Sarbanes-Oxley Act (SOX)
Whistleblower Digest
PROCEDURE BEFORE THE OFFICE OF ADMINISTRATIVE LAW JUDGES (OALJ)
[Last Updated May 9, 2013]

Table of Contents

Amendment of Complaint

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ADMINISTRATIVE REVIEW BOARD DECISIONS

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

FILING OF COMPLAINT; ALJ MAY LIMIT CONSIDERATION OF ADVERSE ACTIONS TO THOSE STATED IN THE OSHA COMPLAINT AND OBJECTIONS TO THE OSHA RULING WHERE THE COMPLAINANT FAILED TO FILE A FORMAL COMPLAINT AS ORDERED BY THE ALJ

In Brookman v. Levi Strauss & Co. , ARB No. 07-074, ALJ No. 2006-SOX-36 (ALJ July 23, 2008), the ALJ ordered the Complainant to file a complaint specifically identifying the alleged protected activities and adverse actions supporting his case. The Employer filed a motion to dismiss based on the Complainant's failure to comply. By that time the Complainant was no longer represented by counsel, so the ALJ denied the motion to dismiss, but restricted the hearing to the allegations contained in the OSHA complaint and the Complainant's subsequent objections to the OSHA findings. On appeal, the Complainant alleged that a meeting he had with an attorney for the Respondent was an interrogation, and an adverse action under SOX. This meeting was not identified as adverse action in the original OSHA complaint or in the Complainant's objections to the OSHA finding. The ARB found that the "interrogation" was not adverse action given the ALJ's proper limitation of the actions to be considered as a result of the Complainant's failure to file a formal complaint as directed by the ALJ. The ARB found that the ALJ acted properly in not addressing the meeting in his recommended decision.

ADMINISTRATIVE LAW JUDGE DECISIONS

AMENDED COMPLAINT; WHETHER AN ANSWER IS REQUIRED

In Gonzalez v. Colonial Bank , 2004-SOX-39 (ALJ Sept. 14, 2004), the ALJ ruled that the Respondent was not required to file an answer to the Complainant's amendment of his complaint. The ALJ noted that under the Part 1980 rules, the complaint initiates an investigation by OSHA; it is not the type of complaint that initiates a judicial proceeding.

[Editor's note: For rulings on the standards for the amendment of complaints to add a publicly traded company as a respondent, see the "Covered Employer" section of this Digest]

AMENDMENT OF COMPLAINT; MISTAKE IN FAILING TO NAME PARENT CORPORATION

In Gonzalez v. Colonial Bank , 2004-SOX-39 (ALJ Aug. 17, 2004), the Complainant moved to amend his complaint before the ALJ to include as a Respondent the publicly held parent company of his employer. Applying the Secretary's holding in an STAA case, Wilson v. Bolin Associates, Inc. , 1991-STA-4 (Sec'y Dec. 30, 1991), the ALJ permitted the amendment under 29 C.F.R. § 18.5(e) and FRCP 15(c). The named Respondent did not dispute that it had received notice of the claim when originally filed or that the claim arose out of the same transaction described in the original complaint, but argued that Rule 15(c) did not apply because the failure to name it as a Respondent from the beginning was not based on a "mistake." Respondent contended that a "mistake" under Rule 15(c) permits a relation back only when a complainant had named the "correct defendant by the wrong name or other cases of genuinely mistaken identity." Slip op. at 3, quoting Respondent's opposition brief. The ALJ rejected this contention, finding that the relevant "mistake" is not one of identity, but of a mistake in identifying the responsible party. The ALJ, therefore permitted the amendment of the complaint, where the Complainant had alleged that the parent company was responsible for his employment at the employer and had responsibility for his termination. The ALJ also found that it was undisputed that there was a shared management and function between the parent and the subsidiary.

[Editor's note: the Complainant's amendment of his complaint to include the publicly traded parent corporation enabled him to withstand his employer's motion for summary decision on the ground that it was not a publicly traded company. See Gonzalez v. Colonial Bank , 2004-SOX-39 (ALJ Aug. 20, 2004).]

ALJ Authority to Control Hearing

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ADMINISTRATIVE REVIEW BOARD DECISIONS

ALJ'S DISCRETION TO DISMISS FOR FAILURE TO PROSECUTE

In Prioleau v. Sikorsky Aircraft Corp. , ARB No. 13-002, ALJ No. 2010-SOX-3 (ARB Apr. 30, 2013), the Complainant stopped participating in the litigation after the ALJ denied his request for certification for interlocutory review of the ALJ's denial of his motion for reinstatement, and his request for a stay on the ALJ proceedings while he pursued an interlocutory appeal. The ALJ attempted twice to hold a status conference, but the Complainant did not participate. The ALJ issued an Order to Show Cause why the complaint should not be dismissed, to which the Complainant never responded. Thus, the ALJ dismissed the complaint. On appeal, the Complainant argued that his Mother had passed away several months earlier and that it had been extremely unpleasant for him when the ALJ wanted to begin litigating the case. The ARB found that the ALJ did not abuse his discretion in dismissing the Complainant's case. The ALJ had given ample notice that a stay had not be granted, and of the dates the conferences. The Complainant had not responded to the ALJ's order to show cause, even after the ARB had denied the request for an interlocutory appeal. The ARB appreciated that the death of a close family member is serious and tragic, but noted that the Complainant had been aggressively litigating the case for several months after his Mother's death, and found that the death was not sufficient reason for not participating in the ALJ conference or responding to the order to show cause.

ALTHOUGH SECTION 29 C.F.R. § 18.6(b) ITSELF DOES NOT COMPEL A RESPONSE TO A MOTION, THE ALJ HAS THE AUTHORITY TO ORDER A RESPONSE; AN ALJ IS NOT REQUIRED TO CULL THROUGH PRIOR FILINGS TO IDENTIFY APPROPRIATE RESPONSIVE ARGUMENTS

In Rowland v. National Association of Securities Dealers , ARB No. 07-098, ALJ No. 2007-SOX-6 (ARB Sept. 25, 2009), the Complainant argued that a complainant's response to a respondent's dismissal motion is optional, citing 29 C.F.R. § 18.6(b). The ARB found that "§ 18.6(b) does not negate the discretion given the ALJ to set matters for argument and/or call for the submission of briefs or to rule that a decision be rendered against a party who does not comply with an order." USDOL/OALJ Reporter at 8 (footnote omitted). Thus, where the ALJ ordered the Complainant to respond the Respondent's motions, it was within her discretion under § 18.6(d)(2)(v) to dismiss the complaint when the Complainant did not timely respond. The Complainant argued that her prior filings were sufficient to defeat the motion. The ARB, however, held that "[i]t is not the task of the ALJ to cull through a party's assorted filings to identify what the party might argue in response to a motion to dismiss or motion for summary decision." USDOL/OALJ Reporter at 9 (footnote omitted). Dismissal of the complaint was not too severe a sanction where the ALJ had previously granted two extensions of time for a response and warned that no further extensions would be granted absent exigent circumstances, and highlighted the due date for the response. Lack of prejudice to the other party is not sufficient reason to allow a party to disregard an ALJ order.

TIMELY RESPONSE TO ORDER TO SHOW CAUSE; FAILURE TO IMMEDIATELY REQUEST EXTENSION OF TIME ONCE UNTIMELY RECEIPT OF ORDER KNOWN

In Rowland v. National Association of Securities Dealers , ARB No. 07-098, ALJ No. 2007-SOX-6 (ARB Sept. 25, 2009), the ARB found that although it appeared that the Complainant had good reason for not responding to an ALJ's Order to Show by the stated deadline because she did not timely receive the ALJ's order, she failed to provide good reason for not immediately requesting an extension of time to file her response, but instead waited an additional five days to file a response without providing a reason justifying the delay. In part, the Complainant had argued that she had been monitoring the ALJ web site for orders issued in her case. The ARB, however, found that the Privacy Act routine use statement specified that ALJ decisions and interim orders of general interest are published, and that upon its review of the ALJ web site, it was appeared that interim orders are published infrequently.

ADMINISTRATIVE LAW JUDGE DECISIONS

ALJ AUTHORITY TO CONTROL LITIGATION; IMPOSITION OF REQUIREMENT OF CERTIFICATION OF GOOD FAITH ATTEMPT TO RESOLVE DISPUTES BEFORE SEEKING INTERVENTION OF THE ALJ

In Davis v. The Home Depot , 2006-SOX-17 (ALJ Dec. 19, 2006), the ALJ found it necessary to impose rules of behavior in regard to the filing of motions based on the manner in which the litigation had proceeded, with almost any dispute resulting in the filing of a motion and several counter-motions. The ALJ ordered that, prior to the filing of a motion, counsel must first contact opposing counsel and attempt, in good faith, to reach a resolution without the intervention of the court. Then, only if that attempt failed, would the ALJ entertain a motion. Such a motion, however, was required to include an explicit statement of the steps taken by the party in an attempt to resolve the matter and a certification that the all good faith measures were taken in an attempt to avoid the filing of the motion. Finally, the ALJ quoted the Ninth Circuit in Mattel, Inc. v. MCA Records , 296 F.3d 894, 908 (9th Cir. 2002): "The parties are advised to chill."

