Texas Supreme Court Opens Door to Voting by Mail

Texas Supreme Court Opens Door to Voting by Mail

There’s a scene in The Incredibles where Mr. Incredible, working a desk job as a civilian for a bureaucratic insurance company, loudly informs the proverbial little old lady that her claim is rejected. But this is just for the benefit of his superiors. He then whispers  instructions on how she can get her claim approved. It’s a great moment.

Well, the Texas Supreme Court pulled a Mr. Incredible this week.

While loudly proclaiming that lack of immunity to COVID-19 is not a “disability” entitling a voter to an absentee ballot, the Texas Supreme Court quietly rejected Texas Attorney General Ken Paxton’s petition for a writ of mandamus. Paxton had asked for an order prohibiting county clerks from informing the public that lack of immunity to COVID-19 alone is a “disability” entitling a voter to an absentee ballot. But the court said no. See In re State of Texas (Tex. May 27, 2020).

(A writ of mandamus is essentially an order from a court requiring a government official to perform some official act.)

It was not a complete loss for Paxton, as the Court agreed in principle with his argument that a voter’s lack of immunity to COVID-19, “without more” or “by itself,” is not a “disability” as defined by the Texas Election Code. But the court emphasized that “a voter can take into consideration aspects of his health and his health history that are physical conditions in deciding whether, under the circumstances, to apply to vote by mail because of disability.”

Thus, the court clearly left the door open for individual voters to decide that lack of immunity plus some other risk factor—such as a heart condition, asthma, being overweight, you name it—is a “disability.”

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And perhaps the most important part: The court emphasized that it is up to each voter to decide whether to apply to vote by mail based on a disability, and that county clerks have no duty to look beyond the face of the application, which simply has a box to check for “disability.” No explanation required.

As the court said, the county clerks “do not have a ministerial duty, reviewable by mandamus, to look beyond the application to vote by mail.” While the AG claimed that clerks are accepting “improper applications,” the court said “there is no evidence in the record that any has accepted a faulty application.” Because the clerks assured the court they would discharge their duty to follow the law, the court rejected Paxton’s petition for a writ of mandamus.

This means county clerks can’t tell Texas voters that lack of immunity to COVID-19 alone is enough to get an absentee ballot. That would be like an insurance company telling its policyholders how to get their claim approved.

But what does this mean for Texas voters?

As a practical matter, the Texas Supreme Court’s ruling clears the way for voters who claim lack of immunity to COVID-19 plus some other risk factor to request an absentee ballot if they decide that is a “disability.”

In effect, the Texas Supreme Court whispered instructions to voters who fear contracting COVID-19 at the ballot box: “just decide you have a disability because of some other risk factor and check the box . . . shhh!”

Mr. Incredible would be proud.

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

These are his opinions, not the opinions of his firm or clients, Do not rely on this post as legal advice for your particular situation. Consult your own lawyer.

 

The Problem With Non-Competes

The Problem With Non-Competes

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

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

That’s it. That’s the tweet.

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

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

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

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

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

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

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

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

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

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

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

You see where this going.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Conclusion

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

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

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

What is “Hearsay” Anyway? Tips for Lawyers and Non-Lawyers

What is “Hearsay” Anyway? Tips for Lawyers and Non-Lawyers

Early in my legal career, I worked on a couple big embezzlement cases. In both cases my firm represented the embezzle-ee, not the embezzle-or (are those real words?). And in both cases, the core evidence of the embezzlement was hearsay.

“Hearsay” has been in the news a lot lately. It’s kind of the evil twin of another term getting a lot of play: “direct knowledge.” Hearsay and direct knowledge are not exactly opposites, but you could say they are two sides of a coin.

As a trial lawyer with at least a basic understanding of the hearsay rule, I cringe when people use terms like “hearsay” and “direct knowledge” without really understanding what they mean.

But we lawyers mustn’t carp too much. “Hearsay” has an ordinary meaning in popular discourse that doesn’t pretend to match the legal definition of hearsay. When an ordinary person says that information is hearsay, they just mean it’s secondhand knowledge. There’s nothing wrong with using the word “hearsay” in that ordinary sense—in theory.

Plus, even lawyers have a hard time with the legal definition of hearsay. I doubt the average non-litigator lawyer could give you a good definition. Even some litigators might struggle to explain it. And in my experience, even the average trial court judge doesn’t have a firm grasp of the hearsay rule.[1]

So what is hearsay? The legal definition is simple: an out of court statement offered for the truth of the matter asserted.[2]

But there’s a lot wrapped up in that definition. Plus, as any Law and Order fan knows, there are exceptions to the hearsay rule. More about that later.

The “out of court statement” part is not too difficult. Let’s say I’m trying to prove that Dawn Davis embezzled money from her former employer, Paula Payne Windows. I call Paula Payne, the owner of the company, to the stand. “Ms. Payne,” I ask, “how do you know Ms. Davis forged those checks?” “Because my bookkeeper told me she saw Ms. Davis do it,” she answers.

In this case, it’s an “out of court” statement, meaning the bookkeeper is not there testifying to the statement she made. Instead, it’s Payne testifying about the bookkeeper’s statement.

And notice something else: Payne does not have direct knowledge, i.e. “personal knowledge,” that Davis forged the checks. She only has “secondhand” knowledge. That’s the connection between hearsay and direct knowledge.

In this case, it is clear that the statement—“I saw Davis forge the checks”—is offered for the truth of the matter asserted. Payne is trying to prove that Davis forged the checks. The statement is that Davis forged the checks. So, the statement is offered to prove the truth of the matter asserted.

But trust me, the “truth of the matter asserted” is where the hearsay rule gets hard. It’s the part that even some judges and lawyers struggle to understand. And that’s before we even get to the exceptions.

