Federal Court Whistleblower Decisions - 2010

Aviation Investment and Reform Act for the 21st Century

FEDERAL CIRCUIT COURT LACKS JURISDICTION TO REVIEW ARB DECISIONS

In Williams v. U.S. Dep't of Labor , No. 2010-3029 (C.A.Fed Mar. 23, 2010) (case below ARB No. 08-063, ALJ No. 2008-AIR-3), the Federal Circuit Court ruled that under 28 U.S.C. § 1295 it lacked jurisdiction to review Administrative Review Board decisions and transferred the case to the regional 9th Circuit pursuant to 49 U.S.C. § 42121(b)(4)(A).

AIR21 CLAIM UNTIMELY FILED

In Sullivan v. Pinnacle Airlines, Inc ., No. 10-208 (D.Minn. May 28, 2010), the District Court dismissed an employee's AIR21 claim as untimely where the employee alleged that he was terminated due to his whistleblower status but did not file a lawsuit until three years after his termination date. The court rejected the employee's argument that his whistleblower claim fell within the scope of the Sarbanes-Oxley Act.

Environmental Statutes

[Nuclear & Environmental Whistleblower Digest VII D 4]
RECUSAL OF ALJ; CIRCUIT COURT AFFIRMS DISTRICT COURT'S DISMISSAL OF A MAMDAMUS ACTION FOR LACK OF SUBJECT MATTER JURISDICTION (ERA CLAIM)

In Newport v. U.S. Dep't of Labor , No. 09-00186 (8th Cir. Mar. 16, 2010) (case below 2005-ERA-24), the Administrative Review Board affirmed the ALJ's dismissal of the plaintiff's ERA whistleblower claim as a sanction for the plaintiff's improper conduct. The plaintiff then brought a mandamus action in the District Court, seeking to have the ALJ recused and his administrative action reinstated. The 8th Circuit upheld the District Court's dismissal of the plaintiff's mandamus action upon concluding that it lacked subject matter jurisdiction.

[Nuclear and Environmental Digest VIII B 1 b]
TIMELINESS OF PETITION FOR ARB REVIEW; COURT OF APPEALS FINDS THAT ARB'S REFUSAL TO HEAR ERA COMPLAINT WAS NOT ARBITRARY, CAPRICIOUS, OR AN ABUSE OF DISCRETION

In Hasan v. U.S. Dep't of Labor , No. 10-1288 (3d Cir. Oct. 6, 2010)(per curiam)(unpublished), pet. reh'g den. , (3d Cir. Nov. 1, 2010) (case below ARB No. 04-045, ALJ No. 2003-ERA-31), the plaintiff filed in May 2003 a complaint under Energy Reorganization Act (ERA) alleging that he had not been hired by a consulting firm as an engineer based on his past whistleblowing activities. The ALJ recommended granting summary judgment in favor of the respondent and denying the complaint. On May 18, 2005, the Administrative Review Board (ARB) accepted the recommendation and denied the plaintiff's complaint. The plaintiff did not file a petition for review from the ARB's May 2006 decision. On November 4, 2009, more than four years later, the plaintiff filed a motion for reconsideration. On January 13, 2010 the ARB denied the motion on the grounds that "the motion was not filed within a reasonable time and because the plaintiff had given no reason to justify reconsideration." Hasan at 1.

The plaintiff filed a timely petition for judicial review. The Court of Appeals denied his petition on the grounds that, if the ARB has the power under the ERA to reconsider its ruling, "its refusal to reconsider its ruling four years later for the reasons argued by the plaintiff was not arbitrary, capricious, or an abuse of discretion." See 5 U.S.C. § 706(2)(A). The Court of Appeals did not address the question of whether the ARB has the power under the ERA to reconsider its ruling.

[Nuclear & Environmental Digest VIII C 2]
SUBJECT MATTER JURISDICTION IN COURT OF APPEALS OVER CERCLA MATTER WHERE DOL ALSO RESOLVED CLAIMS THAT AROSE UNDER STATUTES PERMITTING DIRECT REVIEW BY THE COURT OF APPEALS

In Lewis v. U.S. Dept. of Labor, Adm. Rev. Bd. , No. 08-12114 (11th Cir. Feb. 24, 2010) (per curiam) (unpublished) (case below ARB No. 04-117, ALJ Nos. 2003-CAA-5 and 6), the Court of Appeals held that it had subject matter jurisdiction over the Complainant's entire petition for review of the ARB's final order on a complaint that had alleged violations of the whistleblower provisions of the CAA, SDWA, CERCLA, TSCA, FWPPCA, and SDWA, even though CERCLA provides for exclusive direct review in district court.

[Nuclear and Environmental Digest IX B 2]
COURT OF APPEALS HELD THAT THE FORMER EMPLOYEE DID NOT HAVE ADDITIONAL TIME TO FILE THE INITIAL BRIEF BEYOND THE DEADLINES SET BY THE ARB, AND THAT THE ARB COULD DISMISS THE EMPLOYEE'S APPEAL DUE TO HIS FAILURE TO MEET FILING DEADLINE FOR INITIAL BRIEF ON APPEAL

In Ellison v. U.S. Dep't of Labor , No. 09-13054 (11th Cir. June 17, 2010)(unpublished)(case below 2005-CAA-9), a former employee, who allegedly was terminated in retaliation for activities protected under federal whistleblower statutes, filed a complaint with OSHA, which determined that the complaint lacked merit. An administrative law judge granted the former employer's motion for summary disposition. On appeal, the ARB dismissed the employee's appeal on the grounds that his initial brief was untimely and his counsel's explanation for late filing was not credible. The Court of Appeals held that: (1) the former employee did not have additional time to file the initial brief, beyond the deadlines set by the ARB; and (2) the ARB could dismiss the former employee's appeal due to his failure to meet filing deadline for the initial brief on appeal.

[Nuclear and Environmental Digest XIII D]
AVOIDANCE OF LIABILITY FOR RETALIATORY ACTIONS OF NON-SUPERVISORY EMPLOYEE WHERE RESPONDENT TAKES PROMPT DISCIPLINARY ACTION REASONABLY CALCULATED TO PREVENT FURTHER HARASSMENT

In Lewis v. U.S. Dept. of Labor, Adm. Rev. Bd. , No. 08-12114 (11th Cir. Feb. 24, 2010) (per curiam) (unpublished) (case below ARB No. 04-117, ALJ Nos. 2003-CAA-5 and 6), the Eleventh Circuit assuming, without deciding, that subjecting an employee to a hostile work environment in retaliation for protected activity constitutes adverse employment action, found that substantial evidence supported the ARB's conclusion that the Respondent (EPA) was not liable for one of its employee's retaliatory conduct where that employee had no supervisory authority over the Complainant and because EPA took prompt disciplinary action against the employee that was reasonably calculated to prevent further harassment of the Complainant by the employee.

[Nuclear and Environmental Whistleblower Digest XVIII C 8]
FAILURE TO PROSECUTE APPEAL BEFORE THE ARB; DENIAL OF PETITION FOR REVIEW

In Newport v. U.S. Dep't of Labor , No. 10-1572 (8th Cir. Dec. 30, 2010) (per curiam)(unpublished) (Case below ARB No. 10-005, ALJ No. 2009-ERA-4), the Court of Appeals denied the employee's petition for review of a final order of the ARB dismissing his appeal for failure to prosecute. The Court concluded that the ARB's decision was not arbitrary, capricious, an abuse of discretion, contrary to the law, or unsupported by substantial evidence in the record.

Federal Railroad Safety Act

PREEMPTION; TENTH CIRCUIT AFFIRMS FINDING THAT PRE-2007 AMENDMENT FRSA PREEMPTED STATE LAW CLAIM FOR WRONGFUL TERMINATION IN VIOLATION OF PUBLIC POLICY PREMISED ON A CLAIM OF RETALIATION WITHIN THE SCOPE OF THE FRSA, BUT ADDS THAT AMENDMENTS ADDED A “NO PREMPTION” PROVISION (49 U.S.C. § 20109(g)) THAT WOULD CHANGE THE RESULT

Abbott v. BNSF Ry. Co. , 383 Fed. Appx. 703 (10th Cir. 2010): Plaintiff filed a suit alleging retaliatory discharge in violation of public policy and breach of contract in state court.

