If a windmill kills a bird in the forest, and there is no one there to hear it, does it make a sound?
That has always struck my literal mind as a silly question. Of course it makes a sound. It doesn’t make a difference whether someone is there to hear it or not.
But obviously there is more to it than that. There are more philosophical points embedded in the question. Is our reality determined by our experience of reality? Does it matter whether something happens, if no one experiences it?
The same kind of point comes up in trade secrets litigation. I see it a lot. (But disclaimer: my hypothetical is not based on any particular case; if it seems similar to your case, that’s just because the same kind of thing tends to happen in a lot of cases.)
Let’s say our favorite hardworking sales person, Dawn Davis, gets frustrated with her employer, Paula Payne Windows, and decides to quit to join a competitor, Real Cheap Windows.
During her last week on the job, Dawn logs into the Paula Payne computer system using her password and opens six months of sales reports. She downloads them to her personal laptop (which she uses for work), or transfers them to a USB drive, or emails them to her personal Gmail account. This kind of thing happens a lot.
Dawn goes to work for Real Cheap the next week. When Paula Payne finds out that Dawn joined a competitor, she has Fred, her “IT guy,” investigate. Fred discovers that Dawn downloaded the sales reports. Paula Payne Windows sues Dawn and Real Cheap, claiming misappropriation of trade secrets and asking for an injunction to stop Dawn from working for Real Cheap.
Let’s assume for the sake of argument that the sales reports contain trade secrets, although this is usually a contested issue. See When Is a Customer List a Trade Secret. Let’s also assume that Dawn had authorization to access the computer system but was not authorized to access the particular sales reports at issue.
“Yes, I told Real Cheap’s President I had the sales reports,” Dawn says, “and we discussed generally what kind of information they contained.” But Dawn claims she never provided any of the Paula Payne Windows documents to Real Cheap, and that she never used them for any purpose.
Of course, Paula Payne Windows is skeptical. Paula Payne suspects that Dawn provided the documents to Real Cheap and used the confidential pricing information in the sales reports to undercut Paula Payne and poach some of its customers. But Paula Payne Windows has no evidence to prove this.
This fact pattern is similar to the scenario in the Waymo v. Uber case, one of the biggest trade secrets trials in recent years.
Variations on this theme are common. Employee behaves badly and takes confidential documents, Employer sues, and Employee denies using or disclosing the documents.
It raises several key practical and legal issues.
1. If the defendant wrongfully acquired the trade secrets but did not use or disclose them, is there “misappropriation”?
Let’s start with acquisition of the trade secrets. If the defendant wrongfully acquired the trade secrets, does the plaintiff have to prove the defendant also used or disclosed them?
The short answer is no. Here is the definition of “misappropriation” in the Texas Uniform Trade Secrets Act:
Tex. Civ. Prac. & Rem. Code § 134A.002(3). The federal Defend Trade Secrets Act has the same definition. 18 U.S.C. § 1839(5).
In short, TUTSA “provides six theories under which a plaintiff can establish misappropriation of trade secrets.” Six Dimensions, Inc. v. Perficient, Inc., 969 F.3d 219, 230 (5th Cir. 2020). These six theories can be grouped under two categories: (1) “acquisition of a trade secret” and (2) “disclosure or use of a trade secret.” Id.
So there you have it. “Acquisition” can be misappropriation, even without use or disclosure, if it meets the definition of misappropriation in the statute.
Yet courts have struggled with this question. In StoneCoat of Texas, LLC v. ProCal Stone Design, LLC, 426 F. Supp. 3d 311 (E.D. Tex. 2019), Judge Mazzant carefully surveyed Texas case law on whether “use” is an essential element of a trade secrets claim. He noted that some Texas cases say use is required, while others say it is not. Id. at 340-44. But ultimately, it was unnecessary to resolve that question because there was sufficient evidence to raise a fact issue on whether two defendants used the secret “French formula” at issue. Id. at 344-45.
Judge Mazzant returned to this issue in Accresa Health LLC v. Hint Health Inc., No. 4:18-cv-00536, 2020 WL 3637801, at *8-11 (E.D. Tex. July 6, 2020), discussing the StoneCoat opinion and other Texas opinions in detail. Again, he found that even assuming “use” is required, there was sufficient evidence to create a fact issue on whether the defendant used the alleged trade secrets. Id. at *11.
The cases stating that “use” is an element of a trade secret claim should be taken with a grain of salt. You have to start with the plaintiff’s theory of the case. If the plaintiff’s theory is that the defendant used or disclosed the trade secrets, then it will be accurate for the court to say evidence of “use” or “disclosure” is required. If, on the other hand, the plaintiff relies on an “acquisition by improper means” theory, then evidence of use may not be required.
In short, under the plain language of the statute’s definition of “misappropriation,” the “acquisition” theory is still a potentially viable theory.
But persuading a judge that “use” of the trade secrets is not required may be an empty victory. Because there is an obvious follow-up question: if the defendant didn’t use the trade secrets, how was the plaintiff damaged? Isn’t it the proverbial tree falling in the forest that no one hears?
2. If the evidence proves that Real Cheap Windows acquired the trade secrets from Dawn Davis but did not use them, what are the actual damages?
In theory, it may be possible to prove that Dawn Davis’s acquisition of the trade secrets—without any use or disclosure—caused actual damages to Paula Payne Windows. But in practice it will be difficult. Let’s say Paula Payne Windows cannot show that it lost any customer sales as a result of Dawn downloading the confidential sales reports. In that case it may have no actual damages.
But wait, Paula Payne, will protest. How can you say we were not damaged? Suppose our IT guy had to spend many hours investigating Dawn’s computer activity, and then we had to pay a forensic expert to investigate further. Then we had to pay our lawyer a huge amount of fees to send Dawn a demand letter, file a lawsuit, seek a Temporary Restraining Order, etc. How can you say we were not damaged?
Paula would have a point, but there’s a threshold problem with her argument. Generally, under Texas law a plaintiff cannot recover attorneys’ fees as actual damages. Worldwide Asset Purchasing, L.L.C. v. Rent-A-Center East, Inc., 290 S.W.3d 554, 570 (Tex. App.—Dallas 2009, no pet.). There are some exceptions, but none that fit the typical trade secrets dispute.
What about the forensic expert fees? Could Paula Payne Windows recover those expert fees as actual damages? The argument would be that but for the acquisition by improper means, the forensic investigation would not have been necessary.
If there is evidence that the employee’s misconduct naturally led to the company needing to hire a forensic expert to investigate, the fees may be recoverable as actual damages. See Sandberg v. STMicroelectronics, Inc., 600 S.W.3d 511, 528-29 (Tex. App—Dallas 2020, pet. filed) (forensic expert fees were recoverable as actual damages where they resulted from employee taking laptop computer with confidential information on it home after termination and not returning it for four days).
But whether the misappropriation caused those fees will depend on the specific facts. Was the forensic investigation caused by Dawn’s improper acquisition of the trade secrets, or did the forensic investigation cause the company to discover the improper acquisition? If it’s the latter, that may not be a viable actual damages theory. Similarly, if the internal IT guy is on salary, it’s probably an uphill battle to claim damages for time spent on the investigation.
So, when the misappropriation theory is acquisition by improper means, rather than use or disclosure, there may be some viable arguments for recovering actual damages, but usually those damages will be relatively minor. (I say “relatively,” because forensic expert fees, like attorneys’ fees, can add up quickly, easily reaching six figures or more in some cases.)
That’s good news for the employee, but it doesn’t lessen the sting of attorneys’ fees the employee will have to pay to defend a lawsuit.
Most of my trade secrets cases are not Google vs. Uber. They’re more like Jim Bob’s Oilfield Supply vs. Vince’s Valves. That means the cost of defense is sometimes a bigger factor than the amount of actual damages.
In many cases, that’s exactly what the plaintiff is counting on. If the company suing my client has more money and more determination, it may try to use the cost of litigation to bully my client into submission.
That brings up the next question.
3. If Dawn really didn’t use or disclose the information in the documents, how can she get the lawsuit dismissed without spending a small fortune on attorneys’ fees?
I encounter this practical problem a lot. There are several procedural options, but most of them have a low success rate.
a. Rule 12(b)(6) Motion in Federal Court
If Paula Payne Windows sues Dawn Davis in federal court and doesn’t allege specific facts establishing that Dawn used or disclosed the trade secrets, Dawn’s lawyer can file a Rule 12(b)(6) motion to dismiss. I cover this in Set Phazrs to Stun: Motions to Dismiss in Texas Trade Secrets Litigation.
(Practice Tip: This is one factor that favors filing your trade secrets suit in state court. But of course there are many factors.)
As I wrote in the Phazr post, I’m usually not a big fan of filing a motion to dismiss, but in this scenario it makes some sense. If the plaintiff does not allege specific facts establishing that the defendant used or disclosed the trade secrets, there is a decent chance the court will grant the motion. See, e.g., Phazr, Inc. v. Ramakrishna, No. 3:19-CV-01188-X, 2019 WL 5578578, at *1-2 (N.D. Tex. Oct. 28, 2019).
On the other hand, all the plaintiff has to do is allege facts sufficient to make a plausible case that the defendant used or disclosed the trade secrets. See, e.g., Computer Sciences Corp. v. Tata Consultancy Servs., Ltd., No. 3:19-cv-970-X(BH), 2020 WL 2487057, at *6 (N.D. Tex. Feb. 7, 2020) (denying motion to dismiss where plaintiff alleged facts sufficient to plausibly allege misappropriation by unauthorized disclosure and use to develop a competing software platform).
So, even in federal court it’s usually difficult to get a motion to dismiss granted.
In Texas state court? Forget about it. At least, that’s what people used to say.
b. Rule 91a Motion in Texas State Court
Times have changed. Texas now has Rule 91a, which allows you to file a motion to dismiss a cause of action on the grounds that it has “no basis in law or fact.” A cause of action has no basis in law “if the allegations, taken as true, together with inferences reasonably drawn from them, do not entitle the claimant to the relief sought.” That’s pretty similar to the federal standard, so even if Dawn Davis gets sued in state court, her lawyer could give it a try.
But it’s probably an uphill battle. It’s not clear that Rule 91a incorporates the “Twiqbal” plausibility standard that applies in federal court. See Reaves v. City of Corpus Christi, 518 S.W.3d 594, 610 n.10 (Tex. App.—Corpus Christi 2017, no pet.) (“this Court has rejected the argument that rule 91a replaced Texas’s notice-pleading standards with federal fact-pleading standards”). And if the court denies Dawn’s motion to dismiss, it could order her to pay Paula Payne’s attorneys’ fees. Tex. R. Civ. P. 91a.7.
If you were a defense lawyer in Beaumont in 1979, you probably loved special exceptions. They’re delightfully old-fashioned. A special exception usually asks the court to order the plaintiff to plead a vague claim more specifically, or else to go hence without day.
Special exceptions are something of a throwback. These days, when there is so much pretrial discovery, judges tend to say that the better way for the defendant to pin down the plaintiff on specifics is through discovery devices like interrogatories, Rule 194 disclosures, and depositions.
But in this case, special exceptions may be just what the doctor ordered. If the plaintiff has no specific evidence of use or disclosure and just relies on broad conclusory allegations, I’ll file a special exception that asks the court to order the plaintiff to plead the specific facts supporting the allegation and, if the plaintiff cannot do so, to dismiss the trade secrets claim. If nothing else, it sets me up to try to spike the ball with a later motion to dismiss or motion for summary judgment.
e. Motion for Summary Judgment
This is the grand-daddy. If Paula Payne Windows has no real evidence that Dawn Davis used or disclosed the alleged trade secrets, then a motion for summary judgment is the most direct way to attack that defect.
The problem, in a word, is discovery.
If Dawn’s lawyer files a motion for summary judgment at the start of the case, the lawyer for Paula Payne Windows is going to object that discovery has to come first. That means serving and responding to requests for production of documents, scheduling and taking depositions, and fighting over discovery disputes in pretrial hearings. All of that takes a lot of time and money. So it usually defeats the purpose of trying to get an unfounded claim dismissed quickly and inexpensively.
This is a problem in all kinds of litigation, not just trade secrets litigation. The Texas legislature and Texas courts have tried to do something about it—such as passing the TCPA—but there’s no easy answer. Unless you’re going to cut off a plaintiff’s right to seek discovery to support its claim, litigation is just going to be expensive. There’s no way around it.
Kind of like a forest.
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Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation. Thomson Reuters named him a 2020 Texas Super Lawyer® for Business Litigation.
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.
This series has focused on drafting an enforceable Texas non-compete, because that’s where I practice, but if you’re drafting a non-compete for a company in the oil and gas industry, you may need to consider other states, especially Louisiana. Check out Drafting Enforceable Non-Competes in the Energy Industry for some good tips.
But back to Texas.
In Part 1 we saw how to draft a Texas non-compete to meet the once-elusive “ancillary to an otherwise enforceable agreement” requirement.
In Part 2 we saw how to meet the “reasonableness” requirement.
You could stop there and have a pretty decent Texas non-compete, but do you need a separate non-solicitation agreement? And what about all that additional boilerplate you often see in non-competes? Do you need that?
I’ll answer those questions in this third and final installment.
10. Does the agreement need to restrict both competition and solicitation?
This is kind of a trick question, because a restriction on soliciting customers is a restriction on competition. See Is a Non-Solicitation Agreement a Non-Compete? In other words, a “non-solicit” is subject to the same statutory requirements as a “non-compete,” at least in Texas.
Still, many non-competes have one section for restrictions on competition and another section restricting solicitation. This format is often unnecessarily duplicative. I think it is simpler to combine the two in one section.
But the substantive question remains, should the agreement restrict competition generally and solicitation specifically?
There is a case to be made for restricting competition and not getting into the messier issue of solicitation. The problem with a restriction on solicitation is that it almost always leads to factual disputes.
Suppose Dawn Davis leaves her sales position at Paula Payne Windows and goes to work for Real Cheap Windows. The next week, her friend and customer Bob Builder calls her up:
“Hey Dawn, how’s it going?”
“Pretty good, Bob, it’s been a busy week.”
“Oh really?”
“Yeah, you may not have heard yet, but I left Paula Payne and went to Real Cheap.”
“Wow, I didn’t know that.”
“Well, Bob, I really like the value they provide for their customers.”
“That’s great. You know, I was going to order some more storm windows for that new subdivision project, can Real Cheap give me a good price on those?”
Did Dawn just “solicit” business from Bob? Would it make a difference if Dawn had made the call to Bob, just to chat? Would it make a difference if Dawn had not volunteered that she changed companies?
You can see how “solicitation” creates questions and uncertainty.
In contrast, it’s pretty easy to determine if an employee violates a restriction on “doing business” with a certain customer. If Dawn goes to Real Cheap and Bob then starts buying windows from Real Cheap, that’s “doing business.” We don’t have to get into the whole “solicitation” issue.
Given the kind of factual disputes that often come up, I don’t use the word “solicit” in my form. But I do include a restriction on “urging or causing” a customer to become a customer of the new company.