Claim Splitting

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ADMINISTRATIVE LAW JUDGE DECISIONS

CLAIM SPLITTING; DISMISSAL ON GROUND OF CLAIM SPLITTING IS NOT SUPPORTED BASED ON COMPLAINANT'S PURSUIT OF A STATE WHISTLEBLOWER CAUSE OF ACTION WHERE THE SOX AND THE STATE LAW ARE MATERIALLY DIFFERENT IN PROCEDURE, POTENTIAL ASSISTANCE TO THE COMPLAINANT, AND THE OBLIGATIONS IMPOSED ON THE SECRETARY OF LABOR

In Gonzalez v. Colonial Bank , 2004-SOX-39 (ALJ Aug. 9, 2004), the Complainant filed a SOX whistleblower complaint with OSHA and several days later filed a complaint in a Florida state court for damages under the Florida Whistleblower statute based on defamation. On motion of the Respondent, the latter proceeding was transferred to U.S. District Court. Before the ALJ in the SOX case, the Respondent moved to dismiss arguing that the SOX case was based on the same facts and seeks the same relief as the claim filed under Florida law, and therefore is contrary to the rule against claim splitting.

The ALJ denied the motion, finding that the cases cited by the Respondent were decided all on the basis of res judicata or claim preclusion. The ALJ observed that the SOX whistleblower provision imposes obligations on the Secretary of Labor and provides additional support to a complainant different from the Florida law. Specifically, the ALJ pointed out that the Assistant Secretary for OSHA and the SEC could participate as amicus curiae at any time in the administrative process; that the SOX process provides for expeditious handling by DOL, for ALJ's broad authority to limit discovery, for immediate reinstatement, and for DOL authority to file a civil action to enforce an order of reinstatement. The ALJ also observed that settlements of SOX complaints must be approved by the ALJ or the ARB, who have the obligation of ensuring that the settlement is fair, adequate and reasonable not only in regard to the complainant's individual interests, but also those of the public.

Thus, the ALJ found that the SOX case before DOL was not barred by res judicata or by claim-splitting as there was no prior judgment, the SOX claim was filed first, and most significantly, because the SOX action differs materially from the Florida law.

Consolidation

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ADMINISTRATIVE LAW JUDGE DECISIONS

CONSOLIDATION; SAME OR SUBSTANTIALLY SIMILAR EVIDENCE STANDARD OF 29 C.F.R. § 18.11

In Davis v. The Home Depot U.S.A., Inc. , 2006-SOX-17 (ALJ Mar. 13, 2007), three Complainants moved under 29 C.F.R. § 18.11 for consolidation of their SOX complaints against the Respondent before an administrative law judge who had already conducted an evidentiary hearing in the first of the three cases. The Complainants contended, inter alia, that all three cases involved retaliation for protesting the same type of actions by the Respondent. One of the two new cases was already scheduled for a hearing before that same ALJ, while a third new case was scheduled to be heard by an ALJ from a different office. The Chief ALJ denied the motion to consolidate based on the very different stages of litigation for the three cases, because the complaints alleged different acts taking place in different stores in different regions of the country. The Chief ALJ found that the complaints did not involve the "same or substantially similar evidence" and that the evidence in one hearing may not be relevant or material in another.

Decision and Order

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ADMINISTRATIVE LAW JUDGE DECISIONS

ALJ'S DECISION AND ORDER MUST MAKE SPECIFIC FINDINGS AND STATE THE REASONS SUPPORTING THOSE FINDINGS

In Pittman v. Diagnostic Products Corp. , ARB No. 06-079, ALJ No. 2006-SOX-53 (ARB May 30, 2008), the Complainant had filed a SOX complaint alleging that following his discharge the Respondent company and its agents had retaliated against him within the 90 day period for filing a SOX complaint. The ALJ found, without explanation, that none of the post-termination acts alleged by the Complainant "appear to constitute adverse employment actions within the meaning of the Act" and therefore that the complaint was time barred. On review, the ARB found that the ALJ's decision failed to comply with 29 C.F.R. § 18.57(b) and 29 C.F.R. § 1980.109(a), which require an ALJ to issue an opinion with specific findings and the reasons supporting those findings. The ARB, therefore remanded the case to the ALJ for issuance of a revised recommended Decision and Order discussing whether SOX covers retaliatory acts against former employees and whether the specific acts of retaliation proffered by the Complainant were actionable.

SUFFICIENCY OF ALJ DECISION; MAKING FINDINGS ON ALL CONTESTED ISSUES FACILITATES APPELLATE REVIEW

In Klopfenstein v. PCC Flow Technologies Holdings, Inc. , ARB No. 04-149, ALJ No. 2004-SOX-11 (ARB May 31, 2006), the ARB found that the ALJ's lack of findings on whether the complainant had engaged in protected activity and on causation hampered its ability to review the decision on appeal. The Board indicated that the ALJ should make findings on all contested issues.

Compare Erickson v. U.S. Environmental Protection Agency , ARB No. 03-002, ALJ No. 1999-CAA-2 (ARB May 31, 2006) (ARB, assumes without deciding, that the Complainant engaged in protected activity because her complaints failed on other grounds).

De Novo Proceedings

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ADMINISTRATIVE REVIEW BOARD DECISIONS

HEARING BEFORE ALJ IS DE NOVO; RESPONDENT MAY RAISE DEFENSES BEFORE ALJ THAT WERE NOT RAISED BEFORE OSHA

In Rowland v. Prudential Equity Group, LLC , ARB No. 08-108, ALJ No. 2008-SOX-4 (ARB Jan. 13, 2010), the ARB rejected the Complainant's argument that an immunity defense could not be raised because it was first raised "on appeal," because an ALJ hearing in a SOX case is de novo, and therefore use of the defense before the ALJ was proper.

ADMINISTRATIVE LAW JUDGE DECISIONS

TIMELY RAISED CLAIMS; OSHA INVESTIGATION DOES NOT ESTABLISH BOUNDARIES OF FACTUAL INQUIRY BEFORE ALJ

In Morefield v. Exelon Services, Inc. , 2004-SOX-2 (ALJ Jan. 28, 2004), the Respondents contended that any "new claims" that Morefield failed to raise within 90 days of his termination and allegations which were not raised and investigated by OSHA are not properly subject to adjudication in the proceeding before the ALJ. The ALJ clarified that

The violation . . . is not the whistleblower's protected conduct, it is the retaliatory action which it allegedly triggered. In this instance it was the termination, and, although there are exceptions not here pertinent, Morefield generally would not now be free to charge additional violations. In contrast, neither [a decision cited by the Respondent -- Ford v. Northwest Airlines, Inc. , 2002 AIR 21, at n.3 (ALJ Oct.18, 2002)] nor the statute require that every instance of protected activity be brought to OSHA's attention or that OSHA investigate every instance that is alleged in a complaint. The scope of an OSHA investigation does not establish boundaries of the factual inquiry permitted in the subsequent adjudication. After 90 days, new violations generally may not be raised, but the statute and the implementing regulations contemplate both discovery and a de novo hearing of the facts relating to both the protected activities and the reasons for the adverse action regardless of OSHA's findings. It involves no transgression of the "two tiered" scheme for handling whistleblower claims to adjudicate fully the circumstances of a timely filed complaint.

Discovery

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ADMINISTRATIVE REVIEW BOARD DECISIONS

DENIAL OF DISCOVERY OF GENERAL LEDGER; OFFER OF SUMMARY OF EVIDENCE AND THE REQUIREMENT OF MAKING THE SOURCE DOCUMENT AVAILABLE FOR INSPECTION OR COPYING; LIMITED RELEVANCE AND PROBATIVE VALUE OF THE GENERAL LEDGER AND THE AVAILABILITY OF THE CONTROLLER AS A WITNESS

In Bechtel v. Competitive Technologies, Inc. , ARB No. 09-052, ALJ No. 2005-SOX-33 (ARB Sept. 30, 2011), the ALJ denied the Complainant's motion to compel the Respondent to produce its general ledger because, while some of the information could corroborate or impugn the testimony of the Respondent's officials, the general ledger would be mainly irrelevant to the issues, could be obtained by other means, and was unduly burdensome for the Respondent to produce. Instead, the ALJ admitted summaries of the Respondent's personnel and direct expenses. On appeal, the Complainant argued that the ALJ abused her discretion because 29 C.F.R. § 18.1006 requires a party offering a summary of evidence to make the source documents available for examination or copying. The Complainant argued that without the general ledger, he was unable to compare financial information in the summaries with that in the general ledger to show that the Respondent's financial reasons for firing him were pretext.

