquaintances at big-name law firms, and I fear this week’s post may ruffle some feathers. But stay with me, BigLaw Fivers. As you will see, I conclude that it sometimes makes sense for clients to pay the high rates commanded by lawyers at big-name law firms. This is no manifesto against those firms.

Still, have you seen the hourly rates that the most prominent law firms charge business clients these days? I would give some examples, but if I say something like “can you believe partners at XYZ firm charge $950/hour?” the next thing you know people will think, “Ha! that’s nothing, ABC firm is charging . . .”

So I won’t get into numbers. But you know what I’m talking about.

These super-premium rates seem to coincide with the increased importance of branding in the competition for high-end business clients. I’m guessing this is no accident. If you look at the firms charging the very highest rates, I would bet most of them have one thing in common: they are firms everyone has heard of (at least everyone who has some familiarity with the legal field).

I doubt you will find a lot of “no-name” firms charging the highest rates for legal services. Those that are, I congratulate you. But most of the firms that charge the kind of rates I’m talking about are the “household names” of law practice.

Are these sky-high hourly rates justified? Should lawyers criticize these rates as excessive, or should we accept them as what the “market will bear”?

Personally, I’m ok with sophisticated clients paying whatever they agree to pay for their legal work. I don’t see it as an ethical issue.

But is it smart for business clients to pay premium rates for big-name law firms? Let’s look at the main reasons clients pay these rates, and whether those reasons hold up to scrutiny.

1. They’re just better

The first reason clients are willing to pay a premium for big-name law firms is the reason those firms want clients to think is the reason: they’re just better. But are they actually better? And even if they’re better, are they that much better?

Full disclosure: I do not work for a big-name firm, so I am probably a wee bit biased.

But I will give the prominent firms their due. The reality is that most superstar attorneys are going to work at law firms everybody has heard of. If you’re a superstar lawyer at a lesser-known firm, don’t be offended. I said “most,” not “all.”

And if us small-firm lawyers are honest, we’ll admit to ourselves that most of the very best lawyers work in BigLaw, because that’s where the money is. And the prestige. But mostly it’s the money. And we might be just a slight bit envious.

Second, even aside from the superstar attorneys, it is unlikely that a partner at a prominent BigLaw firm is going to be incompetent. (Notice I said “unlikely,” not “impossible.”) So when clients hire big-name law firms, they can usually rest assured that the lawyer in charge of their case will at least be competent. That lawyer probably wouldn’t have made partner otherwise.

But it’s not that unlikely that a partner at a big-name law firm will be mediocre. If that sounds critical, it’s not really. By “mediocre” I just mean someone with average practice skills. Yes, there are many top-notch lawyers at big-name law firms, but believe me, there are plenty of average ones too.

How do mediocre lawyers become partners at elite law firms? In most cases I would bet it’s because they bring something else to the table, like excellent business development skills, or a family, personal, or political connection to a major client. In some cases, they are just good at promoting themselves and taking credit.

But let’s not be too snarky. Most of these lawyers have worked their butts off. And like I said, most of the very best lawyers are at big-name firms. If your lawyer really is that much better than the competition at the no-name firms, and if your company can afford it (more about that later), then there is some logic to paying a premium for excellent legal services.

Also, let’s acknowledge there are plenty of lawyers at well-known law firms who are not charging the kind of rates I’m talking about. So if you’re a client paying reasonable rates for a lawyer at a big-name firm and you’re happy with the work, that’s great.

This post is about the rates that make eyes pop. Are there any other reasons to justify such rates?

1a. Expertise and specialization

I call this reason “1a” because it’s related to reason 1, but slightly different. Big-name law firms don’t just tout their lawyers as better, they also promise expertise in highly specialized areas of law practice that business clients sometimes need.

This is not just hype. There are some practice areas where you’re not going to find anybody experienced who isn’t at a big law firm or a high-priced boutique. For example, I’m guessing there aren’t a lot of inexpensive small-firm lawyers who have done a lot of bet-the-company patent litigation. And a typical small firm is not going to have experience defending massive securities fraud class actions, or doing M&A work for Fortune 500 companies, etc. You get the idea.