Let’s start with a relatively easy example where a statement is not offered for the truth of the matter asserted.

“Ms. Payne,” I say, “please take a look at Plaintiff’s Exhibit 10, is that an email from Ms. Davis to your bookkeeper?” “Yes,” Payne says. “What did Ms. Davis say in the email?” I ask. “She said can you please take care of getting the attached invoice paid,” Payne answers.

Here, the statement in the email is clearly an out of court statement. But is it offered for the truth of the matter asserted?

It depends on what I’m trying to prove. Let’s say that the point is to prove a scheme to submit fraudulent vendor invoices on behalf of a company that Davis secretly owned. In that case, I am not offering the email for the truth of the matter asserted. If anything, I’m offering Davis’s statement in the email to prove the opposite of what it asserts.

So in this case, if opposing counsel says “objection, hearsay,” the judge should say “overruled.”

Harder Cases

But it’s not always this easy. Sometimes, a statement is offered both for the truth of the matter asserted and for another purpose.

Let’s say I’m trying to prove that Davis secretly accepted a job offer from Paula Payne’s fierce competitor, Real Cheap Windows. “Mr. President of Real Cheap Windows,” I say, “what did Ms. Davis say to you when you offered her a job at your company?” His response: “she said yes I would like the job.”

“Yes I would like the job.” That’s an out of court statement. But is it offered for the truth of the matter asserted? Well, yes. And no.

On the one hand, I am trying to prove that Davis wanted the job and accepted the job offer. So the statement is hearsay, right?

No, not really. Here’s the thing. It’s not a question of whether the statement “I would like the job” is true or not. The relevant fact is that Davis accepted the job offer.

As my law school Evidence professor used to say, it’s a case where the “saying of the words” itself, not the truth of the words said, is significant. You could also call this a “verbal act.” Some older court opinions tend to call this sort of statement res gestae (“things done”).

Another way to put it: the statement is not hearsay because the probative value of the statement does not flow from the speaker’s belief in the truth or falsity of the statement.

Confused yet? That’s ok. It’s a subtle distinction.

And, frankly, it’s one that a lot of judges may struggle to grasp. Picture this:

Me: What did Ms. Davis say when you offered her the job?

Opposing Counsel: Objection, hearsay.

Me: Your Honor, it’s not hearsay, it’s a verbal act. 

Judge: Verbal act? What exception is that?  

Me: Uh, that’s not really an exception per se. It’s just that the statement is not hearsay because, well I’m not so much offering it to prove the truth of the matter asserted. 

Judge: You’re not offering it to prove she accepted the job?

Me: Well yes, your Honor, I am trying to prove she accepted the job, but . . .

You get the idea. It’s hard enough to explain this subtle distinction. It’s even harder in the heat of a courtroom battle, especially when opposing counsel is happy to contribute to the judge’s confusion.

Luckily, in this case there is an easier way out of the problem. I could simply say “it’s an admission by a party opponent, your Honor, an exception to the hearsay rule.”

This leads me to my Hearsay Practice Tip for lawyers: If a hearsay exception clearly applies and is easy to explain, argue the exception first, rather than trying to make a subtle argument about the “truth of the matter asserted.”

Hearsay Exceptions 

I promised we would get to the exceptions.

But first, there is a slight complication. There are two different types of hearsay exceptions. First, there are exceptions that are defined as “not hearsay.” If they are not hearsay in the first place, then you might say they are not “exceptions” at all, but let’s not be pedantic. Second, there are exceptions for certain types of statements that are admissible, even though they are hearsay.

For simplicity, let’s just call both types hearsay “exceptions.”

I once made it a goal to memorize all of the hearsay exceptions. I count 31 of them in the Federal Rules of Evidence and 30 in the Texas Rules of Evidence (they are largely the same).

My heart was in the right place, but this was not an efficient exercise. I mean, it’s great to know that there is an “ancient documents” exception to hearsay, but over 90% of the time there are only a handful of hearsay exceptions a litigator needs to know.

You can probably get by with a thorough understanding of just three of the hearsay exceptions:

  1. Impeachment with prior testimony (like a deposition)
  2. Admission by party opponent
  3. The “business records” exception

You can look up the other exceptions when needed, or memorize them if you are really nerdy. But these three should be second nature to any litigator.

The first one, impeaching the witness with prior testimony, is a trial lawyer’s bread and butter. I probably don’t need to say much about it, although the rule has some little twists and turns that are worth checking.

Admission by Party Opponent

I shouldn’t have to say much about the second exception either, but maybe I need to anyway. I once had a trial where I offered an email from the opposing party’s president to an agent of my client. Opposing counsel jumped up and objected, “hearsay!”

“You’ve got to be kidding me,” I thought to myself. “Your Honor, this is an email from Mr. X as a representative of the company,” I said, “it’s an admission by a party opponent.”

“What exception is that?” the judge said. And this was not a new judge.

It took some discipline for me not to roll my eyes. Instead, I flipped open my Texas Rules of Court to Rule of Evidence 801. “Here it is, Rule 801(e)(2)(A), the statement is offered against an opposing party and was made by the party in an individual or representative capacity.”

Lawyers with trial experience know that exception should have been obvious to the judge. Maybe I was just being tested. And to the judge’s credit, the objection was overruled.

The Business Records Exception

Then there is the business records exception. The actual words are “records of a regularly conducted activity,” but everyone calls it the business records exception. It has a four-part definition they made us memorize in trial advocacy class, but the definition is pretty abstract. It’s easier to give examples: monthly bills, bank statements, receipts, invoices, etc.

Documents like these are admissible “business records” when they are “kept in the course of a regularly conducted business activity” and making the record was a “regular practice.”[3] Documents like these are routinely admitted in evidence even though they are hearsay. (But remember, just because they are admitted doesn’t mean they have to be accepted as true.)

