Lawyer Lessons from Fly Fishing

Lawyer Lessons from Fly Fishing

This is an edited transcript of my interview with appellate lawyer Kendyl Hanks about lessons for lawyers (and others) from fly fishing. You can watch the video of the interview here.

Z: I’m Zach Wolfe. I’m here with Kendyl Hanks. Kendyl, welcome.

K: Thank you for having me.

Z: Thanks for joining us on the show. So, a lot of viewers probably already know Kendyl Hanks, the outstanding appellate practitioner in Texas, greenhouse gardener, dog lover, and all those good things. But you are also a fly-fisher.

K: I am. Yeah.

Z: We’re going to talk a little bit about fly fishing today and maybe how it applies to practicing law or maybe other things, but first, let me give you a chance to introduce yourself and talk a little bit about your law practice.

K: Sure. Thank you so much for having me. I’m a huge fan of your blog Five Minute Law. It’s always a good place to start, particularly like employment stuff, I’m always checking out your blog. I’m a shareholder with Greenberg Traurig in Austin. I have practiced in Texas and New York for the last about, I guess this year will be 20 years. I can’t believe it. Oh, I really can’t believe it. And I have had the good fortune to have an appellate practice, most times it’s in Texas, but I have cases throughout the country for some clients. We do a lot of test cases where we’re creating precedent, a lot of big cases, big verdicts, big judgments, things like that. And I was the daughter of a litigator and I love litigating, but I’m a huge fan of the appellate side. So one of my favorite things is to work with really talented trial lawyers, who I think live by the first principle of appellate law, which is the best strategy for winning an appeal is to win the trial. So, that’s a summary of my practice.

Z: I think that’s probably far too modest, and I know that because I experienced this firsthand. I remember one time I emailed you about this really interesting Texas Supreme Court case that came out, and then you emailed me back and you were like, yeah, that was my case.

K: Sorry.

Z: I should have known. But anyway, my favorite saying about trial versus appellate is “trial lawyers drive for show, and appellate lawyers putt for dough.”

K: [Laughing] I like that.

Z: But that’s golf. We’re going to talk about fly fishing now. But before I do that, you’re very popular on Twitter, and I thought, I’d go look at your Twitter profile.

K: Oh, gosh. Have I looked at that recently?

Z: It’s got three things. It’s got #AppellateTwitter, @LadyLawyerDiary, and #FlyFishing. So before we get to the fly fishing, what is #AppellateTwitter for people who don’t know?

K: I’m not a huge fan of social media, surprisingly. I’m not on Facebook. I actually found #AppellateTwitter because I was doing a program in Washington D.C. on recent developments in the U.S. Supreme court with some really wonderful panelists. A reporter from Bloomberg was live tweeting the program, and one of my colleagues said, they live tweeted your program. Now I gotta get on Twitter. So I got on Twitter and I think in the, in the description he had tagged #AppellateTwitter. I was like, oh my gosh, there’s this thing, appellate Twitter, this is amazing.

And, as I know you know, the Texas appellate community is very robust and close-knit community. We all sort of know each other and send each other business. And I saw a lot of those people on Twitter, which was sort of fun and a surprise. And we started talking about big cases, and trends in different courts, and fonts and spacing and footnotes and Oxford commas. I was like, I have found my people. So, appellate Twitter is just a wonderful community of people who sort of nerd out about law and support each other and send each other referrals. It’s a really great community, and I feel very lucky to have found it.

Z: Yeah, same here. And if anybody is not active on appellate Twitter, and you’re interested, go check it out for sure. Now how about this account called @LadyLawyerDiary?

K: Lady Lawyer Diary is an account that grew out of a hashtag, #LadyLawyerDiaries, which was basically a bunch of women who were connected through #AppellateTwitter. So it’s a lot of appellate lawyers, some professors, some in-house, a lot of law firm litigators, and we were talking about not so much appellate issues, although that’s kind of how we connected, it arose in the context of the #MeToo developments, Kozinski, and some of the other issues that were playing out a couple of years ago, and still playing out of course. The hashtag was taking off, and one of the things that we noticed, women in particular felt more comfortable talking about issues when they didn’t necessarily have to do so under their own name, for obvious reasons. There are a lot of fraught issues when it comes to sexual harassment, the pay gap, the lack of diversity, you know, traditionally, and it’s always been a challenge in the legal profession and in the courts.

So we, the group of us, not just me, a group of about a dozen or so of us started the handle as a forum. And we curate that forum, to start conversations, to facilitate discussions. We will post things for people who want to post anonymously. We do things behind the scenes that may not even reach social media, if it’s something particularly sensitive. And one of our co-founders testified before the Senate Judiciary Committee about reforms of the judiciary for reporting with respect to sexual harassment and things of that nature.

So we talk about diversity, inclusion, issues that affect women in the profession, and we try to do our best to promote women’s successes. Women, sometimes we can be really bad about tooting our own horn. And so we try to create a forum where we really encourage that. Like, if you’ve got a big success, a big promotion, and it’s something that’s not privileged, you can talk about it. We want to hear about it. And, and so we’d like to signal boost, things like that.

Z: Well . . . Kendyl, actually . . .

K: Actually . . . Tell me all about it, Zach, I want to hear all about it.

Be sure to follow!

Z: No. Okay. All right. Let’s get to the fly fishing this past summer, you published an article in the ABA Litigation journal called Fly Fishing Lessons. And it’s a great article. Everybody should go read it in addition to watching our fabulous interview, but I’m curious, what kind of feedback have you gotten about the article?

K: It’s been interesting. I’ve gotten a lot of emails from people, some who I’ve known before, and some I’d never met before, who read it and who were either anglers and they were like, wow, I’ve never made this connection, and you’re so right. Or people who are not anglers, but they’re litigators or appellate lawyers and they’re like, wow, now I want to go fishing, which I think is fantastic.

So, great feedback. I mean, we’ve all written a lot of articles and spoken on legal developments and big cases, and this is very different. This is a very personal, almost a thought exercise in some ways about how something that I’m really passionate about in my personal life, I’ve learned has a lot of lessons for my professional life, and I didn’t even really necessarily make that connection until I got deeply into this article, and I was thought, that’s something I do in my career that is also something that is great in fly fishing, or something I don’t do professionally that I really should be doing more of.

Z: Yeah. Well, we’re going to dig into that, but let me start with the most basic question, and I’ll confess, I don’t really fish.

K: That’s ok.

Z: What is fly fishing?

K: So fly fishing, there’s different kinds of fishing, right? I mean, if you there’s commercial fishing with nets, right? There’s spin cast fishing, which is you toss out a heavy lure and then you reel it back in and then you toss it back out. And a lot of spin casting, you might use a fake lure, or you might use a worm, for example, you know, your traditional sitting by the pond with a worm on a hook.

Fly fishing is a different setup. It is a rod that uses the weight of the line to push an artificial fly out onto either the surface of the water or to a spot where you can pull it down through the water. And the idea is that it mimics the food source of the fish, usually the food source. Sometimes if it’s salmon fishing, for example, you might not want necessarily a food source. You might just want to make the fish angry and territorial, so something really flashy and obnoxious. But usually fly fishing is known for trying to mimic the food source of what a trout or something else you might be fishing for is going to go for.

And so there’s a little bit more strategy for it. You’re not actually throwing the worm in the water. You’re trying to recreate a creature on or in the water that is so enticing to the fish that they want to come up and catch it. So it’s not so much tossing something into the water as it is learning how to control the line in the air and how to get this itsy bitsy tiny little thing, you know, 30 feet out into moving water.

Z: Sounds challenging. I can sense the connection to appellate law, but tell me, what’s your earliest memory of fly fishing?

K: My mother’s family is from Idaho, and she grew up fly fishing. Maybe I was nine or ten. Certainly before 12 or 13. When I was about 13, we took a pack trip, like an 11-day pack trip with mules and everything in Yellowstone. So it was before that. Copper Basin is this beautiful basin in Idaho. They have gorgeous streams full of trout and otters and all sorts of wildlife. And I was young enough that I still had a spin rod, and we would put salmon eggs on the spin rod, which is like Ambrosia for trout. So, if you’ve got fish in a river and you want to catch a whole bunch of trout, and this is one of these trips. It was long enough that , we had trout for breakfast, trout with eggs, then we had trout for dinner. So we were literally eating what we were catching.

And so I just got a little bored and my dad was fly fishing. It looked really cool. And I mean, I was catching tons of fish, but this fly fishing thing was really intriguing to me. And so I tried it out. I was terrible at it. I was like 10 and hardly had the coordination. But I sort of got hooked on it after that.

And then, by the time we took our Yellowstone trip, a year or two later—I think I posted this picture on Twitter once—I think my parents were worried about me getting lost in the forest. And so I was dressed in like head to toe bright yellow, right? I mean, I literally looked like a banana walking around Yellowstone park, but this is where I learned how to fly fish, up in Yellowstone, which now as an adult, I know is some of the most pristine and spectacular fly fishing in the world, which I couldn’t have appreciated as a child.

So those are my first memories, getting bored with regular fishing, with bait casting, with bait fishing and saying, you know, I really want to try that, even if I’m not good at it yet.

Z: I see. So you’ve been doing this a long time. Now in the article, you talked about issue spotting, which lawyers are familiar with. So tell us, how does issue spotting apply to fly fishing?

K:  I think one of the challenges in appellate law is there may be 20 things that you think the trial court did wrong. This was clearly a bad decision. The question is what are the issues that are going to make the difference in the case? What are the points of error, the issues on appeal, you can narrow this down to that are going to get the court of appeals’ attention, persuade them that you are right, and reach the result that you want, which is to win. Whether, you know, to reverse, if you’re the appellant, or affirm, if you’re the appellee.

In fishing, I think it’s easy to want to just sort of throw anything out there. It’s like, they want salmon eggs, right? Fly fishing is maybe not for you. You really have to understand your audience. What are you fishing for? Are you fishing for brown trout fishing for rainbows? Brookies? Are you saltwater fishing? Are you fishing for striped bass, what is the water like? What are the aquatic insects like? What is the air like? I mean, you need to understand the environment in which fish are making their choices and you need to understand why fish make their choices, right? So trout care about three things—food, shelter, and sex—and depending on what they’re doing at a particular moment, they’re going to care about different things. And that drives your choices in terms of what flies you might pick.

Choosing a particular kind of fly: Is it a wet fly that goes under the surface? Is it a dry fly that sits on top? Is it a big, huge, obnoxious fly? Is it a teeny tiny—I’ve got some here that are like, you can barely see, that’ll catch enormous fish, even though they’re super tiny.

The process that goes into choosing the right kind of fly for a particular environment and a particular audience, a particular kind of fish on a particular day on a particular river is very much to me, feels like the same process that goes into picking the right issues for an appeal, especially in a high court. So, when you’ve got discretionary review at the Texas Supreme Court, they’re not necessarily going to care about a court of appeals or trial court having done something that should have been different. They’re going to care about the important stuff, the things that are going to set precedent that matters in the state. So for me, it’s not so much translatable in a template way, it’s translatable in a process way, if that makes sense.

Z: Oh, I absolutely see the connection. Just like you might have your favorite flies that you like to fish with, you’ve got your favorite issues, but those may not be the issues that your court of appeals cares about.

K: Exactly. I’ve had plenty of days on rivers where there are some flies that are my favorite flies. I love these flies. They’re pretty, they’re cool. They’re easy to tie on. I know how they go in the air. I know how to get them on the water. But if it’s not what the fish wants, it is going to be pointless. There have been different kinds of flies and kinds of fishing that I’ve had to learn in order to be successful on different kinds of rivers and in different kinds of environments, because the stuff I’m used to and I get excited about isn’t necessarily what the fish gets excited about.

Z: In the article you also talked about the importance of assembling your own fly-fishing outfit. So one, what is the outfit, and two, why is it important to assemble it yourself?

K: When we say outfit, usually what we’re talking about is the rod and the gear-up that we’re putting together. Although there’s plenty of great fly-fishing outfits in terms of, I have my stuff that I go out in, all of which has tons of pockets, which is something that is woefully lacking generally in women’s wear. A lot of people, the first time they learn, there’s a lot that goes into actually putting a rod and a reel and a line and a fly together before you can get on the river. And you’re not going to have those skills the first time you’re introduced to it. So someone is going to show you how to do that. But a lot of people, they may go fishing four or five times in their life, like on a trip with some folks or whatever, and somebody will just hand them a rod that’s already set up right. And say, okay, go out on the river, cast it around, see if you can catch some fish.

I think there is great value in putting that setup, that outfit together yourself. Getting the line on the rod, learning the knots and to tie the line—the line is the weighted part—and you take the line and you attach it to a leader, and then you take a leader and you attach it to tippit, and understanding what those pieces are.

It is very similar to when I was a younger associate, before everything was electronically filed, we’ll walk down to the Dallas courthouse, meet the clerk, see what it is that they do with the document, have a conversation with people. And putting different pieces of a brief together and understanding their role in a brief. An introduction is different from a summary of argument, is different from a statement of facts, is different from a statement of jurisdiction. They have different purposes. They have different consequences if you don’t get it right. So putting together sort of your outfit when you’re getting ready to go fishing helps educate you a lot on how it all works, how it all comes together.

This is so nerdy, by the way, like I’m listening to myself talk and I’m thinking, oh man, I’m going to get so much hell for this.

Z: Yeah, but it’s nerdy in a good way.

K: I hope so. It is very nerdy.

Z: You mentioned pockets, let’s see the vest.

