Lawlor v. North Am. Corp.. of Ill.

• Decision Date: 04 May 2011
• Docket Number: No. 1–09–3603.,1–09–3603.
• Citation: 350 Ill.Dec. 667,409 Ill.App.3d 149,949 N.E.2d 155
• Parties: Kathleen LAWLOR, Plaintiff–Appellee and Cross–Appellant,v.NORTH AMERICAN CORPORATION OF ILLINOIS, Defendant–Appellant and Cross–Appellee.
• Court: United States Appellate Court of Illinois

409 Ill.App.3d 149

949 N.E.2d 155

350 Ill.Dec. 667

Kathleen LAWLOR, Plaintiff–Appellee and Cross–Appellant,

v.NORTH AMERICAN CORPORATION OF ILLINOIS, Defendant–Appellant and Cross–Appellee.

No. 1–09–3603.

Appellate Court of Illinois, First District, Fourth Division.

March 24, 2011.Rehearing Denied May 4, 2011.

Mitchell B. Katten, Nancy A. Temple, Joshua R. Diller, Katten & Temple LLP, Chicago, IL, for Plaintiff–Appellee and Cross–Appellant.Eric N. Macey, Steven J. Ciszewski, Julie Johnston–Ahlen, Novack & Macey LLP, Chicago, IL, for Defendant–Appellant and Cross–Appellee.

OPINION

Justice LAVIN delivered the judgment of the court, with opinion.

Here, we are confronted with dueling appeals from the trial of an employment dispute that paradoxically concluded with both parties prevailing in their respective claims and each receiving punitive damages. The litigation itself arose out of an employment noncompetition investigation. After plaintiff left her sales position from a large corporate employer, she figured out that she was under surveillance by investigators, whom she suspected of stealing her mail and whom she ultimately learned used nefarious means (“pretexting”) to obtain her private phone records. These phone records were then used by her ex-employer to investigate her activities in the waning months of her seven years of employment. The employee, Kathleen Lawlor, filed suit against North American Corporation of Illinois (North American), after learning of the investigation. She claimed an “intrusion upon seclusion” tort and requested compensatory and punitive damages. North American's counterclaim alleged she violated her fiduciary duty of loyalty by attempting to steer business to a prospective employer and that she also communicated confidential corporate sales information to the same company.

At trial, both parties prevailed in their respective claims. A jury awarded Lawlor

[350 Ill.Dec. 674 , 949 N.E.2d 162]

$1.75 million in punitive and $65,000 in compensatory damages. The trial court heard the employer's equity claim contemporaneously and, one month after the trial, it ruled in North American's favor, awarding $78,781 in compensatory and $551,467 in punitive damages.

North American's primary contention is that Lawlor failed to prove that North American was liable on an agency theory for the actions of an independent contractor that somehow acquired her private phone records. Lawlor, meanwhile, appeals from the reduction of her punitive damage award and also appeals from the trial court's judgment on the counterclaim, which raised the duty of loyalty issue. She argues that, as an at-will employee without any contractual duty to refrain from disclosing simple sales volume and commissions information, the trial court's findings were against the manifest weight of the evidence and amount to an abuse of the trial court's discretion. For the reasons that follow, we affirm the jury's verdicts against North American in Lawlor's favor and reinstate the full punitive damage verdict returned by the jury. With regard to North American's breach of loyalty counterclaim, we hold that the trial court's judgments for compensatory damages and punitive damages were against the manifest weight of the evidence and we therefore reverse those judgments.

BACKGROUND

The parties engaged in four years of bruising discovery, but the testimony at the six-day trial was relatively uncomplicated. Lawlor was aggrieved that North American, through surreptitious means, acquired her mobile and home phone records in a failed effort to prove that she breached the company's noncompetition agreement. Painted with a broad brush, Lawlor presented evidence at trial to the effect that North American, through counsel and at least two independent investigators, set about the tasks of personal surveillance and getting her private phone records.

