Smooth Transitions

Smooth Transitions

addressing the Legal issues arising from the departure of employees & Business breakups

The Fan Duel Update

Posted in Injunction, Recent Cases, Uncategorized

A few weeks ago we touched on the “insider trading” that was going on at the fantasy sites Fan Duel and Draft Kings.  It ended up being the subject of a Republican Debate and then the  the New York Attorney General got involved.  He claims the websites are nothing but betting and it trying to keep New Yorkers from using the site through a lawsuit seeking an injunction.  The sites have come back with their own filings trying to prevent an injunction.  Draft Kings even teamed up with high-profile lawyer David Boies who argues the state’s poisition is unconstituational.

The best take on the whole situation came from HBO’s John Oliver Show.  Warning there is some crude language in the skit, but it is right on target:

The Fifth Circuit Chimes In on Inevitable Disclosure

Posted in Recent Cases, Trade Secrets, Trial and Pre-Trial Procedure, Uncategorized

keep-calm-i-told-you-it-was-inevitable-We’ve discussed the inevitable disclosure doctrine in previous posts.  It’s a powerful claim and whether adoption of the uniform trade secrets act makes it viable in Texas remains to be seen.   What is it?  Assume that in your prior job you were exposed to certain trade secrets of your employer that you would “inevitably” use in new employment.  The argument goes from the former employer that you should not be able to work at your new  job because of inevitable use. In practice, the employer would not need an agreement to enforce this type of claim, only the existence and provision of trade secrets.  Wow.  Many courts are reticent to invoke such a doctrine.

Whether such a concept is enforceable in Texas remains an open question.  This is especially true with adoption of the Texas Uniform Trade Secrets Act.  It provides that “Actual or threatend misappropraiation may be enjoined.”  So, could a court use this provision to prevent a former employee from working somewhere else in order to protect a trade secret?  In theory, yes.  There is no reported case of a Texas court doing so.

Last week the Fifth Circuit Court of Appeals waded into the state of the law in Texas on inevitable disclosure.  The results were mixed, but the Court was clear to say that Texas has not adopted inevitable disclosure as a “categorical rule”.  Here is a really long but helpful quote from the case:

It is thus not surprising that more recent Texas case law has rejected the notion of a categorical rule. See Cardinal Health Staffing Network, Inc. v. Bowen, 106 S.W.3d 230, 242–43 (Tex. App.—Houston [1st Dist.] 2003, no pet.) (observing that “no Texas case expressly adopt[s] the inevitable disclosure doctrine” and holding that it need not decide whether to follow Rugen and Conley’s “modified version of the doctrine” because the employee produced evidence that “raise[d] a reasonable inference . . . that disclosure and use [of former employer’s confidential information] was not probable”); see also M-I, L.L.C. v. Stelly, H-09-cv-01552, 2009 WL 2355498, at *7 (S.D. Tex. July 30, 2009) (stating that “inevitable disclosure” is not yet the law in Texas, and refusing to order an injunction due to lack of evidence that former employees “took any confidential informationwith them or that they are using such information” at their new employers); see also Troy A. Martin, Comment, The Evolution of Trade Secret Law in Texas: Is It Time to Recognize the Doctrine of Inevitable Disclosure?, 42 S. TEX. L. REV. 1361, 1376 (2001) (concluding that “the functional premise behind the doctrine itself is clearly at odds with Texas jurisprudence” and noting that “very few courts in Texas have advanced the theory”).

We’ll continue to montior the state of the law on inevitable disclosure in Texas.  The bottom line is our state courts have been quiet on the subject and the Texas Supreme Court has not addressed the issue.  Here is a link to the opinion.

First Uber – Now Amazon – Independent Contractor or Not?

Posted in HR Issues, Recent Cases


A few weeks ago I placed an order with Amazon Prime and selected the option for same day delivery.   As promised, my order arrived late that afternoon.  To my surprise the delivery was made by a driver in what appeared to be their own private vehicle.  It was not a UPS or USPS truck.

It turns out that Amazon is using private drivers to handle some of its deliveries.  Kind of like Uber.  Also, similar to Uber, Amazon drivers have sued Amazon alleging they are employees, not independent contractors.  The Los Angeles Times offered the detail of the California state court lawsuit over the weekend.  In sum:

other drivers for Amazon Prime Now weren’t considered employees of Amazon or Scoobeez, its contracted courier company. Instead, they were treated as independent contractors — making them ineligible for overtime pay, mileage reimbursement, workers’ compensation and other protections given to employees under state and federal law.