K: Oh, okay. So this is my, I have a bunch of vests because I share them with people when I take them out, but this is my personal vest, that I’ve had for gosh, 20 years maybe. So, as you notice, tons and tons of pockets, pockets everywhere, it’s lined with pockets literally, and it actually has a creel on the back, so if I wanted to keep a fish—I don’t, I do catch and release all the time now—but you can actually stick a fish in the back of your vest.

Z: I could wear one of those to court, and like you’d stick highlighters and flags in it.

K: Right. Everything’s right here, got these little grabber things that, you know, it’s wonderful. I love it.

Z: And you want to show us your hat as well?

K: Oh, my hat. So this is one of the things that I was thinking when I wrote about diversity and inclusion in the article, and it’s something, obviously I care a lot about with @LadyLawyerDiaries. There’s not a lot of gear out there for women. So it’s sort of like when Sarah Weddington argued Roe vs. Wade at the U.S. Supreme Court, there were no women’s bathrooms. She had to go to a totally different floor to find a women’s bathroom. The fly-fishing industry is sort of the same, it’s really geared toward men. And so we’re constantly having to adapt to men’s gear, like men’s shoe sizes and vests and waders. And one of the things recently is that some shops are realizing there are a lot of women out there who like to fly fish. And one of my favorite fly shops is the Taos fly shop in New Mexico. And they did this hat, it’s “fish like a girl”

Z: I like it. Nice.

K: It is utilitarian as well, because it’s, you know, you’re out in the sun, you’re out in the water and you can easily get badly burned up in the mountains. But being a woman and fly fishing, particularly when I was growing up, when I was younger and took a year off from college to go fishing, basically, there just weren’t a lot of women who were out there all the time like I was. That’s starting to change, but not fast enough for me.

Z: Yeah, and in the article, you talked about “fishermansplaining.”

K: It’s like mansplaining. Right.

Z: That sounds pretty self-explanatory.

K: So there’s actually a story about that, that I did not put in the article, but when I was about 14, we were on a raft trip in the middle fork of the Salmon River. You stand up on the bow of the boat, moving through rapids and you’re casting from side to side to side to side. And there was a guy, it was a big group trip, probably about 20 people, or so, and there was this guy who came over and he’s like, wow, you really should be doing it this way and that way and this way.

And he takes my rod away and he starts casting and he grabbed himself right here in the lip, like with the hook. And I thought to myself, I just don’t need men to explain to me how to do it. I will do it the way I want to do it.

So “fishermansplaining” is just one of those things where everyone has their own way of doing it, their own way of learning. There are some truisms about the physics of how a line works, but a lot of it’s about personal style. And, I love learning and from accomplished anglers, but it’s like someone who comes in and edits, not the substance of your brief, but the style. They want to change all of your em-dashes to commas and semi-colons and stuff like that. That’s like, you know, don’t tell me how to cast to my fish. If I ask, you can tell me, but it’s the same in mansplaining, right? Like if I don’t ask for your advice, I actually don’t need it.

Z: Yeah, the catching the hook on the lip kind of makes me think of, it’s like a lawyer being in court and the judge says, what’s the standard of review, and you say “the usual one.”

K: Oh yes. The usual one. What? No, is it regular? Is it strict scrutiny? No, it’s the regular one, or something like that.

You have to learn the fundamentals before becoming a master

Z: The regular one, right. Now, another parallel between the fly fishing and practicing law is you said something about needing to master the basics before you get creative. What did you mean by that?

K: So, like I mentioned, the physics of a line, so this is unlike spin casting, where you have something that’s weighted at the end. So you’re literally tossing the weighted thing into the water. And that pulls the line out. Fly fishing, it’s this very long line. You have to manage that line in the air in order to propel a virtually weightless thing dozens of feet away.

There are certain basic skills that you need to learn about how that works, like riding a bike, right? You need to learn how the pedals work. You need to learn how forward motion goes, how to stop. Same thing in fly fishing, but once you get the basic rhythms down, then it’s a lot more nuanced about what works for your body style, for your height, for your arm length, all of that stuff.

And getting creative, there are a lot of different ways of casting and a lot of different ways of keeping the line in the air, of laying it down on the water, and people have sort of different ways they adapt to their own form. And that’s the creative part. So it’s like art, right, in many ways.  You need to learn the basics of art before you can turn into a Picasso. I mean, not that I’m comparing myself to Picasso, but you know what I mean. Like you hear sometimes people say, oh, abstract art, like any 10-year-old could do that. Well, I mean, a lot of those masters they weren’t making abstract art as young artists. They were learning the fundamentals of art, and the medium, and the canvas, and all of that, before they started getting creative, if that makes sense.

Z: Yeah, and how would you apply that in an appellate practice?

K: You need to understand the court rules. You need to have a good, fundamental writing skill set. And I think a lot of us have voices as lawyers. I can read a brief and be like, I definitely wrote that brief. And I think a lot of people are like that. That was not necessarily the case when I was a younger lawyer, not just in things that were filed, obviously, which went through partners and things, but when I drafted them, I was so focused on just getting the argument, the law, the points, all of that out. I think as you grow as a lawyer, you sort of find your way of persuading that works with your voice, and that authenticity that’s specific to you in some ways, without making it about you. I think part of persuasion is finding a voice that is not just persuasive because it’s right, or it has a really good argument, but because it’s conveyed in a way that is persuasive to this particular audience, and compelling.

And fly fishing is like that. You can get the fundamentals down, like anybody can toss a line in the water and sometimes catch a fish, even if they have no idea what they’re doing, which is wonderful. I think beginner’s luck is a big thing in fly fishing, just like it is in litigation. But it’s not that one lucky hit, that fish that you managed to land, or that big case that you managed to win. It’s the consistency. It’s developing your practice and your voice and your skill sets so that you know your patterns, you know what battles to pick. Do those corollaries make sense?

Z: It makes a lot of sense. You could have the most creative legal argument in your case, but if you don’t understand the deadlines in the rules of civil procedure.

K: Yeah. I mean, if you just pop out into a local river and start taking fish home, you’re liable to get in a lot of trouble with the local fish and game. I mean, you need a license, there are limits to what kind of bait you can or can’t use, lures, there are regulations about barbless hooks. Flies that you buy have barbs on them, which make it harder for the fish to get off of them. And a lot of rivers that I fish require barbless. And if you don’t know any of that stuff, not only are you not operating correctly in the environment, you can actually get into trouble for it. So mastering the fundamentals is also about understanding the culture in which you’re working, and the rules that govern that culture, and being able to identify the most likely avenues for success.

Z: Can you cite unpublished cases in fly fishing?

K: Well, if fish tales count, then yes.

Z: Yes!

K: Although now nobody has an excuse anymore, because everybody’s got their phones and can take pictures. When I was growing up, 95% of the fish I caught, no one else ever saw them because I didn’t really walk around with a big camera. Maybe a guide took a picture, but everybody was like, I caught this 29-inch brook trout, which is not true, nobody is catching a 29-inch brook trout, you know what I mean? [I just fact-checked myself and indeed found an article pictures of the angler who caught a world-record 29-inch brook trout! So anything is possible.] Now we’ve got little phones. I can pull them out and take pictures. So yeah, everything gets published now, even if it’s technically unpublished.

Z: Right. It’s probably not as fun. Now in the article, you have a quote from Jeena Cho, and it says, “we know that when you’re in a stressed or fight or flight state, you are unable to access higher cognitive functions such as imagination.” What do you take away from that?

K: Well, first of all, Jeena is amazing. You know, she wrote the book Anxious Lawyer, and she writes a lot about mindfulness, mental health, and the legal profession. She’s just amazing, I love her. So I encourage anybody to look her up and read her stuff. What I take away from that is we, our chosen career is a very stressful one. Whether it’s family law, or criminal law, or business litigation with companies and employees and a lot of money on the line, it’s a lot of stress, a lot of pressure. Someone else is putting their future in some respect in our hands. And it’s a lot of stress. It’s not a coincidence that the legal profession has the highest incidents of substance abuse, depression, and suicide.

It takes a real toll. And I think that when you’re living in that constant stress place, it’s difficult to really sort of stretch your wings and get more creative about your practice. And so, Jeena’s talking about  mindfulness, and how important mindfulness is to take us out of that fight or flight sort of mindset, to give ourselves the space to be thinking in a much bigger and creative way, instead of like, Oh my God, I must win, here are the reasons why: X, Y, and Z. Trying to pull ourselves out of that and saying, okay, let’s think about this case big picture. It’s not just about whether, you know, who wins this particular case. It’s about where the law has been, where it’s going, what it’s going to mean for different industries.

Employing that sort of mindfulness to the process makes us better lawyers. I think it makes us more persuasive. I think it allows us to communicate to the court why a particular case is important and why their decision is important and why they should agree with us, of course. But it also, I think, makes our practice more enjoyable and more sustainable long-term. Because if you’re practicing out of a constant sense of fear of failure—what if I don’t get promoted, or what if I don’t make partner, or what if I don’t make this kind of money, and what if I lose my job—if those are the decisions, those are the fears that are driving our decision making, that’s a really hard way to live. And I’ve lived that way plenty, don’t get me wrong. I’ve learned the hard way that that’s not a good way to live. And so I try to be much more deliberate and sort of, you know, coaxing that mindfulness state out of my process in a way that I wasn’t as good at when I was younger.

Mindfulness. Good for fishing. And lawyering (?)

Z: What you just said is something that also comes across at the end of your fly-fishing article. And that was the thing that kind of caught me by surprise. You know, I could kind of guess some of the other parallels, but when you made that turn, that’s what really caught my attention. And especially this statement where you said “fly fishing teaches that embracing the process without judgment is plenty effective in achieving results.”

K: It’s so counterintuitive. We are so focused on quantifiable results and chalking up wins, and don’t get me wrong, those things are important. I have clients. Wins are important to them. You know, I’m a partner in a law firm. Those things are very important. But when those are the driving impulse, when we are so focused on results-oriented achievement, we lose the importance of the process that’s supposed to get us there. And I think that one of the things that fly fishing has really taught me is that if you invest in the process, the moments between the beginning and the end, and you engage in those moments in a meaningful way, you are inherently perpetuating positive results.  hey may not necessarily be the ultimate perfect result that you want, but you’re perpetuating good positive results for yourself, for your client, for your firm, for the legal system. And I think that when people get tunnel vision focused on one specific thing that must be, and anything else is failure, you’re just setting yourself up for that. Because that’s not the way our system is set up, and that’s not the way fly fishing works.

Z: Yeah. That was my number one takeaway from the article.

K: Was it? That’s interesting.

Z: I mean, just the idea, it’s somewhat counterintuitive, but when you’re not worrying as much about the results, but just enjoying what you’re doing, you actually tend to get better results.

K: Yeah. Enjoying what you’re doing and also just being mindful of what you’re doing, even when you may not really love it. There’s certainly, you know, briefs that I’ve written where I was like, I really, this is not my favorite part of the brief, I really don’t want to work on it. But being mindful of that particular piece of the brief, why it matters, what it advances, how it fits into the bigger picture, that investment in the process and enjoying that process, I think really yields results that are good.

Z: Agreed. Now, before we finish up, I do want to mention Project Healing Waters. Tell us a little bit about that.

K: Of course. Project Healing Waters is a national nonprofit that operates throughout the country, that serves men and women in military service in our armed services and veterans who have suffered physical injury or invisible injuries. We work with a lot of service people and veterans who have PTSD or depression, very serious physical injuries, brain injuries, things of that nature. And one of the really amazing things about fly fishing—and this is supported by scientific studies—is that the process of fly fishing, the physical movements, tying flies like that very detailed, small work with your hands, focused attention, it’s amazing for rehabilitation. And so Project Healing Waters operates throughout the country. We have programs for our participants, teaching them how to tie flies, to build their own rods, to fish, and then we even take them out fly fishing places.

We have a place up in Montana called Freedom Ranch where we will bring veterans. They stay in the lodge and they fly fish right there on the water. I personally did not serve, but most of the men in my family have served in the U.S. military. It’s something that I love doing, and fly fishing has been a wonderful thing for my own mental health. When I was struggling with depression, fly fishing was something that really sort of pulled me out of that a bit. And I love being able to share that with people. And so it’s just a way of giving back and it’s a wonderful organization. I would love for people to check it out. We have great fundraisers. We have trips that we sell at these fundraisers and fly rods and all sorts of stuff. So, check it out.

Z: Great. So, we’re doing this interview in February 2021. We’ve all been on some form of quarantine for almost a year, most of us. So I’m guessing that has kind of put a damper on the fly fishing.

K: I have not been fly fishing in over a year, and it’s driving me crazy. I am trying to plan, I don’t have a scheduled vaccination yet, so I don’t know, but, I’m going to try and assume that that happens by the summer. And I’m definitely gonna get a couple of trips in, I’m going to try to do one in the Rockies somewhere, probably Southern Colorado or somewhere in New Mexico where I have family, and then probably something on the coast, either the coast of Texas has some really great flats fishing or, maybe in Florida, I have some pals out in Florida. Maybe we’ll go out to the keys and do some bone fishing or something like that.

Z: That sounds great. Now, when you eventually get to go on one of these trips, does your dog, Molly, get to come with you?

K: Yeah. Oh, do you want to see Molly? Come here.

Z: Oh yeah.

K: Oh, good girl. She’s tired. She was napping. Here’s Molly.

Z: Sleeping on the job.

K: No, she does not. She gets bored. And we’re sort of out in relatively remote places. There’s coyotes and eagles, and Molly is of the size that an eagle could pick her right up. And I’ve actually been with her out in New Mexico, like on a walk, and a coyote came right in between me and her. She was about 15 feet in front of me and had I not pitched an absolute fit . . . So yeah, she’s not much of a fishing dog. You kind of need to have a bigger dog to survive the perils of that kind of wilderness.

