It’s Alive, It’s ALIVE! How to Kill a TCPA Motion in a Trade Secrets Lawsuit

It’s Alive, It’s ALIVE! How to Kill a TCPA Motion in a Trade Secrets Lawsuit

It’s Franken-steen

First let’s get something out of the way. The Texas Citizens Participation Act (TCPA) is a Frankenstein’s monster that the legislature created and now needs to reign in (not that they listen to me).

As I explained in a three-part series back in the summer of 2017, the TCPA grants defendants in certain cases the unusual right to require the plaintiff to prove its case before taking any discovery. In litigator jargon, it effectively lets the defendant file a “no-evidence” motion for summary judgment without first requiring an adequate time for discovery.

The statute was intended to curtail “SLAPP” lawsuits, e.g. where a big company sues a “little guy” in retaliation for exercising his right to publicly criticize the company. The idea was to stop litigation bullies from using groundless lawsuits to grind ordinary people into submission under the weight of crushing legal fees.

But the legislature in its wisdom used broad language in the TCPA, and the Texas Supreme Court applies the plain meaning of statutes (in theory). So the TCPA has taken on a bizarre life of its own. It can apply to just about any kind of lawsuit, including “departing employee” lawsuits where a company claims its former employees misappropriated trade secrets or other confidential information.

This really makes no sense. There is no compelling public policy reason why some defendants should have a right to file a motion to dismiss before any discovery takes place and others should not, depending on whether the lawsuit falls under the byzantine definitions in the TCPA.

Might this have been avoided by construing the statute “liberally”–rather than literally–as the statute itself tells courts to do?[1]

Maybe. But that ship has sailed. As Justice Pemberton wrote in a recent dissent, Texas courts now apply the TCPA as written, even when the implications “sound crazy.” As he noted, unintended consequences are likely when courts interpret statutes “superficially in a mistaken perception of plain-meaning textualism.”[2] So here we are.

The bottom line is that the TCPA will apply to most trade secrets lawsuits in Texas state court. And maybe in federal court too.

This raises several strategic questions in a Texas trade secrets lawsuit:

1. Can the plaintiff avoid the TCPA by filing the trade secrets lawsuit in federal court under the federal trade secrets statute?

2. Can the plaintiff in a trade secrets suit avoid the TCPA by “pleading around” it?

3. When should the defendant in a trade secrets case file a TCPA motion to dismiss?

4. What evidence does a trade secrets plaintiff need to offer to defeat a TCPA motion to dismiss?

In the words of MC Hammer, let’s “break it down.”

Some trade secrets strategery

First, it’s possible that the plaintiff may be able to avoid the TCPA by filing the trade secrets lawsuit in federal court rather than state court. The federal Defend Trade Secrets Act (DTSA) allows a plaintiff to file a trade secrets lawsuit in federal court as long as the case has some connection to interstate or foreign commerce, which means virtually every case.

Courts are divided about whether the TCPA applies in a federal case, and the Fifth Circuit has not yet resolved the issue.[3] It turns on whether the TCPA is considered “procedural” or “substantive,”[4] which is kind of like asking whether the Beatles were a rock band or a pop band.

Law professors and people who were on law review love this kind of question. Personally, I’m less intrigued. I initially assumed the TCPA was procedural and would not apply in federal court, but there are people smarter than me who argue it is substantive, and I’ll concede you can make a reasonable case for that. (If you want more details on this issue see the good summary in this Law360 article by April Farris and Matthew Zorn.)

If I had to predict, I’d say the Fifth Circuit will hold that the TCPA does not apply in federal court. But for now it remains an open question.

That means that filing your trade secrets lawsuit in federal court won’t necessarily get you out of the TCPA woods. Your choice of state or federal court will likely depend on other considerations, i.e. whether you prefer a judge appointed for life who can do whatever the *#$% he wants, or a judge with no experience who got swept into office because he picked the right political party.

Regardless of where you file your trade secrets suit, you can try to avoid a TCPA motion by pleading around the TCPA. Without getting too much into the weeds, the TCPA applies to claims that relate to “communications” about a matter of public concern. So one theory is that the plaintiff in a departing employee case can avoid the TCPA by pleading only use of the trade secrets rather than disclosure of the trade secrets. Disclosing a trade secret to the new employer is obviously “communicating” the information, so just don’t say anything about disclosure.

That’s what I mean by “pleading around” the TCPA. But this may be easier said than done. Even if the plaintiff does not expressly plead that the employee disclosed the trade secrets to the new employer, that allegation will often be implied.

Plus, the mere allegation that the employee has joined another company and used the plaintiff’s trade secrets may be enough to ensnare the plaintiff in the TCPA’s definitional web. The TCPA covers “a communication between individuals who join together to collectively express, promote, pursue, or defend common interests.”[5] Arguably, any time an employee goes to work for a competitor, there is necessarily going to be communication between employee and employer to “collectively . . . pursue . . . common interests.”

So, omitting allegations of trade secrets disclosure from your pleadings may not be sufficient to avoid the TCPA.

Defense wins championships

Now let’s look at it from the other side. If you represent the defendant in a trade secrets case, should you file a motion to dismiss under the TCPA? I see three potential benefits:

(1) obviously, the potential early dismissal of the lawsuit;

(2) smoking out the plaintiff and making him put his cards on the table (talk about mixed metaphors); and

(3) slowing down the plaintiff’s momentum.

Also, if you win the motion you have the right to recover legal expenses “as justice and equity may require.”[6]

The potential downside of filing a TCPA motion in a trade secrets case is that, if the court finds your motion was “frivolous or solely intended to delay,” you will lose the motion and be ordered to pay the plaintiff’s attorneys’ fees for responding to the motion.[7] That’s a momentum shift like throwing a pick-six in the first quarter.

So, deciding whether to file a motion to dismiss a trade secrets case will likely come down to whether you think the plaintiff has enough evidence to prove the claim.

This gets us to the last question: if the defendant files a motion to dismiss, what evidence does the plaintiff need to offer to defeat the motion?

As a threshold matter, the plaintiff can try to prove the TCPA does not apply to the lawsuit. But if the TCPA applies, the plaintiff will need to offer evidence of three essential elements:

(1) the information at issue is a “trade secret”;

(2) the defendant “misappropriated” the trade secret; and

(3) the misappropriation caused some injury to the plaintiff.

I cover the key points of these elements in my Trade Secrets 101 memo (soon to be updated and published in the Texas Journal of Business Law). And a recent opinion from the Tyler Court of Appeals provides a roadmap for offering evidence to support these elements.

But if that salt has lost its flavor . . .

