Title: Estate of Frank L. Roach, et als. v. TRW, Inc., et als.

State: new-jersey

Issuer: New Jersey Supreme Court

Document:

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). VERNIERO, J., writing for a unanimous Court. In this appeal, the Court considers whether the jury's verdict in favor of the plaintiff is sustainable under the Conscientious Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -8. Plaintiff, Frank Roach (now deceased), began his employment with TRW, Inc. in 1981. He was hired by TRW as the Staff Assistant of Physical Security, to protect TRW's secrets, including classified information provided to TRW by the United States government. During the twelve years of his employment with TRW, Roach was twice promoted in the security division and received positive evaluations. As a defense contractor, TRW was directed by the United States government to implement an ethics program for the training and education of its employees. In 1988, Roach was promoted to manager of TRW's Business Ethics and Conduct Program. As manager of the program, Roach was involved in implementing TRW's code of conduct. That code required any employee who acquired information that gave him or her reason to believe that another TRW employee was engaged in conduct prohibited by the TRW policy to report that information to his or her supervisor or to a TRW attorney. To facilitate reporting of violations, TRW set up an independent hotline managed by TRW attorneys. Failure of an employee to report a violation of TRW policy could result in disciplinary action, including termination. In November 1991, the secretary to Vernon DeBord, a TRW employee, approached Roach and alleged improper activities on the part of DeBord and another employee by the name of Jim Vrungos, including an allegation of kick-back payments intended for DeBord and Vrungos if TRW's planned acquisition of a certain company took place. After investigating the matters, Roach concluded that each complaint was valid. Thereafter, Roach reported his findings to his supervisor, Charles Briggs, who assured him that he would follow up. Although Roach understood this to mean that Briggs would call the hotline and report the matter to the TRW attorneys, in fact, Briggs told Vrungos about the complaints. Roach claims that Briggs and Vrungos subsequently informed him during a telephone conference that the allegations were not important enough to warrant further investigation and that they were gray in nature. Following that conversation, in November 1991, Roach met with Briggs and urged him to submit his findings to the legal department to comply with their reporting obligations under the code of conduct. When Briggs was not responsive, Roach asked him to acknowledge in writing that he (Roach) had satisfied his reporting obligations. Ultimately, Roach was informed that no action would be taken. On March 29, 1992, Roach himself telephoned the TRW hotline, believing that the call was necessary to satisfy his reporting obligations under the code. According to the hotline attorneys, Roach's call fell through the cracks, and the attorneys apparently took no action on the complaints. In August 1992, TRW announced plans for a reorganization of its space and defense sectors. Under the plans, Roach's group was to be combined with another group. The TRW employee who was to head that group directed nine individuals, including Briggs, to evaluate each staff member for past and expected future performance. Briggs gave Roach a favorable rating, while another employee gave him an unfavorable rating. The combination of those ratings put Roach in the classification of an average performer, ranking him at the bottom of the thirty-seven individuals evaluated. Subsequently, on November 3, 1992, TRW sent Roach a layoff notice, which provided him with ten-weeks notice to find new employment. The other thirty-six employees who were evaluated were either retained by TRW or transferred to other positions, voluntarily resigned, or were hired back as independent contractors for the company. Roach attempted to resolve the matter internally, ultimately filing a formal grievance with TRW to protest his layoff. That grievance was unsuccessful. The Appellate Division set aside the jury's verdict, concluding that CEPA did not extend protection to employees' complaints about co-employees' actions that harmed only the employer. The Supreme Court granted Roach's petition for certification, but summarily remanded to the Appellate Division to reconsider the appeal in view of its decision in Higgins v. Pascack Valley Hospital, 158 N.J. 404 (1999) (finding that certain complaints about co-employee activity are protected under section 3c.