Can an in-house lawyer be a whistleblower? 

Posted: 1:00 am Mon, February 9, 2009
By Barbara L. Jones

Brian Kidwell , then in-house counsel for Sybaritic Inc., was charged with overseeing the handling of a lawsuit alleging breach of contract and theft of trade secrets against an Estonia-based competitor, NeoQi. During the course of this work, Kidwell became aware of the existence of certain e-mails potentially damaging to his employer’s case. These documents had not been requested by the defendants, but Kidwell was concerned that they would be, and that Sybaritic would fail to disclose them.

The e-mails were put on a disk and provided to outside counsel. An apparent problem arose with the data, and the company retrieved the disk from outside counsel, fearing it had a virus. Kidwell, who was in Estonia when these events transpired, let company executives know he was concerned that evidence might be being tampered with.

When he returned from his trip, Kidwell sent an e- mail to four members of senior management at Sybaritic. Entitled “A Difficult Duty,” the e-mail said that the company was pervaded with a culture of dishonesty. He went on to say that he intended to advise authorities about his concerns over the potential obstruction of justice in the litigation, as well as other concerns arising from the company’s alleged culture of dishonesty.

Three weeks after sending the e-mail, Kidwell was fired. The company said the termination was for performance reasons and because Kidwell breached his fiduciary duty by forwarding the “difficult duty” e-mail to his father.

Kidwell sued under the whistleblower act, and was awarded damages of $197,000. He also was granted attorney fees of $138,000.

But the Court of Appeals reversed. The court found that an in-house attorney does not engage in conduct protected by the Minnesota Whistleblower Act if the alleged report of a violation or a suspected violation of law is a communication made to the client-employer in fulfillment of the attorney-employee’s job responsibilities.

The Minnesota Supreme Court accepted review, and last week heard oral arguments in the case, Kidwell v. Sybaritic.

The case will be closely watched both in the local legal community and around the country. Minneapolis lawyer Marshall Tanick called it the “Super Bowl of whistleblower cases.”

’Job duty doctrine’

When a lawyer, who is supposed to be the client’s confidant, seeks whistleblower protection, it naturally raises questions. At the oral argument, it was readily apparent that the justices were grappling with some issues.

A few seconds into the Kidwell’s argument, Chief Justice Eric Magnuson cut in, and, during the course of a question, made the point that what happened in this case could be viewed as a lawyer doing just what a lawyer is supposed to do — tell their clients what the law is. (In its opinion, the Court of Appeals found that, under the job duty doctrine, Kidwell was not entitled to whistleblower protection because he was acting pursuant to his role as in-house counsel. The whistleblower act protects an employee who has reported a violation or suspected violation of a law or rule. The job duty doctrine says that a report that is made in furtherance of one’s job responsibilities does not constitute a report for whistleblower purposes.)

The job duty doctrine has to date not been adopted by the Minnesota Supreme Court, and courts in other states have stepped away from it, according to Tanick. The doctrine is “troublesome,” he continued, because it eviscerates the whistleblower law without any support in the text of the statute. In her dissent in this case, Court of Appeals Judge Harriet Lansing said that the court constructed an exception that does not appear in the statute, Tanick noted.

Minneapolis attorney Justin Cummins agreed. “The Court of Appeals decision [in Kidwell] was part of a trend of decisions that go beyond the plain meaning of the [whistleblower act],” he said.

The job duty doctrine also eviscerates the whistleblower act by removing protection from the very employees most likely to be whistleblowers, Tanick said.

Inver Grove Heights attorney Daniel Warner, one of the attorneys who filed an amicus brief on behalf of the National Employment Lawyers Association, Minnesota Chapter, agreed. It’s the bridge inspectors who will know if the gusset plates are defective, he pointed out.

Are lawyers different?

But since Kidwell involves an in-house lawyer, is implicates concerns that would not be present if the alleged whistleblower were, say, a bridge inspector.

During argument the high court evidenced concerned about the attorney-client relationship and the right of a client to terminate an attorney. Magnuson pointed out that the Legislature does not regulate the responsibilities of lawyers and the lawyer-client relationship – that is in the purview of the court.

“We have made it very clear that the client’s rights are paramount,” Magnuson said. “Your argument is premised on the notion that the Legislature can trump our notion of how the attorney-client relationship should be regulated.”

Magnuson said “lawyers are different” than other employees, suggesting the proper course may be for a lawyer to resign rather than threaten to disclose a client’s conduct.

Tanick told Minnesota Lawyer he doesn’t buy the “lawyers are different” rationale for whistleblower cases. Those who argue attorneys are “different” are “hoist on their own petard” because special duties require special protection, he said.

Kidwell’s attorney, Sofia B. Andersson, pointed out that the statutory definition of employee includes attorneys.

Warner said that attorneys are not necessarily different under the statute. While the court regulates attorney discipline, the Legislature regulates the employment relationship. “What if the client-employer wants to fire an attorney because of race or religion? That’s the argument that has to prevail,” Warner said.

The argument that should prevail in a whistleblower case involving an attorney is that good faith is a fact question, said Minneapolis attorney Clayton Halunen. If it is the attorney’s job to report wrongdoing, then look to the purpose of the report, he said.

An exception for employees who have a fiduciary duty would swallow the rule, Halunen said. If every employer placed a fiduciary duty on every employee, then the whistleblower law would be useless.

Andersson told the court the same thing and pointed out that the whistleblower act, like the Minnesota Human Rights Act, still allows an employer to terminate an employee-attorney for legitimate reasons.

During the rebuttal, Magnuson pointed out that a client has a right to refuse to follow a lawyer’s advice. Only in limited circumstances where a lawyer’s services have been used to perpetrate a fraud does a lawyer have a right to make a disclosure, the chief justice continued. As a lawyer, he doesn’t have the right to make his client do anything.

“You’re asking us to say that a lawyer’s rights as an employee should trump the client’s decision on what they want to do,” Magnuson said. “The law is pretty clear that when a lawyer gives legal advice that is not followed, the lawyer doesn’t get to decide whether the client has done it right or not.”

Andersson responded that the public interest trumps the right of the employer.

Doing what attorneys do

Representing Sybaritic, Minneapolis attorney Katherine A. McBride said that her client was not claiming that an attorney could never be a whistleblower, but in this case, Kidwell was doing what attorneys do. “When one is doing one’s job, you are not making a report for purposes of exposing an illegality [under the act],” she said. But the jury was never given that instruction, she said.

Kidwell never stepped outside his role as an attorney, McBride continued. She suggested that an attorney could step outside the role of legal advisor if the attorney went to an outside authority, because then the attorney would not be performing the functions of his or her job.

Justice G. Barry Anderson pointed out that the whistleblower act doesn’t say anything about a job duty exception.

McBride responded that the statute requires a whistleblower to be acting in good faith, and to act in good faith one must be acting for the purpose of exposing an illegality. “You cannot be acting for the purposes of exposing an illegality when you are doing [your] job,” she said. Otherwise all a client’s compliance discussions will turn into protected reports, she added.