In practice, the business records exception is the most formulaic hearsay exception. It leads to two rituals. First, the lawyer going through the four-part definition with a witness on the stand to “prove up” the business records. Second, the pretrial “business records affidavit,” a signed and notarized statement from a records custodian reciting the four elements of the definition and swearing that the 8,000 pages of attached records meet all those elements.

In both cases it is rare that the witness really has personal knowledge of how each record was generated. But everybody kind of “looks the other way.” Opposing counsel usually doesn’t want to be a jerk and object, knowing you could pull the same move when she offers her business records. And most judges don’t require proof of the business records exception that is truly based on personal knowledge.

That’s probably the way it should be, especially when it is obvious that the documents at issue meet the exception. If it’s the type of document that is clearly a business record—like a monthly bank statement—no time should be wasted going through the elements of the exception. It’s not the time to pull a “gotcha” and suddenly become a stickler for “personal knowledge.”

Direct Knowledge

Personal knowledge, which is essentially what people mean by “direct knowledge,” is important, but sometimes you have to rely on hearsay.

Imagine the owner of Paula Payne Windows gets a call from an anonymous tipster. “Paula, you don’t know me, but I’ve got some important information I feel I need to share with you. I have a friend who heard from someone who has reason to know, and that person said that Dawn Davis has been embezzling thousands of dollars from your business every month. You should probably look into it.”

What is Payne going to say? “I appreciate your call, Mr. Tipster, but I can’t rely on this information, because it is clearly hearsay. I’m not going to accuse someone of stealing based on secondhand information.”

No, obviously, that is not what Payne is going to do. She’s going to investigate this serious allegation to find out if it’s true.

So Payne calls Davis into her office the next day. “Dawn, I hate to ask you this, but I received an anonymous tip that you’ve been stealing money from the company. What do you have to say for yourself?”

“That’s hearsay!” Davis says. “That person doesn’t have any direct knowledge that I embezzled money from you.”

This response does not exactly inspire confidence. Wouldn’t you expect Davis to deny the tipster’s allegation, if it wasn’t true?

Which leads me to my Practical Tip for lawyers and non-lawyers alike: Don’t confuse courtroom rules of evidence with practical rules of life. People reasonably rely on “hearsay”—or secondhand knowledge—to make important judgments about business, politics, and life in general all the time.

Of course, testimony based on personal knowledge is generally more reliable than hearsay or other secondhand information. But it’s not everything.

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

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

[1] This is not really a problem, because of course most trial court judges are above average.

[2] More precisely, hearsay is “a statement that: (1) the declarant does not make while testifying at the current trial or hearing; and (2) a party offers in evidence to prove the truth of the matter asserted in the statement.” Fed. R. Evid. 801(c); Tex. R. Evid. 801(c).

[3] Rule 803(6).

One Law Dude’s Reflections on #MeToo, and Seinfeld

One Law Dude’s Reflections on #MeToo, and Seinfeld

You have to feel bad for us men in the workplace these days, what with the #MeToo movement and everything. I mean, we just don’t know what we’re allowed to say or do anymore.

Can you hold the door open for a lady at the office? Compliment a woman on her new dress? Roll up to the parking garage blasting “Panama” on the car stereo?

Of course, back in the “good old days,” things were not so good for women in the workplace. There was plenty of overt sexism. It was wrong, but at least the rules of polite society were better defined.

That all changed beginning with the social upheavals of the 60s. Now everything’s upside down, and we need somebody to tell us the new rules.

Fortunately, there was a TV show in the 90s that examined the new social rules, sometimes in minute detail. It was billed as a “show about nothing,” but it was actually a meticulous comedy of manners.

Seinfeld was brilliant because it explored the social world’s unique standards of conduct. You don’t want to be one of those “low talkers.” You don’t make out with your date during Schindler’s List. You stand at a certain distance behind someone at the ATM. You certainly don’t double dip.

At the same time, Seinfeld showed that these norms cannot be reduced to a code of conduct with rules, sub-rules, exceptions, and counter-exceptions. This is what distinguishes manners from the law, or at least from what the law wants to be. It’s why someone with autism might be able to memorize the NFL rulebook but struggle with simple social cues.

And it’s why us guys might have a hard time grasping the new rules for how to interact with women. Take George Costanza, for example. In Season 5, Episode 4, “The Sniffing Accountant,” George gets a lesson in appropriate workplace conduct.

In the opening scene, Elaine gushes over her new boyfriend. They met at the office:

Elaine: So, I was sitting at the reception desk, I was looking pretty hot. I was wearing my sling back pumps.

George: What are those?

Elaine: Ask your mother, you live with her now, don’t you? Anyway, so then this guy comes up to me and starts feeling my jacket through his thumb and his forefinger, like this.

Jerry: So, what did you do?

Elaine: I said, “So, what do you think?” And he said, “Gabardine?” And I said, “Yeah.” That was it.

George: Wow, just felt your material?

Elaine: Yeah, Jake Jarmel.

George: Sounds like a cool guy.

Later, George decides to try out Jake’s maneuver. After a successful job interview with Mr. Farkus for a position as a brassiere salesman, George is on a roll as he waits for the elevator. There’s an attractive woman standing next to him, so he reaches out and touches the sleeve of her jacket. It does not go well:

Ms. De Granmont: What do you think you’re doing?

George: Oh, nothing.

Ms. De Granmont: Farkus, get out here!

Farkus: Yes, Ms. De Granmont?

Ms. De Granmont: Who is this perverted little weasel?

Farkus: This is Costanza, he’s our new bra salesman. He’s supposed to start on Monday.

Ms. De Granmont: If he’s here on Monday, you’re not. Take your pick.

Farkus to George: Get out!

