USDOL/OALJ: Federal Court Whistleblower Decisions 2013

Federal Court Whistleblower Decisions - 2013

Aviation Investment and Reform Act
Energy Reorganization Act
Federal Rail Safety Act
Longshore and Harbor Workers' Compensation Act/Defense Base Act
National Transit Systems Security Act
Safe Drinking Water Act
Sarbanes-Oxley Act
Surface Transportation Assistance Act

Aviation Investment and Reform Act

Williams v. UAL, Inc. , No. 13-15299 (9th Cir. Dec. 31, 2013) (unpublished) (case below ARB No. 08-063, ALJ No. 2008-AIR-3) PDF
(Memorandum)
Summary :
DISTRICT COURT DOES NOT HAVE JURISDICTION OVER AIR21 WHISTLEBLOWER CHALLENGE AGAINST DOL DEFENDANTS; SUCH JURISDICTION LIES WITH COURT OF APPEALS

JUDICIAL AND QUASI-JUDICIAL IMMUNITY OF JUDGES, ALJ'S AND JUDICIAL CLERKS

In Williams v. UAL, Inc. , No. 13-15299 (9th Cir. Dec. 31, 2013) (unpublished) (case below ARB No. 08-063, ALJ No. 2008-AIR-3), the Ninth Circuit held that the district court properly dismissed the Plaintiff's claims against various federal circuit and district judges and the clerk of the court on the basis of judicial and quasi-judicial immunity. The district court properly dismissed the Plaintiff's claims against UAL, Inc. and the International Association of Machinists and Aerospace Workers defendants as time-barred. See 18 U.S.C. § 1514A(b)(2)(D). The court held that the district court lacked subject matter jurisdiction over the Plaintiff's claims against the Department of Labor ("DOL") defendants because he alleged that the DOL improperly denied his complaint under the AIR21 whistleblower provision, and jurisdiction to review the DOL's decision under AIR21 is vested in the Court of Appeals. See 49 U.S.C. § 42121(b)(4)(A); see also Williams v. U.S. Dep't of Labor , 447 F. App'x 853, 854 (9th Cir. 2011) (sustaining the DOL's denial of Williams's complaint as untimely). The Ninth Circuit further held that

the DOL administrative law judges are protected by quasi-judicial immunity. See Hirsh v. Justices of the Supreme Court , 67 F.3d 708, 715 (9th Cir. 1995) (per curiam) ("Administrative law judges . . . are entitled to quasi-judicial immunity so long as they perform functions similar to judges . . . in a setting like that of a court.").

Slip op. at 2.
Mizusawa v. USDOL , No. 12-9563 (10th Cir. Apr. 26, 2013) (unpublished) (2012 WL 1777421) (denying petition for review) (case below ARB No. 11-009, ALJ No. 2010-AIR-11) PDF
(Order and Judgment)
Summary :
TEMPORAL PROXIMITY; INFERENCE NOT LOGICAL WHEN INTERVENING EVENT INDEPENDENTLY COULD HAVE CAUSED THE ADVERSE ACTION

CLEAR AND CONVINCING EVIDENCE; WHERE COMPLAINANT FAILS TO ESTABLISH THAT PROTECTED ACTIVITY WAS A CONTRIBUTING FACTOR IN THE ADVERSE ACTION, RESPONDENT IS NOT REQUIRED TO ESTABLISH A CLEAR AND CONVINCING EVIDENCE DEFENSE

In Mizusawa v. USDOL , No. 12-9563 (10th Cir. Apr. 26, 2013) (unpublished) (2012 WL 1777421), the ARB had affirmed the ALJ's highly fact- and credibility-intensive determination that the Complainant had not established that protected activity was a contributing factor in the Respondent's decision to terminate the Complainant's employment. On appeal, the Tenth Circuit denied the Complainant's petition for review, finding that substantial evidence supported the ARB's determination and that nothing suggested that the ARB's decision was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. The court of appeals addressed the Complainant's several arguments as to why the ARB's decision was purportedly wrong, but found none of them persuasive. The ARB had not expressly discussed the temporal proximity between the Complainant's reports of safety violations and his termination, but the ALJ found that temporal proximity alone was insufficient to show retaliation because intervening events (two failed audits and the Complainant's violation of the Respondent's strict policy not to authorize videos at its facility) could have independently caused the Complainant to lose his job. The ALJ relied on the ARB decision in Barber v. Planet Airways, Inc. , ARB No. 04-056, ALJ No. 2002-AIR-19, 2006 WL 1151953, at *5 (ARB Apr. 28, 2006), for the proposition that "'inferring a causal relationship between the protected activity and the adverse action is not logical when the two are separated by an intervening event that independently could have caused the adverse action'"). The Tenth Circuit agreed that temporal proximity in this case was insufficient to show a causal connection between the Complainant's safety reports and his termination.

The Complainant also argued that the Respondent did not support its defense with clear and convincing evidence. The court, however, found that the Respondent was not required to establish that defense because the Complainant had not meet his initial burden to demonstrate that his protected activity was a contributing factor in the adverse personnel decision. See 49 U.S.C. § 42121(b)(2)(B)(iii), (iv); see also Hoffman v. Solis , 636 F.3d 262, 267-68 (6th Cir. 2011).

Energy Reorganization Act

Vander Boegh v. EnergySolutions, Inc. , No. 5:10-cv-31 (W.D.Ky. Dec. 17, 2013) (case below 2006-ERA-26)
(Memorandum Opinion)
PDF
Summary :
[Nuclear & Environmental Whistleblower Digest XIV A 2 b]
COVERED EMPLOYEE; JOB APPLICANTS ARE NOT WITHIN THE MEANING OF "EMPLOYEE" UNDER THE ERA, SWDA, CWA, SDWA AND TSCA WHISTLEBLOWER PROVISIONS, AND DO NOT HAVE STANDING TO BRING A RETALIATION COMPLAINT

In Vander Boegh v. EnergySolutions, Inc. , No. 5:10-cv-31 (W.D.Ky. Dec. 17, 2013) (case below 2006-ERA-26), the Plaintiff was employed by WESKEM as a landfill manager. WESKEM ceased operations and the Plaintiff's employment with WESKEM was terminated. The Defendant, EnergySolutions, then took over waste management at the landfill. The Plaintiff was never employed, managed, paid or supervised by the Defendant; there was no contractual relationship between the Plaintiff and the Defendant; the Defendant took no affirmative action indicating that it intended to employ the Plaintiff. The Plaintiff filed an employment discrimination complaint with the Department of Labor under the Energy Reorganization Act, the Solid Waste Disposal Act, the Clean Water Act, the Safe Drinking Water Act and the Toxic Substances Control Act, and subsequently removed the action to federal district court. The complaint essentially alleged that the Defendant did not hire him because of his reports of environmental violations to a former employer and because years earlier he had engaged in protected activity under the False Claims Act. The court dismissed the retaliation claims because all of the pertinent statutes require an employment relationship to confer standing. The Plaintiff contended that the statutes should be read to cover not only employees, but also applicants for employment. The court reviewed the statutory language of the ERA and the environmental statutes, and found that the conventional master-servant relationship under common law agency doctrine was applicable, citing Nationwide Mut. Ins. Co. v. Darden , 503 U.S. 318, 322-23 (1992). The court noted that the Sixth Circuit, in applying Darden , held that a complainant must be a "hired party" to be able to bring an ERA retaliation claim. Demski v. U.S. Dep't of Labor , 419 F.3d 488, 491-92 (6th Cir. 2005); accord O'Connor v. Davis , 126 F.3d 112, 115 (2d Cir. 1997).
Vander Boegh v. EnergySolutions, Inc. , 12-cv-5643 (6th Cir. Aug. 14, 2013) (2013 WL 4105648) (case below 2006-ERA-26)
(Opinion)
PDF
Summary :
[Nuclear and Environmental Digest XIII A]
ADVERSE EMPLOYMENT ACTION; SIXTH CIRCUIT APPLIES "MATERIALLY ADVERSE" STANDARD IN UNPUBLISHED DECISION

[Nuclear and Environmental Digest XI A 2 c]
CAUSATION; DECISIONMAKER’S KNOWLEDGE OF PLAINTIFF’S PROTECTED ACTIVITY CONCERNING WASTE MANAGEMENT AT LANDFILL; GENUINE ISSUE OF MATERIAL FACT MAY BE CREATED BASED ON DECISIONMAKER’S RESPONSIBILITIES AS PROJECT MANAGER FOR NEW WASTE MANAGEMENT SUBCONTRACTOR

[Nuclear and Environmental Digest XI A 2 c]
CAUSATION; DECISIONMAKER’S KNOWLEDGE OF PLAINTIFF’S PROTECTED ACTIVITY; UNCERTAINTY WHETHER "IMPUTED KNOWLEDGE" OR "CAT’S PAW" THEORY APPLIES IN A RETALIATION (AS OPPOSED TO DISCRIMINATION) CASE

[Nuclear and Environmental Digest VII C 1]
SUMMARY DECISION; PLAINTIFF DID NOT ESTABLISH EXISTENCE OF GENUINE ISSUE OF MATERIAL FACT ABOUT WHETHER LANGUAGE IN BID WAS DESIGNED TO CUT HIM OUT OF HIS JOB WITH A NEW SUBCONTRACTOR WHERE PLAINTIFF FAILED TO PUT THE BID LANGUAGE INTO THE RECORD

In Vander Boegh v. EnergySolutions, Inc. , 12-cv-5643 (6th Cir. Aug. 14, 2013) (2013 WL 4105648) (unpublished) (case below 2006-ERA-26), the Plaintiff was a landfill manager who engaged in a range of protected activity while working for a subcontractor to handle waste management at the Paducah Gaseous Diffusion Plant (PGDP). When another contractor took over the PGDP contract and subcontracted with a different company for waste management, the Plaintiff was not hired as the landfill manager and his employment was terminated. The Plaintiff alleged that he was purposely drafted out of the new contractor's bid on the contract in retaliation for his protected activity, and named three defendants in his ERA whistleblower complaint: the original contractor and the new contractor and subcontractor. A district court granted summary judgment in favor of all three Defendants. The Sixth Circuit reversed the summary judgment as to the new subcontractor and affirmed it as the other two Defendants.

Adverse action; materially adverse standard A manager who had previously been found in a DOE whistleblower proceeding to have retaliated against the Plaintiff had left employment with the original contractor and joined the new contractor. He assigned the new contractor in preparing its bid for the PGDP contract. The Plaintiff alleged that this manager drafted the waste management portion of the bid in such a way as to eliminate the Plaintiff as landfill manager and insert himself into that position. Applying the Burlington Northern "materially adverse" standard for determining adverse employment action in the retaliation context, the court found that the Plaintiff had failed to establish a genuine issue of material fact whether the bid language was materially adverse. The court faulted the Plaintiff for failing to include in the record the actual bid language, and sole reliance on his own bare assertions.

Decisionmaker's knowledge of protected activity; reasonable jury could find that decisionmaker had due diligence responsibility and would have discovered Plaintiff's protected activity

A second claimed adverse action was the new subcontractor's transition project manager's decision not to hire the Plaintiff as landfill manager. The court stated this decision was undisputedly adverse employment action. The question remained, however, of whether the new manager knew of the Plaintiff's protected activity prior to the date he decided to hire another person for the landfill manager position. The court rejected many of the Plaintiff's arguments on the issue of actual knowledge, but found that other circumstantial evidence supported the claim — specifically that a reasonable jury could conclude that the new manager was responsible for performing due diligence in the area of material disposition and would have discovered the Plaintiff's environmental complaints; that this manager was responsible for hiring a landfill manager and, as part of the hiring process, would have acquired information regarding the current landfill manager and his protected activities. Because there were genuine issues of material fact whether the new manager had actual knowledge of the Plaintiff's protected activity, the district court erred in granting summary judgment as to the new subcontractor.

Imputed knowledge or cat's paw theory of liability; question whether theory is available in retaliation case; summary judgment warranted where evidence did not show a genuine issue of material fact that decisionmaker was influenced

The court noted the Plaintiff's alternative "imputed knowledge" or "cat's paw" theory of liability. The court noted that this theory originated in the employment discrimination context and that it was not clear under the Sixth Circuit's precedent whether that theory is available in a retaliation case. The court stated that it may be necessary for the district court to analyze the issue on remand. Assuming that the theory applied, the court found that genuine issues of material fact existed as to whether the person who was ultimately hired as the landfill manager learned of the Plaintiff's protected activity prior to being offered the job, and thereafter influenced the new manager's hiring decision.

The court affirmed the dismissal of the new contractor because there was no genuine issue of material fact created on the issue of whether the bid language was materially adverse, and because assuming a cat's paw theory is available, there was insufficient evidence to show that the new contractor's officials had any influence over the new manager's decision to hire a person other than the Plaintiff for the landfill manager position. Similarly, the court affirmed the dismissal of the original contractor, again because even assuming the availability of a cat's paw theory of liability, there was scant evidence in the record that it influenced the hiring decision. What evidence the Plaintiff presented was largely speculative and insufficient to create a genuine dispute.

Dissent: Issue is not what the new manager could have discovered about the Plaintiff's protected activity, but whether the new manage did have knowledge about the protected activity

One member of the court dissented in part, disagreeing that a genuine issue of material fact existed regarding the new manager's knowledge of the Plaintiff's protected activity. The dissenter indicated that the majority had relied on what the new manager could have discovered about the protected activity, and that this was insufficient to create a factual issue as to whether he did have such knowledge. The dissenter also expressed concern whether the Plaintiff was an employee within the meaning of the ERA whistleblower provision because the Plaintiff's only connection to the new subcontractor was his employment with the company that the new subcontractor supplanted. The new subcontractor never "hired" the Plaintiff.

