Ethical Issues in Departing Employee Litigation

Ethical Issues in Departing Employee Litigation

If you’re a lawyer who handles departing employee litigation—including non-compete and trade secrets issues—you may sometimes find yourself tip-toeing around some ethical landmines. To avoid stepping on a landmine, first you have to know where they are. 

Let’s use a hypothetical to find them.

Paula Payne Windows sells—you guessed it—windows to builders. Dawn Davis quits her job as a legal assistant, goes to work for Paula Payne, and within a few years becomes Paula Payne’s top sales person. Paula, the owner, promotes Dawn to President and asks her to run the company.

But Paula just can’t help herself. She keeps butting in and interfering with Dawn. The sales people don’t know whether to take orders from Dawn or Paula.

Dawn gets frustrated and decides to start her own window business. She’ll call it Real Cheap Windows, she decides, and she’ll take Paula Payne’s best customers and employees with her.

Dawn has access to all the sales records, so she can easily offer to undercut Paula Payne’s prices as an extra enticement to the customers. Plus, she knows how much all the employees are making, so she can offer them a little more to jump ship to the new company. Shortly before announcing her resignation, she looks into creating her own LLC and saves 60 days’ worth of sales reports to a USB drive she takes home with her.

So far this is a fairly typical departing employee scenario. Now let’s see what ethical issues it can raise for lawyers.

1. Conflict of Interest and Communications Seeking Representation

Suppose you represent Paula Payne. You worked closely with Dawn Davis last year when a sales person got fired and made an employment discrimination claim.

Dawn has learned to value your opinion, so one day she calls you up and says she has a question. “Suppose I left Paula Payne Windows and started my own company,” she says, “and let’s say I don’t sell to any of Paula Payne’s existing customers, would that violate my non-compete?”

Hopefully you are already thinking wait, I have a duty not to represent a client in a matter adverse to my current client, Paula Payne Windows. In Texas, where I practice, this duty is found in Rule 1.06(b) of the Texas Disciplinary Rules of Professional Conduct.

So what should you do?

A. Give Dawn your honest opinion but caution her to “keep in mind, my client is Paula Payne Windows, not you individually.”

B. Tell Dawn “sorry, Dawn, I would love to help you with this, but Paula Payne Windows is my client, so I just can’t give you advice on this,” and leave it at that.

C. Tell Dawn the same thing in B, and then call Paula Payne to tell her what Dawn asked.

It is a good idea to make sure Dawn understands you don’t represent her. See Parker v. Carnahan, 772 S.W.2d 151, 157 (Tex. App.—Texarkana 1989, writ denied) (“an attorney can be held negligent where he fails to advise a party that he is not representing them on a case where the circumstances lead the party to believe that the attorney is representing him”).

But A is still problematic. Even if you make clear to Dawn that you don’t represent her, giving her your opinion about her non-compete may violate the duties of loyalty and confidentiality you owe to Paula Payne Windows. See Rule 1.05.

B is probably a safer answer than A. Just politely tell Dawn you can’t advise her on this issue and explain why.

But then what do you do? If you don’t tell Paula Payne Windows about the conversation, are you violating a duty of disclosure to Paula Payne Windows? If you do tell Paula Payne Windows, are you violating any duty to Dawn Davis?

Let’s change up the hypothetical. Suppose Dawn doesn’t call you, but one morning you see an email from one of your partners in the law firm with the subject line “Confidential Conflict Check.” The email simply says, “Any conflict with representing Dawn Davis in the formation of an LLC?”

Hmm. Why would Dawn be forming an LLC? You should probably let Paula Payne know about this.

But keep in mind that the attorney-client privilege can extend to communications made in seeking legal representation. See Tex. R. Evid. 503(a)(1)(B) (“client” includes person who “consults a lawyer with a view to obtaining professional legal services from the lawyer”). So you may have a duty to keep that confidential conflict check confidential, even if that means not revealing it to your own client.

2. Lawyer as Witness

One crisp fall morning you’re pulling out of the Starbucks drive through with your Pumpkin Spice Latte (I won’t judge), and you get a call on your cell phone. “Hey, Paula,” you answer “how are you?”

“I’m sorry to bother you like this,” Paula says, “but I need you to get over to our office right away.”

“What’s going on?”

“I need to fire somebody, and I need you here to see it.”

“Wow, ok, does Dawn know about this?”

“Dawn’s the one I’m firing. I just found out she formed her own company a month ago, and she’s been sending some of our best customers there. I’m meeting with her in an hour.”

You attend the meeting, where Dawn admits that she sent some of Paula Payne’s customers to her new company, but claims Paula Payne was too pricey for those customers. “They weren’t going to give Paula Payne that business anyway,” she says. “I’m sorry, Dawn,” you say, “but we’re going to have to let you go.”

The next day, Paula Payne asks you to file a lawsuit against Dawn Davis. What should you do?

A. Accept the representation and file the lawsuit

B. Tell Paula Payne you can file the lawsuit but can’t be the lead lawyer in the courtroom because you may be a material witness.

C. Tell Paula Payne it would be better to have one of your partners represent the company, because you may be a material witness.

D. Tell Paula Payne it would be better to send the matter to Zach Wolfe, Thought Leader, because you may be a material witness.

Obviously, the best answer is D.

Kidding. I’m just kidding.

But you can see the issue. You’re a witness to Dawn’s admission that she diverted customers to her new company. Perhaps not an essential witness, because Paula Payne can testify to the same thing, but at a minimum your testimony might be needed to corroborate Paula.

This implicates the lawyer-as-witness rule. See Rule 3.08. The bottom line is that you may not be able to act as the courtroom advocate for Paula Payne Windows if you’re also going to be a witness on a key potential fact dispute.

3. Duty of Candor

One of my favorite plot devices is that Superman is not capable of lying. You start with that premise and the story practically writes itself.

But did you know that lawyers are also not allowed to lie?

I know, it sounds like the setup for a bad punchline, but it’s true.

Rule 4.01 of the Texas Disciplinary Rules of Professional Conduct says that “[i]n the course of representing a client a lawyer shall not knowingly . . . make a false statement of material fact . . .”

