New Jersey Court Holds Employer Not Liable for 'Retaliation' After Terminating Employee Who Removed Confidential Information to Support Her Discrimination Claim

In Quinlan v. Curtiss-Wright Corporation, __ N.J. Super. __, 2009 N.J. Super. LEXIS 200 (App. Div. Aug. 11, 2009), a New Jersey court for the first time addressed the issue of whether an employee who has asserted a claim under the Law Against Discrimination (“the LAD”) can also assert a claim of retaliation based on having been terminated for removing confidential information from the company’s files that allegedly supported the employee’s original discrimination claim. The court ruled that the removal of confidential information by the plaintiff is not “protected activity,” i.e., an employer can take action against an employee who violates company policies dealing with confidential information without subjecting itself to a claim of retaliation.

Background

Plaintiff was hired by Curtiss-Wright (“Curtiss”), as a benefits analyst and eventually was promoted to Executive Director of Human Resources. When she began her employment at Curtiss she signed a statement acknowledging that she could not disclose to others confidential information she obtained during the course of her employment. In addition, she had received a copy of Curtiss’ code of conduct, which inter alia, precluded an employee from using her position with the company for private advantage.

After another employee, Kenneth Lewis, was promoted to the position of Vice-President of Human Resources and Management Development and became plaintiff’s superior, plaintiff believed she had been passed over for Lewis’ position because of her sex. She complained to the company’s CEO and was told that Lewis received the position because of several initiatives he had conceived and implemented in the human resources department.

Dissatisfied with this explanation, plaintiff consulted with counsel. She also made copies of more than 1800 pages of documents in the files of the human resources department for the purpose of supporting her claim of sex discrimination. These documents contained confidential personal information of other employees, including home addresses, telephone numbers. social security numbers and salary information. She provided this material to her attorney.

Subsequently, plaintiff brought a lawsuit in the Law Division alleging, inter alia, sex discrimination for failing to promote her, in violation of the LAD, N.J.S.A. § 10:5-1 et seq. During the course of discovery, plaintiff’s counsel produced to Curtiss’ counsel copies of the records plaintiff had copied from Curtiss’ files. This document production was the first notice to Curtiss that plaintiff had copied confidential personnel files. Curtiss’ management and in-house counsel discussed the fact that plaintiff had copied personnel records but took no other action.

Several weeks after turning over these documents, plaintiff’s counsel deposed Kenneth Lewis. During the course of the deposition, plaintiff’s counsel showed Lewis his most recent performance appraisal. Plaintiff had received the performance review in connection with her position in the company’s human resources department. She had made a copy of it believing that it supported her failure to promote claim. Lewis denied ever seeing the document, and Curtiss’ trial counsel objected to the use of this document at the deposition.

Shortly thereafter, plaintiff was discharged, the company having concluded that plaintiff had continued to remove confidential information after the commencement of the lawsuit. Her termination letter from the company’s CEO included the following language.

“Without authorization, you have removed confidential, and in some instances privileged, information . . . . This unauthorized taking of confidential or privileged information from the Corporation constitutes a theft of Company property. . . .”

Plaintiff then amended her complaint to add a count for retaliation. She alleged that she was terminated in retaliation for having engaged in “protected activity,” which she identified as (a) the filing of her failure to promote claim and (b) her removal of personnel files to support her claim. In denying a motion by Curtiss to dismiss that claim, the trial court ruled that while plaintiff’s removal of documents from the company’s files was not protected activity, constituting conduct for which plaintiff could have been terminated, the use of the performance review by plaintiff’s attorney at Lewis’ deposition was protected activity and should not have been a factor in the termination decision. At trial, the judge so instructed the jury.

The jury ultimately returned verdict for plaintiff on both the failure to promote and retaliation claims. The jury awarded plaintiff in excess of $10 million, including punitive damages and an amount to cover plaintiff’s tax liability for the award.