In Morgan v. Clements Fluids South Texas, three employees left Clements, an oil and gas services company, to work for two competitors. Clements claimed it trained the employees on its proprietary system for well completion and production called “salt systems.” It sued the former employees in state court for breach of their NDAs and misappropriation of trade secrets, and the employees filed a motion to dismiss under the TCPA.[8]

The defendant employees met their initial burden to show that the trade secrets claim was factually predicated on conduct that falls within either the “exercise of the right of association” or the “exercise of free speech,” as defined by the TCPA. The court reasoned that the claim was “based on, relates to, or is in response to,” at least in part, the employees’ communications among themselves and within the competitors through which they allegedly “shared or utilized” the alleged trade secrets.[9]

The court then turned to the plaintiff’s burden to establish by “clear and specific” evidence a prima facie case for each element of its trade secrets claim. The TCPA “does not impose an elevated evidentiary standard,” the court said, “and circumstantial evidence and rational inferences may be considered.”[10]

To prove the information at issue was a trade secrets, Clements claimed it had a confidential method for salt systems that gave it a competitive advantage. Its vice president signed an affidavit stating that Clements invested millions of dollars for almost 33 years on research, development, training, and testing of its salt systems, that its system was not available through any outside source, that the system was not available outside the company, and that the system had made Clements the industry leader. The Court of Appeals concluded this was sufficient “clear and specific” evidence of a trade secret.[11]

Whether the employees misappropriated the trade secrets was a closer call. The defendants argued that Clements failed to prove misappropriation because it did not show the employees actually used the trade secrets. The employees signed affidavits denying that Clements provided them with any training they did not have before working for Clements, and denying they shared any Clements information with any third party.[12]

But the court found that Clements offered sufficient evidence of misappropriation to avoid dismissal. Specifically, Clements established:

(1) The employees had no experience in salt systems before working for Clements.

(2) Clements trained the employees to perform salt systems and disclosed its proprietary formula to them.

(3) The employees left Clements to go to a company, Greenwall, that was not doing salt systems.

(4) Shortly after that, Greenwell launched a salt systems business, announcing it in a website post authored by one of the employees.

(5) Greenwell then performed a salt systems job for Pioneer, one of Clements’ customers.

“Given Clements’ description of the time, money, and effort dedicated to the development of its salt systems,” the court said, “it is reasonable to conclude from the totality of the circumstantial evidence that [the employees] used Clements’ proprietary and confidential information in concert with Greenwell to launch its salt systems business.”[13]

Finally, Clements had to offer evidence it was injured by the trade secrets misappropriation. “The burden of proof on damages for misappropriation of trade secrets is liberal,” the court said, “and is satisfied by showing the misappropriation, the defendant’s subsequent commercial use, and evidence by which the jury can value the rights the defendant obtained.” The Texas Supreme Court does not require the plaintiff to establish a specific amount of damages in response to a TCPA motion. Clements was only required to offer evidence supporting a “rational inference as the existence of damages, not their amount or constituent parts.”[14]

The defendants argued that Clements failed to link its loss of the Pioneer job to the alleged misappropriation of trade secrets, but the court disagreed. Greenwell did not previously do salt systems jobs, it performed a salt systems job for Pioneer shortly after the Clements employees joined, and Clements had previously performed all of Pioneer’s salt systems jobs. This was sufficient circumstantial evidence to link the alleged misappropriation to Clements’ loss of Pioneer’s business, establishing an injury to Clements.[15]

The Morgan case teaches us that, while speculation and assumption are not evidence of trade secret misappropriation, you don’t need surveillance camera footage of the employee handing over the secret formula either. It’s enough to offer circumstantial evidence creating a reasonable inference that an employee has used the information to help a competitor take business from the plaintiff.

But Morgan was somewhat unusual. The plaintiff had actual evidence of a secret method that other competitors (allegedly) did not know or practice.

Most trade secrets cases don’t have this. The typical case involves “soft” trade secrets like customer lists, prices, and customer information. And usually the two competitors both do the same kind of non-confidential business before and after the employee changes jobs. In these cases, the fact that a customer follows an employee from one company to another doesn’t necessarily prove the employee used any confidential information. It could just mean the employee has a good relationship with the customer.

So plaintiffs in soft trade secrets cases beware. You will probably need “something more” than losing a customer to defeat a TCPA motion. At least until the legislature fixes the monster it created.

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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. Most of his posts don’t have so many footnotes.

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.

[1] Tex. Civ. Prac. & Rem. Code § 27.011(b) (“This chapter shall be construed liberally to effectuate its purpose and intent fully”).

[2] Hawxhurst v. Austin’s Boat Tours, 550 S.W.3d 220, 233-35 (Tex. App.—Austin 2018, no pet.).

[3] Thoroughbred Ventures, LLC v. Disman, No. 4:18-CV-00318, 2018 WL 3472717, at *3 (E.D. Tex. July 19, 2018).

[4] Even if the TCPA is substantive, it may not apply in federal court because it conflicts with Federal Rules of Civil Procedure 12 and 56. Id. at *3.

[5] Tex. Civ. Prac. & Rem. Code § 27.001(2).

[6] See Tex. Civ. Prac. & Rem. Code § 27.009(a)(1). A successful movant also has the right to recover sanctions sufficient to deter the plaintiff from filing similar lawsuits, see § 27.009(a)(2), but it will probably be a rare trade secrets case where the court finds such sanctions are needed in addition to attorneys’ fees.

[7] See Tex. Civ. Prac. & Rem. Code § 27.009(b) (“If the court finds that a motion to dismiss filed under this chapter is frivolous or solely intended to delay, the court may award court costs and reasonable attorney’s fees to the responding party”).

[8] Morgan v. Clements Fluids South Texas, Ltd., No. 12-18-00055-CV, 2018 WL 5796994, at *1 (Tex. App.—Tyler Nov. 5, 2018, no pet. h.).

[9] Id. at *3.

[10] Id. at *4 (citing In re Lipsky, 460 S.W.3d 579, 586 (Tex. 2015)).

[11] Id. at *5-6.

[12] Id. at *7.

[13] Id. at *8. However, as to a third employee, Laney, the court held that Clements did not meet its burden. Unlike the evidence concerning the first two employees, Clements offered no evidence, circumstantial or otherwise, that Laney disclosed or used the trade secrets at his subsequent employer, ChemCo. And there was no evidence of whether Chemco had performed salt systems before, or that Laney performed any salt systems jobs with ChemCo. Id.

[14] Id.

[15] Id. at *8-9.

It’s the Norm: French Lessons on the Limits of Law

It’s the Norm: French Lessons on the Limits of Law

It’s that time again.

Every two years I write an “Election Edition” of Five Minute Law. Two years ago, on the eve of the 2016 presidential election, I posted Political Correctness, Paleo Correctness, Trump, and What All This Has to Do With Lawyers.

The primary argument: political correctness, i.e. dogmatic liberalism, is a problem, but the proper antidote is true liberalism (in the historic sense), not prejudice. The secondary argument: lawyers have a special role in defending individual liberties and tolerance.

I think subsequent events have largely confirmed both arguments. The backlash against liberalism has proceeded on multiple fronts. And on each front, lawyers have played a prominent role.

It’s striking how many of the political fights over the last two years have involved litigation, lawyers, and judges. Take the “travel ban,” separation of immigrant children, the Mueller investigation and prosecutions, just to name a few. These battles have raged in the courts, not the halls of Congress.

Even the most recent political battle, while fought in the Senate, was about who would sit on the nation’s highest court. Everybody understood the stakes.

If there is one thing both sides agree on, it’s that law matters in American politics. Whether you send money to the Federalist Society or the ACLU, you understand the power wielded by those who interpret and apply the law.

