News America Marketing Group Wins Summary Judgment Against Whistleblower Robert Emmel

Last Updated Mar 16, 2009 12:35 PM EDT

A federal judge has awarded a summary judgment to News America Marketing Group in its case against a former account director who alerted federal authorities to the company's alleged anticompetitive practices.

The ruling is chilling for employees of ad agencies and marketing firms who discover that their company is engaged in potentially illegal acts.

Robert Emmel took a computer hard drive to the SEC and the New York State attorney general, claiming it showed that his former employer, Rupert Murdoch's News America, had hacked into the computers of a rival company,* engaged in anticompetitive practices against Floorgraphics Inc. News America then sued Emmel for breach of contract, claiming he had agreed as an employee to return all company documents.

The judge awarded News America nominal damages and attorneys' fees. Those damages will probably be paid by FGI and Insignia, another direct marketing company. Emmel was backed by FGI and Insignia because they wanted to use Emmel's information in their own lawsuits against News America. FGI settled with News America midtrial, Insignia's suit and another similar one, from direct mail giant Valassis, have yet to be heard.

The summary judgment order is bad news for any employee who worries whether their company is engaged in criminal acts or antitrust behavior. It suggests that providing evidence to the authorities of such wrongdoing can leave employees vulnerable to breach of contract actions from their former employers. The ruling states:

Emmel further argues that any breach of the December 2006 agreement that he did commit was justified by his desire to benefit the public as a whistleblower because he sought to disclose NAMIS's anticompetitive business practices . However, Emmel cites no law that immunizes an employee from what he did in this case, namely, misappropriating and voluntarily disclosing confidential information. Conversely, NAMIS cites several cases that have made it clear that mere assertion of an employee's whistleblower status does not immunize the employee from breaching his confidentiality obligations to his employer.
So how is an advertising whistleblower supposed to stop wrongdoing at his or her company? The court suggests that employees may be able to take documents if they believe they might be destroyed by the company:
The situation might be different if Emmel had proffered evidence that he had a legitimate concern that NAMIS might destroy or conceal the relevant information had he not taken action to preserve and disclose the documents.
The judge also notes that whistleblowers should seek to obtain the documents through the usual legal discovery process:
... if the former employee "desires to use such documents, he is free to seek them from [his employer] through the traditional routes available to him in the forum adjudicating his claims"...
Bottom line: If you think your employer is engaging in wrongdoing, take careful personal notes of the emails and documents which record it, then communicate that to your lawyer. He or she can subpoena the originals later. Don't take them out the door with you.

*Correction: The hacking allegation came from another person, which you can read about here. Hat tip to Daniel Low, of the Consumer Goods and retail Industry Litigation blog.