That, of course, does not entirely solve the problem, because you could have the same kind of factual disputes about “urging” or “causing.” But I think those terms are easier to apply than “soliciting.”
And I think there is some advantage to including a restriction on “urging or causing” in addition to the more general restriction on “doing business.”
11. Should the non-compete state that it is an “independent covenant”?
Yes. The employee will sometimes argue that she is excused from complying with the non-compete because the employer breached the employment agreement first.
To avoid or at least reduce the risk of this argument being successful, I include this clause in my form:
Even without such a clause, the employer could argue that the non-compete is an independent covenant because the employer’s breach of another clause—such as the obligation to pay a bonus or commission—could be separately compensated by damages. But expressly stating the parties’ intent to treat the non-compete as an independent covenant should remove any doubt. SeeChambers v. Hunt Petroleum Corp., 320 S.W.3d 578, 584 (Tex. App.—Tyler 2010, no pet.) (clause should be treated as an independent covenant if “a breach may be compensated for in damages . . . unless this is contrary to the expressed intent of the parties”) (citing Centex Corp. v. Dalton, 840 S.W.2d 952, 956 (Tex.1992)).
12. Should you have the employee stipulate that the non-compete is reasonable and can be reformed?
This is probably ineffective and unnecessary, but it doesn’t hurt, and it may carry some weight with a judge who is not sophisticated about non-competes.
Most non-competes contain some kind of stipulation that the restrictions are reasonable. In my personal opinion, courts should give these stipulations no weight, especially considering limitations on non-competes are a matter of public policy. But some judges might give some weight to the stipulation, and you might be able to use the stipulation to get the employee to admit the scope of the non-compete is reasonable.
It also doesn’t hurt to include a reformation and severability clause. This is probably unnecessary, because the Texas statute already says the court shall reform an overbroad non-compete. But again, it doesn’t hurt to include it.
So, my form includes the following:
13. Should the non-compete include an “ipso facto” clause granting an injunction?
This is a close call for me. Most non-competes contain stipulations designed to support the employer’s request for an injunction. I call this an “ipso facto” clause. Texas courts vary on whether an ipso facto clause has any effect. See Can a Non-Compete Grant an Injunction by Stipulation?
Personally, I don’t give any weight to a non-compete ipso facto clause. But not everybody agrees with me, and it probably doesn’t hurt to include one. Mine looks like this:
Again, my own view is that this kind of stipulation should have no legal effect, but if the non-compete has an ipso facto clause, I might cite it as at least one of my grounds for an injunction.
14. Should the non-compete include “non-circumvention” language?
Employees often try to “get around” non-competes. “Technically I’m not competing with my former employer,” you can imagine an employee arguing, “I’m just providing consulting services to an LLC that my cousin owns.”
That’s just one example, but you get the idea.
This kind of gambit to circumvent a non-compete is usually not persuasive. If the judge applies the plain, common-sense meaning of the non-compete, this type of argument by the employee should usually fail.
But of course judges don’t always do that, and in fairness to the employee, if the employer drafts the non-compete poorly and its plain language does not prohibit the thing the employee is doing, then that’s the employer’s problem. See, e.g., East Texas Copy Sys., Inc. v. Player, 528 S.W.3d 562, 567-68 (Tex. App.—Texarkana 2016, no pet.) (enforcing plain meaning that allowed employee to avoid non-compete by terminating his own employment without cause).
I try to head off any cleverly contrived arguments by the employee by including the following in my form:
The idea is to avoid any hyper-technical interpretation intended to get around the non-compete. I haven’t had occasion to test it in court yet, but I would rather have it than not.
15. Should the non-compete prohibit making plans to compete?
Hey, why not? My form includes the following:
This is something I came up with that, somewhat surprisingly, I have not seen in other non-competes.
It is common for an employee to make plans to compete while still employed by the employer. And Texas courts have said that making such plans—and even concealing them from the employer—is not a breach of the employee’s quasi-fiduciary duty to the employer. See Fiduciary Duty Lite: What Employees Can and Can’t Do Before Leaving.
The rationale of the employee fiduciary duty cases is employee mobility. But those cases don’t necessarily stop the employer from creating a contractual duty not to make plans or preparations to compete. So I include that commitment in my form.
It’s such a clever idea, I almost feel guilty.
Like I said at the start, I don’t even like non-competes. I think most employers would be better off focusing on keeping their best employees happy, rather than trying to keep their employees from running off with customers. See The Most Effective Form of Non-Compete in Texas (or Anywhere).
But if you’re going to make an employee sign a non-compete, you might as well draft it as effectively as possible.
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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.
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.
I decided to share my updated Plain-Language Non-Compete with the world, and not only that, I’m walking you through it step by step to explain why I drafted it the way I did.
You should draft a non-compete in a style and format that is easy to read and present in the courtroom.
The non-compete should expressly state that the company will give the employee confidential information.
The non-compete should provide for giving the employee specialized training, if applicable.
The non-compete doesn’t need a complicated definition of competing.
Next we get into the real heart of making a non-compete as enforceable as possible: reasonableness.
You probably already know that Texas law requires a non-compete to be reasonable in time period, geographic area, and scope of activity. But do you know how to draft the non-compete to meet this requirement?
Don’t worry, we’ve got you covered.
5. Should the non-compete have a reasonable time limitation?
Yes. This is a no-brainer. The statute requires it, Tex. Bus. & Com. Code § 15.50(a), and a non-compete with no time limitation is therefore unenforceable on its face.
But what should the time limitation be? This is harder, and there’s no one-size-fits-all answer.
If the non-compete is part of the sale of a business, Texas courts are likely to allow a longer time period. See Oliver v. Rogers, 976 S.W.2d 792, 801 (Tex. App.—Houston [1st Dist.] 1998, pet. denied) (lack of time limitation did not render non-compete unreasonable when it was part of the sale of a business).
So for the sale of a business, I would recommend something in the range of three to five years.
But for the typical employee non-compete, shorter is better. Your maxim should be “shorten it until it hurts.” When the length of time is short enough that it causes the client some discomfort, you’re probably getting it right.
As a rule of thumb, I say the typical employee non-compete should be limited to one year. Two years max.
Yes, there are Texas cases that find periods of as long as five years reasonable. See Stone v. Griffin Comms. & Security Sys., Inc., 53 S.W.3d 687, 696 (Tex. App.—Tyler 2001, no writ) (“two to five years has repeatedly been held a reasonable time restriction in a non-competition agreement”) (citing cases).
But the analysis in those cases is superficial. I say go shorter, for several reasons.
First, keep in mind that if a court finds the time period as written is unreasonably long, then this effectively cuts off the employer’s right to get damages for breach of the non-compete. See Tex. Bus. & Com. Code § 15.51(c). The employer can still seek an injunction, but the right to get damages is a significant bargaining chip.
Second, the employer usually has the burden to prove the time period is reasonable. If I’m representing the employee, I guarantee you I am going to try to take advantage of this. If I see a time period of two years or more, that gives me something to attack. I can almost always offer testimony from my client that at least creates a fact issue about whether the time period is reasonable.
One year, on the other hand, is pretty hard to attack. I’m not saying you could never prove that one year is longer than needed, but in most cases that’s going to be a tough sell.
Finally, one year is usually enough to accomplish your client’s key business goal: stop a departing employee from immediately moving her key customers to her new company. The first few months are usually critical. In most cases, one year should be enough time for the company to try to persuade the key customers to stay.
6. Should the time period have a “tolling” clause?
I don’t recommend it.
A tolling provision extends the time period of the non-compete by the time that the employee was violating the non-compete. So, for example, if an employee competes for six months before a court enters an injunction to stop the competition, the time period of the non-compete would be extended by six months.
The upside to the employer is obvious. The downside is that it gives the employee an argument that the time period is indefinite and unenforceable. See Central States Logistics, Inc. v. BOC Trucking, LLC, 573 S.W.3d 269, 277 (Tex. App.—Houston [1st Dist.] 2018, pet. denied) (citing Cardinal Personnel, Inc. v. Schneider, 544 S.W.2d 845 (Tex. App.—Houston [14th Dist.] 1976, no writ)).
I wouldn’t say the issue is totally settled under Texas law, so you can include a tolling clause if you really want to, but why complicate the time period unnecessarily?
Simpler = easier to enforce.
7. Should the non-compete have a reasonable geographic limitation?
Duh. Of course it should. The requirement is right there in the statute. Tex. Bus. & Com. Code § 15.50(a).
But believe it or not, I still sometimes see non-competes with no geographic limitation. How can this happen?
To be fair, there are Texas cases that say a limitation on scope of activity can be used in lieu of a geographic limitation, especially where the employee is a high-level executive who is responsible for the company’s operations everywhere, or where customer goodwill is not tied to any specific geographic area. I cover this is in Geographic Area of a Texas Non-Compete – Part 2.
Still, why chance it? Even if you need to make the geographic area extremely broad, it’s still better to have some geographic limitation than none.
But what should it be?
8. What should the geographic limitation be?
In general, the geographic limitation should coincide with the expected area the employee will be responsible for.
It gets more complicated with upper-level management. But even for higher-level executives, I think you should try to define the geographic area they will be responsible for, even if that means a geographic limitation like “the United States,” “North America” or “the US Gulf Coast.”
My form geographic limitation looks like this:
It doesn’t have any more specific formula, but for geographic area there’s just no way to get around the need to adapt the clause to fit the circumstances.
9. Should the non-compete have a reasonable limitation on scope of activity?
Yes. Again, the Texas non-compete statute requires this.
But this is probably the most neglected requirement of the statute. I often see non-competes that define the restricted scope of activity too broadly.
This is the most common defensive argument I make for employees. For a typical sales employee, if the non-compete is not limited to the customers the employee dealt with at the company, I will argue it is unreasonably broad.
On the other hand, Texas cases tend to allow restricting a broader scope of activity where the employee is a high-level executive who is responsible for the whole company, not one subset of customers.
So my non-compete form provides two options, depending on the type of employee:
Option 1 may strike some employers as too narrow. But again, the advantage is that it will be difficult for the employee to argue that the scope of activity is too broad. That’s a significant tactical advantage for the employer in a non-compete lawsuit. And from a business perspective, it focuses on the key customers that the company if probably most concerned about the employee taking.
Option 2 is broader, because it is not limited to particular customers, but note that it is still limited to customers or prospects. This is usually better than prohibiting competition with the company generally, which could be seen as a prohibited industry-wide exclusion.
I was on the fence about including “prospects” in Option 2. If you really want to make your enforceability argument strong, you could take that out.
Also note that I use the phrase “doing business” rather than some longer formulation. I think “doing business” has a common-sense plain meaning that is usually easy to understand. If the employee’s lawyer wants to try to argue that providing goods or services for money is somehow not “doing business,” good luck with that.
Beyond Reasonableness
Now you know how to draft the non-compete to be reasonable. That is the most important part of enforceability.
But what else can you include in the non-compete to make sure it is effective and enforceable? Does it need a separate restriction on solicitation of customers? Should it include a lot of self-serving boilerplate in the event of a lawsuit?
I’ll tackle those questions in Part 3.
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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.
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.
Well, don’t we all. But of course, there is no such thing. The basic principle of non-compete law is reasonableness, and that’s a pretty fuzzy concept. So no matter how well the non-compete is drafted, there will almost always be some argument that it is unreasonable.
Still, there are ways to draft a non-compete to maximize the chance that a court will enforce it later.
I’m a little reluctant to share these tips. For one thing, I don’t really like non-competes. But sometimes my clients want me to draft one or enforce one, and like they say in the Fabulous Baker Boys, if the money’s green . . .
So I do have a form non-compete I use. You can download it here if you want. *Disclaimer: every situation is different, and you should not use this form without being or consulting with a lawyer.
And here are the key questions that come up when you’re drafting a typical Texas non-compete.
1. Should you draft the non-compete in a style and format that is easy to read and to present in the courtroom?
The question pretty much answers itself, doesn’t it?
And yet . . . most non-competes are written in a format that is difficult to read.
When it comes to style, lawyers who draft non-competes tend to go wrong in several ways:
Long, dense paragraphs
Each clause written as a single lengthy sentence
Small type
Unappealing fonts
No paragraph breaks between items in a list
Really long lists
Too much ALL CAPS
No Oxford commas (an almost unforgivable sin)
Too many acronyms or abbreviations
Too much legalese
I’ve seen a lot of non-competes that commit one or more of these offenses.
But one might object, what difference does the style make if the substance is good?
I addressed this in The Plain-Language Non-Compete. In short, if you want to maximize the enforceability of a non-compete in the courtroom, you will make it as readable and presentable as you can.
So, I now use 12-point Century Schoolbook. Not too stuffy, but not too modern. It’s not going to win any typeface awards or anything, but it’s less generic than Times New Roman. You can probably find a better font that suits your style.
I use bold headings, but not in all caps, and I now indent my paragraphs. When I use a list, I have a paragraph break after each item in the list. I use fairly standard margins.
You might decide to make different decisions regarding style and format, and that’s fine. You can probably come up with something better than I have. The point is to pay attention to these style issues.
Now let’s get into substance.
2. Should the non-compete expressly state that the company will give the employee confidential information?
The answer is yes.
The first thing any Texas non-compete with an employee should do is expressly state that the company agrees to provide the employee with confidential information. This is the simplest way to meet the requirement that a Texas non-compete must be “ancillary to an otherwise enforceable agreement.” Tex. Bus. & Com. Code § 15.50(a); Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644, 655 (Tex. 2006).
I will sometimes see a confidentiality clause stating that the employee will not disclose the company’s confidential information, but never expressly promising to give the employee confidential information.
That’s better than nothing, and it may be sufficient to create an implied promise to provide the employee confidential information. See Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 850 (Tex. 2009).
But why chance it? There’s no good reason not to include an express promise. So, the first part of my form non-compete looks like this:
As you can see, my form has two options, depending on whether the employee is a new hire or is being promoted.
Having an employee sign a non-compete midstream is tricky. If the company doesn’t provide some new consideration for the non-compete, then the employee can argue later that the non-compete is void for lack of consideration.
The obvious candidate for consideration is continued employment. But the promise of continued at-will employment is considered illusory and therefore not real consideration. See J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 228 (Tex. 2003) (at-will employment does not preclude providing contract formation “so long as neither party relies on continued employment as consideration”); Eurecat US, Inc. v. Marklund, 527 S.W.3d 367, 389 (Tex. App.—Houston [14th Dist.] 2017, no pet.) (“a promise of continued [at-will] employment is illusory and does not constitute consideration”).
So, the employer needs to provide some kind of consideration other than just continued employment.
Continued access to the company’s confidential information may be sufficient, provided the company actually provides it. But if the company merely continues to provide the same kind of information as before, the employee can argue there was no new consideration.
The better thing to do, when feasible, is to tie the non-compete to a promotion that gives the employee access to a wider scope of confidential information than before. That’s why my form for a post-promotion non-compete says “we will also give you new types of confidential information that you did not have access to in your previous position.”
There could still be a factual dispute about whether this actually happened. But if the company includes this language, it will at least have a reasonable argument that it agreed to provide new consideration for the non-compete, and that the non-compete was ancillary to that agreement.