Z: Makes sense. Well, Kendyl, this has been great.

K: Are we done already? That went so fast.

Z: Well, is there anything you want to add?

K: It’s such a treat to talk to you. Obviously, it’s something that I’m really passionate about, and I love sharing it with people, and it’s a real treat to be invited. Thank you.

Z: You’re welcome. Yeah. I mean, like I said, I have no experience with fly fishing, but it’s really fun hearing you talk about it,

K: But we’re going to have to change that.

Z: Well, yeah, maybe I’ll learn. We’ll see. All right. Thanks, Kendyl. K: Thank you.

________

Kendyl T. Hanks is an appellate shareholder with the Austin office of Greenberg Traurig. She has earned some professional recognitions, but none has made her feel more alive than disappearing into the mountains, messing about in a river, and catching these fish (which were promptly released).

Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. He has never caught a trout, but Thomson Reuters named him a 2020 Texas “Super Lawyer”® for Business Litigation.

The Originality Requirement in Copyright Law

The Originality Requirement in Copyright Law

On April 9, 2021, Taylor Swift released the album Fearless (Taylor’s Version), her re-recording of her second album, originally released in 2008 when she was 18.

This was a big deal. I’m not really a huge Taylor Swift fan, but she’s undeniably talented, and my daughter was seven when the original Fearless album came out. So you do the math.

I also love the fact that the origin story of Fearless (Taylor’s Version) is found in the nuances of U.S. copyright law. If you want to understand why, check out this excellent lawsplainer thread from law school student “Mauv” on Twitter.

I can’t improve much on Mauv’s explanation, but it got me thinking about the originality requirement in copyright law, an issue I sometimes grapple with in my law practice. It’s a requirement that is easy to explain in theory, but often difficult to apply in practice, as we will see.

Copyright law protects original works of expression. We’re talking stuff like movies, artwork, sculpture, novels, musical compositions, poetry, and yes, recordings of pop songs.

This is not to be confused with trademark law, which protects source identifiers for goods or services—usually a word, short phrase, or logo. A trademark doesn’t have to be original or creative to function as a trademark; it just needs to create an association in consumer minds between a product or service and its source.

Copyright law, in contrast, is about protecting creativity. The copyright owner must create an original work of expression.

The originality requirement in copyright law

This doesn’t require any evaluation of artistic merit, which would be pretty subjective. And original doesn’t necessarily mean novel. As the U.S. Supreme Court held, the originality requirement “means only that the work was independently created by the author (as opposed to copied from other works), and that it possesses at least some minimal degree of creativity.” Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340 (1991).  

That’s a good thing for creators, because you could make a case that there’s nothing really new under the sun, especially in music. Did Beethoven invent the simple melody in Ode to Joy? Copland the folk melody featured in Appalachian Spring? Even the great Stevie Ray Vaughan borrowed plenty of blues guitar licks from Albert King.

You can always identify components of music taken from previous works. Most of the songs on Fearless, for example, use the same four chords as hundreds of other pop, rock, or country songs. And lyrically, Taylor wasn’t exactly breaking new ground: girl meets boy, boy lets down girl, girl grows up a little.

But you put those old musical cliches together in a new way, and that’s where the magic happens. There’s no question a Taylor Swift song meets the originality requirement.

At the other end of the spectrum, consider the old White Pages. It was basically just an alphabetical list of names and phone numbers. Sure, the author had to make some choices, like what typeface to use, how many columns, etc. But courts said we have to draw the line somewhere. So regardless of how much work may go into it, a utilitarian document like a phone book typically won’t meet the originality requirement.

A slightly harder case is a cookbook. The problem with claiming a copyright for a recipe is that you really can’t separate the idea of the recipe—the ingredients, quantities, how you prepare it—from the expression of that idea. And copyright law protects expression, not ideas.

So courts have said a recipe book will only receive copyright protection when it includes additional creative elements, like a story about how your grandmother used to bake these cookies when you were a child.

These are relatively easy cases. An original song is sufficiently creative, even if it uses elements from other songs. A list of phone numbers isn’t.

But there are other categories that fall somewhere in the middle. Take jewelry designs, for example.

The originality requirement applied to jewelry design

This has been an issue for a long time. In the Trifari case from 1955, the defendant claimed that the plaintiff’s article of lady’s costume jewelry was “devoid of originality” because many firms had previously made similar “cab” necklaces.

But the court rejected this argument, and in doing so stated a standard for originality of jewelry designs that applies to this day:

It is not the idea of the use of the cab which is the subject of the copyright but rather the author’s artistic expression which reflects a distinguishable variation from what had gone before. The copyrighted matter need not be strikingly unique or novel. All that is needed is that the author contribute more than a merely trivial variation, something recognizably his own

Trifari, Krussman & Fishel, Inc. v. Charel Co., 134 F. Supp. 551, 553 (S.D.N.Y. 1955).

So that takes care of the originality requirement for jewelry designs. We know the standard. All we have to do is apply it.

But of course, stating the standard is the easy part. Applying the standard is the hard part.

If you think it’s easy, take a look at these examples and, just for fun, make a list of the ones you think contain a sufficient spark of creativity to meet the originality requirement of copyright law.

How many did you get? The correct answer is five. Specifically, nos. 1, 2, 3, 5, and 8 are sufficiently creative. The other four are not.

If you’re saying yeah, well that’s just your opinion, man. Well, ok, but I have cites:

Yurman Design, Inc. v. PAJ, Inc., 262 F.3d 101 (2d Cir. 2001) (No. 1); Jane Envy, LLC v. Infinite Classic Inc., 2016 WL 797612 (W.D. Tex. Feb. 26, 2016 (Nos. 2, 4, and 6); Tacori Enterprises v. Beverly Jewelry Co. Ltd., 2008 WL 11338681 (C.D. Cal. Aug. 20, 2008) (No. 3);Van Cleef & Arpels Logistics, S.A. v. Landau Jewelry, 547 F. Supp. 2d 356 (S.D.N.Y. 2008) (No. 5); Protecting the Intellectual Property of Jewelry Designs (2018) (No. 7); Merit Diamond Corp. v. Frederick Goldman, Inc., 376 F. Supp. 2d 517 (S.D.N.Y. 2005) (No. 8); Todd v. Montana Silversmiths, Inc., 379 F.Supp.2d 1110 (D. Colo. 2005) (No. 9).

You cannot argue with the courts.

But seriously, of course these examples present close calls. Other judges could have easily ruled differently.

You might almost think that copyright law requires judges to draw lines that can seem arbitrary, but that this is an inherent problem, and perhaps one presented by every area of law.

And if you think these jewelry designs present close calls, wait until you consider copyright for distinctive logos.  

The originality requirement applied to logos

Logos are right at the border between copyright law and trademark law. Consider this well-known logo:

There’s no question this logo functions as a trademark. Just about anyone in the U.S. knows that logo means American Airlines. But is that “AA” logo creative enough to warrant copyright protection?

Probably not. According to the U.S. government, these are some examples of works not subject to copyright: “Words and short phrases such as names, titles, and slogans; familiar symbols or designs; mere variations of typographic ornamentation, lettering or coloring.” 37 C.F.R. § 202.1(a).

Still, some logos could be sufficiently creative to be more than “mere variations” of typographic, ornamentation, lettering, or coloring.

Here are some real-world logos for which companies sought copyright protection. If you’re scoring at home, make a list of which ones you think are original enough to warrant copyright protection:

How many are on your list? In this case, the correct answer is all of the above.

Surprised? Embarrassed you got it wrong?

Just shake it off.

_______________________

Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation (and sometimes copyright litigation) at his firm Fleckman & McGlynn, PLLC. Thomson Reuters named him a 2020 Texas “Super Lawyer”® for Business Litigation.

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

Wolfe’s Pattern Jury Charge for Texas Non-Compete Cases

Wolfe’s Pattern Jury Charge for Texas Non-Compete Cases

Predicting the cost of litigation

Litigators usually wince when clients ask how much a lawsuit is going to cost. It’s kind of like asking “how much will it cost to invade Iraq?” You can’t control what other people do, and you don’t know how long the project will drag on.

For this reason, I’m going to start telling clients “on average, a lawsuit will cost you $10,000 a month until you settle.”

I think this gets the point across better than hemming and hawing about how the total expense is hard to predict. Of course, the $10,000 is just a rule of thumb. You can probably double or triple that for some law firms (you know the kind of firms I’m talking about). But the point is that the cost is largely a function of when the case settles.

And the case will settle, you can tell clients. It will not go to trial.

Ok, that’s a little too strong. But the vast majority of cases will settle before going to trial. We’re talking over 90%. Probably 95%. Maybe even 99%.

You get the point.

Why non-compete cases don’t go to trial

Trials in non-compete lawsuits are even more unusual. There are several reasons for this.

First, in many non-compete lawsuits there is a temporary injunction hearing in the first month or so. The judge’s decision at that hearing will often lead to the case settling, especially if the judge orders that the employee can’t work for the competitor that just hired her.

Second, most cases take at least a year to get to trial. Two years is more likely. Most non-competes expire in one or two years. You do the math.

Third, and this is where it gets a little more esoteric, in most non-compete lawsuits the key issue is enforceability of the non-compete, and that issue is typically seen as a “question of law” (whatever that means). A trial is not required to decide a question of law.

Notice these reasons had a lot of “many,” “often,” “typical,” etc. That’s because of course I’m generalizing. There are plenty of exceptions.

But as a general rule of thumb, non-compete lawsuits just don’t go to trial.

What happens when non-compete cases go to trial?

Of course, non-compete cases sometimes go to trial.

I had one of these a few years back. Some of you might remember my post where I talked about asking the owner of the company what he thought a reasonable time period for the non-compete would be, and he said “when hell freezes over.” That might give you a little insight into why the case went to trial.

When that happens, what are the questions that will go to the jury?

In most non-compete cases, there will be some dispute about whether the non-compete is enforceable as written. This was the subject of my very first blog post, What a Litigator Looks For in the Typical Texas Non-Compete.

Sometimes there will also be a dispute about whether the employee violated the non-compete as written. This is especially true when the non-compete prohibits solicitation of customers or employees. “Solicit” is a word built for factual disputes, which is why my Plain-Language Non-Compete doesn’t rely solely on the word.

But in many cases, it will be undisputed that the employee violated the non-compete—at least a little—as written. In those cases, the two key questions are:

(1) is the non-compete enforceable as written?

(2) if yes, what is the amount of damages caused by the breach?

(If the non-compete is unenforceable as written, there will be no damages. See Tex Bus. & Com. Code § 15.51(c).)

The second question will typically go to the jury (assuming there is admissible evidence establishing an amount of damages), and the standard breach of contract damages question from the Texas Pattern Jury Charge is probably adequate in most cases.

The first question is trickier. Does enforceability go to the jury?

In many non-compete cases, one side—or sometimes both—will move for summary judgment on whether the non-compete is enforceable as written. If the court grants summary judgment that the non-compete is or is not enforceable, then the issue won’t go to the jury (unless the judge changes her mind).

But what if nobody moves for summary judgment on enforceability, or if the judge denies summary judgment on the issue?

In that case, I say you need to submit enforceability to the jury, but I will concede this is more art than science. If you need ideas you can use Wolfe’s Pattern Jury Charge for Texas Non-Compete Cases:

I will also concede that you may get a funny look from the judge when you ask for a jury question on enforceability of the non-compete. “Counsel, isn’t that a question of law?”

And there it is, the “question of law” question. Be aware, there are dozens of Texas cases that say enforceability of a non-compete is a question of law. But those cases are largely wrong, for reasons I explain in Blown Call: The Thing Texas Courts Get Wrong About Non-Competes.

So the short answer to the judge is “no.” But you’ll have to explain.

Scenarios for submitting enforceability to the jury

There are several different ways the issue can arise.

Let’s say you represent the employer who is trying to enforce the non-compete against a former at-will employee.

DANGER! DANGER!

You must be careful in this situation. You might intuitively think that the burden is on the employee to prove unenforceability as a defense to the claim for breach of the non-compete. WRONG!

Take a look at Section 15.50(b) of the Texas Business and Commerce Code. If the non-compete is tied to a “personal services” agreement, e.g. the typical at-will employment agreement, then the burden is on the employer to establish that the non-compete meets the criteria specified in Section 15.50, i.e. that that the non-compete is ancillary to an otherwise enforceable agreement and is reasonable.

I think my smarter appellate lawyer friends will confirm that if a party bears the burden of proof on an issue, and if there is conflicting evidence on that issue, then the party with the burden of proof must submit a question to the jury on the issue. If it doesn’t, it waives the issue.

Sure, you could take a chance, not ask for a question on the issue, and then argue post-verdict that the enforceability of the non-compete is a question of law. And the trial court judge might agree with you. But if there was any evidence during trial that the non-compete was unreasonable, the judge would be wrong. And you’ve just given the employee a good issue to appeal.

Now let’s suppose you represent the employee in this situation. You don’t have the burden of proof on enforceability, so you can just sit back and watch the employer waive the issue, right?

I wouldn’t recommend that. The problem is that many Texas judges will incorrectly think that enforceability of the non-compete is a question of law, even though the statute is quite clear that the employer has the burden of proof on the issue.

If you represent the employee and you ask for a question on reasonableness of the non-compete, you may get it. And you may have a better chance with the jury on reasonableness than you do with the judge.

On the other hand, if the judge denies your requested question on enforceability, you’ve just bought yourself an insurance policy—in the form of reversible error—if the verdict and judgment go against you—assuming there is conflicting evidence on the issue.

