Anheuser-Busch InBev’s lawsuit against a former operations director turned lawyer turned whistle blower illustrates many of the special challenges in a whistle blower trade secret case.  The former employee, James Clark, claims that AB InBev has watered down its beer and he has garnered generally favorable media treatment this week by filing a motion to dismiss the case against him under California’s whistle blower statute.  (Full disclosure:  I represented Anheuser-Busch in a litigation about 10 years ago).
According to Bloomberg, AB InBev sued Clark, a former director of operations support, one week after the company was accused of overstating the alcohol content in several of its beers. Clark worked at Anheuser-Busch from 1998 until June, when he resigned to become (gasp) a lawyer.  Clark held several quality-assurance positions before rising to director of operations support.

Consumers have filed at least eight lawsuits accusing AB InBev of adding water to beers including Bud Ice, Budweiser, Busch Ice and Michelob.  AB InBev asserts Clark has improperly divulged or misrepresented confidential information to the lawyers for those plaintiffs.  In February, Clark apparently refused AB InBev’s demand that he testify under oath about whether he had divulged any confidential information in connection with those lawsuits.

The Streisand Effect:  Clark has not hesitated to seize the bully pulpit.  In moving to dismiss the case because he believes California law bars using strategic lawsuits against public participation (SLAPP) as a means of intimidation, Clark argues that the lawsuit is intended to silence and punish him for standing up for consumers.  (PDF copies of the Complaint and Motion to Strike can be found below). 

AB InBev’s lawsuit did not generate much publicity when it was filed on March 1, 2013.  In contrast, Clark’s claims and motion have generated a fair amount of media coverage since their filing on March 29, 2013.  In this respect, AB InBev’s case, like many cases against self-styled whistle blowers, may have led to the dreaded Streisand Effect — that in attempting to fight unwanted or unfavorable publicity, a company ends up unintentionally creating even more media attention.

The Collision Between The First Amendment and Trade Secret Law:  I have written before about the special challenges of prosecuting a trade secrets case against the whistle blower.  There is a long tradition in our country generally supportive of whistle blowers.  Think Ida Tarbell and Standard Oil, Upton Sinclair and the meat packing industry, Ralph Nader and the Corvair, Daniel Ellsberg and the Pentagon Papers — the list goes on and on.  Courts are not immune to the romance of the narrative of the heroic employee trying to protect the public and reveal the alleged misdeeds of his former employer.

Not surprisingly, former employees making these claims can effectively cloak themselves within the protections of the First Amendment and federal courts in particular have been receptive to that defense, especially in areas of public health and safety.  While states such as California and Ohio may allow trade secret protection to trump First Amendment concerns in certain situations, federal courts have generally found that such efforts to squelch this speech qualify as a forbidden prior restraint.   (For more on this issue, see my earlier post on the Julius Baer v. WikiLeaks case).

The Takeaway:  Suing a whistle blower is always a high-wire act.  Unfavorable media attention and the thicket presented by the First Amendment are frequently a part of the fabric of these disputes.  A trade secret claimant needs to tread carefully and have a thick skin. 

I will continue to monitor the case and provide an update when the court rules on Clark’s Motion to Strike.

AB Complaint (2).pdf (720.10 kb)

Clark Motion to Dismiss.pdf (1.21 mb)