Can I be Sued for Whistleblowing?
While most whistleblowers do not face counterclaims by their current or former company, it is possible for a company to file such a counterclaim. Many such suits against whistleblowers, however, are doomed to failure. This blog will discuss some of the laws whistleblowers should consider and the pitfalls they should avoid when contemplating reporting illegal conduct.
Public Policy Support for Rejecting Lawsuits Against Whistleblowers
In general, courts are hesitant to permit claims against whistleblowers for steps they have taken to support their report of illegal activity. Courts have reasoned that the federal False Claims Act (“FCA”), along with other whistleblower laws, state an overriding public policy in favor of private citizens providing the government with evidence of fraud. Thus, courts frequently reject counterclaims against whistleblowers out of concern that such claims would have a chilling effect and deter disclosure of fraud to the government.
Grounds for Counterclaims
Two common counterclaims against whistleblowers based on the whistleblower’s disclosure of confidential company information to the government are for breach of contract or breach of fiduciary duty. These are often based on provisions in employment or separation agreements requiring that the employee not disclose the company’s confidential information.
Courts evaluating such counterclaims in the context of qui tam actions under the FCA usually follow one of two approaches when dealing with such counterclaims: (1) dismissing the counterclaims on public policy grounds, or (2) permitting only those counterclaims that are “independent” of the FCA claim, meaning that the counterclaim seeks remedies for damages wholly independent of potential FCA liability, such as damages sustained when whistleblowers engage in misconduct unrelated to whistleblowing. Because many such employer counterclaims are not truly independent of the whistleblowing – i.e., they seek to punish the employee for reporting information to the government or pursuing a whistleblower award – those claims would generally be dismissed.
Whistleblowers reporting fraud to the SEC under the Dodd-Frank Act’s whistleblower bounty program have access to stronger protections. Under SEC Rule 21F-17(a), “[n]o person may take action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement . . . with respect to such communications.” This regulation prohibits employers from enforcing confidentiality agreements against whistleblowers who report fraud to the SEC, including through breach of contract counterclaims or separate lawsuits.
In addition to these common law claims, employees who “purloin” company documents may face liability for theft of trade secrets or other statutes, including the Computer Fraud and Abuse Act (“CFAA”) and the Defend Trade Secrets Act (“DTSA”). The CFAA prohibits individuals from accessing computers “without authorization or exceeding authorized access.” The Supreme Court in 2021 held that the CFAA does not prohibit obtaining information for purposes outside of those contemplated by the employer, e.g., whistleblowing, if the individual was otherwise authorized to access that information. The DTSA permits a company to pursue claims seeking relief for trade secret misappropriation related to a product or service. Critically, however, the DTSA contains a carveout rendering whistleblowers immune from liability if their disclosure is either: (1) made “in confidence to a Federal, State, or local government official . . . or to an attorney,” and “solely for the purpose of reporting or investigating a suspected violation of law;” or (2) made in a sealed document filed in a court proceeding.
Safeguarding Against Counterclaims
There are several things a whistleblower should do – or avoid doing – to guard against potential counterclaims, all of which have to do with how they obtain the confidential documents of their employer and which documents they then retain. First, the whistleblower should only take documents they are authorized to access in the first place. Taking documents that exceeds their authorized access could risk liability under the CFAA or other claims of misappropriation.
Second, the whistleblower should generally avoid taking privileged documents, i.e.,those documents that contain communications with a lawyer. With limited exceptions, government agencies themselves may often choose not to review privileged materials; as a result, a whistleblower is hard-pressed to argue that the taking of privileged materials was “reasonably necessary” to support their whistleblower tip. Given the protections afforded legal privilege, courts have also often taken a more restrictive view about whether the taking of privileged documents is legally protected.
Third, a whistleblower should only take documents reasonably necessary to support their whistleblowing claim, i.e., those relevant to the underlying fraud or violation to be reported to the government. Several courts have allowed an employer’s counterclaims to proceed as “independent” counterclaims where the whistleblower’s retention of documents was not “reasonable,” i.e., where the whistleblower took documents and disclosed information that were not relevant to their claims. In several prominent cases where counterclaims against whistleblowers were successful, the whistleblower copied or retained the contents of their entire laptop or email history, or downloaded and retained thousands of documents, with little regard for retaining only the documents relevant to the underlying claims to be reported to the government. Ideally, the employer will not even be able to credibly allege that the whistleblower took non-relevant documents, which would make their counterclaim much more vulnerable to early dismissal.
Anti-SLAPP Protections
To the extent a whistleblower is facing a particularly frivolous claim, they should investigate whether their state provides anti-SLAPP (strategic lawsuits against public participation) laws. For most lawsuits in the United States, each party must pay their own attorneys’ fees, regardless of who prevails. Anti-SLAPP laws, however, may entitle a whistleblower to recoup the fees she spent defending against a frivolous claim from an overzealous company bent on reprisal. Further, anti-SLAPP laws may permit a whistleblower to get a retaliatory claim dismissed early in the case, allowing them to avoid the burden of additional litigation.
This article has only scratched the surface of the complex issue of taking company documents to support a whistleblower claim. If you are a whistleblower considering obtaining or retaining company documents to support a tip and/or a claim of employment retaliation, we strongly recommend you retain an experienced whistleblower lawyer.
Avi Kumin is a Partner and Matthew LaGarde is a Senior Associate with Katz Banks Kumin LLP
