USDOL/OALJ Reporter: ARB Decision Caselist - June 2011

The ARB affirmed the ALJ's conclusions that the Respondent terminated the Complainant's employment as a result of her demand for the Respondent to recognize an ailment that resulted directly from a violation of a federal commercial motor vehicle safety standard (fiberglass particles and dust entering the cab from the engine), and that even considering the Complainant's objectionable behavior at a meeting to discuss her health complaints, the Respondent failed to show that it would have taken the same adverse action absent the Complainant's protected activity.

The instant appeal had been held in abeyance pending resolution of five prior appeals involving the same parties. Following dismissal of the five prior appeals, the ARB issued an order directing the Complainant to submit a sworn affirmation that sufficiently explains how his petition for review in this case and the underlying complaint are not essentially a relitigation of his previous claims brought against the Respondent. The Complainant did not respond to the ARB's order, and the ARB dismissed the appeal.

PROTECTED ACTIVITY; REMAND BASED ON SYLVESTER ; FACT THAT EMPLOYER ALREADY KNEW ABOUT PROBLEMS REPORTED BY COMPLAINANT DOES NOT CAUSE THE REPORT NOT TO BE PROTECTED UNDER SOX SECTION 806

In Inman v. Fannie Mae , ARB No. 08-060, ALJ No. 2007-SOX-47 (ARB June 28, 2011), problems with Fannie Mae's amortization integration modeling system (AIMS) were identified by an oversight agency as the cause of internal control weaknesses. Fannie Mae and the oversight agency agreed to eliminate AIMS and restate certain accounting information on a new accounting system. Fannie Mae announced to the public that its financial statements and auditor's reports from January 2001 through the second quarter of 2004 could not be relied upon. Subsequently the Complainant was hired as a Senior Manager to develop an updated accounting and reporting process. During the Complainant's employment, AIMS was still used to close out Fannie Mae's books. The Complainant reported what he believed to be AIMS errors to management -- including a $52.4 million expense overstatement and a $2.6 billion anomalous income result -- and recommended that a White Paper on the problem be revised. The Complainant was given an unfavorable performance review and was later discharged. His SOX complaint was dismissed on summary decision by the presiding ALJ, who applied the "definitive and specific" standard for protected activity that had been articulated in ARB decisions. The ALJ also dismissed the complaint because it had not specified that the events reported by the Complainant constituted evidence of fraud. The ARB found that the ALJ's grant of summary decision was error based on its recent decision in Sylvester v. Paraxel Int'l , ARB No. 07-123, ALJ Nos. 2007-SOX-39, -42 (ARB May 25, 2011) (en banc). In Sylvester , the ARB rejected the "definitive and specific" standard, finding that it was in potential conflict with the express statutory authority of section 1514A. The ARB also explained in Sylvester that an allegation of fraud is not a necessary component of protected activity under Section 806 of the SOX. The ARB found that the ALJ erred in concluding that the complaint was deficient because the Complainant had not informed the Respondent that its actions could adversely affect the investing public. The ALJ also erred, the ARB stated, when he appeared to indicate that the Complainant could not prevail because the Respondent was already aware of the concerns he was raising. The ARB stated that "neither the SOX nor its implementing regulations indicate that an employee does not engage in protected activity when he informs his employer about violations of which the employer is already aware." The ARB remanded the case to the ALJ for further proceedings.

While the appeal was pending before the Board, the Respondent's former counsel informed the ARB that the Respondent had ceased operations and completed the necessary administrative steps to conclude its business. The ARB issued an order to show cause why the appeal should not be dismissed, and when the Complainant's response failed to address the Respondent's status or to provide the ARB with a reason to continue his appeal against the Respondent, the ARB dismissed the appeal. Thereafter, the Complainant filed a motion for reconsideration arguing that the Respondent had not complied with the dissolution requirements under state law. The ARB reviewed the former counsel's earlier notice and determined that it did not contain an express representation about "dissolution." The ARB found that the motion for reconsideration demonstrated a sufficient question about the Respondent's corporate status to merit reinstating the appeal.

