Whistleblower Protection Blog : Whistleblower Lawyer & Attorney : National Whistleblower Legal Defense and Education Fund : Whistleblower Protection, Fraud Claims : Washington DC

Today, the U.S. Department of Labor issued a summary of the September 2012 decisions of its Administrative Review Board (ARB).  The twelve decisions issued in September cover important procedural issues involving the time limits for filing complaints and petitions for review to the ARB, considering motions for summary decision, and approving settlement agreements. Read more about these decision in the continuation of this blog post.

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This morning, the U.S. Supreme Court issued an order inviting the Solicitor General of the United States to file a brief "expressing the views of the United States" in Lawson v. FMR.  This is a good sign that the Supreme Court is interested in the case, and could accept the case if the Solicitor General explains that Supreme Court review would be beneficial.  As the First Circuit decision was terrible for whistleblowers, today's order is a welcome sign.

Stephen Kohn, Executive Director of the National Whistleblowers Center (NWC) and I filed the only amicus brief to the Supreme Court in this case.  Before the First Circuit, however, the Solicitor of Labor and the Securities and Exchange Commission (SEC) both filed amicus briefs urging the First Circuit to find that the Sarbanes Oxley Act (SOX) did cover employees, like Jackie Lawson and Jonathan Zang, who work for contractors of publicly traded companies. After the First Circuit panel majority rejected these arguments, the Department of Labor's Administrative Review Board issued a blistering decision reaffirming how SOX must cover the employees of contractors. Now, the Solicitor General can just copy from any of these amicus briefs, or the ARB's decision in Spinner, to make an excellent argument about why the public interest depends on the Supreme Court accepting the Lawson case for review.

There is no time limit on the Solicitor General to submit this brief, but where the ARB, the Solicitor of Labor, and the SEC are all in agreement, hopefully it will not take long for the Solicitor General to file this brief.  Then the Supreme Court will have another opportunity to review this case.

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My client, Doug Evans, just won a remand from the Department of Labor's Administrative Review Board (ARB). In a rare en banc decision, all five ARB judges joined in holding that Iqbal and Twombly do not apply to OSHA whistleblower complaints. Thus, the ARB's 2010 decision in Evans' case is finally overruled.  The ARB also made clear that Evans' decision to initiate the OSHA process is itself protected, and his employer cannot retaliate against him for having commenced his original whistleblower complaint.

Douglas Evans (left in photo, with me) was an employee of the U.S. Environmental Protection Agency (EPA) in Las Vegas, Nevada, for 17 years. He was a technician who repaired equipment. EPA managers in Las Vegas were under pressure to get a high rate of their employees to “volunteer” for emergency response work. Evans recalls getting an order to participate. He wrote a letter to the EPA Administrator, and his supervisors never forgave him for it. Evans' letter complained about the lack of training for the emergency response work, and about other aspects of the plan. I recognized that a concern about lack of training for emergency response work is an environmental concern. I filed Evans' complaint with OSHA under the federal environmental laws. Shortly thereafter, Evans' bosses fired him on trumped up charges. I filed a supplemental complaint against the discharge. OSHA dismissed. I requested a hearing before an Administrative Law Judge (ALJ). I asked for discovery from EPA. EPA made a motion to dismiss, and to stay discovery while its motion is pending. I opposed the motion to dismiss, citing the DOL's rule that there is “no particular form of complaint.” I also provided statements from Evans' co-workers supporting his complaint, and explained how the discharge in retaliation for his first OSHA complaint is certainly protected. Still, the ALJ dismissed the case, and in 2010 the ARB has affirmed. Evans petitioned for review to the U.S. Court of Appeals for the Ninth Circuit.  During that review, the ARB issued its landmark decision in Sylvester v. Parexel International, ARB Case No. 07-123 (ARB May 25, 2011), Evans had submitted an amicus brief in the Sylvester case, explaining how the Iqbal standard had been so harmful to his whistleblower case. The Solicitor of Labor agreed that Evans' case should be returned to the ARB for reconsideration, and the Ninth Circuit agreed. Back at the ARB, the Solicitor of Labor filed a brief in support of Evans. Now we finally have the ARB's reconsideration.

