Steven Trzaska v. LOreal USA Inc
865 F.3d 155, 2017 WL 3138371, 42 I.E.R. Cas. (BNA) 169 (2017)
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Rule of Law:
An employer violates New Jersey's Conscientious Employee Protection Act (CEPA) by terminating an employee for refusing to participate in a company policy that the employee reasonably believes would require them to violate a law, regulation, or clear mandate of public policy, such as an attorney's Rules of Professional Conduct.
Facts:
- Steven J. Trzaska was employed as an in-house patent attorney for L’Oréal USA, Inc.
- As a licensed attorney, Trzaska was bound by Rules of Professional Conduct (RPCs) that prohibit filing frivolous or bad-faith patent applications.
- L’Oréal established a mandatory annual quota for the number of patent applications its attorneys were required to file.
- L’Oréal management informed Trzaska and his team that failure to meet this quota would result in negative consequences for their careers and/or continued employment.
- At the same time, a new L’Oréal quality initiative reduced the number of patentable inventions available for the team to process.
- Trzaska came to believe his team could not meet the 2014 quota without filing applications for products they did not in good faith believe were patentable, which would violate their RPCs.
- Trzaska informed his superiors that he and his team would not violate their ethical obligations to meet the quota.
- Shortly thereafter, L’Oréal offered Trzaska two severance packages, which he rejected, and then terminated his employment.
Procedural Posture:
- Steven J. Trzaska sued L’Oréal USA, Inc. and its parent company, L’Oréal, S.A., in the U.S. District Court for the District of New Jersey for wrongful retaliatory discharge under the New Jersey Conscientious Employee Protection Act (CEPA).
- L’Oréal USA filed a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).
- The District Court granted the motion to dismiss, holding that the Rules of Professional Conduct could not form the basis of Trzaska's CEPA claim and that he had failed to show a reasonable belief that a violation of law was imminent.
- The District Court also dismissed the claim against L’Oréal S.A. on the same substantive grounds.
- Trzaska, as appellant, appealed the dismissal to the U.S. Court of Appeals for the Third Circuit, with L'Oréal USA and L'Oréal S.A. as appellees.
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Issue:
Does an employer violate New Jersey's Conscientious Employee Protection Act (CEPA) by terminating an in-house attorney who refuses to comply with a company policy that the attorney reasonably believes would require them to violate their professional rules of conduct, even if the employer never explicitly ordered the violation?
Opinions:
Majority - Ambro, J.
Yes. An employer's instruction, coercion, or threat that would result in an employee's disregard of their obligatory professional ethical standards violates a clear mandate of public policy under CEPA. The court reasoned that CEPA must be construed liberally to protect employees. The basis of the claim is not that L’Oréal itself violated the RPCs, but that it established a policy that pressured its attorney-employees to disregard their ethical duties. The court found that requiring attorneys to follow RPCs, especially in the patent system which is affected with a public interest, is a clear mandate of public policy in New Jersey. At the motion-to-dismiss stage, Trzaska's allegations of a mandatory quota, threats of termination, and his subsequent firing were sufficient to state a plausible claim that he had an objectively reasonable belief his employer was coercing him to violate public policy.
Concurring-in-part-and-dissenting-in-part - Chagares, J.
No. While RPCs can form the basis of a CEPA claim, Trzaska failed to plead sufficient facts to show he had an objectively reasonable belief that his employer’s conduct was violating a law or clear public policy mandate. The dissent argued that Trzaska's complaint contained only conclusory allegations and failed to identify even a single frivolous patent application he was asked to file. It noted that L'Oréal's own initiative to improve patent quality undermined the claim that it was encouraging bad-faith filings. The dissent also contended that as an attorney, Trzaska should be held to a 'higher standard' requiring him to plead that an actual violation of an RPC occurred, not just a reasonable belief, and he failed to do so.
Analysis:
This decision clarifies that under New Jersey's CEPA, an employer's policy can constitute an implicit instruction to violate a professional's ethical obligations, even without a direct order. It lowers the pleading threshold for such claims, allowing cases based on coercive work environments, like those created by high-pressure quotas, to proceed to discovery. The ruling reinforces that an employee's adherence to professional codes of conduct is a protected public policy, potentially broadening liability for companies that employ licensed professionals and creating tension between corporate goals and professional ethics.
