by Stephen Kohn
Michael Volkov, Redefining the Relationship of the General Counsel and Chief Compliance Officer, p. 8. Rand Center for Corporate Ethics and Governance (May 28, 2014); available at www.rand.org/jie/centers/corporate-ethics/pubs.html (comprehensive article supporting a narrow interpretation of the privilege in compliance investigations).
The Chairman of the Senate Judiciary Committee provided strong testimony opposing efforts to require employees to communicate with corporate compliance programs, and pointed out the conflicts of interest in these proposals; “Statement for the Record by Senator Chuck Grassley of Iowa, Chairman, Senate Judiciary Committee At a House Judiciary Subcommittee on the constitution and Civil Justice Hearing on ‘Oversight of the False Claims Act’ April 28, 2016.”
Rule 19: Auditors and Compliance Officials: Qualify for Rewards
Stephen Kohn, “The SEC’s Final Whistleblower Rules and Their Impact on Internal Compliance.” West Law Publishing (October 2011) (rights of compliance officials to blow the whistle).
Cases discussing whether compliance officials/auditors/attorneys are covered under antiretaliation laws: Brown & Root v. Donovan, 747 F2d 1029 (5th Cir. 1984); auditor not protected, but the case was reversed in Willy v. ARB, 423 F.3d 483 (5th Cir.) (an attorney protected in Willy); Kansas Gas & Elec. v. Brock, 780 F.2d 1505 (10th Cir. 1985) (quality assurance inspector protected); Mackowiak v. University Nuclear, 735 F.2d 1159 (9th Cir. 1984) (inspector protected); Van Asdale v. International Game Tech., 577 F.3d 989 (9th Cir.) (attorney protected).
SEC Press Release 2014-180 (August 29, 2014) (first compliance official obtains monetary reward).
SEC Press Release 2015-73 (April 22, 2015) (compliance official awarded $1.5 million); www.sec.gov/news/pressrelease/2015-73.html.
Requirement that publicly traded companies have a program to accept confidential employee concerns regarding questionable accounting and auditing practices is codified at 15 U.S.C. § 78j-1(m); 17 C.F.R. § 2400.10A-3.
Speech by Chairman Mary L. Schapiro, U.S. Securities and Exchange Commission, Washington, DC (May 25, 2011); www.sec.gov/news/speech/2011/spch052511mls-item2.htm (SEC whistleblower program).
The pressures facing auditors was outlined by the Institute of Internal Auditors in “Political Pressure Intense on Internal Audit” (March 10, 2015), news release announcing the release of the IIA Research Foundation report The Politics of Internal Auditing.
Rule 20: Cautiously Use “Self-Help” Tactics
Argyropoulos v. City of Alton, 539 F.3d 724 (7th Cir. 2008) (warning that anti-retaliation laws do not grant employees right to engage in “dubious self-help tactics”).
Jefferies v. Harris County Community Action, 615 F.2d 1025 (5th Cir. 1980) (setting forth the “reasonableness test” for self-help tactics). See also Hochstadt v. Worcester Foundation, 545 F.2d 222 (1st Cir. 1976); Wrighten v. Metropolitan Hospital, 726 F.2d 1346 (9th Cir. 1984) (setting forth “balancing test”).
Taping: Lopez v. U.S., 373 U.S. 427 (1963) (Supreme Court permits one-party taping); Omnibus Crime Control Act, 18 U.S.C. § 2511(2)(d) (federal law permitting one-party taping); Reporters Committee for Freedom of the Press, (online publication) (state-by-state review of one-party taping laws); Heller v. Champion International, 891 F.2d 432 (2nd Cir. 1989) (one-party taping permitted for gathering evidence of discrimination).
