April 10, 2009
SARBANES-OXLEY ACT EXHAUSTION; MERE FACT THAT COMPLAINANT IS AN ATTORNEY IS NOT AN EXEMPTION FROM THE REQUIREMENT TO EXHAUST ADMINISTRATIVE REMEDIES BEFORE FILING IN FEDERAL COURT
In Curtis v. Century Surety Co. , No. 08-16236 (9th Cir. Mar. 23, 2009) (unpublished), the Ninth Circuit affirmed the District Court's ruling in Curtis v. Century Surety Co. , No. CV 05-1538 (D.Ariz. Aug. 24, 2006), granting summary in favor of the Defendant on the Plaintiff's SOX whistleblower claim because the Complainant did not fulfill the exhaustion requirements of 18 U.S.C. § 1514A(b). The Ninth Circuit found that the Plaintiff had conceded that had not exhausted; the Ninth Circuit rejected the argument that being an attorney exempts the Plaintiff from doing so in this case.
The District Court's decision contains more detail about the Plaintiff's position: that the statutory exhaustion requirement "do[es] not apply because compliance would require him to breach his fiduciary duty to Defendant and require him to divulge information subject to the attorney-client privilege in violation of the Ethics Rules of the State Bar of Arizona." This District Court found that the only authority cited by the Plaintiff, a California State Bar Ethics Alert and Washington State Bar Opinion reminding lawyers that they remain bound by the ethical rules of conduct surrounding breach of attorney-client confidences despite the passage of disclosure requirements under SOX, only related to individuals divulging privileged information, not merely information deemed confidential by an employer, and that the Plaintiff had not established how the information upon which he would have relied would have been privileged, or that the purported privileged information would have been necessary to the administrative complaint. The District Court found that Congress recognized in the SOX that there would be circumstances in which attorney employees would be whistleblowers regarding violations of securities laws, but did not create exceptions for attorneys.
PROTECTED ACTIVITY; REASONABLENESS OF PLAINTIFF'S BELIEF SCRUTINIZED FROM BOTH SUBJECTIVE AND OBJECTIVE STANDARD
In Harp v. Charter Communications, Inc. , No. 07-1445 (7th Cir. Mar. 16, 2009), the Seventh Circuit, observing that the whistleblower provision of SOX requires that the employee "reasonably" believe in the unlawfulness of the employer's actions, stated that it agreed with "the courts that have held that the reasonableness must be scrutinized under both a subjective and objective standard" Objective reasonableness 'is evaluated based on the knowledge available to a reasonable person in the same factual circumstances with the same training and experience as the aggrieved employee.'" Slip op. at 3 (citations omitted).
In Harp , the court found that the Plaintiff, the supervisor of a technical fraud unit, had failed to establish an objectively reasonable belief that her supervisor had fraudulently authorized full payment to a contractor for work that was not performed. The court found that the Plaintiff's allegation of fraud rested on a conversation with another employee in which she attempted to divine the supervisor's intent in paying the invoices, and that the statements made by the supervisor were far too ambiguous to support an objectively reasonable belief that a fraudulent payment had been ordered. Moreover, the supervisor's conduct up to the time of the allegedly fraudulent order had been to support the Plaintiff, and the ethics complaint filed by the Plaintiff with HR spoke only in terms of the supervisor trying to reach a negotiated settlement. The court also looked to subsequent actions of the supervisor, indicating that he still supported the Plaintiff, but wanted her to better document the claims of improper billing, and had not instructed her to stop her investigation. One member of the court disagreed with the majority's interpretation of the facts, and found that the discrepancies were reconcilable, and that the case should go forward to a jury.
CONTRIBUTING CAUSE; RIF OF PLAINTIFF'S ENTIRE AUDITING UNIT
In Harp v. Charter Communications, Inc. , No. 07-1445 (7th Cir. Mar. 16, 2009), the Plaintiff alleged that her termination was in retaliation for her whistleblowing activities in violation of the Sarbanes-Oxley Act. The Seventh Circuit affirmed the district court's grant of summary decision, finding that the Plaintiff had failed to point to any evidence to indicate that her termination was attributable to something other than the financial problems that necessitated a RIF. The Plaintiff's entire technical auditing department plus about 25 employees from other departments had been RIFed. The record showed that the Employer had not met its budget revenues, and as a result missed its cash flow in the first month of the year, resulting in a need to address the problem as soon as possible. The Plaintiff's supervisor was instructed to move quickly to reduce expenses, and he decided to eliminate positions least related to customer recruitment and retention to minimize impact on revenues. Consequently, the Plaintiff's audit department was targeted, and its functions turned over to a department in charge of quality control. The court found that the Plaintiff was only able to reply to these facts by pointing out minor discrepancies as to when the directive to reduce costs was issued. Rather, the Plaintiff mainly focused on the timing of the RIF, which was proximate to her protected activity. The court, however, found that the timing was also proximately tied to revenue shortfall. Moreover, the court found that the sheer scope of the RIR was relevant to whether an inference of retaliation could be drawn. The court stated that a "jury would have to conclude that in an effort to cover up the retaliatory action against [the Plaintiff], [the Defendant] laid off the entire audit department as well as approximately 25 other individuals in other departments." One member of the court dissented. Although acknowledging that on initial blush the Plaintiff's contention that the RIF was merely cover for retaliation was highly implausible, the dissenter found that the Plaintiff had offered enough evidence to make the contention plausible enough to go to a jury.
EXHAUSTION OF ADMINISTRATIVE REMEDIES; FAILURE TO NAME EMPLOYER AS DEFENDANT
In Smith v. Psychiatric Solutions, Inc. , No. 3:08-cv-00003 (N.D.Fla.. Mar. 31, 2009), the court held that the Plaintiff could only pursue her SOX whistleblower complaint in federal court against defendants named in her administrative complaint because the federal court's jurisdiction depended on the claim having been administratively exhausted. 18 U.S.C. § 1514(b)(1)(A). The Plaintiff had only named the publicly traded parent corporation in her OSHA complaint, and had not named the subsidiary for which she worked. Since the Plaintiff did not allege in her complaint or amended complaint that the parent company was her employer, a necessary element of a SOX whistleblower claim, the parent company was entitled to summary judgment. Even if the parent had been alleged to be the Plaintiff's employer, there was no evidence to support an employment relationship. The fact that an insurance document had the parent's name on it and that the parent had sent an official to investigate the Plaintiff's post-termination grievances were legally insufficient to establish such an employment relationship, while voluminous other documentary evidence suggested that the subsidiary was the Plaintiff's employer.
SURFACE TRANSPORTATION ASSISTANCE ACT [STAA Digest VII A 2 e]
COVERED EMPLOYEE; SECURITY MANAGERIn Luckie v. Administrative Review Board, USDOL , No. 07-13997 (11th Cir. Mar. 24, 2009)(per curiam) (unpublished) (case below ARB Nos. 05-026, 05-054, ALJ No. 2003-STA-39), the Eleventh Circuit affirmed the ARB's finding that a District Security Manager's occasional touching of packages -- unrelated to uploading, unloading, or the sorting of packages -- failed as a matter of law to qualify the Complainant as a freight handler under the whistleblower provision of the STAA. The court also affirmed the ARB's ruling rejecting the ALJ's conclusion that the Complainant was covered because he was "an individual who directly affected commercial safety." The ARB found that found that the ALJ failed to consider whether the Complainant's security responsibilities directly affected commercial motor vehicle safety. Reviewing the record, the ARB concluded as a matter of law that the Complainant's job responsibilities -- which affected worker safety in UPS facilities -- did not directly affect safety on the highways.