Plaintiff had been employed by Defendant since 1979 and in 2006 was promoted to general director of railroad training services. He became aware that a vice-president who maintained an engineering license and needed to be recertified had conspired with another employee to obscure the security cameras so that the other employee could take the recertification test on the vice-president’s behalf. This was reported, and led to the retirement of the vice-president and salary grade reduction for the other employee. Later that year issues were raised about Plaintiff’s performance, which led in 2007 to his removal from a salaried position. He stayed with the railroad by exercising union seniority rights to take an engineering position. There was no FRSA complaint—rather, Plaintiff

Defendant railroad removed the suit to federal court, claiming both diversity jurisdiction and federal question jurisdiction on the grounds that the FRSA preempted the state causes of action. The district granted a motion to dismiss the retaliatory discharge claim, agreeing that it was preempted by the FRSA. The district court later granted summary judgment to the railroad on the contract claim on other grounds. Plaintiff appealed.

The Tenth Circuit affirmed. The amendments to the current version of the FRSA became effective in August 2007, after the date that Plaintiff was effectively demoted. The amendments added 49 U.S.C. § 20109(g): “No preemption. Nothing in this sections preempts or diminishes any other safeguards against discrimination, demotion, discharge, suspension, threats, harassment, reprimand, retaliation, or any other manner of discrimination provided by Federal or State law.” But the Tenth Circuit agreed with the district court that the FRSA as it existed before this addition did preempt the state law claim. Plaintiff argued that since the FRSA as it existed had incorporated the Railway Labor Act, and it was established that the Railway Labor Act did not preempt state law claims of this sort, the same result should follow. But the Tenth Circuit disagreed, noting that the FRSA as it existed at the relevant time only adopted the dispute resolution mechanisms of the Railway Labor Act. Preemption is a question of federal intent, and the district court’s conclusion that the intent with the earlier version of the FRSA was to pre-empt state law claims for violations of railway safety was sound.

The Tenth Circuit added: “Congress later decided not to preempt state law claims like [Plaintiff’s] claim for wrongful discharge, so our holding will likely have little effect in future cases.”

Sarbanes-Oxley Act

Statute and Regulations - Preemption

A FEDERAL SOX WHISTLEBLOWER CLAIM DOES NOT PREEMPT THE STATE LAW CAUSE OF ACTION FOR WRONGFUL DISCHARGE IN VIOLATION OF PUBLIC POLICY

In Jones v. Home Federal Bank , No. 1:09-cv-00336-CWD (D. Idaho Mar. 17, 2010) (case below 2009-SOX-32), the plaintiff alleged that she was terminated after working for Home Federal Bank for 10 weeks because she had objected to, opposed and provided information to executive officers of Home Federal Bank about conduct she reasonable believed constituted a violation of the rules and regulations of the SEC and other provisions of federal and state law relating to fraud against shareholders. The defendant's filed a motion to strike contending that the plaintiff's state law claim, wrongful termination in violation of public policy, must be stricken because the relevant public policy that the plaintiff claims was violated by her discharge is contained in SOX, which provides a federal remedy. The District Court denied the defendant's motion on the basis that granting the motion would contradict the clear intent of SOX not to preempt or diminish the rights, privileged or remedies under state law.

Removal to Federal Court

COLLATERAL ESTOPPEL DID NOT APPLY TO DOL ADMINISTRATIVE PROCEEDINGS UNDER SOX WHISTLEBLOWER PROVISIONS WHEN DECISION WAS ON APPEAL AND MORE THAN 180 DAYS HAD PASSED SINCE THE INITIAL FILING OF THE COMPLAINT WITH THE DEPARTMENT

In Lawson v. FMR LLC , Nos 08-10466, 08-10758 (D. Mass. Mar. 31, 2010)(Memorandum and Order)(case below 2007-SOX-27), two former employees of a nonpublic mutual fund company sought the protection of Sarbanes-Oxley Act whistleblower provision, alleging that they were unlawfully retaliated against after complaining about the company's improper business activities. In denying the employers' motion to dismiss the District Court found: (1) principles of collateral estoppel did not apply to Department of Labor administrative proceedings under SOX whistleblower provisions when the decision was on appeal and more than 180 days had passed since the initial filing of the complaint with the Department; and (2) plaintiffs were covered "employees" for purposes of SOX whistleblower provision.

Procedure Before and Review by Federal Courts

INFORMAL PLEADING RULE; SUFFICIENT INFORMATION IN HEADING AND BODY OF ADMINISTRATIVE COMPLAINT TO FIND THAT PARENT COMPANY WAS NAMED AS A DEFENDANT

In Jones v. Home Federal Bank , No. 1:09-cv-003366-CWD (Jan. 15, 2010) (case below 2009-SOX-32), the parent company Defendant moved to be dismissed from the Plaintiff's federal court action because it had not been named as a Defendant in the administrative complaint filed with OSHA. The Chief Magistrate Judge, although acknowledging authority requiring specific naming of defendants in the OSHA complaint to put OSHA on notice of which parties are to be investigated, denied the motion because the administrative complaint had identified the Complainant's employer as the subsidiary, and identified the parent company with an asterisk and note to the heading of the complaint. The magistrate judge found this sufficient under the informal complaint requirements. The judge found other information within the heading of the administrative complaint that supported this conclusion, such as phone numbers and addresses. The judge also found that the parent had received notice of the administrative action and its potential liability in a letter from OSHA. The body of the complaint also specifically alleged that the parent company controlled employment and other decisions of the subsidiary and that the companies were so interrelated as to constitute one entity.

COURT OF APPEALS HELD THAT THE SECRETARY OF LABOR'S DECISION TO INVESTIGATE AND PROSECUTE A COMPLAINT UNDER SOX IS NOT SUBJECT TO ALJ OR JUDICIAL REVIEW

In Fleszar v. U.S. Dept. of Labor , No. 09-2423 (7th Cir. Mar. 23, 2010) (cases below 2007-SOX-30; 2008-SOX-16), the Court of Appeals held that the Administrative Review Board properly ruled that a former employee could not pursue a claim that her former employer, the American Medical Association, fired her for whistleblowing activity in violation of SOX. The Department of Labor declined to investigate the former employee's claim against her employer because the employer is a nonprofit membership organization that does not issue stocks and, therefore, is not covered by SOX. The administrative law judge agreed as did the ARB in making the agency's final decision.

On appeal the former employee argued that the ALJ should have ordered the Secretary of Labor to conduct an investigation; however, the Court of Appeals disagreed holding that the decision of the Secretary of Labor as to whether to investigate and prosecute a complaint concerning a violation of the SOX whistleblower-protection provision is not subject to review by an ALJ, nor is it open to judicial review. Prosecutorial decisions are committed to agency discretion. See 20 C.F.R. § 1980.109(a); 5 U.S.C. § 701(a)(2)

NO SUBJECT MATTER JURISDICTION IN FEDERAL COURT WHERE PLAINTIFF FAILED TO FOLLOW THE ADMINISTRATIVE PROCEDURES UNDER SOX

In Nieman v. Nationwide Mutual Insurance Co. , No. 09-3304 (C.D. Ill. Apr. 8, 2010), an employee brought an action in state court against his employer, its affiliates, and certain management personnel, alleging that he "suffered various adverse employment actions in violation of common law and constitutional protections against retaliation and/or discrimination." After removal to federal court, the defendants filed a motion to dismiss in part. The District Court held that it did not have jurisdiction over a SOX whistleblower claim where the employee did not follow the required administrative procedures. In this case, Plaintiff admitted that he did not follow the administrative procedures proscribed by SOX. The Court reasoned that it did not have subject matter jurisdiction over his claims because following the administrative procedures prescribed by § 1514A is necessary to give a federal court jurisdiction over the claim.

COURT OF APPEALS APPLIES "CAPRICIOUS AND ARBITRARY" STANDARD TO REVIEW AND UPHOLDS ARB DECISION UNDER SOX

In Klopfenstein v. Admin. Review Bd . , 10-60144 (5th Cir. Nov. 23, 2010)(per curiam)(unpublished)(case below ARB Nos. 07-021, -022, ALJ No. 2004-SOX-11), a former employee appealed an ARB decision, 2009 WL 6546648, which affirmed an ALJ's decision that his termination did not violate the whistleblower protection provisions of Sarbanes-Oxley. The Court of Appeals reviewed the ALJ's conclusions under the "highly deferential arbitrary and capricious standard, which focuses on 'whether any agency articulated a rational connection between the facts and the decision made.'" Klopfenstein at. 2. The Court of Appeals held that there was substantial evidence to support the ALJ's findings that the decision to terminate the employee was not the result of an employee purported whistleblowing regarding discrepancies with inventory balance sheets. The Court of Appeals, therefore, concluded that the ARB's decision was not arbitrary or capricious and denied the employee's petition for review.