The ARB found no abuse of discretion by the ALJ. In this regard, the ARB noted that at the hearing, the ALJ stated that the Respondent's whole general ledger would be relevant only if the whistleblowing activity concerned receipts, profits, or income, and that was not the case. The ARB noted that the ALJ had added that the summaries went only to the weight to be given to the Respondent's allegation of its need to cut operating costs and increase revenues, but that the general ledger was not proof of anything. The ARB observed that the ALJ noted that the Respondent was calling its controller as a witness, and that the Complainant could question her on the figures in the summaries.

ADMINISTRATIVE LAW JUDGE DECISIONS

DISCOVERY; DEPOSITION OF CEO; WHETHER "APEX" RULE APPLIES TO SOX WHISTLEBLOWER CASES; IMPOSITION OF DISCOVERY LIMITS TO ADDRESS POSSIBILITY OF HARASSMENT

In Blanton v. Biogen IDEC, Inc. , 2006-SOX-4 (ALJ Apr. 18, 2006), the Respondent sought a protective order to prevent deposition of its CEO based on a line of decisions indicating concern for the potential for harassment and disruption of corporate business if parties can routinely depose high-level (or "apex") executives who have no personal knowledge of relevant and material facts, and requiring the requester to utilize other, less-intrusive methods to initially demonstrate that the executive has unique or superior relevant personal knowledge. The ALJ noted that, of the decisions cited, only one had been decided after enactment of SOX, and that a number of the decisions involved products liability cases in which the CEO was unlikely to have "superior or unique" knowledge. Moreover, the ALJ noted that the general rule in federal civil litigation is that it is exceedingly difficult to demonstrate an appropriate basis for barring the taking of a deposition, even where the proposed witness is a busy person or professes lack of knowledge of the matters at issue, as the party seeking discovery is entitled to test the asserted lack of knowledge. The ALJ reviewed the decision in Thomas v. IBM Corp ., 48 F.3d 478 (10th Cir. 1995), in which the court acknowledged a "corporate officer lacking personal familiarity" exception, but found it distinguishable because the plaintiff in that case was a very low level clerk who sought to depose the CEO of a very large corporation, whereas in the instant case, the Complainant was a high level officer in a much smaller corporation. The ALJ also pointed out the nature of SOX litigation, which was a comparatively new brand of corporate litigation, suggested greater scrutiny of the "apex" rule than products liability or insurance cases. The ALJ also pointed out that the Respondent's CEO's affidavit denying any "first-hand" knowledge of many matters, was obviously very carefully prepared, and did not assert lack of any knowledge of the matters at issue in the instant case. The ALJ observed, as the Complainant had pointed out, that the CEO likely would have had contact with employees who did have direct contact with the Complainant. Thus, the ALJ denied the request for a protective order and granted the Complainant's motion to compel the deposition. The ALJ, however, "not being blind to the possibility of harassment" set limitations on the deposition, including not requiring the CEO to travel outside Boston unless convenient, not permitting a videotape deposition unless all parties agreed, prohibiting inquiry into certain topics unless a succinct preface was presented showing how the inquiry might lead to the discovery may lead to the discovery of relevant evidence, and limiting the duration of the deposition to three hours.

DISCOVERY; FAILURE TO TIMELY RESPOND TO REQUEST FOR ADMISSIONS; STANDARD FOR PERMITTING WITHDRAWAL OR AMENDMENT OF ADMISSIONS

In Lowe v. Terminex International Co., LP , 2006-SOX-89 (ALJ Sept. 15, 2006), the Respondent filed a motion for summary decision arguing that it was not a publicly held company subject to the whistleblower provision of the SOX. The parties were granted time to conduct discovery on the issue propounded by the summary decision motion. The Complainant failed to timely respond to the Respondent's requests for admissions, and the Respondent filed a motion requesting that the requests for admissions be deemed admitted. The ALJ observed that under OALJ's rules of practice, failure to timely respond to a request for admissions results in that matter being deemed admitted. 29 C.F.R. § 18.20(b). The ALJ stated that the proper procedure for withdrawing or amending admissions made by virtue of a failure to response is by motion to withdraw or amend. Because OALJ's rules are silent on this topic, the ALJ referenced FRCP 36(b), and found that courts have employed a two-part test in considering whether to exercise the discretion to permit amendment or withdrawal of admissions: (1) presentation of the merits of an action must be served, and (2) the party obtaining the admission must not be prejudiced in the presentation of his case by the withdrawal. The prejudice at issue is a party's facing a sudden need to obtain evidence with respect to questions previously answered by the admissions. In the instant case, the Complainant's counsel stated that he had substantially finished preparing responses when a power outage caused loss of those responses. He had intended to raise the issue during a telephone conference call the next day with the ALJ, but because of the length of the conference and his conclusion that his responses were not crucial at the present stage of the proceeding, he did not mention the problem. The ALJ found that the Complainant had failed to establish good cause why he should be allowed to amend or withdraw the admissions made by virtue of failure to timely respond to the Respondent's admissions request.

DISCOVERY; DEPOSITION OF CEO; WHETHER "APEX" RULE APPLIES TO SOX WHISTLEBLOWER CASES; IMPOSITION OF DISCOVERY LIMITS TO ADDRESS POSSIBILITY OF HARASSMENT

In Blanton v. Biogen IDEC, Inc. , 2006-SOX-4 (ALJ Apr. 18, 2006), the Respondent sought a protective order to prevent deposition of its CEO based on a line of decisions indicating concern for the potential for harassment and disruption of corporate business if parties can routinely depose high-level (or "apex") executives who have no personal knowledge of relevant and material facts, and requiring the requester to utilize other, less-intrusive methods to initially demonstrate that the executive has unique or superior relevant personal knowledge. The ALJ noted that, of the decisions cited, only one had been decided after enactment of SOX, and that a number of the decisions involved products liability cases in which the CEO was unlikely to have "superior or unique" knowledge. Moreover, the ALJ noted that the general rule in federal civil litigation is that it is exceedingly difficult to demonstrate an appropriate basis for barring the taking of a deposition, even where the proposed witness is a busy person or professes lack of knowledge of the matters at issue, as the party seeking discovery is entitled to test the asserted lack of knowledge. The ALJ reviewed the decision in Thomas v. IBM Corp ., 48 F.3d 478 (10th Cir. 1995), in which the court acknowledged a "corporate officer lacking personal familiarity" exception, but found it distinguishable because the plaintiff in that case was a very low level clerk who sought to depose the CEO of a very large corporation, whereas in the instant case, the Complainant was a high level officer in a much smaller corporation. The ALJ also pointed out the nature of SOX litigation, which was a comparatively new brand of corporate litigation, suggested greater scrutiny of the "apex" rule than products liability or insurance cases. The ALJ also pointed out that the Respondent's CEO's affidavit denying any "first-hand" knowledge of many matters, was obviously very carefully prepared, and did not assert lack of any knowledge of the matters at issue in the instant case. The ALJ observed, as the Complainant had pointed out, that the CEO likely would have had contact with employees who did have direct contact with the Complainant. Thus, the ALJ denied the request for a protective order and granted the Complainant's motion to compel the deposition. The ALJ, however, "not being blind to the possibility of harassment" set limitations on the deposition, including not requiring the CEO to travel outside Boston unless convenient, not permitting a videotape deposition unless all parties agreed, prohibiting inquiry into certain topics unless a succinct preface was presented showing how the inquiry might lead to the discovery may lead to the discovery of relevant evidence, and limiting the duration of the deposition to three hours.

DISCOVERY; ATTORNEY WORK PRODUCT, ATTORNEY-CLIENT AND SELF EVALUATION PRIVILEGES; PROTECTION OF REPORT PREPARED BY CONSULTANT FOR RESPONDENT'S GENERAL COUNSEL

In Penesso v. LLC International, Inc. , 2005-SOX-16 (ALJ Mar. 18, 2005), the Complainant had filed a discovery request for a report and related documents prepared by a consultant hired by the Respondent to investigate its subsidiary's operations in response to the Complainant's allegations of financial mismanagement. The Respondent asserted three privileges: attorney work product, attorney-client and self-evaluation. The ALJ agreed with the Respondent's argument that the consultant, who had been hired for an investigation initiated by the Respondent's general counsel and who reported only to the general counsel, was considered to be an agent of the attorney and its report therefore subject to the same privileges as if the attorney had prepared the report himself.

The ALJ found that attorney work product privilege did not apply because the consultant's report had not been prepared "in anticipation of litigation." However, the ALJ found that the attorney-client privilege did apply in light of the Supreme Court decision in Upjohn Co. v. U.S. , 449 U.S. 383, 101 S.Ct. 677 (1981). The ALJ did not reach the question of whether the self-evaluation privilege would be recognized (the ALJ noting that most jurisdictions do not recognize it).