That last proviso is important. If you represent the employee, you must be sure to offer evidence concerning the reasonableness of the non-compete.

For example, if it’s a three-year non-compete, ask your client “would the company’s confidential information still have any value after two years?” In most cases the answer will be no. If the geographic area of the non-compete is the State of Texas, ask your client “did your actual sales territory cover the whole State of Texas?” Again, the answer is probably no.

These are just examples, but you get the idea.

The last thing you want to do is blow it at trial after your client has spent $10,000 a month (or more) to get there.

_______________________

Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Thomson Reuters named him a 2020 Texas “Super Lawyer”® for Business Litigation.

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

My Big Fat Texas Non-Compete Paper

My Big Fat Texas Non-Compete Paper

I had a dream. I had everything I wanted.

But it wasn’t a Billie Eilish song. It was finishing and publishing my non-compete paper, Wolfe on Texas Non-Compete Litigation -or- My Big Fat Texas Non-Compete Paper.

And now the dream is a reality. I released the “beta” version in connection with my webcast for UT Law CLE, Non-Compete Essentials in February 2021. (You can register to watch that great webcast here, by the way.)

Since then, I’ve cleaned up some errors (gasp!), inserted a short new section, and added some recent case cites. You can download the paper for free, but first the usual disclaimers.

Number one, I’m not your lawyer (unless you have a signed engagement agreement with my firm).

Number two, every situation is different, so you should not rely on my paper as legal advice, and if you’re not a lawyer, you should definitely consult with your own lawyer.

And number three, any opinions expressed in the paper are solely my own, not those of my law firm or clients.

Of course, you knew all that, but it doesn’t hurt to say it. See my Ethics Tips for Law Bloggers.

If you’re one of my regular Fivers, you’ve probably seen some of the content in the paper before, but I knew it would be valuable to consolidate my non-compete material in one place, which you can download here:

I hope you find it useful.

As big as it is, there is still plenty of room for expansion. There are plenty of Texas non-compete topics I have not yet covered in this version. Future versions will include sections on:

  • Non-competes for physicians (the Texas statute has special provisions for this)
  • Employee hardship as part of the “balance the equities” element of injunctive relief
  • Non-competes for insurance agents

And if there’s another Texas non-compete topic you’d like to see in a future version, what should you do?

Just let me know.

Duh.

_______________________

Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Thomson Reuters named him a 2020 Texas “Super Lawyer”® for Business Litigation.

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

“It Never Hurts To Be Bold”: Karen Kaplowitz, Trailblazer for Women in the Law

“It Never Hurts To Be Bold”: Karen Kaplowitz, Trailblazer for Women in the Law

This week’s post is my interview of Karen Kaplowitz, who I first knew as a business development coach for lawyers. Turns out she was also a real trailblazer for women in law practice, as you will see. If you prefer to watch the interview in convenient video format, you can find it here on my YouTube channel, That Non-Compete Lawyer.

Z: I’m Zach Wolfe. I’m here with my friend, Karen Kaplowitz. Karen, welcome.

K: Thank you, Zach. Thanks for inviting me to have this conversation with you.

Z: You’re welcome. So, let’s start with what you do today, and that is you are the founder and owner and operator of The New Ellis Group.

K: That is true. The New Ellis Group is a business development strategy and coaching firm, which I started in 1997 when I was a practicing trial lawyer in Los Angeles. So, for the last 23 years, I have been the owner, operator, proprietor, chief cook and bottle washer of the New Ellis Group.

Z: And that’s actually how I first met you. You were doing some business development coaching for a firm that I formerly worked for, and we had a firm retreat and you gave some great tips. And so I’ve kept in touch with you and gotten lots more great tips over the years. But what led me to want to do this was I started hearing some of your stories about law practice, law school, all kinds of things. So we’ll come back to the New Ellis Group later, but first let’s go back in time. It’s the late 1960s, and a young Karen Kaplowitz is a student at the University of Chicago Law School. Now, people who are not lawyers might not realize this, that is one of the elite law schools in the country. So, you’re a student there. And there were not a lot of women students at that time. What was that like?

K:  I am a child of the sixties, which was a time, which was a lot like now in some ways. I started law school in the fall of 1968, the day after there were riots in Grant Park, in Chicago, in connection with the Democratic National Convention. It was a time of great political turmoil and crisis. Robert Kennedy had been assassinated that spring. Martin Luther King had been assassinated that spring. It was a time of chaos and violence and political upheaval. It reminds us a lot of what it’s like now, 50 years later. So, I’m about to celebrate my 50th law school reunion from the University of Chicago. But the struggle in those days, a lot of it had to do with the Vietnam War. And I was admitted to the University of Chicago Law School because of the Vietnam War. The University of Chicago saw that men were being drafted and decided that instead of having empty seats, they would accept women law students. My class, the class of 1971, was the first class at the University of Chicago Law School with 20% women law students. That’s how I got into law school. It was an economic decision on the part of the law school. So that’s where I fit kind of historically. And here we are, you know, 50 years later.

Karen Kaplowitz, lead plaintiff in Kaplowitz v. Univ. of Chicago

Z: When you started law school, what did you have in your mind that you wanted to do with that law degree?

K:  I wanted to be a civil rights lawyer. I wanted to change the world. I wanted to create more racial equity in particular. I was just beginning to think about gender equity. That wasn’t as much on the horizon in those days, but I thought I’d be a civil rights lawyer or a legal aid lawyer. I didn’t expect to end up in a commercial kind of law firm environment.

Z: Speaking of gender equality, what was the on-campus law firm interviewing like for women at the University of Chicago in the late sixties?

K: Well, so that was one of the surprises. You know, there we were, there were 30 women in my class and maybe 15 or 20 in the class ahead of us and the law school had accepted us, but law firms weren’t hiring women lawyers yet in any great numbers. And so one of the things women in my class encountered was a lot of really overt sex discrimination.  Law firms would show up and they’d just kind of blow off the women law students. And, you know, “we don’t really need to talk today.” “We’re not hiring trusts and estates lawyers this year.” “So there’s no point in our talking to you,” with the subtext, that the only reason we’d consider a woman would be for a trust and estates job. So that was pretty disconcerting. And we found to our dismay that when we took those experiences to the law school administration and said, this is what’s happening, please help us deal with it, the law school was pretty indifferent initially.

Z: And it turns out there was even a lawsuit, and there’s an opinion. People can actually read about this. And the case is called Kaplowitz v. University of Chicago [387 F. Supp. 42 (N.D. Ill. 1974)]. Now, would you happen to know the named plaintiff in that case?

K: Well, so when we experienced, when some of the women in our class experienced sex discrimination and the law school wouldn’t take action, one of my classmates who had just studied the new civil rights law, Title VII of the Civil Rights Act of 1964,  said, “you know, the law school is acting like an employment agency, and don’t we have rights to enforce a non-discriminatory environment against a law school as an employment agency?” Ultimately we filed a Title VII charge, and then a lawsuit, asking the federal court to require the law school to protect women from overt discrimination.

Z: Reading that case, it seemed like the law school had a very clear written policy of non-discrimination. So if that was the case, what did the law school do wrong?

K: What the law school did wrong was failed to take action. When it discovered through complaints filed by women law students, that there was actual overt discrimination taking place on its premises, in connection with the recruiting function, having a non-discrimination policy that’s not enforced was not, to our minds, a sufficient application of the spirit of the law involved.

Z: The federal district court judge agreed with the theory that the law school was acting as an employment agency as defined in Title VII. So that was a win. And then I want to read just a little portion of the judge’s opinion. He said: “Sex discrimination is a bane to both men and women in this society, and to the extent that it is practiced by the employers who use the University of Chicago Law School placement facilities, it is a particularly ugly scar on the legal profession. In this decade of heightened consciousness, it is disheartening to note the degree to which sexism flourishes. It is prevalent in both professional and non-professional careers and all the more odious because of the subtle manner in which it is practiced.” That sounds pretty darn good. So you had the right judge, right?

K: And the judge by the way, was named Abraham Lincoln Marovitz.

Z: So Judge Marovitz ruled in your favor?

K: In some ways. This case, Kaplowitz v. University of Chicago, is a landmark case because it is the first case interpreting the scope of the employment agencies’ section of Title VII broadly. So, from that standpoint, it was a win. But the judge at the end of the day told the women in my class that we needed to exercise our rights against employers directly against the employers, and that we could not require a law school to hold hearings to make determinations. So we lost that part of our case. And at that point we took the part we won and we called it a day.

Z: It definitely set a precedent. And I imagine that even though you didn’t get the relief you were asking for in the lawsuit, this must have had ripple effects in the law school community.

K: For sure. This year is my 50th law school reunion. And we’re expecting to be doing a panel at reunion weekend in the spring on 50 years of women at the University of Chicago Law School, students, faculty, and alumni. So yes, we made our mark, elicited a lot of commitment on the part of the Law School, more of a commitment to gender equity. And that was at the end of the day, what we really wanted to accomplish.

Z: Now on just a personal level, when I think back to when I was in law school, I was just like, okay, just keep your head down. Don’t cause trouble, don’t make anybody mad at you, get good grades, get a job offer. I would be terrified to take on the entire law school and, and, you know, have people think, oh, that guy’s a troublemaker. Did those thoughts go through your mind at the time?

K: Well, you know, I didn’t act on my own. I was one of about 15 women law students who confronted the law school over these issues. And there’s safety in numbers. This was an era of protest and commitment to civil rights. I honestly really never thought too much that it would have adverse consequences, and the opposite turned out to be true. Because I was a leader of that group, I had a lot of interaction with the faculty and with the administration of the law school. And the Dean of the Law School taught me an incredible lesson about professionalism. You know, the Dean never held it against me—that I knew about anyway—that I had confronted the law school in this way and challenged their policies, and he went out of his way to be helpful to me. So that was kind of an interesting lesson on the outcome of being bold and of being courageous. It didn’t hurt. It probably helped me in my career.

Z: That’s great. Okay, so you graduate from law school and you start doing civil rights law?

K: No, I actually ended up deciding that before I became a civil rights lawyer, I wanted to get some conventional experience in a big law firm. And I joined what was then the largest law firm in Los Angeles, O’Melveny and Myers, where I was recruited by a University of Chicago alum who was very committed to bringing in more women. And I was the third woman lawyer at O’Melveny and Myers.

I love L.A.

Z: So, I know what it’s like to be a brand-new lawyer at a firm with experienced lawyers who know what they’re doing, and you’re trying to figure out what to do. You had to do that while being just the third woman at the firm, right?

K: Well, what that meant though, was that there were people who mentored me, you know, like the lawyer who recruited me, he was a mentor to me. There were other people at that office in those days who cared about the idea of being more diverse. Warren, Christopher, who later became Secretary of State was a partner in the firm, for example. There were people of goodwill, in other words.

Z: That’s great. So back to the subject of civil rights, I understand there were issues early in your career with the LA County Women’s Jail. Can you tell us how did that come about?

K: O’Melveny and Myers absolutely supported lawyers doing pro bono work. And I took on a project to investigate and then challenge civil rights violations at the Los Angeles Women’s County Jail, along with the ACLU. I organized a group, there were about 25 lawyers involved, and we investigated civil rights violations. And then we brought a civil rights lawsuit against the Women’s County Jail. And this was all under the rubric of pro bono work at O’Melveny and Myers. That was a tremendous learning experience for me as a young lawyer.

Z: Was that the case where you had sort of a run in with the FBI, or was that another case?

K: No, ultimately, I didn’t have a run in with the FBI. I was a young lawyer. I was like a second year lawyer doing this civil rights work. And I made a really classical mistake of a young lawyer. My mistake was that one of the named plaintiffs in our civil rights case was a member of the Manson family, if you remember Charles Manson. So this woman who was an inmate at the Women’s County Jail was not one of the murderers. She was a burglar in the Manson family, and we included her as a named plaintiff in the case. And at the hearing, when we filed the lawsuit, there was a TRO hearing at which the County Counsel had to stop the rest of the hearing to explain to the judge that our plaintiff had just tried to escape from the Women’s County Jail and that she had a hacksaw blade, which he was sure must have been smuggled into her by one of her lawyers, pointing at me.

Now, the good news was the judge did not take seriously the idea that I had smuggled a hacksaw blade to this member of the Manson family, but my hearing on the TRO, you know, blew up, didn’t get too far. Fast forward a couple of years, and I get a call one day from the FBI. And the FBI is calling me around the time that Squeaky Fromme, another member of the Manson family, had tried to assassinate President Ford, and the FBI called to say, we got your name off a list that Squeaky Fromme had in her possession. And we’re calling to warn everybody whose name was on the list to be careful. And I said, if my name was on the list, it probably wasn’t an enemies list. I represented another member of the Manson family in connection with my civil rights case. So that was my contact with the FBI. The FBI was trying to protect me from a risk I probably didn’t have.

Z: When your named plaintiff escaped using the hacksaw, did she tie the bedsheets and climb out the window?

K: She didn’t escape, she attempted to escape.

Z: Oh, she attempted escape.

K: She attempted an escape and they confiscated her hacksaw blade.

Z: Got it. That’s just an amazing story. Now, you also had something early in your career involving the Beverly Hills Hotel?

K: Yes. So, you know, I’ve explained that I started my law career at O’Melveny and Myers, and I stayed there for three years. At the end of three years, I left and started a women-owned law firm in Los Angeles with two other women lawyers, one from Gibson Dunn & Crutcher, the other big firm in town, and the other from the State Attorney General’s office. And that was a law firm that was designed to handle civil rights cases. So, I started with an idea of civil rights, I went to O’Melveny and Myers for three years, and then I started a women-owned law firm to handle civil rights cases. And one of our cases was against what’s now probably still well-known, the Beverly Hills Hotel. Former President Trump had some alleged liaisons that took place at the Beverly Hills Hotel.