Cases finding one-party taping potentially protected: Haney v. North American Car, 81-SWDA-1 (ALJ Order, Aug. 10, 1981), affirmed by Secretary of Labor (June 30, 1982); Mosbaugh v. Georgia Power Co., 91-ERA-1/11 (Order of Secretary of Labor) (Nov. 20, 1995); Melendez v. Exxon, 93-ERA-6 (DOL ARB, July 14, 2000) (one-party taping protected activity); Deltek v. Department of Labor, No. 14-2415 (4th Cir. 2015) (affirming DOL decision permitting taping); Heller v. Champion, 891 F.2d 432 (2nd Cir. 1989) (taping judged case by case).
Documents (obtaining and preserving): O’Day v. McDonnell Douglas, 79 F.3d 756 (9th Cir. 1996) (warning against “rummaging through” the “supervisor’s office”); Hodgson v. Texaco, 440 F.2d 662 (5th Cir. 1971); JDS Uniphase Corp. v. Jennings, 473 F.Supp.2d 697 (E.D. Vir. 2007) (requirement to obtain documents legitimately through civil discovery); Deltek v. Department of Labor, No. 14-2415 (4th Cir. 2015) (affirming DOL decision permitting removal of documents); Kempcke v. Monsanto Company, 132 F.3d 442 (8th Cir. 1998) (innocent removal of confidential documents permitted); Westlake Surgical v. Turner, 2009 Tex. App. LEXIS 6132 (removal of confidential documents permitted); Leon v. IDX Systems Corp., 2:03-cv-01158-MJP (W.D. Wash. 2004) (sanctions for wiping out computer hard-drive); Webb v. Government for the District of Columbia, 175 F.R.D. 128 (D.D.C. 1997) (default judgment against employer for destroying documents). Under New Jersey state law, an employer that destroys evidence not only can have an adverse inference drawn against it, but can also be liable for the tort of fraudulent concealment. Tartaglia v. UBS PaineWebber, 961 A.2d 1167 (N.J. 2008).
The Court in Smith v. Chi Transit Auth., 2016 U.S. App. LEXIS 11553 (7th Clr. 2016) described what a court should consider when evaluating whether an employee was reasonable in disclosing confidential e-mails: “Reasonableness depends on how [the employee] obtained the e-mails, whom he shared them with, the type of confidences revealed, their relevancy to the discrimination charge, whether [the employee] had a good-faith belief in their relevancy, the scope of the [employer’s] confidentiality policy, and whether [the employee] could have sought the evidence in a way that would not have violated the policy.”
Privacy Rights Clearinghouse, “Fact Sheet 7: Workplace Privacy and Employee Monitoring” (online publication) (information on management’s rights to monitor employees at work).
Government employees have had some success in challenging e-mail monitoring. On June 20, 2012, the Executive Office of Management and Budget issued a government-wide “Memorandum for Chief Information Officers and General Counsels” warning that warrantless searching of public employee e-mails could violate whistleblower disclosure laws.
McKennon v. Nashville Banner Publishing, 513 U.S. 352 (1995) (“after-acquired evidence” standards).
Rule 21: Be Prepared for the Lid to Blow
Greenberg v. Kmetko, 840 F.2d 467, 477 (7th Cir. 1988) (en banc) (dissenting opinion of Judge Cudahy) (“Dissenters and whistleblowers rarely win popularity contests or Dale Carnegie awards. They are frequently irritating and unsettling. These qualities, however, do not necessarily make their views wrong or unhelpful. . . .”).
Management Information v. Alyeska Pipeline Services, 151 F.R.D. 478 (D.D.C. 1993) (problems facing whistleblowers).
Halliburton v. ARB, 771 F.3d 254 (5th Cir. 2014) (explaining adverse consequences that follow an employee being “outed” as a whistleblower).
Myron and Penina Glazer, “The Whistleblowers: Exposing Corruption in Government and Industry” (Basic Books, NY: 1989).
Acknowledging that protected disclosures “may well engender disruption, controversy and adverse publicity.” Curl v. Reavis and Iredell County, 740 F.2d 1323 (4th Cir. 1984).