Federal Rail Safety Act

Ratledge v. Norfolk Southern Railway Co. , No. 12-CV-402 (E.D.Tenn. July 25, 2013) (2013 WL 3872793) (case below 2012-FRS-00064)
(Memorandum Opinion and Order)
PDF
Summary :
FRSA ELECTION OF REMEDIES PROVISION DOES NOT PRECLUDE AN EMPLOYEE FROM SIMULTANEOUSLY PURSUING ARBITRATION PURSUANT TO RIGHTS UNDER A COLLECTIVE BARGAINING AGREEMENT

In Ratledge v. Norfolk Southern Railway Co. , No. 12-CV-402 (E.D.Tenn. July 25, 2013) (2013 WL 3872793) (case below 2012-FRS-00064), the Plaintiff filed an FRSA employee protection complaint with OSHA after he was charged with falsely reporting an injury. Following an investigation, the Defendant fired the Plaintiff. The Plaintiff's union representative filed an appeal with the Director of Labor Relations, who denied the appeal. The Plaintiff then sought relief from the Public Law Board, which concurred with the guilty decision but which ordered reinstatement with seniority intact but without compensation for lost time. OSHA found that the Defendant violated the FRSA employee protection provision, the Defendant requested an ALJ hearing, and the Plaintiff then filed suit in U.S. district court. The Defendant filed a motion to dismiss the 49 U.S.C. § 20109(a) retaliation count of the complaint for lack of subject matter jurisdiction based on the election remedies provision at § 20109(f). The Defendant argued that the Plaintiff's claim must be dismissed because that section's election-of-remedies provision precludes a rail carrier employee from simultaneously pursuing arbitration of his rights under a collective bargaining agreement and seeking whistleblower protection under the FRSA. The Plaintiff argued that the election-of-remedies provision does not apply to statutorily mandated arbitration. The Court agreed with the Plaintiff. The district court first found that the Defendant's motion was properly treated as a FRCP 12(b)(6) motion, rather than a FRCP 12(b)(1) motion. The court then analyzed the purposes of the Railway Labor Act (to govern disputes between management and labor in the railroad industry) and the Federal Rail Safety Act (to promote safety in railroad operations and reduce railroad-related accidents and injuries), and the relevant legislative history; the positions of the parties and the Department of Labor; and the recent decision in Reed v. Norfolk Southern Railway Co. , 12-cv-873 (N.D.Ill. Apr. 26, 2013). The court found that the clause in the statutory language that bars an employee from seeking protection under the FRSA employee protection provision and "another provision of law" was not ambiguous, and that RLA arbitration does not constitute "another provision of law." Consequently, it was not necessary to reach the question of whether to accord Chevron deference to the DOL's interpretation, as the court had done in Reed . The court found that § 20109 distinguishes between legal remedies and CBA remedies, and rejected the Defendant's argument that the RLA-arbitration process was a statutory remedy. The court stated that "the provisions [of the RLA] at issue—the provisions that create rights and pursuant to which Plaintiff in this case sought relief—are not provisions of law . They are . . . contractual rights governed by the framework of the RLA, as opposed to contract law. And it is those rights, not the RLA, under which Plaintiff sought protection." Slip op. at 23. The court observed that Congress would have understood when amending the FRSA in 2007 that many, if not the majority, of those seeking whistleblower protection would also have claims related to RLA-governed CBAs. The court stated that if Congress had expected the amendments to require employees to pick between enforcing the CBA through arbitration or seek recompense for unlawful retaliation, the court would expect such a change to be more clearly stated.
Reed v. Norfolk Southern Railway Co. , No. 12-cv-873, 2013 WL 1791694 (N.D.Ill. Apr. 26, 2013)
(Memorandum Opinion and Order)
PDF
Summary :
FRSA ELECTION OF REMEDIES PROVISION; PLAINTIFF'S INITIATION OF ARBITRATION UNDER THE COLLECTIVE BARGAINING AGREEMENT WAS NOT AN ELECTION OF REMEDIES WITHIN THE MEANING OF THE FRSA; COURT GIVES DEFERENCE TO ARB'S DECISION IN MERCIER

In Reed v. Norfolk Southern Railway Co. , No. 12-cv-873, 2013 WL 1791694 (N.D.Ill. Apr. 26, 2013), the Plaintiff alleged that the Defendant violated the Federal Rail Safety Act, 49 U.S.C. § 20101 et seq. ("FRSA"), by discharging him in retaliation for reporting a workplace injury. The Defendant moved for summary judgment, arguing that due to the FRSA's Election of Remedies provision, 49 U.S.C. § 20109(f), the Plaintiff was barred from seeking relief under the FRSA because he already elected to pursue a remedy under the Railway Labor Act, 45 U.S.C. § 151 et seq. ("RLA"). The question before the court was whether the Plaintiff's initiation of arbitration under the CBA was an election of remedy under the meaning of Section 20109(f). The court looked to the statutory background to the RLA and the FRSA; to the text of the elections of remedy provision at Section 20109(f), which provides that "[a]n employee may not seek protection under both this section and another provision of law for the same allegedly unlawful act of the railroad carrier"; and to Supreme Court decisional law, and found that the arbitration proceeding was not an "election" of a remedy because the tribunals and National Railroad Adjustment Boards are mandatory, and those tribunals may only hear disputes arising out the interpretation of the CBA. The court acknowledged that the FRSA's election of remedies provision could tolerate a contrary reading, but found that this ambiguity permitted it to give deference to the Department of Labor's interpretation of the law. The court wrote:

Here, the Department of Labor has consistently taken the position that § 20109(f) is not triggered by an employee, such as Reed, pursuing arbitration under a collective bargaining agreement because a collective bargaining agreement is a private contract and not another provision of law. See Mercier v. Norfolk Southern Corp., et al. , Administrative Review Board Case No. 09-121; see also Brief Amicus Curiae of Assistant Secretary of Labor in Mercier , Dkt 32-1. Additionally, the Department of Labor interpretation avoids the potential conflict between § 20109(f) and § 20109(h), which Norfolk's assertions could create.

Reed , supra , slip op. at 8. The court noted that the district court's decision in Norfolk S. Ry. Co. v. Solis , CIV.A. 12-0306 BJR, 2013 WL 39226 (D.D.C. Jan. 3, 2013) (an appeal of the ARB's Mercier decision), supported deference to the Department of Labor's interpretation:

The court in Solis , for purposes of determining subject-matter jurisdiction only, found that the Administrative Review Board reading was "colorable under the statute, and not in violation of a clear, mandatory directive within the statute. Thus, [ ] the Leedom doctrine does not apply." Solis , 2013 WL 39226, *19. Because the district court did not have subject-matter jurisdiction, the case was dismissed. This Court notes that the ruling in Solis did not reach a decision on the merits because it lacked subject matter jurisdiction. The Solis ruling, however, does lend support to the conclusion that the statute is ambiguous and the Department of Labor's interpretation is reasonable.

Reed , supra , slip op. at 9. Accordingly, the court denied the Defendant's motion for summary judgment.
Pfeifer v. Union Pacific Railroad Co. , No. 12-cv-2485, 2013 WL 1367054 (D.Kan. Apr. 3, 2013) (case below ARB No. 12-087, ALJ No. 2011-FRS-38)
(Memorandum and Order)
PDF
Summary :
District court is not deprived of jurisdiction based on Plaintiff's failure to notify DOL in advance, as directed by 29 C.F.R. § 1982.114, of the intent to file in district court. Plaintiff's litigation of the complaint before the ALJ, but then re-filing in district court after the ALJ issued his decision was not "bad faith" under 49 U.S.C. § 20109(d) that would strip the federal court of jurisdiction. Because Secretary of Labor had not issued a final decision, ALJ's decision did not have res judicata effect.
Battenfield v. BNSF Railway Co. , No. 12-cv-213, 2013 WL 1309439 (N.D.Okla. Mar. 26, 2013) (case below ALJ No. 2012-FRS-65)
(Opinion and Order)
PDF
Summary :
Order granting Plaintiff leave to amend complaint to add a retaliation claim under the FRSA. Defendant argued that the retaliation claim is precluded by the FRSA's election of remedies provision.
Araujo v. New Jersey Transit Rail Operations, Inc. , No. 12-2148,     F.3d     , 2013 WL 600208 (3rd Cir. Feb. 19, 2013)
(Opinion)
PDF
Summary :
SUMMARY JUDGMENT UNDER THE FRSA WHISTLEBLOWER PROVISION; EVIDENCE OF TEMPORAL PROXIMITY AND DISPARATE TREATMENT FOUND TO BE SUFFICIENT TO SURVIVE DEFENDANT'S MOTION FOR SUMMARY JUDGMENT; CONGRESS' INTENT TO BE PROTECTIVE OF PLAINTIFF-EMPLOYEES

In Araujo v. New Jersey Transit Rail Operations, Inc. , No. 12-2148,     F.3d     , 2013 WL 600208 (3rd Cir. Feb. 19, 2013), the Plaintiff filed an action alleging that he had been disciplined by the Defendant in retaliation for his participation in activity protected by Federal Rail Safety Act (FRSA) -- reporting an emotional injury after he witnessed a fatal accident. The district court found that the discipline was not retaliatory and granted summary judgment the Defendant.

First, the district court held that the Plaintiff not establish a prima facie case of retaliation because the record lacked evidence from which a reasonable factfinder could infer that the protected activity—the report of employee injury—was a contributing factor in the Defendant's decision to discipline the Plaintiff for operational rules he was found by the employer to have violated relating to the fatal accident. The Court of Appeals, however, found that although the Plaintiff had not offered overwhelming evidence in opposition to the motion for summary judgment he had identified evidence of temporal proximity and adverse disparate treatment, sufficient to withstand summary judgment.

The court observed that "[t]emporal proximity between the employee's engagement in a protected activity and the unfavorable personnel action can be circumstantial evidence that the protected activity was a contributing factor to the adverse employment action. See Kewley v. Dep't of Health and Human Servs. , 153 F.3d 1357, 1362 (Fed.Cir.1998) (noting that, under the Whistleblower Protection Act, "the circumstantial evidence of knowledge of the protected disclosure and a reasonable relationship between the time of the protected disclosure and the time of the personnel action will establish, prima facie, that the disclosure was a contributing factor to the personnel action') (internal quotation omitted)." Araujo, supra , slip op. at 19. The court acknowledged that the evidence on the Plaintiff's temporal proximity argument was entirely circumstantial, and that he had not provided any evidence about the Defendant's motive, but ruled that direct evidence of motive is not required.

The Court of Appeals also found that the Defendant's had not carried its "clear and convincing evidence" burden sufficient to be entitled to summary judgment. The Defendant's proffered facts to rebut the temporal proximity and disparate treatment proffered facts were insufficient in view of the steep burden on employers under the AIR21 burden-shifting framework. Although the Defendant showed that the Plaintiff was in technical violation of written rules, they did not shed any light on whether the Defendant's decision to file disciplinary charges was retaliatory.

The Court of Appeals emphasized that the Complainant had not articulated an overwhelming case of retaliation: for example he had not proffered any evidence that the Defendant dissuaded him from reporting his injury or expressed animus at him for doing so. The Plaintiff's evidence was entirely circumstantial, and the Court expressed no opinion as to the strength of the Plaintiff's evidence. The Court noted, however, that "by amending the FRSA, Congress expressed an intent to be protective of plaintiff-employees." Araujo, supra , slip op. at 26. Thus, applying the AIR-21 burden-shifting framework applicable to FRSA whistleblower cases, the Plaintiff had shown enough to survive the Defendant's motion for summary judgment.

BURDEN OF PROOF AND PRODUCTION IN FRSA WHISTLEBLOWER CASES; AIR21 RATHER THAN MCDONNELL-DOUGLAS FRAMEWORK APPLIES; FRSA FRAMEWORK IS MEANT TO BE PROTECTIVE OF EMPLOYEES IN VIEW OF LEGISLATIVE FINDING THAT RAILROADS PRESSURE EMPLOYEES NOT TO REPORT INJURIES

In Araujo v. New Jersey Transit Rail Operations, Inc. , No. 12-2148,     F.3d     , 2013 WL 600208 (3rd Cir. Feb. 19, 2013), the Third Circuit Court of Appeals noted that since the FRSA was substantially amended in 2007 regarding anti-retaliation protections, including the AIR21 burden shifting test. The court described the AIR21 test as follows:

Under AIR-21, an employee must show, by a preponderance of the evidence, that "(1) she engaged in protected activity; (2) the employer knew that she engaged in the protected activity; (3) she suffered an unfavorable personnel action; and (4) the protected activity was a contributing factor in the unfavorable action." Allen v. Admin. Review Bd. , 514 F.3d 468, 475-76 (5th Cir.2008). Once the plaintiff makes a showing that the protected activity was a "contributing factor" to the adverse employment action, the burden shifts to the employer to demonstrate "by clear and convincing evidence, that the employer would have taken the same unfavorable personnel action in the absence of that behavior." Id . § 42121(b)(2)(B)(ii). The Department of Labor has promulgated regulations that adopt this burden-shifting standard to FRSA complaints filed with the Department of Labor. See 29 C.F.R. § 1982.104(e)(3)-(4).

Araujo, supra , slip op. at 12 (footnote omitted).

In Araujo , the district court noted that it was unable to locate any binding authority regarding burden-shifting, and discussed both McDonnell Douglas framework and the regulations promulgated by the Department of Labor, 29 C.F.R. § 1982.104(e)(4), which implement the AIR-21 framework. The Court of Appeals disagreed with this approach because the FRSA unquestionably employs the AIR-21 burden-shifting framework. The court stated:

    In the past, we have found that if a statute does not provide for a burden-shifting scheme, McDonnell Douglas applies as the default burden-shifting framework.. See Doyle v. United States Sec'y of Labor , 285 F.3d 243, 250 (3d Cir.2002). This implies that when a burden-shifting framework other than McDonnell Douglas is present in a statute, Congress specifically intended to alter any presumption that McDonnell Douglas is applicable. The FRSA is clear that AIR-21 burden-shifting applies.

Araujo, supra , slip op. at 12-13 (footnote omitted).

The Court of Appeals paused to note that Congress intended the burden-shifting framework to be protective of employees:

    It is worth emphasizing that the AIR-21 burden-shifting framework that is applicable to FRSA cases is much easier for a plaintiff to satisfy than the McDonnell Douglas standard. As the Eleventh Circuit noted in a case under the Energy Reorganization Act, 42 U.S.C. § 5851, a statute that uses a similar burden-shifting framework, "[f]or employers, this is a tough standard, and not by accident." Stone & Webster Eng'g Corp. v. Herman , 115 F.3d 1568, 1572 (11th Cir.1997). The Eleventh Circuit stated that the standard is "tough" because Congress intended for companies in the nuclear industry to "face a difficult time defending themselves," due to a history of whistleblower harassment and retaliation in the industry. Id. The 2007 FRSA amendments must be similarly construed, due to the history surrounding their enactment. We note, for example, that the House Committee on Transportation and Infrastructure held a hearing to "examine allegations ... suggesting that railroad safety management programs sometimes either subtly or overtly intimidate employees from reporting on-the-job-injuries." (Impact of Railroad Injury, Accident, and Discipline Policies on the Safety of America's Railroads: Hearings Before the H. Comm. on Transportation and Infrastructure, 110th Cong. (Oct. 22, 2007)). As the Majority Staff of the Committee on Transportation and Infrastructure noted to members of the Committee:

The accuracy of rail safety databases has been heavily criticized in a number of government reports over the years. The primary issue identified in many previous government investigations is that the rail industry has a long history of underreporting incidents and accidents in compliance with Federal regulations. The underreporting of railroad employee injuries has long been a particular problem, and railroad labor organizations have frequently complained that harassment of employees who reported injuries is a common railroad management practice.

Id. The report noted that one of the reasons that pressure is put on railroad employees not to report injuries is the compensation system; some railroads base supervisor compensation, in part, on the number of employees under their supervision that report injuries to the Federal Railroad Administration. Id . We will leave our discussion of the legislative history here, as the AIR-21 burden-shifting language is clear, and "[w]here the statutory language is unambiguous, the court should not consider statutory purpose or legislative history." See In re Phila. Newspapers, LLC , 599 F.3d 298, 304 (3d Cir.2010). We simply note this history to emphasize that, as it did with other statutes that utilize the "contributing factor" and "clear and convincing evidence" burden-shifting framework, Congress intended to be protective of plaintiff-employees.

Araujo, supra , slip op. at 16-18 (footnote omitted).

CONTRIBUTING FACTOR UNDER FRSA WHISTLEBLOWER FRAMEWORK; CONTRIBUTING FACTOR MEANS ANY FACTOR WHICH, ALONE OR IN CONNECTION WITH OTHER FACTORS, TENDS TO AFFECT IN ANY WAY THE OUTCOME OF THE DECISION.

In Araujo v. New Jersey Transit Rail Operations, Inc. , No. 12-2148,     F.3d     , 2013 WL 600208 (3rd Cir. Feb. 19, 2013), the Third Circuit Court of Appeals noted that since the FRSA was substantially amended in 2007 regarding anti-retaliation protections, including the AIR21 burden shifting test. In regard to the plaintiff's burden of proof, the court noted that the FRSA burden-shifting is much more protective of plaintiff-employees than the McDonnell Douglas framework. The court stated:

. . . The plaintiff-employee need only show that his protected activity was a "contributing factor" in the retaliatory discharge or discrimination, not the sole or even predominant cause. See 49 U.S.C. § 42121(b)(2)(B)(ii). In other words, "a contributing factor is any factor, which alone or in combination with other factors, tends to affect in any way the outcome of the decision." Ameristar Airways, Inc. v. Admin. Rev. Bd. , 650 F.3d 563, 567 (5th Cir.2011) (quoting Allen , 514 F.3d at 476 n. 3 (internal quotation omitted).

    The term "contributing factor" is a term of art that has been elaborated upon in the context of other whistleblower statutes. The Federal Circuit noted the following in a Whistleblower Protection Act case:

The words "a contributing factor" ... mean any factor which, alone or in connection with other factors, tends to affect in any way the outcome of the decision . This test is specifically intended to overrule existing case law, which requires a whistleblower to prove that his protected conduct was a "significant", "motivating", "substantial", or "predominant" factor in a personnel action in order to overturn that action.

