ARB CASE NO. 99-034
ALJ CASE NO. 95-TSC-9
DATE: September 13, 2000
In the Matter of:
STEVEN A. BALOG,
COMPLAINANT,
v.
MED-SAFE SYSTEMS, INC.,
RESPONDENT.
BEFORE: THE ADMINISTRATIVE REVIEW BOARD
Appearances:
For the Complainant: Marie A. Backes, Esq.,
San Diego, California
For the Respondent: Robert C. Longstreth, Esq., Gray Cary Ware & Freidenrich LLP, San Diego,
California
DECISION AND ORDER APPROVING SETTLEMENT
AND DISMISSING COMPLAINT
This matter arises under the employee protection provisions of the Toxic
Substances Control Act (TSCA), 15 U.S.C. §2622 (1994). Steven A. Balog filed a complaint
alleging that Med-Safe Systems, Inc. (Med-Safe) violated the TSCA when it discharged him on
February 9, 1995. Balog and Med-Safe agreed to settle the complaint and submitted a Confidential
Agreement and Release of All Claims (Settlement Agreement) for approval. We have jurisdiction
pursuant to 24 C.F.R. §24.8 (1999) and Secretary's Order No. 2-96, 61 Fed. Reg. 19,978 (May
3, 1996). We APPROVE the Settlement Agreement and DISMISS the
complaint with prejudice.
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I. BACKGROUND
A. Balog's termination by Med-Safe and resulting legal actions.
Med-Safe employed Steven Balog as a Senior Quality Assurance Engineer
until his discharge on February 9, 1995. In this capacity Balog oversaw, among other things, the
quality assurance of Med-Safe's only product, a "sharps collector." A sharps collector
is designed to hold any discarded razor blades, scalpels, syringes, needles, etc., used in hospitals,
clinics and doctors' offices. Med-Safe warranted that its sharps collectors had a minimum wall
thickness of .050 inches.
During the performance of his regular duties, Balog discovered that the sharps
collectors did not have the warranted thickness. Balog claimed that Med-Safe discharged him
because he disclosed this information internally to Med-Safe management and because he reported
the wall thickness problem to Becton Dickinson, Med-Safe's only customer. Med-Safe claimed that
it discharged Balog because he permitted the sharps collectors to be shipped when he knew they did
not meet Med-Safe's warranted wall thickness.
On February 28, 1995, Balog filed a TSCA whistleblower complaint asking
the Department of Labor to investigate Med-Safe's "flagrant disregard for regulatory laws,
public safety, and employee rights that epitomize the illicit business situations that the whistleblower
laws were enacted to prevent and punish." As relief for the alleged discrimination, Balog
sought "abate[ment of] further violations; reinstate[ment] with back pay; reimbursement for
attorney fees and related expenses; expunge[ment of] all insulting documents planted in my
personnel file; and a letter of employee exoneration to employees, suppliers, and customers."
The Department investigated Balog's complaint and made a preliminary determination that the TSCA
did not apply; Balog requested a hearing before an Administrative Law Judge (ALJ).
Separately, Balog also filed a civil suit in California state court (Case No.
697054) based upon the same set of facts surrounding his discharge by Med-Safe. In that lawsuit,
Balog named as defendants both Med-Safe and its customer, Becton Dickinson, based upon his
belief that Becton Dickinson unlawfully had interfered with his employment and had conspired with
Med-Safe to discharge him. Becton Dickinson had not been named in Balog's TSCA whistleblower
complaint.
B. The Settlement Agreement.
Before commencing the hearing before the Labor Department ALJ in the
TSCA complaint, the parties requested appointment of a settlement judge. After extensive
discussion with the settlement judge, the parties agreed to a global settlement of Balog's claims
against Med-Safe, including both the TSCA complaint and the state court action. Although Becton
Dickinson was not signatory to the Settlement Agreement, the company was named in the
Agreement as a "released party," i.e., Balog's settlement with Med-Safe, by its
terms, also resolved Balog's claims against Becton Dickinson.
[Page 3]
As part of the Settlement Agreement, Med-Safe agreed to pay Balog $47,401
for alleged lost wages, $226,901 for alleged personal injury damages and $34,099 for attorney's fees.
In addition, the proposed Settlement Agreement included a non-disparagement clause, Paragraph 5:
Nondisparagement. The Parties hereto agree that they and
their agents and attorneys will not make any voluntary statements,
written, verbal, or cause or encourage others to make such statements,
that defame or disparage the personal and/or business reputation,
practices or conduct of the other Parties hereto or any of the Released
Parties.
The parties presented the Settlement Agreement to the ALJ by letter dated
April 19, 1996, with Med-Safe's attorney requesting "that we be sent copies of the
documentation closing the file with respect to this matter." On April 24, 1996, the ALJ issued
a Decision and Order Approving Settlement and Dismissing Matter with Prejudice (ALJ D&O) in
which he reviewed and approved the Settlement, finding it to be adequate and not procured by
duress. Although the parties had agreed that Balog would submit a motion to dismiss the TSCA
claim after the Settlement Agreement was approved by the ALJ (and that Balog also would
seek dismissal of the action pending in state court), the ALJ proceeded to dismiss with prejudice
Balog's TSCA claim without waiting for such a motion from Balog. See ALJ D&O at 4.