Still, if you are a client who is willing to pay a premium for specialization, ask yourself two questions. First, is the work you are sending that big-name firm really that specialized? I often see prominent law firms handling what I would call fairly “routine” matters (recognizing that no legal dispute is entirely routine).

Second, are there lawyers with similar expertise at lesser-known firms who charge less? It may take some hustle to find them, but I would bet that in most cases the answer is yes. You might even already know some lawyers like that. But you stick with the well-known firm because . . .

2. “Nobody ever got fired for buying IBM”

Now we’re moving into the less compelling reasons to pay high rates for legal work. But this one still has a certain logic to it. If you own the company, you can hire whoever you want and if it goes bad, you’re probably not going to fire yourself. But if you just work at the company, then the last thing you want is to hire a law firm nobody’s heard of, have the case go south, and then get blamed for hiring the wrong firm.

In the computer world (where, full disclosure, my dad owned a small business, so more bias), this concept is expressed in the cliché “nobody ever got fired for buying IBM.”

Is this a good reason to choose a big-name law firm over a no-name law firm with similar experience and expertise?

I guess it depends on your perspective. If you’re an in-house lawyer at a big company and you’re looking out for numero uno, then it makes sense to insulate yourself from criticism by selecting the firm your CEO will instantly recognize.

But if you’re truly looking out for the company’s interests, then you should at least consider less expensive options. After all, the company has entrusted you with spending its money wisely.

Which brings me to . . .

3. The “steakhouse” or “expense account” effect

I specifically remember the last time I had dinner with my wife at one of those expensive steakhouses (and I don’t mean Saltgrass). Bear in mind, as a kid growing up in south Austin, for me a fancy restaurant was the Red Lobster on South Lamar. I’m just as happy to get dinner from a taco truck, but I have to admit, this upscale steakhouse was really good.

The prices, on the other hand, were outrageous.

Prices that high give me some moral discomfort; there is something almost obscene about paying that much for a meal when millions of people don’t have enough food to eat. Then again, the amount of money I spend on Starbucks in a year could probably bring clean drinking water to a third-world village, so maybe I’m just a hypocrite.

Anyway, the point is that I was fine with paying the exorbitant price at the swanky steakhouse. Was it because the food was so exquisite? Well, it was good, but not that good. No, the reason I was fine with shelling out big bucks for a piece of grilled meat is that a client had generously sent me a gift card as a thank-you for doing a good job on his company’s case. In short, I wasn’t spending my own money.

I’d bet this is part of the reason upscale steakhouses exist in the first place: many of their patrons are business people taking clients to dinner on the company’s dime. It’s the “expense account” effect.

This is the same reason clients will sometimes select a law firm that charges twice as much for the same quality of work: the person making the decision is not spending his own money. I would even venture to say this could be the main reason.

This strikes me as an understandable reason for paying more, but not a good reason. Would the company’s general counsel pick the most expensive firm if she had to pay the fees out of her own pocket? I doubt it.

Unless . . .

4. Snob appeal, or the “Mercedes” effect

Let’s say the general counsel is rich. And let’s say he wants everyone to know it. In that case, what better way to let everyone know how much money you have to burn than to hire the most expensive law firms?

Now apply that to big companies as a whole.

Snob appeal. It’s the reason people are willing to pay more for a Lexus than for a Camry. Granted, the Lexus may be a really good car. It might even perform a little better than the Camry.

But that’s not why people pay more for a Lexus. Do you think they would pay the same price for a Lexus if they had to slap a Toyota emblem on it? No way. The whole point is to send the message “I make enough money to afford a Lexus.”

Again, I think the same principle is sometimes at work when big companies pick their lawyers. They’re not just paying for the services, they’re paying for the name. They want people to know their lawyers are expensive. It sends a message: “We’re [insert name of global company], our revenue is more than the GDP of most nations, and we can afford to pay for the very best lawyers to be found.”

This strikes me as the least compelling reason to pay a premium for legal services.

But again, we must give big-name firms their due. The motivations for hiring them are usually intertwined. If companies are willing to pay high rates because the lawyers really are that good, I don’t see much harm if a little snob appeal gets mixed in.

My advice to clients: just be clear with yourself what your reasons are.

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IMG_4571Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. He aspires to someday charge the same hourly rate as a third-year associate at a big New York Law firm.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.