Filing With OALJ

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ADMINISTRATIVE LAW JUDGE DECISIONS

FILING OF RESPONSE WITH ALJ BY E-MAIL

In Stevenson v. Vertex Pharmaceuticals, Inc. , ARB No. 06-107, ALJ No. 2006-SOX-56 (ARB Feb. 29, 2008), the ALJ had issued an order directing the Complainant to respond to the Respondents' motion to dismiss based on lack of timeliness of the complaint. When the ALJ did not receive a response, she dismissed the case based on the record before her, which showed that the Complainant's complaint was five days late. On appeal, the Complainant argued that she had responded to the ALJ's order "to everyone" by e-mail. The Board, however, found that the Complainant had not sent the e-mail to the ALJ, and therefore affirmed the dismissal.

The Respondents had argued that e-mail filings were not permitted by the applicable rules. The ARB did not rule on this argument, but observed that the SOX regulations do permit e-mail filings in certain circumstances.

Pro Se Litigants

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ADMINISTRATIVE REVIEW BOARD DECISIONS

PRO SE LITIGANTS HELD TO LESS EXACTING PLEADING STANDARDS, BUT CANNOT SHIFT BURDEN OF LITIGATING CASE TO THE ADJUDICATOR AND ULTIMATELY BEAR THE BURDEN OF PLEADING ALL ELEMENTS OF A COMPLAINT

In Pik v. Credit Suisse AG , ARB No. 11-034, ALJ No. 2011-SOX-6 (ARB May 31, 2012), the original complaint filed with OSHA contained no factual allegations addressing whether the Complainant had engaged in SOX protected activity. The ALJ issued an Order to Show Cause why the case should not be dismissed for failure to allege protected activity. When the Complainant only responded with a general, conclusory statement, the ALJ dismissed the complaint. The ARB affirmed. The ARB, evidently concerned about the application of pleading standards when the complainant is pro se, explained that ultimately all litigants are responsible for the presentation of their case. The Board wrote:

    Initially, we note that adjudicators must accord a party appearing pro se fair and equal treatment, but a pro se litigant "cannot generally be permitted to shift the burden of litigating his case to the courts, nor avoid the risks of failure that attend his decision to forego expert assistance." Thus, although an ALJ has some duty to assist pro se litigants, a judge also has a duty of impartiality and must refrain from becoming an advocate for the pro se litigant. In the end, pro se litigants have the same burdens of proving the necessary elements of their cases as litigants represented by counsel.

USDOL/OALJ Reporter at 4-5 (footnotes omitted). The ARB noted that the Complainant appeared pro se and was entitled to some leeway, but that "a complainant must at least point to facts that fairly identify the activity protected by the SOX statute, particularly where the issue of extraterritoriality must be resolved." USDOL/OALJ Reporter at 5. The ARB also stated in regard to the Complainant's appellate brief: "Again, we are aware that pro se pleadings are held to less exacting standards than those prepared by counsel and are to be liberally construed, but the Board must be able to discern cogent arguments in any appellate brief, even one from a pro se litigant." USDOL/OALJ Reporter at 5 (footnote omitted).

Reconsideration

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ADMINISTRATIVE LAW JUDGE DECISIONS

MOTION TO RECONSIDER BEFORE ALJ; AUTHORITY OF ALJ TO CONSIDER

In Steffenhagen v. Securitas Sverige, AR , 2003-SOX-24 (ALJ Aug. 13, 2004), the ALJ found that she did not have jurisdiction to rule on a motion to reconsider when the Complainant also filed on the same day an appeal to the ARB.

Recusal

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ADMINISTRATIVE REVIEW BOARD DECISIONS

MOTION TO DISQUALIFY ALJ GENERALLY MUST BE SUPPORTED WITH EVIDENCE OF EXTRA-JUDICIAL BIAS

In Matthews v. Ametek, Inc. , ARB No. 11-036, ALJ No. 2009-SOX-26 (ARB May 31, 2012), the parties engaged in lengthy and contentious pre-trial and discovery proceedings spanning two years. Ultimately, the ALJ issued an Order to Show Cause why the Complainant's failure to comply with a discovery order and failure to provide certain documents should not result in sanctions, including dismissal of the claim. Rather than responding directly to the order, the Complainant moved to disqualify the ALJ alleging personal bias. The ALJ denied the motion to disqualify, and while acknowledging that the Respondent had been more proactive and even aggressive than the Complainant in exercising its right to discovery, noted that the Complainant had repeatedly failed to comply with discovery requests requiring multiple orders, had provided late and incomplete responses, and was non-communicative. The ALJ concluded that dismissal was warranted. On appeal, the ARB found that the ALJ acted within his discretion in dismissing the complaint. One member of the ARB speculated that a lesser sanction may have cured any actual prejudice to the Respondent, but agreed that the ALJ acted within his discretion. The concurring member wrote: "Regardless of [the Complainant's] belief of judicial bias, his counsel cannot simply fail to appear for pretrial conferences, fail to return the ALJ's phone calls and e-mails, and continue to refuse to comply with repeated orders to produce documents." USDOL/OALJ Reporter at 8.

In regard to the motion to disqualify, the ARB rejected the Complainant's argument on appeal that disqualification was warranted because the ALJ had allegedly lost control of discovery and that the discovery permitted by the ALJ created an appearance of personal bias against the Complainant. The ARB wrote:

    A motion to disqualify (or recuse) an ALJ from proceedings can be filed pursuant to 29 C.F.R. § 18.31.3 ("Whenever any party shall deem the administrative law judge for any reason to be disqualified to preside . . . that party shall file with the [ALJ] a motion to recuse.")(emphasis added). Matthews alleged that the ALJ had a personal bias against him based on the ALJ's discovery rulings. Beyond disputing those rulings, Matthews has not asserted that the ALJ engaged in any non-judicial conduct that would question his impartiality. The ARB generally "presume[s] that an ALJ is unbiased unless a party alleging bias can support that allegation; and bias generally cannot be shown without proof of an extra-judicial source of bias." See, e.g., Matter of Slavin , ARB No. 04-088, ALJ No. 2004-MIS-002, slip op. at 15-18 (ARB Apr. 29, 2005); Eash v. Roadway Express, Inc. , ARB No. 00-061, ALJ No. 1998-STA-028, slip op. at 8 (ARB Dec. 31, 2002). "Unfavorable rulings and possible legal errors in an ALJ's orders generally are insufficient to prove bias." Powers v. Paper, Allied-Indust., Chem. & Energy Workers Int'l Union , ARB No. 04-111, ALJ No. 2004-AIR-019 (ARB Aug. 31, 2007). Here, Matthews has not shown that the ALJ had any personal bias against him based on any extra-judicial source.

USDOL/OALJ Reporter at 5 (footnote omitted).

RECUSAL; DISTINCTION BETWEEN PERSONAL BIAS AND JUDICIAL BIAS

In Levi v. Anheuser Busch Companies, Inc. , ARB Nos. 06-102, 07-020, 08-006, ALJ Nos., 2006-SOX-27 and 108, 2007-SOX-55 (ARB Apr. 30, 2008), the Complainant argued that the ALJ, who had been the presiding judge in an earlier proceeding involving the same parties, erred in failing to recuse himself. The ARB wrote:

Absent specific allegations of personal bias, prejudice, or interest, neither a judge's prior adverse rulings, nor his participation in a related or prior proceeding is sufficient to require recusal. Davis v. Fendler , 650 F.2d 1154, 1163 (9th Cir. 1981); 13A Charles Allen Wright, Arthur R. Miller, & Edward H. Cooper, Federal Practice and Procedure § 3542 (West Supp. 2008). Federal courts have required personal bias rather than judicial bias to support recusal. Id. The ARB has held that previous unfavorable dispositions do not amount to personal bias. Eash v. Roadway Express, Inc. , ARB No. 00-061, ALJ No. 1998-STA-028, slip op. at 8 (ARB Dec. 31, 2002) (ALJ twice recommended dispositions contrary to Eash's interests, which fact was found insufficient to show personal bias); Roach v. National Transp. Safety Bd. , 804 F.2d 1147, 1160 (10th Cir. 1986). Consequently, the ALJ did not err in failing to recuse himself.

Remand to OSHA

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ADMINISTRATIVE LAW JUDGE DECISIONS

REMAND; OSHA MOTION TO REMAND ON GROUND THAT IT ERRONEOUSLY DENIED THE COMPLAINT ON JURISDICTIONAL GROUNDS

In Penesso v. LLC International, Inc. , 2005-SOX-16 (ALJ Jan. 5, 2005), the Assistant Secretary for OSHA moved for a remand because OSHA now believed that denial of the complaint based on a lack of jurisdiction was in error and that it should conduct an investigation on the merits. The Respondent agreed with the motion and cited section 1980.111(b) for the proposition that the Assistant Secretary has the right to withdraw a determination prior to the expiration of the 30-day period to object. The ALJ, however, found that the Assistant Secretary does not have a right to withdraw the OSHA determination once an objection has been filed. Moreover, the ALJ found that section 1980.109(a) precluded a remand. Moreover, even if the regulations did not preclude a remand, the ALJ would not grant it in the instant case given the time constraints in SOX cases, that the proceeding before an ALJ is de novo, and that OSHA has the authority to appear as a party before the ALJ.