Marano v. Dep't of Justice , 2 F.3d 1137, 1140 (Fed.Cir.1993) (quoting 135 Cong. Rec. 5033 (1989) (Explanatory Statement on S. 20)) (emphasis added by Federal Circuit). Furthermore, an employee " need not demonstrate the existence of a retaliatory motive on the part of the employee taking the alleged prohibited personnel action in order to establish that his disclosure was a contributing factor to the personnel action." Marano , 2 F.3d at 1141 (emphasis in original); see also Coppinger-Martin v. Solis , 627 F.3d 745, 750 (9th Cir.2010) ("A prima facie case does not require that the employee conclusively demonstrate the employer's retaliatory motive.").

Araujo, supra , slip op. at 14-15 (emphasis as in original).

CLEAR AND CONVINCING EVIDENCE STANDARD UNDER FRSA WHISTLEBLOWER FRAMEWORK; CLEAR AND CONVINCING EVIDENCE REQUIRES EMPLOYER TO SHOW THAT THE TRUTH OF ITS FACTUAL CONTENTIONS ARE HIGHLY PROBABLE

In Araujo v. New Jersey Transit Rail Operations, Inc. , No. 12-2148,     F.3d     , 2013 WL 600208 (3rd Cir. Feb. 19, 2013), the Third Circuit Court of Appeals noted that since the FRSA was substantially amended in 2007 regarding anti-retaliation protections, including the AIR21 burden shifting test. The court stated:

    Once the employee asserts a prima facie case, the burden shifts to the employer to demonstrate, "by clear and convincing evidence, that the employer would have taken the same unfavorable personnel action in the absence of that behavior." 49 U.S.C. § 42121(b)(2)(B)(ii). The "clear and convincing evidence" standard is the intermediate burden of proof, in between "a preponderance of the evidence" and "proof beyond a reasonable doubt." See Addington v. Texas , 441 U.S. 418, 425, 99 S.Ct. 1804, 60 L.Ed.2d 323 (1979). To meet the burden, the employer must show that "the truth of its factual contentions are highly probable." Colorado v. New Mexico , 467 U.S. 310, 316, 104 S.Ct. 2433, 81 L.Ed.2d 247 (1984) (internal quotation omitted).

Araujo, supra , slip op. at 15-16.
Windom v. Norfolk Southern Railway Co. , No. 12-cv-345 (M.D.Ga. Feb. 1, 2013)
(Order)
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MOTION TO DISMISS INDIVIDUAL DEFENDANT; EXHAUSTION OF ADMINISTRATIVE REMEDIES; WHETHER MANAGER WAS SUFFICIENTLY NAMED AS RESPONDENT IN ADMINISTRATIVE COMPLAINT FILED WITH OSHA

MOTION TO DISMISS INDIVIDUAL DEFENDANT; WHETHER FEDERAL COURT COMPLAINT MET FRCP 8 PLEADING REQUIREMENTS

In Windom v. Norfolk Southern Railway Co. , No. 12-cv-345 (M.D.Ga. Feb. 1, 2013), the court denied a motion to dismiss filed by the defendant Norfolk's Manager of Administrative Services ("manager"), who had been also named as a defendant by the plaintiff. The plaintiff was a welder who contended that Norfolk and the manager had acted together to violate the Federal Rail Safety Act when the plaintiff reported an injury. The manager first argued that the FRSA claim should be dismissed because the plaintiff did not name her as a respondent in the administrative complaint filed with OSHA, and therefore the plaintiff did not exhaust his administrative remedies against her and she should be dismissed from the federal district court action.

The plaintiff had named the Norfolk as the establishment and the manager as the management official in the heading of his complaint, and the court agreed with the plaintiff that is was sufficiently clear that the plaintiff intended his OSHA complaint to be directed at both Norfolk and the manager. The court noted that there was no other location on the OSHA complaint form for the plaintiff to have named the manager and that the manager had been clearly listed in the heading of the complaint. Although the manager was not specifically mentioned in the body of the complaint, the complaint statef that Norfolk, through its management official, engaged in improper conduct. Moreover, the specific acts described in the complaint form were acts of the manager, and had OSHA investigated, it would have been apparent to OSHA that the plaintiff was complaining of the manager's actions. The court did not find dispositive OSHA's alleged failure to send a copy of the complaint to the manager. More than 210 days had passed with no decision from OSHA before the plaintiff filed in district court, and the court found that the plaintiff had exhausted his administrative remedies against the manager.

The manager also argued that the FRSA action should be dismissed because the paragraphs in the complaint in which her name was mentioned alleged wrongdoing by Norfolk, and as such did not permit the court to infer more than a mere possibility of misconduct by her. The plaintiff pointed to several specific allegations in the complaint regarding the manager's actions, and argued that they were not general or legal conclusions but specific factual allegations supporting his FRSA claim against the manager.

The court, noting that at this stage of the proceeding the pleadings are construed broadly and the allegations in the complaint are viewed in the light most favorable to the plaintiff, found that the plaintiff had satisfied FRCP 8's pleading requirements. The court summarized the complaint, noting inter alia , that the plaintiff's whistleblower claim was based on allegedly unlawful retaliation for reporting an on-the-job injury; that the plaintiff contended that reporting his injury and seeking medical treatment are both activities protected by the FRSA; that the plaintiff contended that Norfolk knew about the injury and the report of injury; that the plaintiff contended that Norfolk planned to punish him at least partly because of his injury report; and that the plaintiff contended that the defendants acted together to violate the FRSA because he reported this injury.
Solis v. Union Pacific Railroad Co. , No. 4:12-cv-00394 (D.Idaho Jan. 11, 2013) (related to 2012-FRS-15)
(Memorandum Decision and Order)
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PRELIMINARY ORDER OF REINSTATEMENT BY OSHA UNDER THE FRSA; JUDICIAL ENFORCEMENT IS NOT AVAILABLE

In Solis v. Union Pacific Railroad Co. , No. 4:12-cv-00394 (D.Idaho Jan. 11, 2013) (related to 2012-FRS-15), the Secretary of Labor sought enforcement of a preliminary reinstatement order issued by OSHA under the whistleblower provision of the Federal Railroad Safety Act, 49 U.S.C. § 20109. The district court found it had jurisdiction to enforce final orders of the Secretary of Labor, but not a preliminary order of reinstatement issued by OSHA. The court noted a spilt in the few courts that had addressed the about the issue,that the Ninth Circuit had not yet addressed the issue, and that the only circuit authority on the issue was a spilt decision. Bechtel v. Competitive Technologies, Inc. , 448 F.3d 469 (2d Cir. 2006). The court found that "the fact that a preliminary order can prescribe the same relief as a final order does not mean Congress intended for federal courts to review preliminary orders." The court was not persuaded by the Secretary argument that because AIR21 (which is used for FRSA whistleblower procedure) provides that objecting to a preliminary order will not stay any reinstatement remedy in that order, and therefore there must be an enforcement mechanism. The court noted that a preliminary order issued by OSHA is based only on reasonable cause to believe a complaint has merit, which the court found was too tenative for present enforcement. The court was also not persuaded by the Secretary's alternative argument that the FRSA itself provides the necessary jurisdiction because the FRSA whistleblower provision specifically incorporates the procedures of AIR21 for preliminary orders, and because the appeals paragraph of the FRSA whistleblower provision also incorporates AIR21, which limits appeals to a final order of the Secretary.
Norfolk Southern Railway Co. v. Solis , No. 12-00306 (D.D.C. Jan. 3, 2013) (case below ARB No. 09-101, ALJ No. 2008-FRS-3)
(Memorandum Opinion [granting Secretary of Labor's motion to dismiss])
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DISTRICT COURT REVIEW NOT AVAILABLE CONCERNING NON-FINAL ORDER OF ADMINISTRATIVE REVIEW BOARD RULING THAT § 20109(f) OF THE FRSA DOES NOT PRECLUDE AN EMPLOYEE WHO CHALLENGED HIS TERMINATION IN AN RLA § 3 ARBITRATION FROM FILING A FRSA WHISTLEBLOWER CLAIM

In Norfolk Southern Railway Co. v. Solis , No. 12-00306 (D.D.C. Jan. 3, 2013) (case below ARB No. 09-101, ALJ No. 2008-FRS-3), Larry L. Koger filed a FRSA employee protection complaint. The ALJ held that 49 U.S.C. § 20109(f) barred the complaint because the Complainant elected to challenge his dismissal by pursuing the grievance and arbitration procedures under RLA § 3, 45 U.S.C. § 153. Koger v. Norfolk Southern Ry. , ALJ No. 2008-FRS-3 (May 29, 2009). On administrative appeal, the ARB consolidated Koger's appeal with an appeal in another case, Mercier v. Union Pacific R.R. , ALJ No. 2008-FRS-4 (June 3, 2009), where a different ALJ determined that § 20109(f) did not preclude an employee who had challenged his termination in RLA § 3 arbitration from filing a whistleblower claim under FRSA. The ARB agreed with the decision of the ALJ in Mercier , and ruled that, as a matter of law, an employee's pursuit of RLA arbitration does not constitute an election of remedies under 49 U.S.C. § 20109(f). The ARB remanded both Mercier and Koger for further proceedings.

The Respondent in Koger's administrative proceeding, Norfolk Southern Railway Co. (the "Plaintiff"), filed an action in federal district court claiming that the district court could review the ARB's non-final decision under the doctrine of Leedom v. Kyne , 358 U.S. 184 (1958), arguing that the decision was in excess of the Secretary's delegated powers, and that the Plaintiff would have no other meaningful and adequate means to vindicate its statutory right. The Secretary moved to dismiss arguing that the district court lacked subject-matter jurisdiction because 49 U.S.C. § 20109(d)(4) places review of final decisions by the ARB in the appellate court.

The district court noted that the exception under the Leedom doctrine is extremely narrow — essentially a "Hail Mary" pass. The doctrine has two predicates: (1) the party must demonstrate that the agency disobeyed a statutory provision that is "clear and mandatory"; (2) the party must show that, without the district court's exercise of jurisdiction, it lacks any meaningful and adequate means of vindicating its statutory rights. In regard to the first predicate, the court reviewed the Plaintiff's arguments as to why the ARB's decision was allegedly in error, and found that the Plaintiff's argument was flawed in several respects, whereas the ARB's reading was supported by statutory history. The court found that it was not necessary to determine, for the purposes of the jurisdictional question, whether the ARB's ruling was correct, but only that it was colorable under the statute and not in violation of a clear, mandatory directive within the statute. Accordingly, the court found that the Leedom doctrine did not apply. In regard to the second predicate, the district determined that it could not be said that the practical effect of making the Plaintiff go through with the FRSA investigation would somehow foreclose all access to the courts.

Longshore and Harbor Workers' Compensation Act/Defense Base Act

Sickle v. Torres Advanced Enterprise Solutions, LLC , No. 11-cv-2224 (D.D.C. Dec. 24, 2013)
(Memorandum Opinion)
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RETALIATION FOR FILING OR ASSISTING A WORKERS’ COMPENSATION CLAIM UNDER THE DEFENSE BASE ACT; FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES; PREEMPTION OF STATE LAW CLAIMS

In Sickle v. Torres Advanced Enterprise Solutions, LLC , No. 11-cv-2224 (D.D.C. Dec. 24, 2013), the court dismissed the Plaintiffs' complaint alleging retaliatory discharge in violation of the Defense Base Act (DBA). One of the Plaintiffs claimed that he was discharged in retaliation for filing a workers’ compensation claim under the DBA. The second Plaintiff, a medical officer, claimed that he was discharged for refusing to withdraw a medical report regarding the other Plaintiff's injury. The court determined that the Plaintiffs failed to exhaust administrative remedies under the Longshore and Harbor Workers' Compensation Act, 33 U.S.C. § 948a, which applies to DBA retaliation complaints. The court also determined that the LHWCA/DBA preempted the Plaintiffs related state common law claims for breach of contract, breach of the covenant of good faith and fair dealing, relatiatory termination in violation of public policy, and conspiracy and prima facie tort.

National Transit Systems Security Act

Nichik v. New York City Transit Authority , No. 1:10-cv-05260 (E.D.N.Y. Jan. 11, 2013)
(Memorandum of Decision [denying summary judgment])
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SUMMARY JUDGMENT NOT GRANTED WERE REASONABLE JURY COULD FIND PROTECTED ACTIVITY IN REPORTING OF SAFETY CONCERNS WITH SUBWAY GATES; ADVERSE EMPLOYMENT ACTION; CAUSATION; AND LACK OF CLEAR AND CONVINCING EVIDENCE THAT DEFENDANTS WOULD HAVE TAKEN SAME ADVERSE ACTION IN ABSENCE OF PROTECTED ACTIVITY

In Nichik v. New York City Transit Authority , No. 1:10-cv-05260 (E.D.N.Y. Jan. 11, 2013), the Plaintiff, a superintendent for the New York City Transit Authority, alleged that he was retaliated against by the Defendants for reporting unsafe conditions related to gates in New York City subway stations under several laws, including the National Transit Systems Security Act ("NTSSA"), 6 U.S.C. § 1142. The Defendants filed a motion for summary judgment. The district court judge noted that there was little caselaw regarding the NTSSA, but that the parties agreed that he could look to other whistleblower statutes for guidance, including the SOX, 18 U.S.C.A. 1514A.

Protected Activity

The NTSSA protects transportation employees who make reports regarding hazardous safety or security conditions on the public transportation system. § 1142(b)(1)(A). The Defendants had not briefed the issue of protected activity and the court found that the Plaintiff's activities were sufficient to support a jury finding he engaged in protected activity under the NTSSA.

Specifically, the Plaintiff had emailed NYCTA's then president regarding unsafe subway conditions explaining that the gates are required to be secured (whether in the closed or open position), and that the failure to secure them could lead to injuries or fatalities. The Plaintiff expressed concern that this problem may be system-wide. The Plaintiff also provided the president with photographs depicting discrepancies between the reported conditions of the gates and their actual conditions.

Adverse Action; "Materially Adverse" Standard

The Defendants conceded that its "Disciplinary Action Notification" against the Plaintiff was an adverse action, but argued that various other acts were not. The court applied the "material adverse" standard of Burlington N. & Santa Fe R.R. Co. , 548 U.S. 53, 68 (2006), and found that a reasonable jury could find that personnel actions taken against the Plaintiff could dissuade a reasonable NYCTA worker from reporting a hazardous safety or security condition. In the two months following his report of the safety problem with the gates, the Plaintiff had received six reinstructions (a written reminder to an employee to conform his actions to NYCTA requirements) and a citation. The reinstructions were placed in his personnel file and relied upon in making future decisions about discipline; they were used in a "marginal" performance review which in turn resulted in the Plaintiff's not receiving a raise; and there was deposition testimony stating that a reinstruction can be a form of discipline.

Causation; Contributing Factor Standard

The court stated that the NTSSA requires the Plaintiff to demonstrate a causal connection between his protected activity and the adverse actions taken by the Defendants by showing, by a preponderance of the evidence, that the protected activity was a "contributing factor in the unfavorable personnel action" taken against him. § 1142(c)(2)(B)(i).

The Defendants contended that the Plaintiff could not show causal connection because there was lack of temporal proximity between the protected activity and the unfavorable personnel action, i.e., there was a six month period between the Plaintiff's report and the Disciplinary Action Notification. The court, however, found that a reasonable jury could conclude that the reinstructions occurred beginning a month after the report, and demonstrated temporal proximity. The court also noted that there was direct and circumstance evidence of retaliatory animus supporting a causal connection. For example, the Plaintiff had "good" ratings on his yearly managerial performance reviews in the six years preceding the protected activity. In the eight months prior to the protected activity, the Plaintiff had received only two reinstructions, but beginning a month later, he began to receive numerous reinstructions and write-ups. While the Defendants provided explanations for the reinstructions and the Disciplinary Action Notification, the court found that those arguments were more appropriately addressed by a jury.

Non-retaliatory Defense; Clear and Convincing Evidence Standard; Evidence That Other Managers Would Not Have Been Disciplined for Similar Actions as Preventing Summary Judgment

The court noted that "[i]n a NTSSA action, an employer may defeat a prima facie case of retaliation at the summary judgment stage if it can show that no genuine issue of material fact exists that would preclude the conclusion, by clear and convincing evidence, that defendant 'would have taken the same unfavorable personnel action in the absence of [the protected] behavior.' See § 1142(c)(2)(B)(iv)." Nichik , supra , slip op. at 11.

