Appellate Division Holds Jury-Waiver Did Not Encompass CEPA Claim and Narrowly Interprets Employer’s Right to Recover Attorney’s Fees under CEPA

April 6, 2017

Francine Foner, Esq.

Ty Hyderally, Esq.

New Jersey has a strong whistleblowing statute, the Conscientious Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -14, which is intended to provide relief for whistleblowers who experience retaliation by their employers for engaging in whistleblowing activity.  One important remedy available to employees who prevail under CEPA is the right to payment by the employer of the employee’s reasonable attorney’s fees and costs. N.J.S.A. 34:19-5. However, in limited circumstances, an employer can recover reasonable attorney’s fees and costs from an employee incurred in defending the employee’s CEPA claim,  “if the court determines that an action brought by an employee under this act was without basis in law or in fact.” N.J.S.A. 34:19-6. The New Jersey Appellate Division recently confirmed in a published decision that finding that a CEPA claim is “without basis in law or fact” only in the rarest of cases.  Noren v. Heartland Payment Sys., 2017 N.J. Super. LEXIS 12 (App.Div. Feb. 6, 2017).

Greg Noren (“Noren”) worked for Heartland Payment Systems (“HPS”) from April 1998 until his termination in June 2005. Noren filed a CEPA claim and breach of contract claim against HPS. After a twenty-two-day bench trial, the Court found that Noren had failed to prove either claim and dismissed his complaint. The Court further awarded HPS $2,059,206.53 in fees and costs.

Noren appealed the trial court’s dismissal of his CEPA claim and award to HPS of its attorney’s fees and costs attributable to defending the CEPA claim upon the grounds that: (1) Noren was entitled to a jury trial on the CEPA claim since his employment agreement did not contain a clear and unambiguous waiver of his constitutional right to a jury trial on his CEPA claim; and (2) HPS was not a prevailing party entitled to attorney’s fees in defending the CEPA claim because the trial court did not find that Noren’s CEPA claim was “without basis in law or in fact.”  N.J.S.A. 34:19-6.

The Appellate Division agreed with Noren on both points. The Court held that the language in Noren’s employment agreement waiving a right to a jury trial was not broad enough to encompass statutory and constitutional claims, including CEPA claims. This was because the jury-waiver provision in the employment agreement was limited to “any suit, action or proceeding under, in connection with or to enforce this Agreement.” Id. at *8.  The Appellate Division further observed that “[the jury-waiver provision] made no reference to statutory claims and did not define the scope of claims as including all claims relating to Noren’s employment.” Id. Thus, the Appellate Division held that Noren was entitled to a jury trial on his CEPA claim and therefore reversed the trial court’s judgment dismissing Noren’s CEPA claim and remanded that claim for a jury trial.

In addition, despite that the Appellate Division acknowledged that it gives great deference to a trial court’s fee determination, it opined that in this case remand to the trial court was warranted on the fee determination. The Appellate Division observed that the trial court failed to apply the appropriate standard to determine whether the employer was a prevailing party entitled to its fees under N.J.S.A. 34:19-6. Rather than applying the proper standard of whether the CEPA claim was “without any basis in law or fact,” the trial court improperly utilized a standard of whether Noren’s CEPA claim was “not viable.” The Appellate Division opined that such “not viable” standard was far broader than that authorized by CEPA, which provides for a narrower “without any basis in law or fact” provision. N.J.S.A. 34:19-6. The Appellate Division explained that “this provision applies only to “a narrow band of cases” in which “the employer must be vindicated and the employee must have proceeded without basis in law or in fact. . . .” Id. at *9, citing Best v. C&M Door Controls, Inc., 200 N.J. 348, 358 (2009). The Appellate Division further compared this standard to the standard for a “frivolous pleading” under R. 1:4-8 of “no rational argument can be advanced in its support, or it is not supported by any credible evidence, or it is completely untenable.” Id.  The Court further found that since Noren’s CEPA claim had survived summary judgment, any finding that it was “without basis” was precluded. Id. at *8. Thus, the Appellate Division remanded the fee determination to the trial court to fashion a fee award for only those reasonable attorney’s fees and costs in incurred in defense of Noren’s breach of contract claim.

This holding should provide some comfort to whistleblowers, as it essentially holds that absent filing a frivolous CEPA claim, a plaintiff should not be liable to pay an employer for its attorney’s fees and costs.

The above blog post was written over one year ago. The information in this blog post may not be current due to changes in the law or recent case decisions. We encourage you to contact our firm, at 973-509-8500, for information on this particular post and to make sure the content is still current.

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