JURY TRIAL; WHETHER RIGHT TO JURY TRIAL IS AVAILABLE UNDER SOX

In Jones v. Home Federal Bank , No. 1:09-cv-003366-CWD (Jan. 15, 2010) (case below 2009-SOX-32), the Chief Magistrate Judge struck the Plaintiff's jury demand on her SOX claim pursuant to the logic of the court in Schmidt v. Levi Strauss, Co. , 621 F.Supp.2d 796, 806 (N.D.Ca. 2008), but without prejudice to renew the demand if later legal authority supports such a demand. The Schmidt court had determined that the SOX statute does not provide for a jury trial, and therefore it was necessary to analyze the right under a Seventh Amendment test which requires (1) comparison of the statutory action to actions in England prior to the merger of courts of law and equity, and (2) an examination of the remedy sought and a determination of whether its nature is legal or equitable. If the remedy is equitable, a jury trial is not available. If the factors weigh in favor of a jury trial, the court must still consider whether Congress had assigned adjudication to a non-Article III adjudicative body that does not use a jury as a fact-finder. The Chief Magistrate Judge described the Schmidt court's analysis as follows: "[A]lthough a SOX claim is analogous to one that could be brought in a court of law, the nature of the remedy is restitutionary and equitable, and because the second step of the test is more important than the first, a jury trial is not available. Id. at 806. Further, the court found that, independently of the two factors weighing against the right to a jury for SOX claims, no right to a jury trial exists because Congress expressly assigned the right to adjudicate a SOX claim to the Secretary of Labor, a non-Article III tribunal. Id . (citing 28 U.S.C. § 1514A(b)(2)(A))." Jones , slip op. at 14.

NO RIGHT TO JURY TRIALS ON SOX CLAIMS

In Van Asdale v. International Game Technology , No. 3:04-CV-00703-RAM (D. Nev. Apr. 13, 2010), the plaintiffs were former corporate counsel for the defendant who sued the defendant for their dismissals which they allege were done in retaliation for their protected activity of reporting suspected IGT shareholder fraud to federal authorities. Before the court was plaintiffs' Motion for Certification of the Nevada Supreme Court and/or for Reconsideration, which the court denied. On plaintiff's Motion to Retax Costs and Fees, the court granted in part and denied in part.

The court granted the defendant's Motion to Strike Jury Demand. At issue was whether plaintiff's were entitled to a jury trial on their § 1514A claims. The defendant argued that nothing in the language of SOX provides a right to a jury or indicates any intent by Congress to create a right to a jury trial for a SOX claim. In contrast, the plaintiffs contended that the statutory text of SOX provides a right to jury trial. The plaintiffs primarily argued that the statutory language "all relief necessary to make the employee whole" supports classifying the damages under SOX as "restitutionary," which makes them legal rather than equitable in nature. The Court rejected this argument and concluded that the statutory text of § 1514A does not imply a statutory jury right. The court cited to two cases that have specifically addressed this SOX statutory language and concluded that the intended purpose of such remedies are equitable in nature and does not imply a statutory jury right. See Walton v. Nova Info. Sys ., 514 F. Supp.2d 1031, 1034 (E.D. Tenn. 2007) and Schmidt v. Levi Strauss & Co ., 621 F.Supp.2d 796, 804 (N.D.Cal. 2008).

NO RIGHT TO JURY TRIAL ON SOX CLAIMS

In Skidmore v. ACI Worldwide, Inc ., No. 8:08CV01 (D.Neb. July 20, 2010), the District Court granted the defendant's motion to strike, pursuant to Fed.R.Civ.P. 39(a)(2), the plaintiff's demand for a jury trial on a SOX claim.

NO PROTECTED ACTIVITY OR CAUSATION UNDER SOX; NO JUDGE ERROR IN FAILING TO RECUSE

In Fraser v. Fiduciary Trust Co. Int'l , No. 09-4188-cv (2d Cir. Oct. 14, 2010)(unpublished)(case below 2003-SOX-28), the pro se plaintiff appealed from an award of summary judgment in favor of the defendants on his claim of retaliatory discharge for protected whistleblowing activity in violation of § 1514A of SOX Act. The Court of Appeals held that summary judgment was appropriately entered primarily because the plaintiff failed to show that he engaged in protected activity and that the alleged protected activity was a pretext for retaliation. The Court found that the plaintiff's retaliation claims failed as a matter of law under the McDonnel Douglas Corp. v. Green , 411 U.S. 792, 802-05 (1973) burden shifting framework and the SOX burden shifting framework. S ee 49 U.S.C. § 42121(b)(2)(B); see also 18 U.S.C. § 1514A(b)(2)(C). (Some sister circuits have found that the frameworks are not identical).

Fraser submitted that the district judge erred in failing to recuse himself after learning that he and the defendant were both members of the Lower Manhattan Development Corporation. The Court of Appeals review is limited to plain error, see United States v. Carloton , 534 F.3d 97, 100(2d. Cir. 2008), which the court did not identify in this case. The district judge ceased his work with the Corp in 2005 and had no recollection of ever meeting the defendant.

Filing of Complaint; Timeliness; Equitable Tolling

COURT OF APPEALS FINDS THAT ARB PROPERLY DISMISSED COMPLAINT UNDER SOX AS UNTIMELY; EQUITABLE TOLLING AND EQUITABLE ESTOPPEL DID NOT APPLY; SUFFICIENT INFORMATION TO MAKE A PRIMA FACIE CASE; FRAUDULENT CONCEALMENT MUST INVOLVE CONDUCT ABOVE AND BEYOND WRONG UPON WHICH CLAIM IS FILED

In Coppinger-Martin v. Solis, Sec. of U.S. Dep't of Labor , No. 09-73725 (9th Cir. Nov. 30, 2010)(case below ARB No. 07-067, ALJ No. 2007-SOX-19), the plaintiff sued her former employer for allegedly violating the whistleblower-protection provisions under SOX. The plaintiff alleged that her former employer terminated her employment in retaliation for her reporting to supervisors conduct she believed violated the rules and regulations of the SEC. The employer asserted that she was terminated because her job duties were eliminated and there were no other opportunities for her in the company. The ALJ dismissed the plaintiff's complaint as untimely filed and the ARB affirmed. The Court of Appeals concluded that the ARB properly dismissed the plaintiff's complaint as untimely and denied the petition for review.

The Court of Appeals found that the plaintiff's claim accrued, and the statute of limitations began to run, when she learned of the actual injury, i.e. that her employer had decided to terminate her employment. The plaintiff filed her complaint more than 90 days after her final day of work, therefore, unless the date of accrual was tolled, her complaint was untimely filed. The plaintiff argued that equitable tolling should extend the filing period because she was not aware of her employer's retaliatory motives until three months after her termination date, when she learned that other employees were performing many of her former job duties.

"Equitable tolling may be applied if, despite all due diligence, a plaintiff is unable to obtain vital information bearing on the existence of his claim. " … If a reasonable plaintiff would not have knowing of the existence of a possible claim within the limitations period, then equitable tolling will serve to extend the statute of limitations for filing suit until the plaintiff can gather what information he needs.

Coppinger-Martin at 3. The Court of Appeals found that the plaintiff's equitable tolling argument failed for two reasons. First, she retained counsel a month after she was terminated at which time she was "charged with constructive knowledge of the law's requirements." Id . Second, under the burden-shifting framework of the SOX whistleblower-protection provision, the plaintiff had sufficient information to make a prima facie case on the date the decision to terminate her employment had unquestionably been made and communicated to her.

The plaintiff asserted that equitable estoppel should have prevented her former employer from asserting a statute of limitation defense because the company fraudulently concealed its motive in terminating her employment. The Court of Appeals rejected this argument, stating that "the plaintiff must point to some fraudulent concealment, some active conduct by the defendant ' above and beyond the wrong upon which the plaintiff's claim is filed, to prevent the plaintiff from suing on time.'" Coppinger-Martin at 4. The court found that the plaintiff's attempt to invoke equitable estoppel merged the substantive wrong with the tolling doctrine.

Protection of Information; Privacy; Confidentiality

PROTECTIVE ORDER; NO WAIVER OF ATTORNEY CLIENT PRIVILEGE AND WORK PRODUCT DOCTRINE UNDER SOX

In Robinson v. Morgan Stanley , No. 06-C-5158 (N.D.Ill Mar. 17, 2011), the District Court granted the defendant's motion for a protective order finding that the communications at issue in the discovery dispute were created in preparation of litigation and, therefore, protected under the work product doctrine and attorney client privilege. The court reasoned that this discovery dispute was governed by Upjohn Co. v. United States , 449 U.S. 383, 101 S.Ct. 677, 66 L.Ed2d 584 (1981) because: (1) there were questions as to the legality of certain activities raised by an auditor--the plaintiff; (2) the company, through its legal department, and along with an outside counsel firm, undertook an investigation into the plaintiff's SOX complaint that included interviews with employees; (3) all the communications were intended to be and were kept confidential; and (4) the memo at issue in the discovery dispute was produced at the request of corporate counsel and was clearly designed to allow the attorneys to provide the company with informed legal advice on the subject of the plaintiff's charges.

