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Illinois Supreme Court Affirms Liability Against Former Employer For Unlawful Investigation Methods Used By Private Investigators In Non-Competition Investigation Into Activities By Ex-Sales Agent

Posted in Non-Compete Enforceability, Practice & Procedure, Restrictive Covenants, Trade Secrets, Unfair Competition

By Marcus Mintz

Recognizing the trend across Illinois appellate courts in recent years, the Illinois Supreme Court joined the “vast majority of other jurisdictions” in recognizing the tort of intrusion upon seclusion – a claim against one who intentionally intrudes upon another’s privacy if such intrusion would be highly offensive to a reasonable person. In Lawlor v. North American Corporation of Illinois, 2012 IL 112530, (Oct. 18, 2012), the departure of a successful sales agent, Lawlor, from the company to a direct competitor, spurred the employer to launch an investigation into whether Lawlor breached her duty of loyalty and non-compete obligations to the company. Lawlor’s departure eventually led to both parties asserting claims against each other relating to commission payments, Lawlor’s compliance with her obligations to the company, and the company’ s liability for its investigator’s unlawful acts.

Similar to many employers seeking to protect their customer relationships and confidential information, after Lawlor left the company, it directed its outside counsel to hire a private investigation firm, Probe, to determine whether Lawlor violated her obligations to the company. The company provided Probe with Lawlor’s personal information, including her date of birth, her address, her home and cell phone numbers, and her social security number. Probe then hired another investigative firm, Discover, to obtain Lawlor’s phone records by using her personal information and pretending to be Lawlor. After Discover obtained Lawlor’s phone records, they were sent to the company and distributed among certain employees to determine whether Lawlor had been contacting the company’s clients. While the company expected to receive the phone records, it did not direct Probe or Discover into how they were to perform their investigation or what investigative methods they were to use.

At trial, Lawlor contended that the investigators’ access to her phone records constituted an intrusion upon her seclusion and the company should be liable under the theory that the investigators were acting as the company’s agents. The company disputed any liability, arguing that it did not hire the investigators – its attorney did, and it did not tell the investigators how to do their job. The jury returned a verdict in Lawlor’s favor on her claim for intrusion upon seclusion, finding that the company was vicariously liable for its investigators’ conduct and awarding both compensatory and punitive damages against the company.

On appeal to the Illinois Supreme Court, the Court expressly found that because the company knew the phone records were not publicly available, the jury could reasonably infer that the company was setting a process in motion whereby the investigators were going to pose as Lawlor to obtain the phone records. In addition, although the investigators were hired by the company’s attorney, the attorney had no other role in the investigation. In contrast, the company approved the payments to the investigators and tasked a company vice president to be the company’s contact person for the investigation. Accordingly, the Court held that sufficient evidence existed to sustain the jury’s finding that Probe and Discover were acting as the company’s agents and that the company is liable for their unlawful acts. However, because the investigation was conducted for a legitimate business purpose, the Court limited the award of punitive damages to Lawlor’s compensatory damages, just $65,000, from the jury’s award of $1.75 million and the appellate court’s remitter to $650,000.

Following Lawlor, employers in Illinois are put on notice that they may be charged with the conduct of their investigators – even if such investigators are not directly hired or controlled by the employer. While professional investigation provides a useful tool to combat against employee malfeasance, efforts must be taken to ensure that investigations are conducted within the bounds of the law to preclude potential liability. Please also see Ken Vanko’s informative post about this important new case.