Well, in those days they had a bar called the Polo Lounge, and the Polo Lounge had a rule. The rule was a woman who was not escorted could not enter the premises. And the concept behind that rule was that if a woman was unescorted, she must be a prostitute. So, our law firm represented somebody, an unescorted woman who tried to patronize the Polo Lounge and was of course, escorted out. And we brought a lawsuit against the Beverly Hills Hotel on the grounds that that was sex discrimination. They couldn’t arbitrarily say an unescorted woman was not allowed on the premises. And we resolved that case quite quickly.

Beverly Hills, that’s where I want to be.

Z: So, you were at this women-owned firm in the mid-seventies in LA and you’re doing all kinds of different cases. This like sounds to me like basically a women’s version of LA Law. This has got to be made into a TV show.

K: We’ve been asked actually on several occasions to submit some information on our stories. One of my favorite stories I can share with you, in those days, was the lawsuit we brought against the California Court of Appeal. The court itself was advertising to hire a new deputy court clerk. And we had a client who had experience in the trial court level being a court clerk, who applied to become the deputy clerk of the court of the Court of Appeal. And the man who was the court administrator flatly turned her down, saying quite explicitly he would not hire a woman. So that was one of our very favorite cases. We brought a Title VII lawsuit against the California Court of Appeal itself. And again, the Court quickly settled that case because we kind of had them dead to rights. It was a pretty blatant act of sex discrimination.

Z: Now, again, in that case, you’re successful with the case, but did you worry about some kind of retaliation later on by, you know, judges or other lawyers who were not happy about this?

K: You know, we didn’t really worry about it. One of my law partners in those days had been in the State Attorney General’s office, and the offices of the California Court of Appeal were in the same office building as the Attorney General’s office. My partner knew justices on the California Court of Appeal. One day she was in the lobby of that building. One of the justices she knew well came over and started to give her a hug, and then he said, “oh no, I better not do that, you’re suing us”. So, you know, it was the right thing to do. It didn’t seem like it took a lot of courage to do it. It needed to be done. It was simply the right thing to do. And fortunately for us, we did not suffer any retaliation that I’m aware of.

Z: So then, I guess all good things must come to an end. You eventually leave that firm and you go to a bigger litigation boutique, is that right?

K: So after six years of our women-owned firm, my partners and I parted because we just had different interests. One of my partners became one of the most prominent family law attorneys in Los Angeles. I joined a twenty-five-lawyer litigation boutique and stayed there for close to 20 years.

Z: How did you end up becoming the marketing partner, in effect, for that firm?

K: When I joined the firm, I was of course used to running my own small firm and bringing in clients and managing client work. And that firm had a problem. The problem that my new firm had was that one lawyer, a very prominent trial lawyer, brought in most of the work in the firm, and that created a risk. That was a risk for everybody else because he was young and healthy. But if anything happened to him, if he got hit by a bus, the firm would have collapsed because there were 25 lawyers who mostly depended on a work he generated. So, I became initially really just the de facto go-to person to help any other lawyers in the firm who wanted to create more independence, wanted to create their own pipeline of clients and cases. So that’s kind of what I did, just to be a good team player and to fill a need.Over time, it became something I really enjoyed, which ultimately led me to start my consulting business.

Z: In addition to your consulting and helping people with business development, I know that you’re active in a number of nonprofit causes. I think one of those is Legal Momentum. Can you tell us a little bit about Legal Momentum, and what’s your involvement with them?

K: Legal Momentum is a women’s civil rights organization that was started 50 years ago. When I moved to the East Coast in 1998, after starting my consulting business, I began working on a pro bono basis for Legal Momentum and created what became known as the Aiming High Awards. The idea of the Aiming High Awards has been to recognize very powerful and successful business leaders who care about civil rights and would bring their companies and their business partners to an event to honor them and to support Legal Momentum. So, for the last 20 years, my core pro bono work has been raising money to sustain their work in women’s civil rights.

For example, one of the things that they are best known for is being an advocate for something called the Violence Against Women Act, VAWA. This is a law that was passed in 1994, which creates protection and has pumped literally billions of dollars into police departments and police programs to help support protection of women against domestic violence and other violence. So, that’s been a core part of what I’ve done on a pro bono basis. I don’t practice civil rights law anymore, but I found another way to contribute to the cause.

Z: And I think it was a few months back, I was able to watch these awards online. When is the next presentation of the Legal Momentum awards?

K: The next awards will be sometime this fall. We haven’t set the date yet. We will be honoring another group of people, including our Man of Distinction this year, the Chief Legal Officer and Secretary of Comcast, Tom Reid. And we’ll be honoring a group of people. I’ll be happy to let you know the date as soon as it’s set.

Karen is heavily involved in Legal Momentum’s “Aiming High” awards

Z: Great. I’m sure people will be interested in that. So, you become sort of the marketing guru at this previous firm, but then at some point you decide to move on from the practice of law to full-time consulting to help lawyers. What was that like, starting your own consulting business?

K: You know, it felt like a leap because I had practiced law for over 25 years and that was kind of the core of what I knew. It was a little bit scary to do that, but when I thought about what interested me and what I wanted to do, I kept thinking back to my mother’s experience. My mother had been an immigrant born in Eastern Europe who came to the United States speaking no English at age 13. And I thought, okay, well, it’s a little bit scary for me to leave my secure job as a partner in a very successful law firm in Los Angeles and start a business, but probably not nearly as scary as being an immigrant, coming to a strange country and not speaking the language and having no resources. So, you know, that’s, that was kind of my reference point. My mother was my reference point. So when I started my business, I called it The New Ellis Group, Ellis being a reference to my mother’s experience, being an immigrant at Ellis Island.

Z: What a great inspiration for the name. Now I have to ask you this. What did your mother think when she found out you were going to be the plaintiff in Kaplowitz v. University of Chicago?

K: I’ll tell you what my mother thought when I left O’Melveny and Myers and started my own law firm.  I don’t remember what she said about my lawsuit, but I do remember what she said about my leaving a secure job and starting my little law firm. She said, “are you crazy? Are you crazy? You went to the University of Chicago Law School, you have this fabulous job in a big law firm. And, you know, you get a paycheck.” I mean, you know, the paycheck in those days was probably $15,000 a year, but you know, that was a lot of money in the early seventies. And my mother was literally horrified, but she assured me that no matter what happened, she would always be there to support me.

Z: Well, that’s great. And that reminds me, what did the bank tell you when you went to get a loan to start your law firm?

K: Ah, yes. Well, so I had banked for the three years I was at O’Melveny and Myers at a bank called Security Pacific National Bank, which was later acquired by Bank of America.  I’d been a loyal and, you know, creditworthy customer of Security Pacific for three years. And when we started our women-owned law firm in 1974, we decided we needed a line of credit. So I went to my bank, Security Pacific, and I said, may I please have a line of credit? I don’t even remember if it was for $10,000 or $20,000, whatever it was, it was a modest sum of money. And they said, of course, we are happy to provide you with a line of credit, provided that you deposit an amount equal to the line of credit in the bank and do not touch it during the term of the line of credit. And I said, if I had whatever the amount was, $10,000 or $20,000, to deposit in your bank account, I wouldn’t need a line of credit. That would be enough for me. I need a line of credit because I don’t have $10,000 or $20,000 just lying around. They turned us down.

Z: But you started anyway.

K: We did start anyway.

Z: Good for you. Well, when I first heard the story about your lawsuit back when you were a law student, you told me “being bold, never hurts.” What did you mean by that?

K: I meant that I’ve been lucky in my life that when I’ve done things that you might’ve thought were bold, like bringing a lawsuit against the Law School, or leaving a secure job and starting a women-owned law firm, or starting a new business doing business development, coaching, and strategy, I’ve been lucky that those things turned out well. I may have shared with you a story.  As a young lawyer, I was aggressive, all the time, and had a lot of agendas, especially in the women’s rights arena. And about 20 years into my law practice, I ran into a judge before whom I’d appeared as a young lawyer, who had gone on to the Court of Appeal by that time. He was a very well known judge and I met him at some bar event or a cocktail party. And I said, you know, I want to share with you that I’ve mellowed, since you knew me as a young lawyer out there fighting the good fight in your courtroom. I’ve really mellowed a lot. And I’ll never forget his response. He said, “I’m sorry to hear that.”

Z: That’s great.

K: Yeah. So, I’ve been lucky. I’ve been lucky that the things that I’ve been passionate about and have advocated for and worked hard to accomplish, haven’t hurt me. That’s the good news. As I look back on 50 years of practicing law and look at, you know, this time period marked on one end by, you know, riots in Grant Park in Chicago and marked at the other end, by January 6th, the riots at the US Capitol, you know, I am saddened that more has not changed in these intervening 50 years, and that we are again, fighting to preserve our democracy, our rule of law, and I’m glad that I’ve had a small part in being part of a profession whose core commitment is to preserving the Constitution, preserving the rule of law, and preserving our democratic institutions. So, that’s kind of how I look back on these 50 years.

The name of Karen’s consulting company was inspired by her mother

Z: Well, I think “small part” might be a little bit of an understatement. That is quite a career of accomplishment. So thank you for sharing some of those stories with me and with our audience. Before we wrap up, I just want to get back a little bit to your current consulting practice. I know that I’ve gotten so much great input from you on business development issues. What would you say makes your consulting approach different from some of the other coaches who are out there?

K: Thanks for asking. I would say that the one thing that I try hard to do in my coaching work is to help people figure out how to identify their best opportunities and how to integrate what they do in the realm of business development and marketing into their everyday work. So it’s not an add on, it’s not an extra burden, it’s part and parcel about how they go about their everyday opportunities. It’s a real privilege for me to have worked with literally hundreds of partners in law firms around the country to help them build their practices. And I’m glad to have run into you, and glad to have had the opportunity to work with you and your former law firm, and appreciate this opportunity to talk to you about work, law, and life in 2021.

Z: Well, I was so happy to do it, and if you are a lawyer looking for coaching, I highly recommend Karen. And if you’re not ready to take that leap, at least check out Karen’s newsletter, which is called what?

K: Monday Monday.

Z: Monday Monday, a great song and a great newsletter. It comes out usually once every two weeks?

K: Every two weeks. Right. People can go to my website, newellis.com, and they can sign up.

Z: And I recommend people do that. It’s concise, it’s fresh, it’s right to the point. It’s worth a few minutes, every two weeks to check it out, if you’re a lawyer who cares about business development. Okay. Thank you, Karen!

K: Thank you so much.

_______________________

Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Thomson Reuters named him a 2020 Texas “Super Lawyer”® for Business Litigation.

Disclaimer: Every case is different. Suing your elite law school in federal court may not achieve similar results.

When is a contract “unconscionable” under Texas law?

When is a contract “unconscionable” under Texas law?

When electric bills hit mailboxes next month, many Texans may wonder, does the law allow a consumer to get out of a contract if the result of enforcing the contract terms turns out to be really unfair?

The short answer is no.

But what if the result of the contract is really, really, really unfair?

Then the short answer is maybe. In that case the contract might be considered “unconscionable,” and therefore unenforceable.

Texas law recognizes the common-law defense of unconscionability, at least in theory. But how does Texas law define “unconscionable,” how do Texas courts apply that definition in practice, and how should they apply it?

Before we get to those questions, let’s set the goalposts.

On one end, everyone agrees, in principle, that you can’t get out of a contract just because the result turns out to be unfair.

Suppose I sign a contract with Bob the plumber to do some work on my historic Houston home for $2,000. I need the work done in two weeks because an inspector is coming. But in the meantime, a freak winter storm hits Texas, causing rates for plumbers to skyrocket. Bob could make $10,000 on other jobs instead of doing my job.

Sorry, Bob, you’re out of luck. It may be unfair to hold you to the contract, but it’s inherent in a contract that the parties take on the risk that the market rate could change. The shift in the market doesn’t make my contract unconscionable.

Several policies support this conclusion. First, freedom of contract. See Besteman v. Pitcock, 272 S.W.3d 777, 787-88 (Tex. App.—Texarkana 2008, no pet.) (“The high threshold a party must meet in proving unconscionability is based on a strong policy favoring the freedom of contract”).

My first scientific survey

Of course, there are some kinds of contracts people are not free to make: gambling, prostitution, selling illegal drugs, to name the usual suspects. But generally, private parties are free to agree on the terms of their contract, and courts aren’t going to second-guess whether those terms are “fair.” People who like economics and “free markets” really like this rationale.

A second, related reason for enforcing even unfair contracts is the principle that people should honor their agreements. Of course, this principle has deep roots in Judeo-Christian morality—it’s no accident that Anglo-American contract law uses the word “covenant”—and not only that, I would bet this principle is found among virtually every faith and culture.

There’s a third, less obvious, reason the law generally doesn’t like to get into whether a contract is fair or not. We could call this the “capability problem” or maybe “judicial economy.” If we allow people to get out of contracts just because they’re unfair, then the courts will be constantly clogged with such disputes, and it’s hard to decide what’s fair. Let’s call this the “pragmatic” rationale for not second-guessing contract terms.

Ok, so there are strong reasons for the principle that you can’t get out of a contract just because it’s unfair. But now let’s go to the other end of the football field.

Everyone agrees, in principle, that a contract term can be so grossly unfair that the law refuses to enforce it. The “pound of flesh” contract from The Merchant of Venice would fail today for this reason.

But even when the unfairness is purely economic, almost everyone agrees that there is some limit to how unfair a contract can be.