The court found that the plaintiff failed to provide any insights as to how the circumstances in this case deviate from those in Upjohn , which would prevent it from governing disposition in this case. The court also found that there was no waiver in privilege when the defendants provided a summary of their investigation to plaintiff nor when the defendant's submitted the summary as an exhibit to one of their filing. The court found that these disclosures were nothing more than disclosure of the fact that an investigation was conducted overseen by counsel and that counsel's conclusion was that the plaintiff's charges were unfounded. The Court stated that the summary of the investigation did not reveal the substance of the underlying communications or analysis and thus did not constitute a waiver.

DISTRICT COURT FOUND THAT NEITHER SOX NOR OSHA GUIIDELINES PROHIBIT DISCLOSURE OF A WHISTLEBLOWER COMPLAINT AND INFORMATION REGARDING INVESTIGATION OF THE ALLEGATIONS OF THAT COMPLAINT

In Haley v. Merial, Ltd , No. 4:09-CV-94 (N.D.Miss. July 7, 2010), the District Court had previously granted plaintiffs' motion to expedite discovery responses having determined that the plaintiffs' should be allowed to conduct limited written discovery related to their motion for preliminary injunction that was pending before the Court. Before the Court was the plaintiffs' motion to compel discovery responses related to the investigation of an OSHA whistleblower complaint. The defendants' objected to the request primarily arguing that SOX and OSHA guidelines prohibit full disclosure of the requested whistleblower complaint and information regarding investigation of the allegations of that complaint. The defendants further argued that there were policy reasons behind maintaining the confidentiality of whistleblowers that supports nondisclosure of the information and that they would be prejudiced in the OSHA investigation by such interference. The Court found the defendants arguments to be unconvincing reasoning that the defendants failed to point to any authority supporting their claim that SOX prohibits disclosure and "very weak" authority in support of their claim that OSHA guidelines prohibit disclosure. The Court found it to be quite apparent that the OSHA guidelines upon which the defendants relied were designated to ensure that the agency itself complies with the Privacy Act and Freedom of Information Act during its investigation of a whistleblower complaint. With regards to the policy argument, OSHA's guidelines provide that the respondent's copy of the whistleblower complaint may contain redactions of "personal, identifiable information" about third parties.

DISCOVERY RULING COMPELING PARTIES TO CONFER REGARDING DISCRETE SEARCH TERMS FOR ESI AND "CONFIDENTIAL" DESIGNATION ON DOCUMENTS

In Trusz v. UBS Realty Investors LLC , No. 3:09 CV 268 (D.Conn Sept. 7, 2010), the plaintiff filed a motion to compel the production of electronically stored information alleging that the defendant's production of over 4 million pages of documents in response to the discovery order was a "document dump." The Court found that the issues raised in the motion largely could have been eliminated had counsel actually conferred with each other about refining search terms. The Court ordered the parties to have an in-person conference "in order to ascertain if there are more discrete search terms, or combinations of search terms, that can applied by defendant, so that the volume of documents produced are substantially less that 1.8 million, with the expectation that as a result, a significantly higher percent of the documents captures by the searches will be relevant." Trusz at 5. Due to the sheer volume of documents, the Court also ordered counsel for the respective parties "to confer further regarding what is the most efficient manner, in terms of costs and time, to review the four million pages produced by defendants to remove the confidential designation." Id . at 9. In the absence of any agreement, the Court ordered the matters to be addressed by a Special Master.

Covered Respondent - Covered Employee

SOX PROHIBITS RETALIATION AGAINST AN INDIVIDUAL WHO IS AN EMPLOYEE OF A PUBLICLY HELD COMPANY'S CONTRACTOR, SUBCONTRACTOR, OR AGENT

In Lawson v. FMR LLC , Nos 08-10466, 08-10758 (D. Mass. Mar. 31, 2010)(Memorandum and Order)(case below 2007-SOX-27), two former employees of a nonpublic mutual fund company sought the protection of Sarbanes-Oxley Act whistleblower provision, alleging that they were unlawfully retaliated against after complaining about the company's improper business activities. In denying the employers' motion to dismiss the District Court found that the nonpublic mutual fund company served as the investment advisor for the publicly held mutual funds, therefore, the firm's employees were covered by the SOX whistleblower protections. The mutual fund company tried to argue that the former employees were outside the protection of SOX because they were not employed directly by the mutual funds that were owned by public investors, however, the Court found that SOX also prohibits retaliation against an individual who is an employee of a publicly held company's contractor, subcontractor, or agent.

CERTIFICATION OF INTERLOCUTORY APPEAL REGARDING THE APPLICABILITY OF SOX TO NON-PUBLIC AFFILIATES

In Lawson v. FMR, LLC , Nos. 08-10466, 08-10758 (D.Mass. July 28, 2010)(case below 2007-SOX-27), in two separate cases, employees of nonpublic companies in the mutual fund industry sought the protection of the SOX whistleblower provision, alleging their employers unlawfully retaliated against them after they complained of employers' improper business activities. The District Court dismissed the action in part; however, the Court found that the employees did state a claim under SOX. The Court granted the employer's motion that the dispositive issue of SOX's applicability be certified under 28 U.S.C. § 1292(b) for interlocutory appeal to the Federal Court of Appeals. Section 1292(b) permits certification of controlling questions of law, as to which there is substantial ground for difference of opinion, the immediate appeal of which may materially advance the ultimate termination of the litigation. First, the Court reasoned that the question of applicability of the statute to non-public affiliates in the mutual fund industry plainly controls this litigation. Second, the Court found that different views about the applicability question have been stated in a number of judicial and administrative cases. Third, the effect of a First Circuit opinion on the question earlier rather than later—whether an affirmation or reversal—would materially advance termination of these cases in inferior federal courts.

DISTRICT COURT CONCLUDED THAT PLAINTIFF WAS NOT A COVERED EMPLOYEE UNDER SOX BECAUSE THE NAMED EMPLOYER WAS A NON-PUBLIC SUBSIDIARY OF A PUBLIC PARENT COMPANY AND NOT ITSELF A PUBLICLY TRADED COMPANY

In Hein v. AT&T Operations, Inc . , No. 09-CV-291 (D.Colo. Dec. 17, 2010)(case below 2008-SOX-32), a former employee sued her former employer for retaliation in violation of the Sarbanes-Oxley Act, alleging that she was retaliated against for reporting to executives that a directive to re-code contracts within a recording system violated SOX. The plaintiff alleged that she was reprimanded, given work assignments, sent to a fitness for duty examination and eventually terminated in retaliation for her alleged protected activity. The defendant moved for summary judgment claiming that the plaintiff could not prove that she was a covered employee under SOX since the defendant, AT&T Operations, Inc., is a corporate subsidiary of AT&T and not itself a publicly traded company. The defendant further alleged that the plaintiff did not engage in protected activity under SOX because the alleged violations did not pertain to matters that would be material to stockholders. Additionally, the defendant asserted that the plaintiff could not show that she experienced any pre-termination adverse employment action or that her complaints were a contributing factor in her employment termination.

The District Court found that in light of the "corporate law principle" that parent companies are not liable for their subsidiaries' actions and the fact that Congress supported this rationale by mentioning subsidiaries of public companies in SOX provisions other than § 1514A, the plaintiff was not a covered employee under §1514A. Accordingly, the Court granted the defendant's motion for summary judgment concluding that the defendant was not itself a publicly traded company subject to § 1514A and that the plaintiff failed to also name the parent company as a defendant.

Arbitration Agreements

ARBITRATION AGREEMENTS UNDER SOX

In Hill v. Ricoh Americas Corp . , No. 09-3182 (10th Cir. Apr. 19, 2010)(cases below D.C. No. 2:08-cv-02548; 2008-SOX-48), a former employee sued his former employer alleging that after he reported evidence of fraud he was fired in violation of the Sarbanes-Oxley Act. The Employer moved to stay action and compel arbitration pursuant to the arbitration clause in the parties' employment agreement. The District Court overruled the employer's motion. On appeal, the Court of Appeals reversed the District Court's refusal to compel arbitration. The Court held that (1) the employer did not waive its right to arbitration by failing to demand arbitration in its answer; (2) the employer did waive its right to arbitration by delaying its demand for arbitration until four months after it had answered employee's complaint; (3) the employee was not substantially prejudiced by employer's four-month delay in demanding arbitration; (4) the employment agreement's arbitration clause was not superseded by subsequent executed retention bonus agreements; and (5) the employment agreement's arbitration provision did not prevent the employee from vindicating his statutory rights under SOX.