Lawlor testified that she decided to quit her job as a salesperson after her employer suddenly attempted to change her compensation agreement. Shortly after she left its employ, North American began an investigation to determine if she had violated their noncompetition agreement. The evidence at trial revealed the following sequence: (1) North American assigned an officer, Patrick Dolan, to serve as corporate liaison on the investigation; (2) North American asked its lawyer, Lewis Greenblatt, to conduct the investigation; (3) the lawyer then hired an investigator, Probe, which had worked in so-called “noncompetition” cases before; (4) Dolan gave the lawyer and the investigator personal information from the plaintiff's personnel file, including her birth date, social security number, address and telephone numbers; (5) the investigator passed this information on to yet another investigator, Discover, which, presumably through “pretexting,” obtained the phone records; and (6) the phone records were then passed up the line back to North American, which used the information internally to investigate Lawlor's activities by cross-checking all of the numbers found on the records. This investigation started shortly after Lawlor left North American and lasted approximately five months, by which time Lawlor had been working at a competitor for three months.

North American vigorously defended itself on all levels, attempting to prove that the investigation was conducted in an entirely proper fashion while endeavoring to separate itself, under the aegis of the thorny provisions of agency law, from the shadowy activities of the investigators. It

[350 Ill.Dec. 675 , 949 N.E.2d 163]

sought a directed verdict at the close of Lawlor's case, arguing that it could not be held liable on an agency basis for the improper conduct of either of the investigation firms, one of which had been directly hired by North American's lawyer.¹ With regard to its lawsuit against Lawlor, North American sought to prove that she had improperly communicated company information to a prospective employer while still in its employ and also argued that she attempted to steer business to the prospective employer, despite the fact that it did not allege a violation of the noncompetition agreement, which was the genesis of the investigation.² THE EVIDENCE AT TRial will be described below in a witness-by-witness recitation.

Testimony of Kathleen Lawlor

Lawlor, an at-will employee, worked at North American as a commission-based salesperson selling printed promotional items from 1998 to 2005. Lawlor was given wide latitude in determining the prices she charged her clients for North American's products. Once she acquired a third party's business in the manner of a “rainmaker,” the account was managed and handled by other North American employees. During her first three years at North American, Lawlor received a salary, but beginning in 2001, she signed an agreement with North American that provided she would receive commissions of 30% of the gross profits she generated for North American, with a draw of $70,000. Some of the accounts Lawlor generated included Komatsu, FTD, Pliant, and MapQuest, which she stated she did not receive commissions for after she left North American. The evidence at trial revealed that Lawlor was very successful in her role for her employer and that she generated income in excess of $200,000 on an annual basis, tied to the profits she made for the corporation.

The controversy that led to the dueling lawsuits seemed to have its genesis in Lawlor's attempt to acquire the business of MapQuest in March 2004, when she initially received an order for roll-up maps, and was paid 30% of North American's gross profits. Lawlor was North American's primary contact person on the account and worked closely with Kevin Bristow, an outside consultant hired by MapQuest to negotiate its print business.

In November 2004, Lawlor interviewed for a sales position at Shamrock Companies, Inc., one of North American's competitors. Lawlor flew to Cleveland and interviewed with Greg Christenson, a former North American employee and coworker of Lawlor's. As part of the interview, she toured the Shamrock facilities

[350 Ill.Dec. 676 , 949 N.E.2d 164]

and met with some of the department heads. In December 2004, Lawlor sent Christenson a follow-up letter, at his request, discussing several of the accounts she worked on for North American, revealing information related to North American's gross profit margins on those accounts. In her letter to Christenson, Lawlor stated:

“Per our discussions, I will highlight where I currently am as far as total volume: By year-end, I will have billed $2,000,000 in sales with a [gross profit] of 34%. In addition, Komatsu, which is shared with Jennifer Hall, will bill an additional [$]1,600,000 with a [gross profit] of 44%. The $2,000,000 is made up of many accounts to include FTD, Mobil Travel Guide, MapQuest, Vista Management and Pliant as the majors.”

Lawlor denied attempting to steer any customers to Shamrock while she was employed at North American.

In December 2004, Lawlor received an e-mail from Bristow regarding an opportunity to generate new business from MapQuest. Lawlor met with Bristow various times in January and February 2005. The MapQuest business, by all accounts, was projected to be very lucrative if everything fell into place. Plaintiff testified that when the “pitch” was getting readied, she sensed that she was being pushed aside. In March 2005, Mike Perez, Lawlor's direct supervisor, informed her that the MapQuest pitch needed to be a “sexy presentation” and would be led by another employee, Klay D'iorio. When Lawlor protested, Perez told her that she was not to have any contact with Bristow until the deal closed. During the meeting, according to Lawlor, Perez made several statements that appeared designed to distance Lawlor from the account, indicating that a different “personality” could be substituted if Lawlor were not the right person. Following the meeting, Perez e-mailed...