On July 25, 2017, the Third Circuit allowed a plaintiff who was an in-house attorney to proceed with a whistleblower retaliation lawsuit under the New Jersey Conscientious Employee Protection Act (CEPA) based on its conclusion that CEPA protects attorneys from being discharged for refusing to violate Rules of Professional Conduct. Trzaska v. L’Oreal USA, Inc., 2017 U.S. App. LEXIS 13381 (3d Cir. July 25, 2017).
Background. Plaintiff was the former head of a regional patent team at the Company. As an attorney, he was bound by the Rules of Professional Conduct of both Pennsylvania (where he was admitted to practice law) and the United States Patent and Trademark Office (USPTO). Plaintiff oversaw the process by which the Company invented and applied for patents on products. He alleged that the Company had an annual minimum quota for patents and that with fewer invention disclosures being submitted to the patent team for vetting, his team could only improve their chances of reaching the quota by filing frivolous patent applications. Plaintiff allegedly complained of this to his superiors, noting that the filing of frivolous or bad-faith patent applications violates the USPTO Rules of Professional Conduct. Plaintiff further alleged that the Company responded by offering him the choice of severance or “go[ing] back to [his] office and get back to work.” His employment was subsequently terminated.
Rulings. Plaintiff filed suit in U.S. District Court for the District of New Jersey claiming that he was retaliated against in violation of the CEPA. The Company moved to dismiss pursuant to Rule 12(b)(6), arguing that the Rules of Professional Conduct were an inadequate basis for a CEPA claim. The District Court agreed with the Company and dismissed the case. In a split decision, the Third Circuit reversed, determining that “an allegation that an employer instructed, coerced, or threatened its patent attorney employees to disregard the Rules of Professional Conduct binding him violates a clear mandate of public policy” under CEPA. The court added that the basis of the CEPA claim is not the Company’s violation of the Rules of Professional Conduct, but instead is that the Company allegedly instructed employees to disregard their duties under the Rules of Professional Conduct. The dissent noted that the quota system was in place for years prior to the complaint and that the Company had been working to improve the quality of their patent applications and vetting process.
Implications. This decision arguably expands the scope of protected activity under CEPA and reflects a trend of increased whistleblower claims by in-house attorneys.