1 As of the date the ALJ issued his Decision
and Order, all ALJ decisions automatically were reviewed by the Secretary of Labor. Soon afterward, this
function was delegated to the Administrative Review Board pursuant to Secretary's Order 2-96. 61 Fed. Reg.
19,978 (May 3, 1996).
The automatic review provision that was in effect in 1996 was discontinued in 1998.
Decisions issued by ALJs on or after March 11, 1998, became the final decisions of the Department unless
affirmatively appealed by one or more of the parties. 43 Fed. Reg. 6614, 6620 (Feb. 9, 1998). The
Settlement Agreement in the present case was signed, and the ALJ's Decision and Order was issued in 1996,
long before the 1998 effective date of the changed procedures, and therefore was subject to automatic review
by the Secretary or this Board.
2 Apparently, Balog did not think to
object to the recommended dismissal of his complaint until he received our Briefing Order. Even then Balog
neglected to pursue his objection. Balog was given until February 24, 1999, to file his initial brief. On
February 18, 1999, we granted Balog an extension of time, until March 16, 1999, to file his initial brief. On
March 18, 1999, we granted Balog another extension, until March 29, 1999, to file his initial brief. When
Balog did not file his initial brief by March 29, we denied any further extensions noting:
"Complainant's counsel has been given a generous amount of time to submit a brief in this matter, but
has failed to do so. Significantly, [Balog's counsel] Backes did not even attempt to request additional time
for submitting her brief before the March 29, 1999 time limitation for submitting the brief had expired. We
see no compelling reason to grant yet more time to Complainant's counsel under these circumstances."
3 When the ALJ considered the
proposed Settlement Agreement, Labor Department regulations governing whistleblower cases required that
the ALJ issue a "show cause" order before dismissing a claim:
In any case where a dismissal of a claim . . . is sought, the administrative
law judge shall issue an order to show cause why the dismissal should not
be granted and afford all parties a reasonable time to respond to such order.
After the time for response has expired, the administrative law judge shall
take such action as is appropriate to rule on the dismissal, which may
include a recommended order dismissing the claim.
29 C.F.R. § 24.6(e)(4)(ii) (1996).
4 "Immediately after receipt
of the payments set forth in paragraph 1, above, Balog shall cause to be filed Requests for Dismissal With
Prejudice of the Department of Labor Proceeding and the Superior Court Action, and all claims and
defendants therein, and shall take all appropriate steps to secure the dismissal with prejudice of those actions.
Balog shall serve notices of such dismissals with prejudice on counsel for Med-Safe within 48 hours after
receipt of the payments identified in paragraph 1, above." Settlement Agreement ¶ 3.
5 Ironically, even while attempting
to repudiate the Settlement Agreement and proceed to litigate his original TSCA claim, Balog asserts that
he need not return the money he received under the Settlement Agreement. Balog Reply Brief at 8-9.
6 As discussed above, Balog has
exercised these legal remedies.
7 "This error is fatal to the
settlement as it violates the essential requirement of 29 C.F.R. 18.9(e)(9), which regulation expressly requires
that any settlement agreement 'shall be written and signed by all parties.'" Balog
Reply Brief at 2 (italics in original).
8 Balog argues that the Settlement
Agreement is unfair because Becton Dickinson obtained all the benefits of being a "released
party" yet suffered no liability. He claims that "Becton Dickinson deliberately avoided signing
the Settlement Agreement and thereby committed a fraud on the ARB and Complainant, and the U.S.
Department of Labor." Balog Reply Brief at 4. This is essentially a claim that Becton Dickinson
committed a fraud upon the court. Fraud upon the court must involve an unconscionable plan or scheme
designed to improperly influence the court in its decision. Abatti v. Comm'r, 859 F.2d 115, 118 (9th
Cir. 1988). To show fraud upon the court, the complaining party must establish that the alleged misconduct
affected the integrity of the judicial process, either because the court itself was defrauded or because the
misconduct was perpetrated by officers of the court. Alexander v. Robertson, 882 F.2d 421, 424 (9th
Cir. 1989). Balog has not established either of these elements.
Having fully participated through counsel in the negotiations leading up to the
drafting of the Settlement Agreement and its execution, Balog cannot now complain that the Agreement was
imperfectly drafted or executed.
9 Having received over $300,000 for
lost wages, other damages and attorney's fees, Balog is unpersuasive when he argues that "[h]e has
essentially received nothing by signing the Settlement Agreement." Balog Reply Brief at 7. The fact
that the settlement proceeds may be inadequate after having been reduced by expenses related to the
unsuccessful defamation suit is no basis to disapprove the settlement. Worthy v. McKesson Corp.,
756 F.2d 1370, 1373 (8th Cir. 1985) (party to a voluntary settlement agreement cannot avoid the agreement
simply because it ultimately proves inadequate).