Aaron Kesselheim, et al., “Whistle-Blowers’ Experiences in Fraud Litigation against Pharmaceutical Companies,” N. Engl. J. Med. 362:19 (May 13, 2010) (documenting the severe emotional distress and hardships suffered by whistle-blowers, even when they prevail in a major case).
The types of damages and hardships experienced by whistleblowers was the subject of major litigation in the case of Hobby v. Georgia Power Co., 90-ERA-30 (ALJ, Sept. 17, 1998), affirmed, DOL Administrative Review Board (Feb. 9, 2001), affirmed, U.S. Court of Appeals for the 11th Circuit (Sept. 30, 2002). In that case Georgia Power’s challenge to the professional damages incurred by a whistleblower, which were the subject of extensive expert testimony, were rejected by the Department of Labor. The record in that case establishes how Georgia Power improperly fought the whistleblower for over ten years, engaging in extensive and relentless litigation in order to defeat the employee. After losing the case, the company engaged in new (and ultimately unsuccessful) litigation trying to limit th
e employee’s damages. The case is a window into the type of aggressive litigation tactics a whistleblower can expect.
The quote from “Deep Throat” comes from Carl Berstein and Bob Woodward, “All the President’s Men,” (Simon and Schuster, NY: 1974), pp. 268-69.
Rule 22: Delay Is Deadly
English v. General Electric Company, 85-ERA-2, Decision and Order of Administrative Law Judge (Aug. 1, 1985), reversed by Final Decision and Order of the Under Secretary of Labor (Jan. 13, 1987).
Delaware State College v. Ricks, 449 U.S. 250 (1980); Chardon v. Fernandez, 454 U.S. 6 (1981) (key Supreme Court cases discussing how to calculate running of the statute of limitations).
The doctrines of “equitable tolling” and “equitable estoppel” may provide grounds for an employee to enlarge the filing deadlines based on the actions or statements of an employer: “Equitable tolling focuses on the plaintiff’s excusable ignorance of the employer’s discriminatory act. Equitable estoppel, in contrast, examines the defendant’s conduct and the extent to which the plaintiff has been induced to refrain from exercising his rights.” Rhodes v. Guiberson Oil Tools Div., 927 F.2d 876, 878 (5th Cir. 1991), quoting Felty v. Graves-Humphreys, 785 F.2d 516, 519 (4th Cir. 1986). See also Zipes v. Transworld Airlines, 455 U.S. 385 (1982); Bonham v. Dresser Industries, 569 F.2d 187 (3rd Cir. 1977); School District of Allentown v. Marshall, 657 F.2d 16 (3rd 1981); Carlile v. South Routt School Dist., 652 F.2d 981 (10th Cir. 1981).
The applicability of the “continuing violation” theory for tolling a statute of limitations was limited by the Supreme Court in National Railroad v. Morgan, 536 U.S. 101 (2002).
Whistleblower reward programs all encourage employees to quickly file allegations of fraud with the appropriate authorities. They all have a version of a “first to file” rule that can result in the disqualification of whistleblowers who delay filing a rewards claim, if another whistleblower files a similar or identical claim first. See Handbook Rules 6–12.
The statute of limitations for filing a securities fraud case is generally 5 years. See Gabelli v. SEC, 133 S.Ct. 1216 (2013).
The statute of limitations for filing a False Claims Act reward case is 6 years after the date of the violation or within 3 years of the date for which an official of the United States should have been reasonably aware the violation occurred (but in no event greater than ten years from the initial violation). 31 U.S.C. § 3731(b). A wrongful discharge case under the FCA must be filed within 3 years. 31 U.S.C. § 3739(h)(3).
The United States has a catch-all statute of limitations for cases for which a civil fine, penalty or forfeiture may be imposed. See 28 U.S.C. § 2462. Under this law, if a statute does not impose a specific statute of limitations, civil cases that can result in a fine or penalty being imposed must be filed within 5 years of the violation.