The Decision of the Appellate Division

In addressing the issue of whether the plaintiff had made out a viable claim of retaliation under the LAD, the Appellate Division first set forth the now well recognized elements of a prima facie case of retaliation, to wit: “proof that a plaintiff engaged in a protected activity, that the employer knew that the plaintiff had engaged in such protected activity, that the employer unlawfully retaliated against the employee and that the retaliation was caused by the employee’s participation in that protected activity.” The court then focused on whether plaintiff’s removal of confidential personnel files, admittedly for the purpose of supporting her discrimination lawsuit, constituted a protected activity. The court noted: “While an activity taken in furtherance of the employee’s claim of discrimination is protected activity . . . not all such activity is protected,” citing Carmona v. Resorts Int’l Hotel, Inc., 189 N.J. 354, 373 (2007).

Noting that no New Jersey court decision specifically addressed the issue of whether taking confidential documents from an employer can be considered a protected activity, and after reviewing a number of federal court decisions concerning that issue, the court concluded that plaintiff’s removal of the confidential personnel files was not a protected activity. In so holding, the court rejected the distinction made by the trial court between the personnel records plaintiff initially removed and the performance appraisal of Lewis that was used at Lewis’ deposition. “Such an approach, in our view, could have the undesirable result of encouraging employees to go through their employers’ files and copy confidential material, secure in the knowledge that employers could do nothing so long as that material was later used in litigation.” Moreover, the fact that the performance review came into plaintiff’s possession during the normal course of her duties did not mean that her unauthorized removal of it constituted a “protected activity.” In this regard the court rejected the trial court’s reasoning that “[an] employer cannot lay traps for its employees by tantalizing them with such documents, enticing them to send a copy to their lawyer, and then claim that their lawyer’s use of the document is wrongful.” The appellate court noted that nothing in the record supported an inference that Curtiss attempted to “lay a trap” for plaintiff. “Such a document would have been delivered to plaintiff in the regular course of her duties prior to her filing suit; if Curtiss had altered that routine after she filed suit, it could have opened itself to the possibility of another claim of retaliation.” Finally the court noted that even if plaintiff had come across the documents accidentally, her removal of them would not constitute protected activity for purposes of a retaliation claim.

Thus the Appellate Division ruled that the trial court’s instruction to the jury, to the effect that the removal of the performance review could constitute protected activity, was an error and required a new trial on the retaliation claim. (The court did not dismiss the retaliation claim because of its holding that there was sufficient evidence to go to the jury on plaintiff’s claim that she was retaliated against for filing her failure to promote claim.)

Other aspects of the Appellate Division’s decision are also of interest. First, the court held that there was insufficient evidence to support the verdict for punitive damages. The court noted that punitive damages may be awarded under the LAD only “when there is both actual participation in the wrongful behavior on the part of upper management, and when the wrong-doer’s behavior is especially egregious,” citing, Rendine v. Pantzer, 141 N.J. 292, 313-14 (1995). The Appellate Division recognized that not all cases of employment discrimination warrant an award of punitive damage, and it rejected the trial court’s finding that the letter terminating plaintiff’s employment constituted “especially egregious conduct” because it referred to plaintiff’s “theft of company property.” The court noted that plaintiff had admitted that her actions breached her duty to her employer. In addition, there was no suggestion that the termination letter was made available to anyone other than plaintiff, such as a prospective employer, and, in fact, plaintiff found a new position shortly after she began her job search. Thus the court held that the question of Curtiss’ liability for punitive damages should not have been submitted to the jury.

Also of interest is the court’s ruling that plaintiff was entitled to an award to compensate her for the tax consequences she would experience as a result of her recovery. The court cited to the Law Division’s opinion in Ferrante v. Sciaretta, 365 N.J. Super. 601, 607 (Law Div. 2003). The court left it to further proceedings in the trial court to determine the amount of this award.

Conclusion

The Quinlan decision should be of great relief to many employers. The decision permits employers to discipline employees who violate company policies designed to protect confidential information, and at the same time, puts employees on notice that, merely because they believe they have some type of discrimination claim, they are not free to violate those policies for the ostensible purpose of gathering evidence against the employer. Moreover, the decision, reinforces the importance to the employer of having in place, and disseminating to its workforce, clearly worded and effective policies concerning the company’s confidential business and personnel information.