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, Restrictive Covenant & Trade Secret, and Whistleblower…

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, Restrictive Covenant & Trade Secret, and Whistleblower Practice. Steven’s national practice focuses on defending companies in federal and state courts and in arbitration fora against the full spectrum of employment-related claims, including claims of executives; restrictive covenant violations; employee raiding; theft of trade secrets; whistleblower retaliation under the Sarbanes-Oxley Act, the Dodd-Frank Act and similar state laws; and wage-and-hour violations, including class, collective and PAGA actions.

Steven has successfully handled trials in multiple jurisdictions; prevailed in seeking and defending against applications for temporary restraining orders and preliminary injunctions; defended one of the largest Illinois-only class actions in the history of the federal courts in Illinois (over 90k putative class members); and prevailed following his oral arguments before federal and state appellate courts. He brings his litigation experience (beginning in 1998) 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 the unusual experience of testifying in federal court in connection with investigations. 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 is a Fellow of the College of Labor and Employment Lawyers. Chambers has reported:

  • Steven is “one of the best in the country and has a lot of experience”;
  • Steven is as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field”;
  • He is thoughtful, attentive and demonstrates an acute understanding of matters top of mind for business-minded general counsel; and
  • “He is someone who can navigate the twists and turns of litigation without difficulty.”

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 U.S. Library of Congress Burton Award Winner 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.

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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