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.

Posted in State-Specific Whistleblower Claims
Tags: CEPA, New Jersey, whistleblower
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Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department, where he is Head of the Restrictive Covenants, Trade Secrets & Unfair Competition Group and Co-Head of the Whistleblowing & Retaliation Group.

Employment, Whistleblower, Restrictive Covenant and Trade Secret Practice.…

Steven J. Pearlman is a partner in the Labor & Employment Law Department, where he is Head of the Restrictive Covenants, Trade Secrets & Unfair Competition Group and Co-Head of the Whistleblowing & Retaliation Group.

Employment, Whistleblower, Restrictive Covenant and Trade Secret Practice. Steven’s national practice focuses on defending companies in federal and state courts and arbitration against claims of: discrimination, retaliation and harassment, including claims brought by high-level executives; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations (including class, collective and PAGA actions).

Illustrating his versatility, Steven has successfully handled bench and jury trials in multiple jurisdictions (e.g., Illinois, California, Florida and Texas); defended one of the largest Illinois-only class actions in the history of the federal courts in Chicago; and prevailed following his oral arguments before the Seventh Circuit and state appellate courts. Steven brings his litigation experience to bear in counseling clients to minimize risk and avoid or prepare for success in litigation.

Investigations. Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Thought Leadership and Accolades. Steven was named Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He was also named as One of the Top 10 Impactful Labor & Employment Lawyers in Illinois for 2023 by Business Today. He is a Fellow of the College of Labor and Employment Lawyers. Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Chambers also reports that “He is someone who can navigate the twists and turns of litigation without difficulty. Steven is great with brief-writing, crafting arguments, and making sure the client is always happy.”

Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven was appointed to Law360’s Employment Editorial Advisory Board and selected as a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is often quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC, and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.

In 2024, Steven received the Excellence in Pro Bono Service Award from the United States District Court for the Northern District of Illinois and the Chicago Chapter of the Federal Bar Association.

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