A lawyer shall not knowingly make a false statement of material fact. Think about that. How many times do you think the typical lawyer knowingly makes a false statement of material fact to opposing counsel in a lawsuit?  

It’s probably not as many as you think, but still, it seems like lawyers ignore this rule more than they should. There’s no exception in the rule for “negotiations with opposing counsel.”  

Or is there? Comment 1 says that “under generally accepted convention in negotiation, a party’s supposed intentions as to an acceptable settlement of a claim may be viewed merely as negotiating positions rather than as accurate representation of material fact.”

But still, the general rule is that a lawyer can’t make a false statement of material fact.

Now let’s apply that.

Suppose Paula Payne Windows sues Dawn Davis for misappropriation of trade secrets, and Dawn hires you to defend her. Dawn confidentially tells you that she has the USB drive with 60 days of sales reports on it. 

Paula Payne’s counsel schedules a temporary injunction hearing. You call her to see if there’s a way to avoid the hearing. “Dawn doesn’t have any confidential documents from your client,” you say, “not a single one.”

Have you violated Rule 4.01?

A. No, because Dawn’s statement to you that she had confidential documents was attorney-client privileged.

B. Yes, because you knowingly made a false statement of material fact.

C. No, because whether the documents are confidential or not is a matter of opinion.

A strikes me as not quite right. It’s true that you shouldn’t reveal confidential attorney-client information to Paula Payne’s lawyer. But that doesn’t give you a license to make a false statement of material fact.

Of course, reconciling the duty of confidentiality and the duty of candor can get messy. Let’s say opposing counsel asks you point blank, “did Dawn take any Paula Payne documents with her?” If you say “I’m sorry, I’m not at liberty to say,” then you might as well say yes. Does that mean it would be ethical to lie and say no?

Perhaps answer C provides a way out of this dilemma. If there’s a reasonable basis to take the position that the sales reports don’t contain confidential information, then it’s not necessarily a false statement of material fact to say that Dawn doesn’t have any confidential Paula Payne documents.

But I think that approach only works if you have a good-faith basis for saying the documents are not confidential. Which leads me to the next issue.

4. Meritorious Claims and Contentions

A lawyer cannot take a position in a lawsuit without a reasonable good-faith basis. In Texas, Rule 3.01 provides: “A lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, unless the lawyer reasonably believes that there is a basis for doing so that is not frivolous.”

The term “frivolous” gets thrown around a lot, so let’s look at how the comments to the rule define it.

For starters, comment 2 says a contention is frivolous “if it contains knowingly false statements of fact.” That’s pretty obvious. But the motive behind the contention also matters. An assertion is also frivolous if it is made “primarily for the purpose of harassing or maliciously injuring a person.”

“It is not frivolous, however,” comment 3 says, “merely because the facts have not been first substantiated fully or because the lawyer expects to develop vital evidence only by discovery.”

Comment 3 goes on: “Neither is it frivolous even though the lawyer believes that the client’s position ultimately may not prevail.”

I think we can synthesize these principles in the overarching principle that a lawyer must have a good-faith and reasonable basis for making a contention in a lawsuit. Good faith means the motive is not merely to harass. Reasonable means the lawyer expects the evidence may support it.

Now let’s apply that to the lawyer for Paula Payne Windows. Suppose Dawn Davis has no non-compete. Suppose she didn’t start competing until after she left. In that case, Paula Payne’s best bet is to sue for misappropriation of trade secrets.

But what if Paula Payne doesn’t know whether Dawn Davis took any documents and has no evidence that Dawn used any confidential information or trade secrets? As a lawyer, can you ethically file a lawsuit against Dawn Davis asserting that she misappropriated Paula Payne’s trade secrets?

A. No, because you don’t have evidence to support the elements of the cause of action.

B. Yes, but only if you plead misappropriation of trade secrets “on information and belief.”

C. Yes, if your purpose is not merely to harass Dawn, and if you reasonably believe you will discovery evidence supporting the claim.

I think some judges want the answer to be A, especially in federal court, but that is not current law. Generally, you are not required to have evidence to support every element of every cause of action when you file a lawsuit. That is what discovery is for. And the comments to Rule 3.01 make this clear.

Some lawyers will instinctively gravitate to B. It’s a common practice for lawyers to say “on information and belief” when pleading an allegation that does not yet have evidence to support it.

I’ve never really understood this. There’s no “on information and belief” exception in Rule 3.01, the Texas Rules of Civil Procedure, or the Federal Rules of Civil Procedure. As the lawyer, you rarely have personal knowledge of the facts, so everything you plead is “on information and belief” in a sense.

I say you either have a reasonable good-faith basis to plead it or you don’t. I think “on information and belief” just clouds the issue.

And that’s why I think C is the better answer. It comes down to a question of reasonableness. If you have a reasonable basis to claim that Dawn misappropriated trade secrets, then you can sue for it. If you don’t, then you can’t.

5. Conflict of Interest and Joint Representation

For our fifth and final ethical issue, let’s change up the hypothetical. Assume that Real Cheap Windows was already a competitor of Paula Payne Windows, not a new company formed by Dawn Davis. Paula Payne is seeking an injunction barring Real Cheap from employing Dawn. The owner of Real Cheap wants to know if he can save some money by hiring you to defend both Real Cheap and Dawn in the lawsuit.

Can you represent both of these defendants?

A. No, because there is a potential conflict of interest between Real Cheap and Dawn.

B. Yes, if Real Cheap and Dawn both waive the potential conflict of interest.

C. Yes, if you confirm there is no actual conflict of interest and inform Real Cheap and Dawn that you cannot represent both of them if a conflict develops.

This may be our toughest issue. The potential for a conflict between Real Cheap and Dawn is real. Rule 1.06(b)(2) prohibits representing a person if the representation “reasonably appears to be or become adversely limited by the lawyer’s or law firm’s responsibilities to another client.”

It’s easy to see how that could happen. Suppose Paula Payne Windows offers to settle for no money as long as Real Cheap agrees to fire Dawn. That might be an ok deal for Real Cheap, but not for Dawn.

Still, I don’t necessarily think answer A is required. Let’s say you talk to the owner of Real Cheap Windows, and he says, “I don’t care how much money we have to spend on litigating, I want Dawn at my company, and I’m not going to let Paula Payne Windows tell me who I’m allowed to hire.”  