This is partly because of the Supremacy Clause. When the Constitution is the supreme law of the land, interpretation of the Constitution becomes paramount.

Even aside from the Constitution, law is fundamentally important to American politics. Whether you vote for Ted Cruz or Beto O’Rourke, you probably like to invoke the “rule of law” in support of your political opinions.

The Constitution and the rule of law are supposed to keep the majority from oppressing the minority. And we want to prevent those who come to power in the name of the majority from abusing their power to the point where they no longer bother answering to the majority. It’s part of the “checks and balances” the American founders created.

They even left us with an instruction manual, in the best book ever written about American politics. It’s really not a book, but a series of essays anonymously published under the pseudonym “Publius.”

The real identity of Publius remains shrouded in historical mystery, but some believe he was connected to Aaron Burr.

Publius was bullish on the possibilities of an American republic but had one overriding worry: how to prevent American democracy from devolving into tyranny—either by the majority or by a demagogue claiming to speak for the majority. The Constitution—along with the Bill of Rights added later—was designed to prevent this.

But Publius understood the Constitution was not an automaton that, once set in motion, would guarantee freedom for his posterity. The success of the American experiment would depend on certain virtues of the people and their leaders. The republican system could be thwarted by a leader skilled in “flattering the prejudices of the people” who could “mount the hobby horse of popularity.”

So as great as the Federalist Papers are, they are not enough. We also need the second-best book about American politics. Strangely, the man who wrote this book was not a democrat, and not even an American. He was a French aristocrat named Alexis de Tocqueville.

In his two-volume masterpiece Democracy in America, Tocqueville tackled essentially the same problem Publius confronted decades earlier: how to keep democracy from turning on itself and threatening liberty. Or to put it in our contemporary terms, how to prevent a liberal democracy from degenerating into a corrupt democracy, leading to authoritarianism.

Americans might object, “what can this Frenchman teach us about democracy, much less about America?”

But one thing Tocqueville had over Publius was a broader perspective. When Tocqueville talks about “democracy,” he does not so much mean a form of government as a social system based upon equality, the opposite of a landed aristocracy. So while the Federalist Papers focus almost entirely on politics, Tocqueville steps back and looks at the effects of democracy on politics and society.

Plus, the fact that Tocqueville was an alien in America only added to his insight.

tocqueville
America’s favorite philosophizin’ Frenchman

One advantage of Democracy in America is that Tocqueville exhibits no trace of sentimentality towards either America or democracy. While he finds many things to admire about America, and acknowledges that democracy has its advantages, he views both with a certain objective detachment.

Of course, you will not get that sort of honesty from American politicians today. They may betray the ideals of democracy, but you will never find them publicly criticizing the ideals themselves. No, they celebrate the “common man,” even if they wouldn’t be caught dead actually socializing with one.

Tocqueville, in contrast, does not praise democracy as man’s greatest achievement. Rather, he views democracy—of the social state—as inevitable, a fait accompli to be accepted. “I have not even claimed to judge whether the social revolution, whose advance seems to me irresistible, was advantageous or fatal to humanity,” he wrote in the Introduction to Volume 1, rather “I have accepted this revolution as an accomplished fact or one about to be accomplished.” (13)

And Tocqueville’s admiration for American democracy did not come from being born here. It arose from the fact that by the 1830s America had been largely successful in maintaining a peaceful and stable democratic republic. “There is one country in the world where the great social revolution I am speaking of seems nearly to have attained its natural limits,” he wrote, and “this country sees the results of the democratic revolution operating among us without having had the revolution itself.” (12)

This was in stark contrast to revolutionary France, which desperately needed lessons on maintaining a stable democratic republic. Tocqueville said he did not go to America “only to satisfy a curiosity,” rather he “wanted to find lessons there from which we could profit.” (12)

France was always on his mind. In contrast to some famous philosophers, Tocqueville generally says what he means in fairly straightforward language. But one thing that may not be obvious is that almost every time Tocqueville says something about America, he is comparing it to France. If he were to drop his elegant style and speak more bluntly, he would say, listen, France, if you want to see how to protect freedom from the dark side of democracy, look at how they do it in America.

But now, almost two centuries later, are there lessons we Americans can learn from Tocqueville?

I think so. There is a lot of wisdom in the 676 pages of Democracy in America (I recommend the English translation by Harvey C. Mansfield and Delba Winthrop). But if I had to boil it down to one word: mores.

Tocqueville starts by examining the institutions and operation of American government from the township up to the federal government and continues with a discussion of the advantages and disadvantages of the U.S. Constitution.

But he really gets down to the nitty-gritty in Volume 1, Part 2, Chapter 9: On the Principal Causes Tending to Maintain a Democratic Republic in the United States. Here Tocqueville tries to distill the essence of what makes America a successful democracy:

American laws are therefore good, and one must attribute to them a great part of the success that the government of democracy obtains in America; but I do not think that they are the principal cause of it. And if they seem to me to have more influence on the social happiness of Americans than the nature of the country itself, on the other hand I perceive reasons for believing that they exert less [influence] than mores. (294)

You may be thinking, what the heck are “mores”? It sounds like a dessert you eat on a camping trip.

Fortunately, Tocqueville tells us exactly what he means. “I understand by this word [mores] the sum of the intellectual and moral dispositions that men bring to the state of society.” (292) Today, Webster’s defines mores as “the fixed morally binding customs of a particular group.”

We don’t have to guess how important mores are to Tocqueville because he tells us explicitly:

I am convinced that the happiest situation and the best laws cannot maintain a constitution despite mores, whereas the latter turn even the most unfavorable positions and the worst laws to good account. The importance of mores is a common truth to which study and experience constantly lead back. It seems to me that I have it placed in my mind as a central point; I perceive it at the end of all my ideas. (295)

But even assuming Tocqueville was right, how do we apply this lesson to our present difficulties?

Trouble is, we don’t use the word “mores” much today. But we have a word that means something very close to what Tocqueville was talking about: norms.

Granted, it’s not an exact equivalent. When we talk about norms, we primarily mean unwritten rules that the politicians follow. When Tocqueville talks about mores, he’s referring more broadly to the beliefs and practices of the people and the politicians. But I think it’s fair to say that norms are a close cousin to mores.

So, to adjust and restate Tocqueville’s thesis in contemporary terms: laws are important to preserving freedom in a democracy, but norms are more important.

This is an important lesson, especially for lawyers. As practitioners of the law we tend to assume the law is what really matters. And it does matter. But perhaps norms are even more important.

Ok, norms are important, you say. But that’s too abstract. Which norms exactly? What are the norms that help maintain a democratic republic in America? And how do we enforce those norms?

Check back with me in two years.

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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.  

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

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Is “Just Answer the Question” Good Deposition Advice?

Is “Just Answer the Question” Good Deposition Advice?

“Just answer the question” is standard deposition advice. The idea—conveyed by countless lawyers to their clients—is that you should only answer the question asked, and nothing more. Don’t volunteer additional information.

If you’ve ever testified in a deposition, you probably heard some version of this advice from your lawyer. And you probably didn’t follow it.

“Just answer the question” may be the most ignored legal advice ever.