The Defendants argued that the Plaintiff had a long record of poor and marginal performance as a superintendent, including submitting monthly reports late, failing to inspect his station, and failing to report to a station where a dead person was found in a restroom, despite being instructed to do so by his supervisor. The Defendants contended that the Plaintiff's insubordination left them with no choice but to discipline and suspend him. The court, however, found that there was evidence that other employees in managerial positions would not have been disciplined for similar conduct, and that on the record before him, he could not conclude as a matter of law that the Defendants demonstrated by clear and convincing evidence that the Plaintiff's infractions would have necessarily resulted in unfavorable employment actions independent of any retaliatory motive.

Safe Drinking Water Act

Vander Boegh v. EnergySolutions, Inc. , No. 5:10-cv-31 (W.D.Ky. Dec. 17, 2013) (case below 2006-ERA-26)
Summary :
[This decision is casenoted above under the ERA decisions]
Onysko v. Administrative Review Board, USDOL , No. 13-9529 (10th Cir. Dec. 4, 2013) (case below ARB No. 11-023, ALJ No. 2009-SDW-4)
(Order and Judgment])
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[Nuclear & Environmental Whistleblower Digest III C 3]
CAUSATION; REFERENCE IN A PERFORMANCE REVIEW TO EARLIER DEMOTION, CONCERNING WHICH A SDWA COMPLAINT HAD NOT BEEN TIMELY FILED, DOES NOT WARRANT TREATING THE DEMOTION AND PERFORMANCE REVIEW AS A SINGLE EMPLOYMENT ACTION

In Onysko v. Administrative Review Board, USDOL , No. 13-9529 (10th Cir. Dec. 4, 2013) (unpublished) (case below ARB No. 11-023, ALJ No. 2009-SDW-4), the Complainant was an environmental engineer with a state environmental agency who had been conditionally promoted to a managerial position. More than 200 days after a demotion, the Complainant filed a SDWA whistleblower complaint with OSHA. Later, the Complainant filed a second SDWA complaint based on a negative rating on one of seven categories on a performance evaluation. That category related to the reviewer's concern that the Complainant viewed the agency's operating principles as an impediment to enforcing the SDWA and rules. The state agency's view was that compliance with the rules could be achieved by implementing the operating principles. Following a four day hearing, the ALJ dismissed the complaints for several reasons, including the failure to prove causation. The ARB affirmed the ALJ on the causation finding in a spilt 2-1 decision. The Tenth Circuit affirmed the ARB's decision. The court declined to address issues other than the narrow ground of causation. The Complainant urged the court to adopt the rationale of the ARB dissenting member, to wit: although the complaint about the demotion was untimely, the performance evaluation effectively reached back to the demotion for its substance and cause, and thus the ALJ erred in failing to address causation in connection with the demotion itself; and alternatively, the state agency arguably tolled the limitations period when it addressed the demotion in the performance evaluation. The court found this rationale unsupported. Because the limitations period concerning the demotion had already run by the time of the performance evaluation there was nothing to toll. Moreover, the argument that the demotion and the performance review were effectively a single action was contrary to law. Slip op. at 10, citing See Nat'l R.R. Passenger Corp. v. Morgan , 536 U.S. 101, 113 (2002) ("[D]iscrete discriminatory acts are not actionable if time barred, even when they are related to acts alleged in timely filed charges."); see also Almond v. Unified Sch. Dist. No. 501 , 665 F.3d 1174, 1178 (10th Cir. 2011) (holding that discrete acts such as demotion, "trigger the statute of limitations when announced to the claimant, and do so whether or not all of their adverse effects or consequences are immediately felt"). The court also rejected a series of other arguments made by the Complainant.

Sarbanes-Oxley Act

McEuen v. Riverview Bancorp, Inc. , No. 12-cv-5997 (W.D.Wash. Dec. 19, 2013)
Order Denying Defendant's Motion for Summary Judgment
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SUMMARY JUDGMENT; PLAINTIFF PRESENTED SUFFICIENT EVIDENCE TO RAISE GENUINE ISSUE OF MATERIAL FACT

In McEuen v. Riverview Bancorp, Inc. , No. 12-cv-5997 (W.D.Wash. Dec. 19, 2013), the Defendant moved for summary judgment on the Plaintiff's SOX Section 806 complaint on the ground that the Plaintiff had not established a prima face case that she was engaged in protected activity, or that such conduct was a contributing factor in her termination from employment. The Defendant also argued that clear and convincing evidence showed that the Plaintiff would have been terminated for violation of bank policy (using an external hard drive at work) regardless of any alleged protected activity. The court denied the motion. The court noted that the Ninth Circuit had adopted the "definitively and specifically" standard for protected activity, but that the Third Circuit had recognized and given deference to the ARB's decision in Sylvester v. Parexel Int'l LLC , ARB No. 07-123, 2011 WL 216854 (ARB 2011), in which the ARB had rejected the "definitive and specific" standard. The court, however, did not find it necessary to consider whether the Ninth Circuit might adopt the Sylvester rule, as the Plaintiff presented sufficient evidence of protected activity to survive summary judgment. Moreover, the Plaintiff presented sufficient evidence of temporal proximity and facts suggesting that she had permission to use an external hard drive at work, to allow a fact finding to reasonably determine that the asserted policy for termination was pretext for unlawful retaliation for the Plaintiff's reporting of bank fraud.
Neal v. Asta Funding, Inc. , No. 13-cv-2438 (D.N.J. Dec. 4, 2013)
Opinion
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ARBITRABILITY OF SOX SECTION 806 COMPLAINT; DODD-FRANK AMENDMENT TO PROHIBIT ARBITRATION; COURT FINDS AMENDMENT IS NOT RETROACTIVE IN EFFECT

In Neal v. Asta Funding, Inc. , No. 13-cv-2438 (D.N.J. Dec. 4, 2013), the district court stayed court proceedings pending arbitration proceedings. The court noted that it would leave to the arbitrator the question of whether all of the Plaintiff's claims were arbitrable. The court stated, however:

I note one issue that, if meritorious, would pose a threshold legal bar to the arbitrability of one of Neal's claims. In 2010, Congress passed Dodd-Frank, which amended Section 1514(c) of SOX to prohibit arbitration of SOX claims. 18 U.S.C. §1514A(c)(2). The courts have "nearly uniformly" held, however, that the Dodd-Frank arbitration bar does not apply to SOX whistle blower claims that were arbitrable at the time the law was enacted. See Weller v. HSBC Mort. Services, Inc., 2013 WL 4882758 (D. Col. Sept. 11, 2013); Blackwell v. Bank of Am. Corp., No. 7: 11-cv-02475-JMC, 2012 WL 1229675 (D.S.C. April 12, 2012); Taylor v. Fannie Mae, 839 F. Supp. 2d 259 (D.D.C. 2012); Holmes v. Air Liquide USA LLC, No. H-11-2580, 2012 WL 267194 (S.D.Tex. Jan. 30, 2012); Henderson v. Masco Framing Corp., No. 3: 11-CV-00088-LRH, 2011 WL 3022535 (D. Nev. July 22, 2011); Ruhe v. Masimo Corp., SACV 11-00734-CJC, 2011 WL 4442790 (C.D. Cal. Sept. 16, 2011);. It must be noted, however, that at least two courts have applied the prohibition retroactively. See Wong v. CKX, Inc., 890 F. Supp. 2d 411, 423 (S.D.N.Y. 2012); Pezza v. Investors Capital Corp., 767 F. Supp. 2d 225 (D. Mass. 2011).

Here, the Consulting Agreement was signed in June 2009, before the enactment of the Dodd-Frank amendments. I agree with the majority, non-retroactivity rule, which preserves the arbitrability of claims as of the date of the arbitration agreement. That rule best respects settled expectations and the federal policy in favor of arbitration freely agreed upon by the parties. I note also that retroactivity is generally not "favored in the law." Landgraf v. USI Film Prods., 511 U.S. 244, 264, 271 (1994). Under the majority view, which I accept, the amendments would not bar arbitration of the SOX claims. In any event, however, I would stay this proceeding. See infra.

Slip op. at n. 6.
Jones v. Southpeak Interactive Corp. of Delaware , No. 3:12cv443 (E.D.Va. Nov. 19, 2013)
Memorandum and Opinion (deciding motion for front pay award)
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FRONT PAY IS A POTENTIAL REMEDY IN SOX RETALIATION CASES WHERE REINSTATEMENT IS NOT APPROPRIATE

In Jones v. Southpeak Interactive Corp. of Delaware , No. 3:12cv443 (E.D.Va. Nov. 19, 2013), after a jury found in her favor on her SOX complaint, the Plaintiff moved the court for an award of front pay in lieu of reinstatement. The court noted that the retaliation provisions of SOX do not mention front pay as a remedy and that the court had not found any judicial decisions awarding front pay in lieu of reinstatement. The court noted, however, that DOL's 2011 interim final rule on SOX complaints stated that front pay is a possible remedy where reinstatement is not appropriate, citing several administrative ALJ and ARB decisions. The court found those administrative decisions consistent with Fourth Circuit decisions respecting front pay under similar statutes, and consistent with the remedial provisions of SOX. Thus, the court found that front pay is a potential remedy for plaintiffs who prevail under the SOX retaliation provision.

FRONT PAY WHERE DEFENDANT IS NO LONGER OPERATIONAL IS NOT NECESSARILY A WINDFALL; HOWEVER, A PLAINTIFF MUST OFFER PROOF THAT MINIMIZES NECESSARY SPECULATION; PLAINTIFF WHO RELIED SOLELY ON ASSUMPTION THAT SHE WOULD HAVE SUFFERED NO DECREASE IN COMPENSATION DENIED FRONT PAY

In Jones v. Southpeak Interactive Corp. of Delaware , No. 3:12cv443 (E.D.Va. Nov. 19, 2013), the Defendant argued that because it had effectively ceased operations, and no longer employs a Chief Financial Officer (the position formerly held by the Plaintiff), front pay was not an appropriate remedy for its violation of the SOX retaliation provision because it would put the Plaintiff in a better position than she would have occupied had she not been fired. The court rejected this argument finding that "[i]f a plaintiff has been diverted onto a less profitable career path through the unlawful actions of his former employer, an award of front pay to compensate the plaintiff until such time as he can regain his former career track is not a windfall" and that "[t]his is true without regard to whether the former employer continues to operate and to maintain comparable opening within the company." Slip op. at 12. The court noted, however, that the tests developed by the courts for determining the scope of a front pay award are largely not useful in the situation of a Defendant that has gone out of business. Thus, the court stated that a plaintiff in this situation "will be obliged to produce more data about future earning prospects than a plaintiff who confronts a defendant-employer that continues to operate and employment individuals in a similar capacity." Slip op. at 15. The court indicated that if future earnings would have been depressed because of the job market and low demand for a person with the plaintiff's skills, front pay would be an unearned windfall. However, front pay would be appropriate when a plaintiff "can show that she would have been well-positioned to weather a temporary layoff and resume employment at a salary level commensurate with the amount of front pay sought." Slip op. at 15. A plaintiff must offer proof that minimizes the degree of speculation in determining earnings potential.

In the instant case, the Plaintiff would have been laid off in struggling job market, and would have been seeking a high-ranking position with limited openings. The court found that the Plaintiff's effort to justify her proposed front pay award was meager, and asked the court to assume that if lawfully terminated, she would have been able to obtain another CFO position immediately without any decrease in compensation. The Plaintiff proposed a five-year period for front pay. The court found that proposal to be an arbitrary choice unsupported by any lay or expert analysis. Thus, the court denied the motion for front pay because any award would be entirely speculative.
Jones v. Southpeak Interactive Corp. of Delaware , No. 3:12cv443 (E.D.Va. Oct. 30, 2013) (2013 WL 5874619)
Memorandum and Opinion (deciding motion for pre- and post-judgment interest)
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CALCULATION OF PRE- AND POST-JUDGMENT INTEREST ON BACK PAY AWARD; WHERE PLAINTIFF USED A HYBRID METHOD PARTLY INCONSISTENT WITH DOL REGULATIONS, BUT DEFENDANTS DID NOT OBJECT TO THE METHOD, DISTRICT COURT ACCEPTED THE PLAINTIFF'S CALCULATIONS

In Jones v. Southpeak Interactive Corp. of Delaware , No. 3:12cv443 (E.D.Va. Oct. 30, 2013) (2013 WL 5874619), a jury found that three Defendants were liable to the Plaintiff under the whistleblower provision of the Sarbanes-Oxley Act, 18 U.S.C. § 1514A. The Plaintiff then filed a motion seeking pre-judgment and post-judgment interest on the jury's back pay award. The court stated:

Under 18 U.S.C. § 1514A(c), a prevailing employee is entitled to back pay with interest. See 18 U.S.C. § 1514A(c). This interest is calculated using the interest rate applied to underpayment of taxes under 26 U.S.C. § 6621 (the Federal short-term rate plus three percentage points) and is compounded daily. See Procedures for the Handling of Retaliation Complaints Under Section 806 of the Sarbanes-Oxley Act of 2 002, as Amended, 76 Fed. Reg. 68084, 68088 (Nov. 3, 2011).

Slip op. at 5. In the instant case, the Plaintiff based her calculations of pre-judgment interest on the interest rate calculation and compounding process described above, but

also relied on an administrative decision that has been partially superseded by Department of Labor regulations. See Mem. at 2 (citing Doyle v. Hydro Nuclear Services , ARB Nos. 99-041, 99-042, 00-012, 89-ERA-22 (ARB May 17, 2000) ) ; Procedures for the Handling of Retaliation Complaints Under Section 806 of the Sarbanes-Oxley Act of 2002, as Amended, 76 Fed. Reg. 68084, 68088 (Nov. 3, 2011) (noting that the daily compounding of interest represents a departure from Doyle ). Doyle compounded the applicable interest rate on a quarterly basis and also distributed the plaintiff's back pay on a quarterly basis. The Plaintiff here has, consistent with the Department of Labor regulations, compounded interest on a daily basis, but has followed the procedure of Doyle in distributing back pay on a quarterly basis. The Defendants have not objected to this hybrid interest calculation method. The Court's previous opinion (Docket No. 169) having reduced the size of the back pay award to $470,000, the Court accepts the Plaintiff's calculated pre-judgment interest of $38,898.86 for that sum. (See Docket No. 168)

Slip op. at 6. The court also approved the Plaintiff's method for calculating post-judgment interest, the Defendants having made no objection to the method used.
Liu v. Siemens A.G. , No. 13-cv-317 (S.D.N.Y. Oct. 21, 2013)
Memorandum and Order (S.D.N.Y. Oct. 21, 2013)
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A DODD-FRANK, SECTION 78u-6(h)(1)(A) COMPLAINT CANNOT BE MANTAINED ON THE THEORY THAT THE PLAINTIFF MADE "REQUIRED OR PROTECTED" DISCLOSURES UNDER SOX SECTION 806 WHERE THE ALLEGED PROTECTED ACTIVITY WOULD REQUIRE EXTRATERRITORIAL APPLICATION OF THAT SECTION, AND WHERE THE COMPLAINT WAS GROUNDED IN ALLEGED VIOLATIONS OF THE FOREIGN CORRUPT PRACTICES ACT WHICH IS NOT PROTECTED ACTIVITY UNDER SOX SECTION 806