DISTRICT COURT DISMISSED CLAIMS UNDER SOX HOLDING THAT THE CLAIMS ARE GOVERNED BY ARBITRATION AGREEMENT

In Raw v. Bank of New York Mellon Co. , No. 09-4341 (E.D.N.Y. Oct. 21, 2010), the plaintiff sued his employer for retaliation under the Sarbanes-Oxley Act, 18 U.S.C. § 1514A. The defendant filed a motion pursuant to FRCP 12(b)(1) and the Federal Arbitration Act ("FAA") to compel arbitration and dismiss plaintiff's complaint, or in the alternative to compel arbitration and stay the lawsuit to Section 3 of the FAA. The District Court granted the defendant's motion and dismissed the plaintiff's complaints. The court held that plaintiff's claims fell within the scope of the arbitration clause within his employment agreement, and therefore, the defendant's motion to compel arbitration was granted.

In determining whether or not the dispute is governed by an arbitration agreement, the District Court applied the four prong analysis provided by the Second Circuit: (1) whether the parties agreed to arbitrate; (2) the scope of the agreement; (3) if federal statutory claims are asserted, whether Congress intended those claims to be non arbitrable; and (4) if the court concludes that some, but not all, of the claims in the case are arbitrable, whether to stay the balance of the proceedings pending arbitration. Raw . at 3. (citing JLM Indus., Inc. v. Stolt-Nielson SA , 387 F.3d 163, 169 (2d Cir. 2004).

Adverse Employment Action

DISTRICT COURT DENIED SUMMARY JUDGMENT ON THE ISSUE OF WHETHER AN EMPLOYMENT TRANSFER AND BANISHMENT FROM A FIELD OF EMPLOYMENT WAS AN ADVERSE EMPLOYMENT ACTION UNDER SOX

In Schlicksup v. Caterpillar, Inc . , No. 09-CV-1208 (C.D.Ill. July 13, 2010), the plaintiff alleged that he was transferred from his tax/finance position to a new information technology position in retaliation for reporting his concerns that one of the defendant's structures illegally avoided U.S. taxes. Under the Title VII adverse employment standard, an employment action is adverse if it would "dissuade a reasonable worker from filing a charge." In its motion for summary judgment, the defendant asserted that no reasonable person in the plaintiff's position would have been dissuaded from filing a complaint because the plaintiff did not lose any compensation, privileges, or benefits as a result of his transfer. In fact, when the plaintiff was transferred his compensation increased and his salary grade, performance rating and potential assessments remained the same. The Court, however, concluded that these facts were not dispositive and that a materially adverse action may still have occurred within the constellation of surrounding circumstances.

The plaintiff alleged that he suffered adverse employment action despite the financial advantage of his transfer because the defendant's actions limited his career prospects. The Seventh Circuit previously held that an action leading to a loss of "career prospects" can be an adverse employment action. The plaintiff alleged that he was told that he could no longer work in tax or finance, which the District Court found to be sufficient evidence to ward off a motion for summary judgment. The Court found that such banishment would leave the plaintiff with fewer potential positions than he would have had if those career paths were open. Thus, it was an issue of fact whether or not such banishment would deter a reasonable person in the plaintiff's situation.

Causation; Contributing Factor/Motiving Factor Standard

ALLEGED PROTECTED ACTIVITY UNDER SOX FOUND NOT TO BE A CONTRIBUTING FACTOR IN TERMINATION OF EMPLOYMENT

In Hemphill v. Celanese Corp. , No. 08-2131-B (N.D.Tx. June 16, 2010)(unpublished)(case below 2008-SOX-31), a former employee filed suit against his former employer asserting claims for violations of the whistleblower protection provisions of the Sarbanes-Oxley Act, 18 U.S.C. § 1514A. The former employee alleged that he was terminated in response to reports he made as part of an audit expense report investigation. The employer filed a motion for summary judgment asserting that the employee did not engage in protected activity and that his alleged protected activity was not a contributing factor in his termination. The employer asserted that there was clear and convincing evidence that the employer would have terminated the employee regardless of his alleged protected activity.

The District Court found that a material issue of fact remained as to whether the employee engaged in protected activity, however, the Court granted summary decision finding that no reasonable trier of fact could find that the employee's alleged protected activity was a contributing factor in his termination. The Court reasoned that the employer established by clear and convincing evidence that it would have terminated the employee regardless of any protected activity.

PROTECTED ACTIVITY UNDER SOX NOT A CONTRIBUTING FACTOR TO FORMER EMPLOYEE'S DISCHARGE; HISTORY OF POOR PERFORMANCE THAT PRECEDED PROTECTED ACTIVITY

In Robinson v. U.S. Dep't of Labor , No. 10-1587 (7th Cir. Dec. 27, 2010)(unpublished)(case below ARB No. 07-070, ALJ No. 2005-SOX-44), the defendant, a financial services company, fired the plaintiff from her senior auditor position six months after she submitted a memo to its President and CFO reporting improper business practices. The plaintiff sued her former employer alleged that it violated SOX by discharging her in retaliation for her protected activity of reporting corporate fraud. The ALJ determined that the employee was instead fired for poor performance and the ARB affirmed.

The Court of Appeals denied the plaintiff's petition for review holding that: (1) substantial evidence supported the ARB's determination that the employee was not terminated as a result of any protected activity; and (2) ALJ's credibility determination and evidentiary ruling were not arbitrary or capricious.

Protected Activity

PROTECTED ACTIVITY UNDER SOX; MUST BE BASED ON A SUBJECTIVELY AND OBJECTIVELY REASONABLE BELIEF; MERELY REPORTING RUMOR IS NOT OBJECTIVELY REASONABLE BELIEF

In Pearl v. DST Systems, Inc. , No. 08-2196 (8th Cir. Jan. 7, 2010) (per curiam) (unpublished), the 8th Circuit affirmed the district court's grant of summary judgment against the SOX Plaintiff. The court stated that the Plaintiff's complaint to the Defendant about a possible understatement of earnings did not amount to protected activity under SOX because the evidence showed that such a belief was not objectively reasonable.

The district court had found that the Plaintiff had sent an e-mail to the Defendant stating that there may have been an understatement in earnings in the amount of $12 million dollars, but that the Plaintiff's information came from an unidentified source, the Plaintiff had not consulted with anyone prior to sending the e-mail, and the Plaintiff never learned any more factual information. Pearl v. DST Systems, Inc. , No. 06-cv-00918 (W.D.Mo. Apr. 25, 2008). The court also found that the Plaintiff had acknowledged in his deposition that what he was saying was that there might be a SOX violation, but that he did not have knowledge that it did or did not occur. The district court wrote:

    With respect to this claim, plaintiff had scant factual information on which to make the allegation. Plaintiff did not know who had made the report to begin with; he had not seen any of the documents which he suspected might be the cause of the under reporting of the income; he did not attempt to obtain any further factual information; and he admits he did not have sufficient knowledge to know if a SOX violation had occurred. Thus, plaintiff did not have a subjective belief that a violation had occurred. See Van Asdale v. Int'l Game, Tech. , 498 F.Supp.2d 1321, 1333 (D. Nev. 2007)(no reasonable jury could find that plaintiff had a belief that fraud had occurred since her testimony was that she had no belief one way or the other). Because of the lack of information, plaintiff also lacked an objectively reasonable basis on which to base his report. See Bechtel v. Competitive Tech., Inc. , 2005-SOX-33, 29-32 (ALJ Oct. 5, 2005)(complainant's belief that company president engaged in insider trading not objectively reasonable where "[t]he snippet of conversation that [complainant] overheard is too vague to make a reasonable guess at [the president's] intentions, never mind to reach the serious conclusion that complainant drew"). This was not a situation where even though no SOX violation was ultimately found, plaintiff had actual information, as opposed to rumor and hearsay, that would support an alleged SOX violation.

Pearl , No. 06-cv-00918, slip op. at 20-21.

PROTECTED ACTIVITY UNDER SOX; CONTACTS WITH MEDIA

In Tides v. The Boeing Co. , Nos. C08-1601 and 08-1736 (W.D.Wa. Feb. 9, 2010), when the Plaintiffs became convinced that the Defendant was not taking their concerns about the company's auditing culture seriously enough, they contacted a newspaper reporter and provided her with information and documents. When the Defendant became aware of the contact and disclosures, it placed the Plaintiffs on suspension and referred the matter to a corrective action review board. The board voted to terminate both of the Plaintiffs, who were informed of the decision. The Plaintiffs then filed SOX whistleblower complaints with OSHA, and eventually the matter was filed in federal district court.