Let’s say I’m late to see the musical Memphis at the Hobby Center in Houston, and I can’t find a parking spot. I pull into a downtown parking garage and the attendant hands me a clipboard with a pre-printed parking agreement to sign. I’m in a hurry so I quickly skim through it, it seems fine, and I sign.

Assume I’m an educated, intelligent person—maybe I even have a law degree!—and  that there’s no disparity in “bargaining power” between me and the parking attendant. I’m free to say “no thanks, I’ll park somewhere else.”

After the show I hang around the stage door trying to get an autograph, and when I finally get back to the garage I find my car has been towed. It turns out the contract has a clause stating that if I’m late removing my car, the building owner can keep it as a late fee. Assume the clause is “conspicuous,” and that if I had read the contract more carefully I would have seen it.

Now, there may be some of you who say tough luck, counselor, a deal’s a deal. Cf. Allright, Inc. v. Elledge, 515 S.W.2d 266, 268 (Tex. 1974) ($100 limit of liability in month-to-month parking agreement was not void as against public policy).

But some of you also prefer Pepsi to Coke. I’m guessing that the vast majority of you would say no way, that clause is just too unfair. It’s so grossly one-sided that it should not be enforced.

In a word, it’s unconscionable.

The policy behind this unconscionability defense is perhaps a little harder to identify, but in short, it’s fairness. At some point, almost everyone agrees the policies favoring enforcement of unfair contract terms—freedom of contract, honoring one’s agreements, judicial economy—must yield when enforcement would be so grossly unfair.

But where is that point? How do we draw the line between a contract term that is merely unfair and one that is so one-sided that it should not be enforced? 

That’s the hard question. Let’s look at how Texas courts have tried to answer it.

Black letter law on unconscionability

Unconscionability is largely a “common law” defense, meaning law made by judges. (Article 2 of the UCC, Texas Business and Commerce Code Chapter 2, allows a court to refuse to enforce an “unconscionable” contract for the sale of goods, and the Texas Deceptive Trade Practices Act prohibits “unconscionable” consumer transactions, but the concept originated in common-law court decisions.) So let’s start with the case law.

Here are the general principles of unconscionability we can derive from the Texas cases:

  • A contract is unenforceable if, “given the parties’ general commercial background and the commercial needs of the particular trade or case, the clause involved is so one-sided that it is unconscionable under the circumstances existing when the parties made the contract.” In re Poly-America, L.P., 262 S.W.3d 337, 348 (Tex. 2008).
  • “Unconscionability is to be determined in light of a variety of factors, which aim to prevent oppression and unfair surprise; in general, a contract will be found unconscionable if it is grossly one-sided.” Id.
  • “Unconscionability must be determined on a case-by-case basis in light of a variety of factors.” Besteman v. Pitcock, 272 S.W.3d 777, 787-88 (Tex. App.—Texarkana 2008, no pet.).
  • Unconscionability has “no precise legal definition.” Id.
  • An unconscionable contract is “basically” one that is “grossly one-sided.” Id. at 789.
  • A “disparity in bargaining power” can result in oppression or unreasonableness that is labeled “unconscionable.” Id.
  • A contract is not unconscionable “simply because it is foolish for one party and very advantageous to the other.” Instead, “a term is substantively unreasonable where the inequity of the term is so extreme as to shock the conscience.” Id. (quoting Anaheim Indus. v. GMC, No. 01-06-00440-CV, 2007 WL 4554213, at *9 (Tex. App.—Houston [1st Dist.] Dec. 20, 2007, pet. denied)).  
  • Texas courts sometimes distinguish between “procedural” unconscionability, which addresses “how did the parties arrive at the terms in controversy,” and “substantive” unconscionability, which asks “are there legitimate commercial reasons justifying the terms of the contract.” Ski River Development, Inc. v. McCalla, 167 S.W.3d 121, 136 (Tex. App.—Waco 2005, pet. denied).
  • “In other words, in deciding the fairness of a contract’s substantive terms, the court must also consider whether there were ‘procedural abuses,’ such as an unfair bargaining position between the parties at the time the agreement was made.” Id.
  • The party asserting unconscionability has the burden to prove both procedural and substantive unconscionability. Id
  • Factors in determining unconscionability include: the “entire atmosphere” in which the agreement was made, the alternatives available to the parties at the time, the “non-bargaining ability” of one party, whether the contract is “oppressive” or “unreasonable,” any “gross disparity in the values exchanged,” and any “gross inequality of bargaining power.” Id., citing Restatement (Second) of Contracts § 208.
  • The grounds for both procedural and substantive unconscionability must be “shocking.” Id.

So there you have it. Now you know how to determine if a contract is unconscionable or not.

Just kidding. No, of course you don’t. These are just general principles. They tell you almost nothing about how Texas courts actually decide whether any particular contract term is unconscionable. In other words, these generalities don’t help you predict whether a particular contract clause would be found unconscionable.

This is why law schools typically use the “case method.” In olden times, law school students primarily read “hornbooks” that summarized general principles of law derived from years and years of cases. But then someone figured out it was more instructive to read the key cases themselves, so students can see how courts apply the principles to specific facts.

But I digress. The question is how Texas courts have applied these principles of unconscionability.

In a perfect world, I would read hundreds of Texas cases before daring to hazard an answer, but I’m a blogger, not a law school professor, so I’ll just tell you the answer based on a sample. 

How Texas courts have applied the unconscionability defense

From dipping my toe in the Texas unconscionability waters, I can share a couple observations.

First, the vast majority of Texas cases that address the defense of unconscionability hold that the facts did not support the defense. If you research the issue, you’re going to read case after case where the court says sorry, this doesn’t rise to the level of unconscionability.

Second, it is hard to find any recent Texas Supreme Court case that found a contract unconscionable—outside of two very specific arenas.

One is arbitration agreements. See, e.g., In re Poly-America, L.P., 262 S.W.3d at 353. A lot of the cases addressing unconscionability are arbitration cases. Arbitration agreements are a special animal, so I’m just going to set this category aside.

The other category where the Texas Supreme Court has found a contract unconscionable in recent years is attorney fee agreements. See, e.g., Hoover Slovacek LLP v. Walton, 206 S.W.3d 557, 563 (Tex. 2006). Attorney fee agreements are also a special animal, because lawyers have ethical duties to clients that just don’t apply in an ordinary commercial or consumer setting. So let’s set those aside as well.

Outside of those two categories, you’re not going to find many Texas Supreme Court cases in the last 30 years finding contracts unconscionable—if any.

My second scientific survey

You can find some cases from the intermediate Texas Courts of Appeals holding that a contract term was unconscionable.

For example, in Ski River Development v. McCalla, the facts were like a scheme cooked up by Boss Hogg on The Dukes of Hazard. The Bakers were living in a trailer home heated by a stove. Deep in debt and desperate for money, they signed a 99-year lease of their land with the Davises. (Hmm, Jefferson Davis Hogg?) The lease provided for the Davises to pay the Bakers $3,000 per month for only 12 ½ years, and only $75 per month after that, while the Bakers agreed to pay the real estate taxes for the entire time. 167 S.W.3d at 137-39.

Those were just some of the facts, but you get the picture. The court said the evidence established “unfair bargaining positions, unfair terms, gross disparity in the value exchanged, no substantial benefit to the Bakers, shocking circumstances of the procurement of the lease, and shocking/gross lease terms.” Id. at 139.

Outside of extreme hard luck stories like that, most Texas appellate opinions that consider the defense find that the contract term at issue was not unconscionable. See, e.g., Besteman v. Pitcock, 272 S.W.3d at 789-90 (enforcement of written-notice provision of lease would not be unconscionable).

In short, Texas courts have set the bar extremely high for the common law defense of unconscionability.

Too high, in my opinion.

Is the common law bar too high?

For one thing, there seems to be too much focus on bargaining power. You can almost always say the party complaining about the unfairness of the contract terms had the right to just walk away. “Nobody put a gun to your head,” is the typical refrain.

That kind of argument confuses duress and unconscionability. Duress is already a contract defense. When we ask whether a contract is unconscionable, we’re already assuming the parties freely entered into the contract.

And while a gross disparity in bargaining power is an important factor, it’s not the only factor. In my view, unconscionability is also about the reasonable expectations of the parties based on the practical social context in which the contract is made—especially for consumer contracts.

Consider my hypothetical parking garage contract. There was no gross disparity in bargaining power, and I could have read the contract. Despite those factors not favoring unconscionability, two other factors made that agreement clearly unconscionable.

First, the forfeiture clause was way out of line with what a reasonable person would customarily expect a parking garage agreement to say. In other words, “unfair surprise.” In re Poly-America, L.P., 262 S.W.3d at 348.

Second, even if I could have avoided that surprise by reading the contract, there would still be a “gross disparity in the values exchanged.” Ski River Development, 167 S.W.3d at 136. Requiring me to forfeit an entire car for being five minutes late is just grossly out of proportion with the value of what the garage agreed to provide to me. In principle, it’s not that different from slipping in a clause saying “and I agree to pay building owner A MILLION DOLLARS!”

Keep in mind, I’m talking consumer contracts, not so much commercial contracts negotiated between two businesses. In most consumer settings, especially increasingly prevalent “click-wrap” agreements, the reality is that people just don’t read those agreements. The common law defense of unconscionability doesn’t seem to be keeping up with that reality.

Perhaps a legislative solution is needed. Or maybe . . . there already is one.

DTPA unconscionability to the rescue?

Remember when I mentioned the DTPA? That’s what we call the Texas Deceptive Trade Practices—Consumer Protection Act. Well, the DTPA generally prohibits an “unconscionable” action or course of action. And guess what. The DTPA definition of “unconscionable” is not the same as the common law definition.

(The DTPA’s “laundry list” of prohibited deceptive practices includes taking advantage of a disaster declared by the Governor or President by selling fuel or another necessity at an “exorbitant or excessive price,” Tex. Bus. & Com. Code § 17.46(b), but this post is about unconscionability, so let’s set that aside.)

The DTPA defines “unconscionable” as: “an act or practice which, to a consumer’s detriment, takes advantage of the lack of knowledge, ability, experience, or capacity of the consumer to a grossly unfair degree.” Tex. Bus. & Com. Code § 17.45(5).[1]

In short, taking advantage of a consumer to a grossly unfair degree. That sounds pretty broad. Maybe DTPA unconscionability is better for consumers than common law unconscionability.

But don’t get too excited. As with common law unconscionability, Texas courts have set the bar high for DTPA unconscionability. The resulting unfairness must be “glaringly noticeable, flagrant, complete and unmitigated,” Ins. Co. of N. Am. v. Morris, 981 S.W.2d 667, 677 (Tex. 1998), even though those words do not appear in the statutory definition. And when you look for cases applying DTPA unconscionability, it seems like most of the cases find that the facts did not support the theory.

My final scientific survey

Still, the bar for DTPA unconscionability is not insurmountable. There are cases holding that there was sufficient evidence to support a finding that the act or practice was unconscionable.

For example:

  • In Rice v. Metropolitan Life Insurance Co., 324 S.W.3d 660, 677-78 (Tex. App.—Fort Worth 2010,  no pet.), evidence that the insurance company represented that the policyholder had coverage and left plaintiffs with no opportunity to obtain coverage was sufficient to raise a fact issue on a claim for unconscionability under the DTPA.
  • In Century 21 Real Estate Corp., 890 S.W.2d 118, 127-28 (Tex. App.—Texarkana 1994, writ denied), the franchisors committed an unconscionable act under the DTPA by placing a second franchise in the franchisee’s area.
  • In Fort Worth Mortgage Corp. v. Abercrombie, 835 S.W.2d 262, 266 (Tex. App.—Houston [14th Dist.] 1992, no writ), it was unconscionable to cancel a mortgage protection policy and to substitute a policy with significantly reduced benefits.
  • In Franks v. Associated Air Center, Inc., 663 F.2d 583, 593 (5th Cir. 1981), the court held that an aircraft repair company’s charges for 80-113 hours of repair work were “grossly disparate” to the value the plaintiff received, considering another mechanic later fixed the same problem in one hour.

So, it is possible to prove unconscionability under the DTPA. Does that mean we will now see a wave of DTPA suits filed by Texas consumers who receive exorbitant electric bills they never would have expected?

I sure hope so.

_______________________

Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Thomson Reuters named him a 2020 Texas “Super Lawyer”® for Business Litigation.

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


[1] Before September 1, 1995, the DTPA’s definition also included an act or practice that “results in a gross disparity between the value received and consideration paid.” Although this “gross disparity” is no longer part of the statutory definition, it may still be evidence of unconscionability under the current definition. Ketter v. ESC Med. Sys., Inc., 169 S.W.3d 791, 800 n.6 (Tex. App.—Dallas 2005, no pet.).

Texas Trade Secrets Law 101 (Remastered)

Texas Trade Secrets Law 101 (Remastered)

Fixing a hole . . .

Why would you redo a masterpiece?

In the case of Sgt. Pepper’s Lonely Hearts Club Band, perhaps the most famous rock album of all time, it was mainly because of the technology available when the Beatles originally recorded the record in 1967.

Giles Martin, son of famed Beatles producer George Martin, explained this in an interview with NPR. He identified at least four important limitations of the recording and mixing technology available at the time.

First, stereo was still a new thing, and the Beatles had released most of their albums in mono. This explains why George Martin reportedly spent three weeks on the mono mix of Pepper and only three days on the stereo mix.

Second, you couldn’t sit at a computer for hours mixing all the tracks until you got it just right. As Giles Martin explained, mixing was essentially a live performance where his dad and famed engineer Geoff Emerick adjusted the levels on the fly.