Rule 23: Conduct Discovery
Checklist 6 identifies the major cases and precedents applicable to discovery in employment retaliation and whistleblower cases. Rule 20 describes the issues facing whistleblowers who remove documents from their worksite in violation of company rules. The discovery rules for DOL cases are found in 29 C.F.R. Part 18; the rules for federal employee cases before the MSPB are found at 5 C.F.R. Part 1201. Rules for discovery in federal court are located in the Federal Rules of Civil Procedure, starting with Rule 26, which is the overview rule.
Rule 24: Get to the Jury
The basic law setting forth an employee’s prima facie case necessary to withstand an employer motion to dismiss or for summary judgment is set forth in Kohn, Concepts and Procedures in Whistleblower Law, pp. 238–79 (Quorum Books: Westport, CT 2001).
Cases setting forth standard prima facie case in whistleblower or retaliation cases: Aka v. Washington, 156 F.3d 1284 (D.C. Cir. 1998); Housing Works v. City of New York, 73 F.Supp.2d 402 (S.D.N.Y. 1999); DeFord v. Secretary of Labor, 700 F.2d 281 (6th Cir. 1983). The Supreme Court uses a similar evaluation process in discrimination cases: McDonnell Douglas v. Green, 411 U.S. 792 (1973).
Curl v. Leroy Reavis and Iredell County, 740 F.2d 1323 (4th Cir. 1984) (example of a court review to determine whether the plaintiff qualified as an “employee” under the statute prior to proceeding to review other issues).
Court decisions concerning definition of “employee” under employment law statutes: Hudgens v. NLRB, 424 U.S. 507, 510 n. 3 (1976); Seattle-First National Bank v. NLRB, 651 F.2d 1272 (9th Cir. 1980); Sibley Mem. Hosp. v. Wilson, 488 F.2d 1338 (D.C. Cir. 1973); Palmer v. Western Trucking, 85-STA-6, Decision of Secretary of Labor (January 16, 1987); Hill v. TVA, 87-ERA-23/24, Decision of Secretary of Labor (May 24, 1989); Robinson v. Triconex Corp., 2006-ERA-31 (DOL ARB, 2012) (broad definition of covered employees under Labor Department precedent). But see Demski v. Department of Labor, 419 F.3d 488 (6th Cir. 2005) (applying narrow common law definition of “employee”).
NLRB v. Schrivener, 405 U.S. 117 (1972); Pettway v. American Cast Iron Pipe Co., 441 F.2d 998 (5th Cir. 1969) (determination of whether employee engaged in protected activity as a threshold legal issue).
Passaic Valley Sewerage Commissioners v. DOL, 992 F.2d 474 (3rd Cir. 1993) (review whether employee’s whistleblowing adhered to the “good faith” standard).
Frazier v. MSPB, 672 F.2d 150 (D.C. Cir. 1982) (key case defining proof necessary to demonstrate “knowledge”).
Passaic Valley Sewerage Commissioners v. DOL, 992 F.2d 474 (3rd Cir. 1993) (Clean Water Act case on “good faith” whistleblowing referenced in SOX legislative history).
Burlington Northern v. White, 548 U.S. 53 (2006) (landmark case on defining adverse action).
Desert Palace, Inc. v. Costa, 539 U.S. 90 (2003) (key case regarding evidence needed to demonstrate discriminatory motive necessary to survive a motion for summary judgment).
Staub v. Proctor Hospital, 131 S.Ct. 1186 (2011). This case was argued before the Supreme Court on Nov. 2, 2010, and decided the following question: “In what circumstances may an employer be held liable based on the unlawful intent of officials who caused or influenced but did not make the ultimate employment decision.” The Court ruled for the employee and held that an employer cannot hide behind a layered decision-making process to escape liability for illegally firing an employee by claiming that the final decision maker was unaware of the protected activity or did not have discriminatory animus.