We’ve discussed the tests for who is or is not an independent contractor.  There are strength in numbers in these types of lawsuits and most attempt to proceed as a class action.  It all comes down to money.  It is much more expensive to employ folks as opposed to treat them as independent contractors.  If these companies are forced to treat contractors as employees it will challenge the company’s business model.  As a result the companies are going to fight these types of cases to protect themselves and lawyers will continue to look for these types of claims to purse.  We will keep you posted on any developments but expect other cases to follow.

Breaking Down the Texas Non-Compete Case

Posted in Executive Compensation, Hiring and Firing, Injunction, Non-Compete Agreements, Non-Solicitation Agreements, Recent Cases


There is a good article from the Houston Chronicle this week outlining a non-compete dispute between two former compensation consultants and their former employer.  The facts are pretty standard fare for this type of dispute:

  • professionals have some type of non-compete agreement with former employer;
  • former employer finds out professionals are leaving in violation of agreements;
  • former employer sues to enforce the provisions of the agreement;
  • judge enters a temporary restraining order that prevents professionals from using trade secrets at new job; and
  • injunction hearing will take place in two weeks.

Though the terms of the non-compete and temporary restraining order are not clear from the article we can get the gist of the lawsuit and what the trial judge will be considering going forward.  Some questions everyone should be asking:

  1. Is there a true non-compete provision that prevents the professionals from working with new employer – most importantly is it likely the Judge will enforce it?
  2. Did one of the professionals recruit the other professional in violation of an anti-raid provision?
  3. Are there really trade secrets involved?
  4. Are the professionals soliciting former employer’s clients?
  5. What bad facts are out there for the professionals? Emails/Texat Messages/Dumps of confidential information through email or jump drives etc.
  6. What does former employer really want in terms of an outcome?

I expect there is probably some expedited discovery going on including depositions and document exchange.  It’s likely that parties will talk about a resolution before any injunction hearing.  But the bottom line is the former employer has won the first fight and set the framework for the dispute.  Harris County is an interesting place becasue the judge that entered the TRO is not the judge that will hear the injunction hearing.  From the lawyer’s perspective this means your operating from a clean slate to some extent.

Sarkisian’s Last Chance

Posted in HR Issues, Uncategorized


Yesterday, we wrote about the alchohol related firing of USC Head Coach Steve Sarkisian.  Since that time some more details have come out about the firing, including reports that Sarkisian’s latest alcohol incidents constituted a breach of an agreement he entered into in August with USC.

My guess would be Sarkisian signed a “last chance agreement”.  Bascially, it is a zero tolerance agreement where an employee acknowledges they have had drug/alchohol issues in the past, they can’t perform the essential functions of their job while impaired, and if they return to work imparied again they will be fired.  They come in various forms, but the point is to document previous use and avoid any future claim by the employee in the future for an impairment-related firing.

Still no word from Sarkisian’s camp and USC goes back to trying to find a new coach.  All employers should make sure to consult with an attorney before they go the “last chance” route.   They can be tricky and the past history of the employee has to be considered.  There is no “one size fits all”.

Sports Employment Law Issues 3

Posted in HR Issues, Uncategorized

A number of interesting employment law related stories in the world of sports:

1.  Steve Sarkisian – Sarkisian was a star quarterback at BYU and former coach of the University of Washington until taking over the helm of USC.  Reports are that he has an alcohol problem and appeared at work under the influence.  USC fired him on Monday.  No idea what the USC employment handbook looks like but I would imagine the athletic director consulted with counsel before making such a move.  The ADA covers alcholism when the employee can performe the essential functions of his or her job.  Will see what Sarkisan does, if anything.  Hopefully he can get his life back on track.

2.  Fantasy Football Insider Trading – There are two major online fantsasy football betting platforms – Draft Kings and Fan Duel.  Turns out that some of their employees were trading on “insider information” and doing quite well.  Basically, they were using information about what players were being used by participants and making betting decisions based on this information which is not publicly available.  They would then use the information on the other site meaning Draft Kings’ employees would use the information to play on Fan Duel.  The New York Attorney general is now looking into the matter.

3.  Greg Hardy – Cowboys’ defensive lineman has been out of football the last couple years because of domestic violence.  I’ll spare you with the details but the allegations out there involved beating up his girlfriend and guns.  He returned to the gridiron on Sunday and by all accounts was good.  Unfortunately, some of his comments before the game involved using the phrase “guns a bazin'”.  Poor word choice to say the least.  So the Cowboys, Greg Hardy, and Jerry Jones were under the microscope over the weekend.  Doesn’t seem like it really matters but bad things can happen with employeees have daily access to the media.