I have sometimes represented both defendants in scenarios like this, even through trial, and I don’t think I violated any conflict-of-interest rule.

But if you’re going to represent both defendants in a departing employee lawsuit, it’s important to do two things. First, satisfy yourself that the employee and her new employer have aligned interests such that an actual conflict is not present. Second, explain the potential for a conflict of interest in writing to both defendants and make it clear that you will be unable to take sides if a conflict between them develops.

Of course, this is not foolproof. It’s a judgment call.

So, A is the correct answer if you want to err on the side of caution, and this is often what defendants in this situation do.

I have separately represented the employee while another lawyer represented the new employer, and vice versa. In those scenarios I have typically worked closely with the lawyer for the other defendant. But the separate representation ensures that each defendant gets legal advice based solely on that defendant’s interests.

In other words, avoid the landmines by not walking into the minefield in the first place.

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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. 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.

Harris County Voting Lawsuit Provides Latest Test for Textualism

Harris County Voting Lawsuit Provides Latest Test for Textualism

I kept having this recurring dream where first I was a teepee, and then I was a wigwam. Night after night, it was the same thing. First a teepee, then a wigwam. Teepee. Wigwam.

I asked my doctor about this, and he said, “I think I see the problem, you’re two tents.”

Two tents. Too tense. Get it? A teepee and . . .

Oh, never mind.

The Hotze challenge to Harris County drive-through voting

Tents are on my mind this week because of a little lawsuit that happened in my neck of the woods down here in H-Town. You might have heard about it. Less than a week before Election Day, a handful of Texas Republicans filed a lawsuit in federal court in Houston, trying to block the Harris County Clerk Chris Hollins from continuing to offer the option of “drive-through” voting.

Dr. Steven Hotze, a prominent white nationalist activist in Houston, was the lead plaintiff. You might have heard of Hotze. He’s the dude who, in the wake of the George Floyd protests, left Governor Gregg Abbott a voice mail urging him to send the National Guard into Houston to “shoot to kill” any violent rioters. “That’s the only way you restore order,” he reportedly said. “Kill ‘em.”

He sounds nice.

But I’m not going to get into the politics of the lawsuit, other than to point out that even a lot of Republicans were against it. Harris County may have gone blue, but it’s not like every one of the 127,000 drive-through voters was a Democrat. Joe Straus, the former Republican Speaker of the Texas House, even joined an amicus brief in support of the Harris County Clerk.

No, I just want to focus on one of the narrow legal issues in the case, and what it teaches us about the theory of adjudication known as “textualism.”

The legal issue, in a nutshell, was whether a tent is a “building.”

See, the Hotze plaintiffs argued that the use of temporary tents for voting violated the Texas Election Code, which provides for voting in a “building.” They asked the court to enter an injunction against further drive-through voting and to “reject” the 127,000 drive-through ballots already cast. They filed the federal lawsuit on October 28, shortly after the all-Republican Texas Supreme Court rebuffed their bid to obtain similar relief in Texas state court.

The case was assigned to U.S. District Judge Andrew Hanen. This caused Democrats a little discomfort, considering some press reports characterizing Judge Hanen as a highly partisan Republican appointee.

I did not share their concern. I made this prediction on Twitter:

I just knew a federal judge was not about to tell 127,000 Houstonians “sorry, the County Clerk messed up, so your votes just don’t count.”

And I was right. Judge Hanen denied the request to “reject” the drive-through votes already cast. In fact, he dismissed the whole lawsuit on the procedural ground of lack of standing.

(There were several strong procedural grounds for rejecting the request for an injunction, including the plaintiffs’ delay in seeking relief and the fact that, even when there is a violation of the Election Code, “rejecting” votes is rarely the warranted remedy.)

But just to cover his bases—knowing the ruling would be appealed—Judge Hanen issued an order stating how he would have ruled if the plaintiffs had standing. And he said he would have sided with the Hotze plaintiffs on at least one issue: a tent is not a “building.” He cited dictionary definition of “building” to support this conclusion. Thus, he applied the theory of textualism to decide the issue.

And that was the most interesting part of the case to me.

Another Test Case for Textualism

My loyal Fivers already know about my interest in textualism. I wrote about it in Bostock Opinion Shows That Strict Textualism Fails to Deliver on its Central Promise.

My thesis: In Bostock, the phrase “because of sex” was ambiguous as applied, i.e. subject to more than one reasonable interpretation, so the application of strict textualism did not yield one determinate answer, contrary to the textualist arguments offered by both the majority and the dissenters.

For me, the lesson of Bostock was that strict textualism failed to deliver on its central promise of determinacy and legitimacy. The text of the statute by itself just wasn’t enough; the Court had to look to something else to decide the question, even if it pretended like it didn’t. Not only did textualism fail to deliver on its promise, I wrote, it failed spectacularly.

But maybe the Hotze case would give textualism a chance to redeem itself.

Perhaps it was unfair to treat Bostock as a test case. You could not get a more “hot button” political issue than the question in Bostock: whether federal law prohibits discrimination against homosexual and trans-sexual employees. You might argue it’s going to be hard to find any neutral theory of adjudication that’s going to satisfy everyone on such an issue.

Maybe textualism would fare better when the issue was less incendiary, mundane even.

Granted, the issue came up in the context of a hotly contested presidential election. But the issue itself had hardly any political valence. It’s not like there’s a “liberal” or “conservative” position in the abstract on whether a tent is a building. Ask some of your friends and family. Unless they’re familiar with the issue in the Hotze case, it’s not like all the MAGA people are going to say one thing and all the libs the opposite.

Just like there’s no “Republican” or “Democrat” position on whether Batman is a superhero. (Or is there?)

Anyway, the point is that when the legal issue isn’t a contested battle in the culture wars, you might expect textualism to do a better job of delivering on its central promise. So let’s see how it did in Hotze.

Application of Textualism in Hotze v. Hollins

The first thing we find when we look closer at Hotze is that the statutory interpretation question was slightly more complicated than we thought. It turns out there were two different statutory sections at issue in Hotze, one for early voting, and another for Election Day voting.

