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Judge Dismisses Retaliatory Lawsuit Brought Against SEC Whistleblower

On Monday, March 8, 2021, U.S. District Judge J. Philip Calabrese dismissed a lawsuit brought by FirstEnergy Corp. and Clearsulting LLC against a former employee, Michael Pircio. FirstEnergy and Clearsulting sued Mr. Pircio after he provided incriminating documents to the U.S. Securities and Exchange Commission (“SEC”) revealing what he believed to be securities law violations. Judge Calabrese ruled that there was no merit to the federal claims against the whistleblower, Mr. Pircio.

Mr. Pircio was working as a senior analyst for Clearsulting, an auditing firm, when he came across information in a 2019 audit of FirstEnergy that the company may have violated one or more federal laws. In July 2020, Mr. Pircio, through his attorneys, shared incriminating FirstEnergy documents with the SEC.  Those revelations appeared to be securities law violations related to racketeering in connection with a $1.3 billion bailout of two nuclear power plants once owned by a FirstEnergy affiliate.

After Mr. Pircio reported wrongdoing to the SEC, FirstEnergy and Clearsulting promptly filed a lawsuit against Mr. Pircio in September 2020. In the suit, the companies alleged  he violated the Defend Trade Secrets Act, Ohio’s Uniform Trade Secret Act, and the Computer Fraud and Abuse Act by downloading and sharing confidential records that were unrelated to his work. They also alleged that Mr. Pircio breached the confidentiality obligations that were laid out in his employment contract that he signed when he began working for Clearsulting during the prior year.  (Clearsulting had terminated Mr. Pircio two months earlier for accessing and downloading client information without authorization). Mr. Pircio subsequently filed a countersuit alleging that the lawsuit against him amounted to whistleblower retaliation, and further that it violated his rights to confidentiality by revealing his identity as an SEC whistleblower.

In the Court’s opinion dismissing FirstEnergy and Clearsulting’s lawsuit, the Court found that the company’s claims of federal law violations do not apply to the conduct allegedly at issue because Mr. Pircio reasonably believed his employers were violating federal law. Judge Calabrese writes, “…[T]he Defend Trade Secrets Act affords Mr. Pircio immunity against civil liability for Plaintiffs’ claims in Count IV (for misappropriation of trade secrets under the Defend Trade Secrets Act) and Count V (brought under Ohio’s Uniform Trade Secret Act) …Mr. Pircio only disclosed the trade secrets at issue to his attorneys and did so to report suspected violations of federal laws.” Such disclosures are protected by the Dodd-Frank Act.

Similarly, Judge Calabrese rejected the company’s claim that Mr. Pircio violated the Computer Fraud and Abuse Act by accessing Clearsulting’s network after his termination to download documents. The Computer Fraud and Abuse Act’s language specifically outlaws “hacking” into a computer network to access information. “To the contrary,” Judge Calabrese states, “the complaint alleges that Mr. Pircio used authorizations he had and exceeded their scope to take data and use it for unauthorized purposes…Against the backdrop of the Sixth Circuit’s interpretation of the Computer Fraud and Abuse Act, the complaint notably contains no allegation—directly or by inference—that Mr. Pircio hacked into the network….” 

Lastly, Judge Calabrese ordered that the Plaintiffs cannot assert a claim for breach of contract to the extent Mr. Pircio engaged in protected activity, such as whistleblowing. Because Mr. Pircio’s employment contract incorporates the aforementioned federal laws, “Clearsulting may only pursue a breach of contract claim to the extent a claimed breach falls outside these areas of federal law and rests on conduct these statutes do not cover—a determination that remained to be made.”

This opinion further cements protections for whistleblowers against retaliation. The whistleblower lawyers at Correia & Puth, PLLC are committed to ensuring that employees are protected when they take a stand for workplace safety, speak up about their employer’s unlawful behavior, and hold employers accountable for wrongdoing.  Correia & Puth vigorously advocates on behalf of workplace whistleblowers. If you are aware of wrongful workplace conduct, or if you fear or have experienced workplace retaliation because of your reports, please contact us right away.

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