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.

Screen Shot 2018-09-09 at 11.46.48 AM.png

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.

 

Essentials of Texas Non-Compete Litigation (the Viral YouTube Sensation)

Essentials of Texas Non-Compete Litigation (the Viral YouTube Sensation)

Fivers, did you know I have a YouTube channel? It’s called That Non-Compete Lawyer. I named it that because I’m a lawyer, and . . . ok, you get it.

I thought about naming it That Houston Lawyer Who Does a Lot of Different Kinds of Business Litigation but in Recent Years Mainly Litigation Involving Departing Employee Issues Like Non-Competes and Trade Secrets*. But that just didn’t have the same ring to it.

Anyway, I’ve had this YouTube channel for a while. It’s the home for my series of videos explaining non-compete issues in a way that lawyers and other humans can both easily understand.

It’s also the hub for my series of “Top 5 Tuesday” videos. I consider them both insightful and hilarious, providing useful legal information in an entertaining way, while critics have expressed amazement at how they manage to be dull and frivolous at the same time.

But now I’ve launched something even more amazing: Essentials of Texas Non-Compete Litigation. It’s a 30-minute video course in 15 installments. As you math majors will deduce, that’s an average of two minutes per installment.

And I would venture to say there has never been a better 30-minute YouTube course on Texas non-compete litigation. I mean, it’s no Dude Perfect, but I think you’ll like it. And when you watch, be sure to follow along with my free Study Guide. It has helpful case cites and tips on additional reading. (Spoiler: there’s a heavy dose of Five Minute Law posts in the “Additional Reading.”)

Love it? Hate it? Is there something essential I left out? Did I get anything wrong? Was there anything I could have cut? If so, I’m pretty sure there is a way to communicate that to me through YouTube’s popular platform. Or if you’re not that tech-savvy, you can just text me on your flip phone.

FAQ

Is Essentials of Non-Compete Litigation approved for CLE credit in Texas? No, but I’ll look into that.

Is it better to watch one episode at a time, or to binge-watch the whole series in one weekend? I leave this to your discretion.

Can one Texas trial lawyer cover the essentials of Texas non-compete litigation in just 30 minutes? There’s only one way to find out.

Is there a GoFundMe campaign to get you better lighting and sound? Not yet, but I like the way you think.

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IMG_4571Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. He hopes to continue litigating even after becoming a viral YouTube sensation. 

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.

*Not certified by the Texas Board of Legal Specialization

Do’s and Don’ts for Departing Employees

Do’s and Don’ts for Departing Employees

Specialization has benefits. A lawyer who repeatedly handles the same type of case will tend to become an expert in that type of case, understanding the nuances, tricks, unanswered questions, and grey areas. See Do I Need a Specialist to Handle My Texas Non-Compete Case?

But becoming an expert on an area of law can have a less obvious downside: the tendency to forget that things that are self-evident to you may not be so obvious to a client.

For example, if you’re a plaintiff’s personal-injury lawyer, it’s pretty obvious that a person who claims he suffered a debilitating injury probably shouldn’t post photos on Facebook showing himself water-skiing at the lake last weekend. But as I discussed here, you still might need to tell the client to avoid posting social media content that could hurt his case.

Let’s apply this to the type of case I often handle. If you’re an employee planning to quit your job and go to work for a competitor, it’s probably a bad idea to lie to your employer about where you’re going. But even an honest employee could make a mistake like this when caught off guard.

This is just one example. There are a lot of things departing employees should and shouldn’t do.

That’s one reason it’s a good idea for a departing employee to consult with her own lawyer ahead of time. Many common mistakes can be avoided by getting some basic advice from an attorney.

But what if your lawyer inadvertently leaves something out? What if the one thing your lawyer forgets to mention on the phone is the one crucial mistake you make on the way out the door?

If only someone could come up with a simple list of do’s and don’ts for departing employees. Some kind of form that could be shared with both lawyers and clients.

Wait a minute. I could do that.

Here it is: Wolfe’s Do’s and Don’ts for Departing Employees. Download it, study it, follow it, critique it. Whatever you want. Just don’t ignore it.

Of course, I need to accompany this with the usual MASSIVE LAWYER DISCLAIMERS:

*This list is for general educational purposes only. Every case is different. If you are the employee, consult with your own lawyer,  Don’t rely on this as legal advice for your particular case.

*Even if you’re a lawyer, keep in mind these are only general tips that apply to most departing employee scenarios. They don’t cover specific substantive legal questions, like Is the Employee’s Non-Compete Enforceable?, Is the Company’s Pricing Information a Trade Secret?, or How Should a Departing Employee “Return” Company Documents? You may need to consult your friendly neighborhood litigation blogger about these issues.

But hopefully these tips will help people avoid some common mistakes. Like posting that water-skiing photo.

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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.