As for the early voting statute, the Hotze plaintiffs just didn’t have a strong argument. The statute on early voting referred to a “movable structure” rather than a “building.” This is an issue where textualism is probably adequate. I just don’t see a reasonable argument that a tent is not a “movable structure.”

Judge Hanen didn’t either. To decide whether a tent is a structure, he looked to Black’s Law Dictionary:

Applying the dictionary definition, Judge Hanen found that a tent was a structure. Thus, he did not think that the use of drive-through tents for early voting violated the statute.

But the section on Election Day voting was different. It provided that each polling place on Election day “shall be located inside a building.” Tex. Elec. Code § 43.031(b). Most people would probably agree a tent is a “movable structure,” but is it a “building”?

Let’s pause here and just reflect on the fact that there are different ways you could approach this question. Before textualism became fashionable, I think most Texas judges—liberal or conservative—would have approached the issue pragmatically. “I don’t see anything wrong with drive-through voting, so sure, for this purpose I can say a tent is a building” would be the typical thought process.

But the Harris County Clerk, probably considering the audience, took a different approach, the textualist approach. This applies the “plain meaning” of a statute’s words, and as a recent textualist opinion in Texas said, “[d]etermining a word’s plain meaning is a dictionary-driven process.” Kawcak v. Antero Resources Corp., 582 S.W.3d 566, 573 (Tex. App.—Fort Worth 2019, pet. denied).

So, notably, both the lawyers for Hollins and Judge Hanen looked to Black’s Law Dictionary for the meaning of “building.”

Here are excerpts from the brief filed by Hollins (top) and Judge Hanen’s order (bottom):

Notice any discrepancy?

Yes, of course. They cite different editions of Black’s Law Dictionary that have slightly different definitions.

I think this exercise in dueling dictionaries teaches us some things about “dictionary-driven” textualism.

Textualism fails to deliver determinacy, again

First, and perhaps most obvious, dictionaries will have multiple definitions of a word, and different dictionaries will define words differently. This is a problem for textualists, but one they are aware of. In the Kawcak opinion, for example, the court painstakingly parsed multiple definitions of the word “common” from three different dictionaries, even getting down into the order of the different definitions.

The problem is that multiple definitions and multiple dictionaries can create ambiguity. If one definition leads to one result and another definition leads to the opposite result, then the dictionary exercise doesn’t answer the question.

And that seems to be exactly what happened in Hotze. The only thing the dueling definitions seemed to agree on is that a building has walls.

But it was even worse than that. Not only were the two dictionary definitions of “building” different, neither definition definitively answered whether a tent is a building.

The definition cited by Hollins focused on the purpose of a building, i.e. what it is designed for, but none of the examples it cited included voting. So you could argue it either way.

Same for the definition cited by Judge Hanen. That definition said “especially a permanent structure,” but it didn’t say a building has to be permanent. So again, you could make a reasonable argument either way.

This is a problem. If the point of dictionary-driven textualism is to apply an objective method of statutory interpretation that provides a single determinate answer, then it failed in Hotze, just like it failed in Bostock.

But even aside from the determinacy problem, which I explained in the Bostock post, I think the Hotze example shows how misguided the whole dictionary-driven enterprise is in the first place.

The problem with “dictionary-driven” textualism

The basic problem is the nature of language itself. Most words, even simple ones like “common” or “building,” are inherently fuzzy. When the authors of Black’s Law Dictionary—or any dictionary—try to define a word like “building,” they are just trying to capture the gist of the meaning. Their purpose is not to draw sharp lines between what things the definition embraces and what things it doesn’t.

In other words, when the authors of Black’s Law Dictionary wrote a definition of “building,” they were not thinking about defining the word in a way that would determine whether a tent is a building. If they had been thinking about that question, they might have drafted the definitions differently.

For this reason, the dictionary approach strikes me as misguided from the start, even before we get to the indeterminacy problem. It’s like looking at a dictionary to determine if a hot dog is a “sandwich.”

Granted, there is precedent for this approach. When Stephen Colbert asked Ruth Bader Ginsburg whether a hot dog is a sandwich, she gave a classic textualist answer her late friend Antonin Scalia would have loved: “you tell me what a sandwich is, and then I’ll tell you if a hot dog is a sandwich.”

With much respect for the late great Notorious RBG, I think that’s the wrong approach.

Here’s the thing. We all know what a “sandwich” is; we don’t need to look at a dictionary. The problem is that in some ways a hot dog is like the things that we all agree are sandwiches, and in other ways it is not. So, even if the dictionary definition of “sandwich” provides a single determinate answer, the dictionary exercise just doesn’t seem that valuable to me. The authors of the dictionary wrote the definition for a general purpose, not for the purpose of either including or excluding a hot dog.

(There is actually some legal precedent about whether a hot dog is a sandwich, as one of my son’s favorite YouTubers explains in Food Theory: What Makes a Sandwich a Sandwich?)

If dictionary-driven textualism is all wrong for the internet parlor game of asking whether a hot dog is a sandwich, then surely it is even more misguided for serious questions of justice and public policy.

Judges aren’t playing some game of Scrabble. They are deciding real disputes that have serious consequences for the parties. And in some cases, like the Hotze lawsuit, they are deciding issues that impact major matters of public concern. Do we really want such momentous decisions to turn on some kind of word game?

No, playing the dictionary game is not how they should do it.

I’m not saying dictionary definitions are totally irrelevant. But framing the question as “is a tent a building?” strikes me as looking through the wrong end of the telescope. The question should not be whether a tent is a building in the abstract, but whether for the purpose of this particular statute, in this particular dispute, the court should construe “building” to include a tent, considering the consequences of the decision and the special circumstances, i.e. the COVID-19 pandemic.

When you frame the question that way, it practically answers itself.

We’ve got you surrounded, textualism

But don’t take my word for it. I’m not the only one who says judges should look to the purpose of a disputed term, the surrounding circumstances, and the consequences of a particular construction.

For one thing, you can find support for my view in Texas contract law. The Texas Supreme Court has recognized that “surrounding circumstances” can bear on the meaning of a contractual term, even when the term is not ambiguous on its face. See Nat’l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 521-22 (Tex. 1995).

I think this contract principle provides an important lesson for statutory interpretation.

