$1.8 Million Verdict in Pretexting Case

Written by Cynthia and Michael

A Cook County, Illinois jury recently awarded $1.8 million dollars to Kathy Lawlor, who claimed that her former employer, North American Corp. of Illinois, violated her privacy rights by hiring a private investigator who fraudulently obtained her telephone records through the use of “pretexting” – or by pretending to be Lawlor herself. Some of you might be familiar with the concept of pretexting from the Hewlett Packard scandal in 2006 where HP’s Chairwoman directed independent security experts to investigate the source of an information leak. The security experts obtained the personal phone records of journalists and HP board members by pretexting – or by pretending to be them - and it ultimately allowed HP to determine the source of leak. HP’s efforts caused an uproar, including leading to criminal charges, a congressional investigation and the passage state and federal laws prohibiting pretexting.


In the summer of 2005, prior to the HP scandal, North American terminated Ms. Lawlor’s employment because she would not agree to modify her salesperson commission agreement prior to landing the biggest account of her career. As a result, Ms. Lawlor sued North American seeking to recover certain commissions and for a judgment to lift her non-compete agreement. Ms. Lawlor did not know that at the time she sued North American, it had decided to hire a private investigator to investigate whether Ms. Lawlor’s was stealing its confidential information and clients, and that it had provided certain personal information about Ms. Lawlor to the private investigator, including her Social Security number and phone numbers. During its investigation, in addition to stationing individuals outside Ms. Lawlor’s home, the private investigator arranged for a third party vendor to obtain Ms. Lawlor’s personal phone records by pretexting. When Ms. Lawlor later discovered that North American was investigating her activities she added a claim for invasion of privacy to her lawsuit.


At trial, North American denied that it knew that its private investigator had engaged in pretexting, but the jury was unsympathetic and awarded Ms. Lawlor $1.8 million, most of it coming in the form of punitive damages. North American is contesting the jury’s decision, and the parties continue to litigate North American’s claim that Ms. Lawlor misappropriated its trade secrets, but this case should serve as a warning to employers considering whether and how to conduct investigations of their employees. The North American case confirms that any time an employer conducts an investigation into an employee’s activities it runs the risk of violating that employee’s rights and a resulting lawsuit. Employers must takes steps to ensure that any investigation, whether it be conducted internally or through the use of third party investigators, do not utilize unlawful or other inappropriate methods, including the use of pretexting, which is now prohibited by state and federal law.