It’s not that people deliberately ignore advice from their lawyers. It’s just that the advice is so unnatural. Imagine a Monday morning conversation at the office like this:

Jim: Hey, Pam, how are you?

Pam: Fine.

Jim: Oh, that’s good. Did you have a good weekend?

Pam: Yes.

Jim: . . . Ok, well. Um, wow, can you believe that Texas-OU game, that was amazing, right?

Pam: Right.

No, people don’t talk like this. So expecting them to suddenly change the way they talk is asking a lot.

Now add to that strong emotions and a lot of money at stake. How many people will naturally just answer the question asked and nothing more?

I had one client who naturally just answered the question and stopped. He was an engineer.

And in a sense he was the exception that proves the rule. Social habits are not the only reason people find it difficult to just answer the question. It’s also because the vast majority of people are not analytical. Most people think intuitively, not analytically.

Try asking somebody “would you have voted for Brett Kavanaugh?” You’re not going to get a lot of “Yes, I would, because . . .” or “No, for the following three reasons. Number one . . .” Chances are you’re more likely to get some kind of emotional, gut-level reaction.

Yet despite how unnatural it is to just answer the question, some can be taught. The teachable can be trained to do a better job of just answering the question. If you work with them enough, by the time of the deposition they will do a pretty good job of just answering the question.

But some people seem unteachable. No matter how hard you try, they just can’t help themselves. There are many reasons for this.

Some people are angry about perceived injustice and want to vent their anger.

Some people have too much pride and want to show the opponent how smart they are.

Some people are nervous and talk more to try to compensate for their nervousness.

“Just answer the question” goes against the grain so much that I have sometimes wondered whether it would be better to reject the conventional wisdom and scrap the standard advice. Just let people go with the flow and answer au naturel.

But let’s not be too quick to embrace the natural approach. There are some good reasons for the conventional wisdom.

Why do lawyers tell clients to just answer the question in the first place? What exactly are we trying to avoid when we give clients this advice?

I think it comes down to trying to avoid four things. When you don’t just answer the question, you increase the likelihood that you will do one of the following:

1. Give incorrect testimony that help’s the other side’s case.

2. Give incorrect testimony that is favorable to your case but weakens your credibility.

3. Volunteer information that is helpful to the other side’s case.

4. Volunteer information that is helpful to your case, helping the other side prepare.

All of these things are bad, but some are worse than others. I have listed them from most harmful to least harmful.

The worst one is making a mistake that is helpful to the other side. This happens more often than you might think. One reason for this is that the lawyer asking the questions wants this to happen. And the more skilled that lawyer is, the more likely you are to make this kind of mistake.

Let’s look at an example from my favorite hypothetical case, Paula Payne Windows v. Dawn Davis.

Screen Shot 2018-10-07 at 9.22.01 PM

Here we see the perils of volunteering too much. This witness makes two mistakes. First, she overstates the facts by saying she never emailed any customers. Second, she volunteers the fact that she called some customers.

Following the “just answer the question” advice can help people avoid mistakes like this.

But just answering the question isn’t always the best way to answer the question. Sometimes a simple yes or no leaves out your side of the story and makes the lawyer’s job too easy.

Let’s take this example:

Screen Shot 2018-10-07 at 9.23.20 PM

Whoa! Did the witness just admit she concealed a critical fact from her employer? This is like Lester Holt getting Trump to say he fired Comey because of the Russia investigation, right? Game over.

Not necessarily. Under Texas law, an employee generally has a right to make plans to compete with her employer, and even to conceal those plans from the employer. See my popular post on Fiduciary Duty Lite.

But the simple “yes” still has a bad smell to it. Here are some alternatives:

Q: Did you conceal that fact from your employer?

A: They didn’t ask.

or

A: Yes, of course. Who wouldn’t?

or

A: Yes, because I wasn’t required to tell them I was looking.

or

A: Did you conceal that from your last employer?

Actually, scratch that last answer. Don’t do that.

But I see some appeal to the other answers, especially for courtroom testimony. These answers don’t dodge the question, but they give the witness a chance to push back. Sometimes it’s better to give an answer like this to prevent the questioning lawyer from getting on too much of a roll.

Of course, the lawyer asking the questions is likely to follow up with “is that a yes?” At that point, the witness should concede the answer. I call this the “you get to argue once” rule and wrote about it in Witness Preparation Lessons from the Waymo v. Uber Trial. If you argue too long, you’re just going to look defensive or evasive.

Plus, you don’t want to go too far in trying to match wits with the lawyer asking the questions. You may be really smart and good at your job, but I guarantee you, even a mediocre lawyer is better at duking it out in a deposition than a non-lawyer.

Wait a minute, I can hear a client saying. So first you tell me to follow the “just answer the question rule” sometimes, and then you give me another rule to follow. How am I supposed to keep all this straight, especially when I’m under pressure? It’s like telling a golfer to concentrate on five different things in the middle of swinging the club.

I agree. See What the Ken Starr Interview Can Teach Lawyers About Witness Preparation – and Golf. For some witnesses, this is just too much. It depends on the witness’s skill level and teachability.

It reminds me of when Aristotle wrote about the best kind of government regime. He analogized to athletic training and said that the best training for the best body may be different than the best training for most bodies. (The Politics, Book 4, Chapter 1)

That’s true of deposition training too. You have to adapt the training to the person. If the witness really struggles to answer hard questions, it may be better to keep it simple and “just answer the question.”

But what if the witness is unskilled and unteachable? What do you do when “just answer the question” is just more than the witness can bear?

This is where the conventional “just answer the question” advice should yield to a more fundamental maxim: listen carefully to the question.

As we’ve seen, there is no single good way to answer tough questions. The best way to answer a question often requires a judgment call.

But “listen carefully to the question” is always good advice for everybody. If you listen carefully to the question—and think about what the lawyer is really asking—you are much less likely to make the worst kind of mistakes.

So, it turns out that the main problem with “just answer the question” is that it shifts the focus to the wrong thing. The focus should be on listening to the question, not deciding how to answer.

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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.

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

 

When Is a Customer List a Trade Secret?

When Is a Customer List a Trade Secret?

Imagine if I said to every salesperson in Texas: I don’t care whether you signed a non-compete or not. If you quit your job and try to take your customers with you to a new company, your original employer can sue you in federal court and get an injunction to prevent you from contacting any of your customers.

That would amount to saying every salesperson has a de facto non-compete.

Surely this cannot be true, right? But here’s how you get there:

  1. Almost every salesperson has some kind of list of his own customers, even if it’s just contacts on a smartphone. The salesperson knows the identity of the customers, their contact information, what they buy, and the prices they pay.
  2. A customer list is a trade secret under both the Texas Uniform Trade Secrets Act (TUTSA) and the federal Defend Trade Secrets Act (DTSA).
  3. Under the DTSA, the employer can file a trade secrets claim in federal court.
  4. The court can enter a preliminary injunction barring the salesperson from contacting anyone on the customer list.
  5. If the salesperson can’t contact his customers, the effect is about the same as a reasonable non-compete.

Hey, you had a good run, sales people. But you’re stuck where you work now, unless your employer agrees you can leave.

Wait. Is it really that bad?