You have to pity George. When Jake pulled this move on Elaine, it was charming. But when George tries the same thing, it’s just creepy.

How is this fair? What is the applicable rule?

The problem, of course, is that all men are not created equal. Jake is handsome and smooth. George is short and bald and awkward. But you couldn’t have an employee handbook that says “debonair men may touch women’s clothing and comment on it; others are prohibited.”

That’s the difference between manners and law. This episode teaches us two things about social conventions: they are hard to rigorously define, and they are decidedly unequal as applied to different people.

This is just not fair, us dudes tend to think. How are we supposed to navigate the gray areas of acceptable conduct towards women?

You hear this kind of complaint a lot from certain guys. But then a funny thing happened on the way to Monk’s Diner. The #MeToo movement exploded, and it exposed an ugly truth: a lot of men have done a lot of really horrible things to women at work.

Let’s just take some of the obvious public examples:

  • Harvey Weinstein
  • Matt Lauer
  • Al Franken
  • Bill Cosby
  • Donald Trump

Obviously, some of their alleged offenses were worse than others. But all of them have one thing in common: these men allegedly did things that everybody knows you shouldn’t do. These things were wrong before the Sexual Revolution, and they are wrong after it. They are not gray areas.

Not only that, I’d wager that part of the attraction for these men was knowing the things were wrong. That’s the whole point. Proving you’re a big shot guy who can take advantage of women and get away with it. “When you’re a celebrity they let you do it.”

Of course, everyone is innocent until proven guilty . . . yadda, yadda, yadda. But let’s assume for the sake of argument these men did the things they’re accused of. One defense they cannot assert in good faith is “I didn’t know it was wrong.”

That’s why the common lament of “we just don’t know what’s ok anymore” rings a little hollow to me.

And that brings me back to Seinfeld. Specifically, Season 3, Episode 12, “The Red Dot.” It’s another one of George’s misadventures at work. George has an affair with the cleaning lady at his office, leading to this confrontation with the boss:

Boss: I’m going to get right to the point. It has come to my attention that you and the cleaning woman have engaged in sexual intercourse on the desk in your office. Is that correct?

George: Who said that?

Boss: She did.

George: Was that wrong? [audience laughs . . .] Should I have not done that? I tell you I gotta plead ignorance on this thing because if anyone had said anything to me at all when I first started here that that sort of thing was frowned upon, [more laughs] you know, cause I’ve worked in a lot of offices and I tell you people do that all the time.

Boss: You’re fired.

This time we don’t pity George at all. It’s not like the fabric incident at the brassiere company, where we laughed because George was so pitiful. In this case, the “was that wrong?” line gets laughs precisely because it’s so absurd. Of course it was wrong!

And once again, Seinfeld delivers an insightful lesson about social norms. Some rules don’t have to be written down; they’re just obvious. The employee handbook doesn’t need to say “employees may not have sexual relations with the housekeeping staff in the office.”

So men, here’s my modest proposal on sexual harassment: let’s agree not to tolerate the stuff we all know is wrong, and not complain so much that there will inevitably be borderline cases.

Don’t get me wrong. I’m not saying that women should just chill about the minor incidents and only complain about major felonies. I’ve got a wife, a mom, sisters, a college-age daughter–I don’t want them or any woman to be subjected to even minor incidents of harassment.

I’m also not saying that men are totally off base when they complain that the standards are so ill-defined today. There is at least a grain of truth to that.

But maybe us guys could focus more on cutting out the stuff we know is bad. I think #MeToo has done a great service by shining a light on those things.

Was that wrong?

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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.

Thanks to Rebecca Wolfe and Hailey Wolfe for their advice on my initial draft (though I bear full responsibility for the final content).

Totally Apolitical Lessons for Lawyers from the Mueller Report

Totally Apolitical Lessons for Lawyers from the Mueller Report

If you’re a lawyer, or if you’ve ever had a lawyer, you’ve probably had a conversation something like this.

It was a conference call I had with a Texas client—let’s call him Fred—who had been dragged into a big lawsuit in another state. We had our local counsel on the line—let’s call him Frank. Frank was an accomplished litigator from the place where the client had been sued.

Frank had a way with words. He meticulously yet simply outlined the legal issues facing our client. He skillfully walked through the pros and cons of the strategy decisions we faced. In short, he laid out all the factors beautifully. I was impressed.

Our client, Fred, was a self-made businessman who had done quite well for himself. He was smart, but plain spoken. Fred’s reaction to Frank’s brilliant presentation of the issues? “Ok, so what should I do?”

That, in a nutshell, is the problem with the Mueller report.

The Mueller Report

Obviously, people have different political views of the Mueller report and the investigation that produced it. Let’s set that aside for a moment.

I’ll start with some easy things we can all agree on. The report has two volumes. I don’t think that’s controversial.

Volume I is about whether Trump and his campaign conspired or coordinated with the Russians to interfere in the 2016 presidential election.

Now we’re slightly drifting into the controversy lane, because some people would say Volume I is about “collusion.” But Volume I is careful to point out that it did not analyze “collusion,” which is not a legal term. See Vol I, p. 2 (“we applied the framework of conspiracy law, not the concept of ‘collusion’”).

Volume I stated a conclusion. The conclusion was: “the investigation did not establish that members of the Trump Campaign conspired or coordinated with the Russian government in its election interference activities.” (Vol I, p. 2) While some people might dispute this conclusion, I don’t think anyone disputes that this was the conclusion.

Volume II was about obstruction of justice. I think everyone agrees on that, although some people might think obstruction of justice should not have been investigated.

In contrast to Volume I, Volume II did not state a conclusion.

Now we’re getting controversial (sort of). Because Trump and his team have claimed that the Mueller report cleared Trump on obstruction of justice. “No collusion, no obstruction.” “Total exoneration.” “Case closed.”

