Federal Court Whistleblower Decisions - 2012
- Affordable Care Act
- Aviation Investment and Reform Act for the 21st Century
- Environmental Statutes
- Federal Rail Safety Act
- Sarbanes-Oxley Act
- Surface Transportation Assistance Act
PROTECTED ACTIVITY UNDER ACA; THE TERM "TITLE I" IN SECTION 218C REFERS TO TITLE I OF ACA, NOT TITLE I OF THE FAIR LABOR STANDARDS ACT (FLSA), AND THEREFORE COMPLAINTS ALLEGING RETALIATION FOR REPORTING VIOLATIONS OF FLSA ARE NOT PROTECTED UNDER SECTION 218C.
In Rosenfield v. GlobalTranz Enterprises, Inc. , No. CV 11-02327-PHX-NVW, 2012 WL 2572984 (D.Ariz. July 2, 2012), the plaintiff, a human resources manager, alleged that she was terminated in retaliation for reporting perceived violations of the Fair Labor Standards Act ("FLSA") to her supervisors. She filed a complaint under 29 U.S.C. § 218c ("ACA"), which was created by the Patient Protection and Affordable Care Act of 2010 ("ACA"). The court concluded that Section 218c did not create a cause of action for individuals that claim retaliation based complaints about violations of the FLSA. The plaintiff argued that the word "title" in Section 218c(5) —which protects individuals that object or refuse to participate in any activity reasonably believed to be a violation of "any provision of this title (or amendment), or any order, rule, regulation, standard, or ban under this title (or amendment) —refers to Title 29 of the United States Code, and thus protects individuals from retaliation for objections about FLSA violations. The court agreed with the defendant, however, that "title" refers to Title I of ACA. Consequently, the court dismissed the plaintiff's complaint.
Aviation Investment and Reform Act for the 21st Century
STATE WHISTLEBLOWER CLAIM REGARDING AIRCRAFT SAFETY NOT PREEMPTED BY AIRLINE DEREGULATION ACT, AND AIR 21'S FEDERAL WHISTLEBLOWER PROTECTION REMEDY DOES NOT INDICATE OTHERWISE
In Ulysse v. AAR Aircraft Component Services , 841 F.Supp.2d 659 (E.D.N.Y. Jan. 23, 2012), the plaintiff, an aircraft mechanic, complained to his supervisors about his employer's instruction book which described when to repair, and when to not repair, airline parts, alleging that the instructions violated FAA rules and regulations. He also complained about the quality of the replacement parts that his employer provided to the mechanics. The plaintiff believed he was terminated as a result of these complaints, and filed a suit in the Supreme Court of the State of New York under New York State's whistleblower statute. The defendants removed the suit to the United States District Court for the Eastern District of New York, arguing that the District Court had federal question jurisdiction because the plaintiff's state law claim is completely preempted by the Airline Deregulation Act (ADA) of 1978.
In finding that the ADA did not completely preempt the plaintiff's retaliation claim, and remanding the case to the state court for lack of federal question jurisdiction, the Court considered whether the 2000 amendments to the ADA—i.e. the enactment of the Whistleblower Protection Program (WPP), 49 U.S.C. § 42121—impacted the preemption analysis. The defendant argued that the existence of the WPP implies that Congress intended to completely foreclose state whistleblower claims relating to airline safety and FAA compliance. The district court disagreed, and found that "the WPP does not alter the scope of the ADA preemption provision so that the court's conclusion should be altered in any way." Ulysse at 681. The court noted that New York's whistleblower statute and the WPP provide for very different procedures, which in the court's view " lends credence to the notion that enactment of one would not necessarily have the intent to displace the other," and also notes that the text of the WPP "says nothing whatsoever about preemption." Id. at 680.
AIR21 COMPLAINT DISMISSED; COURT OF APPEALS FOUND SUBSTANTIAL EVIDENCE SUPPORTING THE ARB'S FINDING THAT THE DEFENDANT PRODUCED CLEAR AND COVINCING EVIDENCE THAT IT TERMINATED THE PLAINTIFF FOR POOR PERFORMANCE, NOT BECAUSE THE PLAINTIFF COMPLAINED ABOUT POTENTIAL NONCOMPLIANCE WITH FAA REGULATIONS
In Yadav v. L-3 Communications Corp. , No. 10-3249, 462 Fed.Appx. 533 (6th Cir. 2012) (unpublished) (case below ARB No. 08-090, ALJ No. 2006-AIR-16), the plaintiff, an engineer that oversaw the defendant's development of and compliance with engineering requirements for airplane navigation systems, complained to his supervisor that the defendant had misrepresented how it developed software for its navigation system in its reports to the FAA. The plaintiff and his supervisor exchanged emails about the problem, and the plaintiff's supervisor forwarded his complaints on to the defendant's Ethics Officer and the Director of Human Resources. After an investigation by the defendant's Ethics Office found no ethical deficiencies in its descriptions of the development process, the plaintiff arranged a meeting with the defendant's Chief Operations Officer (COO) to discuss his concerns in detail. A week after the meeting, the plaintiff sent the COO a PowerPoint presentation describing how he envisioned overhauling the avionics division. The next day, the plaintiff was fired by way of a lengthy "Termination Memo" that listed a host of the plaintiff's performance failures, both related and unrelated to the software development process dispute.
The plaintiff filed an AIR 21 whistleblower complaint with OSHA, which alleged that he was terminated in retaliation for reporting suspected noncompliance with FAA regulations. After OSHA dismissed his complaint, an ALJ found that the employer produced clear and convincing evidence that it would have terminated the plaintiff absent any protected activity, and the ARB affirmed that decision. The plaintiff then appealed the Secretary of Labor's decision to Sixth Circuit Court of Appeals.
The Sixth Circuit denied the plainitff's appeal, finding that substantial evidence supported the ARB's finding that the defendant terminated the plaintiff "for refusing direct orders, failing to perform his clearly assigned duties, and falling well below legitimate performance expectations." Yadav at 537. After reviewing the evidence submitted by the defendant explaining its rationale for terminating the plaintiff, the Court noted that the plaintiff's emails to his supervisors clearly demonstrated his performance deficiencies, including his use of a "condescending tone toward his supervisor . . . inappropriate comments . . . and repeated threats to resign or otherwise abstain from his duties." Id.
DISTRICT COURT DOES NOT HAVE JURISDICTION TO REVIEW AN ARB DECISION AFFIRMING DISMISSAL OF AN AIR21 COMPLAINT
In Williams v. U.S. Dept. of Labor , No. C 11-6653 CW, 2012 WL 1536338 (N.D.Cal. May 1, 2012) (case below ARB No. 08-063, ALJ No. 2008-AIR-3), the plaintiff first filed an AIR21 complaint in district court, which the district court dismissed for lack of subject matter jurisdiction, and the Court of Appeals for the Ninth Circuit affirmed, because the plaintiff failed to exhaust his administrative remedies. See Williams v. United Airlines, Inc. , 500 F.3d 1019, 1021-25 (9th Cir.2007). The plaintiff then filed a complaint with OSHA, which both OSHA and the ALJ dismissed as untimely, and the ARB affirmed. See Williams v. United Airlines , ARB No. 08-063, ALJ No.2008-AIR-003 (ARB Sept. 21, 2009). The ARB also denied his subsequent motion for reconsideration. Williams v. United Airlines , ARB No. 08-063, ALJ No. 2008-AIR-003 (ARB June 23, 2010). Next, the plaintiff attempted to appeal that decision to the Federal Circuit, but it did not have jurisdiction to review the decision, and instead transferred the case to the Ninth Circuit. See Williams v. U.S. Dept. of Labor , 370 Fed. Appx. 97, 97-98 (Fed.Cir. 2010). Finally, the Ninth Circuit found that it had jurisdiction to review the decision, but upheld the ARB's decision as properly denying the complaint as untimely.
The plaintiff then returned to the district court seeking further review. The district court explained that it does not have jurisdiction to review an ARB decision, because "such jurisdiction is vested in the Court of Appeals under 49 U.S.C. § 42121(b)(4)(A)." Williams at *2. Additionally, it is bound to follow the Ninth Circuit's previous finding that the ARB's decision to deny the complaint as untimely was proper.
[Nuclear and Environmental Digest VIII B 1 b]
NUCLEAR AND ENVIRONMENTAL STATUTES; TIMELINESS OF FILING PETITION FOR REVIEW WITH THE ARBIn Prince v. Solis , No. 11-1322, 2012 WL 2161642 (4th Cir. 2012)(per curiam) (unpublished) (case below ARB No. 10-079, ALJ No. 2006-ERA-1), the defendant discharged the plaintiff, a quality engineer at a nuclear research facility, and the plaintiff subsequently filed complaints that his discharge violated the whistleblower provisions of the Energy Reorganization Act, 42 U.S.C. § 5851 ("ERA"), the Clean Air Act, 42 U.S.C. § 7622 ("CAA"), the Solid Waste Disposal Act, 42 U.S.C. § 6971 ("SWDA"), and the Toxic Substances Control Act, 15 U.S.C. § 2622 ("TSCA"). OSHA dismissed the plaintiff's complaint, as did OALJ.
Although the plaintiff did not immediately receive a copy of the order from the ALJ due to a clerical error, the plaintiff was notified by his counsel of his deadline for filing a petition for review with the ARB seven business days prior to the due date. Nonetheless, the plaintiff's counsel filed a petition for review with the ARB one day after the ten-business-day deadline had expired, and in response to the ARB's order to show cause why it should not dismiss his petition as untimely, the plaintiff argued for equitable tolling due to "how long it took to do the 43 page Petition." Prince at *1. The ARB rejected this argument and dismissed the petition, and after the ARB also dismissed his motion for reconsideration, the plaintiff filed for review of the ARB's decision with the Fourth Circuit.
The Fourth Circuit found that the plaintiff and his counsel "had actual notice of the ALJ's decision prior to the filing deadline . . . [but] neither Prince nor his counsel provides a reason that prevented the filing of a timely petition." Id. at *2. Because the ARB considered and rejected the plaintiff's argument for equitable tolling, the Fourth Circuit saw no reason to overturn its decision.
[Nuclear and Environmental Digest VIII B 2 a]
ARB'S "SUBSTANTIAL EVIDENCE" REVIEW OF ALJ DECISIONS; COURT OF APPEALS FOUND ARB EXCEEDED THE SCOPE OF ITS REVIEW WHEN IT REVERSED ALJ DECISION BECAUSE IT DISAGREED WITH ITS ANALYSIS OF CONTRIBUTING FACTOR EVIDENCE DESPITE SUBSTANTIAL EVIDENCE SUPPORTING THE ALJ'S CONCLUSIONS.In Stone & Webster Const., Inc. v. U.S. Dept. of Labor , 684 F.3d 1127 (11th Cir. 2012) (case below ARB Nos. 06-041, 11-029, ALJ No. 2005-ERA-6), the plaintiff worked for years as a journeyman painter for several contractors at the Tennessee Valley Authority's ("TVA") Browns Ferry Nuclear Plant, and after he ascended to "foreman" in 2004, he led a team of apprentice-level painters to repaint the "Torus," which is "a large, circular vessel that surrounds the plant's reactor core and flushes water to the core in the event of a nuclear meltdown." When the defendant-contractor ("S&W") announced that it planned to certify "apprentice" painters to work in the Torus, the plaintiff complained, because traditionally, and under TVA regulations, only experienced journeyman painters were authorized to work inside the potentially-dangerous Torus. The defendant informed the plaintiff that TVA regulations were being modified to allow less-experienced painters to work in the Torus, but the plaintiff and other journeyman painters continued to voice concerns that this change threatened nuclear safety. The plaintiff crossed the line when he loudly derided his supervisor in front of several other subordinates, and he was terminated two days later.
In the retaliation complaint that he filed with OSHA under ERA, the plaintiff alleged that he was terminated for making nuclear safety complaints, but the company responded that terminated the plaintiff for his continued insubordination and foul language directed toward his supervisor. OSHA dismissed the complaint, as did OALJ, which found that the plaintiff produced insufficient evidence suggesting that his protected activity contributed to the decision to terminate his employment. The ARB, however, reversed that decision and remanded the case to OALJ, finding "substantial evidence in the record supported [the plaintiff's] argument that S&W's reasons for terminating him were pretextual and that [the plaintiff] was treated more harshly than similarly situated, insubordinate employees." Stone & Webster Const., Inc. at 1131.
On remand, the ALJ granted the plaintiff back pay, two years front pay, compensatory damages, damages for future psychiatric counseling, and ordered that the plaintiff's employment file be purged of references to his protected activity and discharge. Despite the defendant's objection that the ARB had exceeded the scope of substantial review in reversing the previous dismissal, the ARB summarily affirmed the ALJ's order in its entirety.
Hearing the defendant's appeal, the Eleventh Circuit agreed that the ARB exceeded the scope of its review under See 29 C.F.R. § 24.110(b) when it reversed the ALJ's dismissal of the complaint. The Eleventh Circuit explained that the substantial evidence standard "limits the reviewing court from . . . deciding the facts anew, making credibility determinations, or re-weighing the evidence.'" Id. at 1133 (quoting Moore v. Barnhart , 405 F.3d 1208, 1211 (11th Cir.2005) (per curiam)). The ARB in this case, however, "showed little deference to the ALJ's findings with which it disagreed, and it disregarded the ALJ's conclusions supported by substantial evidence in the record." Id. Specifically, the ARB clearly disagreed with the ALJ's conclusions regarding the evidentiary value of S&W's shifting explanations for terminating the plaintiff and regarding whether two of the plaintiff's coworkers were adequate comparators for a disparate treatment analysis. Not only did the ARB reject conclusions that were based on substantial evidence, but the court found that in doing so, the ARB incorrectly applied Eleventh Circuit case law governing disparate treatment comparators. Consequently, the court remanded the case to the Secretary of Labor for further proceedings.