In theory, it’s fine to say that courts should apply the plain meaning of an unambiguous statutory term, without looking to extrinsic evidence. But to determine whether a term is ambiguous, we must first ask if it has more than one reasonable interpretation, and it’s hard to say if an interpretation is reasonable without looking to the surrounding circumstances. See CBI Industries, 907 S.W.2d at 521 (“The ambiguity must become evidence when the contract is read in context of the surrounding circumstances”). That’s why contract law allows judges to look at surrounding circumstances.

Now let’s apply that idea to the election statute.

Suppose there was an election where drive-through voting on Election Day resulted in numerous problems, leading to a public outcry and demand for reform. As a result, a state representative sponsored legislation to require all voting to take place “inside a building,” with the aim of putting a stop to drive-through voting in future elections.

That’s not what actually happened. There’s no indication that the definition of “building” in the Texas Election Code had anything to do with tents. The section at issue is mainly concerned with distinguishing between public and non-public buildings and addressing what kind of non-public buildings can be used. The provision requiring voting in a “building” seems incidental to that other purpose.

But what if the definition of “building” did result from the hypothetical public outcry described above. Wouldn’t that surrounding circumstance have some bearing on whether construing building to include a tent was a reasonable construction or not? Wouldn’t that be the most logical place to start?

But the strict textualist says no, unless the undefined statutory term is ambiguous, you look to the dictionaries and no further.

Ok, but let’s consider another hypothetical. Imagine the legislature itself, while not providing a definition of “building,” did provide express guidance to the courts on how to interpret the statute.

Let’s say the legislature, rather than restricting judges to the dictionary definition of a statutory term, instructed judges that when construing a statute they can look to the purpose of the statute, the circumstances surrounding its enactment, the legislative history, and the consequences of a particular construction, even if the statute is not ambiguous. In other words, suppose the legislature expressly told courts they are not required to apply strict textualism.

What if I told you that is exactly what the Texas legislature did? Here is Section 311.023 of the Texas Code Construction Act:

As you can see, the legislature has invited Texas courts to consider extrinsic sources when construing a statute, even when the statute is not ambiguous.

But Judge Hanen’s order in the Hotze case said nothing about Section 311.023. He didn’t look at the purpose of the statutory provision or its surrounding circumstances. Instead, he just quoted from one of the Black’s Law Dictionary definitions and then said a tent isn’t a building. Was this a mistake?

The Tex-tualists strike back

To be fair, Hollins did not argue Section 311.023. Plus, the Texas Supreme Court has expressly declined the legislature’s invitation in Section 311.023 to consider extrinsic factors to construe a statute. See Texas Health Presbyterian Hospital of Denton v. D.A., 569 S.W.3d 126, 136 (Tex. 2018).

Texas Health was a medical malpractice case involving a classic statutory interpretation problem: whether a modifying phrase at the end of a clause applies to all the terms of the clause, or only the last term.

The statutory clause at issue was: “in a hospital emergency department or obstetrical unit or in a surgical suite immediately following the evaluation or treatment of a patient in a hospital emergency department.” The question was whether “following the evaluation or treatment of a patient in a hospital emergency department” applied to “in a hospital emergency department.” The outcome of the case turned on this question.

The plaintiffs urged the court to consider extrinsic evidence, including legislative history, citing Section 311.023. But the Texas Supreme Court refused. “Although this section may grant us legal permission,” Justice Boyd wrote, “not all that is lawful is beneficial.” Id. at 136.

Instead, Texas Health cited Scalia & Garner’s Reading Law: The Interpretation of Legal Texts (available to Amazon Prime members for $47.45), a book that is big on textualism and kind of down on legislative history, to put it mildly.  Finding the statute unambiguous, the court refused to consider any extrinsic aids to interpreting it.

That’s not how I would have done it. I might have reached the same result in Texas Health, but more on common sense grounds than textualist grounds.

And I have to say, I’m bothered that the Texas Supreme Court gave more weight to a privately-authored treatise—which only expresses the opinion of its authors—than it did to the legislature. That’s a strange sort of deference, and I don’t like it.

But maybe I’m just too tense.

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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. 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.

Election Edition: Publius vs. Tocqueville

Election Edition: Publius vs. Tocqueville

Two spots at the top of the charts

This is my third “Election Edition” post. The first was in 2016, the second in 2018. I figure every two years is often enough for Five Minute Law to weigh in on politics.

In the last one I repeated the assertion by one of my college professors that Alexis de Tocqueville’s Democracy In America is the second-best book on American politics.

That means the best one must be the Federalist Papers, which are now enjoying a renaissance, due partly to the prominence of “Originalism” in debates over Supreme Court nominees, but mostly—let’s be honest—because of the smash Broadway musical Hamilton.

Thanks to Hamilton, hip schoolkids around the country now know that the Federalist Papers were not really a book, but a series of 75 essays defending the new federal Constitution to the public, written by John Jay (until he got sick), James Madison, and of course, Alexander Hamilton, who wrote “the other 51!”

Still, we’ll call it a book for simplicity.

Of course, not everyone is a fan. The progressive left is uneasy with the Federalist Papers (at best), considering they were written by three wealthy white men to justify a Constitution that treated enslaved African-Americans as three-fifths of a person and denied political rights to women. Two of the authors even owned slaves!

Conservatives, on the other hand, seem to love the Federalist Papers, but they may not like everything they find in them. It is ironic that “populist” movements like the Tea Party like to invoke the rhetoric and imagery of the founders, when many of the founding thinkers—including Madison, and certainly Hamilton—were decidedly un-populist or even anti-populist.

So, the marriage of the arguably elitist political thought of the Federalist Papers with the “populist” strain of contemporary American conservatism was always an uneasy one (even before Trump).

Still, the Federalist Papers remain at the top of the charts when it comes to books about American politics. It’s like even if you think the Beatles are overrated, you have to grudgingly admit they are the most important rock band.

On the other hand, just as some people will make a case for the band in the number two spot (that would be Led Zeppelin, with due respect to the number three Rolling Stones), there is a case to be made for putting ADT (that’s what I call my man Tocqueville) ahead of Publius.

I mean, ADT should at least get extra points for correctly predicting the rise of the United States and Russia as the world’s major powers, over a century before it happened.