But that claim is simply false. Any intelligent and honest person who has read Volume II would have to concede that.

And this shows us the impossibility of a completely “apolitical” or “neutral” discussion of the Mueller report. Even the simplest objective observation about the report directly contradicts things the President has said about it.

I’m not saying this to bash Trump. It’s just a fact.

But I promised no politics. So let’s get back to the things we can all agree on. Like why didn’t Volume II state a conclusion on obstruction of justice?

Oh crap. Controversy again. Trump’s team would say Volume II didn’t state a conclusion on obstruction of justice because there was insufficient evidence that he obstructed justice.

But again, that would be demonstrably not true. The report says the opposite: “[I]f we had confidence after a thorough investigation of the facts that the President clearly did not commit obstruction of justice, we would so state. Based on the facts and the applicable legal standards, we are unable to reach that judgment.” (Vol. II, p. 182)

So why no conclusion on obstruction? The report identifies two related reasons: (1) the OLC memo and (2) the difficulty of the question.

A Strange Asymmetry

The Office of Legal Counsel memo is an internal Justice Department policy that says you cannot indict a sitting President (there is an original 1973 memo and a 2000 update). This is a hotly contested issue of constitutional law. But the Mueller team decided they were bound to follow this policy.

And then they went a step further. The Mueller team decided that, because they could not charge the President with obstruction of justice, they could not state a conclusion that the President obstructed justice, even if that’s what the evidence established. The Conclusion of Volume II stated: “Because we determined not to make a traditional prosecutorial judgment, we did not draw ultimate conclusions about the President’s conduct.”

I think this was the most important decision the Special Counsel made, and I think it was the wrong decision.

It produced a strange asymmetry: if the evidence established that the President did not obstruct justice, the report would say so; but if the evidence established that the President did obstruct justice, the report would not say so.

And all of this because of that pesky OLC memo, right?

If only it were that simple. The Conclusion to Volume II adds this: “The evidence we obtained about the President’s actions and intent presents difficult issues that would need to be resolved if we were making a traditional prosecutorial judgment.”

Those “difficult issues” are largely questions of the President’s intent, where the report takes pains to lay out the evidence both for and against corrupt intent.

The statement about difficult issues muddies the water. Putting it all together, here’s what I think Volume II is saying:

  1. The evidence does not clearly establish that Trump did not obstruct justice. If it did, we would say so.
  2. There is evidence that Trump obstructed justice, but the evidence presents some difficult issues.
  3. We are not allowed to state a conclusion that Trump obstructed justice.
  4. Because we are not allowed to state a conclusion that Trump obstructed justice, we are not going to bother with trying to resolve the “difficult issues” presented by the evidence of obstruction of justice.

The result is a report that has the same problem as Frank’s advice, recounted earlier. It leaves the public and Congress in the same position as Fred. They are left asking “ok, so what should we do?”

arches-architectural-design-architecture-135018
This ceiling is symmetrical. Mueller’s methodology was not.

What should we do? The Mueller report doesn’t tell us. It is much like a legal memo from a lawyer to a private client laying out the arguments and evidence on both sides of an issue, but not giving the client a recommendation on what to do.

But is that wrong? Was it the Special Counsel’s job to tell Congress what it should do? Is it the lawyer’s job to recommend to the client what decision to make?

In my opinion, the answer to these questions is a qualified yes.

Answer the Question

Now, don’t get me wrong. I’m not saying that the Mueller team’s decision not to state a conclusion on obstruction of justice was unreasonable. There is at least a reasonable argument that if you can’t indict the President for obstruction of justice, then you shouldn’t accuse the President of obstruction of justice. The report explains this.

And I’m not saying the Special Counsel acted in bad faith. I don’t think the Mueller team avoided answering the difficult issues because of laziness, fear of being criticized, or some other inappropriate reason.

But I do think the Special Counsel came up short. The report should have stated a conclusion, yes or no, on whether the evidence established that Trump obstructed justice.

If the answer was no, that would likely be the end of it. Sure, some Democrats would have tried to keep the issue alive, but as a practical matter the obstruction of justice charge would be dead.

If the answer was yes, the report could have stated the conclusion that the President obstructed justice. Then it could have simply added that the President could not be indicted because of the OLC memo. At that point the ball would be squarely in Congress’s court.

Either way, it would be an improvement over the current situation. As it stands, we are left to wonder what the Mueller team would have said. I expect some member of Congress will ask Mueller this question when he testifies this week, and that he will avoid giving a direct answer.

But is there any group of people anywhere in the world more qualified to answer the question than Mueller’s team? Whatever you may think of their political allegiances or motivations, these are some of the top lawyers in the country. They have spent hundreds of hours of their professional lives investigating the facts and analyzing the law.

That doesn’t mean we would all have to agree with their conclusion (and you can guarantee that, either way, a large percentage of voters would not). But wouldn’t it be nice to know what they think?

The Lawyer’s Assignment

The same is true when us “ordinary” lawyers give advice to clients. No one is in a better position to recommend to the client what to do than us.

There are, of course, exceptions. The most obvious reason not to give the client a recommendation is if the client doesn’t want one. If a client says “analyze the issues and give me all the pros and cons, but don’t tell me what you think I should do,” then sure, follow those instructions.

But that’s not the way it usually goes down.

Usually the client does not identify the scope of the assignment so precisely. Clients come to lawyers with problems. They rely on lawyers not only to answer their questions, but to make sure the questions they ask are the right ones. The scope of the assignment is usually somewhat open-ended.

Lawyers can be reluctant to give recommendations. There are several reasons for this. An obvious one, especially for the cynical, is that lawyers don’t want to get sued for malpractice. If lawyers don’t give explicit recommendations, one might think, they can’t get sued for giving the wrong recommendation.

