Gilmore v. Parametric Technology, 2003-SOX-1 (ALJ Feb. 6, 2003)

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Gilmore v. Parametric Technology, 2003-SOX-1 (ALJ Feb. 6, 2003)

U.S. Department of Labor Office of Administrative Law Judges
800 K Street, NW, Suite 400-N
Washington, DC 20001-8002 DOL Seal

Issue Date: 06 February 2003
Case No. 2003-SOX-00001

.............................................................
In the Matter of

JAMES T. GILMORE,
Complainant,

PARAMETRIC TECHNOLOGY
CORPORATION,
Employer.

............................................................

Appearances:
    David Zalesne, Esq.
    William J. Clements, Esq.
    On Behalf of the Complainant

    Geoffrey E. Hobart, Esq.
    Christine M. Leonard, Esq.
    On Behalf of the Employer

Before:
THOMAS M. BURKE
Associate Chief Administrative Law Judge

RECOMMENDED DECISION AND ORDER

This case arises out of a complaint of discrimination filed pursuant to the employee protection provisions of Public Law 107-204, Section 806 of the Corporate and Criminal Fraud Accountability Act of 2002, Title VIII of the Sarbanes-Oxley Act of 2002, 18 USC § 1514A (Sarbanes-Oxley) enacted on July 30, 2002. 18 USC § 1514A(b)(2)(B) provides that an action under Section 806 of Sarbanes-Oxley will be governed by 49 USC § 42121(b). Sarbanes-Oxley affords protection from employment discrimination to employees of companies with a class of securities registered under section 12 of the Security Exchange Act of 1934 (15 U.S.C. 781) and companies required to file reports under section 15(d) of the Securities Exchange Act of 1934. Specifically, the law protects so-called "whistleblower" employees from retaliatory or discriminatory actions by the employer, because the employee provided information to their employer or a federal agency or Congress relating to alleged violations of 18 U.S.C. §§ 1341, 1343, 1344 or 1348, or any provision of Federal law relating to fraud against shareholders.

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I. Procedural History

James T. Gilmore, Complainant, filed an appeal with the Office of Administrative Law Judges on November 6, 2002, from an October 10, 2002 denial of his complaint by the Occupational Safety and Health Administration, U.S. Department of Labor. Complainant was ordered by Pre-hearing Order dated November 20, 2002 to file a brief on the issue of whether the Department of Labor has jurisdiction over his complaint of discriminatory conduct against Parametric Technology Corporation, Employer, in as much as Complainant's alleged protected activity and the resulting adverse employment action occurred prior to the effective date of Sarbanes-Oxley. Employer was permitted a period of time to respond to Complainant's brief.

Complainant's brief was received on December 10, 2002, and the Employer's reply brief was received on or about January 13, 2003.

II. Issue

Whether the Department of Labor has jurisdiction over a complaint of discriminatory conduct under § 806 of Sarbanes-Oxley where the asserted protected activity and adverse employment activity occurred prior to its effective date, but the complaint was filed within 90 days of the adverse employment action, in accordance with § 1514(b)(2)(D).

III. Findings of Fact

Complainant was terminated from his employment in Pennsylvania as a sales representative by a letter from the Employer on July 17, 2002.¹ On September 30, 2002, Complainant filed a complaint with the Department of Labor asserting that his termination constituted discriminatory conduct in violation of § 806 of Sarbanes-Oxley.²

IV. Discussion

It is uncontested that the protected activity and resulting adverse employment action alleged in Complainant's complaint occurred prior to the enactment of Sarbanes-Oxley. Complainant nevertheless argues that his complaint is governed by Sarbanes-Oxley for three reasons: 1) Congress intended for the employee protection provision of Sarbanes-Oxley to apply retroactively; 2) the complaint complies with the timeliness provision of §1514A(b)(2)(D) as it was filed with the Department within 90 days of the termination; and 3) Employer would suffer no manifest injustice if Sarbanes-Oxley was applied retroactively.