In Liu v. Siemens A.G. , No. 13-cv-317 (S.D.N.Y. Oct. 21, 2013), the Plainfiff filed a complaint under the anti-retaliation provison of the Dodd-Frank Act, 15 U.S.C. § 78u-6(h)(1)(A). The Defendant filed a motion for summary judgment, one ground of which was that the Plaintiff had not made "required or protected" disclosures to the SEC under the Sarbanes-Oxley Act, the Securities Exchange Act of 1934, 18 U.S.C. § 1513(e), or "any other law, rule or regulation subject to the jurisdiction of the [SEC]." 15 U.S.C. § 78u-6(h)(1)(A)(iii). The Plaintiff argued that his disclosures were protected by section 806 of the Sarbanes-Oxley Act. The court granted summary judgment. First, Section 806 of SOX does not apply extraterritorially, and therefore did not protect the Plaintiff's disclosures, which involved a Taiwanese resident against a German corporation for acts concerning its Chinese subsidiary relating to alleged corruption in China and North Korea. The only connection to the U.S. was the fact that the Defendant German coporation had listed American Depository Receipts (ADRs) on the New York Stock Exchange. Second, the Plaintiff complaint was based on an allegation that the Defendant was circumventing internal compliance procedures put in place after its guilty plea to Foreign Corrupt Practices Act (FCPA) charges. The court found that FCPA violations are not within the scope of SOX, and thus Section 806 of the SOX does not "require or protect" disclosures of FCPA violations.
Ellington v. Giacoumakis , No. 1:13-cv-11791 (D.Mass. Oct. 16, 2013)
Memorandum and Order on Defendant’s Motion for Judgment on the Pleadings (S.D.N.Y. Oct. 16, 2013)
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A DODD-FRANK, SECTION 78u-6(h)(1)(A) COMPLAINT MAY BE BASED ON PROTECTED ACTIVITY UNDER SARBANES-OXLEY SECTION 806

In Ellington v. Giacoumakis , No. 1:13-cv-11791 (D.Mass. Oct. 16, 2013), the Plaintiff filed a Dodd-Frank Section 78u-6(h)(1) complaint, based on dislosures that the Plaintiff contended where protected under the SOX whistleblower provision at 18 U.S.C. § 1514A. The Defendants moved to dismiss on the ground that the Plaintiff did not meet the statutory definition of a Dodd-Frank whistleblower. The district court denied the Defendant's motion. The district court disagreed with the conclusion of the Fifth Circuit in Asadi v. G.E. Energy (USA), LLC , 720 F.3d 620, 625-628 (5th Cir. 2013), and instead agreed with those courts that had adopted the SEC's interpretation. The court quoted with approval the S.D.N.Y.'s decision in Murray v. UBS Secs., LLC , 2013WL 2190084 at *3-4 (S.D.N.Y. May 21, 2013):

In its comments to the rule, the SEC explained . . . that "[t]he second prong of the Rule 21F-2(b) (1) standard provides that, for purposes of the anti-retaliation protections, an individual must provide the information in a manner described in Section 21F(h)(1)(A). This change to the rule reflects the fact that the statutory anti-retaliation protections apply to three different categories of whistleblowers, and the third category includes individuals who report to persons or governmental authorities other than the Commission." SEC Securities Whistleblower Incentives and Protections, 76 Fed. Reg. 34300-01, at *34304, 2011 WL 2293084 (2011) ("Comments to Final Rule") (emphasis added); see also id. (noting that Section 21 F(h)(1)(A)(iii)'s incorporation of Section 806 of the Sarbanes Oxley Act "provides anti-retaliation protections for employees of public companies, . . . when these employees report to (i)[a] Federal regulatory or law enforcement agency, (ii) any member of Congress or committee of Congress, or (iii) a person with supervisory authority over the employee or such other person working for the employer who has authority to investigate, discover, or terminate misconduct").
Sharkey v. J.P. Morgan Chase & Co. , No. 10-3824 (S.D.N.Y. Oct. 9, 2013)
Order (S.D.N.Y. Oct. 16, 2013)
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EXPERT WITNESS IN ACCOUNTING AND SOX COMPLIANCE; WITNESS MAY TESTIFY AS TO "RED FLAGS" AS TO POSSIBLE FRAUD OR MONEY LAUNDERING, BUT IS PRECLUDED FROM TESTIFYING AS TO REASONABLENESS OF PLAINTIFF'S BELIEF ABOUT A CLIENT'S BEHAVIOR, OR TO BOLSTER PLAINTIFF'S TESTIMONY ON MATTERS ON WHICH EXPERT HAS NO PERSONAL KNOWLEDGE

In Sharkey v. J.P. Morgan Chase & Co. , No. 10-3824 (S.D.N.Y. Oct. 9, 2013), the Defendants moved to strike the testimony of the Plaintiff's expert witness on the ground that her testimony concerns lay matters of which she has no personal knowledge, and inappropriately usurps the role of the jury. The Plaintiff's expert had testified as to concerns lay matters of which she has no personal knowledge, and inappropriately usurps the role of the jury. the expert's testimony concerned her knowledge of SOX compliance and training, and customer identification programs utilized to seek out any instances of fraudulent behavior. The expert had vast experience in this area. The Defendant's objection arose from the expert's testimony as to the reasonableness of the Plaintiff's belief that a client was engaged in money laundering and violating the statutes enumerated in SOX and the reasonableness of the Plaintiff's recommendation to terminate that client. The court agreed, and excluded this portion of the expert's testimony. The court also excluded the expert's testimony relating to the Defendant's internal processes of which she had no personal knowledge. The court, however, found that the witness had been established as an expert as to accounting and SOX compliance programs, and was qualified to testify as to the type of transactinos which might be of concern to an accountant, and those matters which are considered "red flags" under SOX pertaining to possible fraud and/or money laundering the financial industry, including "(1) a client's unwillingness to provide new information or documentation after repeated requests ...; (2) the fact that a client was operating in several high-risk industries; (3) suspicious fund transfer activity, including trading in an escrow account; (4) the large number of open accounts; and (5) a client's refusal to close any accounts, including those with a zero balance." Slip op. at 9, quoting expert's deposition testimony. The court notted that the expert had explained why these types of conduct were red flags and the types of fraudulent activity they suggested. The court state that "This type of information and testimony is not accessible to a lay person and is admissible as expert testimony." Id.
Perez v. Progenic's Pharmaceuticals, Inc. , 10-cv-8278 (SDNY July 24, 2013) (2013 WL 3835199) (case below 2009-SOX-00017)
(Opinion and Order) (denying Defendant's motion for summary judgment)
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PROTECTED ACTIVITY; OBJECTIVE BELIEF THAT PHARMACEUTICAL COMPANY'S PRESS RELEASE WAS MISLEADING FOUND SUFFICIENT TO WITHSTAND SUMMARY JUDGMENT BASED ON PLAINTIFF'S EDUCATION AND EXPERIENCE AS A CHEMIST AND HIS TESTIMONY AS TO THE OBJECTIVE BASIS FOR HIS BELIEF; PLAINTIFF'S TRAINING AND EXPERIENCE DID NOT SUGGEST THAT HE WOULD BE FAMILIAR WITH SECURITIES LAW OR SECOND CIRCUIT DOCTRINE ON "PUFFERY" AND "CORPORATE OPTIMISM" IN PRESS RELEASES

In Perez v. Progenic's Pharmaceuticals, Inc. , 10-cv-8278 (SDNY July 24, 2013) (2013 WL 3835199) (case below 2009-SOX-17), the Plaintiff was a chemist who was supporting development of Relistor, a pharmaceutical drug designed to treat postoperative bowel dysfunction or opioid-induced constipation. The Defendant and Wyeth Pharmaceuticals entered into a license and co-development agreement for commercialization of Relistor. After a phase two clinical trial on an oral formulation of the drug, the Defendant and Wyeth issued a May 22, 2008 joint press release stating that the trial "showed positive activity" and "statistically significant activity as assessed by the occurrence of spontaneous bowel movements and other efficacy measures." The then CEO of the Defendant was quoted as saying "We are pleased by the preliminary findings of this oral formulation." On July 16, 2008, Wyeth executives presented an update on Relistor development to an executive development council at Wyeth; no employees of the Defendant participated. The update noted that despite some dosages of the tablet formulation showing statistically significant results, some targets for the drug had not been met, and advancement to stage three clinical trials was not recommended. At the end of July 2008, the Defendant's general counsel received a copy of the Wyeth update, and he distributed it to five senior managers, not including the Plaintiff. The Plaintiff obtained a copy of the update, and on August 4, 2008 presented a memorandum to certain of Defendant's officers in which the Plaintiff stated that Wyeth and the Defendant were committing fraud against shareholders because representations made to the public were not consistent with the actual results of the clinical trial. The Defendant became concerned about how the Plaintiff obtained a copy of the Wyeth update, and eventually terminated the Plaintiff's employment when the Plaintiff refused to state how he obtained the update. The Plaintiff then filed a complaint with OSHA. OSHA dismissed the complaint, along with an earlier complaint regarding a different drug. The Plaintiff objected to the finding on the Relistor related complaint, and eventually filed his complaint in district court. The Defendant filed a motion for summary judgment.

The first ground for the summary judgment motion was the contention that the Plaintiff did not reasonably believe that the Defendant violated the provisions of law protected under SOX. The Defendant did not contest the Plaintiff's subjective belief in a violation, but claimed that the belief was objectively unreasonable. The district court evaluated the Plaintiff's training and experience, noting that he held a Ph.D. and master's degree in chemistry and worked for the Defendant for about four years, primarily on chemical formulations of Relistor. The court noted that the Plaintiff stated in deposition that he had reviewed more than just a few slides from the Wyeth update (the Defendant having alleged that the Plaintiff had relied on selective quotations from only five slides and had merely glanced at the full version of the update), and had also based his opinion on conversations with other employees on the Relistor team. On this basis, the court found that a reasonable jury could find that the Plaintiff's belief that the press release was misleading was formed on objectively reasonable basis. The court also observed that the Plaintiff did not appear to have any knowledge or training in securities law, and that a reasonable person with the Plaintiff's training and experience likely would not be familiar with the Second Circuit's doctrine with respect to the use of "puffery" and "corporate optimism" in press releases. Thus, the court denied the motion for summary judgment relating to protected activity.

The second ground for summary judgment was the contention that the Plaintiff could not show that his protected activity was a contributing factor in his firing. The court also denied this second ground, finding that the parties disputed the reason for the firing, that there was evidence suggesting hostility prior to any discussion of where the Plaintiff obtained the Wyeth update, and that there was temporal proximity between the protected activity and the Plaintiff's firing.
Asadi v. G.E. Energy (USA), LLC , No. 12-20522 (5th Cir. July 17, 2013)
(Opinion)
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DISTINCTION BETWEEN SOX SECTION 1514A ANTI-RETALIATION AND DODD-FRANK SECTION 78u-6(a)(6) WHISTLEBLOWER PROTECTION CLAIMS

In Asadi v. G.E. Energy (USA), LLC , No. 12-20522 (5th Cir. July 17, 2013), a case arising under the whistleblower protection provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ("Dodd- Frank"), 15 U.S.C. § 78u-6(h), the court held that "Based on our examination of the plain language and structure of the whistleblower-protection provision, we conclude that the whistleblower-protection provision unambiguously requires individuals to provide information relating to a violation of the securities laws to the SEC to qualify for protection from retaliation under § 78u-6(h)." Slip op. at 15 (emphasis as in original).

In Asadi , the Plaintiff-Appellant conceded that he was not a "whistleblower" as that term is defined in section 78u-6(a)(6) because he did not provide any information to the SEC. The Plaintiff-Appellant aruged, however, that the whistleblower-protection provision should be construed to protect individuals who take actions that fall within section 78u-6(h)(1)(A)(iii) (i.e., the third category of protected activity), even if they do not provide information to the SEC. The court rejected this contention. One of the matters examined by the court was the distinction between the SOX anti-retaliation and the Dodd-Frank whistleblower-protection laws. The court wrote:

    Asadi's construction of the whistleblower-protection provision is problematic for another reason. Specifically, construing the Dodd-Frank whistleblower-protection provision to extend beyond the statutory definition of "whistleblowers" renders the SOX anti-retaliation provision, for practical purposes, moot. ¹² Such a construction has this impact because an individual who makes a disclosure that is protected by the SOX anti-retaliation provision could also bring a Dodd-Frank whistleblower-protection claim on the basis that the disclosure was protected by SOX. It is unlikely, however, that an individual would choose to raise a SOX anti-retaliation claim instead of a Dodd-Frank whistleblower-protection claim.

    Three separate, but important, distinctions between the SOX anti-retaliation and Dodd-Frank whistleblower-protection claims lead to this practical result. First, the Dodd-Frank whistleblower-protection provision provides for greater monetary damages because it allows for recovery of two times back pay, whereas the SOX anti-retaliation provision provides for only back pay. Compare 15 U.S.C. § 78u-6(h)(1)(C), with 18 U.S.C. § 1514A(c)(2). Second, individuals who bring a SOX anti-retaliation claim must first file a complaint with the Secretary of Labor and, only if the Secretary of Labor has not issued a final decision within 180 days, may then proceed to file a claim in a United States district court. 18 U.S.C. § 1514A(b)(1). Alternatively, individuals may bring a Dodd-Frank whistleblower-protection claim without first filing their claim with a federal agency. See 15 U.S.C. § 78u-6(h). Third, the applicable statute of limitations is substantially longer for Dodd-Frank whistleblower-protection claims. Compare 15 U.S.C. § 78u-6(h)(1)(B)(iii) (between six and ten years after the violation occurs), with 18 U.S.C. § 1514A(b)(2)(D) (between 180 days after the violation occurs and 180 days after the employee becomes aware of the violation).

    Accordingly, if we were to accept Asadi's construction of the whistleblower-protection provision, the SOX anti-retaliation provision, and most importantly, its administrative scheme, for practical purposes, would be rendered moot.

Slip op. at 13-15 (footnote omitted).
Delmore v. McGraw-Hill Companies , 12-cv-1306 (E.D.Wash. July 12, 2013) (2013 WL 3717741)
(Order)
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WHERE PLAINTIFF FAILED TO FOLLOW REGULATORY PROCEDURE FOR FILING SOX COMPLAINT WITH OSHA, AND WAS REPRESENTED BY COUNSEL AT THE TIME OF THE FILING, DISTRICT COURT DISMISSED FEDERAL COURT SOX ACTION FOR LACK OF JURISDICTION

In Delmore v. McGraw-Hill Companies , 12-cv-1306 (E.D.Wash. July 12, 2013) (2013 WL 3717741), the court dismissed the Plaintiff's SOX whistleblower complaint for lack of jurisdiction. The court found that the Plaintiff's failure to file a complaint with OSHA as required by the governing regulations deprived the court of jurisdiction. The Plaintiff alleged that he had filed a SOX complaint with the Secretary of Labor, but the court, noting that the Plaintiff had been represented by counsel at the time, determined that the Plaintiff would be held to following proper procedure.
Feldman v. Law Enforcement Associates Corp. , No. 13-1849 (4th Cir. July 5, 2013)
(Order)
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PROTECTED ACTIVITY; OBJECTIVELY REASONABLE BASIS FOR REPORT OF SUSPECTED INSIDER TRADING NOT SHOWN WHERE PLAINTIFFS HAD VERY LITTLE INFORMATION TO BASE THAT REPORT ON, AND HAD NOT SOUGHT TO OBTAIN ADDITIONAL EVIDENCE BEFORE REPORTING TO A STATE OFFICIAL

EMPLOYER'S KNOWLEDGE OF PROTECTED ACTIVITY; SUBORDINATE'S PARTICIPATION IN PHONE CALL IN WHICH CEO REPORTED SUSPECTED INSIDER TRADING WAS INSUFFICIENT TO ESTABLISH EMPLOYER'S KNOWLEDGE OF PROTECTED ACTIVITY WHERE PLAINTIFFS PRESENTED NO EVIDENCE THAT THE SUBORDINATE HAD INFORMED THE BOARD OF DIRECTORS ABOUT THE CALL AND THE SUBORDINATE DENIED TELLING ANYONE

CAUSATION; SUMMARY DECISION WARRANTED WHERE THE COMBINATION OF FACTORS OF LACK OF TEMPORAL PROXIMITY, PRE-EXISTING ANIMUS, AND INTERVENING EVENTS, ESTABLISHED THAT NO REASONABLE JURY COULD FIND THAT THE PROTECTED ACTIVITY WAS A CONTRIBUTING FACTOR TO THE PLAINTIFFS' TERMINATION FROM EMPLOYMENT

In Feldman v. Law Enforcement Associates Corp. , No. 5:10-CV-08-BR (EDNC June 28, 2013), the Defendant company was a manufacturer of security and surveillance equipment. SOX whistleblower complaints were brought by two former employees — the company's president and CEO, and a vice-president of sales and marketing. The relationship between the president/CEO and the company's founder and its board of directors became contentious, including in regard to the Plaintiffs' belief that possible export violations had occurred and needed to be reported to government agencies. Eventually the president/CEO was removed by the board of directors in a dispute over moving the company to a new location. The vice-president, who had a history of multiple sclerosis, was taken to the hospital the day of the board meeting that resulted in the president/CEO's removal. The vice-president did not return to his job, and after failing to respond to communications from the Defendant company, the company determined that the vice-president had voluntarily quit his job. The Defendants filed a motion for summary judgment.

