The Illinois Supreme Court’s decision issued on October 18, 2012 provides a cautionary tale for employers investigating the potential breach of non-competition obligations (Lawlor v. Northern American Corporation of Illinois, 2012 IL 112530). In Lawlor, the Supreme Court affirmed the jury’s verdict that the employer was liable when a private investigator improperly obtained the personal telephone records of a former employee. For the first time, the Supreme Court expressly recognized the tort of intrusion upon seclusion in Illinois.
The initial jury verdict of $65,000 in compensatory damages and $1.75 million dollars in punitive damages for the employee arose from facts commonly encountered by employers: a key sales person, who signed a noncompete agreement, quit to work for a competitor and the employer decided to investigate if she violated her non-competition agreement. In this case, Northern American asked its long-time corporate attorney to conduct the investigation. The attorney retained a private investigation firm called Probe to assist with the investigation. North American provided the attorney and Probe with Lawlor’s date of birth, address, home and cellular telephone numbers and social security number. Probe used this information when it requested another investigative entity, Discover, to obtain Lawlor’s personal phone records. North American received and reviewed the phone records to see whether Lawlor was improperly contacting any of its customers.
Lawlor initially sued for outstanding commissions and a declaration regarding the enforceability of the noncompetition agreement. In the course of that litigation, she learned about the investigation and amended her complaint to include a claim for intrusion upon seclusion tort based on the “pretexting scheme” -- someone had pretended to be her to obtain her phone records. North American filed a counterclaim alleging she breached her fiduciary duty of loyalty by attempting to direct business to a competitor while still working for North American and by disclosing confidential corporate sales information. The case went to trial and while the jury found in favor of Lawlor on her claims, it also awarded North American $78,781 in compensatory damages and approximately $500,000 in punitive damages on its counterclaims against Lawlor. The trial court reduced the jury’s punitive damages award in favor of Lawlor from $1.75 million dollars to $650,000. Both parties appealed.
North American did not dispute that the actions of the investigator in obtaining Lawlor’s phone records constituted an intrusion into her seclusion; that she had a reasonable expectation of privacy in her phone records, and that the intrusion would be highly offensive to a reasonable person. Rather, its defense was that it should not be liable for the conduct of the investigators because it had not personally obtained any phone records and that there was no agency relationship between North American and Probe or Discover. Rejecting this argument, the Court held that the jury could reasonably infer that North American was aware that Lawlor’s phone records were not publicly available, and that by requesting such records and providing Lawlor’s personal information, North American set into motion a process by which the investigators would pose as Lawlor to obtain the material.
Another significant aspect of the case is that the Supreme Court reduced Lawlor’s punitive damages award to $650,000. The Court found that an award of punitive damages equal to the award of compensatory damages was warranted where there was no evidence that North American had an intentional, premeditated scheme to harm Lawlor. Moreover, there was no evidence that Lawlor’s emotional distress caused her to miss work, seek medical attention or alter her daily normal activities to warrant a greater award. Nevertheless, the employer learned an expensive lesson: protecting your company’s interest does not justify crossing the line and invading the privacy rights of employees.