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.