Service by ALJ

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ADMINISTRATIVE LAW JUDGE DECISIONS

SERVICE OF PROCESS; FAILURE TO SERVE AGENT OF THE RESPONDENT AUTHORIZED TO ACCEPT SERVICE OF PROCESS

In McCloskey v. Ameriquest Mortgage Co. , ARB No. 06-033, ALJ No. 2005-SOX-93 (ARB Feb. 29, 2008), the ALJ entered a default judgment when the Respondent did not attend the hearing or respond to the ALJ's order to show cause why it had failed to attend the hearing. The ALJ had served the Respondent by certified mail at the field office address where the Complainant had worked. The Complainant appealed, challenging the ALJ's damages award. On appeal, the ARB received a letter from the Respondent's attorney alleging that the Respondent had not received proper notice of the ALJ's hearing or any other proceedings in the case, and asserted that the field office address was not a proper address for service of process and that no one at that office was authorized to accept service on behalf of the company. Consequently, the ARB held that the ALJ erroneously entered default judgment, and remanded the case to provide the Respondent an opportunity to respond to the ALJ's order to show cause.

ALLEGATION OF ALJ'S FAILURE TO SERVE ORDER TO SHOW CAUSE; IN ABSENCE OF EVIDENCE TO THE CONTRARY, ALJ'S CERTIFICATE OF SERVICE SHOWING CORRECT ADDRESS IS SUFFICIENT TO REJECT ALLEGATION

In Harvey v. Home Depot U.S.A., Inc. , ARB Nos. 04-114 and 115, ALJ Nos. 2004-SOX-20 and 36 (ARB June 2, 2006), the Complainant contended on appeal that the ALJ failed to serve an Order to Show Cause on him, thereby prejudicing his ability to adequately respond to the question of whether his complaint stated a cause of action under SOX. The ARB rejected this contention because the ALJ's Order to Show Cause had a certificate of service attached attesting that a copy had been sent to the Complainant and showing the Complainant's correct address as of that date, and because there was no evidence to the contrary in the record.

Subpoenas

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ADMINISTRATIVE REVIEW BOARD DECISIONS

SUBPOENAS; ARB DECLINES TO REVISIT CHILDERS DECISION

See Administrator, Wage and Hour Div., USDOL v. Integrated Informatics, Inc. , ARB No. 08-127, ALJ No. 2007-LCA-26 (ARB Jan. 31, 2011), a case arising under the H-1B nonimmigrant alien labor certification regulations, in which the ARB declined the Wage and Hour Division Administrator's request that the ARB reexamine and reject Childers v. Carolina Power & Light , ARB No. 98-077, ALJ No. 1997-ERA-032 (ARB Dec. 29, 2000).

ASSISTANT SECRETARY FOR OSHA'S PETITION TO INTERVENE FOR PURPOSE OF SEEKING INTERLOCUTORY REVIEW BY THE ARB OF AN ALJ'S ORDER IS PROPERLY FILED WITH THE ALJ RATHER THAN THE ARB

SUBPOENA; CERTIFICATION OF FACTS TO DISTRICT COURT; QUESTION OF AUTHORITY OF ARB TO REVIEW ALJ'S CERTIFICATION ORDER MOOTED BY DISTRICT COURT'S REFUSAL TO FILE ALJ'S ORDER

In Davis v. The Home Depot, Inc. , ARB No. 08-114, ALJ No. 2006-SOX-17 (ARB Sept. 29, 2008), the ALJ issued a subpoena to compel a former Home Depot employee to testify at a SOX hearing. The former employee failed to appear. The ALJ then certified the facts to the District Court for the District of Columbia pursuant to 29 C.F.R. § 18.29(b)(2008), and requested the court to compel the former employee's attendance and testimony before the ALJ. The Assistant Secretary for OSHA then filed with the ARB a motion to intervene, and a petition for review of the ALJ's order certifying facts to the U.S. district court. In the meantime, the Chief Judge of the district court wrote to the ALJ refusing to accept her order, and questioning her authority to file the order within the participation of the U.S. Attorney's office or the Department of Justice. The ALJ replied that she believed that the Chief Judge's interpretation was incorrect, but because the Assistant Secretary was seeking interlocutory review of the order before the ARB, she would await the ARB's decision and then consider whether to resubmit the order to the district court. The ARB, not knowing about the exchange of letters between the Chief Judge and the ALJ, issued an order permitting the parties to brief the question of whether the Assistant Secretary should be permitted to intervene. The ALJ then issued an order granting the Assistant Secretary's petition to intervene, finding that such a motion should have been filed before her since the only proceedings in the case were pending before her.

The ARB suggested that the proper procedure would have been for it to decide where the Assistant Secretary's petition to intervene should have been filed, but since it agreed with the conclusion that it should have been filed before the ALJ, found no useful purpose to remand to the ALJ. The ARB dismissed the Assistant Secretary's petition for review (assuming that it would even have been proper for the ARB to review the ALJ's certification order), finding that the Chief Judge's refusal to file the ALJ's certification order and the ALJ's decision not to refile it, left no justiciable issue to decide.

Summary Decision

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FEDERAL COURT DECISIONS

SUMMARY JUDGMENT STANDARD - DEFENDANT'S BURDEN IS HIGHER IN SOX CASES � PLAINTIFF NEED ONLY DEMONSTRATE A PRIMA FACIE CASE

In Leshinksy v. Telvent GIT, S.A. , No. 10-cv-4511, 2013 WL 1811877 (S.D.N.Y. May 1, 2013), the court reviewed the framework for reviewing a summary judgment motion in a SOX case in Federal District Court. The court recited the general framework for deciding a FRCP 56 motion, but noted that "[i]t is now well accepted that courts should construe Section 806 broadly." Slip op. at 10 (citation omitted). The court noted the burden shifting framework for Section 806 cases, and held:

   At the summary judgment stage, a plaintiff need only demonstrate that a rational factfinder could determine that Plaintiff has made his prima facie case. Assuming a plaintiff does so, summary judgment is appropriate only when, construing all of the facts in the employee's favor, there is no genuine dispute that the record clearly and convincingly demonstrates that the adverse action would have been taken in the absence of the protected behavior. Thus, the defendant's burden under Section 806 is notably more than under other federal employee protection statutes, thereby making summary judgment against plaintiffs in Sarbanes-Oxley retaliation cases a more difficult proposition.

Leshinksy , supra, slip op. at 10-11 (citation omitted).

ADMINISTRATIVE REVIEW BOARD DECISIONS

SUFFICIENCY OF COMPLAINT; ALJ MAY USE ORDER TO SHOW CAUSE TO COMPEL COMPLAINANT TO SPECIFY FACTUAL ALLEGATIONS FOR ESSENTIAL ELEMENT OF THE CASE WHERE THE ORIGINAL COMPLAINT FAILED TO ADDRESS THAT ELEMENT

In Pik v. Credit Suisse AG , ARB No. 11-034, ALJ No. 2011-SOX-6 (ARB May 31, 2012), the original complaint filed with OSHA contained no factual allegations addressing whether the Complainant had engaged in SOX protected activity. The ALJ issued an Order to Show Cause why the case should not be dismissed for failure to allege protected activity. When the Complainant only responded with a general, conclusory statement, the ALJ dismissed the complaint. The ARB affirmed, noting that the Order to Show Cause provided the Complainant "an opportunity to explain that he had additional information that could address whether he engaged in SOX protected activity, one of the requisite elements of his SOX complaint." USDOL/OALJ Reporter at 5.

SUMMARY DECISION; FAILURE OF COMPLAINANT TO IDENTIFY THE ADVERSE ACTION THAT FORMED THE BASIS OF THE COMPLAINT

Noting that "[a]n 'adverse action' under the SOX Section 806 whistleblower provision refers to any unfavorable employment action that is more than trivial, either as a single event or in combination with other deliberate employer actions," the Board in Lewis v. Walt Disney World , ARB No. 10-106, ALJ No. 2010-SOX-27 (ARB Jan. 27, 2012), affirmed the summary dismissal of the Complainant's SOX complaint on the ground that the Complainant failed to identify the adverse action that formed the basis of his claim. The ARB stated that proving an adverse action is an essential element of a SOX whistleblower claim. In Lewis , the record contained a vague reference to the fact that the Complainant "stopped working" sometime in 2007, but it was unclear whether he resigned or whether he was discharged or even constructively discharged. The ARB stated that it was the Complainant's burden to assert and ultimately prove the adverse action taken by the Respondent.