The exhaustion of administrative remedies doctrine was explained in Brown v. GSA, 425 U.S. 820 (1976). The doctrine was applied in Sarbanes-Oxley whistle-blower cases in Portes v. Wyeth, 06-cv-2689 (S.D. N.Y. 2007); Williams v. Boston Scientific, 08-cv-01437 (N.D. Calif. 2008) and Curtis v. Century Surety, 08-16236 (9th Cir. 2009). Under this doctrine, although an employee can eventually have a jury trial, he or she must utilize various administrative remedies in order to file a case in court.
Although this rule is entitled “Getting to the Jury,” a large number of whistle-blower laws provide employees with an option of having their case heard before a jury or an administrative judge, specifically, numerous whistleblower laws as administered by the U.S. Department of Labor. The decision as to whether or not to have a case heard before a judge or jury, or whether to have it tried within the U.S. Department of Labor before an Administrative Law Judge is a tactical decision based on numerous factors, including costs, the reputation of the respective judges, and the evidence that will be presented in any given case. The bottom line is to pick the forum that will hear your case with ease, whether that is a state court, a federal court, or an administrative agency.
Rule 25: Win the Case: Prove Motive and Pretext
Rohloff v. Metz Baking Co., L.L.C., 491 F.Supp.2d 840, 848-849 (N.D. Iowa, 2007).
In Franchini v. Argonne National Laboratory, 2009-ERA-14 (DOL ARB, 2012) the Labor Department outlined some of the facts that have been used to prove evidence of discriminatory motive, including “temporal proximity, pretext, and material changes in employer practices.”
Checklist 4 identifies numerous court precedents regarding the types of pro
of necessary for an employee to demonstrate improper motive or pretext in a retaliation case.
Rule 26: Get Every Penny Deserved
DAMAGES FOR EMPLOYEES
All state and federal laws contain their own rules governing the types of damages permitted under whistleblower protection laws. The following list spotlights some of the major categories of damages permitted under various laws:
General Damages Available Under Whistleblower Laws: Reich v. Cambridgeport Air Systems, 26 F.3d 1187 (1st Cir. 1994); Nord v. U.S. Steel, 758 F.2d 1462 (11th Cir. 1985). In Hobby v. Georgia Power Co., 90-ERA-30 (ALJ, Sept. 17, 1998), affirmed DOL Administrative Review Board (Feb. 9, 2001) and the U.S. Court of Appeals for the 11th Circuit (Sept. 30, 2002) carefully reviewed the full range of damages available to employees under the Department of Labor administered whistleblower laws.
“Affirmative Relief,” Equitable or Preliminary Relief: NLRB v. Gissel Packing, 395 U.S. 575 (1969); Florida Steel Corp. v. NLRB, 620 F.2d 79 (5th Cir. 1980); Donovan v. Freeway Constr. Co., 551 F.Supp. 869 (D.R.I. 1982); U.S. v. Montgomery, 744 F.Supp. 1074 (M.D. Ala. 1989).
Back Pay: NLRB v. J.H. Rutter-Rex, 396 U.S. 258 (1969).
Compensatory Damages: Walters v. City of Atlanta, 803 F.2d 1135 (11th Cir. 1986); Neal v. Honeywell, 995 F.Supp. 889 (N.D. Ill. 1998); Smith v. Atlas Off-Shore Boat Service, 653 F.2d 1057 (5th Cir. 1981); Heaton v. Weitz Co., 534 F.3d 882 (8th Cir. 2008).
Front Pay: McNight v. General Motors, 908 F.2d 104 (7th Cir. 1990); U.S. v. Burke, 504 U.S. 229, footnote 9 (1992).
Interest: Parexel International v. Feliciano, 2008 U.S. Dist. LEXIS 99348 (E.D. Pa. 2008); Donovan v. Freeway Constr., 551 F.Supp. 869 (D.R.I. 1982); Clinchfield Coal v. Federal Mine Safety and Health Comm., 895 F.2d 773 (D.C. Cir. 1990).