Not quite. Because I’ve overstated one step in the analysis above: Step no. 2. A sales person’s customer list can be a trade secret, but it’s not always a trade secret. It depends.

That gives judges an important role. It’s up to them to police the boundary between when a customer list is a trade secret and when it isn’t. If judges set the bar too low for giving trade secret protection to a customer list, the result will be what I said: de facto non-competes for all sales people.

The Austin Court of Appeals made this very point the Trilogy Software case: “[I]nformation that a firm compiles regarding its customers may enjoy trade secret status under Texas law. But this does not mean that trade secret status automatically attaches to any information that a company acquires regarding its customers; if it did, it would amount to a de facto common law non-compete prohibition.”[1]

So, preservation of American free enterprise as we know it depends on courts holding companies to their burden of proof when they claim that customer lists are trade secrets.

To prove the customer list is a trade secret, the company has to show three things:

(1) the customer list has “independent economic value”

(2) it is not “readily ascertainable” by competitors

(3) the employer took “reasonable measures” to keep it secret

It’s usually not that hard to establish element no. 3, reasonable measures. Did the company avoid sharing the information publicly, require employees to sign confidentiality agreements, and maintain password protection on company computers? Those things are typically enough.

What about element no. 1, “independent economic value”? That’s a harder one. But it’s usually going to follow from element no. 2. If the customer list is not readily ascertainable by a competitor, that’s a good sign it has independent economic value. If it was readily ascertainable, it wouldn’t have much value.

One warning: there are still some Texas cases that say a readily ascertainable customer list can be a trade secret. This is a mistake, for reasons I explained in my longest-titled blog post ever, Customer List Confusion: The Pesky Persistence of the Brummerhop Rule in Texas Trade Secret Litigation.

No, a readily ascertainable customer list is not a trade secret. But how readily is “readily”? It is of course a matter of degree. If a competitor could compile the same list from spending a day running Google searches, that’s probably “readily” ascertainable. If it would be extremely difficult to compile the list from public sources, that’s not readily ascertainable. Most cases fall in the middle. It’s going to be a fact-intensive issue.

That means it will often be a fact question for either the jury (at trial) or the judge (at a temporary injunction hearing). In those cases, the jury verdict or judge’s ruling will hold up as long as there is at least a little evidence to support it.

For example, in Amway Corp. v. bHIP Global, Inc., there was testimony that the customer contacts and information the employee provided were his own contacts he had previously developed. This was sufficient evidence to support the jury’s conclusion that the information was not a trade secret.[2]

Conversely, in 360 Mortgage Group, LLC v. Homebridge Financial Services, Inc., No. A-14-CA-00847-SS, 2016 WL 900577, at *4 (W.D. Tex. Mar. 2, 2016), there was sufficient evidence that the customer list was a trade secret. The fact that the employee emailed herself a copy of the broker list was evidence the list was not readily available elsewhere. And the list provided more than simply names and addresses. It also included compensation rates that could be used to “undercut” the employer. (See also The Price Undercutting Theory in Trade Secrets Litigation.)

As these cases illustrate, whether a customer list is a trade secret often presents a fact issue. But in some cases, the undisputed facts will establish as a matter of law that the customer list is not a trade secret.

For example, in Alliantgroup, LP v. Feingold, the court granted summary judgment that a client list was not a trade secret. It was undisputed that the client list was very short (under 15 names), the information was limited, and the names were readily ascertainable.[3]

Parker Barber & Beauty Supply, Inc. v. Wella Corp. was a similar case involving, strangely enough, the barber and beauty supply industry. The court held that “basic customer contact and limited sales information” that the company provided about 39 of its customers was readily ascertainable and therefore not entitled to trade secret protection.[4]

In Numed, Inc. v. McNutt, Numed argued that its pricing structure, marketing research, customer lists, and renewal dates were trade secrets. But the court disagreed: “The evidence reflects much of the information Numed wishes to protect is not secret. Instead, it is contained in the contracts distributed to Numed’s customers, which in turn may be discovered by anyone.”[5] This was a pre-TUTSA case, but the principle should still apply.

Finally, Guy Carpenter & Co. v. Provenzale was a pre-TUTSA case where the federal district court denied the employer’s motion for a preliminary injunction, and the employer appealed. The Fifth Circuit, applying Texas law, noted that a “customer list of readily ascertainable names and addresses will not be protected as a trade secret,” citing numerous cases. The court then said:

. . . the district court implicitly found the customer lists were readily ascertainable. We agree. Evidence in the record indicates participants in the reinsurance market freely disclose the identity of their reinsurance broker and the nature of the reinsurance products they regularly consume. We also note that Provenzale’s list of customers was relatively short—it included only those companies he personally serviced while at Guy Carpenter. He could easily reconstitute this list even without the aid of a trade publication. Even though Guy Carpenter took steps to protect its customer list and Provenzale signed a contract stating the customer list was confidential, we conclude the customer list was not a trade secret because it was readily ascertainable.[6]

So, if the employee offers evidence like this, the court may reject trade-secret status of the customer list as a matter of law.

These cases suggest some good deposition questions to ask if you are the lawyer representing the employee:

  • How long is the employee’s customer list in comparison to the entire customer list for the company?
  • Does the company require all of its customers to keep their transactions with the company secret? If not, how is the identity of the customers a secret?
  • Do customers freely share the identity of companies they buy from?
  • Could the employee easily reconstruct her short customer list? If so, doesn’t that suggest the information is readily ascertainable?
  • Are you saying a competitor would pay real money for this customer list? If not, how can you say it has “independent economic value”?

These can be tough questions for the company. But the company’s lawyer always has the best comeback: if the customer list is readily ascertainable and doesn’t have any economic value, why did the employee take it?

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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.

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.

[1] Trilogy Software, Inc. v. Callidus Software, Inc., 143 S.W.3d 452, 463 (Tex. App.—Austin 2004, pet. denied) (emphasis added).

[2] Amway Corp. v. bHIP Global, Inc., No. 4:10-CV-549, 2013 WL 2355083, at *2 (E.D. Tex. May 29, 2013).

[3] Alliantgroup, LP v. Feingold, 803 F.Supp.2d 610, 626 (S.D. Tex. 2011).

[4] Parker Barber & Beauty Supply, Inc. v. Wella Corp., No. 03-04-00623-CV, 2006 WL 2918571, at *17 (Tex. App.—Austin Oct. 11, 2006) (mem. op.).

[5] Numed, Inc. v. McNutt, 724 S.W.2d 432 (Tex. App.—Fort Worth Feb. 5, 1987, no writ).

[6] Guy Carpenter & Co. v. Provenzale, 334 F.3d 459 (5th Cir. 2003).

The Problem With “The Most Successful People”

The Problem With “The Most Successful People”

There is a story about a lady at a dinner telling President Calvin Coolidge she had wagered she could get the President to say more than three words. Silent Cal’s famous response: “you lose.”[1]

More about Coolidge later.

Over the summer you may have noticed that social media was abuzz with “the most successful people I’ve met” posts. Apparently it started with this tweet from a guy calling himself Pomp:

Pomp.png

Naturally this led to people posting their own lists. These fell into two categories: (1) earnest attempts to make a better list and (2) parodies.