3. Does the non-compete need to provide for specialized training?
Specialized training is the Dickey Betts of Texas non-competes. Less well known than confidential information, but just as effective.
That means a Texas non-compete doesn’t necessarily need to provide for specialized training, but it’s a good idea, if the company is actually going to provide the employee specialized training. My specialized training clause looks like this:
The important thing is to include a description that is specific enough to persuade a judge that this is not mere boilerplate. A generic promise of providing specialized training may not cut it, especially if the company later struggles to identify what the training was and why it was “specialized.”
4. Does the non-compete need a complicated definition of competing?
You can probably already guess where I come out on this one. Most non-competes have a pretty wordy definition of competing. Here’s a typical example:
This way of describing the prohibited competition isn’t really wrong, but it strikes me as unnecessarily complicated. You want to be able to put the clause in front of a judge or jury and make it as simple as possible.
I suspect the more complicated clauses came about as a result of clever employees coming up with ways to circumvent the non-compete.
You can imagine. “I know,” the employee says, “for the first year I’ll be an unpaid consultant to an LLC that my brother-in-law forms, so I won’t really be competing.”
I’m sure there have been endless variations on this sort of thing. And it almost never works. I think most judges and juries are smart enough to figure out that this kind of thing still violates an agreement not to “compete” with the employer.
On the other hand, you don’t want your non-compete to be vulnerable to shenanigans like this. Courts will decline to enforce the claimed purpose of the non-compete when the unambiguous language establishes that the non-compete does not apply. See, e.g., Total Safety U.S., Inc. v. Code Red Safety & Rental, LLC, No. 4:19-CV-03836, 2020 WL 57775826, at *4 (S.D. Tex. Sept. 4, 2020) (rejecting employer’s argument that employment did not terminate when employee was promoted and went to work for an affiliate).
So, even though I favor simplicity and plain language, I do include the common non-compete modifier “directly or indirectly” in my form:
You agree not to compete with us or to help anyone compete with us, directly or indirectly, . . .
I also include the “or to help anyone complete with us.” I think this is a good plain-language way to cover most scenarios where the employee tries to get around the non-compete by working through a middleman.
So now you’ve got a non-compete that meets the “ancillary to an otherwise enforceable agreement” requirement, because it expressly promises to give the employee confidential information and/or specialized training. And you’ve got a common-sense definition of competing.
All you need now are reasonable limitations on time period, geographic area, and scope of activity. How should you draft those limitations?
Stay tuned for Part 2.
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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.
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.
If Part 1 was a flashback to the vinyl era, then this Part 2 moves us into the cassette era. That’s more my time. I never actually had a Peter Frampton record, but I can still remember recording The Name of This Band is Talking Heads on to a blank cassette tape.
The theme of Part 1 was the Sales Territory principle, which says that a reasonable geographic area for a Texas non-compete should usually coincide with an employee’s actual sales territory. This principle goes all the way back to the first vinyl era, the Jazz Age, when Texas courts reasoned that an employee is going to develop goodwill only in the area where he has personal contact with customers.
But of course, not every case involves the typical sales employee who is responsible for a certain territory. What about cases where physical territory is not important, or where the employee is a high-level executive?
In such cases, the Sales Territory principle may be less useful, and Texas courts may be more likely to follow what I call the Holistic principle. The Holistic principle considers the reasonableness of the geographic limitation not in isolation, but in combination with other factors, such as the employee’s rank in the company, the employee’s knowledge of high-level confidential information, the nature of the business, and perhaps most important, the scope of activity restrained by the non-compete.
This leads us to General Rule No. 5.
General Rule 5: No geographic limitation or broad geographic limitation + non-compete limited to existing customers = probably reasonable.
The Sales Territory principle was rooted in the idea that customer goodwill is usually tied to a certain geographic territory. This idea goes back at least as far as the City Ice Delivery case in the 1920s. But Texas courts also recognized decades ago that even a non-compete with no geographic limitation at all can be reasonably limited to protecting customer goodwill, if the scope of activity it restrains is narrow.
Consider Stocks v. Banner American Corp., 599 S.W.2d 665 (Tex. Civ. App.—Texarkana 1980, no writ). Stocks sold his stock in Banner and agreed not to compete with Banner for three years. Banner’s business included manufacturing and selling blank cassette tapes, selling blank labels for cassette tapes, and custom duplication of cassette tapes. Banner’s customers included Tandy Corporation and Apple Computers. Id. at 666.
Stocks apparently could not leave the cassette game behind, because he somehow became an owner of Xalon Corporation, which sounds like an evil company from Aliens or Terminator. Despite the lack of any geographic limitation in the non-compete, the trial court enjoined Stocks and Xalon Corporation from doing business with Tandy, Apple, or a list of other Banner customers. Id. at 666-67.
The Court of Appeals found that the lack of a geographic area was not fatal to the non-compete. See id. at 667 (“Failure to include a territorial limitation will not void a covenant to compete”). The court cited Justin Belt Company, Inc. v. Yost, 502 S.W.2d 681 (Tex. 1973), where the court held that a non-compete that was “unlimited both as to time and to space” could be enforced to a reasonable extent. Id. The court also reasoned that non-competes may be construed more broadly in the sale of a business than in an employment relationship. Id. (citing Seline v. Baker, 536 S.W.2d 631 (Tex. Civ. App.—Houston [1st Dist.] 1976, no writ)).
Thus, the non-compete could be enforced to some extent, despite the lack of a geographic limitation. But to what extent? The Stocks court cited two cases approving injunctions limited to prohibiting a former employee from contacting certain listed customers. Id. at 667-68 (citing Toch v. Eric Schuster Corp., 490 S.W.2d 618 (Tex. Civ. App.—Dallas 1972, writ ref’d n.r.e.), and Arrow Chem. Corp. v. Anderson, 386 S.W.2d 309 (Tex. Civ. App.—Dallas 1965, writ ref’d n.r.e.)). The takeaway was that “[t]he use of a customer list as an alternative to setting a specific geographical limit is a reasonable means of enforcing a covenant not to compete.” Id. at 668.
Apple Computers was one of the key customers in the Stocks case decided in 1980
From the Stocks rule we can deduce this common-law principle of Texas non-compete law: a non-compete that is limited to prohibiting a former employee or owner from doing business with the company’s existing customers may be reasonable and enforceable even if it lacks a geographic limitation. See also Investors Diversified Servs., Inc. v. McElroy, 645 S.W.2d 338, 339 (Tex. App.—Corpus Christi 1982, no writ) (non-compete limited to clients securities salesmen contacted or learned about while working for company was enforceable despite lack of defined territory).
The logic of the rule is that the point of requiring a geographic limitation was to protect customer goodwill. If the non-compete is otherwise limited to protecting customer goodwill—because it is limited to the company’s existing customers—then a geographic limitation may not be necessary. This is the most basic formulation of the Holistic principle.
But this was a common-law rule. Did the Stocks rule survive the enactment of the Texas non-compete in 1989? Let’s just say the Stocks rule fared better than cassette tapes at the end of the 80s.
Even though the statute expressly requires a geographical limitation, Texas courts continued to hold that a geographic limitation may be unnecessary if the scope of activity restrained is sufficiently narrow.
In Totino v. Alexander & Associates, Inc., No. 01-97-01204-CV, 1998 WL 552818 (Tex. App.—Dallas Aug. 20, 1998), former employees of an insurance brokerage argued that the their non-competes violated the statute because they contained no geographic limitation, but the court rejected this argument. Id. at *3. The statute’s reasonable geographic restriction parallels a similar common-law requirement, the court reasoned, and Texas courts had held that a geographic limitation was not necessary where the non-compete was limited to clients the former employee had contact with. Id. at *3-4 (citing McElroy and Stocks). The non-compete “implicitly” contained a reasonable geographic restriction because it was limited to clients of the brokerage. Id. at *4.
The First Court of Appeals followed the same approach in Gallagher Healthcare Insurance Services v. Vogelsang, 312 S.W.3d 640 (Tex. App.—Houston [1st Dist.] 2009, pet. denied). The non-compete in Gallagher had no geographic limitation, but it was limited to clients the employee had worked with in her last two years at the company. Id. at 654. “A number of courts have held that a non-compete covenant that is limited to the employee’s clients is a reasonable alternative to a geographical limit,” the court said, citing Stocks, Totino, and McElroy. Id. at 654-55. The court held the limitation to clients the employee worked with while employed by the company was a “reasonable alternative to geographical area.” Id. at 655.
The employee’s position in the company is also an important factor, which leads to the next general rule.
General Rule 6: No geographic limitation or broad geographic limitation + non-compete not limited to specified customers + high-level executive = It depends.
We have seen that a broad geographic area—or even the lack of any geographic area—may be found reasonable if the non-compete is limited to existing clients or customers. But what if the non-compete is not limited to existing clients or customers?
This is where it gets hard. In a case like this, other factors, such as the employee’s rank in the company and knowledge of the company’s confidential information, become more important.
The Stocks rule lasted longer than these bad boys
Judge Ellison considered the issue in detail in M-I LLC v. Stelly, 733 F.Supp.2d 759 (S.D. Tex. 2010). In that case, Knobloch resigned from his position as Manager of Sales for the Americas at M-I, an oilfield services company. He started his own oilfield services company and allegedly started “raiding” employees from M-I. Id. at 769-70.
Knobloch’s non-compete restricted doing business with existing M-I customers, but it did not end there. Like many non-competes, it also prohibited Knobloch from engaging in any business “involving oilfield displacement tools or services or any other businesses then conducted by Employer.” Id. at 794. These restrictions applied “in any geographic area” where the company did business, which effectively meant North America, South America, and the Caribbean. Id. at 797.
Knobloch argued that his non-compete was unenforceable because the geographic area was too broad, but Judge Ellison disagreed, citing his own formulation of the Holistic principle. “[N]on-compete covenants with restrictions covering a wide geographic area may be reasonable if they are limited in scope to a firm’s current or prospective clients such that they do not pose a greater restraint than necessary to protect the firm’s goodwill,” he said, citing his own opinion in TransPerfect Translations (I love that flex). Id. at 797-98.
He also cited a version of the Sales Territory principle: “Covenants with wide geographic areas have been upheld frequently in Texas courts, especially when the area covered constitutes the employee’s actual sales or work territory.” Id. at 798.
Applying these rules, Judge Ellison acknowledged that “a geographic area covering the Western hemisphere is broad, reaching to the outer limits of a restriction.” But he ruled that this broad geographic area was reasonable, even where the non-compete was not limited to existing customers, where:
Knobloch had “extensive job responsibilities” and held a position in “upper management” (Manager of Sales for the Americas). He was “much more than a manager and salesman for his former employer.” He oversaw the company’s “relationships with major international clients.”
His actual territory did span the Americas.
Knobloch knew the company’s technical confidential information: “An engineer by training, Knobloch participated in the design of [the company’s] tools and in facilitating wellbore completions. He delivered technical presentations internationally, formulated company growth strategies, and discussed product development with engineers.”
Id. at 798-99.
In short, in M-I v. Stelly the geographic area covering the entire Western hemisphere was reasonable where the employee was a high-level executive, he was actually responsible for that territory, and he had knowledge of the company’s confidential technical information.
M-I v. Stelly took a “holistic” approach
Texas cases since M-I v. Stelly have tended to find broad geographic areas reasonable when the former employee was a high-level executive.
Consider Daily Instruments Corp. v. Heidt, 998 F.Supp.2d 553 (S.D. Tex. 2014). In that case, the non-compete broadly applied to the United States and any country in which Daily Instruments did business. Id. at 567. Daily Instruments specialized in the narrow field of reactor thermometry, which involved electrical temperature measurement devices used in reactors for the refining, chemical, and petrochemical industries. Id. at 557.
The court found the non-compete reasonable for three reasons. First, the employee was a high-level sales manager with responsibility for a very large territory and with access to the company’s confidential information regarding worldwide clients and sales. Id. at 567-68. Second, the field of reactor thermometry was very narrow, with a narrow customer base, few competitors, and a global scale. Id. at 568. Third, the non-compete had a reasonable limitation on scope because it did not bar the employee from working in the industry, but only from performing the kind of work he had performed in his last two years of employment in the narrow field of reactor thermometry products, and from disclosing confidential information. Id.
Similarly, in Ameripath, Inc. v. Hebert, 447 S.W.3d 319, 335 (Tex. App.—Dallas 2014, pet. denied), the court found a broad geographic area reasonable considering the employee was a member of employer’s “highest level management team.” The employee cited the Sales Territory principle and argued that he only worked in two counties, while the geographic scope of the non-compete was much broader. Id.
But the court said “the breadth of enforceable geographical restrictions in covenants not to compete must depend on the nature and extent of the employer’s business and the degree of the employee’s involvement in that business.” Id. (citing Butler v. Arrow Mirror & Glass, Inc., 51 S.W.3d 787, 793 (Tex. App.—Houston [1st Dist.] 2001, no pet.). The restriction on working anywhere for a company that operated in the Dallas-Fort Worth area was reasonable, the court reasoned, because the employee’s “management knowledge of and experience with [the company’s] Dallas-area operations would be valuable to his new employer.”
And in McKissock, LLC v. Martin, 267 F.Supp.3d 841, 856-57 (W.D. Tex. 2016), the court found a nationwide geographic area reasonable, where the company had a national customer base, the employee taught online courses available to the national customer base, and the employee held an upper-level position as Senior Appraisal Instructor.
Hmm. “Senior Appraisal Instructor.” I’m wondering how “upper-level” that really was. In theory, I don’t have a problem with the Holistic principle applied in M-I v. Stelly and subsequent cases. Courts should remember that the primary rationale for requiring a geographic limitation is to protect a company’s goodwill.
But I fear that in practice, dispensing with the geographic limitation requirement or allowing an extremely broad geographic area can have a real chilling effect on the ability of businesses to hire the best executive talent. I’ve seen this in my practice.
Maybe it’s time to hit rewind.
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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.
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.
Shannon Montgomery is a lawyer I know who handles contracts, trademarks, and other legal issues for clients such as social media influencers. We were both presenting at a CLE conference (right before COVID-19), and we got to talking about her training for an upcoming bodybuilding competition. I said something about how hard it would be for me to stick to the kind of strict nutrition plan bodybuilders have to follow.
I don’t remember her exact words, but her response stuck with me. She said something to the effect of, “it’s no different from the things you do as a lawyer that require discipline, you just have to decide to do it.”
You just have to decide to do it. I thought it was great advice. So true, so simple, yet so difficult.
Fast forward a few months, and I found out not only did Shannon enter the competition, she won it. I knew I would have to get her lessons from that experience into a blog post.
I envisioned it as sort of a companion to my post 7 Things Physical Fitness Teaches You About Professional Success. But that post was about physical fitness for ordinary people, like me. I was curious what lessons could be drawn from someone who competes at an elite level.
So here’s my interview with Shannon.
Why don’t you start with telling us a little bit about your law practice?