[Nuclear & Environmental Digest VIII C 1]
EXHAUSATION OF ADMINISTRATIVE REMEDIESIn Kinney v. Blue-Dot Services , CA No. 11-4151-KHV, 2012 WL 3024721 (D.Kan. July 24, 2012), an HVAC technician alleged that he was terminated in retaliation for reporting to the EPA that his supervisor committed violations by improperly using Freon. The plaintiff's Clean Air Act whistleblower claim was dismissed for lack of subject matter jurisdiction because the plaintiff failed to first file a complaint with OSHA.
[Nuclear and Environmental Digest XI A 2 c]
ENVIRONMENTAL STATUTES AND EMPLOYER KNOWLEDGE; GRANTING SUMMARY JUDGMENT FOR THE EMPLOYER BECAUSE THE PLAINTIFF OFFERED INSUFFICIENT EVIDENCE THAT THE MANAGER WHO MADE THE DECISION NOT HIRE THE PLAINTIFF KNEW ABOUT THE PLAINTIFF'S PREVIOUS COMPLAINTS TO A GOVERNMENT AGENCYIn Boegh v. Energy Solutions, Inc. , No. 5:10-CV-31, 2012 WL 1576158 (W.D.Ky. May 3, 2012) (case below ALJ No. 2006-ERA-26), the plaintiff filed suits against three defendants under whistleblower protection provisions of the Energy Reorganization Act, 42 U.S.C. § 5851 ("ERA"), The Solid Waste Disposal Act, 42 U.S.C. § 6971 ("SWDA"), the Clean Water Act, 33 U.S.C. § 1367 ("CWA"); the Safe Drinking Water Act, 42 U.S.C. § 300j-9(i)(2)(B)(ii) ("SDWA"); and the Toxic Substances Control Act, 15 US.C. § 2622 ("TSCA"), as well as a claim under the False Claims Act ("FCA"). A few years prior to the instant complaint, the plaintiff, a landfill manager, first made several complaints regarding storing capacity and leakage of leachate from the landfill to company officials via email. These communications led to his first whistleblower retaliation complaint, which he filed with the DOE Contractor Employee Protection Program, 10 C.F.R. Part 708. Subsequently, with the plaintiff's employer's contract with the landfill set to expire, a project manager was assigned to transition the landfill to new management and to choose a new landfill manager. Ultimately, the project manager did not choose the plaintiff to fill the landfill manager position at the end of the transition. Complainant filed an ERA complaint alleging that he was passed over for the position because of his previous complaints about leakage of leachate, and that he was being coerced into accepting waste in violation of DOE waste acceptance criteria and State of Kentucky regulations.
The defendant argued in its summary judgment motion that the plaintiff could not prove that his employer knew of his protected activity because the project manager responsible for hiring the new landfill manager did not know about the plaintiff's previous complaints. Additionally, the defendant argued that the plaintiff could not establish a causal connection between his protected activities and the decision not to hire him. The court agreed, finding that the plaintiff had "presented no evidence, other than speculations and conspiratorial theories, to show that [the project manager] knew of [the plaintiff's] protected activities or was influenced by others with knowledge of his protected activities," and therefore granted summary judgment for the employer. Boegh at *16.
[Nuclear and Environmental Digest XIV B 1]
EMPLOYER LIABILITY UNDER ERA; ADVERSE ACTION NOT ATTRIBUTABLE TO NAMED DEFENDANT BECAUSE SUBCONTRACTOR-DEFENDANT WAS CONTRACTUALLY OBLIGED TO REMOVE THE PLAINTIFF FROM A PROJECT ONCE ORDERED TO DO SO BY PRIMARY CONTRACTOR, AND THERE WAS NO EVIDENCE THAT THE DEFENDANT CONSPIRED WITH THE CONTRACTOR IN MAKING THE DECISION.In Tamosaitis v. URS Corp. , No. CV-11-5157-LRS, 2012 WL 4829818 (E.D.Wash. Oct. 10, 2012), the plaintiff brought a retaliation claim against his employer (URS), a subcontractor, after he was removed from a project at a waste treatment plant. The defendant conceded that the plaintiff had engaged in protected activity under ERA and that his removal from the project was retaliation for his protected conduct. However, the defendant filed a motion for summary judgment arguing that it was not liable for the plaintiff's removal from the project because the primary contractor on the job, Bechtel National, Inc. (BNI), was solely responsible for the adverse action.
As evidence, the defendant pointed primarily to its contract with BNI, which provided BNI with clear authority to demand that the defendant remove personnel from the project. Additionally, the evidence—articularly, a directive sent by BNI's Project Director to the defendant ordering the plaintiff's removal—clearly demonstrated that BNI's Project Director made the decision to remove the plaintiff from the project, and was authorized to unilaterally act on behalf of BNI with regard to the project. The plaintiff, on the other hand, offered no evidence that the defendant was aware of BNI's desire to remove the plaintiff prior to receiving the directive, and in fact, the defendant unsuccessfully attempted to persuade BNI to reinstate the plaintiff to the project shortly thereafter. Because the defendant was contractually obliged to remove the plaintiff once it was ordered by BNI, and because there was no evidence that the companies conspired to have the plaintiff removed, the court granted the defendant's motion for summary judgment.
[Nuclear and Environmental Whistleblower Digest XIV B 1]
DISMISSAL OF SUBSIDIARIES OF EMPLOYER AND UNIDENTIFIED INDIVIDUALS; MERE FACT THAT THOSE NAMED DEFENDANTS SHARED AN OFFICE ADDRESS INSUFFICIENT TO SUPPORT "ALTER-EGO" THEORYIn Gauthier v. Shaw Group, Inc. , No. 3:12-cv-00274-GCM, 2012 WL 6043012 (W.D.N.C. Dec. 4, 2012), the Plaintiff, a Quality Engineering Supervisor for The Shaw Group, claimed that he was discharged in violation of the whistleblower provision of the ERA, naming as Defendants, The Shaw Group, several subsidiaries, and 20 unidentified individuals. The district court dismissed the subsidiaries and the individuals for failure to state a claim against them under the ERA because they had not been shown to be employers as defined by the ERA. The Plaintiff argued that all of the Defendants were alter egos of the others, but only pointed to their common office address to support that contention. The court found such a conclusory allegation to be insufficient to justify piercing the corporate veil.
[Nuclear and Environmental Digest XX E]
SOVERIGN IMMUNITYIn Yagley v. Occupational Safety & Health Admin., U.S. Dept. of Labor , No. 10-3667, 461 Fed.Appx. 411 (6th Cir. 2012) (per curiam) (case below ARB No. 09-061, ALJ No. 2009-CAA-2), the plaintiff, a registered nurse at psychiatric services center, filed a complaint with the Michigan Occupational Safety and Health Administration (MOSHA) alleging that the airborne dust created by the on-going renovation project at her employer was creating hazardous working conditions, and several months later, she filed similar complaints with the Environmental Protection Agency (EPA) and the Joint Commission on Accreditation of Hospital Organizations (JCAHO).
After her employer terminated her disability benefits, the plaintiff filed a retaliation complaint with OSHA, alleging that she had suffered retaliation for complaining about unsafe working conditions in violation of the Toxic Substances Control Act (TSCA), 15 U.S.C. § 2622, and the Clean Air Act (CAA), 42 U.S.C. § 7622. After investigating her claim, OSHA found that her benefits were terminated in accordance with her benefits plan, not because she had complained about dust in the workplace, and therefore dismissed the complaint. On appeal to the OALJ, the DOJ recommended dismissal of the plaintiff's complaint because her employer was owned and operated by the Michigan Department of Health, and was therefore entitled to state sovereign immunity under the Eleventh Amendment. The ARB affirmed dismissal on sovereign immunity grounds.
A few years later, the plaintiff, along with her husband, co-filed a second OSHA complaint, in which they alleged continued retaliation and harassment in violation on TSCA, CAA, and the Federal Water Pollution Control Act (FWPCA), 33 U.S.C. §1367. OSHA dismissed this complaint on the grounds that it simply re-alleged the allegations in her previous complaint, and on appeal to the OALJ, the ALJ agreed that its decision on Ms. Yagley's first complaint was controlling. However, in response to the plaintiffs' motion to amend the complaint to include non-government respondents, the OALJ reopened the case to determine if the new complaint included charges of retaliation against non-governmental entities. Because the plaintiffs' new complaint did not name a specific respondent, but alleged "continued retaliation," the ALJ concluded that no non-governmental respondents were named, and dismissed the complaint. The plaintiffs petitioned the ARB, and despite the ARB's prompting, the plaintiffs failed to address the issue of sovereign immunity in their reply briefs, and the Board therefore affirmed dismissal of their complaint. Ms. Yagley then appealed the ARB's decision to the Sixth Circuit.
Although the Sixth Circuit acknowledged that it affords liberal construction to the pleadings and filings of pro se litigants, the Court of Appeals rejected the appeal because Ms. Yagley "failed, during the entire course of this protracted litigation, to develop any argument on the key issue of state sovereign immunity."
PROTECTED ACTIVITY UNDER FRSA; PLAINITFF ADDUCED SUFFICIENT EVIDENCE THAT HE REPORTED A WORK-RELATED INJURY TO HIS EMPLOYER AND COOPERATED WITH A SUBSEQUENT INVESTIGATION TO AVOID SUMMARY DECISION
In Infermo v. New Jersey Transit Rail Operations, Inc. , CA No. 10-2498, 2012 WL 209359 (D.N.J. Jan. 24, 2012) (unpublished), the plaintiff, a signal maintainer, slipped and broke his leg while walking along a slippery path to reach a signal case. The employer investigated the injury, and ultimately determined that the injured plaintiff had not been "aware of his surroundings and was not alert to the walking conditions," and therefore he violated two of the company's safety rules. The employer held a disciplinary hearing after the plaintiff had recovered from his injuries and returned to work, and as a result, the employer affirmed the investigation's finding and disciplined the plaintiff with a five-day deferred suspension and mandatory safety counseling. The plaintiff filed an OSHA complaint claiming unlawful retaliation under the Federal Railroad Safety Act (FRSA), 49 U.S.C. § 20109, and after waiting the requisite number of days without a decision from the Secretary of Labor, he filed suit in federal district court.
The district court denied the defendant's motion for summary judgment, rejecting the employer's argument that the plaintiff failed to allege that he engaged in protected activity under FRSA because he merely fell and injured himself. Rather, the court found that the plaintiff offered sufficient proof that he reported his work-related injury to his employer and supplied the employer's investigators with information regarding the accident and possibly unsafe working conditions, which implicate the categories of protected activity listed in 49 U.S.C. § 20109(a)(1) & (4). Additionally, the court found that the plaintiff had adduced sufficient evidence suggesting a connection between his reporting of his injury and his subsequent suspension to avert summary judgment.
CONTRIBUTING FACTOR ANALYSIS UNDER FRSA; COURT GRANTED SUMMARY JUDGMENT WHERE THE PLAINTIFF ADDUCED INSUFFICIENT EVIDENCE THAT HIS REPORTING OF AN INJURY CONTIRBUTED TO THE DECISION TO DISCIPLINE HIM FOR VIOLATION OF WORKPLACE SAFETY RULES; TEMPORAL PROXIMITY BETWEEN REPORT AND DISCIPLINE WAS NOT SUGGESTIVE OF A CAUSAL RELATIONSIP BECAUSE THE EMPLOYEE'S UNION'S COLLECTIVE BARGAINING AGREEMENT REQUIRED THE EMPLOYER TO INITIATE RULE VIOLATION DISCIPLINARY PROCEEDINGS WITHIN TEN DAYS OF A WORKPLACE INCIDENT.
In Araujo v. New Jersey Transit Rail Operations, Inc. , CA No. 10-3985, 2012 WL 1044619 (D.N.J. Mar. 28, 2012) (unpublished) (case below ALJ No. 2010-FRS-23), the plaintiff was a conductor-flagman for a railroad, and his primary responsibility was "to protect the construction crew members from the movement of trains in the course of using the high rail vehicle." Araujo at *1. Due to miscommunication with two linemen that were assigned to de-energize the overhead wires prior to the day's construction project, a member of the crew came into contact with the live wires and suffered a fatal injury. The plaintiff immediately called 911 and also reported the accident to the dispatcher. The defendant and the Federal Rail Administration ("FRA") investigated the accident, and while they found the two lineman that failed to de-energize the wires primarily responsible for the accident, they also found the plaintiff to be partially at-fault, and suspended him for violating several workplace safety rules. As a result of the incident, the plaintiff sought counseling under the defendant's counseling program, and was found to be unfit to return to work. The defendant initially continued paying his salary while on medical leave, BUT even after he received medical clearance to resume working, the defendant held plaintiff out of service. The plaintiff filed a retaliation complaint under 49 U.S.C. § 20109(a)(4), alleging that the defendant disciplined him in retaliation for reporting the deceased crew member's injury, and for reporting his own mental injury to the defendant's medical department. In response, the defendant filed a motion for summary judgment arguing that the plaintiff could not prove that his protected activity was a contributing factor to his discipline.
In granting the defendant's motion, the court dismissed the plaintiff's argument that the temporal proximity between his protected activity and the defendant filing disciplinary charges against him evidenced a causal relationship because the company was required under its collective bargaining agreement with the plaintiff's labor union to initiate rule violation charges within ten days of the incident. In light of the collective bargaining agreement's constraints, the court found "the temporal proximity in this case is not indicative, much less 'unusually suggestive' of a causal relationship between the injury reports and the date the charges were filed." Araujo at *7. Equally unpersuasive was the plaintiff's argument that the defendant's decision not to test the plaintiff for drug abuse after the incident constitutes an admission that the plaintiff did not contribute to the incident. The plaintiff also argued that he was disparately punished for his violating safety rules by relying on his lineman's word that they had de-energized the overhead wires, because it was routine for conductor-flagmen to do so in practice. However, the court found that he failed to complete this disparate treatment argument because he failed to point "to a single conductor-flagman, or any other NJT employee, who committed an infraction of the electrical safety rules in connection with an incident involving a fatality yet faced no disciplinary action." Id. at *8. Not only did the court find that the plaintiff had failed to raise a question of fact as to causation, but it also found that the defendant proved that "it would have pursued charges and imposed discipline on Araujo regardless of whether he made his FRSA-protected injury reports." Id. at *9.