Third, they had to keep the drum levels down, literally to keep the needle from jumping out of the groove of the record. Sorry, Ringo.

And finally, the Beatles recorded Sgt. Pepper on the four-track technology available at the time. If you know the album at all, you know the songs must have had more than four tracks. This magic was achieved by recording one four-track tape to a single track of another four-track tape.

Voila! Sixteen tracks. But sound quality was lost in the process.

When Giles Martin remixed the classic album in 2017, he was able to avoid all four problems. The result was a version of Sgt. Pepper that was noticeably different—and better, according to most listeners—without sounding too different.

The act you’ve known for all these years . . .

That’s what I wanted for Version 3.0 of my “Texas Trade Secrets Law 101” paper. Stick to the original concept—talk right down to earth, in a language lawyers and non-lawyers can easily understand—but update and improve it.

I had one problem Giles Martin didn’t: the temptation to make the paper longer. Giles wasn’t about to add new songs to the album (aside from alternate takes and songs available on the Super Deluxe version), but I had the ability to add new sections, new cases, new commentary.

To avoid the trap of making the paper longer and less readable, I imposed a limitation on myself: add new case cites where helpful, but keep the paper under five thousand words.

How? I had to count them all. Plus, I got under the limit by deleting some unnecessary citations, trying to tighten up the language throughout, and eliminating some of my personal commentary.

That last part was perhaps the hardest. My personal views gave earlier versions flavor. But sometimes you just have to cut the fluff. And I have to admit, it’s getting better.

After all, the goal of Texas Trade Secrets Law 101 (Remastered) is not to wax philosophical, but to give Texas business people and the lawyers who represent them a practical but substantive guide to the essentials of Texas non-compete law and litigation. You can download it here:

As I say in the Conclusion, the paper only scratches the surface, but it’s Texas Trade Secrets Law 101, not Advanced Texas Trade Secrets Law.

You’ll have to wait for the “Advanced” version. It can’t get no worse.

_______________________

Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Thomson Reuters named him a 2020 Texas “Super Lawyer”® for Business Litigation.

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

Lawyer Lessons from Cobra Kai

Lawyer Lessons from Cobra Kai

These are the facts, and they are undisputed: Cobra Kai is my current favorite show on Netflix (considering WandaVision is on rival Disney Plus).

And yeah, I was late to the party, considering Netflix picked up the series in June 2020, but once I started watching, I was hooked.

If you haven’t watched it, here’s the premise. It’s about 30 years after the events of The Karate Kid. Daniel LaRusso (Ralph Macchio) owns a successful luxury car dealership in the San Fernando Valley. He has a smart, beautiful wife, two kids, a fancy house with a pool, and a country club membership. As Dean Martin sings in the intro to episode 2, “how lucky can one guy be?”

Things haven’t gone so well for Danny’s high school rival, Johnny Lawrence (William Zabka). He and his ex don’t get along, his teenage son wants nothing to do with him, and he just lost his handyman job after calling a customer “bitchy.” He seems to spend most of his time drinking Coors Banquet and scoping chicks from his ratty Pontiac Firebird.

Blasting Poison’s “Nothin’ But a Good Time,” natch.

But then everything changes when Miguel (Xolo Maridueña), Johnny’s teenage neighbor who lives with his single mom and grandma, gets assaulted by the cool kids and wants to learn karate. The Cobra Kai dojo is reborn in a Reseda strip mall, to Daniel LaRusso’s dismay.

And the rest of Season 1 practically writes itself. I loved every episode.

I mean, Cobra Kai isn’t deep like The Sopranos, or Friends, but it can be surprisingly moving. And if nothing else, it has some great lessons for lawyers.

That’s because it’s really a show about perspective. Naturally, the original movie told the story from Danny’s perspective. Cobra Kai flips the script and starts from Johnny’s perspective—waking up with a hangover in his crappy apartment.

I came in expecting Johnny Lawrence would be the hero, or at least the anti-hero, while LaRusso would turn out to be the villain. And in the first few episodes, you’re definitely pulling for Johnny, despite his obvious flaws, while it seems Daniel-san has become rich, pretentious, and a little vindictive. But as the season progresses, you see more of the redeeming qualities that made Danny likeable in the movie.

What emerges is a series that deftly shows how much conflict can develop between people who sincerely think they are doing the right thing, from their own point of view.

In the words of Ben Kenobi, the Mr. Miyagi of Star Wars, “you will find that many of the truths we cling to depend greatly on our point of view.”

This becomes clear early on in Cobra Kai, when we learn Johnny’s back story. Would you believe he didn’t become a bully out of nowhere? No, while Johnny did grow up in an upscale neighborhood, turns out he had an emotionally abusive stepfather who bullied him every day. So even if we don’t approve of Johnny beating up Danny in high school, at least we understand.

And when we hear the story from Johnny’s point of view, we even start to wonder if we had it all wrong. Some new kid from out of town moves in on your girl, sprays you with a hose at high school dance, and swipes your All Valley karate title with an illegal kick. Are you supposed to just sit there and take it?

More about that later.

Whatever we think of adolescent Johnny, present-day Johnny is at least trying to do something right. He asks his ex if his son Robbie (Tanner Buchanan) can come live with him. He becomes a father figure to Miguel; they celebrate with a big bear hug after Miguel’s first successful date (with Danny’s daughter, of course). Johnny ridicules his students to their faces, but only so they’ll toughen up and learn to stand up for themselves.

Danny, on the other hand, is not having it, and we can understand why. He wasn’t some rich kid like Johnny; he had to earn success the hard way. Plus, he knows Johnny’s sensei was John Kreese, a coldblooded sociopath. Kreese is now dead, but surely the apple doesn’t fall too far from the tree, Danny thinks.

On Cobra Kai, it’s just like old times

So, even as we’re pulling for Johnny to get more students at his struggling dojo, we also sympathize with Danny trying to protect the kids of his community from a bad influence.

And that, for me, was the biggest lesson of season 1. You see two protagonists in direct conflict with each other, but you fully understand where each one is coming from.

This, of course, is an important skill for a lawyer, especially a trial lawyer. Granted, as a litigator you’re advocating for one side. But the ability to see the case from the opposing side’s perspective is critical.

For one thing, it’s just good strategy. Understanding the motivations of the party who is suing your client, or getting sued by your client, will help you know what to expect and plan accordingly.

But it’s not just that. I think the ability not only to understand where the other side is coming from, but to empathize with the opposing party is important. Whether you’re trying to get a witness to admit an important fact in a deposition or trying to persuade a judge that your motion for summary judgment should be granted, the ability to actually feel what that person is feeling makes a difference.

I’ll take it a step further and say the ability to empathize with everyone involved in a dispute is important. It could be the opposing lawyer, a witness, your legal assistant, a court reporter. Most of these people, most of the time, are doing what they think they are supposed to do. You won’t understand them until you understand that.

Like Atticus Finch famously said, “you never really understand a person until you consider things from his point of view . . . Until you climb inside of his skin and walk around in it.”

And yet, we must not confuse point of view with the truth, as we also learn in Cobra Kai.

Consider Johnny’s rendition of his teenage run-in with Danny. We hear this from Johnny in episode 8, while images from the original movie flash on the screen.

Here’s what Johnny says about his breakup with Ali and ensuing feud with Danny, contrasted with what we see from the flashback:

I figured we would work things out eventually, but then Daniel LaRusso came in town. [Danny arrives with his mom, not looking happy]

Next thing I know he’s hitting on her. I see the two of them flirting with each other. [Danny and Ali with a soccer ball on the beach]

I walked over to have a simple conversation with Ali. [“What is your problem?!” Johnny says to Ali, then grabs her boom box out of her hands]

But LaRusso kept butting in. [Johnny throws the boom box at Danny, knocking him to the sand]

I told him to get lost, mind your own business. Out of nowhere the guy sucker punches me. [Danny gets up and punches Johnny]

I did what any dude would do, I defended myself. [Johnny delivers three hard blows, Danny falls to the ground]

I figured that was that, but LaRusso wouldn’t leave it alone. At the Halloween dance, I’m sitting there minding my own business [Johnny rolling a joint in the bathroom stall], he douses me with a water hose.

I hadn’t seen the guy in months, and he turns a water hose on my head. So I chase him down, try to put an end to things that night, right? [Johnny and his four sidekicks corner Danny]

Turns out the guy’s got a karate master of his own. Guy comes out of nowhere, jumps us, assaults me and my friends. [Mr. Miyagi taking out the five Cobra Kais]

Johnny having a simple convo with Ali, in the original

Sure, we can understand Johnny’s perspective on what happened, but notice what he leaves out.

The fact is that Ali had already broken up with Johnny when she met Danny at the beach.

The fact is that Johnny instigated the fight at the beach.

The fact is that Johnny and his friends were bullying the new kid from out of town.

The fact is that Mr. Miyagi was only defending Danny from five attackers.

I think the lesson here is not to take the whole “perspective” thing too far. Different people have different perspectives on the truth, but the truth is out there. The facts are the facts.

So, many years later, when Johnny shows up angry at Danny’s house after Danny’s cousin sets fire to his car, we can understand why Danny is not about to back down. He knows what really went down back in the day. So when Johnny confronts him, he puts up his dukes. It feels like two aggressive lawyers about to mix it up at a deposition.

Then something interesting happens. Danny’s wife Amanda (Courtney Henggeler) comes out of the house to see what’s going on. She could have said “you’re right, Danny, he’s a bully!” Or she could have said, “you’re wrong, Danny, you should be the one apologizing after what your cousin Louie did.”

But no. Here’s what Amanda says to her husband:

Yeah, you two seem to have this pretty well in hand. It’s a normal Saturday afternoon, a couple of grown men about to kick each other into a pool. You know, as much as I would like to watch you and your childhood karate rival duke it out, I kinda don’t want to get any blood on the patio. So what do you say we try to resolve this over some breakfast instead?

Instead of focusing on who is right about the facts, Amanda makes the guys see how silly they’re acting.

“You wanna go inside?” Danny says. “I could eat,” Johnny replies. Situation defused.

This, my friends, is emotional intelligence. Sometimes it’s not about the facts.

_________________________________

Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation. Thomson Reuters named him a 2020 Texas “Super Lawyer”® for Business Litigation. This post is dedicated to his wife Rebecca.

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.

Let the Light In: The Legacy of the Most Famous Texas Non-Compete Case

Let the Light In: The Legacy of the Most Famous Texas Non-Compete Case

When I started practicing law in Texas in the 90s, the key non-compete case was Light v. Centel Cellular Company of Texas, 883 S.W.2d 642 (Tex. 1994). Light held that a non-compete in an at-will employment agreement was unenforceable because it was not “ancillary” to an otherwise enforceable agreement, as required by the Texas non-compete statute. We spent the next decade arguing about what that means.

Today, Light is not such a big deal, as subsequent decisions have largely abandoned it. You might say it’s the Pennoyer v. Neff of Texas non-compete law, in that it presents a dilemma for anyone teaching the subject. Does Light only deserve a brief mention, considering it is now largely obsolete, or is it worth getting down in the weeds and understanding all of its nuances and the subsequent decisions that tried to apply it?

I’m opting for a middle approach. You can find other articles that get down in the weeds. And sure, it would be fun to chronicle the 90s turf battle between the Texas Supreme Court and the Texas legislature over non-competes (see the snark in Light‘s footnote 7, for example).

But I’m just going to focus on three key hurdles Light created for enforcement of non-competes: (1) the “illusory contract” problem; (2) the “give rise to” requirement; and (3) the “designed to enforce” requirement.

The Texas Supreme Court would later knock down two of these hurdles, but one remains (maybe).

The “illusory contract” problem

Let’s start with the illusory contract problem. Light reasoned that an agreement to provide at-will employment cannot not be the “enforceable agreement” in “ancillary to an otherwise enforceable agreement” because the agreement is not really enforceable by the employee. “Describing something as an at-will obligation is nonsensical,” Light said. Id. at 645 n.7.

You can see the logic. If the employer can fire the employee at any time for any reason or for no reason, then what rights does the employee actually have to enforce? Thus, Light said that an agreement to provide at-will employment cannot be the “otherwise enforceable agreement” to satisfy the “ancillary to an otherwise enforceable agreement” requirement. See id. at 644-46.

Did this mean an at-will employee cannot have an enforceable non-compete?

No. Light made it clear that an otherwise enforceable agreement “can emanate from at-will employment so long as the consideration for any promise is not illusory.” Id. at 645.

This theorizing about illusory promises was all well and good, but employers just wanted to know, how do we meet this “ancillary” requirement if an agreement to provide at-will employment is illusory? The Light opinion gave them an answer in its famous footnote 14: an employer’s agreement to provide an employee confidential information or trade secrets can be the “otherwise enforceable agreement.”

Predictably, that is exactly how employers tried to make non-competes stick after Light. The standard form of non-compete would have a non-compete tied to a confidentiality agreement.

But there was a problem, one based on the reasoning of Light itself. If the employment is at will, isn’t the employer’s agreement to provide the employee confidential information also “illusory”?

That objection was correct in theory, but unworkable in practice. What are we supposed to do, exasperated employers asked, draft the contract to require handing the employee a stack of confidential documents at the moment she signs the contract? And believe me, there was much confusion and uncertainty.

The Texas Supreme Court later cleared this up. The Alex Sheshunoff case solved the “illusory contract” problem by holding that an agreement to provide confidential information to an at-will employee becomes an “otherwise enforceable agreement” when the employer performs its obligation to provide the confidential information. Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644, 655 (Tex. 2006). Thus, the “illusory contract” problem addressed in Light was largely solved.

And this was probably a good thing. Like I said, the “illusory contract” point made some sense in theory, but it caused a lot of confusion, which Sheshunoff cleared up.