Some parodies were funnier than others, but with thousands of people weighing in, the funniest ones were pretty darn funny. Twitter at its best.

I didn’t have an immediate tweet of my own, but my thoughts on “successful people” eventually morphed into a blog post called Successful Blogger Shares Secrets of Morning Routine. It was classic me: half-joking, self-deprecating, not really that funny.

But now I want to share my serious, deeper thoughts about this “habits of successful people” thing. If you’re like me, you probably want to be “successful” (whatever that means), and you like good tips on how to succeed. So does the recent “successful people” episode have any lessons of real value?

Let’s start with the list that kicked off the tweetstorm. It’s easy to make fun of it, and I am not above doing that, but does it contain any true insight?

This is a tough one. The most profound truths are often the simplest and most obvious. That means there is often a fine line between the profound and the banal. Or in the words of David St. Hubbins, “it’s such a fine line between stupid and clever.”

So let’s start by giving Pomp his due. We can concede that it’s good to do the things on his list. We can even acknowledge that most successful people do most of those things.

Now, with that out of the way, let the snark begin.

Many people pointed out the fact that successful people often have a head start:

Lucky.png

Others highlighted the fact that “successful” people can be selfish jerks:

Jerks.png

And some redefined success to favor cats and fuzzy fictional children’s characters:

Eat honey or marmalade

But for me, the funniest ones were the absurd non sequiturs:

Hamburglar.png

Jokes aside, there are also serious critiques. For one thing, many traits people put on these lists are tautological, i.e. true by definition. Saying that successful people “build great teams” or “demand excellence” is only slightly more insightful than saying “successful people tend to be very successful.”

But there’s a more fundamental problem. This tweet pointed it out:

Survivorship Basis.png

Survivorship bias is the logical fallacy of looking at the characteristics of people who survived some selection process and ignoring the people who did not. It is a form of selection bias.

Selection bias provides a meta-critique of the whole idea of identifying traits of successful people. When we select successful people and leave out unsuccessful people, we fail to make a comparison that would be useful. Plus, when we decide which successful people to study, we effectively predetermine which characteristics make one successful.

A trivial (?) example that makes the point: highly successful entrepreneurs who wear the same thing every day. Steve Jobs and Mark Zuckerberg did it and built multi-billion dollar empires. But wearing your sleeveless Def Leppard shirt and cargo shorts every day probably won’t guarantee success. Just like wearing the same white shirt and blue suit won’t make your YouTube series on non-compete litigation a viral sensation. Hypothetically.

This gets to the correlation versus causation problem. Let’s take another example. Does working out every day cause you to succeed? Or perhaps highly successful people have some other characteristic that explains both why they make partner at age 29 and the fact that they never miss their 5 am spin class.

If you really wanted to be scientific about it, you would identify a certain habit—such as reading a book every week—and you would compare a randomly selected group with that habit to a randomly selected group without that habit. Ideally, each group would be exactly the same but for that one characteristic. You would then see if the book-reading group was more successful than the group that watches The Bachelor every week.

Of course, this is virtually impossible to do in real life, which is why social science will never be as “scientific” as laboratory science.

No, understanding the secrets to success requires wisdom, not double-blind clinical trials. The scientific method has its limits.

And while the average individual is not very wise, there is a certain collective wisdom that can emerge from a community. Case in point: the nuggets of wisdom that can be panned from all the “successful people” parodies in the Twitterverse.

Just to name a few:

  • Many factors go into success
  • Success is not entirely within your control
  • Many successful people were born into wealth or privilege
  • People succeed by being in the right place at the right time
  • Some people achieve success through immoral, unethical, or illegal means
  • Successful people can have negative or self-destructive traits in addition to their positive ones
  • Sometimes the negative traits of successful people are inextricably intertwined with the positive ones (Nietzsche said, “Be careful, lest in casting out your demon you exorcise the best thing in you”)
  • Imitating the traits of successful people doesn’t guarantee you will succeed
  • “Success” isn’t everything

Wait a minute. One of these nuggets is not like the other. The last point—success isn’t everything—calls into question the whole premise.

This leads us to the most profound truth to emerge from the “most successful people” memes. The most successful people define “success” on their own terms.

If you define success as becoming a billionaire, a professional athlete, or a rock star, then your chances of success are pretty low. But if “success” for you means loving your friends and family and treating people well, your chances increase.

This is undoubtedly true, but it kind of dodges the question. What if we change the question to “what practice will help you succeed in your business or career?” That’s less important than “what is a meaningful life?” but still important.

And that brings me back to Calvin Coolidge. Here’s something we know he really said:

Nothing in this world can take the place of persistence. Talent will not: nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not: the world is full of educated derelicts. Persistence and determination alone are omnipotent.

My dad shared this quote with me years ago, and aside from the political incorrectness (we wouldn’t say “men” and “derelicts” today), it’s pretty good advice.

It’s also a great example of what I call “dad” advice. I don’t necessarily mean advice from my dad, and dad advice could come from anyone (including a mom). Personally, I’m more prone to make a dad joke than to give dad advice, but I have two kids of my own now, and on occasion I find myself dispensing some dad advice.

Dad advice has two main characteristics: (1) it’s somewhat obvious, and (2) it’s not fun.

Obviously, if you want to build wealth then you should save more and spend less. Obviously, if you want to lose weight you should eat healthier foods and exercise. Obviously, you do not want to emphasize the fourth when playing over a major seven chord.

This is dad advice. It’s kind of a downer.

If it wasn’t obvious, it would come from an expert, like Tony Robbins, not your dad. If it was fun, everyone would do it.

Persistence is like that too. It’s boring. But here’s the good news: it works. Recently I had a small but significant achievement that resulted from a couple years of steady effort. It really brought home to me the importance of persistence.

So yeah, the most successful people I’ve met are persistent. And most of them don’t wear the same thing every day.

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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. “Nietzsche says, out of chaos comes order.”

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

[1] The “you lose” story is probably apocryphal, but like most great stories, if it didn’t really happen it should have.

Key Issues in Departing Employee Litigation

Key Issues in Departing Employee Litigation

On September 19 I gave a one-hour presentation on Key Issues in Departing Employee Litigation to the Houston Bar Association Litigation section. If you couldn’t make it, this is the five-minute version.

Five key issues in five minutes. For each one, I’ll give you a practice tip (or two) and a key case that will help you understand the issue.

Here we go.

No. 1: Preservation of ESI

What’s the first question a lawyer should ask the client in a departing employee case? I say it’s “what company documents did the employee take?” As I explain in this video, the departing employee almost always takes—or keeps—something, even if it’s not for any sinister reason.

This is important to know, whether you represent the original employer, the employee, or the new employer. This fact tends to color all the other issues. A judge is more likely to enforce a non-compete, for example, if there is evidence that the employee downloaded the company’s confidential customer list on the way out the door.

And of course the question is relevant to misappropriation of trade secrets. As a practical matter, the documents taken will determine the strength of any trade secrets claim. I call this Wolfe’s First Law of Trade Secrets: whatever company documents the employee takes will be the alleged “trade secrets” in the subsequent lawsuit.