RELEASE OF FELA CLAIM AS A BAR TO A FRSA WHISTLEBLOWER CLAIM; EXAMINATION OF INTENT OF PARTIES
In Tagliatela v. Metro-North Commuter R. Co. , 2012 WL 5493618 (D.Conn. Nov. 13, 2012) (case below ALJ No. 2009-FRS-13), the Plaintiff brought an action under the Federal Rail Safety Act ("FRSA") in connection with the Defendant's discipline of the Plaintiff for allegedly violating the Defendant's policy requiring employees to immediately report a workplace injury and for failing to appear for a medical evaluation at the Defendant's Occupation Health Services facility. The Plaintiff had injured his knee, but did not report it immediately. The Defendant moved for summary judgment on the ground that a release signed by the Plaintiff in settlement of his FELA claim barred the FRSA claim.
Applying state contract law focusing on the intent of the parties, the court held that the release did not bar the Plaintiff's FRSA claim. The Plaintiff had released all claims that "arise from or out of injuries and damages known or unknown, permanent or otherwise, sustained or received" by the Plaintiff in regard to his knee injury. The court found that this language from the release could not be interpreted to mean that the Plaintiff's FRSA claim arose from the injury he sustained when he twisted his knee. Rather, his FRSA claim can be interpreted as having arisen from his protected activity of reporting a workplace injury and not the injury itself. The court also found that the Defendant was well aware of the FRSA claim at the time of the settlement of the FELA claim, and that had it wished to negotiate a global settlement it would have negotiated to explicitly include the known FRSA claim in that release. The court distinguished the ALJ's decision in Davies v. Florida East Coast Railway, LLC , 2010-FRS-7 (June 3, 2010), because in that case the release explicitly mentioned whistleblower claims. The court did not reach the issue of whether OSHA's approval of the release was required for it to be effective as a bar to the FRSA claim.
Procedure and Review Before Federal Courts COURT'S SUA SPONTE REVIEW OF COMPLAINT FILED WITH REQUEST TO PROCEED IN FORMA PAUPERIS
In Brantley v. Title First Titling Agency , No. 1:11-cv-864 (S.D.Ohio Feb. 2, 2012) (2012 WL 349180), adopted Brantley v. Title First Titling Agency , No. 11-cv-864 (S.D.Ohio Apr. 10, 2012), a magistrate judge sua sponte reviewed the plaintiffs' complaint to determine, inter alia, whether the complaint should be dismissed because it was frivolous, malicious, failed to state a claim upon which relief may be granted, or sought monetary relief from a defendant who is immune from such relief, where the pro se plaintiffs sought to proceed in forma pauperis . The magistrate observed that the pro se complaint was difficult to decipher, but found that it asserted, inter alia, a SOX whistleblower complaint against their own attorney for allegedly unethical conduct in the pursuit of a federal action for predatory lending and treachery by the Bank of America. The magistrate also interpreted the complaint as seeking removal of a state action to federal court on the basis that the state court judge who ruled on the SOX action failed to uphold the integrity and independence of the judiciary, and that their own attorney failed to zealously represent them. The magistrate found that removal of the action was the defendant's prerogative, not the plaintiff's. The magistrate recommended that the complaint be dismissed because the plaintiffs had failed to state a claim upon which relief may be granted for a violation of the SOX whistleblower statute, 18 U.S.C. 1514A, because the complaint failed to allege that the plaintiffs were employees of a publically-traded company, that they engaged in protected activity, or that they suffered any adverse action.
EXHAUSATION OF ADMINISTRATIVE REMEDIES
In Simkus v. United Air Lines, Inc. , No. 11 C 2165, 2012 WL 3133603 (N.D.Ill. July 31, 2012) (case below ALJ No. 2010-SOX-48), the plaintiff filed suits under a myriad of statutes, including the Toxic Substances Control Act ("TSCA"), 15 U.S.C. § 2601 et seq., and the Sarbanes-Oxley Act ("SOX"), 18 U.S.C. § 1514A. His SOX complaint was dismissed as untimely. Moreover, because the plaintiff failed to include a TSCA complaint when he filed his SOX complaint with OSHA, his TSCA complaint was dismissed for failure to exhaust his administrative remedies.
EXHAUSTION OF ADMINISTRATIVE REMEDIES
In Roganti v. Metropolitan Life Ins. Co. , No. 12 Civ. 0161, 2012 WL 2324476 (S.D.N.Y. June 18, 2012) (related to ALJ No. 2005-SOX-2), the complaint was dismissed for failure to exhaust administrative remedies because the plaintiff admittedly did not first file with OSHA.
TO HAVE EXHAUSTED ADMINISTRATIVE REMEDIES, PLAINTIFF MUST HAVE PREVIOUSLY PRESENTED EACH CLAIM — INCLUDING SPECIFIC ADVERSE ACTIONS, PROTECTED ACTIVITY, AND GENERAL NATURE OF THE FACTS — TO OSHA BEFORE FILING IN DISTRICT COURT
In Wong v. CKX, Inc. , No. 11 Civ. 6291, 2012 WL 3893609 (S.D.N.Y. Sept. 11, 2012) (case below ALJ No. 2010-SOX-36), the plaintiff, Senior Tax Counsel for an entertainment company, repeatedly raised concerns to senior management that if its UK-based subsidiary was conducting business in the United States (as she believed it was), than the company needed to pay United States taxes on that subsidiary's income. She believed the company may owe the Unites States government nearly $100 million dollars in back taxes, and their failure to do so rendered false the company's SEC filings regarding their tax liabilities. Two months after she lodged her complaints, the plaintiff was terminated, and filed a complaint with OSHA alleging retaliatory termination in violation of SOX. OSHA dismissed the plaintiff's complaint, and after an ALJ held a three-day hearing on the merits, the plaintiff filed this action for de novo review in district court.
The defendant argued that the court lacked jurisdiction to hear plaintiff's complaint because the complaint that the plaintiff filed before the district court contained factual differences from her OSHA complaint. Specifically, the defendant noted that the plaintiff's district court complaint did not include her allegation in her OSHA complaint that the company's senior management concealed the plaintiff's concerns from the Audit Committee of the Board of Directors. Additionally, in her OSHA complaint, she alleged that she complained about the company's tax position in 2006, but in the district court complaint she said she first complained in 2009, closer to the date of her termination.
The district court began by clarifying the standard for exhausting administrative remedies, which requires that "each separate and distinct claim [be] pled before the agency." Wong at *4 (citing Sharkey v. J.P. Morgan Chase & Co. , 805 F.Supp.2d 45, 53 (S.D.N.Y.2011)). The court elaborated that it is permissible for the plaintiff to include more specific allegations in a subsequent district court complaint, so long as the specific claims, "including specific adverse employment actions, protected activity, and the general nature of the facts that formed [p]laintiff's belief in violations of the enumerated statutes giving rise to the protected activity, were timely presented in her OSHA Complaint." Id. In this case, the court found that "the general nature of the facts pled in the OSHA complaint and the complaint before this Court is the same," and "the thrust of the plaintiff's underlying claim here is the same as the one she filed with OSHA." Id. at *5.
DISMISSAL OF FOREIGN SUBSIDIARY UNDER FRCP 12(b)(2) WHERE PLAINTIFF FAILED TO ESTABLISH GROUNDS FOR DISTRICT COURT'S PERSONAL JURISDICTION OVER THAT DEFENDENT
In Nielsen v. AECOM Technology Corp. , No. 12 Civ. 5163(KBF), 2012 WL 6200613 (S.D.N.Y. Dec. 11, 2012) (case below ARB No. 12-073, ALJ No. 2012-SOX-13), the Plaintiff commenced a SOX Section 806 whistleblower action against his former employer--defendant AECOM Middle East, Ltd. ("AME")--and its parent--defendant AECOM Technology Corp. ("AECOM"). AECOM was a publicly-traded company located in the United States. AME was not publicly-traded and was incorporated and headquartered outside the U.S. AME did not have operations, offices, or employees in the U.S. AECOM was not involved in AME's daily operations--and the two entities do not share any personnel. While the case was before the U.S. Department of Labor, an ALJ dismissed the claim on the ground that hearing the claim would allow an improper extraterritorial application of SOX. The claim was refilled in U.S. district court, and the Defendants sought dismissal of AME under Rule 12(b)(2) on the basis that the court does not have personal jurisdiction over AME. Applying New York law, the court found that it would obtain personal jurisdiction over a nonresident party if it was "doing business" in the state. The court found that the Plaintiff's conclusory allegation that the defendants engage in business in "this District" was an insufficient showing to withstand the Rule 12(b)(2) motion. Moreover, the Plaintiff's own declaration that the personnel functions of AME and AECOM's central headquarters in New York were intertwined was insufficient, the Plaintiff having not provided anything to support the truth of the statement, and the record being devoid of any basis for Plaintiff's own personal knowledge of the corporate structure for personnel decisions. Thus, the court found that it did not have personal jurisdiction over AME.
DISCOVERY; STANDING OF DEFENDANT TO FILE MOTION TO QUASH SUBPOENA SERVED ON CELL PHONE PROVIDER FOR PRIVATE PHONE RECORDS OF NON-PARTY OFFICER
In Johnson v. U.S. Bancorp , No. C11-cv-02010 (W.D. Wash. Dec. 27, 2012 ) (2012 WL 6726523) (case below ALJ No. 2010-SOX-37), the Plaintiffs served a subpoena on AT&T for the personal cell phone records of a non-party officer of U.S. Bancorp. The Defendants moved to quash. The Plaintiffs argued that the Defendants did not have standing unless they can assert a legitimate privacy interest in the cell phone records. The Defendants argued that the officer used his personal cell phone for U.S. Bank business and therefore the bank has standing to protect its own confidential business information that may be revealed through release of the officer's personal phone calls. The court found that “[a] party has standing to challenge a subpoena issued to third parties where its own interests may be implicated” and that the Defendants have standing in this case. The court limited the subpoena to phone records to the timeframe in which the officer allegedly contacted another bank, finding that the Plaintiffs had not adequately articulated the relevance of phone records outside this timeframe. The Defendants also argued that the production of the phone records would subject its officer — and his friends, family and business acquaintances -- to embarrassment and harassment, and requested that they be permitted to redact personal telephone numbers. The court denied redaction, but directed the Plaintiffs not to call any of the phone numbers disclosed, and directed the parties to enter into a protective order limiting disclosure to counsel and to persons necessary for and associated with the litigation. Finally, the court did not find persuasive the Defendants‘ argument that the officer would undoubtedly be deposed, and therefore the Plaintiffs had other means of obtaining the information they sought.
Timeliness of Complaint TIMELINESS OF SOX COMPLAINT; DETERMINING DATE OF VIOLATION UNDER SOX IS AN OBJECTIVE INQUIRY FOCUSING ON WHEN THE EMPLOYEE REASONABLY SHOULD HAVE KNOWN THAT THE ADVERSE ACTION WAS TAKEN
In Mart v. Forest River, Inc. , 854 F.Supp.2d 577 (N.D.Ind. Feb. 22, 2012), the plaintiff, the general manager (and heir-apparent to the CEO position) of a financial services company, discovered that the current CEO had used the defendant and two other "shadow companies" to engage in unlawful transactions. The plaintiff reported these discoveries to the CEO of the defendant's parent company, and subsequently confronted the current CEO about the transactions. The CEO threatened the plaintiff, subjected him to a hostile work environment, and ultimately terminated his employment, prompting the plaintiff to file a complaint with OSHA under SOX's whistleblower provision.
The defendant filed a motion to dismiss pursuant to FRCP 12(b)(1), arguing that the plaintiff failed to file a complaint with OSHA within 90 days of the date that the violation occurred, and therefore the court first set out to determine the date that the plaintiff was terminated. The defendant argued that the plaintiff was notified of the decision to terminate his employment either when he met with a human resources representative to discuss his termination, or the following day, when the human resources representative emailed him to confirm that he need not report to work because the defendant had made the decision to terminate him. Both of those dates occurred more than 90-days before complainant filed his retaliation complaint with OSHA. However, two weeks later, the human resources representative mailed an official letter memorializing the decision, and almost two months later, the plaintiff received a final letter from the defendant that "formally acknowledge[d]" that he had been terminated as of that week. The plaintiff asserted that either of these two later communications signified the date that the violation occurred, as both occurred within 90 days prior to the date the plaintiff filed a complaint with OSHA.
The district court, citing Flannery v. Recording Indus. Ass'n of Am. , 354 F.3d 632, 640 (7th Cir.2004), explained that determining the date that notice has been communicated is an objective inquiry that focuses on "when the employee knew, or reasonably should have known, that the adverse employment decision had been made." Mart at 601. In a discriminatory discharge case, the court looks for "a final, ultimate, non-tentative decision to terminate the employee," and "the employer must give the employee 'unequivocal' notice of its final termination decision." Id. at 601-602. In this case, the human resources representatives follow-up email did not use the term "terminate," but the language of the email "clearly indicated that a decision to terminate plaintiff had been made." Id. at 602. Additionally, the court found the language "sufficient to unequivocally notify plaintiff of the decision to terminate his employment," and therefore the court determined that the date of the human resources representative's email was the date that the violation occurred. Consequently, the plaintiff failed to file within 90 days of receiving notice of his termination, and the district court lacked subject-matter termination to hear the claim. In closing, the court clarified that "any subjective belief [of the plaintiff] that the layoff decision was not final is simply not relevant." Id. at 604 (citations omitted).