COVERED EMPLOYER; UNDER JOHNSON , ALJ MUST DETERMINE WHETHER NON-PUBLICLY TRADED RESPONDENT IS INCLUDED ON THE CONSOLIDATED FINANCIAL STATEMENTS OF A PUBLICLY TRADED PARENT COMPANY

In Mara v. Sempra Energy Trading, LLC , ARB No. 10-051, ALJ No. 2009-SOX-18 (ARB June 28, 2011), the ALJ granted summary decision dismissing the complaint based on the finding that the Respondent was not a covered employer under SOX because it was not a publicly-traded company and did not act as an agent on employment matters for either of its parent companies. The ARB reversed the grant of summary decision based on its recent decision in Johnson v. Siemens Bldg Techs., Inc. , ARB No. 08-032, ALJ No. 2005-SOX-015 (Mar. 31, 2011), in which it determined that Section 929A of the 2010 Dodd-Frank Act, which extended SOX coverage to "subsidiary or affiliate [companies] whose financial information is included in the consolidated financial statements of such company," was a "clarification" of the original Section 806's term "company." Because the ALJ did not make findings on whether the Respondent appears on the consolidated financial statements of its publicly traded parent companies, the ARB remanded for the ALJ to make findings on whether the Respondent is a "subsidiary or affiliate" company within the meaning of SOX.

PROTECTED ACTIVITY; ALJ FINDING THAT MERELY RAISING ACCOUNTING IRREGULARITIES IS NOT PROTECTED ACTIVITY BASED ON "DEFINITIVELY AND SPECIFICALLY" STANDARD LEADS TO REMAND BASED ON SYLVESTER

In Mara v. Sempra Energy Trading, LLC , ARB No. 10-051, ALJ No. 2009-SOX-18 (ARB June 28, 2011), the ALJ employed the standard that, for an employee's activity to be protected, it "must relate �definitively and specifically' to the subject matter of the particular statute under which protection is afforded." The ALJ found that the Complainant's raising of accounting irregularities was not sufficient in itself to establish protected activity under SOX. The ARB remanded based on its recent decision in Sylvester v. Paraxel Int'l , ARB No. 07-123, ALJ Nos. 2007-SOX-039, -042, slip op. at 17 (ARB May 25, 2011) (en banc), in which the ARB rejected the "definitive and specific" standard.

[Nuclear and Environmental Whistleblower Digest XII D 13]
PROTECTED ACTIVITY; TEMPORAL PROXIMITY; IN FAILURE TO REHIRE CASE, PROTECTED ACTIVITY SHOULD VIEWED AS CONTINUING DURING LITIGATION OF ORIGINAL WHISTLEBLOWER COMPLAINT

In Bobreski v. J. Givoo Consultants, Inc. , ARB No. 09-057, ALJ No. 2008-ERA-3 (ARB June 24, 2011), the Complainant had been terminated by the Respondent from employment in 1999 shortly after the Complainant reported some safety concerns. The Complainant filed a whistleblower claim in 1999 against the Respondent's contractor (District of Columbia Water and Sewer Authority or "WASA"). The Complainant obtained a liability verdict in July 2005 against WASA, which was still contracting with the Respondent in 2006. The remedies portion of the case was not resolved until September 2006.

eanwhile, in early 2006, the Complainant - who was well qualified - applied for a temporary job opening with the Respondent, but was not selected. The Complainant filed the instant whistleblower complaint. The ALJ found a lack of a causal link between protected activity and the decision not to hire him. On appeal, the ARB found that the ALJ erred by too narrowly defining the protected activity as the discrete disclosures that had occurred in 1999, causing the ALJ to view the temporal proximity as a seven-year gap. The ARB found that the failure to hire fell in between the ALJ's liability ruling in the WASA claim and the settlement of that case in 2006. The ARB stated in a footnote that filing of, and litigation of, a whistleblower complaint before DOL is itself protected activity. The ARB noted that the Respondent had a long term contract with WASA, and that the Respondent had been implicitly involved with the ALJ's attempt to sort out remedies for the Complainant's earlier whistleblower complaint against WASA.

[Nuclear and Environmental Whistleblower Digest XI A 2 b i]
CAUSATION; IN CIRCUMSTANTIAL EVIDENCE CASE, ALJ MUST CONSIDER THE RECORD AS A WHOLE, INCLUDING EVIDENCE OF PRETEXT

In Bobreski v. J. Givoo Consultants, Inc. , ARB No. 09-057, ALJ No. 2008-ERA-3 (ARB June 24, 2011), the ARB described how an ALJ must consider the record as a whole, and not just view the evidence in fragments, when deciding the issue of causation:

    When the employee presents a case based on indirect or circumstantial evidence, as in this case, each piece of evidence should be examined with all the other evidence to determine if it supports or detracts from the employee's claim that his protected activity was a contributing factor. Circumstantial evidence may include a wide variety of evidence, such as motive, bias, work pressures, past and current relationships of the involved parties, animus, temporal proximity, pretext, shifting explanations, and material changes in employer practices, among other types of evidence. Logically, as was done in this case, the ALJ may examine each piece of circumstantial evidence to determine how substantial it is. Then the ALJ must weigh the circumstantial evidence as a whole to properly gauge the context of the adverse action in question. Taken as a whole, the evidence may demonstrate that at least one individual among multiple decision-makers influenced the final decision and acted at least partly because of the employee's protected activity. Conversely, the evidence as a whole may demonstrate that none of the decision-makers knew about the employee's protected activity and thereby break the causation chain between the protected activity and the final adverse action.

    Permanently fragmenting circumstantial evidence can distort the greater context. For example, terminating an employee's employment for being late to work obviously could be a valid employment decision considered alone. It becomes suspicious when other employees committed the same infraction and were not fired. The same termination becomes even more suspicious if it followed days after the affected employee disclosed corporate fraud. Suspicion will increase even further if the company had not applied the punctuality rule in years. With the introduction of each piece of circumstantial evidence, the focus remains on the proverbial preponderance gauge to see which way it ultimately moves, toward or away from a conclusion of discrimination. The ultimate conclusion could be wrong if the ALJ either mischaracterizes each piece of evidence or fails to ultimately view them as a whole on the same scale. In the end, the ALJ must look at all of the circumstantial evidence as a whole.

USDOL/OALJ Reporter at 13-14 (footnote omitted). The ARB added that evidence of pretext should also be considered in conjunction with evidence of temporary proximity and circumstantial evidence of causation:

    In addition to or in conjunction with temporal proximity evidence and other circumstantial evidence in this case, an employee can prove or buttress a whistleblower claim by proving that the employer's proffered reasons were pretextual (not credible). When the proffered reasons for the adverse action are proven to be false, this evidence coupled with the complainant's evidence that he was qualified, applied, and was rejected suspiciously for the job in question may permit the trier of fact to find discrimination. Pretext can be demonstrated in many ways. One way is by demonstrating that the proffered reasons were conspicuously missing from previous documentation. Shifting explanations could also constitute evidence of pretext. Vague and subjective reasons about personality issues may also suggest that the employer's reasons are pretextual or in reality complaints about whistleblowing. In the end, all pretext evidence should be weighed with all of the circumstantial evidence to determine the issue of causation after an evidentiary hearing.

USDOL/OALJ Reporter at 18-19 (footnotes omitted).

[STAA Whistleblower Digest VII A 2 d]
COVERED EMPLOYEE; STATE EMPLOYEE; WHETHER A UNIVERSITY IS AN ARM OF THE "STATE" IS A LEGAL ISSUE THAT CANNOT BE DECIDED BY THE ADMISSION OR STIPULATION OF THE PARTIES

In Lewis v. Virginia Commonwealth University Police Dept. , ARB No. 10-008, ALJ No. 2009-STA-39 (ARB June 16, 2011), the ALJ granted summary decision on the ground that the STAA excludes state employees from coverage. On appeal, the ARB found that it was undisputed that the Complainant was an employee of Virginia Commonwealth University (VCU). The ARB found, however, that whether VCU is a "state" under the STAA is a legal issue that cannot be decided by the admission or stipulation of the parties. The ARB thus looked to caselaw and the Virginia code to determine that VCU is an arm of the state, and thus agreed with the ALJ's grant of summary decision.

COVERED EMPLOYERS; CONSOLIDATED SUBSIDIARIES OF PUBLICLY TRADED PARENT COMPANY

In Merten v. Berkshire Hathaway, Inc. , ARB No. 09-025, ALJ No. 2008-SOX-40 (ARB June 16, 2011), the ALJ granted the Respondents' motion to dismiss finding that the Complainant did not set forth facts in his complaint that supported a finding that a non-publicly traded subsidiary was an agent of the publicly traded parent company for purposes of employee protection under Section 806 or, therefore, that the Respondents were employers subject to the SOX. The ALJ relied on the ARB's analysis in Klopfenstein v. PCC Flow Tech. Holdings, Inc. , ARB No. 04-149, ALJ No. 2004-SOX-11 (ARB May 31, 2006) , holding that a subsidiary acting as the agent of a publicly traded company with respect to the challenged employment decision can be held liable under Section 806, and the the "integrated enterprise test" for determining whether a parent company is responsible for the activity of its subsidiary as set forth in Pearson v. Component Tech. Corp. , 247 F.3d 471, 485 (3d Cir. 2001). The ARB vacated the ALJ's decision, and remanded for the ALJ to address the subsidiary's status as a consolidated entity of the parent company consistent with the Board's more recent holding in Johnson v. Siemens Bldg. Tech., Inc. , ARB No. 08-032, ALJ No. 2005-SOX-15 (ARB Mar. 31, 2011), and if so, to determine the issue of liability under the facts presented at hearing. In Johnson , the ARB held that Section 806 of the SOX applied to consolidated subsidiaries, even before enactment of Section 929A of the Dodd-Frank Act.