The court granted summary judgment in favor of the Defendant, holding that SOX does not prohibit termination for disclosures to the media. The Plaintiffs had conceded that SOX's list of protected activity was the most specific of all of the whistleblower statutes, but asked the court to read it expansively, drawing parallels to other whistleblower protection statutes. The court, however, found that Congress had been clear in SOX about the types of whistleblowing that would be protected, and that leaking documents to the media was not one of them.

The Plaintiffs also argued that the Defendant's reliance on the media disclosures as the reason for their termination was pretext because dissemination of information outside the company was permitted by corporate policy on confidentiality. The court, however, found that the corporate policies did not, in fact, protect the disclosures made by the Plaintiffs. Because the disclosures violated corporate policy, and the grounds for the dismissals were not vague or unsupported by the facts, the court found that the Defendant had shown by clear and convincing evidence that the Plaintiffs would have been dismissed independently of any protected activity under SOX.

PROTECTED ACTIVITY UNDER SOX; OBJECTIVE BELIEF STANDARD; RESPONDENT'S GENERAL COUNSEL

In Harkness v. C-Bass Diamond, LLC , No. CCB-08-231 (D.Md. Mar. 16, 2010) (case below 2007-SOX-81), the plaintiff sued C-Bass Diamond alleging that the company retaliated against her for engaging in protected activity in her position as General Counsel. The plaintiff alleged that she engaged in protected activity when she reported that the company's President and Corporate Executive Officer had informed an outside investor of non-public information that the company was about to restate its earnings. At the time of the disclosure the company was in the process of becoming a publicly-traded company. The plaintiff asserted that she reasonably believed that this disclosure might be a violation of Regulation FD, 17 C.F.R. § 243.100-243.103. Prior to reporting the violation, however, the plaintiff did not investigate whether Regulation FD applied to the company, even though she knew that SEC had not yet approved the company's application to become a publicly-traded company. Neither did the plaintiff ask members of her legal staff or the company's outside counsel to conduct research on this threshold question.

C-Bass filed a motion for summary judgment arguing that the plaintiff did not engage in protected activity and could not prove causation. The District Court granted C-Bass's motion for summary judgment. The Court found that in light of the plaintiff's professional experience and the legal resources available to her, her belief that the company was in violation of Regulation FD was not objectively reasonable, and therefore, her report to her supervisor does not constitute protected activity under the SOX.

NO PROTECTED ACTIVITY UNDER SOX; ACTUAL OR SUBJECTIVE BELIEF

In Gale v. U.S. Dep't of Labor , No. 08-14232 (11th Cir. June 25, 2010)(unpublished)(case below 2006-SOX-43), a former chief operations officer of a financial services company, who allegedly was discharged in retaliation for activities protected under the whistleblower provision of Sarbanes-Oxley Act, filed a complaint with OSHA. The former employee alleged that he was terminated because he, among other things, provided information and opposed decisions made by company officers relating to waste and misuse of corporate monies that resulted in loss of stockholders equity and because he raised concerns regarding the violation of SEC rules and regulations in the operation of a broker business by the financial services company.

OSHA determined that the company did not violate SOX because it was not a covered employer. The administrative law judge granted the employer's motion for summary judgment finding that a genuine issue of material fact existed as to the company's covered status; however, there was no factual basis that the former employee had an actual or subjective belief that the company committed illegal or fraudulent acts prohibited by SOX. On appeal, the ARB affirmed the ALJ's findings. The Court of Appeals affirmed the ARB's ruling holding that the decision was supported by substantial evidence that the former employee did not engage in protected activity.

NO PROTECTED ACTIVITY UNDER SOX WHEN THERE IS NO ALLEGATION THAT PATENT FRAUD AFFECTED INVESTORS; DEFINITIVELY AND SPECIFICALLY STANDARD

In Vodopia v. Koninklijke Philips Elec. NV , No. 09-4767-cv (2d Cir. Oct. 25, 2010)(per curiam)(unpublished)(case below 2007-SOX-40) , the U.S. Court of Appeals for the Second Circuit ruled that a federal District Court properly dismissed a lawsuit by a former in-house lawyer who alleged that he was fired for warning that patents acquired by his employer were obtained through fraud, since he failed to state a plausible claim for relief under the Sarbanes-Oxley Act. Noting that several courts have required that a whistleblower's complaint must "definitively and specifically" relate to one of the act's enumerated categories of fraud or securities law violations, the appeals court stated that the former employee failed to make such an allegation about his former employer.

The plaintiff claimed that the company assigned a $50 million value to worthless patents that were obtained through fraud on the Patent Office. The plaintiff argued on appeal that his lawsuit plainly alleged fraud upon shareholders by virtue of his claim that the company was "knowingly assigning an eight figure value to worthless patents." The appeals court was not persuaded by these arguments. The court said that his federal district court complaint "clearly centers on" his concern that patents were invalid, not on the company's valuation of the patents. "[M]ore important, the complaint does not allege that the $50 million value assigned to those patents was ever reported to the public or to shareholders." Observing that there was nothing in the plaintiff's lawsuit that alleged he had reported potential securities fraud—as opposed to patent-related misconduct—the court held that he had not stated a viable claim for relief under Sarbanes-Oxley. The Court concluded that the plaintiff's complaint "does not plausibly allege the first, necessary element of a section 1514A claim," and the Court affirmed the trial court's dismissal of the lawsuit.

Damages and Other Remedies

DISTRICT COURT HAS THE JURISDICTION TO ENFORCE THE SECRETARY OF LABOR'S PRELIMINARY ORDERS; SECRETARY EXERCISED DUE PROCESS N THE CONTEXT OF AN INTERIM REINSTATEMENT OF A TERMINATED EMPLOYEE; PRELIMINARY INJUNCTIVE RELIEF STANDARD

In Solis v. Tennessee Commerce Bancorp, Inc. , No. 3:10-cv-00472 (M.D. Tenn. May 19, 2010) (case below 2010-SOX-33), the Secretary of Labor filed action under SOX, 18 U.S.C. § 1514A, and AIR 21, 49 U.S.C. 42121(b)(2)(A) and (b)(3), and moved for a temporary restraining order and preliminary injunctions against Tennessee Commerce Bancorp, Inc. and Tennessee Commerce Bank. The Secretary cited the defendant's refusal to obey her preliminary order to reinstate the defendant's former chief financial officer, whom the Secretary found reasonable cause to believe was unlawfully discharged by the defendants in violation of Section 806 (a) of SOX. During her investigation she found that the chief financial officer's protected activity was a contributing factor in the adverse actions taken against him and that such conduct warranted the Secretary's Order awarding him preliminary injunctive relief, included reinstatement, back-pay, restoration of benefits and attorney fees. The defendants filed a motion to dismiss, asserting that the Court lacked the jurisdiction to enforce the Secretary's preliminary orders. They asserted that the Secretary's order violated the defendant's due process rights because the preliminary order would result in a permanent and irreparable loss to the defendant's of the permanent deprivation of payments and wages pending a final resolution of the Secretary's proceedings against the Defendants.

The District Court granted the Secretary's motion holding that: (1) jurisdiction existed to enforce the Secretary's preliminary order of reinstatement or a whistleblower for defendant's violation of SOX; (2) the Secretary's procedure for her findings and ordering reinstatement complied with due process requirements; and (3) the Secretary was entitled to preliminary injunction. The jurisdictional question was one of first impression in the Sixth Circuit, therefore, the Court looked to the Second Circuit for guidance. It adopted the analysis in the opinion by Judge Straub in Bechtel v. Competition Technologies, Inc ., 448 F.3d 469 (2d Cir. 2006). On the issue of due process in the context of an interim reinstatement of a terminated employee, the court relied on the analysis used in both Bechtel and Brock v. Roadway Express, Inc ., 481 U.S. 252, 107 S.Ct. 1740 (1987) to find that the Secretary had complied with the due process requirements.