(3) of CEPA). The Appellate Division affirmed its earlier decision, concluding that Higgins was inapplicable because Roach's complaints did not implicate the public interest. The Supreme Court again granted Roach's petition for certification, and also granted the National Employment Lawyers Association of New Jersey's motion to appear as amicus curiae. HELD: Plaintiff was not required to prove a defined violation of public policy to win a jury verdict under sections 3a. and 3c. of the Conscientious Employee Protection Act; plaintiff provided sufficient proofs to the jury that his complaints to his employer about his co-employees' conduct were protected under CEPA and this his discharge was motivated by those complaints. 1. Given CEPA's broad remedial purpose to protect employees who report illegal or unethical work-place activities, the Legislature did not intend to hamstring conscientious employees by requiring that they prove in all cases that their complaints involve violations of a defined public policy. (pp. 14-17) 2. In examining whether a retaliatory motive for discharge exists, jurors may infer a causal connection between the employee's discharge and his or her complaints about the improper conduct of co-employees based on the surrounding circumstances. (pp. 17-18) 3. In considering a motion for judgment notwithstanding the verdict, a jury's verdict will not be disturbed unless it is found that the jury could not have reasonably used the evidence to reach its verdict. (pp. 18-19) 4. CEPA affords protection to employees if they reasonably believe that the activity complained of is fraudulent or criminal even when the activity does not rise to the level of an actual crime. (pp. 19-20) 5. Although the term reasonably believes in sections 3c.(1) and 3c.(2) provides ample justification to sustain the jury's verdict in this case, that term is not intended to spawn litigation concerning the most trivial or benign employee complaints. (pp. 20-21) 6. The jury had ample basis to find that TRW had ratified the alleged employee misconduct, thereby treating the complained-about activities as the employer's own conduct in satisfaction of section 3a. of CEPA. Intent to ratify an unauthorized transaction may be inferred from a failure to repudiate it. (p. 21) 7. The jury's findings in respect of sections 3c.(1) and 3c.(2) are sufficient to sustain the entire verdict. If there are numerous theories on which the jury could rest its determination, the verdict of the jury must be upheld if there is any one possible theory of liability substantiated by the evidence taken as a whole. (pp. 21-22) Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Law Division to reinstate the jury's verdict. ESTATE OF FRANK L. ROACH, Plaintiff-Appellant, and KATHERINE BORAL, Plaintiff, v. TRW, INC., Defendant-Respondent, and FRANCES KRUSE, Individually and as Agent for TRW, Inc., Defendant. Argued May 2, 2000 -- Decided July 19, 2000 On certification to the Superior Court, Appellate Division, whose opinion is reported at 326 N.J. Super. 493 (1999). Linda B. Kenney argued the cause for appellant (Kenney Schaer & Martin, attorneys; Ms. Kenney and Gregory S. Schaer, of counsel; Mr. Schaer, on the briefs). Kenneth J. Kelly argued the cause for respondent (Epstein Becker & Green, Mr. Kelly and Mark D. Lurie, on the brief). Christopher P. Lenzo submitted a brief on behalf of amicus curiae, National Employment Lawyers Association of New Jersey (Francis, Lenzo & Manshel, attorneys). The opinion of the Court was delivered by An infraction by any employee of this policy, of the applicable laws or of recognized ethical business standards will subject the employee to disciplinary action, which may include warning, reprimand, probation, reduction in compensation, demotion, suspension or dismissal. In defining the responsibilities of TRW employees, the code provides, in part, that [e]very employee should bring possible violations of [the code] to the attention of (i) his or her supervisor or another [TRW] executive and (ii) a [TRW] attorney. More specifically, the code requires that [a]ny employee who acquires information that gives such employee reason to believe that another employee is engaged in conduct prohibited by this policy has a responsibility to report promptly such information to his or her supervisor or a TRW attorney. To facilitate reporting of violations, TRW set up an independent hotline managed by TRW attorneys. As stated in TRW's literature, the hotline was intended to provide employees with the mechanism to satisfy[] their reporting obligations. . . . Failure to report a violation of the policy could result in disciplinary action, including termination. In a section titled Contracting with the United States Government, the code indicates that [b]ecause even the appearance of impropriety can erode the public confidence in [TRW] and in the Government procurement process, this policy affirms required standards of conduct and practices with respect to transactions with the United States Government. The code further explains: The standards of conduct