That is surely a factor, but I think it’s a minor factor. There are more fundamental reasons lawyers like to leave it to the client to decide what to do.

First, there is the simple human fear of getting criticized for making the wrong recommendation. Legal malpractice suits are very rare, and judgment calls do not make for good malpractice claims. But being blamed for recommending a decision that does not turn out well is all too common. Hindsight is 20/20, and no one likes getting thrown under the bus.

Second, there is the simple fact that sometimes the client doesn’t really want the lawyer’s recommendation. What some people actually want are legal reasons to support the decisions they have already made in their minds. In these situations, lawyers who are good at keeping clients don’t want to recommend what to do until they figure out what the client already wants to do. You don’t want to take the risk that you recommend the opposite.

In both cases, the lawyer’s impulse to avoid giving a sincere recommendation on what to do is understandable, but not commendable.

Just as the Mueller team was in a unique position to give an opinion on the obstruction question, a lawyer is a unique position to give a client guidance on the best thing to do. Who is better qualified to give a recommendation?

Of course, there are often things the lawyer does not know. It can be hard to gauge the client’s risk tolerance. There can be unidentified factors, especially personal factors, that bear on the decision, e.g. the lawyer may not appreciate that taking that settlement offer is better than the emotional toll of two years of litigation. And it is even possible—gasp!—that there are undisclosed facts the client knows but the lawyer doesn’t.

But factors like this underscore the importance of understanding the client. You have to get to know Fred before you tell him what to do.

__________________________________________________

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.

 

Legislation Aims to Reign in the TCPA, Protect Non-Compete Suits

Legislation Aims to Reign in the TCPA, Protect Non-Compete Suits

Winston Churchill said democracy is the worst possible form of government, except for all the alternatives. I recall that sentiment any time I think about the Texas legislature. I also think of the words of another wise man, Obi-Wan Kenobi, when he described Mos Eisley spaceport to a young Luke Skywalker.

But sometimes the legislature surprises you and does something halfway sensical.

To wit: on February 28, 2019, Representative Jeff Leach (R-Plano) filed House Bill 2730, which would amend the Texas Citizens Participation Act (“TCPA”). My Fivers already know the TCPA is the hottest thing in Texas litigation right now, and that it could use some amending.

The bill would make these fundamental changes:

  • The TCPA would be limited to suits implicating the constitutional rights to petition, speak freely, or associate, as those rights are applied by state and federal courts—not as those rights were broadly defined in the original TCPA.
  • The TCPA would not apply to suits to enforce non-competes or NDAs.

Notably, the bill does not exempt suits brought under the Texas Uniform Trade Secrets Act (TUTSA) from application of the TCPA.

The bill would also make these less fundamental, but still important, procedural changes:

  • Certain motions—including a motion to compel and a motion for summary judgment—would not trigger the right to file a TCPA motion to dismiss.
  • The TCPA would expressly state that its purpose is procedural (to avoid application in federal court?)
  • At least 14 days’ notice of a hearing on a TCPA motion would be required.
  • The responding party could avoid the TCPA motion—and any award of attorney’s fees—by filing a nonsuit at least three days before the hearing.
  • The statute would not apply to a compulsory counterclaim.

In departing employee litigation, the overall effect would be to shift the balance of power back towards companies who sue to stop their former employees from working for competitors.

More bills have since been filed. Senator Angela Paxton (R-McKinney) introduced SB 2162, which matches HB 2730. Rep. Joe Moody (D-El Paso) has offered a narrower bill, HB 3547, that would exclude trade secret and non-compete claims from the definition of “right of association.” And Rep. Dustin Burrows (R-Lubbock) has offered House Bill 4575, another more limited rewrite, which would exempt DTPA and non-compete claims.

You can find a useful comparison chart of these bills here at Sean Lemoine’s “Anti-Slapp Texas” blog, which is a great source for TCPA developments generally.

How the Sausage Gets Made

No doubt these bills were in response to Five Minute Law’s call for reform in It’s Alive, It’s ALIVE! How to Kill a TCPA Motion in a Trade Secrets Lawsuit. Right?

More likely it was in response to the chorus of Texas appellate judges saying something has to be done to limit the TCPA it to its stated purpose of protecting constitutional rights. Nobody really intended the statute to apply to, for example, an ordinary departing employee lawsuit alleging breach of a non-compete and/or misappropriation of trade secrets.

On the other hand, I doubt much happens in the legislature unless either (1) some powerful donor or interest group is pushing for a change (I was going to say “special” interest group, but that would be somewhat redundant), or (2) some issue has personally irritated a legislator.

Then it hit me. Leach, a Republican representing parts of Collin County, practices complex commercial and civil litigation with Gray Reed. So I’ll bet he has some firsthand experience with TCPA motions.

Plus, as I speculated in Can You “Plead Around” the TCPA?, “[c]ompanies that want to enforce their non-competes and protect their (alleged) trade secrets are going to push back on broad application of the TCPA.” You had to think that business groups were going to get behind some effort to reign in the TCPA.

And right on cue, “Texans for Lawsuit Reform” circulated an 18-page report urging changes to the TCPA. See TLR Comes Out Swinging Against the Texas Anti-SLAPP. From the press I’ve seen, it appears that TLR is backing the more sweeping changes in the bills offered by Leach and Paxton.

Naturally, this has produced a counter-offensive from media interests and free speech groups, resulting in editorials like the Fort Worth Star-Telegram’s Your right to share your opinion is threatened by this proposed state law. The Star-Telegram prefers Moody’s narrower bill, warning that the broader rewrites “would allow anyone to file a lawsuit against a speaker or writer regardless of whether the claim is valid.” (Can you imagine?!)