Judge Brown's dissent makes some important points for whistleblowers and practitioners who face motions to dismiss before an Administrative Law Judge (ALJ). He notes that the majority's discussion of how ALJ's can handle motions to dismiss is "but dicta." Page 19. He finds that the majority "cites neither statutory nor regulatory authority prescribe new procedures by which ALJs are now to resolve motions seeking dismissal of whistleblower retaliation complaints for failure to state a claim for relief." Page 20.  Thus, whistleblowers and their lawyers can cite to this concurring and dissenting opinion in response to any motion to dismiss, and preserve an issue for which the Department of Labor will be poorly equipped to refute on further review.

Judge Corchado explains what he will be looking for in reviewing complaints.  To allege protected activity, he wants Evans to allege "facts about what activities his co-workers might be expected to do and why Evans believed that such acts would violate one or more of the environmental laws." Page 18. "Not much is required," he adds on page 19. It is a lesson about the importance of making clear exactly what is the whistleblower's protected activity.

The case is Evans v. United States Environmental Protection Agency, ARB No. 08-059, ALJ No. 2008-CAA-3 (ARB July 31, 2012), Decision and Order of Remand.

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Tune in tomorrow at 1:00pm EDT to Honesty Without Fear on Progressive Radio Network.
  
In the first half hour, Jane Turner interviews whistleblower Justin Hopson about his recently released book Breaking the Blue Wall: One Man's War Against Police Corruption. During his first days as a New Jersey State Trooper, Mr. Hopson witnessed an unlawful arrest and false report made by his training officer. When he refused to testify in support of the illegal arrest, he suffered severe harassment from a secret society within the State Police know as the "Lords of Discipline." For decades, The Lords' mission was to keep troopers in line. Mr. Hopson stood up to decades of silencing and sparked the largest internal investigation in State Police history. Listen to Jane and Mr. Hopson discuss his journey as a whistleblower.

In the second half hour, Richard Renner discusses a sweeping new pro-whistleblower decision by the Department of Labor with attorney Daniel Corey of the Sensible Law Institute. Attorney Corey represents Thomas Spinner who was fired for blowing the whistle on internal control problems at New York City's largest owner of office buildings, SL Green. The question in Mr. Spinner's case was whether the Sarbanes-Oxley Act (SOX) would protect him because he was fired by one of SL Green's contractors – not by SL Green. On May 31, 2012, the Department of Labor's Administrative Review Board (ARB) explicitly rejected the holding of the First Circuit in Lawson v. FMR, LLC and held that SOX does in fact protect the employees of contractors. Tune in to hear how this will affect workers in the future.

Submit Your Question to be asked on air during the show or call in to 1-888-874-4888.

Missed last week's episode?? You can listen to the podcast.

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Today, attorney Stephen Kohn (Executive Director of the National Whistleblowers Center) and I are filing an amicus brief with the U.S. Department of Labor's Administrative Review Board (ARB). The brief urges the ARB to affirm a decision of an Administrative Law Judge (ALJ) in favor of Christopher Bala, a signalman for the PATH railway that carries commuters between New Jersey and New York City. As one of the first cases the ARB will address under the 2008 amendments to the Federal Rail Safety Act (FRSA), this case could set the tone for railroad workers cases for years to come.

Christopher Bala suffered a back injury at home in June 2008. His doctor ordered him to rest and refrain from work through the end of the next month. PATH's doctor agreed that he should not work. Still, his supervisor decided to launch a disciplinary hearing against him for violating PATH's absenteeism policy. In October 2008, Congress amended the FRSA to protect rail workers when they follow their medical treatment plans. The 2007 version of the FRSA already protected rail workers who raise concerns about safety or refuse to perform duties they reasonably believe are unsafe. Notwithstanding the change in the law, PATH proceeded with the disciplinary hearing against Bala. PATH eventually found him guilty of absenteeism and imposed a suspension. Bala complained to OSHA which ruled in his favor. PATH requested a hearing, and the ALJ again found that PATH violated the FRSA by imposing discipline on Bala. The ALJ held that the FRSA protects rail workers when they follow medical treatment plans for injuries that occurred on or off the job.

On appeal to the ARB, PATH has argued that the FRSA was only meant to encourage workers to report on-the-job injuries. PATH ignores portions of the congressional record showing that Congress wanted to reduce the number of rail accidents. PATH is asking the ARB to adopt an interpretation of the FRSA that would add a limitation that is not in the words Congress used. PATH is also asking to be exempt from the FRSA in cases where the disciplinary process was started before the effective date of the 2008 amendments to the FRSA. The Association of American Railroads (AAR), submitted its own amicus brief supporting PATH. It argued, without supporting data, that the ALJ's holding would impose costs on railroads, and go against the holdings of arbitrators and courts applying other laws.

