The Defend Trade Secret Act (“DTSA”) contains a whistleblower immunity provision which could have a significant impact on employers. Until last month, however, no court had interpreted this provision which provides that no one “shall be held criminally or civilly liable under Federal or State trade secret law for the disclosure of a trade secret” made in confidence to a government official or an attorney and “solely for the purpose of reporting or investigating a suspected violation of law.” 18 U.S.C. § 1833(b). Now, the U.S. District Court for the District of Massachusetts has. In rejecting that assertion of the provision in a motion to dismiss, the court concluded that the party seeking the protections of the provision has the burden of at least asserting facts justifying its application. See Unum Group v. Loftus, No. 16-cv-40154-TSH, 2016 WL 7115967 (D. Mass. December 6, 2016).
Unum Group sued its former employee Timothy Loftus, who served as the company’s Director of Individual Disability Insurance Benefits. It did so based on the undisputed fact that, over a series of days, Loftus removed company documents and a company laptop that Unum Group contended contained trade secrets. While Loftus ultimately agreed to return the company laptop, Loftus’ counsel informed Unum Group that the documents he absconded with “may be evidence or otherwise have a material bearing on certain matters which are the subject of both historical and current governmental inquiries concerning the business practices of [the company]” and that he had taken the documents to prevent their destruction “pending both internal and apparent external investigations of misconduct.” Unum Group sued Loftus for conversion and trade secret misappropriation under the DTSA and Massachusetts Trade Secrets Act and sought a preliminary injunction for the return of the materials taken. In response, Loftus moved to dismiss, arguing that his actions were protected by the DTSA’s whistleblower immunity provision because he had turned over the documents to his attorney in the course of reporting a violation of the law.
The district court denied the motion. It did so because Loftus failed to provide any factual support for his assertion of the DTSA’s immunity provision. The court reasoned, “it is not ascertainable from the complaint whether [the employee] turned over all of Unum’s documents to his attorney, which documents he took and what information they contained, or whether he used, is using, or plans to use, those documents for any purpose other than investigating a potential violation of law.“ (emphasis in original.) Moreover, the court granted the company’s request for a preliminary injunction and ordered the employee and his attorney to return all of the documents he removed.
Unum Group now answers at least one question—that the simple assertion of the immunity provision is not sufficient. Instead, the party seeking protection must provide factual evidence supporting the assertion of this provision. But more questions remain, such as: whether an employer can take action against an employee when the removal of documents violates company policy, whether the immunity applies when the documents taken exceed the scope of the suspected violation of law, and how well-founded the suspected violation of law needs to be. Some of these issues have been confronted and answered in other contexts, such as the False Claims Act. 31 U.S.C. § 3729, et seq.; see, e.g., S. Payne, Let’s Be Reasonable: Controlling Self-Help Discovery in False Claims Act Suits, 81 U. Chi. L. Rev. 1297 (2014). When and how they will be answered in the context of DTSA remains to be seen, so stay tuned as we track these developments.