In Trzaska v. L’Oreal USA, Inc., 2017 U.S. App. LEXIS 13381 (3d Cir. July 25, 2017), the Third Circuit held that an in-house attorney may maintain a cause of action under the New Jersey Conscientious Employee Protection Act (“CEPA”) due to the in-house attorney’s allegation that his employment was terminated because of his refusal to violate the Rules of Professional Conduct governing lawyers in the State of Pennsylvania.  This is an important decision because it further expands the scope of CEPA by recognizing that in-house legal counsel may proceed with claims alleging whistleblower retaliation.

Steven J. Trzaska was an in-house patent attorney for L’Oreal, overseeing the company’s patent team and the process by which the company would patent its newly developed products and inventions.  As a legal practitioner, Mr. Trzaska is bound by the Rules of Professional Conduct established by the Supreme Court of Pennsylvania as well as the United States Patent and Trademark Office.  The company established a global quota of patent applications that each regional office must file each year.  At the same time, L’Oreal adopted an initiative to improve the overall quality of its patent applications filed with the United States Patent and Trademark Office, which resulted in fewer invention disclosures submitted to the company’s patent team for vetting.

Despite its initiative, the company continued to demand that the patent team meet the annual quota.  As a result, the patent team did not believe it could meet the quota for 2014 without filing patent applications for products that it did not, in good faith, believe were patentable.  Accordingly, Mr. Trzaska explained to his superiors that neither he nor his team would be willing to file any patent applications for products that they in good faith, did not believe were patentable.  He further advised that, if any attorney on the patent team filed such an application, it would be in violation of the Rules of Professional Conduct.  In response, the company offered Mr. Trzaska two severance packages if he wanted to leave the company or was otherwise told to “get back to [his] office and get back to work.”   The company subsequently terminated Mr. Trzaska’s employment after he rejected the severance packages.

Mr. Trzaska subsequently filed suit in the United States District Court for the District of New Jersey, alleging that his employment termination was retaliation in violation of CEPA.  The company moved to dismiss the suit on the grounds that the Rules of Professional Conduct were an inadequate basis to maintain a CEPA claim.  The District Court agreed, and dismissed the lawsuit.  On appeal, the Third Circuit reversed, determining that “an allegation that an employer instructed, coerced, or threatened its patent attorney employee to disregard the RPCs [Rules of Professional Conduct] binding him violates a clear mandate of public policy within the meaning of CEPA.”  In addition, the Third Circuit found that “rules of professional conduct in general can underlay a CEPA violation” and even though the applicable Rules of Professional Conduct do not regulate the company’s business practices, the company’s instruction to Mr. Trzaska nevertheless violates a clear mandate of public policy.

If you have any questions about this decision or CEPA, please contact the Law Office of Frank A. Custode, LLC.