TIMELINESS AND PROTECTED ACTIVITY IN SOX COMPLAINTS; PLAINTIFFS ARE AFFORDED A FULL SPAN OF NINETY DAYS AFTER THE VIOLATION TO FILE A SOX ACTION, AND IF THE NINETIETH CALENDAR DAY IS SATURDAY, SUNDAY OR HOLIDAY, THE PERIOD DOES NOT EXPIRE UNTIL THE END OF THE NEXT BUSINESS DAY
In Gladitsch v. Neo@Ogilvy , No. 11 Civ. 919 DAB, 2012 WL 1003513 (S.D.N.Y. Mar. 21, 2012), the plaintiff, an Associate Media Director, served on the company's IT Planning Team, and noticed in a proposal sent by one of the company's media service vendors that the vendor intended to substantial overcharge a client. The plaintiff immediately notified the Director of Media Management, and after she met with the vendor to discuss the proposed charges, it was revealed that the company had used the proposed pricing scheme for years. As a result, it appeared to the plaintiff that the company had overcharged the client by several million dollars. The plaintiff complained to her direct supervisors on the IT Planning Team, and when billing practices remained unchanged, she arranged a meeting to discuss the billing scheme with the company's Managing Director and other upper-level management. However, rather than correct the problem, the plaintiff alleged that her supervisors retaliated against her by threatening her and removing her from the client's account. Despite a history of consistently positive performance reviews, her next performance review criticized her performance, and specifically mentioned that she had been distracted by the company's billing practices. She also did not receive a promotion that she had been promised prior to discovering and complaining about the billing practices, and was instead demoted to a position she had held three years earlier. She filed a claim with OSHA under SOX, and after 180 days without a decision, filed in federal court.
First, the district court found that Section 929A of the Dodd-Frank Act — which amended Section 1514A to clarify that its protections cover subsidiaries of publicly-traded companies — applies retroactively, because it is a "clarifying" amendment that does not "effect a substantive change in the law," but rather "correct[s] a misinterpretation." Gladitsch at *4. Consequently, the defendant in the instant case is covered under SOX as a subsidiary of a publicly-traded company. The court also found that Neo and Ogilvy — which "share common ownership, premises, directors and/or officers, and financial control" — were a single or joint employer of the plaintiff. Id. at *5.
The defendants' argued that the plaintiff's complaint that her negative performance review was retaliatory was not timely filed because it occurred exactly 91 days prior to her filing with OSHA. However, the district court explained that plaintiffs are allotted "a full span of ninety days in which to file [their] action, and accordingly, when the ninetieth calendar day is a Saturday, Sunday, or holiday, the period does not expire until the end of the next day." Id. (citing Kane v. Douglas, Elliman, Hollyday & Ives , 635 F.2d 141, 142 (2d Cir.1980)). In this case, "ninetieth calendar day following Plaintiff's performance review was a Sunday, and Plaintiff's complaint with OSHA was filed the next business day," and therefore "falls within the limitations period." Id.
TIMELINESS OF COMPLAINT FILED AFTER EFFECT DATE OF DODD-FRANK AMENDMENTS TO SOX
In Ashmore v. CGI Group Inc. , No. 11 Civ. 8611, 2012 WL 2148899 (S.D.N.Y. June 12, 2012), the court found that the plaintiff's SOX complaint to OSHA was timely under the post-Dodd-Frank Act 180-day filing timeframe, because he the plaintiff "filed both his whistleblower complaint with the Secretary and his civil complaint with this Court after the 2010 amendments went into effect . . . [and] the 180-day statute of limitations thus applies without raising any retroactivity concerns." Ashmore at *5.
Adverse Action ADVERSE ACTION UNDER SOX; AN ADVERSE ACTION IS A MATERIAL ADVERSE CHANGE IN THE TERMS AND CONDITIONS OF EMPLOYMENT, AND THE PLAINTIFF ALLEGED SUFFICIENT MATERIAL ADVERSE ACTIONS TO DEFEAT A MOTION TO DISMISS
In Kolchinsky v. Moody's Corp. , No. 10 Civ. 6840(PAC), 2012 WL 639162 (S.D.N.Y. Feb. 28, 2012), the plaintiff was Managing Director of the Derivatives Group at Moody's, a nationally recognized rating organization (NRSRO), who reported concerns to his supervisor when he discovered that Moody's planned to use outdated rating methodologies to a line of asset-backed securities CDOs. Believing that proceeding would violate federal securities laws and SEC rules, the plaintiff complained to Moody's Head of Credit Policy when his immediate supervisor was not responsive to his complaints. According to the plaintiff, he began suffering retaliation shortly thereafter, and alleges that he was excluded from meetings, demoted and had his salary and bonuses reduced. A year after his initial complaints, the plaintiff, after being asked for his opinion, criticized the new credit rating methodology promoted by the defendant's Derivative's Group as "irresponsible." Soon after, he was transferred to a "support" role, a move that the plaintiff perceived as retaliatory and detrimental to his future promotion prospects. Over the next sixth months, the plaintiff reported additional concerns related to Moody's rating methodologies, leading the defendant to hire a law firm to investigate his claims. Although the plaintiff asserts that he otherwise cooperated with the investigators, he declined to meet with the investigative team without his own attorney present, and as a consequence, the defendant suspended him for failure to cooperate. The plaintiff alleged in his SOX whistleblower complaint that this suspension amounted to constructive termination, noting that his name was removed from the company's directory, he was forced to return all company property, and was told that he would not be doing any work for Moody's again.
The defendant's motion to dismiss the plaintiff's claim argued that because the plaintiff was suspended without pay, he failed to allege that he suffered an adverse employment action. The district court stated that "a materially adverse change in the terms and conditions of employment" are all that are required to suffer an adverse employment action, and by alleging that he was excluded from meetings, demoted, given reduced salary and bonuses, transferred to a support role, suspended, and constructively terminated, the plaintiff pled adverse action sufficient to defeat a motion to dismiss.
ADVERSE ACTION UNDER SOX INCLUDES ALL UNFAVORABLE EMPLOYMENT ACTIONS THAT ARE MORE THAN TRIVIAL
In Guitron v. Wells Fargo Bank, N.A. , No. C 10-3461 CW, 2012 WL 2708517 (N.D.Cal. July 6, 2012), two bankers (Plaintiff Guitron and Plaintiff Klosek) alleged that they suffered retaliation after they reported to their employer that two of their coworkers were engaging in unlawful and unethical business practices related to customer account management.
Plaintiff Guitron complained to her supervisor that her coworker had allegedly opened or closed accounts without the customer's permission, and that other bankers were opening accounts with forms of identification that were not acceptable under company policy. As a result, Plaintiff Guitron alleged that her supervisor stopped referring business to her and harassed her when she requested time off. When her coworkers were not investigated, she contacted the regional Vice President, the company's human resources office, and the company's ethics hotline to report the conduct. Plaintiff Guitron's struggled to meet her sales requirements, and her relationship with her supervisor deteriorated, until her supervisor eventually dismissed her for insubordination.
Plaintiff Klosek worked under the same supervisor as Plaintiff Guitron, and also complained about unethical conduct, including opening and closing accounts without customer permission, forcing sales, and "shoving products down customers' throats." Guitron at *7. She alleged that this behavior violated both ethical rules and consumer laws governing fraudulent conduct. Plaintiff Klosek received poor performance evaluations and a verbal warning for failure to meet her sales goals, and she eventually went on extended medical leave due to work related stress. After she was terminated, she filed a joint SOX complaint with Plaintiff Guitron, alleging unlawful retaliation for reporting bank and mail fraud.
Relying principally on the Fifth Circuit's decision in Allen v. Admin. Review Bd. , 514 F.3d 468, 476 n. 2 (5th Cir.2008), which applied the Title VII Burlington Northern standard for adverse action to a SOX complaint, the defendants argued that Plaintiff Guitron failed to offer sufficient evidence showing that she suffered a materially adverse employment action. The court first corrected the defendants, explaining that the ARB's decisions in Williams v. America Airlines, Inc. , ARB Case No. 09-018 (2010) and Menendez v. Halliburton, Inc. , 2011 DOL Ad. Rev. Bd. LEXIS 83 set the standard for adverse action in SOX cases, and "adverse actions" refers to "unfavorable employment actions that are more than trivial, either as a single event or in combination with other deliberate employer actions alleged." Guitron at *16. In this case, Plaintiff Guitron has offered sufficient evidence that she suffered an unfavorable employment action that is more than trivial, including a suspension and poor performance reviews.
However, the court nonetheless granted summary judgment for the employer on Plaintiff Guitron's SOX complaint because the employer had provided clear and convincing evidence that it would have terminated her employment even absent the protected activity. Specifically, the defendants demonstrated that they issued Plaintiff Guitron numerous warnings for failure to meet her quarterly sales goals, that they dismissed her (i.e. placed her on administrative leave) for clear insubordination, and that they eventually terminated her because she refused to return to work from administrative leave.
Contributing Factor/Employer Knowledge PROTECTED ACTIVITY AND EMPLOYER KNOWLEDGE UNDER SOX; COMPLAINTS TO COWORKERS AND SUPERVISOR ABOUT THEIR ALLEGEDLY-ILLEGAL SCHEME WAS SUFFICIENTLY SPECIFIC TO CONSTITUTE PROTECTED ACTIVITY UNDER SOX
In Ashmore v. CGI Group Inc. , No. 11 Civ. 8611, 2012 WL 2148899 (S.D.N.Y. June 12, 2012), the defendant was a subcontractor of a public housing authority that provided services related to the administration of HUD's Section 8 project-based rental subsidy program. The plaintiff worked for the defendant's Rebid Assessment Team (RAT), which coordinated rebidding process for Section 8 administrative services contracts. While working in this capacity, the plaintiff allegedly caught wind of a scheme concocted by several RAT coworkers to violate HUD rules limiting the number of rental units that can be administered by a single public housing authority or private subcontractor. According to the plaintiff, he complained to his coworkers and supervisor about the scheme, and alleged in his complaint that he reasonably believed that his coworker's use of telephone lines and emails to implement the scheme violated federal mail and wire fraud statutes. The plaintiff alleged that he was first kicked off of RAT, and two days later was fired for opposing the scheme, leading him to file a retaliation complaint under SOX.
The defendant argued that the plaintiff's complaints to his fellow RAT members about the scheme was insufficiently specific to constitute protected activity under SOX. The district court stated that SOX required that the plaintiff "show that the information she provided about the conduct was not overly general," and that she "reported information [with] a certain degree of specificity." Id. (citing Lerbs v. Buca Di Beppo, Inc. , No. 2004-SOX-8, 2004 WL 5030304, *33-34, (ARB June 15, 2004)). According to the court, "the fact that [the plaintiff] did not specifically inform [the employer] . . . of his belief that the scheme involved mail or wire fraud, or his reasons for thinking so, does not mean that the information he communicated was insufficiently specific to count as activity protected by § 806." Id. at *6. Citing Fourth Circuit's decision in Welch , the district court clarified that "what the specificity requirement instead demands is that 'employees' communications ... identify the specific conduct that the employee believes to be illegal.'" Id. (citation omitted). In the instant case, it was undisputed that the plaintiff specifically identified the conduct that he believed to be illegal in his disclosures (i.e. the scheme to avoid HUD's limit on unit administration), and the court found his disclosures sufficient to satisfy the specificity standard. Likewise, the court rejected the defendant's argument that the plaintiff's belief that the scheme constituted mail or wire fraud was unreasonable.
Because it believed the plaintiff's communications failed to sufficiently inform RAT members that they were violating federal law, the defendant also alleged that it did not have knowledge of the plaintiff's protected activity. The court disagreed, and explained that a plaintiff "does not need to demonstrate that his employer actually believed that what he said about the illegality of the company's conduct was true," but rather he must "demonstrate only that he did in fact communicate his reasonable belief to that effect to his employer ." Id. at *7. The plaintiff satisfied that standard here, and the court dismissed the defendant's motion accordingly.
CONTRIBUTING FACTOR AND EMPLOYER KNOWLEDGE UNDER SOX; GRANTING SUMMARY JUDGMENT FOR EMPLOYER BECAUSE THE PLAINTIFF FAILED TO OFFER EVIDENCE SUGGESTING THAT HIS EMPLOYER KNEW ABOUT HIS COMPLAINT TO THE SEC, AND BECAUSE DEFENDANT DEMONSTRATED THAT ITS DECISION TO TERMINATE HIS EMPLOYMENT PREDATED THE COMPLAINT
In Boyd v. Accuray, Inc. , No. 11-CV-01644-LHK, 2012 WL 1999667 (N.D.Cal. June 4, 2012) (case below ALJ No. 2012-SOX-18), the plaintiff was a senior manufacturing engineer at a biomedical technology company, who was terminated after he received consistently negative performance evaluations over the course of several years. The plaintiff, however, filed a retaliation complaint under SOX, alleging that his ultimately termination was motivated by his complaints to the SEC that the company had developed "an inventory of defective camera detectors," which caused the company to have "reported million[s] of dollars in inflated assets." Boyd at *12. The court granted the defendant's motion for summary judgment because the plaintiff failed to raise a genuine issue of material fact as to whether the employer knew about his complaint to the SEC. The plaintiff admitted that he did not inform his company's human resources office about his SEC complaint, and the defendant offered evidence indicating that the plaintiff's supervisors also had no knowledge of the complaint. Moreover, the plaintiff conceded that he already on the path to termination before he made his complaint, and the defendant demonstrated that the decision to terminate the plaintiff also predated his complaint.
