Trade Secrets Meets Whistleblower Law

Something for employees to consider about bringing a whistleblower case against your employer. A case from Alabama highlights this problem. What makes the case particularly poignant is that the basis for the fraud claim comes out of Hurricane Katrina.

From The Sunhearld.com comes Trial will tell what Rigsbys may owe:

Two former insurance adjusters for State Farm will stand trial before a federal judge who earlier this week determined they breached employment contracts when they copied thousands of insurance records in an attempt to prove policyholders were being cheated after Hurricane Katrina.

The two, Ocean Springs sisters Cori and Kerri Rigsby, adjusted State Farm claims for their employer, independent adjusting firm E.A. Renfroe of Alabama. Renfroe sued them in 2006, alleging breach of contract and violation of the Alabama Trade Secrets Act.

U.S. District Judge William M. Acker Jr. dismissed the trade secrets claim, saying Renfroe failed to prove the documents taken by the Rigsbys involved trade secrets because claims adjustment is fairly standard in the industry, Renfroe did not own the documents and the Alabama act does not apply in Mississippi.

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The Mississippi Insurance Department has concluded in an examination of State Farm released earlier this week that the documents contained no "smoking guns" pointing to fraud.

The Rigsby continue to pursue a whistle-blower lawsuit filed in Mississippi's Southern District against State Farm, Renfroe and other insurance vendors. They claim in the federal False Claims Act case that State Farm used biased experts to overcharge the National Flood Insurance Program for Katrina's water damage so the company could minimize payments for wind damage.

The Rigsbys would share in any proceeds recovered in the lawsuit. State Farm admits mistakes were made during claims adjustments after the massive disaster but has denied any intentional wrongdoing.

Oh, remember the Rigsbys? provides a link to the Alabama decision, but Slabbed has the more interesting post for my purposes:

If there is a screaming lesson for our readers here, it would be that if you see your employer breaking the law or defrauding the government it would LOOK THE OTHER WAY AND SAY NOTHING. It is very clear form the government’s actions here the Feds do not want to know if big business is stealing from them.

Two thoughts for whistleblowers: 1) employers can sue if you violate laws while trying to get the material to support your whistleblower case, and 2) you take the chance that you will recover enough from the whistleblower suit to offset any losses from the employer's lawsuit.

(I had not seen anything on this case till last week. Doing a simple Google search for "Rigsby sisters" turns up a lot of material on the case. I might come to the case itself in more detail when the press of business slackens).