On June 24, 2010, the Minnesota Supreme Court issued its
long-awaited decision in the case of Kidwell v. Sybaritic,
Inc., Nos. A07-584, A07-788, 2010 WL 2517602 (Minn. June 24,
2010). This case will likely change the landscape of whistleblower
cases brought pursuant to Minn. Stat. § 181.932,
Minnesota's Whistleblower Statute. First, the Court
concluded that there is no blanket exclusion of whistleblower
protection for in-house counsel (or employees tasked with similar
compliance duties), opening the door for such in-house reporters to
bring whistleblower claims. The Court also stated that that the
Whistleblower Statute does not contain blanket job-duties exception
to bar employees who report illegal conduct or suspected illegal
conduct as part of their job duties from bringing a claim under the
statute. The Court stated, however, that an employee's job
duties are relevant in determining whether the employee made the
report in "good faith" for the purpose of exposing
illegal conduct, which is required for an employee's report
to qualify as protected activity under the statute.
Factual Background: The plaintiff in this case was
Brian Kidwell, the former in-house counsel for Sybaritic, Inc.
While employed by the company, Mr. Kidwell claimed he had made a
protected report by sending what the court referred to as the
"Difficult Duty" e-mail. In that e-mail, Mr. Kidwell
stated that he had become aware of activity which, as in-house
counsel, he felt he had a duty to report. Specifically, Mr. Kidwell
stated that he felt he had an obligation to report to management
his belief that the company was intentionally withholding various
damaging documents in an ongoing lawsuit. Mr. Kidwell testified at
trial that he sent the "Difficult Duty" e-mail to
management "[b]ecause I hoped that we could pull this company
back into compliance by enlisting some of the other members of
management, and as the person responsible for the legal affairs of
the company, that's what I had to do." Mr. Kidwell
also sent a copy of the "Difficult Duty" e-mail to his
father.
Approximately three weeks after he sent the "Difficult
Duty" e-mail to Sybaritic's management, Mr. Kidwell
was terminated by the company. Sybaritic told Mr. Kidwell it
terminated his employment because of various performance issues Mr.
Kidwell had had before and after sending the e-mail. Sybaritic also
discovered (during an otherwise unrelated search of Mr.
Kidwell's computer) that Mr. Kidwell had sent the
"Difficult Duty" e-mail to his father, thus violating Mr.
Kidwell's duty to maintain the privilege of the
company's information.
Mr. Kidwell filed a lawsuit claiming that Sybaritic terminated him
in retaliation for complaining about the company's
allegedly illegal activities. Sybaritic filed a counterclaim
against Mr. Kidwell alleging breach of fiduciary duty (for sending
the e-mail to his father) and conversion. A jury considering the
claim concluded that Sybaritic terminated Mr. Kidwell in violation
of the Whistleblower Statute. The Minnesota Court of Appeals
overturned the jury's decision, stating that Mr. Kidwell
did not engage in protected conduct under the Whistleblower Statute
because he was fulfilling the duties of his position as in-house
counsel when he reported the suspected violation of the law to the
company's management, and he therefore did not make the
report for the purpose of reporting a suspected illegality.
Legal Analysis: The Minnesota Supreme Court also
concluded that the jury's verdict was incorrect, but based
its decision on different grounds than the Minnesota Court of
Appeals. The Court reiterated that the Whistleblower Statute
requires only that an employee report in good faith a suspected
violation of the law, and contemplates that the report can be made
to an employer. According to the Court, the statute does not
contain a blanket job-duties' exception (as the Court of
Appeals had ruled).
The Court stated that an employee "cannot be said to have
'blown the whistle' when . . . it is the employee's
job to investigate and report [the] wrongdoing." The Court
stated that because Mr. Kidwell sent the e-mail as part of his
normal job duties (as in-house counsel, which he explicitly stated
in the e-mail), he had not sent the e-mail in order to expose an
illegality. Rather, he sent the e-mail as part of his normal job
duties, and his conduct was not a "good faith" report of
an illegality that would be afforded protection under the
Whistleblower Statute.
The Court did not rule out protection under the Whistleblower
Statute for all employees who are responsible for investigating
illegal conduct and/or ensuring compliance within an organization.
For such an employee, whose regular job duties involve
investigation and/or reporting of potential unlawful activity, an
employee can be protected if he makes the report "outside
normal channels." In this case, Mr. Kidwell had previously
sent similar e-mails regarding legal issues to the same members of
management, and had testified that his reason for sending the
e-mail was to have management fix the issue (and not to report an
illegality), so the Court concluded that he utilized the same
channels as he had to make such reports within his normal job
duties (and therefore was not protected by the Whistleblower
Statute). The Court stated that an employee's job duties
are relevant in determining whether a report was made within the
employee's assigned responsibilities and thus whether the
report was made in "good faith" to garner protection
under the Whistleblower Statute.
What This Case Means for Employers: While this
case applied specifically to in-house counsel, it will likely
impact all classes of employees with internal reporting duties.
This case makes it more difficult for employees who are otherwise
tasked with internal investigation and/or reporting of potential
illegalities, and/or compliance, to make reports that would be
protected by the Whistleblower Protection. Such employees will now
have to make their reports "outside normal channels"
(i.e., to governmental or other similar agencies) in order to
garner protection under the statute. Essentially, this case places
an additional burden on employees in these types of positions to
demonstrate that their report was made to expose an illegality,
rather than to accomplish their normal job duties.
This case also clarified that an employee's job duties are
not dispositive of whether an employee's report under the
statute is protected, but that those job duties can be used to
analyze whether the employee made his report in good faith and for
the purpose of reporting a potential violation of the law. A court
should also look to the content of the report and the
employee's purpose in making the report to determine
whether the report was made in "good faith" and for a
protected purpose.
The attorneys in Larkin Hoffman's Labor & Employment
Group have experience in counseling employers regarding
whistleblower cases and litigating whistleblower claims after
lawsuits have been filed. We are also able to assist with any other
labor or employment questions you may have.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.