Protected Activity PROTECTED ACTIVITY UNDER SOX; THE COURT DISMISS THE PLAINTIFF'S SOX COMPLAINT BECAUSE THE CONTENT OF THE EVIDENCE THAT HE PROVIDED WITH HIS COMPLAINT DIRECTLY CONTRADICTED THE ALLEGATIONS IN THE COMPLAINT
In McManus v. McManus Financial Consultants, Inc. , No. 3:11-CV-00134-LRH-VPC , 2012 WL 937812 (D.Nev. Mar. 19, 2012), the plaintiff served as President of defendants McManus Financial Consultants, Inc. ("MCFI") and McManus & Co., Inc. ("MCI"), and his brother served as Executive Vice President of MCFI and MCI. Additionally, the plaintiff served as Chief Financial Officer ("CFO") of defendant Aeolus Pharmaceuticals, Inc. ("Aeolus"). After Aeolus sold investors shares in return for financing in October 2009, the investors sought to renegotiate the conversion price of the notes in November 2009. The plaintiff told Aeolus' CEO and Chairman that changing the conversion price and providing additional shares to investors for no consideration and without a new agreement would constitute securities fraud, but despite his warnings, Aeolus' Board of Directors approved the renegotiation and allocation of additional shares. The plaintiff, as CFO, had to sign the subsequent 8-K that Aeolus filed with the SEC, which stated that Aeolus lowered the share price "to correct a misunderstanding." Over the next few months, the plaintiff's salary was reduced and he was eventually terminated from Aeolus. He filed a complaint with OSHA alleging a violation of the Sarbanes-Oxley Act ("SOX"), and after 180 days passed without a resolution, he filed in district court.
Because he only filed an OSHA complaint against Aeolus, the district court dismissed the plaintiff's claims against MCI and MFCI for failure to exhaust administrative remedies. As for his SOX complaint, the district court granted the defendant's motion to dismiss under FRCP 12(b)(6) because, after reviewing the Form 8-K at issue, "the court finds that the document contradicts Plaintiff's allegation that it failed to disclose to other shareholders two material facts: lack of a new agreement and/or consideration." McManus at *4. Instead, the court's review of 8-K revealed that "it specifies the terms of the amended conversion (including the adjustment of the conversion price and the number of new shares issued), and it specifically states that Aeolus will not receive any proceeds from the Issuance," which "directly contradict the plaintiff's allegations." Id.
AN ALLEGATION OF SHAREHOLDER FRAUD IS NOT A NECESSARY COMPONENT OF PROTECTED ACTIVITY UNDER SOX.
In Gladitsch v. Neo@Ogilvy , No. 11 Civ. 919 DAB, 2012 WL 1003513 (S.D.N.Y. Mar. 21, 2012), the plaintiff, an Associate Media Director, served on the company's IT Planning Team, and noticed in a proposal sent by one of the company's media service vendors that the vendor intended to substantial overcharge a client. The plaintiff immediately notified the Director of Media Management, and after she met with the vendor to discuss the proposed charges, it was revealed that the company had used the proposed pricing scheme for years. As a result, it appeared to the plaintiff that the company had overcharged the client by several million dollars. The plaintiff complained to her direct supervisors on the IT Planning Team, and when billing practices remained unchanged, she arranged a meeting to discuss the billing scheme with the company's Managing Director and other upper-level management. However, rather than correct the problem, the plaintiff alleged that her supervisors retaliated against her by threatening her and removing her from the client's account. Despite a history of consistently positive performance reviews, her next performance review criticized her performance, and specifically mentioned that she had been distracted by the company's billing practices. She also did not receive a promotion that she had been promised prior to discovering and complaining about the billing practices, and was instead demoted to a position she had held three years earlier
The district court rejected the defendants' argument that the plaintiff failed to engage in protected activity under SOX because she did not complain about fraud affecting shareholders or investors, explaining that "an allegation of shareholder fraud is not a necessary component of protected activity under Section 1514A." Id. at 7. As support for this position, the court cited the district court decisions in O'Mahony v. Accenture Ltd. , 537 F.Supp.2d 506, 518 (S.D.N.Y.2008) and Sharkey v. J.P. Morgan Chase & Co. , 805 F.Supp.2d 45, 57 (S.D.N.Y.2011), and the ARB's decision in Sylvester v. Parexel , ARB No. 07-123, 2011 WL 2517148 (May 25, 2011). Ultimately the court found that the plaintiff sufficiently alleged that she engaged in protected activity: the plaintiff "has alleged sufficiently that she reasonably believed that the pricing scheme, which overcharged IBM, violated an enumerated category of misconduct under SOX," and "her communications with supervisors . . . identifies specifically the overcharges . . . she believed to be unlawful." Id . at 8.
PROTECTED ACTIVITY UNDER SOX; PLAINTIFF'S COMPLAINTS TO HIS EMPLOYER ABOUT OPEN DISCUSSION OF STOCK PRICES AND PERSONELL ISSUES DID NOT DEFINITIVELY AND SPECIFICALLY RELATE TO A SOURCE OF LAW LISTED IN SECTION 1514A; PLAINTIFF'S BELIEF THAT OPEN DISCUSSION OF STOCK PRICES AT THE OFFICE ENCOURAGED INSIDER TRADING THAT WOULD DEFRAUD SHAREHOLDERS WAS NOT OBJECTIVELY REASONABLE.
In Andaya v. Atlas Air, Inc. , No. 10 CV 7878, 2012 WL 1871511 (S.D.N.Y. Apr. 30, 2012), the plaintiff served as the Director of the defendant's newly-created Project Management Office. In that capacity, he often reminded employees that because the defendant is a publicly traded company, they should not discuss its stock prices openly, because the plaintiff believed such discussions violated SOX and SEC regulations. The plaintiff also made a host of complaints to his superior about personnel issues, the IT department's use of a consultant, and management officials that accepted fees for speaking engagements. The plaintiff also objected when his superior discussed the company's stock price with the plaintiff and several other directors, because the plaintiff felt that doing so violated SOX and SEC regulations by "promote[ing] insider trading and wast[ing] corporate assets." Andaya at *1. Prompted by a written complaint about his management style from a group of his subordinates, the defendant's CFO made the decision to terminate the plaintiff's employment, and the plaintiff filed a retaliation complaint under SOX's whistleblower protection provision.
In deciding on the defendant's motion for summary judgment, the district court first found that the Dodd-Frank Act's amendment to Section 806 that clarified that SOX applies to subsidiaries of publicly traded companies applies retroactively, and therefore the defendant is a covered company under the statute. However, the court agreed with the defendant that the plaintiff failed to raise a question of fact regarding whether he engaged in protected activity, because he "failed to identify any way in which the conduct he complained about related to any conduct proscribed by" the sources of law listed in § 1514A(a)(1). Andaya at *4. As such, the plaintiff failed to satisfy the requirement that his communications to his employer "definitively and specifically relate to one of the listed categories of fraud or securities violations." Id. at *3. The court found his communications to his employer to be devoid of "allegations [of] criminal conduct, shareholder fraud, or fraudulent intent," and therefore the court determined it could not "conclude plaintiff complained of any fraud which would trigger Section 1514A(a)(1) liability." Id. at *4. Additionally, the court found that his belief that that staffing issues, company waste, management accepting speaking fees, and excessive consulting fees constituted fraud against shareholders was not objectively reasonable, nor was his belief that "open discussions of stock prices" constituted shareholder fraud. Id at *5. In short, "complaints largely related to internal corporate policies concerning corporate waste, personnel matters, and relationships with vendors . . . are not the subjects courts have found covered by SOX." Id.
PROTECTED ACTIVITY UNDER SOX; PLAINTIFF RAISED A QUESTION OF FACT REGARDING WHETHER HER COMPLAINTS TO HER EMPLOYERS ABOUT REPORTING DISCREPENCIES — WHICH SHE DID IN THE ORDINARY COURSE OF HER JOB DUTIES — CONSTITUTED PROTECTED ACTIVITY, AND WHETHER SHE HAD A REASONABLE BELIEF THAT THE DISCREPENCIES VIOLATED A SOURCE OF LAW LISTED IN SECTION 1514A.
In Barker v. UBS AG , CA No. 3:09-CV-2084, 2012 WL 2361211 (D.Conn. May 22, 2012) (case below ALJ No. 2009-SOX-65), the plaintiff, an Associate Director that worked for the company's Equities COO, discovered reporting discrepancies related to the company's exchange holdings while working with the company's traders. After she communicated these discrepancies to senior management, management assigned her to "reconcile" the company's exchange holdings and create a list of holdings that were not accounted for on the company's balance sheet. After the project was finished, the COO presented the reconciliation project findings to the company's senior executives, but instructed the plaintiff not to discuss it with senior executives directly. As a result of the plaintiff's analysis, the company sold some of its exchange holdings, resulting in substantial revenue gains, and COO nominated the plaintiff for a "Thank You Award" for her work on the reconciliation project. Nonetheless, in subsequent months, the plaintiff felt that the COO had been overlooking her for projects, such that she felt she was being constructively discharged, although an internal investigation into her complaints found that she had not been treated unfairly. Shortly thereafter, the plaintiff's employment was terminated as part of the company's large-scale reduction in force, leading her to file a retaliation complaint under SOX.
The defendant's motion for summary judgment rested primarily on whether the plaintiff's communications about reporting discrepancies constitute protected activity under SOX. Primarily, the defendant argued that because the plaintiff did not "step outside [her] role" and was simply performing her job duties, she is not entitled to whistleblower protection. Barker at *5 (citing Riddle v. First Tennessee Bank , 2011 WL 4348298, at *8 (M.D.Tenn. Sept.16, 2011)). The court, however, acknowledged that the ARB ruled in Robinson v. Morgan-Stanley , ARB Case No. 07-070, slip op. at 24-25 (Jan. 10, 2010) that SOX "does not indicate that an employee's report or complaint about a protected violation must involve actions outside the complainant's assigned duties." Id. Even so, the plaintiff alleged that she did take steps beyond her normal duties in reporting the discrepancies, and thus the court found an issue of fact had been raised. Additionally, the court rejected the defendant's argument that the plaintiff did not have a reasonable belief that a violation had occurred. Instead, it found that "a reasonable jury could conclude that [the plaintiff] had a subjectively reasonable belief that UBS had violated the law by reporting inaccurate information to its shareholders and adequately conveyed those concerns to various members of management," and in light of her education and experience "a reasonable jury could find that Barker held an objectively reasonable belief" that a violation occurred. Id. at *5-6.
The court likewise rejected the defendant's argument that the plaintiff could not prove that her complaints contributed to the decision to terminate her employment, finding that she raised a genuine issue of material fact. Finally, while the company did present "convincing evidence that the firm was experiencing extreme financial hardship at the time Barker's employment was terminated, and a reduction in force was necessary," such evidence "does not explain why Barker in particular was selected for termination." Consequently, the defendant's motion was denied. Id. at *8-9.
PROTECTED ACTIVITY AND EMPLOYER KNOWLEDGE UNDER SOX; COMPLAINTS TO COWORKERS AND SUPERVISOR ABOUT THEIR ALLEGEDLY-ILLEGAL SCHEME WAS SUFFICIENTLY SPECIFIC TO CONSTITUTE PROTECTED ACTIVITY UNDER SOX
In Ashmore v. CGI Group Inc. , No. 11 Civ. 8611, 2012 WL 2148899 (S.D.N.Y. June 12, 2012), the defendant was a subcontractor of a public housing authority that provided services related to the administration of HUD's Section 8 project-based rental subsidy program. The plaintiff worked for the defendant's Rebid Assessment Team (RAT), which coordinated rebidding process for Section 8 administrative services contracts. While working in this capacity, the plaintiff allegedly caught wind of a scheme concocted by several RAT coworkers to violate HUD rules limiting the number of rental units that can be administered by a single public housing authority or private subcontractor. According to the plaintiff, he complained to his coworkers and supervisor about the scheme, and alleged in his complaint that he reasonably believed that his coworker's use of telephone lines and emails to implement the scheme violated federal mail and wire fraud statutes. The plaintiff alleged that he was first kicked off of RAT, and two days later was fired for opposing the scheme, leading him to file a retaliation complaint under SOX.
The defendant argued that the plaintiff's complaints to his fellow RAT members about the scheme was insufficiently specific to constitute protected activity under SOX. The district court stated that SOX required that the plaintiff "show that the information she provided about the conduct was not overly general," and that she "reported information [with] a certain degree of specificity." Id. (citing Lerbs v. Buca Di Beppo, Inc. , No. 2004-SOX-8, 2004 WL 5030304, *33-34, (ARB June 15, 2004)). According to the court, "the fact that [the plaintiff] did not specifically inform [the employer] . . . of his belief that the scheme involved mail or wire fraud, or his reasons for thinking so, does not mean that the information he communicated was insufficiently specific to count as activity protected by § 806." Id. at *6. Citing Fourth Circuit's decision in Welch , the district court clarified that "what the specificity requirement instead demands is that 'employees' communications ... identify the specific conduct that the employee believes to be illegal.'" Id. (citation omitted). In the instant case, it was undisputed that the plaintiff specifically identified the conduct that he believed to be illegal in his disclosures (i.e. the scheme to avoid HUD's limit on unit administration), and the court found his disclosures sufficient to satisfy the specificity standard. Likewise, the court rejected the defendant's argument that the plaintiff's belief that the scheme constituted mail or wire fraud was unreasonable.
Because it believed the plaintiff's communications failed to sufficiently inform RAT members that they were violating federal law, the defendant also alleged that it did not have knowledge of the plaintiff's protected activity. The court disagreed, and explained that a plaintiff "does not need to demonstrate that his employer actually believed that what he said about the illegality of the company's conduct was true," but rather he must "demonstrate only that he did in fact communicate his reasonable belief to that effect to his employer ." Id. at *7. The plaintiff satisfied that standard here, and the court dismissed the defendant's motion accordingly.
PROTECTED ACTIVITY AND ADVERSE ACTION UNDER SOX; ONE PLAINTIFF'S COMPLAINTS ABOUT HER COWORKERS' CONDUCT WERE NOT SUFFICIENTLY RELATED TO BANK FRAUD TO CONSITUTE PROTECTED ACTIVITY UNDER SOX
In Guitron v. Wells Fargo Bank, N.A. , No. C 10-3461 CW, 2012 WL 2708517 (N.D.Cal. July 6, 2012), two bankers (Plaintiff Guitron and Plaintiff Klosek) alleged that they suffered retaliation after they reported to their employer that two of their coworkers were engaging in unlawful and unethical business practices related to customer account management.