I do intellectual property and some transactional business work, but it’s mostly contract drafting and review, trademark, and copyright. Most of my clients are fitness entrepreneurs or fitness influencers. And I’m getting into sort of the supplement space as well and doing some work in that arena. I do have clients who are not fitness related, but the majority of my clients are somehow connected to the fitness industry.
Shannon Montgomery of Montgomery Law, PLLC
How did you end up with these clients in the fitness-related industry?
It all started on Instagram. I had a personal Instagram, @liftinglawyer, which I started back in law school, and I used it to post fitness-related content. And then I started getting legal questions from influencers and different people that I was following. They would pop into my DMs or comment on something and ask me some sort of legal question.
I realized that there are a lot of influencers out there who are business owners or who want to start businesses or who just make a lot of money on the Internet, and they didn’t have any legal help. So I thought, you know what, I’m going to go ahead and be the person to help these people out. In law school I spent a lot of time in the sports world. I worked with a lot of sports agents, and it’s kind of the same thing.
What I do now is obviously a little bit more. I help them with their businesses more than I would for an athlete, but a lot of the contract principles and IP issues are the same for influencers as for athletes. I thought maybe I’m a good fit for this because it’s what I wanted to do in first place.
Before you were a lawyer, were you a weightlifter?
Yeah. I started working out when I was very young. My dad took me to the gym when I was in high school at 15, maybe 16. I don’t know if I could drive.
My older sister was really into lifting. She did powerlifting at the high school. She was very athletic. I was always a gymnast and a cheerleader, so I was athletic, but not quite like her. She was working out with my dad, and I went and I just got became obsessed.
So I have been lifting and working out in some capacity since I was in high school, and I just never stopped. When I got to college, I would skip class to go to the gym. I would plan my day around going to the gym.
Were you able to continue a disciplined weightlifting schedule in law school or was that difficult?
Law school was the first time in my life when I couldn’t skip class to go to the gym, because you had to go to class. But I definitely made sure that I planned all of my classes around my ability to get to the gym.
I prioritize the gym. I always have. So you know how they say if you if you really want something and you don’t have time for it, make time. That’s always been the case. It was never a matter of, oh, I don’t have time for this today. It was what else can I take off my plate? Because I have to be able to get to the gym and keep that structure, because it really keeps me sane and focused and allows me to be productive in the rest of my life.
I was going to joke and say, well, it sounds like you had your priorities straight in law school, but it sounds like having that sort of regular schedule helped you with your school.
Yeah, absolutely. I’m one of those people that if I’m not crazy busy and I’m not productive at all, so I need to have structure. I need to have my time blocked out. So I was in the gym every day by 7:00 a.m., typically because I love to work out in the morning or if class didn’t allow, then it was right after class. There was always a slot for the workout because it keeps me focused.
This may be a dumb question, but what’s the difference between weightlifting and bodybuilding?
There’s a lot of different ways to lift weights, so it depends on the context.
When you see people doing clean and jerks, or snatches, which are the two Olympic lifts, that’s technically called weightlifting. Bodybuilding is you lift weights, you can power lift, you can do whatever in order to build your muscle, build your body so you can get on stage in a very small outfit and be judged for how well you build muscle and lean down.
Weightlifting takes a lot of skill. And if you’re competing in weightlifting, you’re obviously a very good athlete.
Bodybuilding is one of those things that takes extreme dedication and discipline. But you don’t really have to be an athlete. You just have to you have to get to the gym and be very disciplined.
How did you make the transition from just the weightlifting to lifting weights for bodybuilding?
I would get questions a lot in the gym. People would be like, what are you training for? Are you a bodybuilder? Do you do physique sports? Are you a Cross-fitter, all that stuff.
When I was in law school, actually, was my first sort of exposure to bodybuilding. I had always thought about it, as the Arnold Schwarzeneggers of the world, and I did not think women competed, or if they did, they looked like a female version of Arnold Schwarzenegger, and I was not interested in that.
But then Instagram, social media in general, but mostly Instagram shed light on these other divisions. There is the Bikini division and the Figure division, which are for women and it’s not this extreme, you’re not huge. It’s really meant to be more someone who’s generally into health and fitness, and it’s a place for you to compete and showcase that.
So when people started asking me, I started looking into it and it just looked like something that was right up my alley. One thing led to another, and here we are six years later, and I’ve done four seasons and 12 shows at this point.
Wow, that’s a lot of shows. Tell us about the most recent competition that you did.
Yeah, so I did the NPC [National Physique Committee] Oklahoma Championship. NPC is the governing body. The NPC is what leads into the IFBB [International Federation of Bodybuilding and Fitness], which is for pro bodybuilders. You can go pro, and you can earn money, although not many of them earn a lot of money.
It was the second show this year to go on because of COVID everything that we had originally planned to do. I started dieting in January, and then every show I was supposed to compete in early May that got canceled. And then I picked another one, and that got canceled.
So it was just like a domino, everything just kept falling. But I got lucky. And this show in Oklahoma was like, are we going to go on? We’re going to take precautions. They limited the amount of people that signed up, a lot of people that could come and I went. It was my first show actually. For years I haven’t competed since 2016.
And I did the Bikini Division, which was actually the two years prior competing I’ve done Figure. So I was kind of going back down into Bikini so I wasn’t used to the posing or just that division in general and very, very nervous. But I went and it was a great show, it was really well run. Everybody was super nice.
There were thirteen girls in my height class. I won my height class, and then I won the overall, which means I beat out all the other girls and all the other height classes too. And it turned out really well. I was not expecting that at all, but I did well and I enjoyed it. So I’m really happy that I got to do it this year.
Congratulations. What was it that made you want to get back into competition after four years of not competing?
It just never feels done, or at least I don’t feel done. I knew the last time that I competed that I was going to take a nice long break, and I was just kind of waiting for the right time. In between I moved from Florida back to Texas, and so when I first got back to Texas, I thought maybe that would be the year and that just wasn’t right. And then last year, I moved to Houston.
Finally this year, January rolled around and I was like, I’m ready to diet and I’m ready to focus. If you’re not one 100% mentally ready to take it on, you should not even try, because it’s exhausting. It takes up a lot of mental space. It takes up a lot of your time. So, I was in a good place, both career-wise and everything else kind of fell into place. I was ready to give it another shot.
When you decided to enter this competition, was your mindset like, ok, I’ll do this competition and I’ll have fun with it and see how it goes? Or was it like, I’m going to do this competition and I’m going to win?
I didn’t necessarily think about winning, but in order to go pro, you have to get first or second place at a national show and there are only four or five national shows throughout the year. So I knew that I needed to get first or second so that I could get nationally qualified. Eventually I would like to compete at the national level and go for that pro card.
I do get on stage just because I love it, but I have been told that I stand a chance of winning a pro card in Bikini. So I was like, this is the year I’m actually going to go in there. I’m going to win first or second and get nationally qualified. That was the expectation. I kind of figured I would just get second, and I kept telling my coach that I wanted to do a really small show so that there would maybe only be like girls in my division and I could get second place, and then I could step on stage at Nationals.
I had no idea that I would take the overall by any stretch of the imagination, especially because I’m not used to Bikini and the posing is just totally different than what I’m used to. So I didn’t have huge expectations.
What was the planning process like?
I started planning way back in September of last year. As far as I knew, I wanted to start dieting in January for a May show. So I have a nice long diet phase so I could go slow instead of because crash dieting is not a good idea.
I started structuring my training around what I know they look for, so I changed up the way I was training a little bit. I kind of stepped back from powerlifting and focused a little more on so hypertrophy training for bodybuilding purposes to kind of grow certain muscles, and then certain muscles stop growing, because I have bigger arms and for Bikini you don’t need that.
The timeframe sounds pretty similar to my law practice where we’re getting ready for a trial, because you’re planning months out. And was there anything that you learned from that planning process that you can apply to professional life?
Absolutely. Fail to plan, plan to fail. Just like with me running my own practice. I don’t litigate, so I don’t have to worry about trial so much, but it’s the same idea with trademarks as they take six to eight months. You’re planning when you get to a client, you have to plan something out maybe even a year. You have to be able to see the big picture, while also seeing the little day-to-day picture, which is 100% what a bodybuilding prep is.
You wake up every single day and you have to take care of these many little tasks that all add up to your long-term goal of getting on stage, which could be a year away, it could be six months away. Until you look at the big larger picture and you can step back and look at things from a macro perspective, then it all adds up to one long bodybuilding prep.
Right. It reminds me a lot of really business development. And I know you have your own firm so I’m sure you know this, but so much so much of it is doing those little things, you know, every day or every week.
Yeah. And just being consistent in what you’re doing.
You mentioned your coach. How was your coach helpful to the process of getting ready for the competition?
I don’t think you can perform or get ready without having a coach. It’s really hard to be objective about the way you’re looking or how your training is going or your nutrition and all of that stuff for yourself. You need somebody who’s outside, looking in, controlling all of that.
Without a coach, I would just grind myself right into the ground almost instantly. I’d be like, we’re going to do one hundred hours of cardio, we’re going to train for three hours, we’re going to not eat anything. That’s not the way to do it.
So having a coach keeps me focused and it helps me stay out of my own head and out of my own way and really gives me the path that I have to follow. And I love structure. I mean, I’m a lawyer. I love it. And so really, somebody else gives me the plan and I can just follow along and makes it way less stressful to have a coach.
It sounds like your coach is not so much pushing you to do things but more like keeping you disciplined and not overdoing it.
Yeah, keeping me in line basically. I don’t struggle with the discipline part. I’m a very self-disciplined person, as I think most attorneys are, I would say, or else we probably wouldn’t have gone into this profession. So that part of it isn’t hard for me. But knowing when to push or knowing when to pull back, I kind of need help with because otherwise I’m just like push, push, push.
You mention self-discipline, which leads to a question about diet. That seems to me like maybe the hardest part of doing something like this. So what was your nutrition plan and your approach for that? How does one eat for a bodybuilding competition?
Well, it depends on who you ask. Obviously, nutrition is very personalized, but for me, I do what we call flexible dieting.
It’s been around for probably ten years now. So the typical old way of thinking was you had to eat fish and asparagus and chicken and flavorless things. And a certain amount of those things. And that was it. But with flexible dieting, you essentially get to eat whatever you want.
You have to track your macros, so your protein, carbs, and then within those macros I’m allowed to eat whatever I want. I typically eat very healthy anyway because you think of it like a bank account. If you eat a doughnut, for example, it’s going to eat up a huge chunk of your carbs and your fat for that day.
So I usually just eat healthy foods. I eat a lot of lean meats, a lot of vegetables. I do love carbs, but I’ll use like potatoes, rice—I do eat bread—that kind of stuff to hit my calorie goal. And then within that, my protein and carb goal for the day.
It sounds similar to the Weight Watchers concept, which I think studies have shown is one of the most effective methods.
It is just like that. Weight Watchers is not as detailed, but it’s the same concept and it’s from a psychological perspective, it helps people adhere to their diet way more because you’re not saying no to anything and you kind of learn to not want anything all that much because you know that you can have it at any point in time, you know, as opposed to say, oh, I can’t eat carbs.
And then when they do let themselves have carbs, they eat a box of cereal and 10 doughnuts and you’re like, no, that’s probably not a good idea.
Most people have a lot of trouble sticking to eating right. How do you do that?
I do love healthy food, and I do love being in control of my nutrition, but really, it’s just making the decision to do something and then doing that thing. I don’t know if that’s a personality trait that I just have, so I always feel like I’m the world’s worst advice giver because I don’t know, is that something that everyone does?
But for me personally, when it comes to sticking to my nutrition or when it came to the bodybuilding and sticking it out even through COVID and the lockdown’s and all of this stuff, it’s just I made a decision to do something.
So I’m going to honor that, and I’m going to continue to make the right choices because I made this decision. I’m going to stick to it.
Are you able to take that mindset of just deciding to do it and use it in your law practice?
100%. Honestly, that’s when I decided to start my law practice. It was kind of like I made the decision and then two days later, I had a law firm.
So again, I’m not the best at giving advice, because when I decide to do something like, I have to do it, I have to get started on that thing right away, or I have to make some sort of move towards accomplishing that thing. So when it comes to the law, when it comes to my practice, that’s pretty much how I get myself to do everything.
You don’t want to do everything it takes to run a law firm every single day. Some of it’s not that fun. Sometimes I’m like, you don’t want to do this. But if I make the decision and I tell myself this exercise is getting done today, then I have no choice. I have to do it. It doesn’t get put off until later, it gets done because I make the decision to do it.
Montgomery Law, PLLC represents fitness entrepreneurs, social media influencers, and other business clients.
Practicing as a solo attorney, what’s the thing that you really dislike having to do every day or every week?
For one, the accounting. I have software for most of it. So, you know, it’s kind of seamless, but I still just hate getting on there. And I don’t like numbers. Yeah, I’m a lawyer, so I hate the accounting part of it.
And then what I would consider the administrative type stuff like some of the emails and intake, the invoicing and all of that, and just those little tedious things.
One more question on nutrition. I know a lot of people are like me in that when you get really stressed, you tend to eat the wrong things. I think most people can relate to that. When you’re training and sticking to this this very specific nutrition plan and running a law practice, I’m sure there’s a lot of stress that comes along with that. How do you deal with the stress?
Well, first, let me say, if you are a stress eater, don’t tell yourself that you’re eating something that’s wrong or bad. You’re just eating something that maybe isn’t ideal for that moment in time. In general, there are healthier choices and then there are less healthy choices, just as a disclaimer for people so that they don’t feel guilty about stuff like that. And for me personally, I’m not immune to wanting to do that.
And now that I’m not bodybuilding, if I’m having a moment of anxiety, it’s like a glass of wine. But when you can’t turn to food or wine or whatever to relieve some of that stress, I might pick a podcast that has nothing to do with business growth. I pick a podcast that is either about training or something fun, something that I just want to listen to. Or go for a walk, or get a book, sit in the corner and read for 10, 15 minutes uninterrupted, and just take a breather and take a moment to myself.
That’s really the only thing you can do when you’re in a bodybuilding preop because everything else is so controlled. Your activity is controlling your nutrition, your water intake, your sleep, all of it. So when you just need that stress relief, it’s really about finding something just a few moments to yourself to shut everything out and then just kind of focus. If you meditate, perfect. I don’t do that. I would love to, but something like that essentially is my version of meditating.
Those sound like much more constructive ways to deal with stress. And you mentioned sleep, which is really interesting to me. One of my most popular blog posts was about how lawyers are so sleep deprived. And I contrasted that with professional athletes who are usually very careful about getting enough sleep. Is getting a certain amount of sleep part of your training for a competition?
Absolutely. And it should be a part of everybody’s training for life, because if you don’t sleep enough, your body doesn’t function properly. And so not only do you have to sleep for muscle recovery, and actually everyone thinks that you’re building muscle in the gym, but you’re not. What you’re doing in the gym is tearing it down. And then when you sleep is when the muscle gets built.
So if you’re not sleeping, you’re not building any muscle. So I am obviously not going to get eight quality hours every single night. But I aim to have everything, have the lights off, have the phone down, everything by 9:30 and in bed.
