Appeal from the Circuit Court of Cook County. No. 05 CH 13876 The Honorable Carol Pearce McCarthy Judge Presiding.
The opinion of the court was delivered by: Justice Lavin
JUSTICE LAVIN delivered the judgment of the court, with opinion.
Presiding Justice Gallagher and Justice Pucinski concurred in the judgment and 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 non-competition 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 $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.
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 non-competition 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 non-competition 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 "non-competition" 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 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.*fn1
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
the non-competition agreement, which was the genesis of the
investigation.*fn2 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 co-worker of Lawlor's. As part of the interview, she toured the Shamrock facilities 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 Lawlor to tell her she did a great job, but he did not know what her role would be with MapQuest moving forward. In May 2005, Perez notified Lawlor that he intended to have the MapQuest account handled by a salaried employee at North American. On June 13, 2005, MapQuest placed an order with North American for approximately $338,000. Just two days later, Lawlor separated from North American. She never received compensation from the MapQuest job that had closed just before she left.
In the beginning of June 2005, North American told Lawlor it was changing its compensation agreement so that she would no longer receive 30% commissions, but Lawlor refused to sign it and left the company. She testified that she was disgruntled because North American was attempting to change her method of compensation from the agreed 30% of profits method, just when she had brought in a big piece of business.
Lawlor testified that she intended to spend the summer with her three young children (age 10 and under) before taking another job. Just weeks later, she suspected that North American was investigating her after spotting what appeared to be investigators lurking around outside her house and her parents' house. Lawlor was also alarmed when she did not receive her June telephone bill.
The surveillance appeared to continue for some time. In October 2005, Lawlor learned that North American had obtained her mobile and home phone records from April 2005 through September 2005. Lawlor testified that she never authorized anybody at North American to acquire or look at her phone records. She testified that she felt violated and physically ill at the revelation that her private information had become fodder at her former employer. She avoided using her personal phone lines and enhanced the security features on her phones. She also changed the locks on her home and installed a security system.
Lawlor testified that she incurred $620,000 in legal fees (half of which she has already paid) to two law firms that handled the first wave of legal action against North American for their invasion of her privacy, but that the lawyers representing her at trial were doing so on a contingency basis. Lawlor testified that during her two months off work, she never contacted any clients from North American. She never told any clients that she was going to Shamrock. She testified that she never compromised her former employer in any conversations or business dealings with anybody affiliated with Shamrock. In August 2005, Lawlor started working at Shamrock, having concluded a long run at North American where she generated many millions of dollars in company profits. Not a single client followed.
Testimony of Kevin Bristow
In December 2004, Bristow, a consultant for MapQuest, contacted Lawlor to discuss a new business opportunity for North American. Bristow contacted Lawlor because he had known her for a long time and she had always been trustworthy and reliable. Through February 2005, Lawlor helped Bristow formulate a business plan to pitch to executives at MapQuest regarding the feasibility of creating a publishing division. Bristow requested that Lawlor keep their discussions to herself to avoid "the additional pressure of everybody coming and getting involved in this project from North American at that time." Bristow testified that Lawlor did not provide him with any information regarding companies other than North American.
On February 23, 2005, Bristow and Lawlor sent an e-mail to Todd Van Paris at North American recommending that MapQuest and North American begin final negotiations. Bristow and Lawlor agreed that it was the right time to include senior executives from both MapQuest and North American in the negotiations because the business opportunity was growing. Van Paris responded to Bristow, who then forwarded the response to Lawlor "to keep [her] in the loop." Despite suggestions to the contrary, Bristow testified that he never asked North American to diminish Lawlor's role with respect to the MapQuest business. Bristow testified that he contacted Van Paris because Lawlor's "boilerplate proposal" was not satisfactory for MapQuest, which was looking for a more detailed proposal. Bristow did notice that Lawlor's role was being diminished, but explained that "on such a large scale opportunity, there's a lot of complicated aspects to it, and one person is not skilled enough to do all those facets of the business." Lawlor never recommended, and Bristow never considered, involving Shamrock with the MapQuest business.
MapQuest placed some orders with North American, but they did not close the deal that was the subject of their negotiations.