SUMMARY DECISION; ADEQUACY OF RECORD FOR REVIEW; UNCLEAR WHETHER RELEVANT DISCOVERY DISPUTE WAS PENDING AND WHETHER ALJ HAD INFORMED COMPLAINANT OF CONSEQUENCES OF FAILURE TO RESPOND TO MOTION FOR SUMMARY DECISION

In Charles v. Profit Investment Management , ARB No. 10-071, ALJ No. 2009-SOX-40 (ARB Dec. 16, 2011), the ALJ granted summary decision on behalf of the Respondent. The ARB held that it could not affirm the ALJ's ruling based on the record before it because it could not tell whether there was a pending discovery dispute related to the motion at the time the ALJ ruled on the motion for summary decision, and because it was not clear whether the ALJ informed the Complainant about the consequences of a failure to respond to the motion for summary decision.

The ALJ had conducted a telephonic conference call with the parties on October 30, 2009, and issued an Order Setting Briefing Schedule on that date. The order indicated that the conference call included discussion of scheduling a hearing, discovery issues, and a schedule for briefing a motion for summary decision. The order set a deadline of January 8, 2010 for any response to a motion for summary decision but did not mention the consequence of failing to respond. The Complainant submitted a letter to the ALJ on November 25, 2009 indicating that some requested information to support her claim had been withheld by the opposing counsel. On December 10, 2009, the Respondents filed their motion for summary decision. The ARB stated that the Complainant did not file a response until February 8 or 16, 2009 [Editor's note: The actual date of response was February, 2010]. The ALJ issued his decision granting summary decision on February 16, 2010.

On appeal, the Complainant alleged that she did not timely respond to the motion for summary decision because she misunderstood the ALJ's order and because the Respondent thwarted her attempts to complete discovery by demanding that she enter into a confidentiality agreement. The ARB found that it was not clear from the record whether this discovery dispute was pending and whether it impeded the Complainant's ability to respond to the motion for summary decision at the time the ALJ decided the motion. The ARB directed the ALJ on remand to consider whether the discovery dispute pertained to issues in the motion for summary decision, but left it to the ALJ's discretion to decide how to address the motion.

In addition, the ARB found that the ALJ had conducted telephonic conference calls with the parties prior to granting the motion for summary decision, and that it was possible that the ALJ had informed the Complainant of the consequences of failing to respond the motion; however, the record did not indicate that he did so.

On remand, the ARB directed the ALJ to provide the Complainant with

... a notice containing: (1) the text of the rule governing summary decisions before ALJs (i.e., 29 C.F.R. § 18.40), and (2) a short and plain statement that factual assertions in the evidence submitted by the Respondents will be taken as true unless she contradicts them with counter-affidavits or other documentary evidence.

USDOL/OALJ Reporter at 4-5 (footnote omitted).

SUMMARY DECISION; ALJ IS REQUIRED TO PROVIDE PRO SE LITIGANTS NOTICE OF REQUIREMENTS FOR OPPOSING A MOTION FOR SUMMARY DECISION

In Wallum v. Bell Helicopter Textron, Inc. , ARB No. 09-081, ALJ No. 2009-AIR-6 (ARB Sept. 2, 2011), the Respondent, Bell Helicopter, filed a motion to dismiss the Complainant's AIR21 whistleblower complaint on the ground that it was not an air carrier or contractor and therefore not a covered employer under the Act. The ALJ treated the motion to dismiss as a request for summary decision and granted it. On appeal, the ARB noted that the Complainant, who was appearing pro se, referenced in his response to the motion to dismiss information from the Respondent's website. The ARB remanded the case for the ALJ to review that information and determine whether it raised a material issue of fact regarding the Respondent's coverage such that summary decision should be denied. The ARB then noted that it had held in Hooker v. Washington Savannah River Co. , ARB No. 03-036, ALJ No. 2001-ERA-16, slip op at 8 (ARB Aug. 26, 2004), and Motarjemi v. Metropolitan Council Metro Transit Div. , ARB No. 08-135, ALJ No. 2008-NTS-2, slip op. at 4 (AR Sept. 17, 2010), that ALJs are required "to give pro se litigants notice of the requirements for opposing a motion for summary disposition, including the right to file affidavits and other evidence in response to such motions, and that such notice be provided in a form sufficiently understandable to apprise litigants of what is required." Slip op. at 7. The ARB specifically directed the ALJ to provide in the notice: "(1) the text of the rule governing summary decisions before ALJs (i.e., 29 C.F.R. § 18.40), and (2) a short and plain statement that factual assertions in [the Respondent's] affidavits will be taken as true unless [the Complainant] contradicts [the Respondent] with counter affidavits and other documentary evidence." Slip op. at 8.

SUMMARY DECISION; FAILURE TO GENERATE A GENUINE ISSUE OF MATERIAL FACT SHOWING PROTECTED ACTIVITY UNDER SOX

In Reamer v. Ford Motor Co. , ARB No. 09-053, ALJ No. 2009-SOX-3 (ARB July 21, 2011), the Complainant was a CPA for Ford Credit. He claimed that his discharge was for SOX protected activity related to an FBI investigation of a dealership. The Complainant had been interviewed by the FBI, and in 2006 he made a series of communications with Ford Credit and the FBI about the investigation, which the Complainant believed was politically motivated. The ALJ granted summary decision based on a finding that the Complainant had not established a genuine issue of material fact showing that he had engaged in protected activity. The ARB wrote:

   We agree with the ALJ that Reamer has failed to generate a genuine issue of material fact that he engaged in protected activity under SOX Section 806. From March through July 2006, Reamer made several communications to supervisors at Ford and to the FBI. These communications can be summarized to show that Reamer: (1) felt he was coerced to report fraud, (2) complained of receiving a threatening phone call, (3) complained of waste of government resources concerning the FBI investigation, (4) requested Ford investigate "possible illegal acts" and loss of "internal controls," (5) requested the FBI internally investigate the investigation as a political maneuver, and (6) made various complaints about the individuals and motives of those conducting the investigation.

   Throughout his 2006 communications, Reamer clearly stated that he had no evidence of fraud. In fact, that Reamer did not make a complaint about fraud and the FBI's apparent disregard of that fact, were parts of his overall grievance. Reamer felt the investigation served ulterior motives and was a waste of government resources.

USDOL/OALJ Reporter at 5. The ARB observed that in an email, the Complainant had discounted a communication of fraud, and stated that he did not want to be accused of sending anyone on a wild goose chase. The ARB found, based on the record made before the ALJ, that the Complainant had not offered evidence sufficient to generate a genuine issue of material fact that he communicated a reasonable belief of a violation of the categories of protected activity enumerated under the SOX whistleblower provision.

SUMMARY DECISION; PLEADING STANDARDS FOR SOX SECTION 806 CASES

In Sylvester v. Parexel International LLC , ARB No. 07-123, ALJ Nos. 2007-SOX-39 and 42 (ARB May 25, 2011), the Respondent was a publicly traded company that tests drugs for drug manufacturers and other clients. The Respondent consistently reported to shareholders that it strictly adheres to the FDA's "Good Clinical Practice" (GCP) standards. One Complainant worked as a Case Report Forms Department Manager, and one Complainant worked as a Clinical Research Nurse. Both alleged that they were discharged in retaliation for reporting clinical research fraud (failure to adhere to GCP standards). The ALJ granted dismissal of the complaints on the ground that the Complainants' OSHA complaints failed to establish subject matter jurisdiction under the SOX because those complaints failed to allege protected activity under SOX Section 806. The ARB decided the appeal en banc to clarify several areas of SOX adjudication.

Subject matter jurisdiction

Initially, the ARB found that the ALJ erred in characterizing the issue of whether the Complainants engaged in protected activity as an issue involving subject matter jurisdiction under FRCP 12(b)(1). The ARB noted that subject matter jurisdiction - which is not particularly onerous to establish - concerns a tribunal's power to hear a case - a separate issue from the issue of whether a complainant's actions are covered as protected activity. The ARB found that subject matter jurisdiction clearly existed because the Complainants had filed complaints alleging that the Respondent violated the SOX by discharging them from employment. The ARB suggested that the ALJ's 12(b)(1) analysis, however, was essentially a 12(b)(6) analysis under a different label.

Heightened pleading standards for federal pleadings do not apply; ALJs should freely grant amendments

In regard to the ALJ's consideration of the matter, in effect, under FRCP 12(b)(6) (failure to state a claim upon which relief can be granted), the ARB found that the ALJ erred in applying the pleading standard for complaints initiating a federal court action. Rather, the ARB observed that SOX complaints are initiated before OSHA, and if the federal court pleading standard was applied, a SOX complainant would have to be mindful of those pleading requirements when first filing the complaint with OSHA. The ARB held that "SOX claims are rarely suited for Rule 12 dismissals," given that they inherently involve issues of fact. The ARB held that "ALJs should freely grant parties the opportunity to amend their initial filings to provide more information about their complaint before the complaint is dismissed, and dismissals should be a last resort. Dismissal is even less appropriate when the parties submit additional documents that justify an amendment or further evidentiary analysis under 'the ALJ rules governing motions for summary decision.'" USDOL/OALJ Reporter at 13. The ARB limited its ruling to SOX whistleblower cases, and did not voice an opinion on the application of federal pleading standards on other whistleblower statutes within the ARB's scope of authority.

