TRT, Inc. CLE Blog

 

An in-house lawyer was fired after notifying his client's management team of his concerns about possible wrongdoing within the company.  In a split-decision, the Minnesota Supreme Court ruled that the in-house counsel cannot obtain redress under the state whistleblower statute (Kidwell v. Sybaritic Inc., Minn., No. A07-584, 6/24/10).  Though the court agreed that lawyers are not excluded from protections of the whistle blowing statute, it held that the jury verdict for the lawyer in the case at hand cannot stand.  Three justices found that the lawyer sent the e-mail not as a whistleblower to expose illegality but rather in his role as their lawyer.  Another justice opined that the lawyer breached his fiduciary duty by sending a copy of the e-mail to his father, forfeiting his whistleblower claim.  Three dissenting justices asserted that the court had no basis to second-guess the jury's finding that the lawyer acted in good faith with the purpose of blowing the whistle on possible corporate misconduct.  Additionally, they argued that a lawyer's breach of confidentiality does not automatically destroy a whistleblower claim.  Brian F. Kidwell served as general counsel of Sybaritic, Inc. for about 10 months.  The company terminated his employment three weeks after he sent an e-mail message to Sybaritic's top management expressing his concerns about a “pervasive culture of dishonesty” within the corporation.  He claimed that the company was illegally withholding potentially damaging e-mails in discovery in pending litigation and engaging in certain other activities that he asserted were unlawful.  The subject of the e-mail was “A Difficult Duty.”  After his termination, Kidwell sued Sybaritic in state court under the Minnesota Whistleblower Act, Minn. Stat. §181.932. A jury found in his favor and awarded him damages. The intermediate appellate court overturned the jury verdict and granted judgment for Sybaritic, holding that Kidwell did not engage in conduct protected by the whistleblower statute because he was fulfilling the responsibilities of his job when he reported a suspected violation of the law.  The Supreme Court concluded that Sybaritic is entitled to judgment notwithstanding the verdict in Kidwell's whistleblower case.  In a plurality opinion four justices rejected the proposition that a report made in fulfillment of an employee's job duties can never constitute protected conduct under the whistleblower statute.  The statute does not contain any language that would support a “blanket job duties exception,” noted Justice Gildea.  At the same time, Gildea insisted that an employee's job duties are relevant in determining whether the employee made the report in good faith for purposes of exposing an illegality, as is required for a viable claim under the Minnesota whistleblower statute.  An employee cannot be said to have “blown the whistle,” Gildea said, when the employee reports illegality because it is that individual's job to investigate and report wrongdoing.  But if an employee responsible for reporting illegality makes a report for the purpose of exposing illegality, then the person can be viewed as engaging in protected conduct under the whistleblower statute, Gildea said.  “When in-house counsel sends his client written advice in order to ‘pull’ that client ‘back into compliance,’ the lawyer is not sending a report for the purpose of exposing an illegality and the lawyer is not blowing the whistle,” Gildea wrote.  Justice Magnuson asserted that in applying the whistleblower statute to lawyers, courts need to keep in mind the fiduciary obligations that attorneys owe their clients, including the duty of confidentiality. A lawyer who blows the whistle on a client must still comply with Minnesota Rule of Professional Conduct 1.6 both before and after the claim is brought, he maintained.  The trial court found as a matter of law, Magnuson noted, that Kidwell breached his fiduciary duty to Sybaritic by disclosing client confidences outside the authorization of Rule 1.6. “Because Kidwell breached his fiduciary obligations to his client, in my opinion he forfeited his right to recovery,” Magnuson wrote.