Friday, December 7, 2018

Reading Round-Up and Some Thoughts on Wrapping Up Another Non-Compete Case

As the year comes to close, I've come across a few recent articles that merit some brief mention.


A prominent early voice in the call for non-compete reform is current Boston University Professor Matt Marx. He drafted a policy paper for The Hamilton Project, titled Reforming Non-Competes to Support Workers, which you can access here.

Professor Marx's paper is worth a read for a number of reasons, including its very informative discussion on the history of non-competes and recent legislative trends. More helpful, though, is Marx's discussion of statistics regarding the ubiquity of non-competes and the impact of contractual restraints on job mobility.

One proposal Marx discusses, which hasn't received as much scholarly attention, is incenting state attorneys general to use general consumer protection or unfair trade practices law to undertake litigation efforts over abusive non-compete practices. Though this has occurred a bit in the low-wage worker context, there's no reason why it couldn't extend outward to address troubling practices directed at additional categories of employees.


Speaking of low-wage workers, the Troutman Sanders firm published a short piece entitled The Potential Pitfalls of Using Non-Competes for Low-Wage Workers, to which my reply simply is "yes." If you really feel the need to be persuaded or convinced on this topic, then click here. But I understand if you take a hard pass...

(The Washington Examiner also explores the increasing backlash against non-competes and horizontal no-poaching pacts, particularly in the fast-food industry, in this September piece.)


Moving on to other controversial topics, Venable authors Tom Wallerstein and William Abramovitz write that the Defend Trade Secrets Act's ex parte seizure provision is, indeed, constitutional. They appear to have written in response to a New York University Law Review article suggesting otherwise. That article is available for download here.

The Venable folks are correct. In fact, the DTSA provision, which allows for the seizure of instrumentalities used to steal trade secrets without notice to the party in possession of those instrumentalities, is modeled on a similar trademark statutory provision. That provision allows for the seizure of counterfeited goods on an ex parte basis. The procedural requirements built into the DTSA and the Lanham Act specifically address the Fourth Amendment concerns that attend property grabs.

I will repeat what I've said before. The ex parte seizure tool is more interesting from an academic, rather than a practical, standpoint. Some variant of this process was around long before the DTSA was ever law. Let's move on, folks.


Now on to another bad non-compete case, just concluded.

Let me start with this. My 6 year-old daughter reads a series of chapter books by author Ron Roy, which are called the A to Z Mysteries. In this series, a trio of aspiring gumshoes (named Dink, Josh, and Ruth Rose) investigate a number of weird mysteries in a fictional Connecticut town. Think of it as a much less violent version of Cabot Cove, Maine. Two things are notable about this A to Z trio of sleuths. First, they most certainly have free-range parents, who are almost never seen and impose little to no restriction on what their kids do. And second, the kids are relentless in their pursuit of understanding facts.

At this point, you're likely asking "what's the point?" Well, I have one.

I just finished yet another case in which a defendant was wrongfully sued for violating a non-compete clause and stealing employer trade secrets. It was immediately clear when I got the case that the plaintiff's attorney made no attempt to discover any basic facts that were alleged uniformly on "information and belief." And to make matters worse, it was even more clear that my client's own attorney was uninterested in investigating these same basic facts.

Instead, as it turned out, counsel both were perfectly content to follow some kind of odd litigation playbook, filing motions, responses, and other filings that did little to address my client's concerns. And let me state this again. Her concern was that the plaintiff got the facts wrong.

It turns out that four months into this case, no one had talked to the two witnesses who knew precisely what facts to confirm and dispel. I was hired, called them the next day, and within literally within hours, the case was dismissed with prejudice. The plaintiff knew it was cooked when it saw my disclosures, because it knew these witnesses would undercut the entire case. We then sought our fees. This matter is now over with a great result for a client who never should have been sued.

This is not to suggest I am great. All I did was what my client had asked. All I did was what the kids in the A to Z Mysteries series did. All I did was call people who knew what happened. Practicing law is not supposed to be some mysterious quest into the abyss, where lawyers operate in a parallel universe from their clients.

What's the lesson? Maybe attorneys should listen more to their clients. Mine had been begging for someone to validate her story, and she had the witnesses ready to do this. The problem is that her former attorneys told her they had a different strategy. Guess what? It was a costly one, despite its patent ineffectiveness. It got them fired.

This anecdote is, unfortunately, far too common in competition cases. Many cases that appear flimsy are in fact flimsy. Attorneys can pick up the phone and call witnesses. Their first reaction should not be to jump on Westlaw and see if a case with a similar non-compete somewhere was dismissed for on some obscure legal basis that does not interest the client and will not interest a judge.

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