But I’m getting ahead of myself. Before we reevaluate which book really deserves the number one spot, perhaps we should step back and ask ourselves what problem the authors were trying to solve.

The problem, in a word, was democracy.

The problem with democracy

To say that democracy was the problem is a little jarring for contemporary ears, on both sides of the spectrum. Almost everyone today—Republican or Democrat—says they are on the side of the people. You’re not going to find any mainstream politicians openly advocating for some kind of aristocracy or dictatorship.

But democracy was the problem both Publius and ADT were trying to solve. Granted, in both cases they were also concerned with the more pragmatic issue of effective government, but the chief philosophical question was how to prevent democracy from destroying liberty, and itself.

This made the project of the American founders unique. Previously, there were pro- and anti-democratic thinkers, but the founders—at least Madison and Hamilton—were different: pro-democratic statesmen grappling with how to save democracy from itself.

The problem from their perspective was that the American Revolution had set loose egalitarian passions that threatened to consume life, liberty, and property like a wildfire. The founders’ proposed U.S. Constitution was designed to implement democratic principles—it is not as if they were proposing some return to monarchy or aristocracy—but it was also designed to constrain them.

Madison made this clear in Federalist No. 10, perhaps the most “philosophical” of the Papers. The problem, he said, was “faction,” by which he meant a group of citizens united by devotion to some passion or cause opposed to the general welfare. Today we would call it an “interest group.” Madison seemed to view factions as the greatest threat to stability and freedom in a democracy.

James Madison

Federalist No. 10 tells us several things about these factions.

First, Madison said factions are unavoidable in a free country. When people are free to form opinions and to express them through politics, there will necessarily be conflicting opinions. The only way to avoid that would be to take away the freedom, a cure that would be worse than disease. There are no factions under communism, for example.

Second, under a democratic form of government, majority factions are more to be feared than minority factions. That’s because the “republican principle”—essentially majority rule through representative democracy—takes care of minority factions.

The problem of a majority faction, on the other hand, cannot be solved with majority rule. That’s true almost by definition. Something else is needed.

This is where contemporary political scientists—especially progressives—are going to object. Isn’t the very idea of a “majority faction” an oxymoron? If a faction is defined as a group pursuing its own interest as opposed to the general welfare, how can a majority be a faction? In a democracy, we decide what is good for the whole based on what the majority says. There’s no other objective standard.

This is where the elitism comes in, both in abstract and concrete terms. In the abstract, Madison believes the majority can be a faction because the majority can be wrong about what is good for the country.

But in concrete terms, who is Madison talking about when he refers to a majority faction? To put it bluntly, he’s talking about the poor.

For the first time, I feel wicked

Yes, the poor. That’s who the majority is, or was at the time (and throughout most of history).

Madison makes this clear in two ways. First, he identifies “those who hold and those who are without property” as two competing factions. Same for creditors and debtors, he says.

Then he makes it even more plain when he names the evils he is most worried about a majority faction enacting: “A rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project” (emphasis added).

A-ha! Now we’ve got him. You don’t have to be a Marxist to question whether all this talk about “factions” is really just an excuse–an ideological superstructure, you might say–for preventing the poor from oppressing the rich, protecting creditors from debtors, and stopping those without property from overrunning those with property. It’s about the “haves” and the “have-nots.”

The materialist view is that Madison, a wealthy landowner, was merely concerned with protecting himself and his rich friends and family. And perhaps he was, at least in part.

But that cynical view misses something important. I think Madison was not just concerned with protecting the rich from the poor, but with protecting democracy itself.

You see, allowing the poor to oppress the rich poses two problems. First, the rich are not just going to sit there and take it. They are going to push back, even if that means seizing power through undemocratic means. Second, there is the ever-present tendency of the people—i.e. the poor, less educated people—to support a certain kind of leader: the demagogue.

The problem with demagogues

Here we can look to Hamilton, Madison’s famous frenemy, for guidance. In a later letter to George Washington, Hamilton offered this striking portrait of the demagogue:

When a man unprincipled in private life desperate in his fortune, bold in his temper, possessed of considerable talents, having the advantage of military habits — despotic in his ordinary demeanour — known to have scoffed in private at the principles of liberty — when such a man is seen to mount the hobby horse of popularity — to join in the cry of danger to liberty — to take every opportunity of embarrassing the General Government & bringing it under suspicion — to flatter and fall in with all the non sense of the zealots of the day — It may justly be suspected that his object is to throw things into confusion that he may “ride the storm and direct the whirlwind.

Hamilton’s description teaches us something valuable: the demagogue is a uniquely democratic threat to democracy. This kind of despot would not come to power by restoring the institutions of monarchy or aristocracy, but by mounting the “hobby horse of popularity” and riding the democratic storm.

In other words, the demagogue draws his support from the majority faction.

When we put this together with the reasoning of Federalist No. 10, we see that democracy itself does not give us the solution for the demagogue problem. That’s because the demagogue’s MO is to appeal to the common man, the “silent majority,” the “real Americans.”

So what can we do? Madison’s answer in Federalist No. 10 has essentially two parts: republicanism, meaning representative democracy, and “enlarging the sphere.”

Enlarging the sphere meant combining the 13 colonies into one nation with a representative democracy to rule it. You can read Federalist No. 10 yourself to see how Madison thought these two principles would solve the problem of faction.

In the simplest terms, Madison’s solution to factions was more factions. In a larger nation, competition between factions would keep any one faction from gaining too much power. And this healthy jockeying between rival factions—combined with the institutions of a representative democracy—would make it more difficult for a demagogue to ride a wave of popular passion to power.

The prospect of a demagogue mounting the hobby horse of popularity was no philosophical abstraction at the time. Soon a democratic revolution would come to France as well, leading to chaos, instability, and eventually, Napoleon Bonaparte.

Ah, France. That brings us back to Tocqueville.

You down with ADT?

Alexis de Tocqueville was a young French aristocrat who wrote his two-volume masterpiece De La Démocratie en Amérique in the 1830s after a nine-month trip to America with his BFF, Gustave de Beaumont.

