The U.S. District Court for the District of New Jersey dismissed a whistleblower lawsuit last week against L’Oreal USA Inc., the personal care company, and the American subsidiary of L’Oréal, S.A. (“L’Oreal”), over the termination of an employee refusing to meet an alleged patent application quota.

Steven Trzaska, the plaintiff, was an in-house patent attorney for L’Oreal who oversaw the company’s patent application process for newly developed products. In 2014, the annual quota for the plaintiff’s team was 40 patent applications. The entire patent attorney team, including the plaintiff, was instructed that failure to meet the quota would result in a negative impact on career growth. Trzaska claimed that he was concerned about the poor quality of L’Oreal product disclosures if the patent applications were filed without proper diligence and in October 2014, voiced his concerns to company leadership. Trzaska was eventually fired in December 2014.

In April 2015, Trzaska filed a lawsuit against L’Oreal in the U.S. District Court for New Jersey and alleged wrongful discharge and unlawful retaliation for refusing to file bad-faith, frivolous patent applications to meet the company’s annual patent quota.[1] In the lawsuit, the plaintiff argued L’Oreal violated the New Jersey Conscientious Employee Protection Act (“CEPA”), which shields employees from retaliation by their employer when they refuse to take unethical decisions or perform immoral actions. L’Oreal, however, denied any wrongdoing, and instead, argued that Trzaska was discharged due to a poor track record, internal complaints of the lack of professionalism, and allegations of discrimination by a female subordinate.

The district court granted L’Oréal’s motions for summary judgment and dismissed the case in October 2015 on grounds that sufficient facts were not presented.  Trzaska then appealed to the Third Circuit in early 2017.[2]

The Third Circuit found that the trial court had misapplied the standard for a motion to dismiss and determined that Trzaska had properly stated a claim for relief. The Third Circuit remanded the case to the trial court for the parties to proceed with discovery. On remand, the trial court was instructed to apply the facts to CEPA to determine whether L’Oreal had engaged in retaliatory practices.

To state a prima facie case under CEPA, a plaintiff must establish that:

1. He or she reasonably believed that his or her employer’s conduct was violating either a law, rule, or regulation promulgated pursuant to law or a clear mandate of public policy;

2. He or she performed a ‘whistle-blowing’ activity described in N.J.S.A. 34:19-3c;

3. An adverse employment action was taken against him or her; and

4. A causal connection exists between the whistle-blowing activity and the adverse employment action.[3]

On remand, the district court determined that Trzaska did not allege an objectively reasonable belief of past or imminent wrongdoing. Trzaska offered no facts suggesting that L’Oréal requested or demanded that he relinquish his professional legal and moral obligations in evaluating or submitting patent applications. In fact, Trzaska had conceded that he never actually filed a misleading patent application with the U.S. Patent and Trademark Office (“USPTO”) and was never instructed by L’Oreal to file a baseless application in violation of ethical duty. The plaintiff’s amended complaint did not include a single defective or fraudulent patent application that was submitted to the USPTO during his employment with L’Oreal. Thus, the plaintiff failed to meet the first prong of the CEPA test.

The U.S. District Court did not find any evidence to establish that a CEPA violation had occurred because Trzaska did not file any frivolous patents himself or knew of other attorneys who did so as a result of the alleged application quota at L’Oreal. Because L’Oreal never actually set an official patent application quota, L’Oreal did not meet the CEPA standard of wrongdoing and thus, a CEPA whistleblower complaint was not established. Trzaska’s belief that L’Oreal was forcing its patent attorney team to violate ethical rules set by the USPTO was erroneous and as a result, the court ruled L’Oreal had not engaged in any wrongdoing and dismissed the lawsuit.