And I’m very strict about my work-life balance. I will cut things off at 6:30, 7:00. I’m done. I don’t want to check my email. I’m not going to answer a client if they text or call after a certain point in time, you just have to put your foot down and prioritize your sleep. I mean really, truly prioritizing sleep over all the other stuff first and foremost. It’s the most important aspect.
Now let’s talk about getting in the gym. I would say most guys at least, you know, they go in the gym, they throw a bunch of weights on the bench, they do a bench press and they stand around for a few minutes, maybe do some more bench press, maybe go get on the StairMaster. I’m guessing that kind of approach is not going to work for someone like you training for a serious competition.
It’s not ideal. I would say you’re not wasting your time, but you’re certainly not utilizing your time wisely. So, yeah, my programming, my training days are very thought out, usually in two to three-month blocks, and things are progressively overloaded. Everything is very structured.
Even in an off season, when I go to the gym, I don’t just go in without a plan. I go in with maybe it’s a chest day or maybe it’s a shoulder test day. I write things down, I keep track of how I feel, how the weight felt. I track all of that because you really have to train with a purpose and with an intent to actually make progress.
So in or out of bodybuilding, you really should train with intent or else don’t bother going to the gym. Go do something else.
A lot of people will start an exercise program and they don’t really see results from it. What do you think most people are doing wrong when they get in the gym?
Either they’re not doing a good program, maybe they’re just following along haphazardly with different exercises or different workouts that they see online or they’re not giving themselves enough time. I’ve been doing essentially the same types of workouts since I started working out. I don’t do a lot of fancy stuff. Things don’t really change, the bread and butter: the squat, bench press, deadlift. There are some accessory movements that go along with that. But I go and do the same things day in and day out, and then you just have to be patient.
Everybody always wants to change up every couple of weeks, to “confuse” the body. I don’t know where that came from; you can’t confuse your body. You just go in and do the movements that, you know, work, the movements that are hard, that challenge you. And you do the same things over and over. Maybe you’re going to add some weight from week to week, or maybe you’re going to add some reps. But be patient. You’re not going to see results in a few weeks. It’s going to take time.
“I’ve been doing essentially the same types of workouts since I started working out. I don’t do a lot of fancy stuff.”
So we’re not going to see Shannon Montgomery doing a lot of rope climbing or tire flipping?
No, unless I’m having a totally crazy day and I feel like just having fun and doing something totally out there, but not typically. And that works for cardio, I mean, it definitely works, but the same thing goes. If you’re going to tire flip, if you use the same weight tire every single time you do it, you’re not going to get any stronger. So start with a small tire and move up to the giant tire.
Another thing I would guess most lawyers would say about physical fitness is just that it’s hard to find the time, because they’re so busy. For someone like you, where you’re doing client work and the administrative work all on your own, how do you manage your time when you’re doing this training?
So, one, you don’t have to spend tons of time in the gym. You don’t need any more time than 45 minutes to an hour.
And two, like I said earlier, if you want something, you will make it happen. So sometimes it means I’m up at 4:00 a.m. to make sure that I get that workout in before the meeting, or before when I was with the firm, I was in the office by 8:00 a.m., so I was at the gym by 4:40 every single day.
I don’t have kids, so I know a lot of people who have kids, it’s a lot there. There are a lot of moving parts. But you can make something happen. You don’t have to go to a gym, not necessarily. You can go for a run or work out in your garage. If you want to do it, you will find the time to do it.
It’s just about understanding you don’t need to spend two hours and it doesn’t have to be the biggest gym work. It can be a 30-minute, 45-minute body-weight workout in your garage.
That’s great advice. I was also wondering about competing on stage, and I’m thinking that most people, including me, would be terrified to get on stage like in a bathing suit. And not only that, where the people are scrutinizing everything about your appearance. Does that make you nervous? And how do you deal with that?
Yes, super nervous. And still, it makes me nervous every single time. I don’t know if that is something that will ever go away. Maybe I’ll let you know in a few years, but I still get nervous because it is it’s very awkward.
And especially for me. I’m just not like a very flashy center of attention kind of person. And you’re getting up on stage in literally nothing and you’re being scrutinized, and as a female, our biggest insecurity is typically our body. But over the years, I’ve been able to kind of separate that being on stage and what the judges are going to say or think from who I am.
It’s definitely given me so much confidence because if I can get on stage in a bikini and some clear plastic heels, I can probably do just about anything, and that bleeds into just everything else in life, having that confidence.
It has led me to starting my own law firm. It’s like, well, if I can get on stage and do this very awkward thing and withstand that, there’s no way I can’t open my own law firm and be at least mildly successful.
My next question was inspired by watching that documentary, The Last Dance about Michael Jordan. One thing that comes out of that is you see this burning desire to compete and win. You just won a competition. How important is that will to win to actually winning?
I think particularly in bodybuilding, if you don’t have the ability to at least visualize yourself winning, you might never get there, because when it comes to bodybuilding, your stage presentation is most of the battle. So having that desire to win will give you more confidence on stage and will give you the ability to really showcase what you worked so hard for.
It’s perfectly fine to compete and have no expectation and want to just do it for fun, but if you want to compete and you want to win, that will to win has to be paramount. Because there are times during prep where you’re just like, why am I doing this? I’m tired, I’m hungry, I have to go do an hour of cardio, and I don’t want to do it. But the desire to actually get on stage and win something just kind of pushes you through those times.
Are you fun to be around in the final weeks of your training?
Ooh, probably not, honestly. You’re kind of hungry and you’re tired and you’re just like, I’m ready to be on stage. I’m over this. So probably not.
After you won the overall competition, what was the first, I’ll say “bad” food—foods are not bad or good, but you know what I mean. What was the first thing you wanted to eat that you couldn’t before?
One, wine. I had a little glass of wine. And then I made myself I guess they call them brookies, but it’s a brownie and chocolate chip cookie thing. I’m a sweets person. My sweet tooth is terrible. So that’s what I always want. I want the sweetest chocolateiest peanut-butteriest thing I can find.
That sounds great. So overall, what was the most important lesson you took out of this experience of training for and winning this competition?
Well, this year was special because of COVID and because of the gym shutdowns and all the show cancellations and everything. So, I think the number one lesson I learned from prepping through all of this was how resilient I am, but also just how resilient humans are, because there are so many people who were doing the same thing as I was. And we were training in our garages with chairs and stuff so that we can get on stage.
Just knowing that not only can I adapt, I can change, I can pivot when I need to. I am apparently very resilient. So it was a it was a very good life lesson this year.
Resilience. Yeah, we all need that right now for sure. So what’s your next bodybuilding goal?
Right now I am taking a break. I actually am kind of dealing with a little bit of a back injury, so my training has been not great.
Probably in the beginning of next year, I will start another prep for hopefully the national shows that originally are in the summertime. We’re hoping that everything goes back to normal next year, and then I can get on stage at a national show and see what the judges say. Maybe they’ll like me as I am and I can win that card.
Or maybe they’ll tell me, hit the hit the gym, do these three things and then come back. So that’s kind of the goal. But the long-term goal is to win a pro card. So hopefully that’ll happen soon.
Well, I expect we’re going to see that sometime in the future. Now, what is your next big professional goal and related to that, people who want to help you professionally, what can they do to help?
I would love to be able to bring on help to do the things I hate to do. So figuring out how to do that the right way.
And scaling the business a little bit, getting better about that, because I have a tendency to just sort of take everything on and just keep everything. I’m starting to do a little more work, like hiring freelancers for certain things, because they always say hire out, hire out. But being a control freak, that’s so hard for me. But I’m getting better at it.
So professionally, I would hopefully by the end of this year, I’m in a position to where I can bring somebody in maybe part time, if not full time, for some of the administrative stuff and actually be a good manager and actually be able to tell them what it is I need, because I feel like I’m really bad about that.
That’s definitely the goal. And then maybe by next year, who knows, hiring an associate or something, that would be crazy, but also awesome.
Well maybe people who see this interview can help with that. And if people want to keep up with what you’re doing, they can follow you on Instagram?
Yes, they can follow my firm Instagram @montgomerylawpllc, and my personal Instagram focused on weightlifting is @liftinglawyer. I haven’t been super active on either of them lately because I’ve just been so busy, but hopefully I’ll get back on there soon because I do love being on social media.
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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.
It was a rite of passage this past year in the Wolfe casa, when I watched the classic 1980 film The Blues Brothers with my 11YO son, just as I had done with my dad back in the day.
Some of you will remember the opening scene. “Joliet” Jake Blues is finally getting out of prison. Dressed in his jailhouse fatigues, he is led to the property room to claim his personal belongings. He steps up to the counter, and an officer holding a clipboard glares at him (played by none other than Frank Oz of Muppets and Yoda fame). The two escorting officers pull him back to stand behind the yellow-taped line on the floor.
“Sign here,” the officer sneers. Jake sarcastically plants his feet behind the yellow line while cartoonishly leaning forward to sign his “X” on the line. Right off the bat you get a sense of Jake’s personality.
I experienced something similar as a teenager when I went to get my driver’s license. I walked up to the counter, and the lady behind it said “please stand behind the line until you’re called.” Afterwards, I remember my dad saying something like “you give people a little bit of power . . .”
I’ll come back to that.
The 2020 bar exam controversy
You may have heard there has been some controversy about the bar exam this year. The problem is obvious. The last thing you want in the middle of a pandemic is hundreds of test-takers assembled in one big room together for hours on end.
This has presented bar examiners with several options. I’ll list them in order from worst to best:
1. Cancel the exam and just wait until next year. Graduating law school students can just figure something out for a year.
2. Grin and bear it. Stick with the in-person bar exam, but maybe with some extra social distancing. How bad could it be?
3. Switch to an online exam. If monitoring the test-takers is too much of a logistical challenge, then just make it an open-book exam (as many exam critics have already suggested).
4. Considering the unprecedented nature of the COVID-19 epidemic, the threat of spreading the virus to test-takers, the anxiety that the threat of the virus must visit on already-stressed-out examinees, and the fact that the bar exam is not really that essential in the first place, grant admission to the bar based on diploma privilege—at least just this one year.
(Diploma privilege means accepting graduation from an accredited law school in lieu of passing the bar exam.)
My ranking of the options is of course just my opinion, and there are pros and cons to each. I’ll concede this is not an easy issue for bar examiners to deal with. Same for the state supreme courts that, in most cases, ultimately oversee the bar examiners.
But that’s about the best I can say for the bar examiners. Overall, if I had to grade their collective response to the COVID-19 crisis, they would get an F. Ok, maybe some of them would get a C, if we’re being charitable.
They should have just made it simple and granted diploma privilege for this one year. That would earn an A.
Granted, as indicated earlier, my grade is based on the premise that the bar exam is not really that valuable. If my premise is wrong, then maybe my grade is too low.
So it comes down to this: what is the real purpose of the bar exam, and how well does it serve that purpose?
Are you ready for some football?
Let’s put it in football terms. NFL teams use the scouting combine to help evaluate college players for the draft.
At the combine, players run a gauntlet of physical fitness challenges that includes things like the 40-yard dash, the vertical jump, and bench pressing 225 pounds as many times as possible. They also get interviewed and take a sort of IQ test called the Wonderlic.
Of course, the tests at the combine are just part of the puzzle. It’s a sports talk show cliché for some former player to say, “I don’t care how good he looks running around in shorts, let me see him on the field in pads getting hit.”
But the physical tests at the combine give the teams some relevant information they find valuable.
No, on game day you don’t get points for running a 40-yard dash in a straight line with no pads for time. But if the defensive back you’re scouting has a subpar time on the 40, that tells you he may not have the speed needed to stay with a Tyreek Hill streaking down the sideline. Seeing that prospective offensive lineman bench press 225 pounds like it’s nothing gives you some idea of what he can do to a blitzing linebacker.
In the same way, testing future lawyers on their knowledge of specific areas of law is obviously not the same as watching them actually practice law, but it gives you some indication of their legal acumen, right?
Well, not so much. The NFL combine is perhaps what the bar exam wants to be, but the reality is different.
Imagine you’re a college football player arriving at the NFL combine, and a team scout hands you a stack of 15 detailed rulebooks from various sports. The sports include everything from tennis to basketball to golf, and maybe—maybe—football. “You’ve got a week to memorize these rulebooks, kid, and then there’s going to be a written test.”
That’s the bar exam.
You can see the problem. First, knowing all the intricate rules to football is no test of how well you are prepared to play football. Second, knowing the rules of, say, professional bowling has no relevance whatsoever to playing football.
Now, in fairness, making NFL prospects memorize these rulebooks and take a test on them might have some value. For one thing, the ability to memorize that much information and apply it on a written test would be some indication of a player’s intelligence. For another, this ordeal would give teams some sense of a player’s grit, determination, and discipline.
It would also serve as a sort of rite of passage, building camaraderie among players. Someday they’ll sit at a bar reminiscing about the experience. “You remember when we had to memorize all those crazy rules of table tennis, that was insane!”
And finally, let’s say the rulebooks include the rules of the NFL. In that case, a player’s knowledge of the rulebook might have some value, even if it’s not the thing that really matters.
So how is my combine hypothetical like the bar exam?
An exam for a bygone era?
The first problem is that the ability to memorize a bunch of legal rules and apply them on a written test isn’t even close to how lawyers actually practice law. It is both too difficult and too easy. It’s too difficult because in practice, if a lawyer doesn’t remember all the elements of the business records exception to hearsay, she’s just going to look them up. It’s too easy because real flesh-and-blood client matters don’t come in neat little fact patterns with right or wrong multiple-choice answers.
But that’s just the least of it. The bigger problem is specialization.
There was a bygone era when small-town lawyers had to know a little about a lot of different areas of law practice. You might draft a will on Monday, appear in court for a criminal defendant on Tuesday, and review an oil and gas lease on Wednesday. The typical selection of bar exam topics seems built for this kind of practice.
But hardly anyone practices like that anymore. Almost every lawyer today specializes in some specific area of law. Sure, the level of specialization varies, and some lawyers have more than one specialty, but very few lawyers now have the kind of general practice that the bar exam attempts to test for.
Let’s say a lawyer specializes in patent law. Testing that lawyer on her knowledge of criminal procedure is about as relevant as testing a wide receiver on his knowledge of the rules of baseball. That would be unnecessary and over-inclusive.
And there’s a less obvious problem. No matter what topics you pick, the bar exam is also going to be under-inclusive. I’ll use myself as an example. My practice focuses on non-compete and trade secret litigation. Sometimes I also handle trademark matters. (This is by happenstance; the two practice areas have nothing to do with each other.)
Guess what? The bar exam I took had nothing about either one of these practice areas.
How can this be? How could the Texas Board of Law Examiners set me loose on an unsuspecting public without first testing my competence in these areas of law?
The answer is twofold and, I think, illustrative.
First, in the case of trademark law, I learned it the old-fashioned way: apprenticeship. I don’t mean any kind of formal apprenticeship. I just mean that I learned it by working with a lawyer who was experienced in trademark matters. I wouldn’t call myself a trademark law expert, but it didn’t take long for me to achieve basic competence in it.