I explained the project of Democracy In America in my last Election Edition, so I won’t repeat all of that here. Suffice to say that Tocqueville viewed democracy—by which he meant a social condition of equality as opposed to a landed aristocracy—as inevitable, and his chief concern, much like Madison and Hamilton, was how to prevent democracy from extinguishing freedom. He hoped to learn lessons from America, a relatively healthy democracy, that could be applied to his own post-revolutionary France, a troubled democracy.

Alexis de Tocqueville

In short, like Madison in Federalist No. 10, ADT was concerned with preventing or tempering the “tyranny of the majority.”

He answered this question largely by observing and describing. He praised the U.S. Constitution and the founding generation that created it, but he opined that there was something more important that maintains a democratic republic in America: “mores,” or what today we might call norms. I wrote about this last time in It’s The Norm: French Lessons on the Limits of Law.

ADT’s analysis of mores gives his book deeper insight into what restrains the tyranny of the majority than the Federalist Papers. In fairness, this was because ADT gave himself a broader assignment. Publius wrote for the narrower purpose of persuading Americans to support the proposed Constitution. Still, I give Democracy In America extra points for its broader perspective.

But regardless of scope or perspective, who got it right? Who predicted better?

Interest groups, money, and oligarchy

Let’s start with the question of minority factions. Here, I think we must dock Madison some points for his assumption that the “republican principle” would prevent minority factions from imposing their will.

It hasn’t really turned out that way, has it? You might even characterize the American form of government as rule by special interest groups. The problem is that a well-organized interest group that intensely cares about an issue will usually win out over a more diffuse public interest.

And that’s true even before you add money to the equation.

Of course, money was a factor at the time of the founding too, but I’m not sure the founders foresaw just how important money would be to politics in the American form of government. Money—mainly in the form of campaign contributions—is the very oxygen American politicians breathe. A well-funded and intensely supported minority interest group will wield disproportionate influence over the laws, violating Madison’s republican principle.

Worse yet, the influence of money is not spread evenly among the factions. Sure, the little guys can band together to raise money—especially now with social media—but overall the politicians’ dependence on campaign cash skews the process in favor of one particular minority faction: the rich.

And it has gotten worse for the poor, who are no longer the majority. Today, the middle class is the majority, which explains why politicians on both sides speak its name with such reverence. Even the Democrats rarely talk about the “poor”—that’s so passé. It’s always the “middle class.”

In short, I think Madison underestimated the oligarchic element in American politics.

“Oligarchy” comes from the Greek oligarkhia, which combines oligoi (“few”) with arkhein (“to rule”). So let’s consult a Greek on its meaning. Aristotle classified political regimes based on two factors: who rules, and in whose interest they rule. Thus, an “aristocracy” was the rule of the few in the interest of the whole city, while oligarchy was the rule of the few in their own interest.

I think if Aristotle were to view American government today, he would see it as a mixed regime, with elements of democracy, oligarchy, and—if he’s being charitable—aristocracy.

Madison and friends hoped that their constitutional system would encourage a sort of “natural aristocracy” where the democratic process would put the best people in charge. Thankfully, through much of U.S. history we have been luckier than we deserve on that score. But overall, I fear that Federalist No. 10 was too optimistic in its expectation that the principle of majority rule would prevent oligarchic factions from holding sway.

ADT, on the other hand, saw that the industrial age could produce a kind of oligarchy within American democracy.

An industrial oligarchy?

His prediction came in Volume Two of Democracy In America, in a short chapter titled “How Aristocracy Could Issue From Industry.”

ADT begins by noting how modern industry degrades the worker: “As the principle of the division of labor is more completely applied, the worker becomes weaker, more limited, and more dependent.” As a result, “at the same time that industrial science constantly lowers the class of workers, it elevates that of masters.” The conclusion: “What is this if not aristocracy?”

This new industrial aristocracy—really an oligarchy in Aristotelian terms, because ADT clearly expected it to pursue its own narrow interests—would be less noble than the old landed aristocracy but also less dangerous, ADT says.

It would be less dangerous primarily because of class mobility. Industrialization could lead to “some very opulent men and a very miserable multitude,” ADT explains, but “although there are rich, the class of the rich does not exist.”

By this he means no “class” of the rich comparable to the aristocrats of old. Membership in the new industrial aristocracy would be based on money, not land or family lineage, and money comes and goes.

“An aristocracy thus constituted cannot have a great hold on those it employs,” ADT says, “and, should it come to seize them for a moment, they will soon escape it.” For this reason, while ADT predicted the manufacturing aristocracy would be “the hardest that has appeared on earth,” he thought it would be the “least dangerous.”

Of course, the Industrial Revolution and the Gilded Age would produce precisely the kind of “opulent” industrial oligarchs ADT predicted. And just as he anticipated, the workers would push back. We would see the American working class assert itself in the Progressive era and the New Deal, and by the 1950s and 1960s the balance of power had shifted.

“Still,” ADT warned about the emerging industrial aristocracy, “the friends of democracy ought constantly to turn their regard with anxiety in this direction; for if ever permanent inequality of conditions and aristocracy are introduced anew into the world, one can predict they will enter by this door.”

This warning of an undemocratic threat to democracy is music to our modern democratic ears. And its prescience is one of the reasons I’m giving Democracy In America a slight edge over the Federalist Papers.

And yet . . .

Democratic versus anti-democratic threats to democracy

The greatest value in both the Federalist Papers and Democracy In America is that they fill in our modern blind spot. All of us today—Democrat or Republican—are small “d” democrats, in the sense that nobody today seriously believes that one class of people is by nature more entitled to rule than anyone else. And as democrats, we have a blind spot for democratic threats to democracy.

As I once learned from Prof. Arthur Melzer, in a democracy you have essentially two kinds of dangers: democratic dangers and undemocratic dangers.

We have no difficulty seeing the undemocratic dangers, the ways that we fall short of the democratic ideal. Through our democratic lens, these threats stand out in red against a grey background.

The ten-dollar founding father

We have more trouble seeing the democratic threats to democracy. It’s as if they were red but we can’t see them clearly because we’re wearing red-tinted glasses.

This makes the insights of Madison and Hamilton all the more valuable because, while they supported representative democracy, they were basically—let’s face it—elitists. The same is true of Tocqueville. And while we may not like elitists, they have some important things to teach us.

(If you want to take this idea even further, try the aforementioned Aristotle, who didn’t think democracy was the best form of government, and even seemed to defend slavery.)