The court, analyzing the summary judgment motion under the criteria for establishing a prima facie case under SOX, found initially that the vice-president's SOX claim against the Defendant company failed because he could not establish that he suffered an unfavorable employment action, having abandoned his position. The court also considered the other elements of a prima facie case under SOX.

The court assumed, without deciding, that the Plaintiffs engaged in protected activity under the "definitively and specifically" standard, when they reported to the board of directors and the federal government that the company's founder had involved the company in possible felonies relating to founder's separate export business, and when they engaged in certain other actions or refusals. The court noted that the Fourth Circuit had expressly adopted the "definitively and specifically" standard in Welch v. Chao , 536 F.3d 269, 275 (4th Cir. 2008), and that the ARB had explained why this standard was inappropriate in Sylvester v. Parexel Int'l LLC , ARB No. 07-123, ALJ Nos. 2007-SOX-39 and 42, 2011 WL 2165854, at *15 (ARB May 25, 2011). Because the court assumed, without deciding, that the Plaintiffs' meet the higher definite and specific standard, it was not necessary to resolve whether the ARB's decision affected the Fourth Circuit precedent.

In regard to the Plaintiffs' report of suspected insider trading, the court found that the Plaintiffs failed to raise a genuine dispute of material fact as to whether they had both a subjective belief and an objectively reasonable belief that their report of possible insider trading was a violation of relevant law. Specifically, the court found that the Plaintiffs did not have an objectively reasonable belief that a violation had occurred because they had very little information on which to make the insider trading allegation, and despite the lack of evidence, they did not try to obtain additional evidence before reporting to a state agent.

The court also found that the Plaintiffs' failed to show that the company knew about their report of insider trading. The Plaintiffs contended that the company knew about the report because a subordinate of the president/CEO participated in the call to the state agent. The court held that a subordinate's knowledge of the report of insider trading was insufficient to demonstrate that the Defendant company knew about the report. Although the Plaintiffs contended that the subordinate employee told the outside members of the board of directors about the call, they presented no credible evidence to support this assertion, and the employee denied telling anyone.

The court, however, found that the Plaintiffs had presented sufficient evidence to establish that the company was aware of their reports concerning the allegation that the founder of the company had involved the company in illegal export trade.

In regard to these remaining SOX protected activities, the court turned to the question of whether the whistleblowing was a contributing factor to the unfavorable personnel actions taken against the Plaintiffs. The court found that there was a 16 to 17 month gap between the protected activity and the unfavorable employment actions, which was too attenuated to establish causation. The Plaintiffs argued that they were not relying solely on temporal proximity, but were also relying on evidence of continuing retaliatory animus. The court recognized that "where an employee provides other evidence indicating a connection between his protected activity and the adverse personnel action, some courts allow for a more relaxed temporal proximity in SOX cases." Slip op. at 42 (citations omitted). The court found, however, that the record in this case showed that animus developed before the Plaintiffs' first protected activity, which refuted the Plaintiffs' contention that the company had a retaliatory motive. The court also found that, although there was a palpable tension and disagreements between the Plaintiffs and outside members of the board of directors, there was an absence of evidence that the Plaintiffs were actually retaliated against prior to their separation from employment. The court also found that intervening events showed that the president/CEO had been found to be insubordinate with the board of directors, and that the vice-president had provided a legitimate basis for separation from employment by not responding to the company's communications about whether he intended to return to work. The court concluded that under this combination of factors, even in the light most favorable to the Plaintiffs, no reasonable jury could find that the alleged protected activities were a contributing factor to the separation decision.
Lockheed Martin v. Adm. Review Bd., USDOL , No. 11-9524 (June 4, 2013) (case below ARB No. 10-050, ALJ No. 2008-SOX-49)
(Opinion)
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PROTECTED ACTIVITY; FRAUD AGAINST SHAREHOLDERS IS NOT AN ELEMENT OF SOX COMPLAINT BASED ON REPORTED VIOLATIONS OF 18 U.S.C. §§ 1341, 1343, 1344, AND 1348

PROTECTED ACTIVITY; 10TH CIRCUIT EMPLOYS ARB'S SYLVESTER DEFINITION OF "REASONABLE BELIEF" AS INCLUDING BOTH A SUBJECTIVE AND OBJECTIVE COMPONENT

CONSTRUCTIVE DISCHARGE; 10TH CIRCUIT'S STRICKLAND REASONABLE PERSON TEST

CONTRIBUTING FACTOR; 10TH CIRCUIT EMPLOYS ARB'S KLOPSTEIN STANDARD

CONTRIBUTING FACTOR; TEMPORAL PROXIMITY IN CONSTRUCTIVE DISCHARGE CASE; RELEVANT TIME FRAME IS NOT WHEN THE CONSTRUCTIVE DISCHARGE OCCURRED, BUT WHEN THE CONDUCT LEADING UP TO THE DISCHARGE BEGAN

CONTRIBUTING FACTOR; CAT-S PAW THEORY OF LIABILITY

In Lockheed Martin v. Adm. Review Bd., USDOL , No. 11-9524 (10th Cir. June 4, 2013) (case below ARB No. 10-050, ALJ No. 2008-SOX-49), the Tenth Circuit affirmed the ARB's decision in Brown v. Lockheed Martin Corp. , ARB No. 10-050, ALJ No. 2008-SOX-49 (ARB Feb. 28, 2011), in which the ARB affirmed the decision of an ALJ that Lockheed violated Section 806 of the Sarbanes-Oxley Act by constructively discharging the Complainant after she engaged in protected activity.

Background

The Complainant worked as a Communications Director and brought concerns to Lockheed's Vice President of Human Resources that the Vice President of Communications was using company funds for illicit activities. The Vice President of Human Resources submitted an anonymous complaint on the Complainant's behalf. Upon questioning by the Vice President of Communications about who reported her, the Complainant revealed that she told the Vice President of Human Resources "a few things," but stated that she was not sure if her comments resulted in the complaint. Shortly thereafter, the Complainant received a lower performance rating. In a company reorganization, the Complainant's position was advertised, and when she applied, SHE was lambasted for doing so. The Complainant was told to vacate her office and either work from home or use the visitor's office (which doubled as a storage room), lost her title and supervisory responsibilities, and was told she could not attend a communications conference that she had attended in the past. When the Complainant came to work and found that someone else was using the visitor's office, she was told that the company was looking for a cubicle for her. The Complainant protested that as a Level 5 employee with a leadership position (an "L code" classification) she was entitled to an office, but was then told that her L code was in the process of being removed. At that point, the Complainant took medical leave for depression, and filed a forced discharge/constructive discharge complaint with OSHA. The ARB affirmed the ALJ's decision finding a constructive discharge in violation of AIR21. On appeal to the 10th Circuit, Lockheed argued that the ARB's findings of fact and conclusions of law were in error as to protected activity, unfavorable personnel action, and contributing factor.

Protected Activity

    -- Fraud against shareholders not an element of SOX complaint based on reported violations of 18 U.S.C. §§ 1341, 1343, 1344, and 1348

Lockheed argued that employee reports of mail and wire fraud that do not allege shareholder fraud are not protected under SOX Section 806. The court rejected this argument, finding that the phrase in 18 U.S.C. § 1514A(a)(1) "relating to fraud against shareholders" modifies only the phrase that immediately precedes it -- "any provision of Federal law." Thus, the court held that Complainants who report violations of 18 U.S.C. §§ 1341, 1343, 1344, and 1348 are not required to also establish that such violations relate to fraud against shareholders. Although the court found that the text was not ambiguous, even if it was, Chevron deference to the ARB's interpretation of SOX applied, even though the ARB had changed its previously expressed position. See Sylvester v. Parexel Int'l LLC , ARB No. 07-123, 2011 WL 2165854 at *15-16 (ARB May 25, 2011).

    -- Reasonable belief that reported conduct was a violation

Lockheed argued that the ARB erred in concluding that the Complainant "definitely and specifically" communicated a belief that the Vice President of Communications engaged in mail or wire fraud. The court observed that Section 806 requires that, to be protected from retaliation, an employee must "reasonably believe" the conduct she reports violates one of the enumerated federal statutes or regulations. 18 U.S.C. § 1514A(a)(1). The court observed that the ARB had defined "reasonable belief" to include both a subjective and an objective component; an employee must actually believe in the unlawfulness of the employer's actions and that belief must be objectively reasonable. Sylvester , 2011 WL 2165854 at *11. And the court observed that the decisions of multiple Circuit Courts of Appeals were in accord with ARB standard. The court found that the conclusion of the ALJ and the ARB that the Complainant met the standard was supported by substantial evidence, and that Lockheed had not made a persuasive argument sufficient for the court to disturb the ALJ's credibility findings. The court did not reach the ARB's disavowing of the "definite and specific" standard for SOX complaints in Sylvester , 2011 WL 2165854 at *14-15, because it found that the complaint in the instant case met that standard.

Lockheed also argued that any belief that the Vice President of Communications' activities amounted to fraud was objectively unreasonable as a matter of law due to a lack of evidence that she acted with specific intent to defraud. The court stated that "While attempted concealment is one method of proving specific intent in a fraud case, . . . it is not essential. For example, this court has also recognized intent can be inferred from whether a defendant 'profited or converted money to his own use. '" Slip op at 19 (citations omitted). The court found that the Complainant's allegations clearly amounted to a claim that the Vice President for Communications had converted company money to her own use. There was thus substantial evidence supporting the ALJ and ARB's findings that the Complainant reasonably believed that the Vice President of Communications had committed fraud and that she definitely and specifically communicated that belief to her superiors.

Constructive Discharge

The court stated that the Tenth Circuit's requirements for establishing constructive discharge were set forth in Strickland v. United Parcel Service, Inc. :

Constructive discharge occurs when an employer unlawfully creates working conditions so intolerable that a reasonable person in the employee's position would feel forced to resign. The plaintiff's burden is substantial. The standard is objective: the employer's subjective intent and the employee's subjective views on the situation are irrelevant. Whether a constructive discharge occurred is a question of fact.

Slip op. at 20, quoting Strickland v. United Parcel Service, Inc. , 555 F.3d 1224, 1228 (10th Cir. 2009) (quotation and citations omitted). In the instant case, Lockheed argued that the ALJ applied the wrong legal standard on constructive discharge, and the ARB incorporated that mistake in its decision.

The court found that the ALJ had recited the correct legal standard for a claim of constructive discharge, and although he had included some analysis of whether Lockheed's actions were "materially adverse" to the Complainant (the Burlington Northern standard), that analysis did not conflict with the ALJ's ultimate conclusion that the working conditions had become so objectively intolerant as to constitute a constructive discharge. The ALJ had also acknowledged that establishing constructive discharge requires a showing of an even more offensive and severe work environment than is needed to establish a hostile work environment. The court also found that the ARB had made no reference to the standard for "material adversity" and had applied the correct reasonable person standard.

Lockheed also argued that there was insufficient evidence to support the conclusion of constructive discharge of the Complainant. The court, however, recited numerous facts cited by the ALJ and the ARB indicative of constructive discharge, and found that a reasonable person would deem this evidence adequate to support a finding that the Complainant's working conditions were so intolerable that she would have viewed quitting as her only option. Although Lockheed argued that the Complainant had alternatives to quitting and left prematurely before the details of such alternatives were revealed, the court found that Lockheed failed to point to any evidence of record to show that the Complainant was ever made aware of any purported alternatives, and that Lockheed never identified any alternatives. Lockheed argued that the Complainant had repeatedly given notice that she intended to resign, and even her final resignation notice indicated that she was in control of the circumstances of her resignation. The court held that assuming this account was correct, the Complainant's "attempts to stay at Lockheed are irrelevant to the question of whether conditions were so intolerable that she had no alternative but to quit." Slip op at 25 (citation omitted).

Contributing Factor

   -- Klopstein standard applied

The court, largely adopting the ARB's decision in Klopfenstein v. PCC Flow Techs. Holdings, Inc. , ARB No. 04-149, 2006 WL 3246904, at *13 (ARB. May 31, 2006), described the contributing factor element of a SOX complaint as follows:

   To establish a prima facie case under Section 806, a complainant must show her protected activity was a contributing factor in the unfavorable personnel action. 18 U.S.C. § 1514A(b)(2)(C); 49 U.S.C. § 42121(b)(2)(B)(I); 29 C.F.R. § 1980.109(a); Harp, 558 F.3d at 723. This element is broad and forgiving: the Board has defined a "contributing factor" as "any factor, which alone or in combination with other factors, tends to affect in any way the outcome of the decision." Klopfenstein v. PCC Flow Techs. Holdings, Inc. , No. 04-149, 2006 WL 3246904, at *13 (Admin. Rev. Bd. May 31, 2006) (emphasis added) (quotation omitted); see also Allen , 514 F.3d at 476 n.3. "[T]he contributing factor standard was 'intended to overrule existing case law, which requires a whistleblower to prove that his protected conduct was a "significant," "motivating," "substantial," or "predominant" factor in a personnel action in order to overturn that action. '" Klopfenstein , 2006 WL 3246904, at *13 (quoting Marano v. Dep't of Justice , 2 F.3d 1137, 1140 (Fed. Cir. 1993)). Temporal proximity between the protected activity and adverse employment action may alone be sufficient to satisfy the contributing factor test. Van Asdale v. Int'l Game Tech. , 577 F.3d 989, 1003 (9th Cir. 2009); see also Marx v. Schnuck Mkts., Inc. , 76 F.3d 324, 329 (10th Cir. 1996) (stating, in context of Fair Labor Standard Act's "motivating factor" element, protected conduct closely followed by adverse action may justify an inference of retaliatory motive").

Slip op. at 26-27.

   -- Temporal proximity in constructive discharge case; relevant time frame is not when the constructive discharge occurred, but when the conduct leading up to the discharge began

Lockheed sought to discredit DOL's conclusion that the Complainant's protected activity was a contributing factor in her constructive discharge based on the argument that a significant amount of time passed between the Complainant's report of the Vice President for Communications' activities and the ultimate constructive discharge. Lockheed argued that the gap between the Complainant's report of the Vice-Presidents' activities and the Complainant's departure was more than 20 months, and even if the gap was calculated from the date the Vice-President became aware that the Complainant was the person who filed the complaint against her, there was still a full calendar year gap. Lockheed cited Title VII authority for the proposition that a period of two to three months between protected activity and adverse employment action is insufficient to establish causation. The court rejected this argument noting that in a Title VII case the requirement is to make a prima facie showing of causation, whereas in a SOX Section 806 case a complainant is only required to show that protected activity was a contributing factor. The court also stated "More importantly, when evaluating temporal proximity for purposes of determining whether [the Complainant's] protected activity was a contributing factor in her constructive discharge, the relevant time frame is not when the constructive discharge occurred, but when the conduct leading up to the discharge began." Slip op. at 28 (citation omitted). The court also noted that in the instant case, the Complainant's contributing-factor showing was not based solely on temporal proximity.