AMENDMENT OF COMPLAINT SHOULD BE FREELY PERMITTED BY ALJ; FRCP 12 MOTIONS CHALLENGING THE SUFFICIENCY OF PLEADINGS ARE HIGHLY DISFAVORED UNDER THE SOX REGULATIONS

In Merten v. Berkshire Hathaway, Inc. , ARB No. 09-025, ALJ No. 2008-SOX-40 (ARB June 16, 2011), the Complainant contended on appeal that the ALJ erred in denying his request to amend his complaint by adding two individuals as parties and to supplement his complaint with nine additional alleged adverse personnel actions. The ARB directed that, on remand, the ALJ "should freely grant parties the opportunity to amend their initial filings to provide more information about their complaint prior to consideration of summary dismissal, and dismissals should be a last resort." The ARB noted its holding in Sylvester v. Parexel Int'l LLC , ARB No. 07-123, ALJ Nos. 2007-SOX-39-42 (ARB May 25, 2011), that FRCP 12 motions challenging the sufficiency of the pleadings are highly disfavored by the SOX regulations. The ARB stated that the Complainant's complaint instead requires further analysis pursuant to ALJ Rule 18.40 or an evidentiary hearing on the merits

[Nuclear and Environmental Whistleblower Digest XVIII A 1]
WITHDRAWAL OF COMPLAINT; ALJ PROPERLY TREATS A MOTION TO WITHDRAW THE COMPLAINT AS A MOTION TO WITHDRAW OBJECTIONS TO THE OSHA FINDINGS

In Saporito Energy Consultants, Inc. v. U.S. Nuclear Regulatory Commission , ARB No. 10-083, ALJ No. 2009-ERA-16 (ARB June 16, 2011), the Complainant filed a motion with the ALJ seeking to withdraw the complaint in accordance with FRCP 41. The ALJ construed the motion as withdrawal of objections to the OSHA findings under 29 C.F.R. § 24.111(c), and dismissed the complaint with prejudice. The Complainant appealed arguing that it was error to dismiss the complaint with prejudice. The ARB first observed that as a practical matter, it did not matter whether the dismissal was issued with or without prejudice because once the 30 day period for requesting a hearing on the OSHA findings has expired. the OSHA decision becomes final. Second, the ARB noted that Rule 41 had been applied prior to amendment of the Part 24 regulations in 2007, but that the regulation as amended and in effect at the time the instant complaint was filed, provides only two options for a party to terminate a case pending with an ALJ prior to final adjudication -- withdrawal of objections to OSHA's findings or order by filing a written withdrawal with the ALJ -- or an adjudicatory settlement. Thus, the ARB found that it was a proper exercise of the ALJ's discretion to treat the request to withdraw the complaint as a withdrawal of objections to the OSHA findings.

ATTORNEY FEES; COMPLAINANT MUST FILE REQUEST FOR ATTORNEY'S FEES FOR WORK BEFORE THE ALJ WITH THE ALJ RATHER THAN THE ARB; THE ARB DISFAVORS BIFURCATED APPEALS OF ATTORNEY'S FEE AWARDS

In Clemmons v. Ameristar Airways, Inc. , ARB No. 08-067, ALJ No. 2004-AIR-11 (ARB June 7, 2011), following a remand, the ALJ affirmed his earlier decision in favor of the Complainant and reaffirmed his earlier attorney fees and costs award. On appeal, the ARB affirmed the ALJ's decision on remand on the merits with certain modifications to a back pay award, permitted the Complainant's attorney to file a petition for fees and costs for legal services before the ARB, and denied a request to remand for the ALJ to consider fees and expenses before the ALJ for the reason that the attorney must file a petition for such fees and expenses with the ALJ. The attorney nonetheless requested in his petition to the ARB for attorney's fees an award of fees for 13 hours of work before the ALJ on the earlier remand. The ARB again instructed the attorney to apply to the ALJ for any legal fees for services performed before the ALJ. The attorney requested reconsideration of this ruling. The ARB denied the request for reconsideration stating that it "does not wish to consider bifurcated appeals of an ALJ's fee awards, and that the proper course for Clemmons's attorney is to wrap his request for 13 hours of legal fees on remand into his original request, thereby affording Ameristar the opportunity to challenge the entire amount of the fee request before the ALJ at one time and, depending on the results of the ALJ's consideration of the entirety of the award, affording both parties the opportunity to challenge that decision on appeal to the ARB."