A. Did Congress Intend for Sarbanes-Oxley to Apply Retroactively, Thereby Rendering Complainant's Complaint Timely as it was Filed Within the 90 Day Statute of Limitations?

The cardinal case addressing the issue of whether a new federal statute may be retroactively applied to prior conduct is Landgraf v. USI Film Products. 511 U.S. 244 (1994). In Landgraf, the Court held that remedial provisions of the 1991 Civil Rights Act did not apply to Title VII cases pending on appeal when the statute was enacted. Id. The Court reasoned that there is a strong presumption against retroactive application of laws, and unless it is determined that retroactive application was the intent of Congress, courts should engage in the prospective application of laws. Id. at 263, citing Bowen v. Georgetown Univ. Hospital, 488 U.S. 204, 208 (1988).

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The Landgraf Court instructed that the analysis begins with a review of the statute to determine whether Congress manifested an intent for the new law to apply to causes of action that arose before the date of enactment. Landgraf, at 257; see also Lindh v. Murphy, 521 U.S. 320, 326 (1997) (elaborating on retroactivity analysis and directing courts, during the course of their statutory examination, to consider whether the normal rules of statutory construction remove the possibility of a retroactive application).

The next step in the retroactivity analysis is a determination of the effect of the new law. See Landgraf, at 273. If the new statute will "impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed," then the presumption against retroactive application must be invoked absent clear intent from Congress for retroactive application. Landgraf, at 280. An exception is where the new law is jurisdictional, procedural, or "uniquely separable from the cause of action to be proved at trial," then retroactive application of the new statute may be proper. Id. at 274-75, 277, quoting White v. New Hampshire Dept. of Employment Security, 455 U.S. 445, 451-52 (1982). Also a new law may apply to prior conduct but not be considered retroactive in circumstances where the statute "affects the propriety of prospective relief." Id. at 273.

With these principles in mind ³ , Sarbanes-Oxley is analyzed:

1. Is There an Express Directive by Congress to Apply § 806 of Sarbanes-Oxley Retroactively?

Complainant argues that Congress's "unambiguous directive" to apply § 806 of Sarbanes-Oxley retroactively is evinced by the language that gives employees 90 days from the date of the wrongful act to bring a cause of action. See Complainant's Brief, at 3, referring to 18 USC § 1514A(b)(2)(D). This argument fails because the plain language of the text Complainant is referring to is the statute of limitations for a claim to be filed under § 806 of Sarbanes-Oxley.

Sarbanes-Oxley's 90 day statute of limitations does not create a substantive right to file a claim, nor is it an explicit authorization from Congress that Sarbanes-Oxley should apply to conduct occurring prior to the date of enactment. Rather, as a statute of limitation, it is intended to confer upon a complainant a discrete amount of time during which a claim is allowable. See Cook v. City of Chicago, 192 F.3d 693, 696 (7th Cir. 1999) ("Purposes of a limitations period are to force parties to litigate claims while the evidence is still fresh, to grant prospective defendant relative security and stability by allowing it better to estimate its outstanding legal obligations, and to enable defendant to cap its liability."). Whereas, a statute's enactment date is the day that Congress is presumed to have selected to bestow the right set forth within that statute. See Landgraf, at 270-73. (articulating the presumption that statutes should apply prospectively from the date of enactment). Every law that contains a statute of limitations would apply retroactively if Complainant was correct in his assertion that § 806's statute of limitations evinces an affirmative grant by Congress for retroactive application.⁴ Hence Complainant's argument is incorrect as it has misinterpreted the purpose and scope of the statute of limitation.

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2. Using Normal Rules of Statutory Construction, has Congress Manifested an Intent to Apply § 806 of Sarbanes-Oxley Retroactively?

Because Sarbanes-Oxley is void of express language authorizing retroactive application of § 806, normal statutory construction rules must be employed to determine if Congress manifested an intent for its retroactive application. See Lindh, at 2063; Mathews, at 161. Upon reviewing the text of Sarbanes-Oxley in its entirety, it is notable that § 804 contains language that explicitly addresses the retroactive application of the "Statute of Limitations for Securities Fraud." