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					                                                     LABOR &
                                                 EMPLOYMENT
                              Published by the NCBA’s Labor & Employment Law Section      Section Vol. 28, No. 2   December 2009      www.ncbar.org




The CFAA
Suing the Traitorous Employee in Federal Court
By Julian H. Wright, Jr. & Jonathan H. Ferry

    Few situations trigger an employer’s vis-    redress in federal court while asserting relat-    §1030(a)(5) prohibits a slate of activities,
ceral reaction like a disloyal employee who      ed state law claims under a federal court’s        which include unauthorized access to a com-
steals or damages sensitive information or       supplemental jurisdiction. The Computer            puter, that cause damage to a protected com-
computer systems for personal gain or to         Fraud and Abuse Act (18 U.S.C. § 1030)             puter.
benefit a competitor. Add to this volatile mix   (the “CFAA”) provides a private cause of               A civil action may be brought under the
that the employee may have violated explicit     action for a host of computer-related activi-      statute, however, only if the conduct involves
agreements to protect such information, and      ties in which a disloyal employee might            one of the six factors set forth in
the employer’s moral outrage can find an         engage at an employer’s expense. Recent case       §1030(c)(4)(A)(i).1 First, and most relevant
outlet in legal action. Often, however, such     law also reveals certain measures employers        for many employers, the violation must
lawsuits are grounded in state law claims for    can take to increase the likelihood of main-       result in the loss to one or more persons of
breach of contract or misappropriation of        taining a CFAA case in federal court.              $5,000 during any one-year period. 18
trade secrets. In such cases in the past, an                                                        U.S.C. § 1030(c)(4)(A)(i)(I). Less important
employer was often unable to pursue litiga-         CFAA Private Right of Action                    for most employers are five other circum-
tion in federal court, which can be more             Although primarily a criminal statute,         stances that give rise to a civil cause of action
desirable because one judge typically handles    Congress amended the CFAA in 1994                  under the CFAA: (1) the modification or
all proceedings, judges are more insulated       explicitly to provide a private right of action    impairment of the medical examination,
from local politics, and the appeals system is   against violators. The CFAA, in relevant           diagnosis, treatment or care of one or more
simpler and can be more predictable.             part, states “[a]ny person who suffers damage      individuals; (2) physical injury to any per-
                                                 or loss by reason of a violation of this section   son; (3) threat to public health or safety; (4)
   Due to the near-universal use of comput-      may maintain a civil action against the viola-     damage affecting a computer system used by
ers in the modern business environment,          tor to obtain compensatory damages and             or for a government entity in furthering the
however, employers now have a way to seek        injunctive relief or other equitable relief.” 18   administration of justice, national defense,
                                                 U.S.C. § 1030(g). More specifically, three         or national security; or (5) damage affecting
                                                 sections of the CFAA cover activities in           10 or more protected computers during any
                                                 which a disloyal employee might engage to          one-year period. 18 U.S.C. § 1030(c)(4)(A)
                                                 an employer’s detriment. First, 18 U.S.C. §        (ii)-(v). Although these five factors may
Inside This Issue:                               1030(a)(2)(C) makes it illegal for an individ-     apply, this article focuses on the first factor as
                                                 ual to intentionally access a computer with-       it applies to most employment situations.
                                                 out authorization or to exceed authorized              Despite the apparent clarity of the
3   The Chair’s Comments                         access and thereby obtain information from         statute, courts have been confused about
                                                 any protected computer. Second, 18 U.S.C.          which types of CFAA violations can give rise
7   Counseling the Laid Off Worker               § 1030(a)(4) prohibits an individual from          to private suits. Properly interpreted, a pri-
                                                 knowingly and with intent to defraud,              vate right of action is available for any viola-
    Who Does Not Have a Case
                                                 accessing a protected computer without             tion of the statute, not only for violations of
                                                 authorization, or by exceeding authorized          § 1030(a)(5). Fiber Sys. Int’l Inc. v Roehrs,
9   Dotson v. Pfizer, Inc.                       access, and thus further any intended fraud        470 F.3d 1150, 1157 (5th Cir. 2006). Prior
                                                 and obtain anything of value, unless the           to the 2008 amendments to the CFAA, how-
11 Case Law Update                               object of the fraud and the thing obtained         ever, the portion of the act creating private
                                                 consists only of the computer and the value        causes of action required that the alleged
                                                 of such use is not more than $5,000 in any         conduct “involve” one of the five enumerat-
                                                 one-year period. Third, 18 U.S.C.
                                                                                                                                  See CFAA page 2
LABOR &
EMPLOYMENT LAW
VOL. 28, NO. 2 DECMBER 2009                                   CFAA            from page 1

                                                              ed factors in certain sub-sections of then §                   commerce or communication.” America
Published by the NCBA’s
                                                              1030(a)(5), which caused some courts to                        Online, Inc. v. National Health Care
Labor and Employment Law Section
                                                              hold that only violations of § 1030(a)(5)                      Discount, Inc., 121 F.Supp.2d 1255, 1272
                                                              gave rise to a civil action. See, e.g., Garelli                (N.D. Iowa 2000). The 2008 amendments
                                                              Wong & Assocs., Inc. v. Nichols, 551 F.                        to the CFAA further expanded the statute’s
Editors                                                       Supp.2d 704, 708 (N.D. Ill. 2008). The                         reach to the full extent of Congress’ com-
Narendra K. Ghosh                                             2008 amendments moved the enumerated                           merce power by changing the definition of
Mary M. Williams                                              factors into a different section, which con-                   the “protected computer” to include a com-
                                                              firmed that a civil cause of action is available               puter “which is used in or affecting interstate
Editorial Address                                             for any violation of the CFAA.                                 or foreign commerce or communication.” 18
 .O.
P Box 3688                                                                                                                   U.S.C. §1030(e)(2) (emphasis added).
Cary, NC 27519                                                   The Simple Elements                                             The second element of a civil action
                                                                 of CFAA Claims                                              under the CFAA is sufficient damage and/or
SECTION OFFICERS                                                 A first element of a civil action under the                 loss. Proof of “Damage” (as defined under
Chair                                                         CFAA is that the computer in question be a                     the statute) is required only for alleged viola-
Brian S. Clarke                                               “protected computer.” Due to the extremely                     tions of § 1030(a)(5), while proof of “Loss”
                                                              broad statutory definition of a protected                      under § 1030(c)(4)(A)(i)(I) is required for
Immediate Past Chair                                          computer, however, this requirement is easi-                   any civil action unless the rather unusual cir-
Jonathan “Jon” Wall                                           ly met by most minimally sophisticated busi-                   cumstances covered in § 1030(c)(4)(A)(i)
                                                              ness networks. Essentially, any computer or                    (II)-(VI) are present. “The term ‘damage’
Vice Chair                                                    system connected to the Internet and used to                   means any impairment to the integrity or
Vicki Brown Rowan                                             send e-mail across state lines should qualify                  availability of data, a program, a system, or
                                                              under one prong of the definition – a com-                     information.” 18 U.S.C. § 1030(e)(8). “The
Secretary
Eric M. D. Zion                                               puter “which is used in interstate or foreign                                                         See CFAA page 4

Treasurer
Andrew K. McVey

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3 AUGUST 2006
The Chair’s Comments
A Word from Brian S. Clarke