CIRCUIT COURT FINDS THAT DEFENDANTS MOTION FOR A STAY RAISED A SUBSTANTIAL QUESTION AS TO THE AUTHORITY OF THE DISTRICT COURT TO ISSUE THE PRELIMINARY INJUNCTION; BALANCING OF THE HARMS SUPPORTED THE ISSUANCE OF A STAY

In Solis v. Tennessee Commerce Bancorp, Inc. , No. 10-cv-5602 (6th Cir. May 25, 2010)(case below 2010-SOX-33), the defendants appealed and moved for a stay pending appeal of the District Court ruling in the previously annotated case. The 6th Circuit applied the traditional injunctive relief standards and concluded that the defendants motion for a stay raised a substantial question as to the authority of the district court to issue the preliminary injunction. The defendants asserted that they would suffer irreparable harm if the complainant was physically reinstated immediately and that his reinstatement would cause disruption to the bank's personnel and operations that could not be undone if the Circuit Court found that the District Court lacked authority to issue the injunction. By contrast, if the reinstatement order was properly issued, the complainant could be made whole with compensatory damages, back pay, and interested. The Circuit held that a balancing of the harms supported the issuance of a stay.

[Editor's Note: On October 25, 2010, the District Court granted an indicative ruling that this case should be dismissed as moot (Fort dismissed administrative complaint, and did not want reinstatement); Sixth Circuit remanded on October 25, 2010; Stipulation of dismissal with prejudice entered on October 29, 2010).]

DAMAGES; MOTION TO STRIKE CLAIMS FOR PUNITIVE DAMAGES, INJURY TO REPUTATION, SPECIAL DAMAGES, AND ENTRY OF ORDER ENJOINING DEFENDANTS FROM VIOLATING RIGHTS OF EMPLOYEES

In Jones v. Home Federal Bank , No. 1:09-cv-003366-CWD (Jan. 15, 2010) (case below 2009-SOX-32), the Defendants moved to strike certain damages claims from the Plaintiff's SOX claim. The Chief Magistrate Judge struck the claim for punitive damages as they are not allowed under SOX. The judge noted the limited jurisprudence on claims for reputational damages under SOX, but because at the current procedural stage of the litigation it was unclear whether the Plaintiff was claiming pecuniary or non-pecuniary damages for injury to reputation, denied the motion to strike without prejudice to raise it at a later date. She granted the motion to strike the Plaintiff's "other special damages" claim because they had not been specifically stated as required by FRCP 9(g). The judge granted the motion to strike a plea for an order enjoining the Defendants from willfully violating the rights of employees because such an order would benefit persons not party to the action, and would not be a "make-whole" remedy as articulated in SOX.

Attorneys and Representatives

DISTRICT COURT IMPOSED AN ATTORNEY FEE SANCTION UNDER SOX WHERE THERE WAS OVERWHELMING EVIDENCE THAT PLAINTIFF'S COUNSEL RELIED ON FORGED DOCUMENTS IN HIS OPPOSITION TO SUMMARY JUDGEMENT

In Davis v. Home Depot U.S.A., Inc . , No. 09-162 (D.Md. Mar. 16, 2010) (case below 2006-SOX-17), the plaintiff filed a action against Home Depot alleging that his firing from Home Depot for absenteeism was a pretext for an unlawful discharge under SOX. In order to prove his claim the plaintiff had to persuade the Court the his discharge was not due to absenteeism. Home Depot moved for summary judgment supported by declarations and sworn testimony which confirmed the plaintiff's multiple absences and further alleged that the plaintiff had forged medical statements to have his absences excused. Both parties submitted evidence as to the validity of the medical statements. The District Court granted Home Depot's motion for summary judgment finding that the plaintiff had submitted forged medical documents.

Home Depot then filed a Motion for Sanctions of Attorney's fees pursuant to 28 U.S.C. § 1927 seeking to have the plaintiff's counsel personally satisfy the excess attorney's fees reasonably incurred by Home Depot as a consequence of the plaintiff's counsel's sponsorship of the documents "known by him to be false, or if known to be false, based on highly suspect testimony that he could have easily determined to be false upon reasonable inquiry." The Court granted the motion finding that there was overwhelming evidence that plaintiff's counsel, in bad faith, relied on forged documents and perjured testimony in his opposition to summary judgment.

Sovereign Immunity

COURT OF APPEALS DISMISSES CLAIMS UNDER SOX BECAUSE DEFENDANT IS A STATE AGENCY ENTITLED TO CATEGORICAL ELEVENTH AMENDMENT PROTECTION; PLAINTIFF FAILED TO STATE SUBSTANTIVE CLAIMS FOR RELIEF UNDER SOX §§ 806 AND 1107

In Hines v. Cal. Pub. Util. Comm'n , No. C-10-2813 EMC (N.D. Cal. Nov. 8, 2010), the Court of Appeals dismissed the plaintiff's retaliation claims under SOX because the California Public Utilities Commission is a state agency entitled to categorical Eleventh Amendment protection. In addition, the Court of Appeals found that the plaintiff failed to state substantive claims for relief under the Sarbanes-Oxley Act §§ 806 or 1107, as she asserted. Although CPUC appears to regulate publicly traded companies, it itself is not such a company, therefore, §806 is not applicable. The Court of Appeals noted that § 1107 is a criminal statute, and no court has expressly found that a private right of action may be brought under this statute. Even if a private right of action existed, § 1107 requires that a whistleblower provide information to a "law enforcement officer." Hines at 6. In this case, the plaintiff alleged that she reported her grievances to a company employee and the Deputy Director of CPUC; neither are "law enforcement officers" under § 1513(e). Thus, § 1107 does not apply.

Miscellaneous

PER CURIAM DECISION DENYING A PETITION FOR REVIEW UNDER SOX

In Levi v. U.S. Dep't of Labor , No. 09-3656 (8th Cir. Aug. 3, 2010)(per curiam)(case below 2008-SOX-28), the Court of Appeals denied an employee's petition for review of a final order of the ARB, affirming the dismissal of his administrative complaint that his employer violated the whistleblower provisions of SOX, 18 U.S.C. §1514A. The court found that the employee's contention that the Department of Labor is selectively enforcing the law was without merit.

Surface Transportation Assistance Act

[STAA Digest VI B 4]
ADVERSE ACTION; WARNING LETTER TO THE DRIVER FOR ABSENTEEISM WAS NOT "DISCIPLINE" ACTIONABLE AS RETALIATION UNDER STAA

In Melton v. U.S. Dep't of Labor , No. 08-4441 (6th Cir. Apr. 20, 2010) (per curiam)(unpublished)(case below 2005-STA-2), an over-the-road truck driver sued his employer alleging a violation of the anti-retaliation provision of the Surface Transportation Assistance Act. The ARB affirmed the ALJ's denial of relief. The truck driver sought review in federal court arguing that (1) a warning letter issued by his employer for absenteeism constituted an adverse employment action under STAA; and (2) the employer's belief that he was not impaired due to fatigue was an insufficient basis for the issuance of the warning letter.

The ALJ found that the truck driver was not guilty of using fatigue as a subterfuge to avoid work, however, held that the warning letter did not constitute discipline under STAA. The ARB affirmed holding that the letter was not a materially adverse action under STAA because it "did not affect [Melton's] pay, terms, or privileges of employment, did not lead to discipline, and was removed from his personnel file without consequence." Melton at 1. The Court of Appeals affirmed holding that the employer's warning letter to the driver for absenteeism was not "discipline" actionable as retaliation under the Act.

[STAA Digest IX A 7]
REINSTATEMENT UNDER STAA; AFTER ACQUIRED EVIDENCE; FALSIFICATION ON EMPLOYMENT APPLICATION

In Roadway Express, Inc. v. U.S. Dep't of Labor , No. 09-1315 (7th Cir. July 22, 2010)(case below 2003-STA-55), the Court of Appeals found that the Administrative Review Board properly concluded that Roadway Express Inc. violated STAA when it failed to produce evidence that it would have fired a truck driver even if he had not testified in a co-worker's grievance hearing. The Court of Appeals had previously remanded this case to allow Roadway to present previously excluded evidence about why it fired the truck driver. On remand, the ARB ordered the truck driver's reinstatement, despite Roadway's attempt to present evidence that the truck driver was fired because he falsified information on his employment application. The Court of Appeals affirmed the ARB's decision and order holding that: (1) the remand order did not open the door for evidence that the driver was fired for falsifying information in his employment application; (2) the evidence was insufficient to establish that driver was terminated because of his driving record; and (3) the reinstatement was an appropriate remedy under the STAA.