Reasonable belief standard does not include a requirement that a complainant actually convey the reasonableness of the belief to management or the authorities

In his decision, the ALJ wrote:

    Complainants' many explanations and conclusory assertions in their complaints which attempt to expand or elaborate the scope of their actual reports of clinical fraud, which they allege comprise protected activity, to establish a connection with shareholder fraud are immaterial as a matter of law. The relevant inquiry is not what Complainants have alleged or argued in their complaints, but what Complainants actually communicated to Respondent prior to their respective terminations as alleged in their pleadings. Until the allegedly protected a activities are shown to have a sufficiently definitive and specific relationship to any of the listed categories of fraud or securities violations under 18 U.S.C. § 1514A(a)(1), what Complainants might have believed or been told by Respondent regarding any relationship of such false reporting to SOX is irrelevant and immaterial to the legal sufficiency of their complaints under SOX. Complainants' beliefs in such regard would also not be objectively reasonable.

Sylvester v. Parexel International LLC , ALJ Nos. 2007-SOX-39 and 42 (ALJ Aug. 31, 2007) (footnote and citations omitted) (excerpt is from the ALJ's decision, which was not quoted in full in the ARB decision). The ARB found that the ALJ had failed to acknowledge the basic requirements for establishing protected activity described in the statute. The ARB noted that the plain language of the statute provides that where the complainant's asserted protected conduct involves providing information to one's employer, the complainant need only show that he or she "reasonably believes" that the conduct complained of constitutes a violation of the laws listed at Section 1514. 18 U.S.C.A. § 1514A(a)(1). The ARB reiterated it has interpreted the reasonable belief standard to include both a subjective and objective component. The ARB stated that "[t]he reasonable belief standard requires an examination of the reasonableness of a complainant's beliefs, but not whether the complainant actually communicated the reasonableness of those beliefs to management or the authorities." USDOL/OALJ Reporter at 15 (citation omitted). Moreover, the ARB stated that the issue of objective reasonableness often involves issues of fact that cannot be decided in the absence of an adjudicatory hearing.

Thus, the ALJ's discounting as "irrelevant and immaterial" of "what the Complainants 'might have believed or been told by Respondent regarding any relationship of such false [FDA] reporting to SOX' improperly "precluded the Complainants from presenting evidence regarding the reasonableness of their alleged protected activities." Id. at 15-16.

Protected activity need not describe an actual violation that has already taken place

The ALJ had held "until enforcement action is taken," the Complainants' allegations that the Respondent had engaged in fraud were speculative and insufficiently material to the Respondent's financial picture to form a basis for securities fraud or to affect shareholders investment decisions. The ARB found that this was error both because it required a specific reference to fraud and to an illegal act that had already taken place. The ARB stated that "[a] whistleblower complaint concerning a violation about to be committed is protected as long as the employee reasonably believes that the violation is likely to happen. Such a belief must be grounded in facts known to the employee, but the employee need not wait until a law has actually been broken to safely register his or her concern." USDOL/OALJ Reporter at 16 (citations omitted).

"Definitive and specific" evidentiary standard; retreat from Platone ruling

The ARB also found that the ALJ erred in applying caseslaw using the words "definitive and specific" or "definitively and specifically" in determining whether a complainant engaged in SOX-protected activity. The ARB found that use of the words "definitively and specifically" in whistleblower retaliation cases is traced to cases arising under the Energy Reorganization Act, to flesh out a statutory catch-all provision protecting employees who assist or participate in a proceeding or any other action designed to carry out the purposes of that chapter of the ERA or the Atomic Energy Act of 1954. The caselaw construed the phrase to require the employee's actions to relate "definitively and specifically" to nuclear safety. The SOX statute, however, contained no similar language but "instead expressly identifies the several laws to which it applies." The ARB noted that Section 1514A refers to "any provision of Federal law relating to fraud against shareholders" but found that this proviso was far more specific and significantly different from the ERA's catch-all provision. The ARB found importation of the ERA "definitively and specifically" standard to SOX was inapposite and potentially conflicts with the express language of the SOX. The ARB noted that the ARB had introduced the standard in Platone v. FLYi, Inc. , ARB No. 04-154, ALJ No. 2003-SOX-27 (ARB Sept. 29, 2006), and followed it in several subsequent decisions. The ARB also noted that several circuit courts had deferred to the Platone ruling. But the ARB found that the standard had been imposed in the later cases without reflection and without further analysis of the term's origin or correct application. The ARB held that "the standard announced in Platone has evolved into an inappropriate test and is often applied too strictly." USDOL/OALJ Reporter at 18. Rather, the ARB found that the "critical focus is on whether the employee reported conduct that he or she reasonably believes constituted a violation of federal law." Id. at 19 (emphasis as in original). Thus, in the instant case, the ARB framed the issue before the ALJ as whether the Complainants provided information to the Respondent "that they reasonably believed related to one of the violations listed in Section 806, and not whether that information 'definitively and specifically' described one or more of those violations." Id . The ARB concluded that "[i]t was therefore error for the ALJ to dismiss the complaints in this case for failure to meet a heightened evidentiary standard espoused in case law but absent from the SOX itself." Id.

SOX protected activity does not necessarily have to relate to fraud against shareholders

The ARB also found that the ALJ erred in dismissing the complaints on the ground that the Complainant's had not alleged that they had referred to shareholder fraud when reporting false reporting of clinical data. The ARB stated that "[t]his constitutes error because a complaint of shareholder or investor fraud is not required to establish SOX-protected activity. " Id . The ARB looked to the SOX legislative history to find that it "was implemented to address not only securities fraud (in the aftermath of financial scandals involving Enron, Worldcom, and Arthur Anderson), but also corporate fraud generally." Id . (citation omitted). Applying the statutory interpretation "rule of the last antecedent" the ARB noted that the last of the six categories of laws about which a complaint is protected under SOX Section 806, "any provision of Federal law relating to fraud against shareholders," was the only category that referred to fraud against shareholders. The ARB held that "[i]n examining the SOX's language, it is clear that a complainant may be afforded protection for complaining about infractions that do not relate to shareholder fraud. On their face, mail fraud, fraud by wire, radio, or television, and bank fraud are not limited to frauds against shareholders." Id. at 20. Thus:

    When an entity engages in mail fraud, wire fraud, or any of the six enumerated categories of violations set forth in Section 806, it does not necessarily engage in immediate shareholder fraud. Instead, the violation may be one which, standing alone, is prohibited by law, and the violation may be merely one step in a process leading to shareholder fraud. Additionally, a reasonable belief about a violation of "any rule or regulation of the Securities and Exchange Commission" could encompass a situation in which the violation, if committed, is completely devoid of any type of fraud. In sum, we conclude that an allegation of shareholder fraud is not a necessary component of protected activity under SOX Section 806.

Id . at 21.

Elements of criminal fraud; retreat from Platone "materiality"standard

The ARB also held that some courts had misinterpreted the analysis in Platone as a requirement that SOX complainants must allege the elements of a securities law fraud claim to qualify for SOX Section 806 protection. Thus, caselaw had "merged the elements required to prove a violation of a fraud statute, e.g., materiality and scienter, with the requirements a whistleblower must allege or prove to engage in protected activity." The ARB stated:

    But requiring a complainant to prove or approximate the specific elements of a securities law violation contradicts the statute's requirement that an employee have a reasonable belief of a violation of the enumerated statutes. We agree that a complainant who blows the whistle on activity that approximates the elements of a fraud will be protected under Section 806. But because a complainant need not prove a violation of the substantive laws, we feel a complainant can have an objectively reasonable belief of a violation of the laws in Section 806, i.e., engage in protected activity under Section 806, even if the complainant fails to allege, prove, or approximate specific elements of fraud, which would be required under a fraud claim against the defrauder directly. In other words, a complainant can engage in protected activity under Section 806 even if he or she fails to allege or prove materiality, scienter, reliance, economic loss, or loss causation.

    The purpose of Section 806, and the SOX in general, is to protect and encourage greater disclosure. Section 806 exists not only to expose existing fraud, i.e., conduct satisfying the elements of a fraud claim, but also to prevent potential fraud in its earliest stages. We feel the purposes of the whistleblower protection provision will be thwarted if a complainant must, to engage in protected activity, allege, prove, or approximate that the reported irregularity or misstatement satisfies securities law "materiality" standards, was done intentionally, was relied upon by shareholders, and that shareholders suffered a loss because of the irregularity.

