• December 26, 2013

Money RoleUpdate (December 26, 2013): The Minnesota Supreme Court denied the Biosense petition for review this month in the employee-raiding case described below.  Here is a little “case study” of one aspect of the case brought to us by the Twin Cities law firm of Briggs & Morgan.

Original post (October 10, 2013): The law business in the United States has been distinct from other private U.S. businesses forever.  The product — legal advice — is so complicated, so nuanced, and so personal that we give the attorney-client relationship a special and sacrosanct status, worlds apart from the buyer-seller model in all other parts of our commercial lives in many respects.

But it is common-place over the past several decades to recognize (and to lament) the closing gap between the attorney-client relationship with other kinds of service contracts.  Unlike the old days, big firm partners (and entire groups of partners) almost seem to be bought, sold, and maybe even traded, like athletes.  Clients seem to treat their lawyers not so much as distinguished wise counselors offering a priceless product (wisdom) but more like any other consultants, who must propose and stand by budgets, who must negotiate and compete on price, and who must give ultimately tangible proof of monetary value.

But one vestige of the old time legal practice continues:  lawyers cannot be subject to non-competes. Neither lawyer-employees nor a law firm’s clients (a.k.a. customers) can be treated as law firm property.

This differentiates the legal market from many other markets that rely on human capital —  the “stock of competencies, knowledge, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value.”  Other businesses can get closer to the idea of investing in, buying, and holding human capital.  U.S. lawyers, on the other hand, are all free agents.

So it is ironic that many thousands of unfettered lawyers across the United States every day are working hard to lock other high value non-legal workers into “non-competes.”  In other businesses, in many states (including Minnesota), there is nothing wrong with a company’s efforts to lock in its human capital, to protect its often huge investments in training its highly specialized work force (so long as they are not lawyers).

(Could this be one reason why law firms, as a general rule, are so bad at mentoring and training?  The mobility of the junior lawyers is so unstoppable that the law firms do not have a strong incentive on long term investment in them?)

These reflections were triggered by this week’s latest chapter in the seemingly endless fighting between St. Judge Medical and another medical device company Biosense over human capital (previously covered here).  In this chapter, it is quite clear that St. Jude scored a unanimous verdict and a knock-out.  It did not even seem close.

An interesting aspect of these battles, though, is the absolutely critical determination of choice-of-law.  In the recent St. Jude v. Biosense, et al., decision, the Court upheld a Minnesota choice-of-law clause.  Under Texas law, non-competes are relatively worthless.  Minnesota Litigator has not undertaken the research to see whether Biosense and St. Jude also fight cases out in Texas.  I bet they do. And I bet Biosense fairs much better in those cases and the battles for brains rage on…

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