    When I started prac-                         tance of this issue in my professional life, I     to represent us and when they do not live
ticing law at what was                           was struck by “The Chair’s Comments” in            up to the standard, we somehow feel
then Adams Kleemeier                             the October 2009 issue of The Litigator (the       betrayal and we recognize that something
Hagan Hannah & Fouts                             Litigation Section’s Newsletter) written by        is lost with every episode.
in Greensboro, one of                            Litigation Section Chair Allison O. Van
my mentors was Dan                               Laningham, which addressed the importance          So it is with our profession. When we
Fouts. When Dan passed                           of professionalism and civility among              become lawyers, and whether we
away in 2003, Margaret Brian Clarke              lawyers. Allison’s comments give voice to          recognize it or not, we make a compact
Burnham, a partner at                            thoughts and feelings on the subject of pro-       with the profession and with our fellow
Adams Kleemeier who worked closely with          fessionalism that I have long held and, rather     professionals. We have an obligation to
Dan said, “[Dan] taught me that you return       than trying to re-say what Allison has already     better the profession and certainly to
telephone calls to a fellow member of the Bar    said so well, Allison graciously agreed to let     make it no worse. We have the obligation
the same day. . . . He taught me that you        me excerpt a portion of her comments for           to engage in advanced civility – and we
should strive to practice law ‘the old-fash-     you.                                               call that professionalism.
ioned way’ – valuing client relationships over
receivables. He taught me that no matter            On a recent Saturday morning, the front         We have likely all had those days when we
how good you become as a lawyer, you will           page of my newspaper greeted me with            leave the office deflated and weary. More
not have accomplished anything if you did           the following headline: “Tone Down the          times than not, those feelings come from
so at the expense of watching your children         Rudeness, Americans Urged.” The prior           dealing with uncivil lawyers. We go home
grow up.”                                           weeks had been full of some high-profile        and a loved one asks about our day. The
    I learned many of these same lessons from       examples of breaches in etiquette and           truth is, it was pretty lousy but it is
Dan (although I am still not very good at           civility from Serena Williams’ verbal           sometimes hard to put into words why it
returning every call the same day). One of          display at the U.S. Open to Kayne West’s        was so lousy. Yes, there was an
the things that Dan stressed to me as a young       interruption at the MTV music awards            unprofessional lawyer that we had to deal
lawyer was to practice law not only the “old        to, perhaps most disturbing for our             with but lurking somewhere under the
fashioned way” but the right way. He                profession, Congressman Joe Wilson’s            surface is something else. The “something
encouraged me to always be polite, courte-          outburst during President Obama’s               else” is that we feel betrayed by that
ous, honest and professional in my dealings         speech. Regardless of how you feel about        lawyer. We feel betrayed on behalf of our
with opposing counsel; to advocate zealous-         any of these people or any of their             profession and we feel betrayed
ly, but to always be respectful to my oppo-         actions, it is concerning that American         personally knowing that we would never
nent; and to generally follow the Golden            rudeness is front page material and even        treat another lawyer the way that we have
Rule and treat opposing counsel the way I           more disturbing that we have to be              been treated. We also feel frustrated
wanted him or her to treat me.                      formally urged to tone it down.                 because, although that lawyer has
    One of the last cases I litigated with Dan                                                      behaved badly, absent a true ethical
was a very contentious covenant not to com-         Of all of the recent examples, I admit that     breach or a rule violation, there is nothing
pete matter. We were retained about mid-            I am most disturbed by Representative           to be done about it and nothing to cure
way through the litigation to represent some        Wilson’s display. It is not that the other      the ill short of that lawyer changing his or
individual defendants. After Dan died,              examples are any better or that his             her own behavior. Nonetheless, that
opposing counsel in that case recalled that         outburst is entirely unprecedented – it         lawyer violated the compact with our
when he heard Dan had been retained to              just strikes closer to home. We are a           profession and made our profession a
represent the individual defendants, he was         society founded on rules, some that are         little worse by the behavior – we know it
relieved and knew that Dan’s level head, cool       written and some that are principles we         and we are not happy about it.
confidence, and steadfast professionalism           have come to accept. To see such a
would change the dynamics of the case for           high-profile breach of civility in the body     As litigators, we may bear more
the better. With Dan involved, the case             that is responsible for making many of          responsibility for the public perception of
indeed became far less contentious and set-         our rules was disheartening.                    our profession than other lawyers. By
tled shortly thereafter at mediation.                                                               percentage, we simply spend more time
    While I will never be a fraction of the         Regardless of where you stand on the            where the public can see us and where we
lawyer Dan was, I have striven to practice the      issue that was under discussion                 have the opportunity to enhance or to
“right way” and to always be mindful of the         (healthcare), there is a time and a place       detract from the public’s perception of us
lessons on professionalism and civility I           for responsible discourse. We expect
learned from Dan. Because of the impor-             (rightly, I think) civility of those elected                     See COMMENTS page 4

                                                                                                   LABOR AND EMPLOYMENT 3
Comments                 from page 3

   as professionals and as a profession. We            us to respect and understand the views of           antagonism, which path will we take?
   also have plenty of opportunities to                others.                                             Like re-circulated air during a flight, the
   interact either well or poorly with lawyers                                                             air in our profession can be no better than
   on the other side of our cases. We cannot           Around the state, a whole new group of              the civility or rudeness that each of us
   discount either how our civility enhances           lawyers has just been sworn in, and they            shows on a daily basis. And like the
   our profession and the lives of other               are learning each day what it means to be           airplane passengers breathing that re-
   lawyers or how poor behavior detracts               part of our profession. They learn it from          circulated air, if one of us breathes out
   from the quality of both.                           those in their own firms, they learn it             rudeness, another may take that in and
                                                       from those on the other side of their cases         pass it along, thus making the air worse
   Balanced between those who work for                 and they learn it from those whose                  for everyone. So too, civility is infectious
   plaintiffs and those who work for                   actions make news. What will we teach               and, used regularly, improves life for all of
   defendants, [this] section council is, I            them? When we have the chance, which                us. How much sweeter could we make
   hope, a model of how civil discourse by             we have every day in every conversation             the air in our profession if, whether for a
   well-intentioned people can lead to the             and every action, will we be polite to              purpose or just to be polite, we chose the
   best results possible. It is a microcosm of         other lawyers even if we disagree with              course of civility and professionalism?
   our profession and demonstrates that we             their positions or will we teach these new
   do not have to agree on every item in               lawyers that they are required to show             I hope that each of you takes these com-
   order to achieve a good outcome and                 contempt equally for an argument and its         ments to heart.
   that, even though we come from different            proponent? When we can make a day
   perspectives, our professionalism requires          better through civility or worse with


CFAA           from page 2

term ‘loss’ means any reasonable costs to any       dant’s intrusion). Given this broad definition      to the computer system is not revoked mere-
victim, including the cost of responding to         of loss, plaintiffs should have little difficulty   ly because the employee misappropriates the
an offense, conducting a damage assessment,         meeting the $5,000 loss requirement.                information or uses such access for purposes
and restoring the data, program, system, or                                                             contrary to the employer’s interests after
information, to its condition prior to the             The Tricky Element of CFAA                       accessing it. Finally, some courts look to the
offense, and any revenue lost, cost incurred,          Claims: Unauthorized or                          specific agreements between employers and
or other consequential damages incurred                Exceeding Authorized Access                      employees to determine the scope of permis-
because of interruption of service…” 18                 The most challenging – and so far most          sible access such agreements provide. Access
U.S.C. § 1030(e)(11).                               litigated – element for a civil claim under the     beyond that agreed to by the employer and
    Most employers can meet the “loss”              CFAA is showing that the employee used              the employee constitutes unauthorized
requirement by proving that the misconduct          unauthorized access or exceeded his author-         access or access that exceeds authorized
resulted in a direct loss of at least $5,000 dol-   ized access to engage in the improper con-          access under the CFAA.
lars. Sometimes, however, quantifying the           duct. Usually the employee or former
expected loss from theft or destruction of          employee was authorized access to the com-             The Citrin and Shurgard
certain information can be difficult or spec-       pany’s computer system and very often had              Approaches Most Favorable
ulative. In those cases, one can use the broad      access to the very information he or she               to Employers
definition of “loss,” which was added to the        damaged or misappropriated. Instead of                 In International Airport Centers, L.L.C.
CFAA in 2001 and includes, among other              accessing the information for legitimate pur-       v. Citrin, 440 F.3d 418 (7th Cir. 2006), the
things, the cost of responding to the offense       poses, however, the employee sought to dam-         Seventh Circuit applied an expansive view of
and conducting damage assessments. See              age information on the employer’s computer          what constitutes unauthorized access. The
A.V. ex rel. Vanderhye v. iParadigms, LLC,          systems or to obtain the information for his        court held that an employee’s authorization
562 F.3d 630, 646 (4th Cir. 2009) (holding          or her own gain and to the employer’s detri-        to access the employer’s computer terminat-
that the CFAA’s “broadly worded” definition         ment.                                               ed upon his misconduct because that consti-
of “loss” “plainly contemplates consequential           Courts follow one of three general              tuted a breach of his duty of loyalty to his
damages of the type sought by iParadigms-           approaches in determining whether such              employer. Id. at 420-421.Under the Seventh
costs incurred as part of the response to the       conduct constitutes unauthorized access or          Circuit’s Citrin rule, an employee’s miscon-
CFAA violation, including the investigation         access that exceeds authorized access under         duct rising to the level of breaching his
of an offense”); EF Cultural Travel BV v.           the CFAA. Some courts apply agency law              duties as an agent alone will be sufficient to
Explorica, Inc., 274 F.3d 577, 584-585 (1st         and find that the employee’s misconduct             sever any right to access the company’s com-
Cir. 2001) (finding that plaintiffs suffered a      extinguishes any right the employee had to          puters, and thus, give rise to a cause of action
loss by having to expend substantial sums to        access the system. Other courts reject this         under the CFAA.
assess the effects on its website from defen-       view and find that previously-granted access
                                                                                                                                     See CFAA page 5

 4 DECEMBER 2009
CFAA           from page 3

   In Shurgard Storage Centers, Inc. v.            unauthorized disclosure of information after     from disclosing information, but also to
Safeguard Self Storage, Inc., 119 F.Supp.2d        access. Id. at 498-499; see also Condux Int’l,   refrain from sending or accessing messages
1121 (W.D. Wash. 2000), a federal district         Inc. v. Haugum, 2008 WL 5244818 (D.              on HP’s computer systems for personal
court specifically noted that an employee          Minn. (2008) (collecting various cases inter-    gain.” Id. (emphasis added). The court dis-
had been authorized to access all of the           preting the authorized access language and       tinguished Lockheed and Werner-Masuda
employer’s proprietary information, includ-        concluding that the Citrin line of cases         on the grounds that those cases dealt solely
ing confidential business plans, expansion         incorrectly focused on what the defendant        with employees who had signed non-disclo-
plans and other trade secrets, that he was         did with the information after he accessed it    sure or confidentiality agreements, but also
accused of taking from his employer and            rather than the access itself ).                 had authorized access to the companies’
sending to another company. Id. at 1121-              In cases like Lockheed and Werner-            computer systems. In Hewlett-Packard,
1123. Applying agency law, the court deter-        Masuda, it is virtually impossible for an        however, the company specifically alleged
mined that “the authority of the plaintiff ’s      employer to take advantage of the protec-        defendants accessed their computers without
former employees ended when they allegedly         tions of the CFAA. If the only protections an    authorization or in excess of authorization
became agents of the defendant.” Although          employer has in place are standard agree-        because the defendants had agreed not to use
similar to the reasoning in Citrin, the            ments against competition, solicitation, or      the computer system in certain ways. See also
Shurguard approach requires that an                the use of confidential information by           Ervin Smith Advertising and Public
employee not just engage in misconduct, but        employees, then the employer can only show       Relations, Inc. v. Ervin, 2009 WL 249998
do so on behalf of a competitor. In both           that an employee violated a policy or an         (D. Neb.) (finding confidentiality agreement
Citrin and Shurguard, however, it was the          agreement after the employee accesses infor-     in employee handbook supported plaintiff ’s
employees’ conduct alone that resulted in the      mation on a computer, not that the actual        argument that defendants were only author-
court finding that there was no authorized         accessing of the material itself on the com-     ized to access protected information as long
access to computers the employee was other-        puter violated permissible access or the         as they abided by the handbook’s terms);
wise allowed to use for the employer’s legiti-     CFAA.                                            Alliance Int’l, Inc. v. Todd, 2008 WL
mate business purposes. Although these cases                                                        2859095, *6-7 (E.D.N.C. 2008) (holding
are very favorable to an employer seeking to          The Middle Approach of                        that an employer’s complaint stated a cause
bring a CFAA claim against an employee or             Hewlett-Packard for Which                     of action under the CFAA because it alleged
competitor, several courts have challenged            an Employer Can Prepare                       the former employee proceeded “without
this view.                                             While the Citrin/Shurgard and                authorization” in accessing and damaging
                                                   Lockheed/Werner-Masuda cases may repre-          the employer’s computers).
   The Lockheed and                                sent opposite ends of the spectrum, at least         Still another case demonstrates steps
   Werner-Masuda Approaches                        two courts have come down somewhere in           employers can take to increase the chance a
   Least Helpful for Employers                     between. In interpreting the CFAA, these         court will determine that a wayward employ-
   In       Lockheed      Martin     v.     L-3    courts rely heavily upon express agreements      ee has exceeded authorized use and run afoul
Communications, 2006 WL 2683058                    entered into between the employer (or com-       of the CFAA. Although not explicitly relying
(M.D. Fla. 2006), a federal district court         puter system operator) and the employee (or      on employee handbook restrictions and
specifically rejected the Seventh Circuit’s rea-   computer system user). In each case, these       other measures adopted by the company to
soning in Citrin. The Lockheed court               courts found that under the express terms of     safeguard its information, the court in
instead held that several Lockheed Martin          the agreements the users accessed the com-       Southeastern Mechanical Services, Inc. v.
employees accused of providing trade secrets       puter without or in excess of their authoriza-   Brody, et. al., 2008 WL 4613046 (M.D. Fla.
to a competitor company had not violated           tion in violation of the CFAA.                   2008), focused on such steps, and they clear-
the CFAA because they were authorized to               In Hewlett-Packard Company v. Byd-           ly influenced the court’s finding that plaintiff
access each and every piece of information         Sign, Inc., 2007 WL 275476 (E.D. Tex.            was likely to succeed on its CFAA claims.
they allegedly provided to the competitor          2007), plaintiff Hewlett Packard (“HP”)          Specifically, the court noted that plaintiff ’s
company. That the employees were accused           alleged that several employees accessed HP       employee handbook prohibited both unau-
of providing such information to a competi-        computer systems to obtain proprietary           thorized possession, use, or copying of
tor after they accessed it was of no moment        information and provide it to the defendant.     records that were plaintiff ’s property as well
to the court as it rejected any application of     Id. at *1, 11-13. Each of the employees was      as any unauthorized release of information
the law of agency to the case and rejected the     authorized to access this information for        about the plaintiff or its clients. The hand-
plaintiff ’s CFAA claims.                          work purposes while at HP. Id. Each employ-      book also prohibited employees from utiliz-
   Similarly, in International Ass’n of            ee also agreed to abide by “HP’s Standards of    ing the plaintiff ’s information technologies,
Machinists and Aerospace Workers v.                Business Conduct” and confidentiality            including its email and telephone systems,
Werner-Masuda, 390 F.Supp.2d 479 (D.               agreements prohibiting disclosure of propri-     for any purpose detrimental to the plaintiff.
Md. 2005), a federal district court in             etary information. The district court found      The confidentiality agreements entered by
Maryland rejected the reasoning in Shurgard        HP had stated a claim for relief under the       the employees reinforced these obligations
and concluded that the CFAA prohibits only         CFAA because HP “actually alleged that the
unauthorized access to information, not            [d]efendants had agreed not only to refrain                                   See CFAA page 6

                                                                                                    LABOR AND EMPLOYMENT 5
CFAA           from page 6

and the company restricted access to its com-           Best Practices for Employers                  ers. The policy should specifically state that
puters and certain databases based on                   Under the CFAA                                accessing any information on, or the use of,
whether employees had a “need-to-know”                  The case law demonstrates that under the      the company’s computers for personal gain,
the information to do their job.                    right circumstances employers will have a         for purposes that would damage the compa-
   Significantly for employers, the CFAA            good chance of maintaining CFAA actions           ny, or for any other purpose beyond the
prohibits exceeding authorized access as well       against employees in federal court. Although      scope of the employment are prohibited.
as unauthorized use. Accordingly, under the         some cases suggest that any wrongdoing or         Further, an employer should seek signed
interpretation of the CFAA in cases like            breach of duty of loyalty by an employee          agreements from every employee acknowl-
Hewlett-Packard, employers can draft poli-          related to his or her access to the computer      edging the policy and agreeing to abide by it.
cies similar to those described in                  system will instantly transform all access to     Additionally, employers should seek non-dis-
Southeastern Mechanical Services, that allow        “unauthorized” access for the purposes of the     closure and confidentiality agreements from
access to information on a computer or com-         statute, there are several measures employers     every employee that has access to sensitive
puter network, but then make the access             should take to increase the likelihood that       information. If practical, an employer also
unauthorized-or exceeding authorized                they can survive a motion to dismiss and          should consider access control lists and com-
access-if the employee decides to steal, sabo-      thus be able to keep their actions in federal     partmented accesses to certain sensitive
tage, or somehow damage the information or          court.                                            information.
the computer system to which the employee               Employers should develop computer                 Although a few courts have found that
has been provided access.                           access policies that explicitly limit the scope   the CFAA does not support a claim against
                                                    of authorized use of the company’s comput-        an employee who accesses information for an
                                                                                                      improper purpose, the weight of the author-
                                                                                                      ity supports a private cause of action under

                                                           Is Your
                                                                                                      the CFAA for employee misconduct in mis-
                                                                                                      appropriating or damaging information on
                                                                                                      an employer’s computer system to which the

                                                           Law Library                                employee otherwise had access. Taking pre-
                                                                                                      cautions early to develop computer access

                                                           Complete?
                                                                                                      and data control policies will increase an
                                                                                                      employer’s chances of successfully maintain-
                                                                                                      ing such a CFAA claim in federal court.

       The NCBA CLE department publishes several section deskbooks and manuals that are                  End Notes
                                                                                                          1. The CFAA was amended in 2008 by
       valuable and useful resources for any law office.
                                                                                                      the “Identity Theft and Restitution Act.”
                                                                                                      Five of the six factors enumerated in current
       Current titles can be found online at www.ncbar.org/cle/bookstore and include:                 § 1030(c)(4)(A)(i), were listed in
                                                                                                      § 1030(a)(5)(B) before the 2008 amend-
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                                                                                                      Bradshaw & Hinson, P.A. in Charlotte.
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 6 DECEMBER 2009
Counseling the Laid-Off Worker
Who Does Not Have a Case
by Michael G. Okun

    Two cowpokes stopped out on the range          the one hand, the article was relatively well-          1. The lay-off is not their fault. Most
for the evening. Lefty built a fire; Hank          received. On the other hand, however, the           workers view their lay-offs as a sign that their
searched for food. Hank returned with bad          article does not seem to have accomplished          value to their employer was less than their
news and good news on the food front. The          its intended purpose of encouraging employ-         cost in wages and benefits and that they had
bad news: nothing to eat but cow patties.          ment lawyers to meet more often with such           failed, and failed their families, because they
The good news: plenty of them. The situa-          workers. Rather, it seems to have encouraged        had not acquired the skills or other assets
tion for laid-off workers is similar. While        those lawyers to refer even more workers            necessary to keep their jobs. Being told that
such workers rarely have a viable legal claim,     without cases to me.                                it is not their fault, because the landscape has
there are plenty of them.                              Since writing that article, as I have con-      changed, and that they, unfortunately, are
    Lay-offs are now nearly epidemic. In the       tinued to meet with laid-off workers, I have        not alone, often helps.
past two decades, well over 30 million work-       realized – often because workers have told
ers have been permanently separated from           me directly – that what I have tried to offer           2. The emotions they are feeling are nor-
their jobs against their wishes, a figure that     concerning the emotional impact of lay-offs         mal. The emotional impact of losing one’s
does not include those forced out through          and how people might best try to move for-          job can be overwhelming. For many, partic-
early retirement or some other disguised lay-      ward has been at least as useful as, and cer-       ularly long-term employees, work is a large
off. An estimated seven or eight percent of        tainly a valuable supplement to, advice about       part of their identity, and the loss of employ-
full-time workers are laid-off annually, and       their legal rights, or lack of legal rights. What   ment brings not just fears about their eco-
the past two years have seen the most job          I have found to be most helpful in talking          nomic future but also the despair that comes
losses in recent history.                          with laid-off workers are the three concerns        with any great loss. Many go through an ini-
    Many ideas have been offered on the rea-       discussed below.                                    tial period of disbelief or denial; they simply
sons for increasing lay-offs, the ramifications        Preliminarily, although most labor and          cannot believe what is happening. Others
for individuals, communities, and society,         employment lawyers understand well that             feel embarrassed – they wonder what to tell
and on how to respond. Consultants and             the employment landscape has changed dra-           their families, their friends, their church and
lawyers advise management on how to han-           matically in the last 20 years, many workers,       their communities. Some become depressed
dle their lay-offs and “survivor” employees.       and particularly older ones, have not grasped       – a life of upward mobility is suddenly one of
By contrast, little attention has been paid to     that change. For most workers the life goal         downward mobility. Almost all are very
how lawyers can best counsel laid-off work-        has been to find a permanent job, with vaca-        angry. They worked hard, did what they
ers. The reality is that most lawyers don’t        tion, insurance and pension, perhaps                were asked, often gave the best years of their
really want to meet with laid-off workers. As      upgrading once or twice before retirement.          lives, and then were let go with little or no
employment lawyers are well aware, the like-       While this “male breadwinner” model has             sign of appreciation. They want things set
lihood of a particular lay-off being unlawful      not been equally available to all, it has never-    right – justice – and the fact that they can’t
and a claim economically feasible to pursue        theless been a goal for most. In the past,          be often makes them bitter. The very fact
is very small.                                     many employers also valued loyalty and the          that I can describe what they are feeling and
    Somehow I have managed to talk with            development of employees, and attempted to          tell them that others go through the same
thousands of laid-off workers, from a room-        tie a worker’s sense of well-being to that of       emotions often offers solace.
ful of 500 Pillowtex victims to countless          the employer. Lay-offs were an embarrass-
individuals. I certainly don’t mind meeting        ment for such employers, a sign of corporate           3. Things may get better. This is a tricky
with laid off workers individually, as long as     failure. Now, of course, lay-offs are standard      one. Some personnel managers, career
they understand before visiting me that I          management practice and long-term                   coaches, pop psychologists and others urge
charge for my time and that the odds that          employment is much less common.                     that a lay-off is in fact a blessing – that one
they have a claim and that we would take               When talking with laid-off workers I first,     door opens as another closes. This view, by
their cases are small.                             of course, explain the law – most people have       and large, is rubbish. Relatively few workers
    About five years ago, I wrote an article for   absolutely no idea of and have difficulty           are able to find comparable employment. In
lawyers about counseling employees who             grasping the basic premise that, absent an          North Carolina, ravaged by manufacturing
had lost their jobs but did not have a case.       individual or union contract, the law does          lay-offs, the new jobs for those who have lost
That article focused on how to best explain        not require fairness – and the individual’s         middle class jobs are usually low paying and
why such workers did not have a case and           own “case.” I then often discuss, with the          marginal. The North Carolina Commission
also covered collateral issues such as sever-      “changed landscape” as background, these            on Workforce Development on which I serve
ance agreements, unemployment, etc. On             three matters:                                                         See COUNSELING page 8

                                                                                                       LABOR AND EMPLOYMENT 7
Counseling               from page 7

was recently advised that in 10 years 40% of          Obviously, not everyone benefits from          While the most important work for lawyers
our citizens will be working such jobs.           this advice. Some people are like LaDainian        representing employees may be in helping to
Nevertheless, many workers do rebound             Tomlinson – when hit hard, they simply spin        create laws guaranteeing fair treatment, in
after a lay-off and do actually find work they    and move forward in a slightly different           helping to build stronger and better unions,
prefer. In addition to compensation and a         direction. Others learned early that life is not   and in helping those who do have viable
sense of security from their work, most           fair and thus how to deal with major set-          claims find justice, we may also be able to
workers want to be appreciated. Their lay-        backs. Many, however, do need a hand in            help individually the many, many laid-off
offs are a clear sign that they were not appre-   moving forward, and benefit from some-             workers who do not have a case.
ciated, and they now have an opportunity to       thing more than being told simply “you have
look for other work where they might be. I        no case.” Moreover, I know the simple advice          Michael Okun is a partner at Patterson
can describe other laid-off workers with          outlined above does help people because            Harkavy LLP, practicing labor and employ-
whom I have met in similar circumstances          they tell me so at the end of almost every         ment law in Raleigh. A previous version of this
who a year later felt better off, and indeed      meeting.                                           article was published in the AFL-CIO Lawyers’
felt fortunate to be out of their old employ-         Employment lawyers are very often the          Coordinating Committee Bulletin in 2007.
ment – not all, of course, but many.              ones to whom laid-off workers first turn.




 8 DECEMBER 2009
Dotson v. Pfizer, Inc.
558 F.3d 284 (4th Cir. 2009)
FMLA Interference & Retaliation Claims
By Margaret M. Kingston

    An employee who took intermittent leave        to adopt a child from Russia. The plaintiff        Plaintiff requested and distributed starters of
in connection with an adoption established a       informed his direct supervisor of the planned      Celebrex to the Medical Director of the
claim for retaliation and interference with        adoption and kept him informed of his              North Carolina Highway Patrol in August of
his rights under the Family and Medical            progress in the adoption process.                  2003 and requested and distributed starters
Leave Act (FMLA), the Fourth Circuit                   According to the plaintiff, upon learning      of Zithromax to the orphanage in Russia he
Court of Appeals ruled. On Oct. 5, 2009,           he would need to travel to Russia twice to         visited in September of 2003.
the Supreme Court denied Pfizer’s petition         complete the adoption process, he spoke                The plaintiff filed suit alleging that Pfizer
for certiorari. No petition for rehearing has      with a Pfizer HR representative about his          interfered with his rights to taking FMLA
been filed, and therefore the Fourth Circuit’s     leave options during the adoption process.         leave for his adoption-related absences and
ruling will stand. In addition to the large        Although the HR representative later testi-        terminated him for exercising his FMLA
jury verdict awarded to the plaintiff, Dotson      fied otherwise, the plaintiff claimed he was       rights. After an eight-day trial, the jury
is also significant because the plaintiff never    told to use vacation time and that FMLA            found that Pfizer had interfered with the
formally requested FMLA leave.                     leave would begin after his vacation time was      plaintiff ’s rights to FMLA leave and dis-
                                                   exhausted. The plaintiff also claimed that he      charged him in retaliation for his exercise of
   Plaintiff ’s Employment at Pfizer               did not formally request FMLA leave                those rights. The jury and district court
    The plaintiff had been employed by             because he thought his adoption-related            awarded Plaintiff over $722,000 on his
Pfizer for approximately 15 years at the time      absences would not exceed his remaining            FMLA interference and retaliation claims,
of his termination. Over the course of his         vacation time and that FMLA would not              including $333,305 in statutory liquidated
employment there, the plaintiff was                apply until his paid leave was exhausted.          damages, $375,000 in attorneys’ fees, and
employed as a sales representative and was             The plaintiff used accrued vacation time       $14,265 in costs. The district court also
promoted several times.                            for his first trip to Russia. During this first    denied Pfizer’s motion for judgment as a
    In 2002, the plaintiff began working in        trip, the plaintiff delivered Zithromax            matter of law.
Pfizer’s National Healthcare Organization          starters to an individual he thought was a             Both parties appealed parts of the ruling
(NHO) division. Before the plaintiff accept-       pediatrician at the orphanage he visited.          to the Fourth Circuit. Pfizer appealed the
ed the position within Pfizer’s NHO, he had        During a performance review following his          denial of the motion for judgment as a mat-
handled “starters” for approximately 13 years      first trip to Russia, the plaintiff ’s two imme-   ter of law, the award of liquidated damages,
at Pfizer. Sales reps provide starters to doc-     diate supervisors expressed concerns about         and the amount of attorneys’ fees. The plain-
tors, who give them to their patients to get       his job performance and about his use of the       tiff appealed the denial of pre-judgment
them “started” on a drug for which a pre-          Zithromax starters. The plaintiff and his wife     interest and front pay and also the attorneys’
scription will later be written.                   then took a second trip to Russia in October       fees award.
    The Food and Drug Administration reg-          of 2003 in order to complete the adoption
ulates the use of starters, while the              process. After bringing their adopted child           Intermittent Leave Issues
Prescription Drug Marketing Act (PDMA)             home, the plaintiff asked his direct supervi-          Pfizer argued that Plaintiff took his adop-
covers their distribution. Under the PDMA,         sor to be excused from an out-of-town work-        tion-related leave intermittently without
Pfizer is required to track and account for        related dinner in order to care for his ill        Pfizer’s consent and thus the leave could not
any starters given to physicians. Pfizer uses      adopted daughter. The plaintiff ’s supervisor      have been FMLA-protected leave because
electronic tracking and “starter activity          refused this request and required the plaintiff    Pfizer had not agreed to the intermittent
forms” to fulfill its responsibilities under the   to attend the dinner.                              absences. However, the court noted that the
PDMA. The Act also requires pharmaceuti-               Pfizer terminated the plaintiff ’s employ-     testimony showed the plaintiff kept Pfizer
cal companies to report any improper diver-        ment on Nov. 11, 2003, less than three             informed of his adoption-related leave.
sion of starters or intentional falsification of   weeks after the plaintiff and his wife             Specifically, the plaintiff kept his supervisors
starter forms. Under its internal starters poli-   returned from Russia with their adopted            informed about his need for adoption-relat-
cies, Pfizer can discharge employees for vio-      child. Pfizer informed the plaintiff at that       ed absences, and no one at Pfizer refused his
lations. However, at the time Dotson was           time that the reason for his termination was       requests or even suggested that he could not
fired, Pfizer failed to provide specific details   his violations of Pfizer’s starters policies.      take the two trips to Russia. Also, Pfizer
of its standards for discharge.                    Pfizer asserted that the plaintiff was termi-      acknowledged in its brief to the court that it
    In February of 2003, the plaintiff and his     nated for distributing starters while
wife began working with an adoption agency         employed in the NHO division. Specifically,                                See DOTSON page 10

                                                                                                      LABOR AND EMPLOYMENT 9
Dotson from page 9
had permitted the plaintiff to take all of the    the plaintiff as a result of his actions in deliv-   of his termination through the date of his
leave he requested with the exception of the      ering the starters of Zithromax to the               planned early retirement at age 58 too spec-
one work-related dinner following the plain-      orphanage in Russia. Pfizer argued that this         ulative and in considering the liquidated
tiff ’s return from his second trip to Russia.    action by the plaintiff created the appearance       damages award in denying the plaintiff any
Pfizer argued nonetheless that it could not       of a quid pro quo that could have had seri-          front pay. The court reversed the district
have approved this intermittent leave where       ous legal implications for Pfizer. In response       court’s denial of pre-judgment interest, rea-
the plaintiff never specifically requested the    to this non-discriminatory explanation for           soning that pre-judgment interest on FMLA
use of intermittent leave under the FMLA.         termination proffered by Pfizer, the plaintiff       damages is mandatory rather than discre-
The court noted that the FMLA does not            submitted evidence to show that Pfizer’s rea-        tionary. The court upheld the award of liqui-
require an employee to mention the FMLA           sons were pretextual. The court concluded            dated damages, noting that Pfizer could not
specifically when requesting FMLA leave. In       that the plaintiff had presented sufficient evi-     prevail on its argument about a good faith
fact, FMLA regulations emphasize that the         dence to allow a jury to find both retaliatory       reasonable belief it was not violating the
employer must determine whether the FMLA          animus and pretext.                                  FMLA because it had “affirmative obliga-
applies to an employee’s leave request. Also,         Specifically, the plaintiff ’s evidence          tions” of seeking out further information
Pfizer could not produce any evidence that it     showed that Pfizer’s account of its decision         and complying with the FMLA when an
had refused to allow the plaintiff to take his    contained weaknesses and inconsistencies.            employee indicated he was seeking leave pro-
adoption-related leave on an intermittent         For example, although several Pfizer employ-         tected by the FMLA.
basis. According to the court, Pfizer would       ees knew of the plaintiff ’s plan to donate the
have had to expressly refuse to allow the         Zithromax starters, including the plaintiff ’s          Practical Implications
plaintiff intermittent leave to rely upon the     direct supervisor and one of the employees              Dotson has numerous practical implica-
defense that the FMLA requires an agree-          who fired him, none of them attempted to             tions. First, it reemphasizes that employees
ment between the employee and employer            stop him from doing so. Thus, the jury could         need not refer to the FMLA or mention any
about intermittent leave.                         reasonably infer that a violation serious            other “magic words” to invoke the protec-
                                                  enough to result in termination should also          tions and benefits of the FMLA. Instead, the
   Employees Need Not Mention the                 have been serious enough to trigger the              employer must determine if the leave being
   FMLA to Establish FMLA                         supervisors or executives of Pfizer to deter         requested is protected by the FMLA.
   Retaliation Claims                             the plaintiff from going through with his            Second, it shows the need for employers to
    Pfizer also argued that the plaintiff could   plan. Also, the two employees who had                have clear written policies on company rules
not establish FMLA retaliation without            obtained starters for the plaintiff were not         to rely upon when an employee is terminat-
specifically informing Pfizer of his need for     disciplined. The court noted that the confu-         ed who incidentally has requested or taken
FMLA leave. In other words, Pfizer argued         sion among Pfizer employees over the com-            FMLA leave. Third, the case emphasizes that
that an employer could not be liable for          pany policy on starters and the timing of the        if such leave is objectionable, employers
retaliation where the employee had simply         plaintiff ’s termination were also facts show-       must expressly refuse a request for intermit-
given the employer notice of the need for         ing pretext. Significantly, the Pfizer Starter       tent leave by an employee requesting inter-
leave for an FMLA-related reason. Rejecting       Guide did not explicitly prohibit NHO                mittent leave for the birth or adoption of a
this argument, the court noted that the           employees such as Plaintiff from possessing          child. If employers do not want to permit
employee need not specifically invoke the         or distributing starters. Also, no other Pfizer      such leave, they should revise their FMLA
FMLA in requesting leave in order to bene-        written policy restricted NHO employees              policies to indicate that intermittent leave in
fit from the protection of the FMLA. Once         from handling starters (as sales representa-         such circumstances will not be allowed. The
the plaintiff gave Pfizer clear and advance       tives of Pfizer did). The plaintiff ’s direct        court in Dotson cited to at least one federal
notice of his need for leave during the adop-     supervisor testified that there was no specific      decision where an employer’s motion for
tion process, the burden shifted to Pfizer to     policy that prohibited NHO employees                 summary judgment was granted on an
determine whether the plaintiff was request-      from handling starters. The timing of the            “intermittent” FMLA claim because the
ing FMLA leave. According to the court, the       plaintiff ’s termination, the confusion over         employer expressly forbade intermittent
plaintiff presented sufficient evidence for a     the Pfizer policy on starters, and the lack of       leave of that type in its employee handbook.
reasonable jury to believe he was terminated      any discipline upon the other employees              Dotson, 558 F.3d at 293-294. However, it is
in retaliation for actions that should have       with advance knowledge of the plaintiff ’s           unclear how the Fourth Circuit would rule
been FMLA-protected. Dotson, 558 F.3d at          handling of starters all were sufficient to cre-     on this exact issue.
296.                                              ate a jury question on whether the plaintiff ’s
                                                  termination was pretextual. Id. at 297.                 Margaret M. Kingston is an associate at
                                                                                                       Hedrick, Gardner, Kincheloe, & Garofalo,
   Retaliatory Animus and Pretext                    Damages                                           LLP in Charlotte, where she focuses her practice
   In order to prevail on his FMLA retalia-          Finally, the court reviewed the district          on       employment        litigation        for
tion claim, the plaintiff needed to establish     court’s rulings on damages for abuse of dis-         management/employers and workers’ compensa-
evidence connecting his termination to the        cretion. The court held that the district court      tion defense.
protected activity of the adoption-related        did not abuse its discretion in finding the
leave. Pfizer asserted that it had terminated     plaintiff ’s request for front pay from the date

 10 DECEMBER 2009
Case Law Update
By Margaret M. Kingston


   MSC Industrial Direct Co.                      it had established a substantial likelihood of     consideration. The court concluded that the
   v. Steele, 2009 N.C. App.                      success on the merits. In applying North           entrusting of confidential business informa-
                                                  Carolina law to determine the enforceability       tion to the defendant was also not valid con-
   LEXIS 1307 (Aug. 18, 2009)                     of the Agreement, the court noted that a           sideration where this was not new informa-
   (unpublished)                                  covenant not to compete is valid and               tion being entrusted to the defendant. The
     Valid v. illusory consideration for non-     enforceable if it is in writing; part of an        court noted that it “appear[ed] clear that
compete agreement. On Aug. 18, 2009, the          employment contract; supported by valuable         such information had been entrusted to
North Carolina Court of Appeals filed an          consideration; reasonable as to time and geo-      defendant for a number of years prior to the
unpublished opinion addressing considera-         graphic scope; and not against public policy.      signing of the Agreement.”
tion supporting non-compete agreements.           The court then analyzed whether the                    The Court of Appeals affirmed the deci-
Judge Barbara Jackson authored the opinion,       Agreement was supported by valuable con-           sion of the trial court, holding that the
and Judges Steelman and Stroud concurred.         sideration.                                        Agreement at issue was not valid and
     Plaintiff MSC Industrial Direct                  On the date the defendant signed the           enforceable and that the plaintiff could not
Company, Inc. (MSC) hired defendant               Agreement, he also signed a Restricted Stock       show a likelihood of success on the merits of
James Gregory Steele as an Outside Sales          Award (the “Award”). The Award stated that         its claims.
Associate in October of 1994. In August of        it was not an employment contract and did              Although an unpublished decision, this
2005, the defendant signed an agreement           not affect the plaintiff ’s right to discharge     case is a good example of the distinction
containing confidentiality, non-solicitation,     the defendant. Additionally, the Award stat-       courts will make between consideration
and non-competition provisions in exchange        ed that it was not to be considered part of the    which has immediate value to an employee
for being given use of a company car. In          defendant’s salary. Pursuant to the Award,         versus illusory consideration. Examples of
February of 2006, the defendant signed a          the defendant had no right to vote or sell the     sufficient consideration when the restrictive
new agreement (“the Agreement”) that con-         shares or receive dividends until they vested.     covenant is entered into after the start of
tained confidentiality, non-solicitation, and     If his employment ended due to involuntary         employment include continued employment
non-competition provisions. The Agreement         termination or resignation, the defendant          for a stipulated period of time; a raise, bonus,
superceded any prior agreements between           was required to return any unvested shares to      or other increase in compensation; a promo-
the plaintiff and the defendant. The consid-      the plaintiff.                                     tion; additional training (employer promises
eration for the defendant signing was identi-         The court held that the Award of restrict-     to train employee in certain practices confi-
fied in the Agreement as: (1) restricted shares   ed shares of the plaintiff ’s stock did not con-   dential to the plaintiff ’s business); or some
of the plaintiff ’s stock; (2) the defendant’s    stitute valuable consideration to support a        other increase in responsibility or hours
continued employment by the plaintiff; (3)        covenant not to compete in North Carolina.         worked that immediately benefits the
Defendant’s compensation; and (4) the             The court noted that the actual grant of the       employee (e.g., employee promoted from
plaintiff ’s entrusting confidential business     shares occurred more than 30 days prior to         part-time to full-time). The Court of
information to the defendant.                     the date the defendant signed the                  Appeals has been consistent in noting that
     On May 11, 2007, the plaintiff terminat-     Agreement, that the defendant had no rights        the consideration stated in the restrictive
ed Defendant for alleged violations of the        to the shares at the time they were granted,       covenant must bind the employer to some
Agreement. The defendant began working            and that the plaintiff still had the right to      promise. For instance, a profit sharing plan
for a competitor of the plaintiff in August of    discharge the defendant at any time without        would be illusory consideration if it is draft-
2007. Subsequently, the plaintiff filed a         cause. The court concluded that the consid-        ed by the employer and is subject to amend-
complaint and motion for temporary                eration was illusory and thus could not sup-       ment by the employer to reduce or eliminate
restraining order (TRO) in Union County           port a valid and enforceable non-compete           contributions to the plan. One final note:
Superior Court. The trial court granted the       agreement.                                         courts will not analyze the amount of consid-
TRO, but after a hearing denied the plain-            The Court of Appeals also considered           eration that the employee accepts in
tiff ’s motion for a preliminary injunction       whether the other stated consideration for         exchange for signing a restrictive covenant.
and dissolved the TRO. The plaintiff              the covenant not to compete constituted            The Court of Appeals recently held that an
appealed.                                         valid consideration. The court noted that          employee’s acceptance of $500 in exchange
     As an initial matter, the Court of Appeals   continued employment and the associated            for signing a non-compete agreement was
held that the appeal, though interlocutory,       salary were not sufficient consideration to        sufficient consideration and not illusory. It
was properly before the court and, rejecting      support a new restrictive covenant where the       was for the parties to the contract to deter-
the defendant’s argument, concluded that          defendant was not receiving any change in          mine the adequacy of the amount of consid-
the case was not moot. The plaintiff argued       his compensation, duties, or commission. In        eration. See Hejl v. Hood, Hargett &
that the trial court erred in denying its         contrast, continued employment for a speci-
motion for a preliminary injunction because       fied period of time would have been valid                                See CASE LAW page 12