Practice Tip:

Press the client for details about documents early in the case. This is important for the reasons I’ve already mentioned, but also to meet the duty to preserve relevant electronically stored information (ESI).

You’ve got to press, especially if you represent the employee, because it’s too easy for the employee to say “no, I don’t have anything” without really thinking it through. No, you don’t have a “customer list,” but what about the contacts on your iPhone?

Cases to Read:

In re Methodist Primary Care Group, No. 14-18-00191-CV, 2018 WL 3061321 (Tex. App.—Houston [14th Dist.] 2018) (orig. proceeding). In Weekley Homes, the Texas Supreme Court laid out the procedure for obtaining direct access to another party’s computer or other device in discovery. This case applies the Weekley Homes standard to a departing employee dispute.

First Western Capital Mgmt. Co. v. Malamed, No. 16-cv-1961-WJM-MJW, 2016 WL 8358549 (D. Colo. Sept. 30, 2016). I wrote about this case here. It’s a good lesson on what not to do if you’re the employee in a customer list case. It also illustrates a Catch-22 for the employee: admit the customer list is a trade secret you help the plaintiff prove its case; if you deny the customer list is a trade secret, the judge may see this as evidence you intend to use it.

No. 2: Confidentiality Agreements

Usually the departing employee signed an employment agreement that includes a confidentiality clause or “NDA.” Often the NDA will require the employee to delete or “return” confidential company documents after termination of employment.

But as I explained here, deleting or returning company documents is not always advisable. First, deleting documents could violate the duty to preserve relevant evidence when litigation is reasonably anticipated. Second, the employee might need those documents to prove her own case, especially if there is a dispute about whether the employee is owed compensation. Then there’s the practical problem: how do you “return” electronic files?

Practice Tip: Exercise judgment about deleting or “returning” company documents. On this issue there is no one-size-fits-all solution. You have to think through the issues and make a judgment call. You may decide, for example, to return that portable hard drive the employee used but to have an expert make a forensic copy that you retain in case of litigation.

Case to Read:

Daugherty v. Highland Capital Management, L.P., No. 05-14-01215-CV, 2016 WL 4446158 (Tex. App.—Dallas Aug. 22, 2016, no pet.) (mem. op.). In this case, evidence that the employee took confidential information supported granting a permanent injunction against the employee, despite the jury’s finding of zero damages.

No. 3: Non-Competes

Texas has a lot of case law on non-competes. If you’ve got 30 minutes you can watch my video series Essentials of Texas Non-Compete Litigation.

But if you only have a minute, I can sum up Texas law on non-competes in just seven words. I call it Wolfe’s First Law of Texas Non-Compete Litigation: you can’t take your customers with you.

It’s just a general rule. But most of the time it will hold true.

Practice Tips:

First, evaluate the confidential information issue early. In the typical case where the non-compete is tied to a confidentiality agreement, the issue is whether the employer made the agreement enforceable by following through on its commitment to provide confidential information to the employee. If the employee is going to take the position that he didn’t receive any confidential information, you need to test that position and, if it holds true, prepare the employee to stick to it.

Second, if you represent the employee or his new employer, you need to understand the business plan. Is the employee going to go after new customers he didn’t deal with at his previous company? Then the non-compete probably won’t be a problem. But if the plan is to bring all of the employee’s old customers over to the new company, you may have a problem.

Case to Read:

Republic Services, Inc. v. Rodriguez, No. 14-12-01054-CV, 2014 WL 2936172 (Tex. App.—Houston [14th Dist.] June 26, 2014). This is a good example of a Texas case upholding a non-compete. The court rejected the employee’s argument that the employer never provided confidential information, citing the employee’s testimony that she received training on software, access to the company’s invoices, and information on pricing. The court also rejected the employee’s argument that the non-compete was a prohibited “industry-wide exclusion,” where there was evidence the employee could work in the legal services industry without working for a competitor of the company.

No. 4: Trade Secrets

Big trade secrets cases tend to grab headlines. There was the Waymo v. Uber trial, where Google accused a former employee of stealing its confidential self-driving car technology. There was the recent Zhang case where the FBI arrested a former Apple engineer as he was getting ready to board a plane to China with Apple’s secret technology for . . . you guessed it, self-driving cars.

But the typical trade secrets claim does not involve cutting-edge technology. More often it’s the company’s customer list or pricing information. The company will argue that information about the identity and needs of customers is a trade secret, and that knowledge of the company’s confidential prices would allow a competitor to “undercut” the company and take its customers.

Practice Tip: Understand the client’s industry. Whether customer information or price information is a trade secret is usually a fact-intensive issue that requires understanding how the industry works.

Is it an industry where everyone knows who the target customers are? Are prices widely available in industry publications? Do the prices change daily, weekly, monthly? These are the kinds of facts that will determine whether the information at issue is “not readily ascertainable,” which is the key to trade-secret protection.

Case to Read:

SP Midtown, Ltd. v. Urban Storage, L.P., No. 14-07-00717-CV, 2008 WL 1991747, at *6 (Tex. App.—Houston [14th Dist.] May 8, 2008) (mem. op.). This case illustrates that even the most mundane information can potentially be a trade secret. The court held there was a fact issue on whether the company’s daily rental logs constituted trade secrets where “[t]he information would allow competitors to slightly undercut Space Place’s prices and take its business.”

No. 5: “Fiduciary” Duty

What if the employee didn’t have a non-compete? What if there are no trade secrets? The employer may still have a claim against the employee for breach of fiduciary duty.

The employee doesn’t have a true “fiduciary” duty, because there is a lot the law allows an employee to do that a true fiduciary couldn’t do. Texas law says it is not a breach of the employee’s fiduciary duty for the employee to make plans to compete with the employer and to conceal those plans from the employer. That’s why I call it “Fiduciary Duty Lite.”

But if there’s one thing an employee shouldn’t do, it’s diverting customers to a competitor while still employed by the company, especially if the employee receives compensation for doing so. That would be a breach of the employee’s fiduciary duty.

Practice Tip:

Don’t assume the Texas Pattern Jury Charge question and instruction on fiduciary duty applies to employees.

If you’re the plaintiff, you love the Texas Pattern Jury Charge question and instruction on breach of fiduciary duty. It places such a heavy burden on the defendant. For example, the defendant must prove it “acted in the utmost good faith and exercised the most scrupulous honesty” toward the plaintiff. How can an employee who concealed his plans possibly meet that standard?

He can’t, and that just shows that the Pattern Jury Charge question and instruction on breach of fiduciary duty was not intended for departing employee cases.

Case to Read:

Orbison v. Ma-Tex Rope Co., No. 06-17-00112-CV, 2018 WL 2993012 (Tex. App.—Texarkana June 15, 2018). In this case, the employee started competing with his employer before leaving, resulting in the court ordering the employee to forfeit a portion of the salary earned at the first company and two weeks of his salary from his subsequent employer. The dollar amounts at issue were small, but the principle provides a warning for any employee thinking about diverting customers to a competitor while still employed.

Of course I’ve only scratched the surface of these issues here. Send me an email if you have questions, or to book me for your next one-hour time slot.

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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.

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.