For more articles, see Media Groups Come Out Swinging Against Changes to the Texas Anti-Slapp.

This is politics, of course, so you don’t always know exactly who is backing what and with what motives. But I can tell you that the opinions you find in the editorials have very little to do with the actual reality of TCPA practice. When practicing litigators who actually handle TCPA motions read the heated rhetoric, we just kind of shake our heads and chuckle.

If I Ran the Zoo . . .

Some have asked me, as a lawyer who handles a lot of departing employee litigation, what I think about the proposed legislative changes. But I’m a guy who thinks Texas should have a state income tax, so that tells you how much currency my opinions hold.

As with so many things in politics, I don’t even know where to begin.

If it were up to me, Texas would encourage more competition by only allowing non-competes in the sale of a business. This would mean less non-compete litigation, thus less billable work for me. On the other hand, employers would just shift to suing former employees for misappropriation of trade secrets—the “de facto” non-compete—so maybe my business wouldn’t dry up.

And if I made the rules, we wouldn’t have special-interest legislation that adopts a different set of rules for one particular type of litigation. So the TCPA (and a lot of other statutes) would have never passed in the first place.

But of course, we are not writing on a blank slate. In politics, as in law, you have to take the world as it is, not as you wish it to be. Considering Texas has a non-compete statute that allows reasonable non-competes and a TCPA that has the stated purpose of protecting constitutional rights, it does make sense to change the TCPA’s broad definitions and to carve non-compete suits out of the statute.

The Preemption Predicament

But does the TCPA apply to non-compete lawsuits in the first place? Section 15.52 of the Texas Covenants Not to Compete Act states that its criteria for enforceability, procedures, and remedies for non-competes are exclusive and preempt other law. Citing this provision, some have argued that the non-compete statute already preempts the TCPA.

Similarly, Section 134A.007 of the Texas Uniform Trade Secrets Act states that it “displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret.” Does this mean that TUTSA preempts the TCPA?

Texas appellate courts have yet to rule on these preemption questions.

Ironically, if House Bill 2730 becomes law, it could imply that the non-compete statute never preempted the TCPA. If the non-compete statute already preempted the TCPA, one could argue, there would be no reason for the legislature to add an exemption for non-competes to the TCPA. After all, the law is a seamless web.

And what would passage of the legislation mean, if anything, for trade secrets claims?

As with so much legislation, the proposed changes to the TCPA in House Bill 2730 and the other bills would answer some questions but raise others. Every time the legislature messes with the civil justice system, there are unintended consequences. But this is how we do it.

As Obi-Wan might say, “Who is more foolish? The fool or the fool who follows him?”

*Update: HB 2730 later passed. See Turn Out the Lights, the Party’s Over: Texas Legislature Takes All the Fun Out of the TCPA.

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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.

 

Lordy, There are Text Messages! Lessons from the Roger Stone Indictment

Lordy, There are Text Messages! Lessons from the Roger Stone Indictment

Like most lawyers, I still recall the very first lawsuit I worked on. It was an insurance coverage case arising from a huge jury verdict. I remember going through the correspondence from the underlying case, mainly looking for evidence about why the insurance companies didn’t settle the case.

That’s thrilling stuff for one group: insurance coverage lawyers. For everyone else, not so much.

But here’s one thing I remember about that correspondence you might find interesting: there was not a single email or text message.

That was 1997. There were a lot of letters in that file, most of them by fax. We had email, of course, but I wasn’t surprised that the file had no emails. And very few people were texting then (certainly not about business or legal matters).[1]

Fast forward two decades, and emails are ubiquitous in litigation. Of course this change has not gone unnoticed. I remember a few years ago a senior litigator lamenting how emails had ruined litigation (he was mainly referring to the time and expense of e-discovery battles). But the degree of the change really hit me when I read the Roger Stone indictment last week: 90% of it is about emails and text messages.

The Stone Indictment

I’m sure you’ve heard about the Roger Stone indictment, but if you haven’t read it, first you’ll need a players list:

“Organization 1”: WikiLeaks

“Head of Organization 1”: Julian Assange

“Person 1”: political commentator Jerome Corsi

“Person 2”: radio personality Randy Credico

“Senior Trump Campaign official”: Steve Bannon

“Supporter involved with the Trump Campaign”: I’m not sure who this is.

For better readability I’m just going to use the proper names in my references below.

The seven-count indictment accuses Stone of three things: obstructing a Congressional investigation (Count 1), false statements to Congress (Counts 2-6), and witness tampering (Count 7).

If you’ve paid any attention to the Mueller investigation, or if you’ve just watched Law and Order, you’re familiar with Mueller’s “flipping” strategy. It’s the same approach prosecutors take to organized crime. You start by charging the lower-level people and getting them to flip on the people above them. You work your way up the ladder until you get the boss.

But the striking thing about the Stone indictment is that Mueller doesn’t need anyone to flip on Stone. Why not? Because he can prove his case against Stone with Stone’s own emails and text messages. Let’s break it down.

Count 1: The Special Counsel alleges that Stone obstructed the Congressional investigation by giving false testimony, failing to turn over responsive documents, submitting a false letter to Congress, and attempting to have Credico testify falsely to Congress. (¶ 41)

This count can be proven simply by the existence of emails and text messages that Stone either failed to produce or falsely stated did not exist. That’s before we even get to the substance of what they said.

Count 2: “STONE testified falsely that he did not have emails with third parties about Assange, and that he did not have any documents, emails, or text messages that refer to Assange.”