The NWC amicus focuses on the plain language of the FRSA which explicitly protects railroad workers when they are following medical treatment plans. The brief reviews the legislative history behind the FRSA and shows that members of Congress wanted to save lives by reducing accidents. The brief explains how the FRSA fulfills the safety purpose by preventing management from pressuring workers to work when their medical condition could make them impaired. The brief sets out how similar laws for truck drivers (STAA) and airline workers (AIR21) protect them when they refuse to work due to medical impairments. The NWC amicus challenges the AAR's claims about costs, and the holdings of courts under other laws. It challenges the PATH brief for arguing that it should be allowed to continue its discipline of Bala even after the FRSA was amended to make that discipline unlawful.

I am particularly pleased to submit this amicus brief in one of the first cases under the new FRSA. Corporate fraud whistleblowers suffered for years when the ARB's initial decisions under the 2002 Sarbanes-Oxley Act (SOX) required a high standard for whistleblowers to win. The ARB finally abated that problem in last year's Sylvester case. With a good decision for Bala, rail workers may find the protection they need to avoid untold future accidents.  For that, we will all be safer.

Available here are:

• PATH's brief against Bala
• AAR's amicus brief against Bala
• Bala's brief
• NWC's amicus brief in support of Bala
• Solicitor of Labor's amicus brief in support of Bala

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Yesterday, the National Whistleblowers Center filed an amicus, or friend of the court, brief with the U.S. Court of Appeals for the Third Circuit in its case of Wiest v. Lynch, Case No. 11-4257. The main issue is whether the Court should adopt the ARB's broad "reasonable belief" standard for determining protection activity, or whether it should affirm the district court's narrow "definitively and specifically" standard. The brief also argues that Wiest's internal complaints should be protected under SOX's participation clause, and that he had no duty to inform management about the basis for his reasonable belief.  The Third Circuit adopted a similar broad scope of protection under the Clean Water Act in Passaic Valley Sewerage Comm. v. U.S. Department of Labor, 992 F.2d 474, 478-79 (3rd Cir. 1993). Hopefully, it will do the same for the Sarbanes Oxley Act (SOX).  This should be easier after the ARB issued its good decision in its Sylvester case.

Stephen M. Kohn, Executive Director of the National Whistleblowers Center (NWC) is the lead attorney for the brief.

UPDATE: The Third Circuit has scheduled oral argument in this case for the morning of September 25, 2012, in Philadelphia, Pennsylvania.  Available here are:

July 21, 2011, district court order of dismissal

November 15, 20122, district court order denying reconsideration

January 25, 2012, brief of appellant

February 15, 2012, NWC amicus brief

April 23, 2012, brief of appellees

April 30, 2012, Chamber of Commerce amicus brief

May 7, 2012, reply brief of appellant

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By a 3-2 vote on a major case, the Department of Labor's Administrative Review Board (ARB) has limited the application of the Sarbanes-Oxley Act (SOX) whistleblower protection outside the boundaries of the United States. The case is Villanueva v. Core Laboratories, NV, ARB No. 09-108, ALJ No. 2009-SOX-6 (ARB Dec. 22, 2011) (en banc).  The decision is particularly disappointing after the ARB had called for supplemental briefing. Stakeholders on both sides, including the National Whsitleblowers, submitted amicus briefs setting out the applicable caselaw, legislative history, and contextual effects of this important legal issue.  Unlike prior decisions that summarily dismissed any extraterritorial application of SOX's whistleblower protection (such as the Canero and Ede), this time the ARB had full briefing of the relevant considerations and the majority still resists protecting whistleblowers from other countries.

Last August, I posted to this blog a description of the Villanueva case and the amicus brief submitted by NWC and the National Employment Lawyers Association (NELA). The brief argues that SOX should protect tax whistleblower William Villanueva, even though he worked for Core Lab's subsidiary in Columbia. Core Laboratories NV is a publicly traded company based in Houston, Texas. It provides services to the petroleum industry. For 16 years, William Villanueva worked as CEO of Saybolt Columbia, Core's subsidiary. On page 3, the ARB noted that "Saybolt Colombia does not register securities under Section 12 or file reports [with the SEC]." This fact became immaterial after the ARB's well-considered decision in Johnson v. Siemens Building Technologies, ARB No. 08-032, ALJ No. 2005-SOX-0151 (ARB March 31, 2011). In Johnson, the ARB held that SOX has always protected the employees of subsidiaries of publicly traded companies.