Plaintiff Guitron complained to her supervisor that her coworker had allegedly opened or closed accounts without the customer's permission, and that other bankers were opening accounts with forms of identification that were not acceptable under company policy. As a result, Plaintiff Guitron alleged that her supervisor stopped referring business to her and harassed her when she requested time off. When her coworkers were not investigated, she contacted the regional Vice President, the company's human resources office, and the company's ethics hotline to report the conduct. Plaintiff Guitron's struggled to meet her sales requirements, and her relationship with her supervisor deteriorated, until her supervisor eventually dismissed her for insubordination.
Plaintiff Klosek worked under the same supervisor as Plaintiff Guitron, and also complained about unethical conduct, including opening and closing accounts without customer permission, forcing sales, and "shoving products down customers' throats." Guitron at *7. She alleged that this behavior violated both ethical rules and consumer laws governing fraudulent conduct. Plaintiff Klosek received poor performance evaluations and a verbal warning for failure to meet her sales goals, and she eventually went on extended medical leave due to work related stress. After she was terminated, she filed a joint SOX complaint with Plaintiff Guitron, alleging unlawful retaliation for reporting bank and mail fraud.
The defendants first argued in its summary judgment motion that the plaintiffs' complaints related to violations of internal company policies, not to bank fraud, and therefore did not sufficiently relate to the categories of law listed in Section 1514A. Following the "definitively and specifically" standard articulated by the Ninth Circuit in Van Asdale , the district court found that because the plaintiffs failed to allege in their original complaint that their reports were related to wire or mail fraud, they were prohibited from asserting the theory now in opposition to a motion for summary judgment. Guitron , 2012 WL 2708517, *14. Consequently, it analyzed the plaintiffs' complaints for a relation to bank fraud only. As to Plaintiff Guitron, the court found that she presented sufficient evidence showing that she complained that coworkers that were defrauding their employer in order to obtain bonuses, and therefore, she had raised "a genuine dispute of material fact as to whether [the] reports related to bank fraud." Id. However, as to Plaintiff Klosek, the district court found that her complaints about her coworkers' "overly aggressive sales techniques" were not related to bank fraud, nor did she exhibit a subjectively and objectively reasonable belief that her coworkers' conduct constituted bank fraud. Id. at *15. The court, therefore, granted summary judgment for the employer on Plaintiff Klosek's complaint for failure to raise a genuine issue of material fact as to whether she engaged in protected activity.
PROTECTED ACTIVITY; COMPLAINT THAT FOOD WAS LEFT OUT BEYOND EXPIRATION DATE
In Atwood v. MJKL Enterprises, LLC , No. CV-10-2783-PHX-GMS, 2012 WL 2919406 (D.Ariz. July 17, 2012), the Plaintiff worked at Carl's Jr. Restaurant, and was terminated for insubordination and violating company policy regarding sexual harassment. The court held that the Plaintiff's SOX claim failed because he did not allege he was retaliated against for complaining of securities violations; rather claimed fired for complaining that his supervisors left food out beyond its expiration date.
PROTECTED ACTIVITY UNDER SOX; PLAINTIFF'S ALLEGED COMPLAINTS TO HIS EMPLOYER WERE TOO VAGUE AND DID NOT DEFINITIVELY AND SPECIFICALLY RELATE TO A SOURCE OF LAW LISTED IN SECTION 1514A BECAUSE IT WAS UNCLEAR WHETHER HE COMPLAINED ONLY ABOUT THE ADVERSE ACTIONS HE SUFFERED, OR THE EMPLOYER'S ALLEGED SOX VIOLATIONS AS WELL
In Nordstrom v. U.S. Bank, N.A., Inc. , No. 3:11-cv-01554, 2012 WL 3000416 (S.D.Cal. July 23, 2012), the plaintiff, a loan officer, alleged that he suffered retaliation after he complained about his belief that the bank had inaccurately reported its financial condition to investors, inaccurately reported loan charges, provided inaccurate information to the bank's accountants, and committed additional violations of banking and securities rules and regulations. The plaintiff filed a common law claim for wrongful termination in violation of the public policy against whistleblower retaliation, citing Section 806 of SOX as evidencing that public policy.
Citing the Ninth Circuit's decision in Van Asdale , the district court stated that "an employee's communications must definitively and specifically relate to [one] of the listed categories of fraud or securities violations under 18 U.S.C. § 1514A" in order to constitute protected activity under SOX. Nordstrom at *4. In this case, although the plaintiff alleged that his employer violated SOX and other securities laws, he failed to allege that "he actually reported such violations to management or supervisors." Id. It was unclear from the plaintiff's allegations whether his complaints about the treatment that he endured were accompanied by complaints about the SOX violations that he allegedly perceived, and therefore the plaintiff's complaint was "too vague so as to not satisfy the 'definitive and specific' requirement outlined in Van Asdale ." Id. Consequently, his complaint was dismissed without prejudice.
PROTECTED ACTIVITY; NO PROTECTED ACTIVITY WHERE EMAILS TO OFFICIALS DID NOT STATE OR SUGGEST THAT RESPONDENTS HAD COMMITTED FRAUD OR VIOLATED SECURITIES LAWS
In Reamer v. U.S. Dept. of Labor , No. 11-3965, 2012 WL 5503369 (6th Cir. 2012) (case below ARB No. 09-053, ALJ No. 2009-SOX-3), the Sixth Circuit affirmed the ARB's dismissal of the Petitioner's SOX whistleblower complaint based on a finding that protected activity did not contribute to the Petitioner's discharge. On appeal, the Petitioner argued that two emails he sent to officials at his employer, Ford Credit and Ford Motor Company, were protected activity. The first email relayed concerns about a threatening telephone call that the Petitioner had received; an internal investigation into his relationship with a female employee; and his concern that the FBI was conducting a frivolous fraud investigation of a dealership. The court found that "Because this e-mail neither stated nor suggested that Ford had committed fraud or violated securities laws, it did not constitute protected conduct. See 18 U.S.C. § 1514A(a)(1)." The second e-mail raised the same concerns and asked Ford and the Board of Directors to investigate "the possibility that illegal acts may have been committed by employees of Ford Credit and Ford Motor Company." The court found that the reference to illegal acts appeared to relate to the threatening telephone call and the FBI investigation. The court found that these acts did not violate or relate to section 1514A and the ARB therefore properly concluded that this email was not protected activity under section 1514A.
PROTECTED ACTIVITY; FRAUD AGAINST SHAREHOLDERS AS ELEMENT OF SOX SECTION 806 COMPLAINT; PLAINTIFF'S OBJECTIVE AND SUBJECTIVE BELIEF ABOUT WHAT HIS COMPLAINTS WERE ABOUT AT THE TIME THEY WERE COMMUNICATED TO THE DEFENDANT
Noting a split in authority as to whether SOX Section 806 whistleblower complaints must relate to fraud against shareholders, but applying the Fourth Circuit decision in Livingston v. Wyeth, Inc. , 520 F.3d 344 (4th Cir. 2008), the court in Gauthier v. Shaw Group, Inc. , No. 3:12-cv-00274-GCM, 2012 WL 6043012 (W.D.N.C. Dec. 4, 2012), granted summary judgment against the Plaintiff where his claimed protected activity was raising concerns about the changing of an audit report conclusion from "ineffective" to "effective" relating to an audit of a steel supplier concerning a shipment of defective steel for use in safety-related applications, and electronically applying the lead auditor's signature to the report over his refusal to sign the report. The district court found that any fraudulent alteration of the audit report would not state a cause of action under SOX because it did not relate to fraud against shareholders. The Plaintiff's complaint of document falsification related to safety, not to finances or accounting. The court also found that the Plaintiff had reported to his employer complaints about violations of nuclear safety regulations, not securities violations. The same was true of the Plaintiff's subjective beliefs about the violations — he was concerned about violating ERA and NRC regulations. Both the Plaintiff's objective words and actions, as well as his subjective beliefs reflected that he did not believe that he was complaining of conduct that would constitute a fraud against shareholders at the time he communicated his concerns, but rather that he was seeking to rectify conduct that raised nuclear safety concerns and possible violations of the ERA or NRC regulations.
The court dismissed the Plaintiff's Dodd-Frank Act whistleblower complaint under Section 29F of the Securities and Exchange Act on the same grounds. The Plaintiff's ERA whistleblower complaint against his Employer, was not dismissed on summary judgment.
PROTECTED ACTIVITY; FAILURE TO PLAUSIBLY ALLEGE PROTECTED ACTIVITY IN RESPONSE TO FRCP 12(b)(6) MOTION; COURT APPLIES FRAUD AGAINST SHAREHOLDERS AND "DEFINITELY AND SPECIFICALLY" STANDARDS
In Nielsen v. AECOM Technology Corp. , No. 12 Civ. 5163(KBF), 2012 WL 6200613 (S.D.N.Y. Dec. 11, 2012) (case below ARB No. 12-073, ALJ No. 2012-SOX-13), the Plaintiff commenced a SOX Section 806 whistleblower action against his former employer, and the Defendants filed a FRCP 12(b)(6) motion to dismiss. The Plaintiff, who was employed as a Fire Engineering Manager, asserted that he engaged in protected activity when he reported that one of the employees under his supervision made procedurally improper approvals of fire safety designs. The district court described the standard for established SOX protected activity:
Under the terms of the statute, a "protected activity" is conduct that the employee "reasonably believes constitutes" a violation of: (1) 18 U.S.C. §§ 1341, 1343, 1344, or 1348; (2) "any rule or regulation of the Securities and Exchange Commission"; or (3) "any provision of Federal law relating to fraud against shareholders." 18 U.S.C. § 1514A(a)(1). The Second Circuit has found that to constitute "protected activity," "'the employee's communications must definitively and specifically relate to one of the listed categories offraud or securities violations in 18 U.S.C. § 1514(a)(1).'" Vodopia , 298 F. App'x at 662-63 (quoting Van Asdale v. Int'l Game Tech. , 577 F.3d 989, 996-97 (9th Cir. 2009)) (alterations omitted) (emphasis in original). In addition, "the employee must have 'a subjective belief that the conduct being reported violated a listed law' and 'this belief must be objectively reasonable.'" Nance v. Time Warner Cable, Inc. , 433 F. App'x 502,503 (9th Cir. 2011) (quoting Van Asdale , 577 F.3d at 1000); see also Fraser v. Fiduciary Trust Co. Int'l , 396 F. App'x 734, 735 (2d Cir. 2010) (affirming the district court's dismissal of a SOX whistleblower claim because "the record evidence would not permit a factfinder to conclude that [the plaintiff] held both a subjectively and objectively reasonable belief that he was reporting conduct covered by the law.").
Nielsen , supra , slip op. at 10 (footnote omitted). The court found that the Plaintiff failed to plausibly allege that he reasonably believed that his reporting of his subordinate's rubberstamping approvals constituted a protected activity. Citing Riddle v. First Tenn. Bank, Nat'l Ass'n , No. 11-6277, 2012 WL 3799231, at *8 (6th Cir. Aug. 31, 2012), the court stated that the employee must have an objectively reasonable belief that the defendant intentionally misrepresented or omitted certain facts to investors, which were material and risked loss. Here, there was no allegation that the Defendants represented anything at all about its approval procedures for fire safety drawings to its shareholders. The court stated that "Without any allegations about defendants' statements to shareholders regarding the subject of plaintiffs reporting to AME management, there is no basis to find that defendants misrepresented anything--or omitted material facts--to its shareholders." Nielsen , supra , slip op. at 11 (citation omitted).
The court also found that the allegation that plaintiff "reasonably believed" that his reporting of improperly approved (or unapproved) fire safety drawings constituted a violation of the mail and wire fraud statutes was not plausible. The court stated: "Indeed, an 'objectively reasonable' employee could not believe that plaintiffs communications 'directly and specifically' related to any of the enumerated federal laws in 18 U.S.C. § 1514A(a)(I). See Vodopia , 398 F. App'x at 663." Nielsen , supra , slip op. at 11-12 (footnote omitted).
Clear and Convincing Evidence CLEAR AND CONVINCING EVIDENCE THAT DEFENDANT BELIEVED THAT THE PLAINTIFF HAD BEEN INSUBORDINATE; SUMMARY JUDGMENT WHERE PLAINTIFF PROFFERED NO EVIDENCE TO CREATE A DISPUTE OF FACT ON THE ISSUE
In Kim v. Boeing Co. , No. 11-35879, 2012 WL 5351230 (9th Cir. Oct. 25, 2012) (case below ALJ No. 2010-SOX-22), the Ninth Circuit affirmed the district court's grant of summary judgment in favor of the Defendant where the Defendant presented clear and convincing evidence of its belief that the Plaintiff had been insubordinate and was subject to discharge on that basis, and where, although the Plaintiff denied that he was insubordinate, he presented no evidence giving a materially different account of his conduct. The court wrote: "SOX whistleblower claims are governed by a burden-shifting procedure under which a plaintiff is first required to make out a prima facie case of retaliatory discrimination. Then, 'if the plaintiff meets this burden, the employer assumes the burden of demonstrating by clear and convincing evidence that it would have taken the same adverse employment action in the absence of the plaintiff's protected activity.' Van Asdale v. Int'l Game Tech. , 577 F.3d 989, 996 (9th Cir. 2009)." Kim , supra , slip op. at 2.
Covered Respondent COVERED EMPLOYEE; EMPLOYEES OF PRIVATELY HELD CONTRACTOR TO PUBLICLY TRADED COMPANY NOT RETAINED TO PROVIDE EMPLOYMENT SERVICES
In Lawson v. FMR LLC , No. 10-2240, 670 F.3d 61, (1st Cir. 2012), cert. granted , No. 12-3 (U.S. May 20, 2013) (case below ARB No. 08-078, ALJ No. 2007-SOX-27), the plaintiffs were employees of private companies that provide advising or management services by contract to the Fidelity family of mutual funds. The First Circuit accepted for interlocutory review the following question certified by the district court:
Does the whistleblower protection afforded by Section 806(a) of the Sarbanes-Oxley Act, 18 U.S.C. § 1514A, apply to an employee of a contractor or subcontractor of a public company, when that employee reports activity which he or she reasonably believes may constitute a violation of 18 U.S.C. §§ 1341, 1343, 1344, or 1348; any rule or regulation of the Securities and Exchange Commission; or any provision of Federal law and such a violation would relate to fraud against shareholders of the public company?