 

Totally Apolitical Cross-Examination Lessons from the Kavanaugh Hearings

Totally Apolitical Cross-Examination Lessons from the Kavanaugh Hearings

Let’s set aside the politics of the Brett Kavanaugh Supreme Court confirmation hearings for five minutes (as if that were possible). What can litigators learn about effective cross-examination from Senator Kamala Harris’s grilling of Judge Brett Kavanaugh about a possible discussion of the Mueller investigation with a law firm that represents Donald Trump?

The reviews of Harris’s performance were all over the map. Some gushed over the former prosecutor’s toughness and cross-examination prowess. Others, especially fellow litigators, scoffed like she was an amateur. (I imagine the latter is similar to the way jealous stand-up comedians review each other.)

And strangely enough, the varied reactions to the Senator’s technique tended to correlate with the political views of the reviewer.

But let’s put aside the fact that Harris is a liberal Democrat with presidential ambitions and Kavanaugh is a conservative Republican who could tilt the Supreme Court rightward for a generation. Let’s just look at it as a lawyer cross-examining a witness. What can we learn?

Recap

First let’s recap what happened. As you can view here, Harris asked Kavanaugh if he had ever discussed the Mueller investigation with anyone at the law firm Kasowitz Benson & Torres, the law firm founded by Donald Trump’s personal lawyer Marc Kasowitz.

Kavanaugh, thinking Harris must have some kind of information on such a discussion, stalled for time. “I would like to know the person you’re thinking of,” he said. Harris kept pressing, without revealing the name of the person she had in mind. Eventually, Senator Mike Lee jumped in to try to rescue Kavanaugh. When Harris resumed the questioning, Kavanaugh continued to avoid giving a direct answer.

This is a familiar scenario for litigators. It often happens in depositions. The lawyer asks a pointed question that is specific enough to imply the lawyer has the goods on the witness, but open-ended enough not to suggest the answer. This makes the witness squirm. “What does she have on me?” the witness thinks. Afraid of giving an answer that could easily be impeached, the witness bobs and weaves. If the lawyer keeps pressing, eventually the witness’s lawyer jumps in, even if that’s a violation of the rules.

So the Harris-Kavanaugh exchange provides a teaching moment. What do we think of Senator Harris’s cross-examination technique? And what can we learn from Judge Kavanaugh’s answers, or non-answers?

Grading Senator Harris

Let’s start with the Senator. So much depends on what she really has on Kavanaugh, if anything. If her question was based on pure speculation or rumor, then I would have to give her performance a C-. Because if she doesn’t really have any evidence of the discussion, then the whole episode will ultimately just hurt her credibility.

As I tweeted:

Screen Shot 2018-09-08 at 8.46.20 AM.png

Yes, in the short term she created some doubt about Kavanaugh’s credibility—that’s why I wouldn’t give her an F—but if she can’t back up her implied accusation the court of public opinion will eventually ask “what was the point of all that?” You don’t want to get the jury excited about some juicy fact and then fail to deliver.

But let’s assume for the sake of argument that Senator Harris does have some specific, credible evidence that Kavanaugh had some substantive discussion of the Mueller investigation with a lawyer at Kasowitz. That would change things.

Then the evaluation would shift to the question of timing. When would be the best time for Sen. Harris to reveal the evidence she has?

Some observers skewered Harris for not immediately impeaching Kavanaugh with evidence. And perhaps they were right that the best time to bring it up was immediately.

But I think it’s wrong to assume that waiting was a mistake. Trial lawyers often have to make this kind of judgment call. The argument for bringing up the impeachment material immediately is that you want to score points while the issue is fresh on the minds of the audience. If you wait, the audience may forget the issue or worse, assume you never had anything on the witness in the first place.

But there are also good reasons to wait. The best one: You may be able to offer the impeachment evidence when it is too late for the witness or his lawyer to try to explain it away.

Screen Shot 2018-09-09 at 11.41.58 AM.png

Let’s say in a civil lawsuit a witness testifies “no, I never emailed my customer list to anyone outside the company.” Suppose such an email comes into evidence later. Imagine the lawyer waits until closing argument to show that email to the jury. “Remember when Dawn Davis said she never emailed her customer list,” the lawyer says in closing, “I guess she conveniently forgot about this one.” What can Dawn say at that point?

So I have to give Sen. Harris an I for “Incomplete” on her strategy. Time will tell.

But of course it’s not just about strategy, it’s also about technique. For demeanor and tone, I give Harris an A. She was persistent without overdoing it. She didn’t let Kavanaugh or Lee get her off track. Her tone was dry, and her facial expressions said it all. “Be sure about your answer, sir,” she deadpanned with a skeptical look.

I liked her tone. But I’ll admit this is the most subjective part of the grade.

Grading Judge Kavanaugh

And of course, even the best cross-examination technique can be thwarted by a good solid answer. So how do we grade Judge Kavanaugh’s response? Again, so much depends on what the real answer is.  As I tweeted that day:

Screen Shot 2018-09-08 at 8.26.07 AM.png

Is there one I’ve missed? Let me know.

Kavanaugh started ok, saying “I’m not remembering,” but then he got more defensive, asking twice if Harris would tell him who she was thinking of, and then saying he was trying to think if he knows anyone at that firm. If he really didn’t remember, why not just stick with that and end the questioning there?

One possibility—consistent with possibility 3—is that Kavanaugh could not answer the question because Washington is crawling with lawyers, the Kasowitz firm itself has over 200 lawyers, and Kavanaugh cannot be expected to know the firm affiliation of every lawyer he talks to. This was essentially what Sen. Lee interrupted to suggest to the witness and the public.

In litigation, jumping in like this generally violates the rules, but I get it. Sometimes as the lawyer for the witness you just have to do it. (It’s only consistent with the rules if the questioning has crossed the line into harassment.) But if you’re the lawyer for the witness and you intervene to suggest the answer, the answer you suggest should at least be credible.

And the answer Sen. Lee suggested just wasn’t that persuasive. Are you telling me that a judge on the D.C. Circuit Court of Appeals—a court likely to hear some appeals arising from the Mueller investigation—has had so many conversations with people about the Mueller investigation that he can’t remember if one of those conversations was with a lawyer who works for a law firm that has represented Trump?

I don’t buy that. But in fairness to Kavanaugh, it’s certainly possible that he didn’t know for sure.

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Without knowing which possibility is the truth, I’ll give Kavanaugh’s response a C. He doesn’t get an F, because at least he didn’t give a direct, dishonest answer. That would be the worst thing to do.

But his equivocating was not the best approach. It made him look like he had something to hide—even if he didn’t. And it instantly highlighted the issue as important. Instead of questioning the questioner—and inviting a debate—why not just give a simple answer?

That doesn’t mean you should trust your memory too much. There is no need to go out on a limb and say “I absolutely never spoke to anyone at that firm about Mueller a single time in my life.” But if the honest answer is “I don’t remember talking to someone at that firm about it,” then just say that. At that point you’ve taken the sizzle out of the question.

So it turns out the Harris-Kavanaugh episode doesn’t just give us a lesson on cross-examination. It teaches us something about witness preparation too: The simple truth will set you free.

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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.

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.