                                                                                                     LABOR AND EMPLOYMENT 11
Case Law from page 11
Assocs., Inc., ___ N.C. App. ___, 674           quently reassigned Hollingsworth as the            tiff to establish the conduct at issue was
S.E.2d 425, 429 (COA08-1065, April 7,           plaintiff ’s supervisor, and the plaintiff relo-   unwelcome; based on the plaintiff ’s gender;
2009).                                          cated back to the branch where                     sufficiently pervasive or severe so as to alter
                                                Hollingsworth was located. The plaintiff           the conditions of her employment and create
    Tate v. First Citizens Bank                 alleged that, in 2004, Hollingsworth began         a hostile work environment; and could be
    & Trust Company and David                   to engage in the same sexual gestures and          imputed to her employer. First, the fact that
                                                other offensive conduct as he had during the       the conduct was unwelcome was undisput-
    Hollingsworth, No. 5:07-CV-                 first period she worked with him. The plain-       ed. Second, the court noted that the alleged
    492-BO (E.D.N.C. April 8, 2009) tiff also alleged three incidents in which                     actions took place because of the plaintiff ’s
    Insufficient employer investigations of Hollingsworth touched her buttocks and                 sex where the plaintiff ’s supervisor made
and responses to employee’s sexual harass- that she had to leave work several times due            repeated sexual gestures and on multiple
ment complaint. Judge Terrence Boyle of to migraine headaches resulting from the                   occasions brushed the plaintiff ’s buttocks.
the United States District Court for the stress Hollingsworth’s conduct caused. On                 Third, the court found the actions were suf-
Eastern District of North Carolina held that March 14, 2006, the plaintiff went to her             ficiently severe or pervasive where the plain-
a female former financial sales representative doctor and was instructed to stay out of            tiff left work with headaches caused by
could proceed to trial on her claims against work for one week. The plaintiff complained           Hollingsworth’s conduct, failed to complete
the employer based upon the plaintiff ’s alle- of Hollingsworth’s conduct to First Citizens        assignments because of his conduct, and
gations of two separate time periods of sexu- management. First Citizens conducted an              where the frequency and duration of the
al harassment (one in 1996 and one from investigation and determined the results                   conduct (on an almost daily basis for 18
2004 to 2006) by a male supervisor and of were “inconclusive” regarding the plaintiff ’s           months) interfered with the plaintiff ’s work
constructive discharge in violation of Title harassment allegations. However, First                performance and caused the plaintiff to suf-
VII.                                            Citizens failed to interview a co-worker of        fer from PTSD.
    The plaintiff began working full-time for the plaintiff who had allegedly witnessed the            On the issue of whether Hollingsworth’s
First Citizens Bank & Trust Company sexual gestures of Hollingsworth toward the                    conduct could be imputed to the employer,
(First Citizens) in 1967. At all times relevant plaintiff. The plaintiff was diagnosed with        First Citizens argued it had exercised reason-
to the plaintiff ’s harassment allegations, the post-traumatic stress disorder (PTSD) and          able care in preventing the re-occurrence of
plaintiff was employed as a financial sales took medical leave until First Citizens                the harassment as shown by its prompt
representative for First Citizens in Fort informed her that her medical leave would                investigations into the alleged harassment
Bragg, North Carolina. Defendant David expire in July of 2006. When the plaintiff ’s               and its anti-harassment policy. However, the
Hollingsworth is the plaintiff ’s former super- medical leave was about to expire, First           court held that First Citizens failed to exer-
visor.                                          Citizens presented her with an “ultimatum”         cise reasonable care in preventing harassment
    The plaintiff alleged that, beginning in of three options: return to work under the            when it re-assigned Hollingsworth to be the
1996, Defendant Hollingsworth would fon- supervision of Hollingsworth, retire, or be               plaintiff ’s supervisor less than four years after
dle himself in front of her, greet her when fired. The plaintiff retired in July of 2006.          the plaintiff made her initial complaint. The
she walked into his office by spreading his         The plaintiff filed a complaint in             court determined that the plaintiff had pre-
legs and “plainly making sexually suggestive Cumberland County Superior Court, and                 sented genuine issues on her Title VII dis-
gestures” to the plaintiff, and engage in other First Citizens removed the action to federal       crimination claim and denied the motion for
inappropriate conduct toward her because of court. Plaintiff alleged violations of Title VII,      summary judgment by First Citizens.
her gender. The plaintiff alleged that she had claiming that First Citizens failed to correct          On the Title VII retaliation claim, the
to visit Hollingsworth’s office on almost a sexual harassment by her supervisor and also           court noted that the plaintiff had to establish
daily basis for her job. Soon thereafter, the constructively discharged her because of her         she engaged in a protected activity; First
plaintiff made a complaint to management. protected activity of complaining about the              Citizens took an adverse employment action
In response, First Citizens conducted a one- sexual harassment. The court held a hearing           against her; and there was a causal connec-
day investigation into the allegations and on the defendants’ motions for summary                  tion between the protected activity and the
determined merely that Hollingsworth had judgment and the plaintiff ’s motion to                   adverse employment action. First, the plain-
used “poor judgment.” First Citizens then amend/correct her response to the summary                tiff engaged in a protected activity when she
asked the plaintiff to relocate to a different judgment motions. The plaintiff ’s motion           filed her complaint to First Citizens manage-
branch in order to work with a different was denied as not being procedurally proper.              ment in March of 2006. Second, First
supervisor, and the plaintiff agreed despite        First Citizens moved for summary judg-         Citizens “forced” the plaintiff to choose
her wish not to have to relocate. The plain- ment on the plaintiff ’s claims that (1) she          between returning to a harassing environ-
tiff alleged that the smaller size and lower was discriminated against based on her sex in         ment, retiring, or being fired. Third, the
customer volume of the branch to which she violation of Title VII; (2) she was retaliated          plaintiff presented a prima facie case of cau-
was relocated affected her ability to meet against in violation of Title VII; and (3) she          sation where she was given the ultimatum
production goals and receive incentive pay.     was forced to retire.                              resulting in her retirement following her
    In 2000, the plaintiff ’s supervisor at the     The court noted that the Title VII hostile     complaint to First Citizens management.
smaller branch retired. First Citizens subse- work environment claim required the plain-           The court noted that First Citizens had prof-

12 DECEMBER 2009
fered non-retaliatory reasons for providing        The court noted that First Citizens could           harassment policy and a prompt investiga-
the plaintiff with the ultimatum. However,         not prevail on the affirmative defense that it      tion if any of the following occur: (1) crucial
the court found that the plaintiff established     should not be held vicariously liable where it      witnesses to alleged harassment are not inter-
sufficient evidence of pretext where the reas-     re-assigned Hollingsworth to be the plain-          viewed; (2) the complainant is transferred to
signment of Hollingsworth as the plaintiff ’s      tiff ’s supervisor less than four years after the   a less desirable position or location; and/or
supervisor caused the plaintiff to have to take    plaintiff made her initial complaint of             (3) the complainant is placed back under
the medical leave that First Citizens used to      harassment about Hollingsworth.                     the supervision of an alleged harasser
offer the plaintiff the job ultimatum. The              Finally, the court denied defendant            under protest or continuing harassment alle-
court denied the motion for summary judg-          Hollingsworth’s motion for summary judg-            gations.
ment on the retaliation claim.                     ment on the plaintiff ’s claim for intentional
    The court treated the plaintiff ’s “forced     infliction of emotional distress.                      Margaret M. Kingston is an associate at
retirement” claim as a Title VII hostile envi-          This decision in Tate underscores the          Hedrick, Gardner, Kincheloe, & Garofalo,
ronment constructive discharge claim. The          importance of an employer’s thorough and            LLP in Charlotte, where she focuses her practice
court denied the motion for summary judg-          prompt investigation into employee allega-          on       employment        litigation        for
ment on the basis that the plaintiff ’s facts of   tions of unlawful harassment. In addition,          management/employers and workers’ compensa-
sexual harassment on a near daily basis over       employers should be aware of the potential          tion defense.
18 months created a genuine issue as to            liability for Title VII hostile work environ-
whether she was constructively discharged.         ment claims despite the presence of an anti-




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PO Box 3688
Cary, NC 27519-3688




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