covered by this policy explicitly require that scrupulous attention be given to . . . proper recording and charging of all costs to the appropriate account, regardless of the status of the budget for that account. The falsification of timecards, charging unsupportable indirect costs, incorrect classification of costs, improper shifting of costs between contracts or other intentional allocation of costs to a Government contract contrary to the contract provisions or related laws, rules and regulations are [also] prohibited by this policy. In another section, the code prohibits conflicts of interest, stating: As a condition of employment, . . . employees are required to avoid any situation that does or may involve a conflict of interest between their personal interests or the interests of the company. A conflict of interest is defined as an activity, interest, or relationship that affects or appears to affect the objectivity, judgment, or effectiveness of an employee in performing his/her job. In June 1990, although he did not have a marketing background, plaintiff requested a transfer to a marketing position, District Office Manager, in TRW's Electronic Systems Group. Plaintiff was interviewed by seven people including his future supervisor, Charles Briggs. Another interviewer, Jim Vrungos, indicated that plaintiff was not qualified for the position. Nevertheless, plaintiff was hired for that position in the Fort Monmouth office. Vernon DeBord worked in that office, under the supervision of Vrungos. In his new position, plaintiff was involved in acquiring and maintaining a contract with the Army worth approximately $65,000,000 over five years. He also was responsible for acquiring new business. Plaintiff received generally favorable performance reviews, although his evaluations contained some constructive criticisms from Briggs, who by that time was plaintiff's supervisor. DeBord's secretary, Frances Kruse, approached plaintiff in November 1991 and alleged improper activities on the part of DeBord and Vrungos. (Apparently, DeBord had previously mentioned to plaintiff that he wanted to discharge Kruse.) The alleged activities included DeBord's filing of a false expense report seeking reimbursement for a minor lunch expense, and false time cards; DeBord's failure to disclose conflicts of interest with subcontractors; leasing equipment on behalf of TRW for DeBord's personal use; and failing to disclose a conflict of interest with a company that TRW considered acquiring, including allegations of kick-back payments intended for DeBord and Vrungos if the acquisition took place. Plaintiff investigated the matters, concluding that each complaint was valid. (In summarizing the complaints against Debord and Vrungos, we make no judgment regarding their validity and imply no wrongdoing on anyone's part.) Importantly, plaintiff testified that he reasonably believed that, by their actions, DeBord and Vrungos had violated TRW's code of conduct and were engaged in illegal and unethical conduct. Plaintiff reported his findings to Briggs who, according to plaintiff, indicated that he would follow-up. Plaintiff believed that in following up Briggs would call the hotline and report the matter to TRW attorneys, but, instead, Briggs told Vrungos about plaintiff's complaints. According to plaintiff, Briggs and Vrungos informed plaintiff during a conference call that the allegations were not important enough to warrant further investigation and that the allegations were gray in nature. On November 22, 1991, plaintiff met with Briggs in Washington, D.C. Plaintiff stated to Briggs that the two of them should submit plaintiff's findings to the legal department to comply with their reporting obligations under the code of conduct. According to plaintiff, Briggs responded that Vrungos was not happy with plaintiff and that plaintiff was not a team player. Plaintiff asked Briggs to acknowledge in writing that he (plaintiff) had satisfied his reporting obligations. Plaintiff never received such acknowledgment. Later that week, Vrungos went to the Fort Monmouth office and had a heated meeting with plaintiff. Purportedly, Vrungos called plaintiff a liar and informed plaintiff that Briggs owed Vrungos a favor, the inference being that Briggs would overlook plaintiff's complaints. Plaintiff testified that his relationship with Briggs then deteriorated and that their communications significantly decreased. Plaintiff claimed that the work environment at the Fort Monmouth office became hostile. Additionally, plaintiff stated that he was informed that no action would be taken against DeBord because he (DeBord) was slated to retire in two years. NO. A-74 ESTATE OF FRANK L. ROACH, Plaintiff-Appellant, and KATHERINE BORAL, Plaintiff, v. TRW, INC., Defendant-Respondent, and FRANCES KRUSE, Individually and as Agent for TRW, Inc., Defendant. DECIDED July 19, 2000 Chief Justice Poritz