The emails show that Stone had communications with Jerome Corsi and Randy Credico about Assange. For example:

7/25/16 Email from Stone to Corsi: “Get to Assange [a]t Ecuadorian Embassy in London and get the pending WikiLeaks emails.” (¶ 13a)

8/2/16 Email Corsi to Stone: “Word is friend in embassy plans 2 more dumps.” (¶ 13c)

Count 3: “STONE testified falsely that his August 2016 references to being in contact with Assange were references to communications with a single ‘go-between,’ ‘mutual friend,’ and ‘intermediary,’ who STONE identified as Randy Credico.”

The emails between Stone and Corsi show that Credico was not the only intermediary. See the examples under Count 1 above.

Count 4: “STONE testified falsely that he did not ask the person he referred to as his ‘go-between,’ ‘mutual friend,’ and ‘intermediary,’ to communicate anything to Assange and did not ask the intermediary to do anything on STONE’s behalf.”

In fact Stone sent text messages and emails to Credico asking him to communicate specific requests to Assange. For example:

9/18/16 text message from Stone to Credico: “I am e-mailing u a request to pass on to Assange.”

9/18/16 email from Stone to Credico: “Please ask Assange for any State or HRC e-mail from August 10 to August 30 . . .”

Count 5: “STONE testified falsely that he and the person he referred to as his ‘go-between,’ ‘mutual friend,’ and ‘intermediary’ did not communicate via text message or email about WikiLeaks.”

Stone and Credico did communicate via text message and email about WikiLeaks, as shown by the examples above.

Count 6: “STONE testified falsely that he had never discussed his conversations with the person he referred to as his ‘go-between,’ ‘mutual friend,’ and ‘intermediary’ with anyone involved in the Trump Campaign.”

The emails and text messages show that, in fact, Stone discussed what he was learning from his intermediary with a “high-ranking Trump Campaign official” (Bannon) and a “supporter involved with the Trump Campaign”:

10/4/16 email from Bannon asking about the status of future releases by Organization 1. Stone replied that Assange had a “[s]erious security concern” but that WikiLeaks would release “a load every week going forward.” (¶ 16c)

10/4/16 text message from the supporter involved with the Trump Campaign to Stone, asking “hear anymore from London”? Stone replied, “Yes – want to talk on a secure line – got Whatsapp?” (¶ 16d)

Count 7: Stone “knowingly and intentionally corruptly persuaded and attempted to corruptly persuade another person, to wit: Randy Credico, with intent to influence, delay, and prevent the testimony of any person in an official proceeding.” (¶ 45)

You’d think this count would depend on the testimony of Credico. In that case, Stone’s strategy would be to deny pressuring Credico and to attack Credico’s credibility. But the problem for Stone is that he pressured Credico in his own text messages.

And this is where it gets juicy. Not only does Mueller have text messages where Stone leans on Credico, he has text messages with flavor. Here are some highlights:

Stone texts Credico: “‘Stonewall it. Plead the fifth. Anything to save the plan’ . . . Richard Nixon.” (¶ 37a)

Stone texts Credico to do a “Frank Pentangeli,” the character in The Godfather: Part II who testifies to a congressional committee that he doesn’t know anything. (¶ 37e)

More texts from Stone to Credico: “And if you turned over anything to the FBI you’re a fool.” “If you testify you’re a fool. Because of tromp I could never get away with a certain [sic] my Fifth Amendment rights but you can. I guarantee you you are the one who gets indicted for perjury if you’re stupid enough to testify.” (¶ 37f)

“I’m not talking to the FBI and if your smart you won’t either.” (¶ 39a)

My personal favorites: “You are a rat. A stoolie. You backstab your friends-run your moth my lawyers are dying Rip you to shreds.” I’m going to “take that dog away from you” (referring to Credico’s therapy dog Bianca). “I am so ready. Let’s get it on. Prepare to die [expletive].” (¶ 39b)

“You are so full of [expletive]. You got nothing. Keep running your mouth and I’ll file a bar complaint against your friend” (¶ 39c)

Dang! If you’re a civil litigator like me, can you imagine finding dynamite emails like this? Not only do they prove Stone pressured Credico to stonewall Congress, they are the kind of zingers that a jury is going to remember. In the words of Bob Schneider, “the flavor’s too strong.”

There is also a sober lesson here. As the senior litigator lamented, fighting over discovery of emails may have taken the fun out of litigation. But the emails themselves—as well as the text messages—may have saved litigation.

The Emails Will Set You Free

Imagine a world where Roger Stone didn’t have email or text capability. Would he have written letters saying all that stuff to Corsi, Credico, and Bannon? Highly unlikely. And then it would come down to testimony from Corsi and Credico, with Stone claiming they made the whole thing up.

But no, Stone can’t reasonably dispute the emails and text messages. That’s why he and his lawyer have already signaled a different strategy. They will have to concede the false statements but argue that the statements were immaterial and unintentional. I’m no criminal law expert, but those arguments sound pretty weak to me. So the big lesson of the Stone indictment is the importance of the defendant’s emails and text messages.

But does such a strange case really tell us anything about ordinary litigation? The defendants in most cases are not so brazen, right?

Yes, we could dismiss Stone as an oddball. I mean, the dude has a tattoo of Nixon’s face on his back and dresses like a villain from an M. Night Shyamalan movie.

Still, let’s not be too quick to treat the Stone indictment as a special case. I admit I’ve never seen an email in a business lawsuit where a guy threatens to take you’re little dog too (!) But I have seen some doozies. You’d be surprised the things people will put in an email. See, for example, the case featured in How Not to Handle “Bad” Emails in Litigation.

And with text messages it’s even worse. Just as people feel comfortable saying things in an email they would never say in a letter, they will put stuff in a text message they would never say in an email.

On the other hand, someone who never uses email or text messages doesn’t have to worry.

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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.

photo credit: Eric Yi-Jun Wolfe

[1] According to this history, the first text message was sent in 1992, but texting did not become widespread until around 2000, eventually passing phone calls in 2007.