The “give rise to” requirement

Light also grappled with the meaning of “ancillary.” What does it mean for a non-compete to be “ancillary” to an otherwise enforceable agreement?

We could look up “ancillary” in a dictionary, but I say it’s more important to understand the purpose of the requirement. So let’s step back and ask a more fundamental question: what is the point of the “ancillary” requirement in the first place?

Put simply, the purpose of the “ancillary” requirement is to balance two interests: the interest in enforcing the contracts of private parties and the interest in encouraging free competition.

Let’s illustrate. Imagine you’re an ice delivery business in the 1920s making huge profits. (See Jurassic Non-Competes.) The last thing you want is for a salesman to quit and start selling ice to your customers. So any time an employee quits, you offer to pay him $500 in exchange for agreeing not to compete for a year.

That would be a “naked” non-compete, i.e. a non-compete that is not “ancillary” to an otherwise enforceable agreement, and we don’t want that. In that scenario, we give more weight to the interest in free competition than the interest in enforcing contracts.

So, the “ancillary” requirement has to mean something more than requiring the non-compete in exchange for some benefit provided to the employee. But what?

Citing to the US Supreme Court, the Restatement (Second) of Contracts, and its own decision in DeSantis v. Wackenhut, the Texas Supreme Court reasoned in Light that “ancillary” means two things:

(1) the consideration given by the employer in the otherwise enforceable agreement must give rise to the employer’s interest in restraining the employee from competing; and

(2) the covenant must be designed to enforce the employee’s consideration or return promise in the otherwise enforceable agreement.

Id. at 647.

To illustrate the first prong, the “give rise to” requirement, Light cited the example already discussed, a confidentiality agreement. In that case, the confidential information is the consideration given by the employer. Providing confidential information to the employee “gives rise to” the employer’s interest in restraining competition, at least where the employee could use the confidential information to compete. See id. at 647 n.14.

Personally, I think Light got this point exactly right. “Ancillary,” in this context, has to mean something more than just related. The non-compete will always be related to some benefit provided to the employee; otherwise, it would be void for lack of consideration under basic contract law principles.

But Texas employers didn’t like this “give rise to” requirement. Yes, this requirement was fairly easy to apply in the typical case where the non-compete was tied to a confidentiality agreement, but in other contexts it presented more of a problem. For example, suppose an employer requires a non-compete as part of an agreement to provide stock options to a trusted executive. It’s hard to see how the stock options “give rise to” an interest in restraining the executive from competing.

Put it this way: Does competition from an executive who has stock options do more damage than competition from a former executive who doesn’t have stock options? I don’t think so.

Still, businesses don’t want employees with stock options to compete, and the Texas Supreme Court likes businesses, so the court jettisoned Light’s “give rise to” requirement in Marsh USA Inc. v. Cook, 354 S.W.3d 764, 773-76 (Tex. 2011). Instead of requiring the consideration to “give rise to” the employer’s interest in restraining competition, Marsh held that it is sufficient for the consideration to be “reasonably related” to an interest worthy of protection, such as confidential information or goodwill. Id. at 775. Applying this new “reasonably related” test, Marsh held that stock options were reasonably related to the protection of goodwill. Id. at 777.

“Reasonably related” is pretty weak sauce. Personally, I think getting rid of the “give rise to” requirement was a mistake, for reasons already covered. Plus, the majority opinion in Marsh is heavy on economic theory and light on practical experience. (For a look at how non-competes actually work in practice, see The Problem With Non-Competes.)

But I’ll bet most lawyers applauded Marsh, because applying the “give rise to” requirement outside the typical confidentiality agreement scenario was such a headache. And I will give Marsh its due: it at least had the benefit of making the “ancillary” requirement simpler to apply.

Still, Marsh did not completely extinguish Light.

The “designed to enforce” requirement

Remember, Light also said “the covenant must be designed to enforce the employee’s consideration or return promise in the otherwise enforceable agreement.” In the typical case where the non-compete is tied to a confidentiality agreement, the non-compete meets this requirement because it is designed to enforce the employee’s promise not to use or disclose the employer’s confidential information. At least, that’s the theory.

So, in the typical case involving a confidentiality agreement, Light’s “designed to enforce” requirement will usually be satisfied.

But what about other types of “otherwise enforceable agreements”? Do they still have to meet Light’s “designed to enforce” requirement? Or did Marsh abolish that requirement too?

That was the issue in Titan Oil & Gas Consultants, LLC v. Willis, No. 06-20-00026-CV, 2020 WL 6878418 (Tex. App.—Texarkana Nov. 24, 2020, no pet. h.). In Titan, the employer argued that Marsh overruled Light’s “designed to enforce” requirement, but the Court of Appeals disagreed. Marsh specifically stated that it was only addressing the “give rise to” prong of Light, the Titan court said, not the “designed to enforce” prong. Id. at *5.

The Court of Appeals was therefore bound to follow the “designed to enforce” requirement. “Neither Marsh nor any other Texas Supreme Court that has considered Light has overruled Light’s designed-to-enforce element of an enforceable covenant not to compete,” the court said. And it is not the function of a court of appeals to abrogate or modify Texas Supreme Court precedent. Id. at *6.

So, Light’s “designed to enforce” requirement survives. For now.

Does the requirement make any practical difference? It did in Titan, but the circumstances there were unusual. The employee signed a contract with one company, Titan, but received the confidential information from a different company, Apache, and the non-compete only restricted the employee from working for Apache. The court reasoned that a restriction on working for Apache was not designed to enforce the employee’s promise not to disclose Apache’s confidential information. Id. at *6.            

Outside of oddball situations like Titan, the “designed to enforce” requirement probably doesn’t do much for the employee. But lawyers in Texas non-compete cases should at least be aware of the requirement and consider whether the contract meets it.

______________________________

Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation. Thomson Reuters named him a 2020 Texas “Super Lawyer”® for Business Litigation. This post is dedicated to Bob Schneider.

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.

Common Misconceptions About the Settlement Communications Rule

Common Misconceptions About the Settlement Communications Rule

Nobody likes it when the other party to a confidential settlement communication spills the beans in public. Like they say, snitches get stitches.

Lawyers try to avoid this problem by putting something like this at the top of their letters and emails about settlement:

*CONFIDENTIAL SETTLEMENT COMMUNICATION SUBJECT TO FRE 408*

Why do lawyers do this?

The answer is that if you put this at the top of your email or letter, then the party who receives it is not allowed to use your statements against you for any purpose. This is federal law.

I’m just kidding. That’s not what the law is. Cue the “Bad Legal Takes” account on Twitter.

But there are some common misconceptions about the settlement communications rule, even among lawyers.

Before I get to those, let’s take a look at the rule itself.

Federal Rule of Evidence 408 says this:

Most states have a similar rule. Texas, where I practice, has its own version of Rule 408, which is similar to—but not identical to—the Federal Rule:

For simplicity, let’s put aside for now the part of the federal rule about certain criminal cases. We can then see, based on the text alone, that both the Texas rule and the federal rule make a statement inadmissible if:

(1) there is a “disputed claim”

(2) the statements is “made during compromise negotiations about the claim”

(3) the statement is offered for the purpose of proving or disproving “the validity or amount of a disputed claim.”

The “exceptions” in part (b) are not exceptions per se; they really just clarify that the rule does not bar admission of a settlement communication offered for some other purpose.

Seems simple enough, but what does this really mean, and why do we have this rule?

Let’s take a very basic example. Suppose you get in a car accident with Dave Driver and there’s a lawsuit. During a discussion of settling the case, Dave says “ok, I ran the red light, but the damages you’re asking for are just too much.”

Under Rule 408, you can’t offer Dave’s statement “I ran the red light” as evidence in court. As the federal version of the rule makes clear, you can’t even offer the statement as impeachment evidence if Dave testifies in court “that light was green.”

At first, this doesn’t seem fair. How can Dave get away with admitting he ran the red light and then say the opposite in court?

But if you think about it, if you could use Dave’s statement against him in court, his lawyer might never let Dave say a word in settlement discussions. Why chance it?

No, we want to encourage people to speak candidly and freely in settlement negotiations. We don’t want them to think anything they say can and will be used against them. That would have a “chilling effect” on attempts to compromise disputed claims. That’s why we have Rule 408.

On the other hand, we don’t want people to use the rule to block admission of evidence that is relevant for some other purpose. Suppose Dave’s insurance company offers Pam Passenger money in exchange for an agreement not to testify that Dave ran the red light. Part (b) of the rule clarifies that evidence offered for some other relevant purpose—such as showing Pam’s bias—could still be admissible.

And keep in mind, the statement has to be part of a communication about a compromise. A statement that simply asserts a party’s position or makes a demand may not be a “compromise” communication.

Now that we understand the elements of the rule and its purpose, let’s look at some common misconceptions about the rule.

1. Thinking that labeling something a “Rule 408 settlement communication” makes it so

This one seems pretty obvious, but some lawyers still seem to think that if they put this kind of label at the top of a letter, the letter can never be offered as evidence. Some will even get bent out of shape and accuse you of being unprofessional if you try.

Whether this is unprofessional will of course depend on the circumstances, but of course, just because one lawyer labeled something a Rule 408 communication does not make it inadmissible. If you’re going to object to the admission of the statement in the courtroom, you will still have to meet each of the elements I outlined earlier.

On the other hand, putting the “Rule 408” label on your letter isn’t a total waste of time. It does at least provide some evidence that at least one party intended the communication as a “statement made during compromise negotiations about the claim,” and that doesn’t hurt.

Conversely, leaving out the Rule 408 label does not mean that Rule 408 does not apply, but again, it probably doesn’t hurt to use the label—if you’re concerned about the communication being used against your client later in court.

2. Thinking that Rule 408 bars admission of a settlement communication for any purpose

This one also seems fairly obvious if you read the rule. But it’s not uncommon for lawyers to object to any evidence of a statement made during a settlement negotiation, even when the evidence is offered for some other purpose. And if the judge doesn’t grasp the distinction, the objection may even be sustained.

But still, lawyers should not think that the rule will keep out evidence of settlement communications, regardless of the purpose. Several times in preparing for a trial I have pulled case law applying Rule 408 to support or respond to an anticipated objection, and I can tell you that most of the cases you run across say that Rule 408 did not bar admission of the evidence, because the evidence was offered for some other purpose.

3. Thinking that Rule 408 bars admission of evidence that a party to a dispute committed a crime in a settlement communication

This is really a corollary to misconception no. 2. If a party’s settlement communication itself is evidence of commission of a crime, then Rule 408 would not bar offering that communication for the “other purpose” of proving that the party committed a crime.

Suppose a mob boss is a party to a contentious civil lawsuit about a restaurant lease. During a conference call to discuss settlement, he says “this is really a reasonable offer, and if you don’t take it, bad things could happen to your nice restaurant.”

In that case, Rule 408 would not prevent the government from offering the mob boss’s statement as evidence in a prosecution for extortion. The statement would meet the first two elements of Rule 408—it was made during compromise negotiations of a disputed claim—but it would not be offered for the purpose of proving or disproving the validity or amount of a disputed claim. Rather, the evidence would be offered for the purpose of proving that the mob boss committed a crime by making the statement.

4. Thinking that Rule 408 establishes a privilege

This is a somewhat subtle distinction, especially for non-lawyers, but it’s an important one.

Rule 408 on its face talks about whether evidence is “admissible.” It doesn’t say that the evidence is “privileged.”

This is an important distinction. To illustrate, let’s consider the attorney-client privilege rule in contrast. That rule governs both admissibility and privilege. If I have a confidential communication with my lawyer for the purpose of obtaining legal advice, that communication is generally privileged.

Privileged means both that I can’t be required to disclose the communication in a lawsuit, and that the opposing party cannot offer the statement as evidence in court.

Rule 408 doesn’t work like that. It says nothing about making the statement privileged from disclosure. Generally, if a settlement communication is relevant to disputed issue in a lawsuit, then Rule 408 doesn’t prevent a party to the lawsuit from demanding disclosure of the communication, such as in a pretrial deposition or in a request for production of documents.

So, while I can object to the opposing party attempting to offer the settlement communication as evidence, that doesn’t mean the statement is exempt from disclosure.

5. Thinking that Rule 408 bars disclosure to third parties

This one is similar to no. 4. Rule 408 is a rule of admissibility, not a rule of confidentiality. The rule says nothing about disclosing an opposing party’s settlement communication to a third party, or to the general public.

So if Dave Driver says “I ran the red light” during a settlement discussion, there is nothing to stop the other party from going to the press and saying “Driver admitted he ran the red light!”

That is, unless the parties agreed to keep the settlement communications confidential. But that would be a contract law issue, not a Rule 408 issue. Dave would have to prove the existence of an agreement to keep the settlement communications, a breach of the agreement, and damages resulting from the breach. Of course, in some cases there could be public policy issues with enforcement of the agreement.

Practice Tips

This leads to my settlement communication practice tips for lawyers:

1. If you’re concerned about sensitive statements your client might make during a settlement negotiation, consider entering into a written agreement up front providing that both sides will keep the settlement communications confidential and not offer them as evidence for any purpose. (This would be broader than Rule 408.)

2. Understand that, as a practical matter, your client’s only recourse in the event of public disclosure will be a claim for damages, which will probably be difficult to prove and won’t really undo the reputational damage.

3. Suggest your client try to avoid making any statements that could be considered a crime.

Like they say, don’t do the crime if you can’t do the time.

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Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Thomson Reuters named him a 2020 Texas Super Lawyer® for Business Litigation. He hereby designates this entire blog post confidential under FRE 408.

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.