Slip op. at 9. The court characterized the question as "whether Congress intended the whistleblower provisions of § 1514A also to apply to those who are employees of a contractor or subcontractor to a public company and who engage in protected activity." Slip op. at 12-13 (footnote omitted). The court concluded that
only the employees of the defined public companies are covered by these whistleblower provisions; the clause "officer, employee, contractor, subcontractor, or agent of such company" goes to who is prohibited from retaliating or discriminating, not to who is a covered employee and so does not violate the rule against rendering superfluous any statutory language. The text of § 1514A(a) first identifies covered employers: those with a class of securities registered under section 12 of the 1934 Act or those that file reports with the SEC pursuant to section 15(d) of the 1934 Act. Such public companies may not retaliate against their own employees who engage in protected activity. Section 1514A(a) then enumerates a list of representatives of such employers, including those who are contractors or subcontractors, and they are also barred from retaliating against employees of the covered public-company employer who engage in protected activity.
*** Section 1514A(a)'s list of company representatives serves . . . to ensure an employee of a public company is covered under the provision if he or she were harassed by officers, other employees, or contractors or subcontractors to the public company for reporting fraud in that public company.
Slip op. at 16-17 (footnotes omitted). The court found supportive of its interpretation the title of Section 806 and the caption of section 1514A(a), which both refer to protection for employees of publicly traded companies; Congress' use of explicit language in other provisions of SOX when it wished enact broader whistleblower protection elsewhere; SOX's reference to AIR21 as a model, where the law limited coverage of certain contractor was explicit; the contrast between the language in SOX and ERA and PSIA whistleblower laws which explicitly extend coverage to employees of contractors of the regulated entities; canons of constructions relevant to securities laws and their relationship between investment companies and their advisors; and contemporaneous legislative history; post-enactment legislative activity. Moreover, the court found that no deference was owed to SEC or DOL in regard to the interpretation of the term "employee" in section 1514A. Those agencies had filed amicus briefs supporting the broad interpretation urged by the Plaintiffs. The court noted that certain DOL regulations concerning what constituted "reasonable belief" under SOX had been given deference in the decision in Day v. Staples , 555 F.3d 42, 54 and n.7 (1st Cir. 2009), but found that this was dicta, and was distinguishable because it involved different regulations.
One member of the three judge panel dissented, explaining that the majority's statutory interpretation analysis was faulty, and that the majority had failed to explain adequately why the broad deference given to DOL regulations and case law in Day v. Staples was dicta or was distinguishable.
[NB: Agency/contractor for employment purposes and "integrated enterprises" theories of contractor /subcontractor liability were not before the Court of Appeals in Lawson . See slip op. at nn.1 and 7. Moreover, the Court of Appeals did not reach the question of whether coverage was limited to complaints relating to fraud against shareholders of the public company. Slip op. at 15.]
[ See also Spinner v. David Landau and Associates, LLC , ARB Nos. 10-111 and -115, ALJ No. 2010-SOX-29 (ARB May 31, 2012) (ARB decision declining to acquiesce to the First Circuit Court of Appeals decision in Lawson ). The U.S. Supreme Court has granted certiorari on the issue presented in Lawson and Spinner .]. COVERED EMPLOYER; LEAVE TO AMEND COMPLAINT TO ALLEGE THAT EMPLOYERS WERE PUBLICLY TRADED COMPANIES NOT AVAILABLE WHERE COMPLAINT EXPRESSLY ALLEGED THAT THEY WERE A PUBLIC AGENCY AND AN ASSOCIATED NON-PROFIT ENTITY
In Sears v. County of Monterey, No. , C 11-01876 (N.D. Cal. Feb. 3, 2012) (2012 WL 368688), an engineer and his wife challenged the engineer's termination from employment by the Housing Authority of the County of Monterey (HACM) and the Monterey County Housing Authority Development Corporation (HDC). The complaint named 25 defendants. In the complaint, it was alleged that HACM is a public agency which provides affordable housing and associated services in Monterey County, and that HDC is a subdivision of HACM and is organized as a non-profit entity under the Internal Revenue Code. One of the several grounds upon which the complaint was based was SOX's whistleblower provision, 18 U.S.C. 1514A. Some of the defendants (not including HACM or HDC) filed motions to dismiss. The court dismissed the SOX complaint as to the moving defendants on the ground that neither plaintiff was an employee of the moving defendants. The court also observed that the complaint expressly alleged that the engineer was employed by HACM and HDC, neither of which was alleged to be a publicly traded entity. The court held that the plaintiffs would not be granted leave to amend the complaint in a contradictory manner to allege that HACM or HDC are publicly-traded entities. Thus, the court dismissed the SOX complaint as to all of the defendants without leave to amend.
SUBSIDIARIES OF PUBLICLY TRADED COMPANIES; DODD-FRANK ACT AMENDMENT TO SOX FOUND TO APPLY RETROACTIVELY
In Ashmore v. CGI Group Inc. , No. 11 Civ. 8611, 2012 WL 2148899 (S.D.N.Y. June 12, 2012), the defendant was a subcontractor of a public housing authority that provided services related to the administration of HUD's Section 8 project-based rental subsidy program. The court held that the Dodd-Frank Act amendment to SOX — which clarified that subsidiaries of publicly traded companies are covered under SOX — applies retroactively, and thus the defendant is a covered company.
DODD-FRANK AMENDMENT TO SOX CLARIFYING THAT SUBSIDIARIES OF PUBLICLY-TRADED COMPANIES ARE COVERED EMPLOYERS UNDER SOX
In Leshinsky v. Telvent GIT, S.A. , No. 10 Civ. 4511, 2012 WL 2686111 (S.D.N.Y. July 9, 2012) , the plaintiff was an employee of a subsidiary of a publicly traded company who alleged that he was terminated for complaining about a proposal to use fraudulent information in a bid to gain a contract with the New York Metropolitan Transit Authority ("MTA"). Because he was employed by a subsidiary of a publicly traded company, the court therefore set out to determine whether the 2010 Dodd-Frank amendment — which clarified that it protects employees of subsidiaries of publicly traded companies — applies retroactively.
In finding that the amendment did apply retroactively to pending claims, the court cited the ARB's decision in Johnson v. Siemens Bldg. Tech., Inc. , ARB No. 08-032, 2011 WL 1247202, at *11 (DOL ARB Mar. 31, 2011) (citation omitted), which held that Dodd-Frank's amendment for subsidiary coverage simplify clarified "what was intended all along." The court also engaged in its own analysis to verify that the amendment was in fact just a clarification, finding that "the statute was ambiguous as to its application to employees of non-public subsidiaries, and this ambiguity is confirmed by the extensive conflict among the different judicial and administrative decisions applying the statute." Leshinsky at *14. The court also found that SOX's legislative history and the policy positions underlying the statute affirmed the ARB's conclusion that the amendment provides a reasonable interpretation of the statute. Finally, court found that other recent decisions did not preclude applying the amendment retroactively, and after its application of "earlier labor law-derived tests" further confirmed that "the amended language is more consistent with the statute's purpose than the contrary reading." Id. at *19.
COVERED EMPLOYER; NON-PUBLICLY TRADED SUBSIDIARY FOUND NOT COVERED UNDER PRE-DODD-FRANK AMENDMENTS TO SECTION 806 OF THE SOX WHISTLEBLOWER PROVISION; DISTRICT COURT REJECTS ARB ANALYSIS IN JOHNSON v. SIEMENS BUILDING TECHNOLOGIES, INC .
In Mart v. Gozdecki, Del Giudice, Americus & Farkas LLP , No. 12 C 2496, 2012 WL 5830627 (N.D.Ill. Nov. 16, 2012), the Plaintiff sued his former law firm for malpractice for failure to file the Plaintiff's SOX claim in a timely fashion. The Defendant sought dismissal of the malpractice suit on the ground that the Plaintiff's SOX claim lacked merit because the Respondent was a non-publicly traded subsidiary of a publicly traded company, and non-publicly traded subsidiaries were not covered by the SOX whistleblower provision prior to the Dodd-Frank amendments to SOX. The validity of this defense depended on whether the pre-amendment version of the SOX whistleblower provision covered non-publicly traded subsidiaries. The court first looked to the plain language of the statute and found that its coverage was unambiguously limited to publicly traded companies. The court further held that even if the statutory text was ambiguous, other tools of statutory construction suggested that pre-amendment section 806 did not protect employees of privately held subsidiaries. The court was not persuaded by other federal court and an ALJ decision that held otherwise. The court also was not persuaded by the ARB's decision in Johnson v. Siemens Building Technologies, Inc. , ARB No. 08-032, ALJ No. 2005-SOX-15 (ARB Mar. 31, 2011) (2011 WL 1431986) and the district court's decision in Leshinsky v. Telvent GIT, S.A. , --- F. Supp. 2d ---, 2012 WL 2686111, at **8-17 (S.D.N.Y. July 9, 2012), that the Dodd-Frank amendment was meant only to clarify existing law. The court found that those decisions skipped the fundamental step of analyzing whether the statute was ambiguous, and that the vast majority of ALJs and federal courts that have reached the issue have concluded that section 806 did not extend protection to employees of privately held subsidiaries, absent circumstances not present in the instant case. The court concluded that Dodd-Frank alters, rather than clarifies, section 806 of SOX. The court applied the principle of anti-retroactivity set forth in Landgraf , and found that the Dodd-Frank amendment did not have retroactive effect. Thus, the Plaintiff was not a covered employee under section 806 of SOX, and he could not therefore demonstrate that he was damaged by his former attorneys' failure to timely file the SOX claim. Thus, the legal malpractice claim failed as a matter of law.
SUIT DISMISSED WHERE PLAINTIFF COULD NOT REBUT THAT NEITHER OF NAMED DEFENDANT WAS A PUBLICLY TRADED COMPANY
In Savage v. Finney , No. 12 CV 2398, 2012 WL 2374687 (N.D.Ill. June 20, 2012), the plaintiff was fired from his position as Chief Financial Officer of the Woodlawn Community Development Corporation ("WCDC") and the Woodlawn Organization ("TWO"), and he alleged his firing was retaliation for reporting that his employers were, with assistance from the other defendants, engaging in questionable financial practices, to the United States Department of Housing and Urban Development ("HUD"). However, the court granted the defendants' motion to dismiss his SOX retaliation complaint because the plaintiff could not rebut that neither of the defendant-companies are publicly traded companies.
SUIT FOR DAMAGES AGAINST FORMER EMPLOYER, UNION, AND GOVERNMENT OFFICIALS BARRED BASED ON JUDICIAL IMMUNITY, RES JUDICATA, TIMELINESS AND OTHER GROUNDS
In Williams v. UAL Inc. , No. 12-CV-3781 (N.D. Cal. Dec. 13, 2012) (related to N.D.Cal. 04-CV-3787, ARB No. 08-063, ALJ No. 2008-AIR-3), the Plaintiff brought suit against his former employer, union officials, federal and state court judges and court personnel, the Secretary of Labor, former and current ARB members, and a DOL ALJ, alleging that they engaged in a conspiracy to terminate him from his employment for improper reasons and to uphold that termination through the various legal challenges he has made over the past several years. The Plaintiff's legal theories primarily relied on RICO and the Sarbanes-Oxley Act, 18 U.S.C. § 1514A, ("SOX") as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The court dismissed all claims without leave to amend. In regard to the judges, the court found that they were protected by judicial immunity. As to the court personnel, the court found that they were protected by absolute quasi-judicial immunity. As to the Department of Labor employees, the court found that the same claims against them had previously been litigated and rejected by a federal district court in a final judgment. Thus, the claims against the Department of Labor employees were barred by the doctrine of res judicata, and the court did not reach the question of whether the Plaintiff's damages claims could only be brought against the United States, and not individual federal defendants acting in their official capacities. The court found that the claim against the Plaintiff's former employer was time barred. The claim against the union was time barred. Finally, the court found that claims against individual union officers for the breach of the duty of fair representation are not permitted.
Arbitration DISMISSAL BASED ON ARBITRATION; PLAINTIFF FORFEITED RELIANCE ON DODD-FRANK AMENDMENT TO SECTION 806, 18 U.S.C. 1514A(e) WHERE HE DID NOT RAISE THE ISSUE BEFORE THE DISTRICT COURT
In Raw v. Bank of New York Mellon Corp. , No. 10-4655-cv (2d Cir. 2012) (2012 WL 48175), the plaintiff-appellant appealed the district court's dismissal of his SOX whistleblower suit on the ground that the parties had agreed to arbitrate. The court found that the plaintiff-appellant forfeited his argument relying on the Dodd-Frank Act amendment to SOX, 18 U.S.C. 1514A(e), because he had not previously raised the argument before the District Court. Although the 2010 Dodd-Frank amendment to SOX had not taken effect until after briefing on the motion to dismiss concluded, the district court had not issued its decision until nearly three months after the provision took effect, the plaintiff did not file a motion for reconsideration, and the plaintiff did not seek relief under FRCP 62.1 once learning of § 1514A(e).