   -- Cat's paw theory of liability

In the instant case, the ARB concluded that although new managers to whom the Complainant reported after a company reorganization did not know about the Complainant's ethics complaint against the Vice President of Communications, both were poisoned by the Vice President of Communications' biased reports of the Complainant's professional competence. The court noted that the Tenth Circuit has applied the subordinate bias, or "cat's paw" theory of liability in other employment discrimination contexts, and that the Supreme Court had recently endorsed the theory in the context of an action under the Uniformed Services Employment and Reemployment Rights Act. The court noted that, importantly, "the required showing to establish causation for a claimant under Section 806 is less onerous than the showing required under Title VII, the ADEA, or USERRA." Slip op. at 29 (citations omitted). The court thus summed up that it "must determine whether the ALJ's finding that [the Vice President of Communications] "poisoned" [the new managers] opinion of [the Complainant] is supported by substantial evidence, keeping in mind that [the Complainant] satisfies the causation element of her Section 806 claim by demonstrating merely that her ethics complaint contributed to the adverse employment actions taken against her." Slip op. at 29-30 (footnote omitted). Although the ALJ drew certain inferences from the testimony, and those inferences were not the only possible interference that could have been drawn, the court found that such a possibility "is a grossly insufficient basis to disturb an agency's findings on appeal." Slip op. at 30-31. The court affirmed the ALJ and ARB's finding that the Complainant's protected activity was a contributing factor in her termination from employment.
Lawson v. FMR, LLC , No. 12-3 (U.S. May 20, 2013), granting petition for certiorari, reviewing Lawson v. FMR, LLC , 670 F.3d 61, 68 (1st Cir. 2012)
Summary :
The Supreme Court will review whether Section 806 of the Sarbanes-Oxley Act applies to employees of a contractor or subcontractor to a public company. See generally 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 Supreme Court argument is scheduled for Tuesday, Nov. 12, 2013.
Leshinksy v. Telvent GIT, S.A. , No. 10-cv-4511, 2013 WL 1811877 (S.D.N.Y. May 1, 2013)
(Memorandum and Order)
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FRAMEWORK FOR REVIEW OF SUMMARY JUDGMENT MOTION IN SOX WHISTLEBLOWER CASE

Background

In Leshinksy v. Telvent GIT, S.A. , No. 10-cv-4511, 2013 WL 1811877 (S.D.N.Y. May 1, 2013), the Plaintiff filed a complaint against several Defendants alleging that his employment was terminated in violation of the Section 806 whistleblower provision of the Sarbanes-Oxley Act. The Plaintiff's position was Vice President, Toll Systems. Following an acquisition of a company that developed and maintained software used in automated toll collection, the Plaintiff was assigned to the acquired company, although he remained formally employed by the acquiring company. During a discussion at a meeting concerning preparations for a bid for a toll system maintenance contract with the Triborough Bridge and Tunnel Authority division of the Metropolitan Transit Authority (MTA), the attendees discussed a strategy for winning the bid that involved possibly using two different overhead rates, one for external use and one for internal use. A few minutes after the end of the meeting, the Plaintiff went to the office of the President of the acquired company to object to the two overhead strategy, telling him that it "was unethical, certainly immoral and may even be illegal but I wasn't sure since I'm not a lawyer." The President became angry, accused the Plaintiff of not being a team player, and asked the Plaintiff to reconsider his objections. The Plaintiff left the office without further discussion. This was the only discussion the Plaintiff had with anyone at the Defendant companies about the two overhead strategy. When the bid was submitted to MTA, it did not use the two overhead strategy. Thereafter the Plaintiff was marginalized at work. The Plaintiff, both before and after the meeting with the President, had other difficulties at work, and managers became increasingly frustrated with his behavior and the caliber of his work. Several months later, the Plaintiff was laid off together with two other employees.

The Defendants filed a motion for summary judgment that presented several questions of first impression for the court.

Summary Judgment Standard - Defendant's Burden is Higher in SOX Cases — Plaintiff Need Only Demonstrate a Prima Facie Case

The court first reviewed the framework for reviewing a summary judgment motion in a SOX case. The court recited the general framework for deciding a FRCP 56 motion, but noted that "[i]t is now well accepted that courts should construe Section 806 broadly." Slip op. at 10 (citation omitted). The court noted the burden shifting framework for Section 806 cases, and held:

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

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

Protected Activity — Rejection of "Specifically and Definitively" Test

The Defendants contended in their summary judgment motion that the Plaintiff's statement to the acquired company's President was plainly insufficient to constitute "providing information" under Section 1515A, as the Plaintiff did not use the word "fraud" and was not even sure if the two overhead scheme was illegal. The court noted that a "specifically and definitively" test had been adopted in Platone v. United States Dep't of Labor , 548 F.3d, 322, 327 (4th Cir. 2009), but that the U.S. Department of Labor, Administrative Review Board (ARB) had subsequently rejected the existence of such a test in Sylvester v. Parexel Int'l LLC , ARB No. 07-123, 32 IER Cases 497, 508 (ARB May 25, 2011). Finding that ARB decisions are entitled to some level of deference (albeit the level of deference was in dispute), the court stated that it agreed with the ARB that the "definitive and specific" test is inapplicable to SOX violations. Rather, the critical focus is on whether the employee reported conduct that he or she reasonably believes constituted a violation of federal law.

Protected Activity — Reasonable Belief Test

The court held that "[t]o demonstrate that a plaintiff engaged in a protected activity, a plaintiff must show that he 'had both a subjective belief and an objectively reasonable belief that the conduct he complained of constituted a violation of relevant law.'" Slip op. at 15, quoting Welch , 536 F.3d at 275 (internal quotation omitted).
- Objective reasonableness
In the instant case, the Defendants argued in the summary judgment motion that it was not objectively reasonable for the Plaintiff to believe that the two overhead scheme could possibly come to fruition. The court, however, found that there were sufficient facts for a reasonable factfinder to find otherwise.
- Rejection of Livingston "existing" violation analysis
The Defendants next argued that it would not have been reasonable for the Plaintiff to believe that a scheme was underway, pointing out at that there had been no agreement to carry out such a scheme and that the specifics of such a scheme had not yet been discussed or worked out. The court noted that the Fourth Circuit in Livingston v. Wyeth, Inc. , 520 F.3d 344, 352 (4th Cir. 2008), had indicated that a report could not concern a claim that a violation was about to happen upon some future contingency. The court observed, however, that the Third Circuit in Wiest v. Lynch , 710 F.3d 121, 133 (3rd Cir. 2013), following the ARB's lead in Sylvester , rejected the notion that a violation must be "existing" in order for a report to be protected. Rather, the court held that Section 806 protects communications about a violation that has not occurred as long as the employee reasonably believes that the violation is likely to happen. The district court stated that it agreed with the Third Circuit and the ARB "that imminent crimes, or at least crimes in their infancy, are within the scope of Section 806." Leshinksy , supra, slip op. at 19. The court stated: "It furthers the purpose of Section 806 to nip corporate wrongdoing in the bud, rather than permitting a scheme to blossom into a full-fledged crime before whistleblower protections take effect. Whistleblowers should not be asked to wait until executives have dotted the i's and crossed the t's before sounding an alarm." Id . at 19. Although the Defendants in the instant case argued that there were far too many contingencies between the discussion of the scheme and its implementation for a reasonable person to believe that the scheme was in progress or imminent, the court found that the discussion at the meeting had been sufficiently substantive for a reasonable person to believe that mail or wire fraud was imminent, if not already in progress.
- Subjective reasonableness — focus on Plaintiff's belief, not whether he shared that belief with a supervisor
The court stated that the "Plaintiff must also have had a subjective belief that fraud was taking place. After all, irrespective of whether Plaintiff reported a violation of the relevant law, "[i]t would make no sense to allow [a plaintiff] to proceed if he himself did not hold the belief required by the statute . . . ." Livingston v. Wyeth, Inc. , 520 F.3d 344, 352 (4th Cir. 2008)." Leshinksy , supra, slip op. at 21. The court found that the Plaintiff's statement to the President that he believed that the two overhead strategy "may even be illegal but I wasn't sure since I'm not a lawyer" was sufficient evidence for a jury to find that he was in fact concerned about the legality of the Defendants' conduct. The court agreed with the Defendants that the fact that the Plaintiff only reported his concern to the President of the acquired company was hard to square with his history of resisting improper actions by superiors, and did not follow his practice of relaying concerns to the President of the company which he was formally employed, who was a long-term friend. The court held however, that its "inquiry is whether there is sufficient evidence that Plaintiff had a reasonable belief, not whether he shared that belief with his superior." Leshinksy , supra, slip op. at 21 (citation omitted).

Protected Activity — Whether Reporting to the Wrongdoer Can Constitute Whistleblowing

The Defendants argued in their motion for summary judgment that, consistent with a line of cases decided under the Whistleblower Protection Act (WPA), disclosure of wrongdoing to the wrongdoer himself is not whistleblowing. The court rejected this argument finding that Section 1514A on its face indicates that such reporting is protected, and the fact that the WPA decisions relied on by the Defendants had been overturned by Congress, "compel the interpretation that a report by an employee to his supervisor is protected under the statute, even if that supervisor is implicated in the wrongdoing. A holding to the contrary would also contravene the very purpose of the Sarbanes Oxley's whistleblower provisions, by facilitating rogue supervisors hoping to silence employees, and discouraging employees otherwise inclined to raise concerns about the legality of company policy from doing so." Leshinksy , supra, slip op. at 24 (citation omitted).

Contributing Factor — Where Temporal Proximity Is Sole Ground for Proof of Causation the Proximity Must be Close to Survive Summary Judgment — Where There Is Other Evidence, Timing of Temporal Proximity Can Be More Relaxed

The court noted that a plaintiff must demonstrate that a genuine issue of material fact exists as to whether his whistleblowing was a contributing factor in his termination. In the instant case, the Defendants argued that a five month gap in time between the protected activity and the termination was too remote to establish a causal connection. The court cited caselaw to the effect that where a plaintiff relies solely on temporal proximity to prove causation, the protected activity and the adverse action must be very close in time, and that a lapse of 2.5 to 3 months had been found to preclude temporal proximity as the sole causal proof. However, where an employee provides other evidence indicating a connection between his protected activity and his termination, the courts in its circuit allow for a more relaxed temporal proximity. In the instant case, the Plaintiff produced proof of marginalization at work between the time of the protected activity and his termination, and given this evidence, there was sufficient temporary proximity to survive summary judgment.

Contributing Factor — Knowledge of One of Persons Responsible for Adverse Action Decision Sufficient

The Defendants argued that the Plaintiff could not prove causation because with the exception of the President with which he had spoken about the two overhead strategy, none of the individuals who made the termination decision were aware of the Plaintiff's complaint. The court held that "Even if that were the case, . . . the fact that one of the persons responsible for Plaintiff's termination knew of the protected activity provides the jury with sufficient evidence to find that Plaintiff's report was a proximate cause of his termination." Leshinksy , supra, slip op. at 26 (citation omitted).

Causation — Knowledge of Individual Named As Defendant Cannot Be Inferred Solely on Circumstantial Evidence

One of the named Defendants was the General Manager of the Plaintiff's employer. This Defendant moved for summary judgment on the ground that there was no evidence that he had any knowledge of Plaintiff's complaints. The court granted dismissal of this Defendant because the Plaintiff failed to point to any substantive evidence supporting an inference that the General Manager knew of the protected activity. The court explained that causation cannot be inferred in regard to a decisionmaker's knowledge of the plaintiff's protected activity solely based on circumstantial evidence:

Retaliation cases must often be proven with "the cumulative weight of circumstantial evidence, since an employer who discriminates against its employee is unlikely to leave a well-marked trail, such as making a notation to that effect in the employee's personnel file." Carlton v. Mystic Transp., Inc. , 202 F.3d 129, 135 (2d Cir. 2000); see also Woodman v. WWOR-TV, Inc., 411 F.3d 69, 83 (2d Cir. 2005) (observing in a Title VII case that " ' [k]nowledge' is a fact often established—even in criminal cases where the prosecution's burden is beyond a reasonable doubt'simply through circumstantial evidence" (citations omitted)). In retaliation cases, however, "district courts have consistently held that, with regard to the causation prong of the prima facie standard, ' [a]bsent any evidence to support an inference that [the decisionmakers] knew of [p]laintiff[']s [protected activity], [p]laintiff cannot rely on circumstantial evidence of knowledge as evidence of causation.'" Murray v. Visiting Nurse Servs. of N.Y. , 528 F. Supp. 2d 257 (S.D.N.Y. 2007) (collecting cases); see also Gordon v. New York City Bd. of Educ. , 232 F.3d 111, 117 (2d Cir. 2000) (explaining that "the lack of knowledge on the part of particular individual agents is admissible as some evidence of a lack of a causal connection").

Leshinksy , supra, slip op. at 28.
Genberg v. Porter , No. 11-cv-2434 (D.Colo. Mar. 25, 2013)
(Order)
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PLAINTIFF DOES NOT EXHAUST ADMINISTRATIVE REMEDIES AS TO INDIVIDUALS NOT NAMED IN OSHA COMPLAINT

In Genberg v. Porter , No. 11-cv-2434 (D.Colo. Mar. 25, 2013), when the Plaintiff filed his SOX complaint with OSHA, he only named one individual as a Respondent. After the complaint was refiled in federal district court, the Plaintiff amended his complaint to name additional individuals as Defendants. The Defendants filed a motion to dismiss based on failure to exhaust administrative remedies against the individuals who had been named in the complaint filed with OSHA. The court noted that other non-controlling district court cases from different circuits supported the Defendants' argument. The court found that caselaw to be persuasive. The court explained:

OSHA is a United States administrative agency responsible for analyzing a large volume of workplace complaints. OSHA is not charged with the task of deducing from a complaint every possible respondent. To a large extent, the OSHA complainant frames the OSHA investigation by naming certain respondents. Genberg's OSHA complaint does not name any of the defendants named in this present action, except Porter. OSHA was not on notice that Genberg would name Redlich, Sperber, Bautista, Darnaud, Hoffman-Bray, and Gastone as defendants in a future action and therefore Genberg failed to exhaust administrative remedies as to these defendants. However, Genberg properly named Porter as a respondent in the OSHA complaint and therefore Genberg exhausted his administrative remedies as to Porter.

Slip op. at 15-15.
Wiest v. Lynch , __ F.3d __, No. 11-4257 (3d Cir. Mar. 19, 2013)
(Opinion of the Court)
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THIRD CIRCUIT OVERTURNS "DEFINITIVELY AND SPECIFICALLY" STANDARD FOR PROTECTED ACTIVITY; "REASONABLE BELIEF" TEST APPROPRIATE FOR DETERMINING IF COMPLAINANT ENGAGED IN PROTECTED ACTIVITY

In Wiest, et al. v. Lynch, et al. , No. 11-4257, 2013 WL 1111784 (3d Cir. Mar. 19, 2013 ), the Third Circuit Court of Appeals reversed the District Court's holding that a SOX whistleblower complainant must show that the whistleblower's internal complaint must " 'definitively and specifically' relate to one of the statutes or rules listed" in Section 806 in order for the communication to be considered "protected activity" under the first prong of establishing a prima facie case of retaliation. Instead, the Wiest court held that the complainant need only show that when making an internal complaint, the complainant had a subjectively and objectively reasonable belief that his employer's conduct constitutes a violation of an enumerated provision in Section 806.

