In an article titled “Lawsuit Accuses Whistleblower Law Firm Of Coaching Employee To Steal Documents,” Forbes quotes whistleblower attorney Jason Zuckerman about the complex issue of employees using confidential company information to bring qui tam actions and Dodd-Frank Act whistleblower reward claims. The article describes how companies are concerned that “self-help discovery” can jeopardize proprietary information and that whistleblower rewards statutes can encourage employees to report fraud directly to the government without first reporting fraud to internal compliance programs.
The articles states:
Plaintiff attorneys say employees have the right to collect evidence of corporate wrongdoing and work with private lawyers to assemble a case on behalf of the government.
“Both plaintiff side and management side lawyers need to take a more reasonable approach to this issue,” said Jason Zuckerman, a Washington lawyer who represents whistleblowers. Employees should try to use only documents that directly support a qui tam case and avoid using a company’s privileged information, Zuckerman said. But employers should be aware that a retaliatory lawsuit could cost them even more if a jury awards the whistleblower not only back pay but compensation for the cost of defending the suit. The False Claims Act allows employees to sue if they are “demoted, suspended, threatened, harassed, or in any other manner discriminated against” for lawfully disclosing wrongdoing.
This is a difficult issue in that the Dodd-Frank Act and the False Claims Act authorize employees to provide confidential information to the government to report fraud, and indeed such conduct is protected under the False Claims Act and the Sarbanes-Oxley Act. See, e.g., In United States ex rel. Grandeau v. Cancer Treatment Ctrs of America, 350 F.Supp.2d 765, 773 (N.D. Ill. 2004); Vannoy v. Celanese Corp., 2008-SOX-00064, ARB No. 09-118, 2011 WL 4690624 (ARB Sept. 28, 2011). But employers also have legitimate interests that should be taken into account, including the protection of proprietary information and preservation of attorney-client privilege.
My quote calls on both sides to be more reasonable about “self-help discovery.” Whistleblowers should try to use only the documents that are necessary to prove a qui tam claim, take steps to protect proprietary information, and avoid disclosing or using a company’s privileged information. And defense counsel should avoid using heavy-handed intimidation tactics, such as filing and aggressively prosecuting frivolous counterclaims, to dissuade lawful whistleblowing. Indeed, bringing a frivolous lawsuit against a whistleblower can backfire by giving rise to an additional claim of retaliation and motivating a jury to award punitive damages to the whistleblower. Moreover, the whistleblower can recover defense costs incurred in defending against a retaliatory counterclaim.
The New Jersey Supreme Court examined the issue of self-help discovery in discrimination litigation in Quinlan v. Curtiss-Wright Corp., 204 N.J. 239, 8 A.3d 209 (2010) and provided a very useful totality of the circumstances standard to determine whether an employee is privileged to take or to use documents belonging to the employer. While the analysis is somewhat different in whistleblower rewards cases (there is greater leeway for whistleblowers to use confidential information to report fraud and other wrongdoing to the government), the factors set forth in Quinlan should be taken into account in assessing self-help discovery:
First, the court should evaluate how the employee came to have possession of, or access to, the document. If the employee came upon it innocently, for example, in the ordinary course of his or her duties for the employer, this factor will generally favor the employee. In that evaluation, it will not be necessary that the employee came upon the document either inadvertently or accidentally, but it will suffice if the employee came into possession of the document in the ordinary course of his or her duties. If, however, the discovery of the document was due to the employee’s intentional acts outside of his or her ordinary duties, the balance will tip in the other direction. Therefore, the employee who finds a document by rummaging through files or by snooping around in offices of supervisors or other employees will not be entitled to claim the benefit of this factor.
Second, the court should evaluate what the employee did with the document. If the employee looked at it, copied it and shared it with an attorney for the purpose of evaluating whether the employee had a viable cause of action or of assisting in the prosecution of a claim, the factor will favor the employee. On the other hand, if the employee copied the document and disseminated it to other employees not privileged to see it in the ordinary course of their duties or to others outside of the company, this factor will balance in the employer’s favor.
Third, the court should evaluate the nature and content of the particular document in order to weigh the strength of the employer’s interest in keeping the document confidential. If the document is protected by privilege, in whole or in part, if it reveals a trade secret or similar proprietary business information, or if it includes personal or confidential information such as Social Security numbers or medical information about other people, whether employees or customers, the employer’s interest will be strong.
Fourth, the court should also consider whether there is a clearly identified company policy on privacy or confidentiality that the employee’s disclosure has violated. The evaluation of this factor should take into account considerations about whether the employer has routinely enforced that policy, and whether, in the absence of a clear policy, the employee has acted in violation of a common law duty of loyalty to the employer.
Fifth, the court should evaluate the circumstances relating to the disclosure of the document to balance its relevance against considerations about whether its use or disclosure was unduly disruptive to the employer’s ordinary business. In evaluating disruptiveness, the court may consider the manner or the timing of the disclosure or use of the document. However, the focus must be on whether the use or disclosure of the document unduly disrupted the employer’s business, rather than on any effect it had on individual company representatives. Thus, for example, if the document had marginal relevance to the claim of discrimination, but was intended to be used merely to cast unfair aspersions, to divert the attention of the jury, or to sensationalize the trial, this factor would weigh in the balance against the employee. On the other hand, if the document was central to the discrimination claim and merely troubling or upsetting to the employee to whom it related, the factor will more likely weigh in favor of the employee.
Sixth, the court should evaluate the strength of the employee’s expressed reason for copying the document rather than, for example, simply describing it or identifying its existence to counsel so that it might be requested in discovery. In this evaluation, the court should consider whether there is evidence that demonstrates that, in the absence of the employee’s act of copying the document, there was a likelihood that the employer would not maintain it, or would have discarded it in the ordinary course of business, that it would have been destroyed, or that its authenticity would be called into doubt. As part of this evaluation the court may also consider whether the document would be critical to the case, like the true “smoking gun,” such that the employee’s perceived need to preserve it would be entitled to greater weight in light of the significance of the risk of its loss.