The Uber Update

Posted in HR Issues



Last week in Dallas, Uber Black drivers went on strike and refused to pick up cheaper Uber X fares.  For those not familiar with the difference, Uber Black is the higher end service with nicer cars while Uber X is cheaper.  Uber Black drivers did not want to drop their fares and a deal was eventually reached.

Uber has had a tough go of it in the courts and public opinion the last few months.  Recently, a lawsuit was filed in Dallas over a driver related assault putting Uber’s practices under the microscope.

In April ago we discussed the California class action asserted by Uber drives claiming that they were employees not independent contractors.  That class has now been certified meaning Uber drivers may move forward with their class action against Uber.  Uber of course was hopeful that the judge would not certify the class and dismiss the case.  Though class certification is not ruling on the merits it is a required first step for a class action.  In many instances, cases will settle (like any other lawsuit) between class action and trial but expect the Uber lawyers to try and knock out as many of the plaintiffs’ claims through discovery and summary judgment practice.

The implications are huge for Uber.  It and other taxi alternatives like Lyft are buit on the independent contractor model.  Employees are much more expensive than contractors and if Uber was forced to pay its drivers like employees its bottom line would be impacted.  The challenge for the Uber lawyers is resolving the case with an admission or judgment that finds Uber is an employer.  We’ll continue to monitor the California class action and other cases against Uber.

Top 10 From Texas Non-Compete Camp

Posted in Arbitration, Confidentiality, Non-Compete Agreements, Non-Solicitation Agreements, Presentations, Trade Secrets, Trial and Pre-Trial Procedure

Texas Non-Compete

Last week I had the privilege of speaking and attending the Texas Non-Compete Camp put on by UT LAW CLE and Mike Maslanka.  There were a number of great lawyers there addressing topics ranging from whether to sue the new employer of a former employee to ethical considerations of representing both the employee and employer.  Here are some items I took away from the employer’s persepctive:

  1.  Spend time considering the non-compete the employee is going to sign.  There is no one size fits all approach and if an employee can show the covenant was overlybroad the court could award them their costs and fees;
  2. The employer doesn’t always have to lead off with a lawsuit – consider pre-suit depositions if more evidence is necessary;
  3. If the employer is going to require a non-compete, also consider non-solicits, anti-raids, and confidentiality provisions;
  4. Always include venue and choice of law provisions;
  5. Consider whether arbitration or jury trial waivers make sense;
  6. Texas has adopted the Uniform Trade Secrets Act and a prevailing party in some circumstances can obtain their attorneys’ fees;
  7. There are other types of agreements that have the impact of a non-compete like stock/equity incentive plan agreements and garden leave agreements that might be considered;
  8. These types of disputes are fast, furious, and expensive;
  9. Remember that most of these disputes will never see a jury and that a judge has a great deal of discretion in temporary restraining orders and injunctions; and
  10. A party seeking a TRO will have to swear to the facts alleged – make sure whatever sworn to is accurate as it can come back to bite you.


Hawaii Non-Compete Legislation

Posted in Non-Compete Agreements, Non-Solicitation Agreements, Trade Secrets, Uncategorized

It’s always interesting to take a look at other states to see how they deal with non-compete legislation.  We’ve discussed Masschusetts and most recently doctor non-competes in New Mexico.  Hawaii is the latest state to enact new noncompete legislation targeting workers in a “technology business”.  This is how the Hawaii legislature defined “technology business”:



Basically, folks that work in a technology business can no longer be subjected to a non-compete and can also solicit other “technology business” workers to come and work with them somewhere else.  Now of course, those employees cannot use their previous employer’s trade secrets at their new job.  The statute does not prohibit non-solicitation clauses that prevent a former employee from calling on previous customers.

Tailoring non-compete legislation to certain professions is neither new nor novel.  Texas has sepcific requirements for doctors that include buyout provisions.  The Hawaii statue basically eliminates any barriers to job change for technology business workers but still prevents them from using trade secrets or calling on former employees.  The inside story on the language in the statute, the carve out of broadcast/phone companies, and the why/how behind the legisation would be interesting to hear.  We’ll continue to montior these types of changes on our end.  No changes appear to be in the pipeline for Texas non-compete statute.