[STAA Digest II B 2 d ii]
EQUITABLE TOLLING UNDER STAA; FAILURE OF OSHA TO NOTIFY COMPLAINANT'S ATTORNEY OF RULING ON SECOND RULING ON COMPLAINT

In Smith v. Solis , No. 08-4058 (6th Cir. July 26, 2010)(case below 2006-STA-32), a truck driver petitioned for review of a final decision of the ARB, which dismissed as untimely the driver's appeal of the determination by OSHA that the driver's anti-retaliation complaint against his employer under the Surface Transportation Assistance Act lacked merit. At the time of the controversy, the truck driver was employed by Lake City Enterprises, Inc. "through an assignment or arrangement with CRST International, Inc." The truck driver filed a single complaint under STAA against Lake City Enterprises and CRST after he was allegedly terminated for refusing to drive unsafe equipment provided to him by Lake City and his subsequent notice to Lake City that he intended to report the company's use of unsafe equipment to OSHA.

While the truck driver filed one single complaint, OSHA ran separate investigations of Lake City and CRST. OSHA reported a finding of no merit as to the truck driver's complaint against Lake City in a letter dated May 12, 2006 and sent the truck driver and his attorney a copy. In the letter he was informed of the 30 day-limitation to contest the findings and request a hearing. His attorney filed an objection to the Lake City decision on behalf of his client and requested a hearing against both Lake City and CRST on May 26, 2006, noting that he had not yet received a determination on the complaint against CRST. Unbeknownst to the attorney, on March 21, 2006 OSHA had mailed a notice to the truck driver that his complaint against CRST had been found to be non-meritorious because CRST and Lake City were not "joint" or "integrated" companies, and therefore, CRST could not be considered to be his employer under STAA. This letter stated that he had 30 day to appeal and indicated that a copy had been sent to his attorney. However, his attorney did not receive a copy of this letter via certified mail until May 22, 2006; this letter was post-marked May 17, 2006. The Department of Labor moved to dismiss the truck driver's request for a hearing as untimely and the truck driver's attorney responded with a request for equitable tolling.

The question of whether the court had jurisdiction to review an untimely request for a hearing was one of first impression for the 6th Circuit. The employer and the Secretary of Labor conceded that the employer would not be prejudiced if the truck driver was granted tolling in this case. The Secretary also conceded that the Act's time limitations are not jurisdictional and that equitable tolling is available in this case. In concluding that the truck driver was entitled to equitable tolling, the Court found that the blame for any negligence fell on OSHA for failing to send the notice to the truck driver's attorney for some two months after the fact, despite knowing that the truck driver was represented.

[Editor's Note: ARB decision on remand Smith v. Lake City Enterprises, Inc ., ARB Nos. 08-091 and 09-033, ALJ No. 2006-STA-32 (ARB Sept. 24, 2010).]

[STAA Digest III J]
EVIDENCE; DOT FMCSA COMPLIANCE REVIEWS AND REPORTS; CAUSAL CONNECTION BETWEEN PROTECTED ACTIVITY AND ADVERSE EMPLOYMENT ACTION UNDER STAA

In R&B Transportation, LLC v. U.S. Dep't of Labor , No. 09-2148 (1st Cir. Aug. 26, 2010) (case below 2006-STA-12), an employer petitioned for review of an order of the Administrative Review Board finding that the employer's termination of a commercial truck driver violated STAA. The Court of Appeals denied the employer's petition holding that: (1) the Department of Transportation Federal Motor Carrier Safety Administration compliance reviews and reports were admissible under the public records hearsay exception in proceedings on a driver's administrative complaint; (2) reports were admissible as proof of employer's knowledge concerning its history of complying with DOT's hours of service regulation; and (3) substantial evidence supported the ALJ's factual finding that a causal connection existed between the driver's termination and his protected activity in telling the employer that he refused to exceed the hours allotted in the DOT regulation, and that the employer proffered reason for terminating driver was actually a pretext for unlawful retaliation in violation of STAA.

[STAA Digest IX F]
ENFORCMENT OF ARB ORDER ON REINSTATEMENT AND BACK PAY

In U.S. Dept. of Labor v. Dalton v. Copart , No. 07-CV-77-TCK-FHM (N.D. Okla Sept. 13, 2010)(case below 1999-STA-46), the U.S. Department of Labor brought this action against the defendant, the former employer, pursuant to 49 U.S.C. § 31105 seeking enforcement of a Final Decision and Order issued by the Administrative Review Board. DOL sought summary judgment requiring the defendant to pay the intervenor, a former employee, a set amount in back pay and interest pursuant to the FDO. All the parties agreed that the employer owed its former employee back pay and interest but disputed the precise amount. The question before the court was whether the employer's offer of reinstatement was sufficient to end the accrual of back pay liability and thus, whether an objective, reasonable person would have rejected the offer of reinstatement. The Court granted DOL's motion for summary judgment and ordered the employer to pay back pay at the amount requested by DOL.

[STAA Whistleblower Digest II H 5 a]
WAIVER OF ARGUMENT THAT 2007 STAA AMENDMENT SHOULD BE APPLIED RETROACTIVELY WHERE ARGUMENT WAS NOT TIMELY RAISED BEFORE THE ALJ AND THE ARB

In Formella v. U.S. Dep't of Labor , No. 09-2296 (7th Cir. Dec. 10, 2010) (case below ARB No. 08-50, ALJ No. 2006-STA-35), the plaintiff, a truck driver, was fired by Schnidt Cartage, Inc. after he raised safety concerns about the truck that Schnidt had assigned to him. The plaintiff filed a complaint with OSHA alleging that Schnidt retaliated against him by firing him after he reported his safety-related complaints, in violation of Section 405 of the Surface Transportation Assistance Act of 1982, P.L. No. 97-424, 96 Stat 2097 (Jan. 6, 1983)("STAA"). An ALJ found that the plaintiff was not terminated for reporting his safety concerns but rather for "his provocative, intemperate, volatile, and antagonistic conduct" in expressing his concerns." Formella at 2. The ARB sustained the ALJ's decision. The plaintiff appealed the ARB decision on the grounds that the ARB erred "in failing to apply the more employee-friendly provisions added to the statute in 2007 and that, in any case, his conduct, even if it was as confrontational as Schnidt claims it was, did not exceed the leeway to which employees complaining of unsafe practices are entitled." Id .

In 2007, the STAA was amended to incorporate the legal burdens of proof set forth in the whistleblower provisions of AIR 21, 49 U.S.C. § 42121(b)(2)(B), which are more favorable to the complaining employee. The court held that the plaintiff "forfeited his belated contentions that the evidence should be evaluated under the statute as amended." Formella at 16. The court noted that "the statute was modified after the hearing before the ALJ concluded, but nearly six months before the ALJ rendered his decision. Yet, the plaintiff did not ask the ALJ to consider the applicability of the amendment to his complaint, and the ALJ applied the statute in its pre-amendment form." Id . The plaintiff failed to argue to the ARB that the amended STAA should be applied to his case and the ARB abstained from deciding the applicability of the amendments. The Court of Appeals found that it was "far too late" for the plaintiff to raise the new burdens of proof specified in the amendments before the Court of Appeals. "The proceedings in the Department of Labor were adversarial, and in an adversarial setting it is reasonable to expect the parties to raise and develop any issues that they want the ALJ and the ARB to address, on pain of forfeiting any issues that they do not mention." Id .

The Court of Appeals denied the plaintiff's petition for review on the grounds that:

the ALJ's factual determination that Schnidt fired Formella not because he refused to drive the truck assigned to him but because he was insubordinate and disruptive in expressing his safety concerns was supported by substantial evidence. Although the Formella was entitled to some leeway for inappropriate behavior his concerns, the ARB was neither illogical nor arbitrary in sustaining the ALJ's determination that plaintiff exceeded that leeway in provoking and antagonizing his superior.

Id . at 25.

Other Laws

PROTECTED ACTIVITY & CAUSAL CONNECTION UNDER FLSA

In Wolinsky v. Standard Oil of Connecticut, Inc. , No. 3:08cv832 (D. Conn. May 5, 2010), a former employee brought an action in state court against his former employer and supervisor, alleging that he was retaliated against for engaging in activity protected by the Fair Labor Standards Act (FLSA). The defendants removed action to federal District Court and moved for summary judgment. The District Court held that: (1) temporal proximity of one day between employee's complaints to state and federal labor departments and adverse employment action was sufficient to establish causal connection required for prima facie FLSA retaliation claim; and (2) there was a genuine issue of material fact precluding summary judgment on the FLSA retaliation claim.

"WHISTLEBLOWER RETALIATION" CLAIM DISMISSED DUE TO LACK OF APPLICABLE FEDERAL WHISTLEBLOWER STATUTE

In Combier v. New York , No. 09-CIV-5314 (S.D.N.Y Aug. 25, 2010), the District Court dismissed a pro se claimant's allegation of "whistleblower retaliation" because she failed to specify any federal whistleblower protection for which she allegedly was eligible; nor was there any obviously applicable statute.