Bristow testified at some length about an affidavit he signed that was prepared by North American. On that day, distressed and preoccupied with concern for his elderly, ill aunt, whom he was flying to visit later that day in England, he spoke with Perez, who threatened to prevent him from leaving the country if he did not sign an affidavit about the MapQuest deal. Bristow said he was assured that "it was not a big deal" and if he signed the affidavit and was assuaged, the dispute with Lawlor "would go away." The need for the signing was so urgent that Perez made plans to meet Bristow on his way to the airport to fly overseas. They met at the O'Hare Tollway Oasis. Bristow signed the affidavit on the hood of a car and said he did so only because he felt threatened by North American.
The court and jury heard the specifics from the affidavit, including that: (1) on several occasions between December 2004 and February 2005, Lawlor asked him to delay the process of awarding the MapQuest business to North American given the possibility that she might change jobs to Shamrock so that he could award MapQuest's business to Shamrock rather than North American; (2) Lawlor offered to introduce Bristow to someone at Shamrock who would be the "point person" until she began working at Shamrock; (3) Lawlor showed him pictures of the Shamrock facility; (4) MapQuest would be better served by Shamrock on the service side; and (5) he advised Lawlor that it was unethical to be pursuing business for one company while employed at another.
Bristow testified that those statements in the North American drafted affidavit were not true.
Testimony of Todd Van Paris
Van Paris joined North American as a vice president and general manager in September 2001. Van Paris did not know about Lawlor's association with Shamrock until he met with Bristow after Lawlor had left North American. Van Paris was aware that North American had conducted an investigation of Lawlor after she left the company. Van Paris did not know whether North American was investigating Lawlor's phone numbers without her knowledge, but acknowledged receiving faxes of phone numbers from Probe, an investigative firm, that he assumed were Lawlor's. Van Paris did not receive Lawlor's permission to look at her phone logs and did not talk to anyone at Probe about Lawlor's investigation. He claimed to be unaware of anyone at North American, or anyone on its behalf, impersonating Lawlor to get her phone records. Prior to the lawsuit, Van Paris was not aware of how Lawlor's phone records were obtained. Van Paris looked at the numbers to see if any of them looked familiar to him. Van Paris also researched the phone numbers on the internet because he was concerned that Lawlor had been talking to competitors.
Testimony of Patrick Dolan
Dolan was the vice president of operations at North American in 2005. Dolan was the North American liaison with its attorney, Lewis Greenblatt, for the internal investigation of Lawlor and testified as an adverse witness during Lawlor's case-in-chief. Dolan also corresponded with a Mr. DiLuigi from Probe directly, who faxed him Lawlor's phone logs. Dolan provided information about Lawlor to Greenblatt and DiLuigi, including her name, address, social security number, birthday, and her home and mobile phone numbers. Dolan claimed that he did not know what DiLuigi was going to do with this information, but conceded that he was not surprised when he received Lawlor's phone logs. Dolan stated that DiLuigi told him that he typically obtained the phone logs of other persons subject to similar investigations as Lawlor where there was a concern about competition. Dolan researched the phone numbers on the logs through internet searches and consulting with others, such as Van Paris, who might have recognized the numbers.
Dolan signed off on a $15,000 payment to Lewis Greenblatt's law firm for Probe's investigation of Lawlor. North American submitted a second payment to Greenblatt's law firm for the investigation in the amount of $22,994.88. When questioned why he did not ask how Probe obtained Lawlor's phone records, Dolan testified that he "relied on Mr. Greenblatt and Mr. DiLuigi in performing the procedures in the investigation."
On examination by North American's lawyer, Dolan testified that he never instructed Greenblatt how to conduct the investigation and that North American never paid Probe directly for any of the investigative work.
On recross-examination, Dolan testified that despite receiving at least five faxes from DiLuigi with telephone numbers, he never asked how or why the records were obtained and never instructed DiLuigi to stop sending them.
Testimony of Albert DiLuigi
Albert DiLuigi was the president and sole employee of Probe International, a local detective agency. He started this agency after serving roughly three years as a policeman.
DiLuigi testified that his company was hired by an attorney representing North American. DiLuigi understood that he was hired to conduct an investigation to learn if Lawlor was taking any business from North American. He testified that Dolan directed him to obtain Lawlor's telephone records. It was not Probe's first ...