This is how almost every new lawyer learns to practice law.
Granted, there are some intrepid souls who get out of law school and immediately hang up the proverbial shingle. But we don’t need to worry too much about them. Anybody who goes that route is likely to have an unusually high amount of initiative and motivation, which I’ll bet more than compensates for lack of experience.
And that is the exception, not the rule. Very few clients hire a lawyer who just got out of law school and has no experience. So, naturally, the vast majority of new lawyers go to work under the supervision of a more experienced lawyer. Effectively, most lawyers start their careers serving an informal apprenticeship that effectively lasts 1-3 years, or even longer.
This informal apprenticeship—not the bar exam—is the main way the profession trains lawyers for basic competence.
The second way the profession ensures competence is through self-study and the free market. Here’s what I mean. Remember I said the main focus of my practice is non-compete and trade secret litigation? I’m not too modest to say I am an expert in that area of law.
And here’s the funny thing. I didn’t become an expert on non-compete and trade secret litigation through studying for an exam on it, or even through some kind of informal apprenticeship. I learned it on my own through on-the-job training, and then tried to make a name for myself in it. Then the free market does its thing, and people who hear that I’m an expert call me up.
These examples teach us that the bar exam is neither necessary nor sufficient to ensure competency of lawyers.
Having said that, I must give the bar exam its due. Like our hypothetical NFL rulebook ordeal, the bar exam doesn’t prove nothing. Passing the bar exam is probably some indication of intelligence. It is definitely some indication of perseverance and dedication. And, like making NFL prospects memorize the rules of badminton, it may have some value as a sort of shared rite of passage.
Still, these are pretty weak justifications for the bar exam.
I think the real purpose of the bar exam is public relations. The public thinks that some test of legal competence is necessary, and that the bar exam serves that purpose. Lawyers are already an unpopular group. The last thing we want is the PR disaster of the public thinking “they’ll let anyone practice law these days, you don’t even have to take a test.”
So I get it. We probably need some kind of bar exam to assuage an already hostile public. But just among us lawyers, let’s not pretend that the purpose goes much further than that.
And with that backdrop, let’s look at how bar examiners have handled the bar exam in 2020.
What is wrong with these people?
Perhaps the greatest shortcoming has been the simple failure or refusal to grasp the seriousness of the health risks of taking an in-person bar exam, combined with an inflated sense of the value of the exam. The response from the North Carolina Board of Law Examiners typifies this attitude:
For the reasons addressed above, I think this position puts too much faith in the value of the bar exam. It just isn’t grounded in the reality of how new lawyers learn to practice law.
But I will concede that this is at least a plausible position, and one the average John Q. Public probably agrees with. Reasonable people can disagree over whether temporary diploma privilege is the best way to respond to COVID-19.
The problem, though, is not so much that bar examiners have made bad decisions, it’s the way they have done it. Their attitudes have not reflected well on our profession.
Sure, I’m basing this on anecdotal evidence, but the stories I’ve seen suggest that bar examiners have reacted to the COVID-19 crisis with a disappointing combination of pettiness, arbitrariness, lack of compassion and empathy, and even outright hostility towards law school graduates preparing to enter the profession.
I’ll give you some examples.
In the hypocrisy category, let’s start with the fact that many bar examiners, while insisting that we continue with an in-person exam, have required examinees to sign COVID-19 waivers. See also the bar examiner boards that are working from home but still insist on an in-person exam.
In the procrastination category, how about waiting until the last minute to tell law school graduates studying for the bar exam that the exam has been canceled or postponed? Breaking: Florida Man cancels online bar exam three days out.
Then there’s New York. Here’s the New York Court of Appeals explaining why an online exam would not work:
“As the nation’s largest legal market . . .” I can only hear that in the voice of Thurston Howell III. Or maybe Dan Aykroyd in Trading Places, when he complains “that’s my Harvard tie!” The message seems to be that an online exam might be ok for some backwoods state, like maybe Texas, but not a civilized place like New York.
And I love the combination of arrogance and resistance to innovation. “We’re the most important legal market in the world, but using the Internet for an exam sounds way too sophisticated.” (Plus, later they changed their minds.)
In fairness, the response of the Southern states hasn’t been much better.
In the “bold thinking” category, Virginia responded to the unprecedented crisis with a radical change: waiving its necktie requirement. This was a big deal for the Virginia Board of Bar Examiners, which is not down with the whole “casual Fridays” thing:
This notice has such a high-school-principal-measuring-mini-skirts-with-a-ruler vibe, but without the actual concern for the students.
It also has the feel of the law firm managing partner announcing that, in lieu of bonuses this year, lawyers won’t be required to wear ties on Fridays. Wow, thanks.
And of course, “no further discussion of this topic will be necessary.”
Discouraging bar applicants from expressing dissent seems to be a theme. One prominent bar exam official said that complaints from examinees to her board were raising “character and fitness” issues.
What does it say about our profession that our response to future leaders of the bar who take the initiative to propose changes is to say, in effect, “hey, snitches get stitches”?
There also seems to be some generational prejudice at play. You get the feeling the bar examiners look at the bar applicants as “entitled” millennials who think law licenses should be handed out like participation trophies. “You want us to make special arrangements just because you could catch Coronavirus? What’s next, demanding free soy lattes during the breaks?” The collective response from bar examiners has had a tone of “just suck it up and deal.”
This was apparent in the “eye roll” incident. You can look it up.
Rolling your eyes at legitimate concerns from bar applicants strikes me as the wrong attitude. Same with dozing off during a Zoom conference with concerned bar applicants. And then there are the bar officials who suggested law school graduates who couldn’t take the bar exam and get jobs could just ask alumni for money. It’s like telling people who get evicted just to move into their summer homes.
But nothing captures the pettiness of the bar examiners quite like the anti-cheating precautions they have adopted for both in-person and online exams.
Before I get to some examples, let me be clear. Cheating on the bar exam would be wrong, and I don’t fault bar examiners for taking reasonable precautions against cheating.
But let’s be real about this. Cheating on the bar exam would be extremely difficult. You could make it an open-book exam, and it probably wouldn’t make a big difference. You’re not going to have enough time to look up the answer to each question, and looking up a rule isn’t going to help you apply the rule to a specific situation. Plus, there is no way you’re going to cram all the testable information on to some kind of crib sheet. It’s just not the kind of exam where you can write the answers on your hand.
Considering this reality, some of the anti-cheating rules bar examiners have adopted are downright bizarre.
Imagine you’re 38 weeks pregnant and taking the bar exam. Surely it would be reasonable to request a few additional bathroom breaks, right? Nope, the Illinois bar examiners said. You might have written the Rule Against Perpetuities on a roll of toilet paper in the bathroom.
And whatever you do, don’t fidget. Consider these rules from the Tennessee Board of Law Examiners:
Seriously? Reading notes on your hand?
And the part about not looking up, down, or to the side for more than a few seconds cracks me up. It’s like the scene in This Is Spinal Tap when Christopher Guest tells Rob Reiner not to look at one of his special guitars. “Don’t touch it. Don’t point even.”
It would be funny if wasn’t so serious for the people taking the exam.
But for sheer absurdity, nothing can top the Great Tampon Caper of 2020.
It turns out that many states, including Texas where I practice, prohibit bringing menstrual products into the bar exam. I’m not making this up.
But for me, it’s even more fundamental than that. There’s something that’s just so petty and idiotic about it. Why did someone ever think this policy was a good idea? Did they think women were going to write all of the hearsay exceptions on a tampon with a Sharpie?
I mean, what is wrong with people?
Abuse of Power
Ultimately, that’s my big takeaway from all of this. There is something wrong with people. I think the abysmal way that bar examiners have responded to concerns about the COVID-19 virus points out something dark about human nature. People just can’t be trusted with power.
Give us authority over other people, even—or maybe especially—in some small sphere of life, and we just can’t help ourselves. We want to use that power. We want to lord it over other people. We get an inflated sense of the importance of our little rules, and we bristle at any suggestion that we change them.
It’s why the property clerk in The Blues Brothers makes Jake stand behind the yellow line. It’s why the driver’s license lady—who was probably a very nice person to her friends and family—did the same thing to me.
And I think it must be part of why bar examiners have dropped the ball when it comes to dealing with the COVID-19 pandemic.
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.
These are his opinions, not the opinions of his firm or clients.
One trick I learned early in my litigation career was what the witness can say when the lawyer asks, “ok, but is it possible that ____?”
The classic answer: “Anything’s possible.”
Sure, it’s flip, but it’s effective. This answer succinctly points out the folly of the question. Getting a witness to say it’s possible that some event happened doesn’t really prove anything. In litigator lingo, it’s “no evidence” that the thing actually happened.
But is it true that anything is possible? Sometimes performance of a contract will become impossible after the parties sign it. This has become even more apparent in the COVID-19 era.
Suppose you own a hotel in the Houston area, where I practice law. You sign a contract with the Texas Knitting Association to host their annual knitting blowout. The contract calls for the hotel to provide a ballroom, three meeting rooms, and catered meals for a three-day convention. The TKA expects 500 members to attend.
But of course something goes wrong. The COVID-19 pandemic hits Texas with a wallop. Both the Governor of Texas and the Mayor of Houston issue emergency declarations.
Public health officials said a large gathering would present a “clear and present danger.”
Then, the week before the knitting convention, the Director of the Houston Public Health Authority notifies the Mayor that the risk of COVID-19 spreading at large in-person gatherings is high. He says a convention presents a “clear and present danger to the health and well-being of convention attendees, workers, local hotel and restaurant owners and Houstonians because of the surging pandemic.” The Mayor recommends that Houston hotels cancel large conventions.
So, the hotel manager emails the head of the TKA. “I’m sorry, we must cancel the convention because of the pandemic situation.”
But this hotel messed with the wrong people.
The knitters swing into action and call their aggressive Houston lawyers. The lawyers file suit asking a Houston judge to order the hotel to host the convention. They claim the breach will cause “irreparable injury” because there’s no time to find an alternate venue, and this may be the last chance some of their members ever get to attend.
Did the hotel breach the contract? Does it have a good defense to the lawsuit? Let’s break it down.
The General Rule
The general rule in Texas is that a deal’s a deal. Impossibility of performance does not excuse a breach of contract:
Where the obligation to perform is absolute, impossibility of performance occurring after the contract was made is not an excuse for nonperformance if the impossibility might have reasonably been anticipated and guarded against in the contract. This is true even though an impossibility may subsequently have occurred by virtue of an act of God or some other circumstance over which the parties had no control. Impossibility of performance is also not an excuse if it is subsequently occasioned by the act or default of the promisor or by the acts of a third party.
So there you have it. If you want to use a subsequent event as an excuse to get out of the contract, you should have put that in the contract. If performance becomes impossible, too bad so sad.
But wait, my loyal Fivers say. What if the parties did put that in the contract? What about a force majeure clause, which you deftly explained in your viral blog post Use the Force (Majeure).
I’m glad you asked.
Use the Force (Majeure Clause)
A force majeure clause is a defense to a breach of contract claim if:
1. The event at issue is one of the events specifically enumerated in the force majeure clause
OR
2. The event at issue is within the scope of the “catch-all” clause AND was not reasonably foreseeable to the parties (?)
AND
3. The event caused the breaching party’s failure to perform
AND
4. The breaching party complied with any notice requirements of the force majeure clause
I put a question mark by the “reasonably foreseeable” part because not everybody agrees. The dissent in TEC Olmos said the court should not read “reasonably foreseeable” into the contract if the plain language of the contract doesn’t say that.
Setting aside that complication, let’s apply these elements to our Houston knitting convention.
Was the event at issue expressly enumerated in the force majeure clause?
Let’s assume for our hypothetical that the force majeure clause expressly refers to “epidemics,” as follows:
But that’s not all! Let’s suppose that after the pandemic hit, the knitting association and the hotel signed an addendum containing this “supplemental” force majeure clause:
I think that gives us a pretty clear answer to element 1. Under our hypothetical, the force majeure clauses specifically refer to the very events that the hotel cited as force majeure events. We don’t even have to look at the catch-all clause under element 2.
So we go to element 3: did these events cause the hotel’s failure to perform?
The answer seems to be yes, but let’s muddy the hypothetical a little. Suppose that a week before the Mayor recommended canceling hotel conventions, he found out that the president of the knitting association made a big campaign contribution to the Mayor’s opponent. The knitters claim in their lawsuit that the mayor didn’t make his recommendation for legitimate public health reasons, but to get back at the knitters.
That might at least present a factual dispute about causation.
If these facts ring a bell, it’s probably because I’ve loosely based them on the litigation over the 2020 Texas Republican Party Convention. The force majeure clauses cited above are taken directly from the contract the Texas Republican Party signed with Houston First, the corporation that operates the massive George R. Brown Convention Center in Houston.
I got pretty excited when that case hit the headlines, because I was scheduled to co-present a continuing legal education course on force majeure issues. But the case, for all its craziness, was kind of a letdown, at least as to force majeure issues. As we’ve seen, whether the pandemic was a force majeure event was not even a close call. It was right there in both the original contract and the addendum.
The harder question was the “pretext” issue, i.e. the allegation that the Mayor caused Houston First to cancel the convention for political reasons, not because of the pandemic. In theory, that allegation could negate the causation element of the force majeure defense.
But in practice, that argument was a pretty hard sell, considering the unprecedented nature of the COVID-19 epidemic and the fact that cases were spiking right around the time of the convention. Two state district court judges and the Texas Supreme Court didn’t seem to buy it. The only judge who did was U.S. District Court Judge Lynn Hughes, who ordered the convention to proceed. But the Fifth Circuit Court of Appeals quickly stayed that order, and then sat on the case until it effectively became moot.
It seems the only lasting effect was to give thought leaders like me a fun hypothetical.
The convention contract specifically included “Pandemics affecting Houston” as a force majeure event
My takeaway for private disputes is that you can make the pretext argument if you represent the party trying to enforce performance, but you’d better have some really strong facts to support it, especially where there’s no question that an enumerated force majeure event occurred.
But that’s really just the first half of the story. Let’s suppose our contract between the hotel and the knitting association doesn’t have a force majeure clause at all. Is the hotel stuck with the obligation to perform?
Impracticability
This is where the impracticability defense comes in. Think of it as an implied, non-contractual force majeure clause.
As we saw earlier, the general rule is that impossibility of performance is no excuse. But there’s an exception. Section 261 of the Restatement (Second) of Contracts states as follows:
Where, after a contract is made, a party’s performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.
Of course, the Restatement isn’t binding on a judge. It’s basically just an attempt by legal scholars to consolidate and “restate” what a bunch of courts have said. But the Texas Supreme Court did cite Section 261 favorably in Centex Corp. v. Dalton, 840 S.W.2d 952, 954 (Tex. 1992).
But what does it mean? In typical Restatement fashion, Section 261 is dense, awkwardly worded, and contains the familiar pragmatist escape hatch “unless the language or the circumstances indicate the contrary.”