In 2008, Villanueva sent emails to corporate executives in Houston reporting how other company executives were engaged in tax transfer schemes that falsely transferred profits to low-tax Curacao, an island in the Caribbean Sea. He also reported that Core Labs accountants in Columbia were making false claims to evade the Columbian value added tax (VAT). After Villanueva refused to sign a false tax return, Core fired him.

Villanueva filed a complaint with the Department of Labor (DOL) claiming that he was fired in retaliation for raising his concerns. He claimed that his discharge violated the 2002 SOX law. An administrative law judge (ALJ) dismissed the case without a hearing on grounds that Villanueva worked outside the U.S. Villanueva appealed to the ARB. Earlier this Summer, the ARB asked for amicus briefs on the effect of the U.S. Supreme Court's decision in Morrison v. National Australia Bank, 130 S. Ct. 2869 (2010).

On page 5, the Villanueva majority notes that the president of Saybolt Latin America (an intermediate Core subsidiary) fired Villanueva in a letter "written in Spanish[.]" While reading this phrase, I had the sense that the ARB majority was motivated not so much by the remedial purpose of SOX as by the administrative inconvenience of helping whistleblowers from different cultures. On page 29, Judge E. Cooper Brown noted the majority's concern, on page 10, about how its decisions could be enforced extraterritorially. Certainly I would agree that the Department of Labor (DOL) ALJs are overworked. To me, however, the solution should not be to limit DOL services to whistleblowers in this country, but rather to explain how the remedial purpose of SOX requires protection of whistleblowers throughout the world, and then ask Congress to authorize the hiring of the necessary ALJs and enforcement attorneys.

Earlier this week, I submitted comments to DOL's new rules for SOX cases that reflect the changes enacted in the Dodd-Frank Act.  On pages 5-6, I urged the DOL to adopted a new rule that makes clear that SOX has the same extraterritorial reach as the SEC's enforcement authority. It makes no sense that U.S. securities law would require publicly traded companies to file reports that accurately reflect the state of the entire business -- including foreign operations -- and then deny protection to employees operating within those foreign operations who raise concerns about the propriety of company operations and reports. Hopefully, DOL leadership will see this wisdom and correct this policy in their final SOX regulations.

In the continuation of this blog entry, I discuss the majority opinion's reasoning and the insights of the two dissents.  I also provide a tip for SOX practitioners with extraterritorial issues.

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The National Whistleblowers Center (NWC) and the National Employment Lawyers Association (NELA) filed an amicus brief this week in Villanueva v. Core Laboratories NV, a case pending at the U.S. Department of Labor's Administrative Review Board (ARB). The brief argues that SOX should protect whistleblower William Villanueva, even though he worked for Core's subsidiary in Columbia.

Core Laboratories NV is a publicly traded company based in Houston, Texas.  It provides services to the petroleum industry. For 16 years, William Villanueva worked as CEO of Saybolt Columbia, Core's subsidiary.

In 2008, Villanueva sent emails to corporate executives in Houston reporting how other company executives were engaged in tax transfer schemes that falsely transferred profits to low-tax Curacao, an island in the Caribbean Sea. He also reported that Core accountants in Columbia were making false claims to evade the Columbian value added tax (VAT). After Villanueva refused to sign a false tax return, Core fired him.

Villanueva file a complaint with the Department of Labor (DOL) claiming that he was fired in retaliation for raising his concerns. He claimed that his discharge violated the 2002 Sarbanes-Oxley Act (SOX). An administrative law judge (ALJ) granted Core's motion to dismiss on grounds that Villanueva worked outside the U.S. Villanueva appealed to the ARB.  Earlier this Summer, the ARB asked for amicus briefs on whether SOX can apply to the employees of off-shore subsidiaries. It also asked for discussion about the effect of the U.S. Supreme Court's decision in Morrison v. National Australia Bank, 130 S. Ct. 2869 (2010).

Our amicus brief argues that Villanueva's case does not raise issues of extraterritorial application of SOX since his protected activity consisted of emails sent to the U.S., and the decision to fire him was made in the U.S. In the alternative, it argues that the very nature of SOX (enacted after Enron and other companies abused off-shore subsidiaries to defraud shareholders) requires that SOX apply to all subsidiaries of companies traded in the U.S. stock markets. This argument builds on the ARB's decision in Johnson v. Siemens Building Technologies, ARB No. 08-032, ALJ No. 2005-SOX-0151 (ARB March 31, 2011). In Johnson, the ARB held that SOX has always protected the employees of subsidiaries of publicly traded companies.

Many thanks go to R. Scott Oswald and Nicholas Woodfield of The Employment Law Group for leading the research and writing for this brief, and also to Rebecca Hamburg of NELA for working with the team that includes Stephen M. Kohn and myself of NWC. This brief will hopefully assist the ARB in expanding SOX's coverage so that it can be effective in protecting our stock markets from frauds committed anywhere in the world. In the meantime, it would be wise for whistleblowers with extraterritoriality issues to preserve their claims until the ARB issues its decision here.

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On May 25, 2011, the Department of Labor's Administrative Review Board (ARB) issued a major decision in favor of whistleblowers. In Sylvester v. Parexel International, ARB Case No. 07-123 (ARB May 25, 2011), the ARB held that a whistleblower only needs a "reasonable belief" of a violation to engage in protected activity under the 2002 Sarbanes-Oxley Act (SOX). The ARB makes clear that a whistleblower does not have to wait for a violation to actually happen, and need not inform management of the basis of that reasonable belief. Indeed, since SOX prohibits companies from violating rules of the Securities and Exchange Commission (SEC), a whistleblower can have a reasonable belief about a violation that has nothing to do with any fraud against shareholders. The ARB also rejects the idea that a SOX violation has to be "material" to form the basis of a whistleblower's "reasonable belief." The ARB has also freed whistleblowers of the unnecessary hurdle of "pleading" their claims under the high "Iqbal" standard.

The Sylvester decision is a significant departure from the decision of the prior administration. All those decisions that required protected activity to "definitively and specifically" implicate a violation of law are now out-of-date. Indeed, in separate concurring opinions, three of the four ARB judges specifically rejected the "definitively and specifically" standard since it is not in the statute.

When considered together with Brown v. Lockheed Martin Corp, ARB No. 10-050, ALJ No. 2008-SOX-49 (ARB Feb. 28, 2011) (no fraud against shareholders need be shown), and Johnson v. Siemens Building Technologies, Inc., ARB Case No. 08-032 (ARB Mar. 31, 2011) (SOX covers the employees of subsidiaries), the Sylvester decision marks a decided turn in favor of recognizing whistleblowers as servants of the public purpose and deserving of strong protection. The ARB is clearing away the hurdles that made SOX so difficult for whistleblowers during its first eight years.

Pictured above are Stephen M. Kohn, Kathy Sylvester and her attorney E. Patrick McDermott. Stephen Kohn co-wrote amicus briefs with me on behalf of the National Whistleblowers Center and Douglas Evans. Congratulations to Kathy Sylvester, her co-complainant Theresa Neuschafer, and their attorney, Patrick McDermott of Annopolis, Maryland. They have helped breath new life into SOX on behalf of future generations of whistleblowers.

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The U.S. Department of Labor's Administrative Review Board (ARB) (shown in a file photo) yesterday decided that the 2002 Sarbanes-Oxley Act (SOX) protects the employees of subsidiaries of publicly traded companies. The case is Carri Johnson v. Siemens Building Technologies, Inc., ARB Case No. 08-032 (ARB Mar. 31, 2011). This is the first case in which the Obama Era ARB requested amicus briefs. The prior administration had held that SOX would not protect employees of a subsidiary unless the employee could show that the subsidiary was acting as an agent of the publicly traded parent company. The National Whistleblowers Center (NWC) joined with the National Employment Lawyers Association (NELA) and the Government Accountability Project (GAP) to to submit an amicus brief as requested by the ARB. In the meantime, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 929A of Dodd-Frank amended SOX to make coverage of subsidiaries clear. NWC submitted a supplemental brief. The ARB's majority opinion, however, would not give direct effect to the Senate Report's declaration that Section 929A was a clarification rather than an amendment. (S. Rep. 111-176, p. 11, stated, "This clarification would eliminate a defense now raised in a substantial number of actions brought by whistleblowers under the statute.") Instead, the ARB finds that Section 929A is a reasonable interpretation of the 2002 SOX language, and consistent with its remedial purpose.

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