    Section 806's plain language contains no requirement that a complainant quantify the effect of the wrongdoing the respondent committed. We acknowledge that the Board has, in prior rulings, held that to be protected, an employee's communication must relate to a "material" violation of any of the laws listed under SOX. But the Fourth Circuit rejected this notion in Welch . The court stated that, "[a]lthough many of the laws listed in § 1514A of [SOX] contain materiality requirements, nothing in § 1514A (nor in Livingston ) indicates that § 1514A contains an independent materiality requirement" Welch , 536 F.3d at 276 (emphasis added). Accordingly, we do not impose a materiality requirement on the communication that the complainants contend is protected activity.

Id . at 22. The ARB acknowledged that a complainant's complaint might implicate such a trivial matter that it would not be considered protected activity under SOX Section 806, but noted that "[a] wide range of conduct may be important to regulatory bodies or a reasonable investor that falls short of satisfying the rigorous requirements for securities violations."

Separate opinions

Two ARB members wrote separately in a concurring opinion that they believed that the lead opinion left unresolved whether the Platone "definitive and specific" standard was still viable. The concurring opinion described why, in the view of the concurring members, the plain language of the SOX whistleblower statute does not permit dismissals of SOX whistleblower claims pursuant to a "definitive and specific" standard.

One member concurred in part and dissented in part. This member dissented from the majority's ruling sustaining the applicability of FRCP 12(b)(6) to SOX complaints. This member concluded that an ALJ's authority to summarily dismiss a meritless claim that is lacking in either legal or factual support is found in the OALJ Rule of Practice and Procedure at 29 C.F.R. §§ 18.40 and 18.41, and recourse to the pleading requirements of FRCP 8(a)(2) or the provisions of FRCP 12(b)(6) are inapposite because a SOX complaint is not equivalent to a complaint that initiates a federal court proceeding.

SUMMARY DECISION; PRO SE LITIGANT MUST BE GIVEN "FAIR NOTICE" OF REQUIREMENTS FOR RESPONDING TO A MOTION FOR SUMMARY DECISION, AND AN OPPORTUNITY TO FILE RESPONSIVE MATERIALS

During the prehearing stage of Galinsky v. Bank of America, Corp. , ARB No. 08-014, ALJ No. 2007-SOX-76 (ARB Jan. 13, 2010), the ALJ had ordered the Complainant to provide a "detailed explanation" of his claim, but did not specifically require him to adduce evidence. The ALJ required the Respondent to address the issues raised in the ALJ's order by written submission or dispositive motion. The Complainant responded with a 4 page statement of his position. The Respondent filed a 23 page memorandum with affidavits and exhibits. The ALJ treated the Respondent's response as a motion for summary decision, and granted summary judgment for the Respondent in part on the ground that the Complainant had not adduced sufficient evidence that he was engaged in protected activity under the SOX. On appeal, the ARB held that the ALJ erred procedurally. The ARB stated that it has "adopted federal precedent that requires a judge to give a pro se complainant 'fair notice' of the requirements of the summary judgment rule, and the right to file affidavits or 'other responsive materials' when confronted with a respondent's motion for summary decision." Slip op. at 2, citing Hooker v. Savannah River Co. , ARB No. 03-036, ALJ No. 2001-ERA-16 (ARB Aug. 26, 2004), slip op. at 9.

CONVERSION OF MOTION TO DISMISS TO MOTION FOR SUMMARY DECISION WITHOUT NOTICE AND DISCOVERY; ARB WILL NOT REVIEW WHERE ISSUE RAISED FOR FIRST TIME ON APPEAL AND COMPLAINANT DID NOT SHOW HOW ADDITIONAL DISCOVERY WOULD HAVE AVOIDED DENIAL OF COMPLAINT

In Lewandowski v. Viacom Inc. , ARB No. 08-026, ALJ No. 2007-SOX-88 (ARB Oct. 30, 2009), the Complainant argued on appeal that the ALJ's decision to treat the Respondent's motion to dismiss as a motion for summary decision without notice and without discovery was error. The ARB declined to consider the argument because it was raised for the first time on appeal, and because the issue on which the ALJ granted summary decision did not turn on disputed facts. Morever, the Complainant did not articulate how additional discovery would have avoided denial of the complaint.

ADMINISTRATIVE LAW JUDGE DECISIONS

SUMMARY DECISION; ADEQUACY OF HEARSAY, CONCLUSORY STATEMENTS AND STATEMENTS CONTRADICTING PREVIOUS DEPOSITION TESTIMONY IN OPPOSING MOTION FOR SUMMARY DECISION

In Wengender v. Robert Half International, Inc. , 2005-SOX-59 (ALJ Mar. 30, 2006), the Respondent objected to a portion of the Complainant's evidence advanced to oppose summary decision. The ALJ rejected an objection based on hearsay, but granted objections based on conclusory allegations. Specifically, allegations made by the Complainant based only on belief were found by the ALJ to amount to nothing more than speculation, the ALJ noting that in opposing summary judgment a non-movant may not rely on ignorance of facts, on speculation, or on suspicion. The ALJ also sustained the Respondent's objection to statements made by the Complainant which were in contradiction of previous sworn testimony, citing caselaw to the effect that "mere conclusory allegations, without support or where contradicted by former deposition testimony, will not create a genuine issue of material fact." Slip op. at 14 (citations omitted).

Time Calculations

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ADMINISTRATIVE REVIEW BOARD DECISIONS

TIMELINESS OF RESPONSE TO ALJ ORDER; SECTION 18.4(c) DOES NOT PROVIDE AN ADDITIONAL FIVE DAYS FOR MAILING A RESPONSE WHERE THE ALJ CLEARLY PROVIDED A SPECIFIC RECEIPT DUE DATE

In Rowland v. National Association of Securities Dealers , ARB No. 07-098, ALJ No. 2007-SOX-6 (ARB Sept. 25, 2009), the Complainant argued that she had been denied the benefit of the five extra days under 29 C.F.R. § 18.4(c) to mail a response to an ALJ order. The ARB rejected the argument making a distinction between an ALJ order requiring a response within a "prescribed period" (e.g., "30 days," "10 days" etc.) and a specific date specified as a deadline. In the instant case, the ALJ's order made it clear that the response would be timely if "received by" a certain date, and made it abundantly clear that filing meant date of receipt by OALJ.

Witnesses

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FEDERAL COURT DECISIONS

EXPERT WITNESSES; OPINION ON ULTIMATE LEGAL QUESTION

In Livingston v. Wyeth , No. 1:03-CV-00919 (M.D.N.C. July 28, 2006), the court granted the Plaintiff's motion to strike the affidavits of two proposed expert witnesses from consideration on the Defendant's summary judgment motion. One of the proposed witnesses was an expert in the field of FDA regulatory practices, and the other was an expert in the field of securities law. The court found both witnesses well qualified, but found that their application of law to the facts of the case on an ultimate legal question would not be helpful to the court.

ADMINISTRATIVE LAW JUDGE DECISIONS

MOTION IN LIMINE; EXPERT TESTIMONY ABOUT SECURITIES LAWS AND OTHER LEGAL MATTERS

In Lee v. Pitney Bowes, Inc. , 2006-SOX-5 (ALJ Jan. 13, 2006), the Respondent filed a Motion in Limine seeking to prevent the Complainant from calling an expert witness to testify regarding "the interpretation of securities laws or other legal matters." The ALJ found that in a SOX whistleblower case, "a fact in issue is whether Complainant reasonably believed he was reporting illegal conduct by Respondent." Consequently, the ALJ granted the Motion in Limine in regard to expert testimony about what law applies in the case and how it applies to the facts; but he denied the Motion in regard to testimony about "industry practices and commonly accepted principles which would tend to show that Complainant's belief that Respondent's conduct was in violation of the law was consistent with those practices and principles and therefore reasonable."

MOTION IN LIMINE; EXPERT OPINION OF LAW PROFESSOR ON LEGAL ETHICS ISSUE

In Welch v. Cardinal Bankshares Corp. , 2003-SOX-15 (ALJ Aug. 15, 2003), Complainant had listed as a witness a law professor with qualifications as an expert in legal ethics and professional responsibility in regard to Respondent's assertion that allowing Complainant's personal attorney to attend during meetings of Respondent's Audit Committees would have abrogated the attorney-client privilege by Respondent and its attorneys. Respondent filed a motion objecting to the witness' qualifications as an expert, which the ALJ construed as a motion in limine , arguing that the law professor's testimony was excludable because it would amount to "an expert opinion on a legal issue" which the ALJ must decide. The ALJ, however, concluded that the law professor's expert opinion would relate to an issue of fact - the reasonableness of Respondent's assertion regarding the abrogation of the attorney-client privilege in Audit Committee meetings - rather the issue of law of whether there would have been an abrogation. The ALJ also observed that formal rules of evidence did not apply to SOX proceedings and that the specialized knowledge of an expert in legal ethics and professional responsibility would clearly assist him in deciding, if required to do so, whether Respondent reasonably believed that the presence of Complainant's personal attorney would negate attorney-client privilege.

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