Let me see if I can put it in plain language: If a basic assumption of the contract unexpectedly becomes untrue, it wasn’t your fault, and you can’t perform your obligation as a result, then you’re excused from performing. That’s the general rule of “impracticability.”
Applying this to our hypothetical, the hotel would have a pretty strong impracticability defense. It was a basic assumption of the contract that holding a convention in the hotel would not threaten public health or run afoul of emergency orders from state and local governments. It wasn’t the hotel’s fault. And the result is that it’s impracticable for the hotel to perform.
Indeed, government action is one of the classic impracticability scenarios. Texas courts have recognized three narrow situations where the impracticability defense applies:
(1) the death or incapacity of a person necessary for performance
(2) the destruction or deterioration of a thing necessary for performance
You can remember these three things if you just think “death, destruction, and taxes.”
Even in these situations, the party trying to avoid performance must show it used reasonable efforts to surmount the alleged obstacle to performance. See id. at 69 (citing Restatement (Second) of Contracts § 261, cmt. d).
Texas courts have also recognized some typical scenarios where the impracticability defense does not apply. Those include:
Where performance has merely become “more economically burdensome than expected.” Huffines v. Swor Sand & Gravel Co., 750 S.W.2d 38, 40 (Tex. App.—Fort Worth 1988, no writ)
Where the expected source for a commodity becomes unavailable but the commodity can be obtained from another source. United Sales Co. v. Curtis Peanut Co., 302 S.W.2d 763, 766 (Tex. Civ. App.—Dallas 1957, writ ref’d n.r.e.)
Inability to obtain financing needed to perform the obligation. E. Taylor Syndicate v. James, 243 S.W. 1105, 1108-9 (Tex. Civ. App.—Amarillo 1922, writ ref’d).
Comparing the categories of events that can establish impracticability with these events that do not, you can see a theme. Just like we saw with force majeure clauses, courts applying the impracticability defense are skeptical of economic excuses for a failure to perform. The fact that performance has become more expensive is usually not going to cut it.
Unless the facts or circumstances indicate otherwise. Anything’s possible.
_____________________________________
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.
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.
I took a Professional Responsibility course in law school, but I can’t remember the grade I received. I think it was at least a B, so hey, that’s good enough for a thought leader, right?
Anyway, major changes to the ethics rules that govern Texas lawyer advertising—including the use of social media—may be coming soon. The proposed changes would modernize and improve the advertising rules. If the changes are enacted, Texas law firms will be allowed to use trade names, and Texas lawyers will be able to use social media more freely without fear of stepping on ethical landmines.
The proposed changes would amend Part VII of the Texas Disciplinary Rules of Professional Conduct, which contains Rules 7.01-7.07 governing lawyer advertising and solicitation. These rules are, frankly, kind of a mess. They were obviously written to regulate plaintiff’s personal injury lawyers, and they are awkward to apply to other practice areas.
For example, how is a defense lawyer or a transactional lawyer supposed to comply with the requirement that when stating results obtained, “the amount involved was actually received by the client”? See Rule 7.02(a)(2)(ii). This is just one example. And these were problems before social media.
Applying these rules to social media is even more awkward. I’ve written about this problem before. See Five Rules Texas Lawyers and Other Professionals Must Follow When Using Social Media. As I explained, the good news was that the Texas State Bar Advertising Review Committee helped by issuing Interpretive Comments that clarified application of the rules to social media.
The bad news was that the Interpretive Comments still left open the possibility that (a) all the Texas lawyers who have LinkedIn profiles they haven’t filed with the State Bar are technically violating the requirement to file all lawyer advertising, and (b) every time a Texas lawyer posts something on social media, it could be an “advertisement in the public media” that is supposed to be filed.
For these reasons, when the Committee on Disciplinary Rules and Referenda circulated proposed changes to the advertising rules earlier this year, I recommended some changes to clarify these issues. See Influential Blogger Recommends Tweaking New Texas Ethics Rules.
To their credit—and to my pleasant surprise—the Committee members took the time to review my detailed memo, expressed appreciation, and listened attentively to my comments at the public hearing. They even invited me to share additional comments at a subsequent meeting and made further changes to the proposed rules to address some of the issues I raised. That was pretty cool.
As a result, the proposed rules include an exemption from the filing requirement for social media posts that are primarily “informational” or “educational,” as well as an exemption that would cover most lawyer social media profiles.
These are significant improvements that will encourage use of social media by Texas lawyers, while continuing the general prohibition of false or misleading lawyer advertising.
Want to see the details? Check out the submission packet for the proposed changes, including a redlined version of the rules. The packet even includes my memo and a transcript of my public comments. For the 15 changes that seem most important to me, read on.
Proposed Structural Changes
I call the first five changes structural in nature. These are the kind of changes that lawyer ethics nerds will love.
#1: One general “false and misleading” rule would replace the previous “per se” rules
This first one requires a little explanation, so bear with me.
The prohibition of false or misleading statements has been moved from Rule 7.02 to Rule 7.01, but the definition of “false or misleading” is the same:
The new part is an expanded definition of a “misleading” statement:
The key terms here are “substantial likelihood,” “reasonable person,” and “unjustified expectations.” This is more specific than the previous prohibition, which has been deleted:
The idea is to prohibit statements that, while literally true, would cause a reasonable person to expect too much. The classic example would be something like “we got a $5 million verdict for a trucking accident victim, and we can do the same for you!”
This is a good clarification, but I don’t view this as a material change.
The bigger change is that the rules now rely on the general prohibition of false and misleading statements, without also enumerating specific types of false and misleading statements.
Previously, the rules identified certain statements that were false and misleading per se, particularly as to past results. Now the per se rule about past results would be deleted:
This is a welcome change. This awkward rule created ambiguity because there are so many situations where it just doesn’t apply. The Advertising Review Committee had to clarify with Interpretive Comment 26, which essentially said just comply with the parts of the rule that apply to your situation:
With the deletion of the previous per se rule about results obtained, this interpretive comment would no longer be necessary. The only downside is that I would no longer get to gripe about this rule when I present this topic at CLE seminars.
#2: The rules would now have a definition of “advertisement,” with the key language “offers or promotes legal services”
The new Rule 7.01 “governs all communications about a lawyer’s services, including advertisements and solicitation communications.” Believe it or not, the old rules did not define an “advertisement” in the public media, but the new Rule 7.01 would:
The definition has three key elements:
(1) “substantially motivated by pecuniary gain”
(2) made to “members of the public in general”
(3) “offers or promotes legal services”
In my memo to the Committee, I quibbled with the “pecuniary gain” element because it’s subjective. Plus, isn’t most of what lawyers post on social media motivated by “pecuniary gain” to some degree? But it’s probably not a big deal. The “substantially motivated” language should be sufficient to keep this from being a problem.
The two other elements are really the key. To trigger the advertising requirements, it has to be a communication to the public, so a private post viewable only by your 50 Facebook friends is probably not advertising. And it has to offer or promote legal services. So a tweet that says “I’m working this weekend on a brief for a client” won’t be considered an advertisement.
Why does this matter? For one thing, the rules generally require advertisements to be filed with the Advertising Review Committee. More about that later.
#3: The rules would now have a definition of “solicitation,” which includes “offering to provide legal services”
The proposed rules also have a new definition of a “solicitation communication”:
This definition has three elements, which correspond to the three elements in the definition of advertisement we looked at earlier:
(1) “substantially motivated by pecuniary gain”
(2) made to a “specific person who has not sought the lawyer’s advice or services”
(3) “offering to provide legal services . . . in a particular matter”
Thus, the difference between an advertisement and a solicitation communication is that a solicitation communication is to a specific person about a particular matter. This can be important because there are specific rules about solicitation in Rule 7.03, including a prohibition on solicitation through social media (with some exceptions).
#4: The rules would now expressly refer to social media
Speaking of social media, the proposed rules would include “social media” in the communications regulated by the rule on solicitation:
Nobody thinks the existing rules don’t apply to social media, but expressly acknowledging social media in the advertising rules is a welcome update. I only wonder if, 20 years from now, the phrase “social media” will be out of date and people will cringe when they read it.
#5: There would be no separate rule for law firm websites
The current rules have a special provision just for law firm websites in Rule 7.07(c). That provision is old enough that it had to include a definition of “website.” The upshot of that rule is that law firms can file the homepage but not worry about filing changes to the rest of the website.
The new rules would have the same effect, but they would do it by adding a filing exemption for portions of the website other than the homepage. (I address this exemption below.)
Those are the major structural changes I see in the proposed new rules. The next five changes are new exemptions to the filing requirement. These exemptions would have more of a practical impact.
Proposed Exemptions from the Filing Requirement
Unless an exception or exemption applies, Texas lawyers must file advertisements and solicitation communications with the Advertising Review Committee, which requires filling out a form and paying a fee. This general requirement will not change.
This filing requirement creates a problem for lawyers who use social media for professional networking and business development. Most Texas lawyers do not file their social media profiles (such as LinkedIn), and they don’t want to have to think about filing every time they post something on social media that might be considered an advertisement.
The good news is that the new exemptions would clarify that in most cases Texas lawyers do not need to file their social media profiles or posts as advertising.
#6: The new rules would have an exemption for content published for informational, educational, political, artistic, or entertainment purposes
In my comments to the Committee, I suggested adding an express safe harbor for communications of an “educational or informational” nature. This would track the current guidance from the Advertising Review Committee in Interpretive Comment 17, which says the filing requirement does not apply to “[b]logs or status updates considered to be educational or informational in nature.”
The revised proposal expands the exemption:
This would be a significant improvement that would provide needed clarity to Texas lawyers who are active on social media. It would allow attorneys to post freely on social media for informational, educational, political, artistic, or entertainment purposes. As long as such posts do not “expressly offer legal services,” they would not have to be filed as advertising.
#7: The new rules would have an exemption for “the type of information commonly found on the professional resumes of lawyers”
Initially, the draft rule revisions included a filing exemption for “a communication on a professional social media website to the extent that it contains only resume-type information.”
In my comments to the Committee, I suggested tweaking this social media exemption to make it clear that the typical lawyer profile on LinkedIn would be exempt.
The proposed language is now a little broader. The exemption would cover a social media profile that does not expressly offer legal services and that:
This exemption would probably cover the typical lawyer profile on LinkedIn, as long as it does not “expressly offer legal services.”
My only hesitation is that one might question whether Endorsements and Recommendations, a staple of LinkedIn profiles, are commonly found on professional resumes of lawyers. But if this exemption is enacted, I think it would be a fairly safe bet to assume your LinkedIn profile does not have to be filed, at least until the State Bar says otherwise.
#8: Most of a law firm website would be exempt from the filing requirement
As noted earlier, the current rules have a special rule specifically for law firm websites, in Rule 7.07(c). That rule would be eliminated, but there would be a specific filing exemption for law firm websites:
In other words, the homepage of a law firm website must be filed, unless all of the information on the homepage is covered by other exemptions. The rest of a law firm website would not need to be filed.
The effect is similar to the current rules, except in some cases firms wouldn’t even have to file the homepage.
#9: The newsletter exemption would be expanded
Existing Rule 7.07(e), newsletters sent to existing or former clients, other lawyers or professionals, and certain members of nonprofit organizations are exempt. The proposed rule would slightly expand this exemption to cover:
Thus, a newsletter sent to a business person who is experienced in using the type of legal services the lawyer offers would be exempt, as would a newsletter sent to anyone who asked to receive it.
#10: Certain basic types of information about a lawyer or law firm would continue to be exempt
The proposed Rule 7.05(i) would carry forward most of the exemptions for certain basic information about a lawyer or law firm now found in Rule 7.07(e), such as names, contact information, court admissions, educational background, licenses, foreign language abilities, and board specializations.
Proposed Rule 7.05(i) would not include the previous exemption for “the particular areas of law in which the lawyer or firm specializes or possesses special competence,” but in most cases that information would be covered by the “professional resume” exemption addressed above.
Things Texas Lawyers Would Now Be Allowed To Do
#11: Use a trade name (if not false or misleading)
This is the big one. Rule 7.01(c) would expressly provide that “[l]awyers may practice under a trade name that is not false or misleading.” Law firm names would no longer be limited the name or names of current or past partners.
I don’t really have a dog in the trade name fight, so I’ll leave it to others to debate this one. I’ll just be curious to see how far creative firms push this. Will we see a firm called Badass Trial Lawyers of Abilene? Trademarks R Us? The Lollipop Firm?
Keep in mind, the only limit is that it can’t be false or misleading. Nothing in the proposed rule requires good taste.
#12: Say you “specialize” (instead of “focus,” “concentrate,” etc.)
Under the current rules, only lawyers certified by the Texas Board of Legal Specialization can say they “specialize” or call themselves “specialists” in a certain type of practice.
Of course, almost every lawyer today specializes in one or more specific areas of law practice, whether board certified or not. And there are many specialties—hmm, non-compete and trade secret litigation comes to mind—that have no board certification.
This is not a big problem, because those lawyers can simply say they “focus” or “concentrate” on their type of practice, rather than “specialize.” But this really puts form over substance.
The proposed changes would end this silliness. Rule 7.02(b) would allow lawyers to say they practice in particular fields of law:
The part about “particular fields of law” does not use the word “specialize,” but the proposed comments to Rule 7.02 make it clear that lawyers would be allowed to say they specialize:
There are limits, of course. As the proposed comment notes, the statement about specialization must not be false or misleading. And as the rest of Rule 7.02(b) provides, there are limits on stating you’re a member of an organization with a name that implies its member possess special competence.
But generally, it will now be ok to say you specialize in a particular type of practice, as long as that’s true.
#13: Promote past successes and results obtained without specific conditions
As noted above, the current Rule 7.02(a) imposing specific conditions on statements about past successes would be deleted. So, for example, there would no longer be a requirement that the lawyer was lead counsel.
But again, to comply with Rule 7.01, the statement can’t be false or misleading, or create unjustified expectations. And the proposed comment to Rule 7.01 says the lawyer who cites a past result must have “played a substantial role in obtaining that result.”
#14 Compare yourself to other lawyers (if not false or misleading)
Current Rule 7.02(a)(4) prohibits comparisons to other lawyers that are not based on objective, verifiable data. In other words, you can’t compare yourself other lawyers based just on opinion. At least that’s the rule. I’m not sure it is followed.
But this rule would be deleted:
This is one case where I like the current rule. Do we really need lawyers expressing opinions comparing themselves with other lawyers? I admit I’m a little old-fashioned on this issue.
On the other hand, deleting this prohibition wouldn’t mean that anything goes. Under the new Rule 7.01, Texas lawyers still wouldn’t be allowed to make comparisons to other lawyers that are unsubstantiated.
The proposed comment to Rule 7.01 makes this clear:
So, assertions like “we’re the best lawyers in town,” or “we can get you a recovery when others can’t” are probably still off limits.
#15: Solicit business from personal or professional contacts
In addition to expanding the filing exemptions for advertisements, the proposed changes would simplify and slightly expand the filing exemptions for solicitation exemptions.
