The New Jersey Supreme Court has ruled 5-2 that an employee who engages in self-help and circumvents the pretrial discovery process by secretly copying her employer’s records for use in a discrimination lawsuit may be insulated from discipline and/or termination. The Court’s decision in Quinlan v. Curtiss-Wright Corp., No. A-51-09 (Dec. 2, 2010), adopting a totality-of-circumstances approach, gives employees who believe they were discriminated against more legal protections than ever while making it more difficult for employers to respond to employee misconduct.
The Facts
Joyce Quinlan was the Executive Director of Human Resources for Curtiss-Wright Corporation. She alleged she was passed over for a promotion to Vice-President of Human Resources and Management Development in favor of Kenneth Lewis because of gender discrimination. The company responded that Lewis received the promotion due to initiatives he conceived and implemented within the department.
Quinlan commenced a campaign of searching and copying human resources department confidential files she felt bolstered her eventual discrimination claims. She delivered more than 1,800 pages of documents to her attorneys. Some of the documents contained confidential personnel information regarding other employees.
Quinlan later sued the employer, asserting, among other things, that she was the victim of gender discrimination based on the decision to promote Lewis instead of her. During pretrial discovery, Quinlan produced the 1,800 pages of pilfered documents. This was the company’s first notice of Quinlan’s conduct. The company, however, did not terminate Quinlan at this time.
Weeks after her document production, Quinlan, in her capacity as Executive Director, was given a copy of Lewis’s performance evaluation. The evaluation rated Lewis as “needing improvement” in several areas. Believing it to be important to her claims, Quinlan copied the document and turned it over to her attorneys. The document, however, was not produced in the ordinary course of discovery; rather, it was first disclosed during Quinlan’s counsel’s deposition of Lewis. (Lewis had not yet seen his performance appraisal.) The company’s counsel objected to the use of the document.
Shortly thereafter, the company terminated Quinlan for her continued taking of confidential and privileged information, deeming it theft of company property in violation of the company’s code of conduct. Quinlan subsequently amended her lawsuit to add a claim for retaliation.
Lower Court Decisions and Jury Verdict
In pretrial rulings, the trial court said that Quinlan’s taking of confidential records, including the Lewis performance evaluation, was not protected conduct and the company could lawfully terminate her for such activity. The court, however, also declared that Quinlan’s counsel’s use of the performance evaluation at Lewis’s deposition was protected and Quinlan could not be terminated for such conduct.
The trial court left it for the jury to determine whether Quinlan was lawfully terminated for taking the documents or unlawfully terminated for using the documents.
The jury found in favor of Quinlan and awarded her in excess of $4.5 million in compensatory damages as well as more than $4.5 million in punitive damages. Factoring in prejudgment interest, counsel fees and costs, the total amount was in excess of $10.6 million.
On appeal, the Appellate Division reversed and remanded the retaliation verdict for a new trial. The panel disagreed with the lower court’s distinction between taking and using documents. In particular, the appeals court expressed concern “that adopting the trial court’s approach would encourage employees to go through their employer’s files and copy confidential material, secure in the knowledge that employers could do nothing so long as that material was later used in litigation.”
Supreme Court Adopts Totality-of-Circumstances Approach
Ruling 5-2 in Quinlan’s favor, the Supreme Court upheld the trial court’s determination that Quinlan’s copying and retaining the company’s documents was not “protected conduct” and left undisturbed the jury’s finding that Quinlan’s termination was retaliatory.
Drawing from several federal court decisions, the New Jersey Supreme Court adopted a “flexible totality of the circumstances approach,” which calls for seven factors to be considered in determining whether an employee is permitted to take and use documents belonging to his or her employer.
The factors to be considered include the following:
- How the employee came to have possession of, or access to, the document;
- What the employee did with the document;
- The nature and content of the particular document, including whether the document is protected by a privilege, reveals a trade secret, or includes personal or confidential information of other people;
- Whether there is a clearly identified company policy on privacy or confidentiality that the employee’s disclosure has violated;
- The circumstances relating to the disclosure of the document, balancing its relevance against consideration about whether its use or disclosure was unduly disruptive to the employer’s ordinary business;
- The strength of the employee’s reason for copying the document, such as whether there was a likelihood that the employer would not maintain the document or it would have been discarded in the ordinary course of business; and
- Consideration of the broad remedial purposes the New Jersey Legislature has advanced through its anti-discrimination laws, including the Law Against Discrimination, as well as the effect, if any, that either protecting the document by precluding its use or permitting it to be used will have on the balance of the legitimate rights of both employers and employees.
Applying this test, the Court determined that the trial court was correct and reinstated the retaliation verdict for Quinlan. Although the Court acknowledged employers’ concerns that this decision has “opened the floodgates” by protecting such employee conduct, it disagreed that employers will be powerless to discipline employees who take documents when they are not privileged to do so.
Takeaway for Employers
Notwithstanding the Court’s assurances, this decision has far-reaching implications for employers. Significantly, employers must be extremely cautious before disciplining an employee found to have taken company documents in connection with his or her complaints of discrimination or other unlawful conduct, especially when such documents are used by the employee’s counsel in connection with a threatened or pending lawsuit.
To help reduce the risks, employers are well-advised to adopt, and consistently enforce, policies protecting confidential documents and other sensitive information. Jackson Lewis attorneys are available to answer questions about this decision and provide guidance to employers regarding how best to protect their confidential records.