On the other hand, perhaps these elitists have their own blind spots, as we have seen. In Federalist No. 10, Madison displays great insight into the dangers of a majority faction, but perhaps he failed to fully appreciate the dangers posed by special interest groups generally, and by an oligarchic minority faction specifically.

And then there is another glaring blind spot in the Federalist Papers, one we have yet to mention despite its enormous importance in American history and politics. I’m talking of course about the question of race. How can we talk about “tyranny of the majority” in America without addressing the tyranny of white over black?

Race in American politics

Madison does refer a couple times to banning importation of slaves (in Federalist No. 38 and No. 42), and he addresses the Three-Fifths Compromise in Federalist No. 54. But the Federalist Papers didn’t tackle the hard questions about how a system of slavery can exist within a democracy in the long term.

One assumes the subject was simply too sensitive, and outside the scope of the assignment. The point was to persuade people to support the new Constitution, and even Hamilton was not about to antagonize the touchy Southern slave states by attacking slavery. So perhaps we can forgive the Federalist Papers for not taking on the thorny subject.

America’s favorite philosophizin’ Frenchman, on the other hand, had no such qualms.

Near the end of Volume One of Democracy In America, there is a long chapter titled “On the Principal Causes Tending to Maintain a Democratic Republic in the United States.” That is the chapter that includes the discussion of mores referenced earlier.

At the conclusion of that chapter, you feel ready to defend freedom from the tyranny of the majority, armed with ADT’s wisdom. But then he throws you a curve ball. There’s one more chapter: “Some Considerations on the Present State and the Probable Future of the Three Races That Inhabit the Territory of the United States.” (He’s referring to whites, African-Americans, and Native Americans.)

It’s as if to say, “oh, by the way, before we finish up, there’s just this wee little issue of race that we need to talk about.” And then he hits you with the longest chapter of Volume One.

I recently heard someone say racism is a central part of the American story, but so is overcoming racism. Either way, if you’re going to write the best book about American politics, you’re going to have to tackle the topic.

So what does ADT have to say about race in America?

I’ll tell you in two years.

______________________________________

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.

Follow @zachwolfelaw on Instagram to keep up with his latest shenanigans.

These are his opinions, not the opinions of his firm or clients.

Does “Misappropriation” of Trade Secrets Require “Use” or “Disclosure”?

Does “Misappropriation” of Trade Secrets Require “Use” or “Disclosure”?

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.

c. TCPA Motion in Texas State Court

There was a brief, exhilirating era when you could file a motion to dismiss a trade secrets claim under the Texas Citizens Participation Act (TCPA), the Texas “anti-SLAPP” statute, but those days are over. Texas courts have been steadily narrowing the scope of the TCPA, and the legislature has now carved trade secrets claims out of the TCPA. See my post Shrinkage: TX Legislature and 5th Circuit Cut the TCPA Down to Size. Or if you want something more scholarly, see Targeting the Texas Citizen Participation Act: The 2019 Texas Legislature’s Amendments to a Most Consequential Law.

d. Special Exceptions in Texas State Court

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.

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.

Drafting the Bullet-Proof Non-Compete: Part 3

Drafting the Bullet-Proof Non-Compete: Part 3

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. See Chambers 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.

Drafting the Bullet-Proof Non-Compete: Part 2

Drafting the Bullet-Proof Non-Compete: Part 2

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.

In Part 1 we learned:

  1. You should draft a non-compete in a style and format that is easy to read and present in the courtroom.
  2. The non-compete should expressly state that the company will give the employee confidential information.
  3. The non-compete should provide for giving the employee specialized training, if applicable.
  4. 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.

For sales employees, that usually means the employee’s sales territory. I call this the Sales Territory Principle. See Geographic Area of a Texas Non-Compete – Part 1.

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.

Can you keep a secret? If I represent the employee, this gives me the argument that the non-compete is a prohibited “industry-wide exclusion.” See Burning Down the Haas: The Industry-Wide Exclusion Rule in Texas Non-Compete Law.

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.

Drafting the Bullet-Proof Texas Non-Compete: Part 1

Drafting the Bullet-Proof Texas Non-Compete: Part 1

So you want a bullet-proof Texas non-compete.

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.

Including a promise to provide specialized training is another way to meet the requirement that a Texas non-compete must be “ancillary to an otherwise enforceable agreement.” E.g., Neurodiagnostic Tex, LLC v. Pierce, 506 S.W.3d 153, 164-65 (Tex. App.—Tyler 2016, no pet.). See also Texas Non-Compete Case Teaches Importance of Providing Specialized Training.  

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.

______________________________________

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.

Geographic Area of a Texas Non-Compete – Part 2

Geographic Area of a Texas Non-Compete – Part 2

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.

As these cases illustrate, the scope of activity restrained is usually a more important factor than geographic area. Even a non-compete that has a reasonable geographic area will be unenforceable if the scope of activity restrained is too broad. See Burning Down the Haas: The Industry-Wide Exclusion Rule in Texas Non-Compete Litigation.

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.

_____________________________________

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.

Lawyer Lessons From Winning a Bodybuilding Competition

Lawyer Lessons From Winning a Bodybuilding Competition

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.

What Is *Wrong* With People? Lessons From the 2020 Bar Exam Debacle

What Is *Wrong* With People? Lessons From the 2020 Bar Exam Debacle

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:

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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.

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Then there’s New York. Here’s the New York Court of Appeals explaining why an online exam would not work:

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“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:

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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.

That’s like saying “nice application to the bar you have there, it would be a shame if something happened to it.” See NCBE Prez Issues Threat To Tie Up Licenses of Bar Exam Critics.

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:

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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.

This of course raises gender equality issues. See If You’re Menstruating or Lactating During The Bar Exam You’re Screwed. Obviously, it puts a burden on women that men don’t have to worry about.

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.

p.s. The Great Tampon Caper at least had a happy ending in Texas. Kudos to Texas Supreme Court Justices Brett Busby and Eva Guzman for helping to get this policy changed. See Texas lifts tampon ban at bar exam after complaints over discriminatory policy. Maybe human nature isn’t all bad.

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

These are his opinions, not the opinions of his firm or clients.