The current solicitation exemptions in Rule 7.05(f) would be deleted:
These exemptions would be replaced by the following solicitation exemptions in the new Rule 7.05:
While the “pecuniary gain” exemption would be deleted, it would effectively remain in place because the new definition of “solicitation communication” in Rule 7.01(b) would include the element of “substantially motivated by pecuniary gain.”
The new exemptions for other lawyers and experienced business users will be especially advantageous for business lawyers who seek to develop business through contact with other lawyers and potential business clients.
Bonus Change: Hammer Don’t Hurt ‘Em
I said the top 15 changes, but here’s a bonus. The proposed changes include a rule that would prohibit telling potential clients you can get results through violence:
Apparently we needed to clarify that lawyers can’t do this. Only in Texas.
My Grade for the Proposed Changes
The Committee on Disciplinary Rules and Referenda has done good work to update and modernize the rules governing Texas lawyer advertising for the social media era. It will be impossible for the changes to please everyone, but the proposed new rules would be a significant improvement in clarity over the old rules.
The new rules would rely heavily on the command to avoid false or misleading statements. That may be a “fuzzy” command that reasonable lawyers can disagree on in any particular case, but at least the command is intuitive and easy to understand.
The proposed rules would also have the benefit of making it easier for Texas lawyers to share information freely on social media without fear of violating the advertising rules. This is a development Texas lawyers should welcome. I give the Committee an A.
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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.
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.
Does misappropriation of trade secrets create a presumption of irreparable injury in Texas?
This is one of my best blog posts to come down the pike. It’s going to cement my blog’s status as one of the best sources for new developments in Texas trade secrets law. But maybe I’m being too presumptuous.
I’m guessing my Fivers don’t obsess over every new Texas trade secrets case like I do. So you may not realize the Texas Supreme Court made a big change to Texas trade secrets law on Juneteenth 2020.
The opinion, Pike v. Texas EMC Management, LLC, __ S.W.3d __, 2020 WL 3405812 (Tex. June 19, 2020), sparked a huge debate on law Twitter. One camp says that when Justice Brett Busby writes an opinion pouring out a multi-million-dollar jury verdict, it’s a “Buzz-burn.” The other faction says it’s a “Buzz-kill.”
But the change I’m talking about may have flown under the radar. Justice Busby’s opinion covered a lot of legal ground. So you may not have noticed that Pike overruled a line of Texas cases that say irreparable injury is presumed when a defendant misappropriates trade secrets.
At least I think it did.
Let’s drill down into the Pike case to understand why, and then I’ll explain why it’s important.
The secret sauce in Pike was a new kind of cement developed by EMC Cement. Pike was the President. When concrete cratered, a new company called VHSC bought the EMC Cement plant at a foreclosure sale and hired President Pike. See id. at *1-3.
The jury found that VHSC and Pike misappropriated EMC Cement’s trade secrets, and the trial court entered a judgment for millions in damages, including $1.5 million for misappropriation of trade secrets. Id. at *4. The Texas Supreme Court reversed the damage award on the kind of procedural and evidentiary grounds only an appellate lawyer could love. See id. at *12-13.
EMC Cement had also asked for a permanent injunction to stop VHSC and Pike from continuing to use the trade secrets. The trial court denied that request. Id. at *22.
But if the jury found that the defendants misappropriated the trade secrets, why didn’t that finding entitle EMC Cement to a permanent injunction against future use of its trade secrets?
The Court of Appeals presumed imminent and irreparable injury
That’s what the Waco Court of Appeals wanted to know. The Court of Appeals first said that the misappropriation of trade secrets established a presumption of imminent harm. Pike v. Texas EMC Mgm’t, LLC, 579 S.W.3d 390, 427 (Tex. App.—Waco 2017). Pike and VHSC “were in possession of EMC Cement’s trade-secret information and were in a position to use it,” the court said, so “imminent harm is presumed.” Id.
But imminent harm is not the same as irreparable harm, as I explained in Injunction Junction, What’s Your Function? Imminent means something is about to happen. Irreparable means you can’t compensate for that thing with damages. Those are two different things.
It’s easy to see why misappropriation of trade secrets would establish a presumption of imminent harm. If the defendant takes the plaintiff’s trade secrets and is in a position to use them, it’s not a big stretch to say harm is about to happen.
But irreparable? I don’t see how possession of the plaintiff’s trade secrets by a defendant in a position to use them proves that damages would be inadequate to compensate for the use of the trade secrets. That’s a non sequitur. I suspect this notion started with courts confusing imminent and irreparable. Plus, courts may have been looking for an easy rationale for affirming injunctions, even where there was really no evidence of irreparable injury.
However it came about, there is a line of Texas cases suggesting a presumption of irreparable injury arises when a defendant is in a position to misuse the plaintiff’s confidential information or trade secrets, and the Court of Appeals in Pike cited some of those cases. Id. at 428.
For example, in Williams v. Compressor Engineering Corp., 704 S.W.2d 469, 470 (Tex. App.—Houston [14th Dist.] 1986, writ ref’d n.r.e.), the court said a finding of irreparable injury is unnecessary where a former employee is working for a direct competitor.
In IAC, Ltd. v. Bell Helicopter Textron, Inc., 160 S.W.3d 191, 200 (Tex. App.—Fort Worth 2005, no pet.), the court said that “[w]hen a defendant possesses trade secrets and is in a position to use them, harm to the trade secret owner may be presumed,” and “[t]he threatened disclosure of trade secrets constitutes irreparable injury as a matter of law.”
The Pike case went all the way to the peak of Texas courts
Based on the case law, the Court of Appeals held that the plaintiffs satisfied both the imminent harm and irreparable injury requirements, and it was therefore an abuse of discretion for the trial court to deny a permanent injunction. Pike, 579 S.W.3d at 428.
In other words, the Court of Appeals said the misappropriation of trade secrets established a presumption of irreparable injury, supporting an injunction. But what does that really mean?
What’s a “presumption” anyway?
Let’s camp out for a second on “presumption.” What does that really mean? There are two kinds of presumptions in the law. A conclusive presumption is a legal conclusion that arises from certain facts and cannot be disputed. A rebuttable presumption is a legal conclusion that arises from certain facts, but that conclusion can be rebutted with other facts. When the law just says “presumption,” that usually means a rebuttable presumption.
So rebuttable presumptions are more common, and they essentially shift the burden of proof. Once a party offers evidence sufficient to create the presumption, the other party can rebut the presumption by offering some evidence—it doesn’t have to be a lot—that the presumption is wrong. At that point the presumption disappears. Poof! Then it’s up to the fact-finder to weigh the evidence and decide who is right.
So, for example, let’s say the cases cited by the Court of Appeals in Pike are correct that threatened misappropriation of trade secrets creates a presumption of irreparable injury. That means the burden then shifts to the defendant to offer evidence that the misappropriation will not cause irreparable injury. The defendant can rebut the presumption by offering evidence that the alleged harm can be adequately compensated by damages. Then the presumption should disappear.
That sounds pretty easy, right? You might even wonder why the presumption is such a big deal if it is so easily dispelled.
I’ll come back to that.
The question here is whether the Court of Appeals was right that the jury finding of misappropriation of trade secrets created a presumption of irreparable injury, which would entitle the plaintiffs to an injunction.
The Texas Supreme Court’s reasoning on irreparable injury
The Texas Supreme Court said no, the trial court was right and the Court of Appeals was wrong. Despite the jury’s finding of misappropriation of trade secrets, EMC Cement failed to show irreparable injury.
How can this be? What about the presumption?
Let’s remember what irreparable injury means: harm that cannot be adequately compensated by damages. As the Pike court recited:
“If there is a legal remedy (normally monetary damages), then a party cannot get an injunction too.” Pike, 2020 WL 3405812 at *24 (citing Schneider Nat’l Carriers, Inc. v. Bates, 147 S.W.3d 264, 284 (Tex. 2004)).
“[A] plaintiff can prove there is no adequate remedy at law where damages cannot be calculated.” Id. (citing Dresser-Rand Co. v. Virtual Automation Inc., 361 F.3d 831, 848 (5th Cir. 2004)).
“For purposes of injunctive relief, an adequate remedy at law exists when the situation sought to be enjoined is capable of being remedied by legally measurable damages.” Id. at *24 n. 38 (citing Dresser-Rand, 361 F.3d at 848).
So the question in Pike became whether damages for the future use of the trade secrets could be calculated in some legally measurable way. The Texas Supreme Court found that damages could be measured—and therefore there was no irreparable injury—where three factors were present:
(1) the plaintiffs themselves sought actual damages for misappropriation of the trade secrets,
(2) the plaintiffs presented expert testimony at trial that attempted to quantify the damages for the misappropriation of the trade secrets, and
(3) the damage calculation presented by the plaintiffs included damages attributable to future use of the trade secrets (not just past use).
See id. at *23.
In short, where the plaintiffs sought damages and presented expert testimony of damages partly attributable to future harm, the trial court did not abuse its discretion when it denied the plaintiffs a permanent injunction on the ground that they had an adequate remedy at law. Id. at *24.
You might be thinking this is no big deal for the plaintiffs in Pike because, hey, they still got to recover millions in damages, right? Well, no. Remember, the court poured out the trade secrets damage award.
But the fact that the plaintiffs failed to present sufficient expert testimony to support the damage award did not change the court’s conclusion that damages would have been adequate. “The failures of the EMC plaintiffs’ experts to take the necessary steps to connect their opinions to supporting data do not establish that no damages could be calculated.” Id.
Ouch. That does burn a little.
Pike teaches us that the plaintiff won’t be entitled to a trade secrets injunction where (1) the plaintiff seeks actual damages for trade secrets misappropriation, (2) the damages could be properly quantified, (3) the plaintiff presents expert testimony that tries to quantify future damages in some way, and (4) the trial court decides not to grant an injunction.
This tells us that just because there is misappropriation of trade secrets doesn’t mean there is irreparable injury. But it leaves many questions unanswered.
Questions left unanswered by Pike
First, don’t sleep on the standard of review. Technically, the holding in Pike was not that the trial court’s denial of an injunction was the right decision, but only that the trial court’s denial of an injunction was not an “abuse of discretion.” In theory, if the trial court judge had decided to grant an injunction, the court could have found that decision was also not an abuse of discretion (and I suspect that’s what would have happened).
But still, the standard of review is not the whole story. What happened to the presumption of irreparable injury? The Texas Supreme Court didn’t say it was overruling the cases that say misappropriation of trade secrets creates a presumption of irreparable injury. But it did say there was no irreparable injury, even where the jury found misappropriation of trade secrets. So how could the presumption still apply?
There are two ways to look at this. One is that Pike overruled the “presumption” line of cases sub silentio. “Sub silentio” is a Latin phrase that means “like a thief in the night.” You could interpret Pike as rejecting the presumption of irreparable injury without expressly saying so.
But another way to look at it is that, even assuming the evidence of misappropriation created a presumption of irreparable injury, there was other evidence that rebutted the presumption. Namely, the evidence that damages could be calculated. This is probably the better interpretation.
It’s really not my place to tell you how to interpret Pike
The rest of the questions raised by Pike arise from the old trick of removing just one of the factors present in the case and asking if the result would change.
Let’s say the plaintiff presents expert testimony limited to past damages, without taking into account any future damages. Or let’s say the plaintiff doesn’t present any expert testimony whatsoever on damages. Would these differences change the result?
You could argue it shouldn’t make any difference. The question is not whether the plaintiff asked for damages or proved damages, but whether the plaintiff could have sought damages for the alleged misappropriation and reasonably quantified them.
So I think it comes down to whether anyone offers evidence that damages could or could not be calculated. And that leads to my practice tips.
Practice tips suggested by the Pike decision
Considering the importance of the irreparable injury requirement, you’d think lawyers on both sides of trade secrets injunction fights would routinely offer evidence to show that damages would or would not be adequate to compensate the plaintiff. But in practice, lawyers rarely do this, especially at the temporary injunction stage.
Why is that?
I think it’s mainly because the lawyers are focused on other issues. Litigators in these situations instinctively focus on whether the defendant did something wrong. Whether the resulting injury is “irreparable” is usually an afterthought.
And there is good reason for this instinct. In practice, trial court judges usually decide temporary injunctions based on how wrongful they think the defendant’s conduct was. See Does a Breach of a Texas Non-Compete Cause “Irreparable Injury”? The judges don’t always think that hard about whether the threatened harm is irreparable.
And the trial court judges really don’t need to worry too much about it. A decision on a temporary injunction almost always holds up on appeal, because the Court of Appeals applies an “abuse of discretion” standard.
That’s not the only reason lawyers and judges don’t focus on irreparable injury. Even when they address the common-law requirements for an injunction, they tend to focus on whether the injury is imminent. But as I said, imminent and irreparable are two different things. Imminent means something is about to happen if the judge doesn’t stop it. That has nothing to do with whether damages would be adequate to compensate for the harm that is about to happen.
In many cases, you can get by focusing on whether the harm is imminent, but if you really want to bring your “A game” to a temporary injunction fight, you should actually offer evidence concerning the irreparable injury element. This isn’t my first temporary injunction rodeo, so I have some ideas on this, some of which I previously shared in Temporary Injunction Rulings in Texas Non-Compete Cases.
If you represent the plaintiff who is trying to get a temporary injunction in a trade secrets case, you want somebody to testify that it would be difficult to calculate the damages that would result from the defendant’s use of the trade secrets. Even better, you want that person to give specific reasons why calculating damages would be difficult.
Conversely, if you represent the defendant in a trade secrets injunction hearing, you want to offer evidence that the plaintiff could calculate the damages resulting from the use of the alleged trade secrets. This can be counter-intuitive, especially to your client. So you’ll want to explain in advance why it sounds like you’re offering evidence to prove damages for the plaintiff.
But what kind of evidence? One great way to get this evidence is on cross-examination of the plaintiff or plaintiff’s representative. “So Mr. CEO, it says in this Petition your company is claiming trade secrets damages in this case, correct?” Yes, the CEO will have to say. “But there’s no way you could calculate those damages with any reasonable certainty, is there?” You get the idea.
At the least, you can prepare your client to testify that “the plaintiff could calculate the damages that would result from my use of the alleged trade secrets.” That’s better than nothing. But that sounds a little conclusory, so it’s even better if your client can testify specifically about how damages could be calculated. If this makes you nervous, you can preface it by saying “we’re not agreeing to any claim for damages made by the plaintiff.”
But if you really want to show that damages would be adequate, consider expert testimony. You usually don’t have much time to prepare for a temporary injunction, but you probably have enough time to find and hire a qualified damages expert. The expert doesn’t have to do a whole damages calculation.
All you really need is for the expert to review the plaintiff’s pleadings, and maybe the depositions (if there are any), and then to testify that a qualified expert could calculate the amount of damages that would result from the use of the trade secrets alleged by the plaintiff. “I have calculated damages in dozens of cases like this one,” your damages expert can probably say. “It’s not necessarily easy, but it can be done with reasonable certainty, and it could be done in this case.”
Boom. You just rebutted any presumption of irreparable injury.
Now that’s a Buzz-burn.
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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.
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.