Complainant Wiest brought an action under the whistleblower protection provisions of Section 806 of the Sarbanes-Oxley Act after he was terminated from his accounting department position with Tyco Electronics for allegedly refusing to approve certain corporate expenditures as business expenses. The District Court dismissed Complainant's complaint under Fed. R. Civ. P. 12(b)(6) because he failed to allege a prima facie case of discrimination. The District Court relied on the Administrative Review Board's holding in Platone v. FLYi, Inc. , ARB No. 04-154, ALJ No. 2003-SOX-27, 2006 WL 3246910 (ARB Sept. 29, 2006), and held that Complainant did not sufficiently allege that his communication to Tyco's directors "definitively and specifically" relate to a rule listed in Section 806. On appeal, the Third Circuit reversed the District Court's dismissal, in part, stating that the ARB's decision in Sylvester v. Parexel Int'l LLC , ARB No. 07-123, ALJ Nos. 2007-SOX-39 and 42, 2011 WL 2165854 (ARB May 25, 2011), which abandoned the "definitively and specifically" standard, was entitled to Chevron deference. The Third Circuit held that the "reasonable belief" test articulated by the ARB in Sylvester is the appropriate standard with which to analyze whether a complainant's communication constituted "protected activity."
Newman v. Metropolitan Life Ins. Co. , No. 12-10078 (D.Mass. Mar. 8, 2013)
(Memorandum and Order)
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Summary :
AMENDMENT OF COMPLAINT; DISTRICT COURT GRANTED PLAINTIFF LEAVE TO AMEND COMPLAINT TO ADD SOX WHISTLEBLOWER CLAIMS WHERE SHE HAD PREVIOUSLY FILED A SECTION 1514A COMPLAINT WITH OSHA AND HAD BEEN GRANTED "PERMISSION" TO BRING A DE NOVO ACTION IN DISTRICT COURT

In Newman v. Metro. Life Ins. Co., et al. , No 12-10078-DJC, 2013 WL 951779 (D. Mass Mar. 8, 2013), the Federal District Court dismissed in part Plaintiff's complaint alleging numerous violations of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132, et seq. ; the whistleblower provisions of Sarbanes-Oxley ("SOX"), 18 U.S.C. § 1514A; the whistleblower protections under the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"); and the Securities Exchange Act of 1934. Plaintiff, a former employee of Lehman Brothers, Inc. ("LBI"), alleged in her complaint that she was fired for reporting LBI's ERISA and SOX violations to the Department of Labor and the Securities and Exchange Commission.

Although the Newman court dismissed several of Plaintiff's claims on other grounds, it granted Plaintiff's motion for leave to amend the complaint to add additional SOX whistleblower claims and denied her motion to amend the complaint to add additional ERISA, Dodd-Frank, and Securities Exchange Act claims. The court granted Plaintiff's motion to add SOX whistleblower claims to her complaint because she previously filed a complaint with the Secretary of Labor pursuant to 18 U.S.C. § 1514A(b)(1)(A) and received permission to file a de novo action in Federal District Court. However, the Court did not allow Plaintiff to add her ERISA, Dodd-Frank, and Securities Exchange Act claims because she failed to provide a proposed amended complaint or articulate the basis for these additional claims.
Bechtel v. Administrative Review Bd., U.S. Dept. of Labor ,     F.3d     , No. 11-4918 (2d Cir. Mar. 5, 2013) (2013 WL 791334) (case below ARB No. 09-052, ALJ No. 2005-SOX-33)
(Opinion)
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SOX WHISTLEBLOWER PROVISION HAS A FOUR-PART BURDEN-SHIFTING FRAMEWORK; PURPOSE; KNOWLEDGE ELEMENT OF FRAMEWORK IS IMPLICIT ELEMENT AND MUST BE PROVED BY PREPONDERANCE OF EVIDENCE AT ALJ LEVEL OF PROCEEDING

In Bechtel v. Administrative Review Bd., U.S. Dept. of Labor ,     F.3d     , No. 11-4918 (2d Cir. Mar. 5, 2013) (2013 WL 791334) (case below ARB No. 09-052, ALJ No. 2005-SOX-33), the Second Circuit Court of Appeals clarified the burden-shifting framework applicable to whistleblower retaliation claims under the Sarbanes-Oxley Act (the "Act"), 18 U.S.C. § 1514A. The Court stated:

    Section 806 of the Sarbanes-Oxley Act, 15 U.S.C. § 1514A, seeks to combat what Congress identified as a corporate "culture, supported by law, that discourage[s] employees from reporting fraudulent behavior not only to the proper authorities, such as the FBI and the SEC, but even internally." S.Rep. No. 107--146, at 5 (2002). To accomplish this goal, § 1514A "protects 'employees when they take lawful acts to disclose information or otherwise assist . . . in detecting and stopping actions which they reasonably believe to be fraudulent.' " Guyden v. Aetna, Inc., 544 F.3d 376, 383 (2d Cir.2008) (quoting S.Rep. No. 107-146, at 19). Specifically, § 1514A makes it unlawful for publicly traded companies to "discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee ... to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of" certain laws, rules, and regulations addressing various types of fraud. 18 U.S.C. § 1514A(a)(1).

Bechtel, supra , slip op. at 5 (footnote omitted).

The court quoted the relevant portions of the SOX and the implementing regulations, and summarized the elements and burdens of proof as explained by sister Courts of Appeals:

"To prevail under [ § 1514A ], an employee must prove by a preponderance of the evidence that (1) she engaged in protected activity; (2) the employer knew that she engaged in the protected activity; (3) she suffered an unfavorable personnel action; and (4) the protected activity was a contributing factor in the unfavorable action. If the employee establishe[s] these four elements, the employer may avoid liability if it can prove 'by clear and convincing evidence' that it 'would have taken the same unfavorable personnel action in the absence of that protected behavior.' "

Harp v. Charter Commc'ns, Inc., 558 F.3d 722, 723 (7th Cir.2009) (alterations omitted) (quoting Allen v. Admin. Review Bd., 514 F.3d 468, 475-76 (5th Cir.2008), in turn quoting 49 U.S.C. § 42121(b)(2)(B)(iv)). We agree that this framework is established by the relevant regulations and is consistent with the statute. See 49 U.S.C. § 42121(b)(2)(B)(iii), (iv); 29 C.F.R. § 1980.109(a), (b).

Bechtel, supra , slip op. at 7 (footnote omitted). In a footnote, the Court observed that the employer's knowledge element of the four-part framework is not expressly stated in the statute or regulations, but that it agreed with sister circuits that

. . . the same basic four-part framework of the complainant's prima facie case applies not only when deciding whether the allegations are legally sufficient, see id. § 1980.104(e)(2), but also when an ALJ considers whether the complainant has satisfied his or her evidentiary burden under 49 U.S .C. § 42121(b)(2)(B)(iii). See Harp, 558 F.3d at 723 (citing 29 C.F.R. § 1980.104(b)(1)); Allen, 514 F.3d at 476 (same). As other circuits and the ARB have noted, however, at the evidentiary stage, the fourth element requires the complainant to prove by a preponderance of the evidence that the "protected activity was a contributing factor in the adverse action," 29 C.F.R. § 1980.109(a), and not merely show that "[t]he circumstances were sufficient to raise the inference that the protected activity was a contributing factor in the adverse action," 29 C.F.R. § 1980.104(e)(2). See Harp, 558 F.3d at 723; Allen, 514 F.3d at 476; Bechtel v. Competitive Technologies, Inc., ARB Case No. 06-010, 2008 WL 7853800, at *4 (ARB Mar. 26, 2008).

Bechtel, supra , slip op. at n.5.

ALJ'S LEGAL ERROR ITSELF IS NOT GROUNDS FOR REVERSING ARB DECISION AFFIRMING ALJ'S DETERMINATION WHERE ARB APPLIES CORRECT LEGAL STANDARD; THE APA HAS THE SAME TYPE OF HARMLESS ERROR RULE AS COURTS APPLY IN CIVIL CASES

In Bechtel v. Administrative Review Bd., U.S. Dept. of Labor ,     F.3d     , No. 11-4918 (2d Cir. Mar. 5, 2013) (2013 WL 791334) (case below ARB No. 09-052, ALJ No. 2005-SOX-33), the ALJ had in a decision on remand from the ARB, although initially correctly reciting the correct legal framework for evaluating a claim under the Sarbanes-Oxley Act, 18 U.S.C. § 1514A, gone on to elaborate in a manner that suggested that the ALJ erroneously believed that, in addition to the framework specified by the statute and regulations, there existed a second burden-shifting system that applied when the complainant failed to prove a prima facie case by a preponderance of the evidence. On appeal, the Complainant's central argument was that, even after the ARB remanded the case, the ALJ persisted in applying an erroneous legal standard, and that for this reason, the ARB's second and final decision, affirming the ALJ's determination, ought to be reversed. The Court of Appeals found that the ALJ's misstatement of the legal framework for analyzing a SOX whistleblower claim was beside the point because the ARB recognized that error and explained why it did not affect the outcome of the case. The court found that the ARB had concluded, relying on the evidentiary findings of the ALJ, that the Complainant had failed to prove by a preponderance of the evidence that his protected activity was a contributing factor in the adverse employment action. The court found that the failure to prove this element was a sufficient reason to rule against the claim, and the ALJ's legal error with respect to an additional aspect of his claim was immaterial. The court stated that there was no need for the ARB to remand a second time to the ALJ when the correct outcome was clear, and noted that the Administrative Procedure Act has the same kind of harmless-error rule that courts apply in civil cases.

OFFICIAL NOTICE; ARB NOT REQUIRED TO TAKE OFFICIAL NOTICE OF ALLEGATIONS RELATING TO CHARACTER AND CREBILITY IN A SEPARATE CASE

In Bechtel v. Administrative Review Bd., U.S. Dept. of Labor ,     F.3d     , No. 11-4918 (2d Cir. Mar. 5, 2013) (2013 WL 791334) (case below ARB No. 09-052, ALJ No. 2005-SOX-33), the Complainant argued that the ARB should have taken official notice of a proceeding concerning the Respondent and John Nano (the Respondent's president and CEO) in the United States District Court for the District of Connecticut. See 29 C.F.R. § 18.201 (governing official notice of adjudicative facts). The Court of Appeals found "no abuse of discretion in the ARB's decision not to take judicial notice of allegations relating to John Nano's character and credibility in a separate case. See 29 C.F.R. § 18.201(b); cf. Int'l Star Class Yacht Racing Ass'n v. Tommy Hilfiger U.S.A., Inc., 146 F.3d 66, 70-71 (2d Cir.1998) (testimony from another case regarding facts that are not common knowledge or derived from an unimpeachable source is not properly subject to judicial notice). In short, we conclude that the ARB's decision with respect to these issues was not 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.' 5 U.S.C. § 706(2)(A)." Bechtel, supra , slip op. at 12 (footnote omitted).

Surface Transportation Assistance Act

Oak Harbor Freight Lines, Inc. , No. 13-cv-1100 (D.Or. Dec. 13, 2013)
(Opinion & Order)
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[STAA Whistleblower Digest XIII B]
EMPLOYER'S SUIT SEEKING ORDER REQUIRING DOL TO DECLARE ITS ATTENDANCE POLICY NOT TO VIOLATE DOT REGULATIONS OR THE STAA DISMISSED WHERE DOL HAD NOT YET RENDERED A FINAL, REVIEWABLE DECISION; EXHAUSTION OF ADMINISTRATIVE REMEDIES REQUIRED; OSHA'S FAILURE TO ISSUE FINDING OR AN ORDER WITHIN 60 DAYS DOES NOT CREATE DISTRICT COURT JURISDICTION

In Oak Harbor Freight Lines, Inc. v. Harris , No. 13-cv-1100 (D.Or. Dec. 13, 2013), the Plaintiff, a service carrier, sought a declaration from the Acting Secretary of Labor that its attendance policy was not in violation of the DOT regulation at 49 C.F.R. § 392.3 or the STAA whistleblower provision at 49 U.S.C. § 31105. Three drivers had filed complaints under the STAA with OSHA stating that they had been retaliated against by the Plaintiff for refusing to drive when too sick to drive. An OSHA investigator proposed settlements, and according to the Plaintiff threatened that if the Plaintiff did not settle, she would recommend to her supervisor that there was sufficient evidence to show a violation of the STAA. At one point, the investigator proposed a settlement that included $10,000 in punitive damages, and warned that if the settlement was not promptly made, OSHA would increase the punitive damages, which could reach up to $250,000. In its federal district court complaint, the Plaintiff argued that its attendance policy did not retaliate against drivers for not driving on days that they are too fatigued or sick to drive, but rather provide drivers an opportunity to perform non-driving tasks and earn a regular wage on those days. Drivers who merely call in sick and do not report to work, however, are subject to progressive disciplinary action. The Plaintiff argued that such an attendance policy does not violate 49 C.F.R. § 392.3 or the STAA whistleblower provision at 49 U.S.C. § 31105.

The Defendant, the Acting Secretary of Labor, argued that the Plaintiff's complaint must be dismissed because (1) Section 31105 requires the Plaintiff to channel its challenges to the Secretary's actions through the administrative review process and to a court of appeals, and not a district court; (2) the Plaintiffs claims are not reviewable under the APA; and (3) the Plaintiff's claims are not ripe.

The Plaintiff argued that OSHA blocked review under the STAA by not timely issuing a preliminary order. The court noted the STAA's detailed procedures for how whistleblower complaints are processed, and found that the facts of the case simply show that the Secretary had not yet made any findings or orders subject to administrative or judicial review under the STAA. The court stated: "By prematurely seeking a declaration by this Court stating that Plaintiff's attendance policy is lawful and that Plaintiff did not unlawfully retaliate against employees, Plaintiff attempts to evade the carefully crafted grievance process articulated by the STAA. Plaintiff's pre-enforcement action, based solely on the Secretary's settlement offers, Plaintiff's anticipation of adverse findings or orders by the Secretary, and the Secretary's decision to not issue any findings or orders at this time, simply do not establish that Plaintiff's avenue for administrative or judicial redress has been 'blocked.'" Slip op. at 11.

The court rejected the Plaintiff's argument that the district court could review its claims because they are "collateral" to the STAA and lie outside OSHA's expertise. The court stated that "Contrary to Plaintiff's bald assertions, whether Plaintiff's attendance policy is lawful and whether the disciplinary actions Plaintiff took against [the three drivers] violated § 392.3 and § 31105 are the type of disputes that fall squarely within OSHA's expertise and the STAA's provisions." Slip op. at 12 (citations omitted). The court found that the STAA's silence about pre-enforcement challenges such as those brought by the Plaintiff only supported the conclusion that Congress did not intend the district court to have jurisdiction over the Plaintiff's claims. The court further found that the Plaintiff had not adequately explained why its claims cannot be meaningfully addressed in administrative proceedings or by a court of appeals. The court found nothing in the STAA or the legislative history indicating that Congress intended to provide district court jurisdiction if the Secretary failed to issue findings or a preliminary order within 60 days after the filing of the complaint.

The Plaintiff responded to the Defendant's failure-to-exhaust-administrative-remedies motion by arguing that failure to exhaust should be excused because it has suffered irreparable harm and because OSHA made it impossible to exhaust its administrative remedies by not issuing a preliminary order. The court rejected the Plaintiff's response, again finding no evidence that OSHA had blocked the Plaintiff from pursuing administrative or judicial review under the STAA, and finding that simply alleging irreparable harm was not supported by any authority as a ground for circumventing the specific review process laid out in the STAA. The Plaintiff asserted that its claims are reviewable under the APA because OSHA's actions amounted to de facto unpublished interpretations of the DOT and STAA regulations, and the STAA. The court found the Plaintiff's assertion without merit; no final agency action had occurred. The court moreover found no allegation by the Plaintiff showing that its claims were ripe for review.
Koch Foods, Inc. v. USDOL , __ F.3d__, No. 11-14850 (11th Cir. Mar. 11, 2013) (case below ARB No. 10-001, ALJ No. 2008-STA-61)
(Opinion)
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Summary :
[STAA Digest V A 3]
REFUSAL TO DRIVE PROVISION AT 49 U.S.C. § 31105(a)(1)(B)(i) IS TRIGGERED ONLY WHEN OPERATION OF THE MOTOR VEHICLE WOULD RESULT IN AN ACTUAL VIOLATION OF LAW

In Koch Foods, Inc. v. USDOL , __ F.3d__, No. 11-14850 (11th Cir. Mar. 11, 2013) (case below ARB No 10-001, ALJ No. 2008-STA-61), the court addressed the issue of whether protection under 49 U.S.C. § 31105(a)(1)(B)(i) is "triggered only when operation of the motor vehicle would result in an actual violation of law? Or may the ARB interpret the provision to cover circumstances in which a driver reasonably but incorrectly believes that operation would result in a legal violation?" Slip op. at 2 (emphasis as in original). The court stated: "After reviewing the plain language of the provision and its statutory context, as well as the relevant statutory history, we hold that the phrase 'refuses to operate a vehicle because . . . the operation violates a regulation, standard, or order, ' as used in 49 U.S.C. § 31105(a)(1)(B)(i), refers only to circumstances in which operation would result in an actual violation of law." Id. at 3 (emphasis as in original).