RETROACTIVE EFFECT OF DODD-FRANK ACT AMENDMENT TO SOX WHISTLEBLOWER PROVISION TO RENDER INVALID AND UNENFORCEABLE PRE-DISPUTE ARBITRATION AGREEMENTS
In Holmes v. Air Liquide USA LLC , No. H-11-2580 (S.D.Texas Jan. 30, 2012), aff'd Holmes v. Air Liquide USA, LLC , No. 12-20129, 2012 WL 5914863 (5th Cir. 2012), a case filed under the Americans With Disabilities Act and Title VII of the Civil Right Act, the plaintiffs argued that a pre-dispute arbitration agreement was rendered invalid by the Dodd-Frank Act provision adding a whistleblower provision to the Commodity Exchange Act, 7 U.S.C. 26(n)(2) and amending the Sarbanes-Oxley Act, 18 U.S.C. 1514A, both provisions having made invalid and unenforceable pre-dispute arbitration agreements if the agreement requires arbitration of disputes arising under those sections. Citing Henderson v. Masco Framing Corp. , 2011 WL 3022535 (D.Nev. July 22, 2011), the court determined that the Dodd-Frank Act did not have retroactive effect to render invalid the instant arbitration agreement because there was no unambiguous intent expressed by Congress that the arbitration ban be retroactive in effect, and because applying the ban would impair contractual rights that existed at the time that the parties acted.
[NB: This was not filed under the SOX whistleblower provision amended by Dodd-Frank. The court, however, analyzed the retroactive effect of that amendment as the Plaintiffs theory of why the ADA and Title VII complaints were not bound by an arbitration agreement depended on application of Dodd-Frank.]
DODD-FRANK ARBITRATION PROVISION DOES NOT APPLY TO INVALIDATE ALL BROADLY WORDED ARBITRATION AGREEMENTS
In Holmes v. Air Liquide USA, L.L.C. , No. 12-20129, 2012 WL 5914863 (5th Cir. 2012), the Plaintiff sued her former employer asserting claims under the Americans with Disabilities Act, a state civil rights law, Title VII of the Civil Rights Act of 1964, and the Family and Medical Leave Act. The Defendant moved to compel arbitration according to the terms of the parties' ADR agreement. The district court found the ADR agreement valid and enforceable. On appeal, the Plaintiff argued that the Dodd-Frank Wall Street Reform and Consumer Protection Act renders the ADR agreement unenforceable. The Plaintiff argued that because the ADR agreement encompassed "all disputes," and because the Plaintiff could have brought Sarbanes-Oxley and Commodity Exchanges Act claims despite the agreement, the entire ADR agreement was invalid, even though she did not actually assert these claims. The court found this argument unavailing because the Plaintiff's theory would "lead to the untenable conclusion that the [Dodd-Frank] Act wholesale invalidates all broadly-worded arbitration agreements (of which there are many) even when plaintiffs bring wholly unrelated claims." Holmes , Slip op. at 4. The court held that it "must interpret the Act in a manner that avoids such unreasonable results." Id .
ARBITRATION OF SOX CLAIMS; COURT DETERMINED THAT DODD-FRANK ACT AMENDMENT TO SOX THAT PROHIBITS ARBITRATION OF SOX WHISTLEBLOWER COMPLAINTS DOES NOT APPLY RETROACTIVELY
In Taylor v. Fannie Mae , 839 F.Supp.2d 259 (D.D.C. Mar. 20, 2012), the plaintiff alleged that he was retaliated against after raising concerns that an employee was reporting fraudulent data to federal regulators, and therefore filed a SOX whistleblower complaint. The defendants, however, asserted that the plaintiff's employment agreement obligates him to submit such a dispute to arbitration. Because the arbitration agreement existed prior to the July 2010 amendments that prohibit arbitration of SOX complaints, the Court set out to determine if the Dodd-Frank Act applies retroactively to preexisting agreements.
The district court first acknowledged the Supreme Court's decision in Landgraf v. USI Film Products , 511 U.S. 244, 280, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994), which "reaffirmed the judicial presumption against applying a statute that 'would impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to [completed] transactions.'" Taylor at 262. After agreeing with other federal courts' finding that the Dodd-Frank Act does not evidence an express intent from Congress to apply retroactively, the court then turned to the "key question," which is whether the Dodd-Frank Act "would affect the substantive rights of the parties." Id.
The defendant argued that the court should follow Henderson v. Masco Framing Corp. , 2011 WL 3022535 (D.Nev. July 22, 2011) and find that retroactive application of SOX would "fundamentally interfere with the parties' contractual rights and would impair the 'predictability and stability' of their earlier agreement." Id. The plaintiff, on the other hand, argued that "applying the statute retroactively would simply change the tribunal that is to hear the case," and cited the district court decision in Pezza v. Investors Capital Corp. , 767 F.Supp.2d 225 (D.Mass.2011) in support. Id. The district court ultimately sided with the defendant and the ruling in Henderson , stating that it "fail[ed] to see how a retroactive application would not impair the parties' rights possessed when they acted," and therefore granted the motion to compel arbitration. Id. at 263.
DODD-FRANK ACT AMENDMENT TO SOX PROHIBITING ARBITRATION OF SOX CLAIMS DOES NOT APPLY RETROACTIVELY, BUT INSTANT COMPLAINT ALSO FAILED FOR FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES
In Blackwell v. Bank of America Corp. , CA No. 7:11-2475-JMC-KFM, 2012 WL 1229673 (D.S.C. Mar. 22, 2012) (magistrate's report), adopted Blackwell v. Bank of America Corp. , No. 7:11-cv-02475 (D.S.C. Apr. 12, 2012) , the plaintiff was employed by Merrill Lynch as a financial adviser, and his employment contract included an agreement to arbitrate claims arising between he and the firm. After he was discharged from Merrill Lynch, the plaintiff filed a claim under the whistleblower protection provision of SOX, and Merrill Lynch filed a motion to dismiss.
The plaintiff argued that Section 922 of the Dodd Frank Financial Reform Act of 2009, which amended Section 1514A to preclude arbitration of SOX claims, applies retroactively to prohibit arbitration of his claim. After acknowledging the presumption against statutory retroactivity that the Supreme Court announced in Landgraf v. USI Film Products , 511 U.S. 244, 264 (1994), the court followed the district court's decision in Henderson v. Masco Framing Corp. , 2011 WL 3022535, at *4 (D.Nev. July 22, 2011) in finding that "a retroactive application of Dodd-Frank's SOX provisions would "fundamentally interfere with the parties' contractual rights and would impair the 'predictability and stability' of their earlier agreement." Furthermore, "the plaintiff's complaint, amended complaint, and second amended complaint do not contain any allegation that the plaintiff exhausted his administrative remedies," and therefore the plaintiff's complaint appeared to fail on exhaustion grounds as well.
DODD-FRANK AMENDMENT TO SOX PROHIBITING ARBITRATION OF SOX CLAIMS APPLIES RETROACTIVELY
In Wong v. CKX, Inc. , No. 11 Civ. 6291, 2012 WL 3893609 (S.D.N.Y. Sept. 11, 2012), the plaintiff, Senior Tax Counsel for an entertainment company, repeatedly raised concerns to senior management that if its UK-based subsidiary was conducting business in the United States (as she believed it was), than the company needed to pay United States taxes on that subsidiary's income. She believed the company may owe the Unites States government nearly $100 million dollars in back taxes, and their failure to do so rendered false the company's SEC filings regarding their tax liabilities. Two months after she lodged her complaints, the plaintiff was terminated, and filed a complaint with OSHA alleging retaliatory termination in violation of SOX. OSHA dismissed the plaintiff's complaint, and after an ALJ held a three-day hearing on the merits, the plaintiff filed this action for de novo review in district court.
Alternatively, the defendant argued that the court should compel arbitration of the claim, as the plaintiff's employment contract with the company pre-dated the 2010 Dodd-Frank amendments to SOX, and the amendments do not apply retroactively. The court disagreed and, following the district court's decision in Pezza v. Investors Capital Corp. , 767 F.Supp.2d 225, 228 (D.Mass.2011), found that because "the right to have a dispute heard in an arbitral forum is a procedural right that affects the forum that will decide the substantive rights of the parties — applying the present law to this dispute would not have a disfavored retroactive consequence." Wong at *10. Consequently, "because the parties' substantive rights remain unaffected by this statute," the court found that the Dodd-Frank amendments applied retroactively to the suit, requiring that the court deny the motion to compel. Id.
Frivolous Complaints; Sanctions DEFENDANT'S REQUEST FOR ATTORNEYS' FEES AS SANCTION; SANCTION FOR FILING THE CLAIM NOT WARRANTED WHERE THERE WAS NO EVIDENCE THAT THE CLAIM WAS BROUGHT IN BAD FAITH; SANCTION FOR OPPOSING SUMMARY JUDGMENT MOTION NOT WARRANTED WHERE THERE WAS NO INDICATION THAT THE OPPOSITION WAS UNREASONABLE OR VEXATIOUS AS REQUIRED FOR 28 U.S.C. 1927 SANCTIONS OR IN BAD FAITH AS REQUIRED FOR SANCTIONS BASED ON COURT'S INHERENT AUTHORITY
In Boyd v. Accuray, Inc. , No. 11-CV-01644-LHK, 2012 WL 4936591 (N.D.Cal. Oct. 17, 2012) case below ALJ No. 2012-SOX-18), after the court granted the Defendant's motion for summary judgment against the Plaintiff, finding that the Plaintiff's claims arising from termination of his employment were insufficient as a matter of law under several theories, including the whistleblower provision of the Sarbanes-Oxley Act ("SOX"), 18 U.S.C. § 1514A, the Defendant moved for a grant of attorneys' fees. The Defendant's motion was based on several theories, one of which was that that the Plaintiff's lack of sufficient evidence on two elements of his SOX claim warranted sanctions pursuant to 28 U.S.C. § 1927 and the court's inherent authority.
The court noted that it was unclear whether the Defendant's motion was based on a sanction for bringing the claim to begin with, or for opposing summary judgment. As regards the former, the court ruled that section 1927 does not apply to initial pleadings, and therefore it could not be the basis for sanctions for filing the SOX claim. Thus, the only available source is the court's inherent power, and there was no evidence that the claim was brought in bad faith.
In regard to the opposition to the summary judgment motion regarding the SOX claim, the court found no indication that the opposition was "unreasonable" or "vexatious," as required for § 1927 sanctions, or in bad faith, as required for inherent power sanctions. The court stated that "the grant of summary judgment establishes only that Plaintiff had not marshaled enough evidence to support his claim—not that the claim was so lacking in merit as to be frivolous." The court therefore denied the Defendant's request for sanctions on the Plaintiff's SOX claim.
Attorneys and Representatives MALPRACTICE FOR FAILURE TO TIMELY FILE SOX SECTION 806 COMPLAINT CANNOT BE MAINTAINED WHERE COMPLAINANT WAS NOT A COVERED EMPLOYEE UNDER SOXIn Mart v. Gozdecki, Del Giudice, Americus & Farkas LLP , No. 12 C 2496, 2012 WL 5830627 (N.D.Ill. Nov. 16, 2012), the Plaintiff sued his former law firm for malpractice for failure to file the Plaintiff's SOX claim in a timely fashion. The Defendant sought dismissal of the malpractice suit on the ground that the Plaintiff's SOX claim lacked merit because the Respondent was a non-publicly traded subsidiary of a publicly traded company, and non-publicly traded subsidiaries were not covered by the SOX whistleblower provision prior to the Dodd-Frank amendments to SOX. The validity of this defense depended on whether the pre-amendment version of the SOX whistleblower provision covered non-publicly traded subsidiaries. The court first looked to the plain language of the statute and found that its coverage was unambiguously limited to publicly traded companies. The court further held that even if the statutory text was ambiguous, other tools of statutory construction suggested that pre-amendment section 806 did not protect employees of privately held subsidiaries. The court was not persuaded by other federal court and an ALJ decision that held otherwise. The court also was not persuaded by the ARB's decision in Johnson v. Siemens Building Technologies, Inc. , ARB No. 08-032, ALJ No. 2005-SOX-15 (ARB Mar. 31, 2011) (2011 WL 1431986) and the district court's decision in Leshinsky v. Telvent GIT, S.A. , --- F. Supp. 2d ---, 2012 WL 2686111, at **8-17 (S.D.N.Y. July 9, 2012), that the Dodd-Frank amendment was meant only to clarify existing law. The court found that those decisions skipped the fundamental step of analyzing whether the statute was ambiguous, and that the vast majority of ALJs and federal courts that have reached the issue have concluded that section 806 did not extend protection to employees of privately held subsidiaries, absent circumstances not present in the instant case. The court concluded that Dodd-Frank alters, rather than clarifies, section 806 of SOX. The court applied the principle of anti-retroactivity set forth in Landgraf , and found that the Dodd-Frank amendment did not have retroactive effect. Thus, the Plaintiff was not a covered employee under section 806 of SOX, and he could not therefore demonstrate that he was damaged by his former attorneys' failure to timely file the SOX claim. Thus, the legal malpractice claim failed as a matter of law.
Surface Transportation Assistance Act
[STAA Digest V B 1 a]
PROTECTED ACTIVITY UNDER STAA; EMPLOYEE COMPLAINTS ABOUT THE CONDITION OF TRUCKS MAY CONSTITUTE PROTECTED CONDUCTIn Manske v. UPS Cartage Services, Inc. , No. 2:10-cv-00320-JAW, 2012 WL 1580770 (D.Me. May 4, 2012), within the first thirty days of his employment with the employer, the plaintiff, a truck driver, made numerous complaints about the condition of the vehicles to his supervisors. Despite the company's "official 'Open Door Policy' which encouraged employees to bring any concerns to any member of management," the plaintiff's complaints incurred the ire of management and convinced management to extend his probationary period of initial employment. Manske at *6. The employer explained that it extended his probationary period because they believed his complaints evidenced an "attitude . . . of confrontation and challenge." Id. at *8. Before his extended probationary period concluded, the employer decided that it did not want the plaintiff as a permanent employee and terminated his employment, explaining that "he did not seem like he was happy" at the company. Id. at *9.
The defendant challenged whether the plaintiff's reports about the condition of the vehicles protected activity under STAA, and in response, the plaintiff cited several DOT regulations that require the driver to report defects or deficiencies in vehicles. Ultimately, the court denied the motion for summary judgment, finding that "the complaints of a trucking company employee to the company about the condition of its trucks may constitute protected conduct." Id. at *1.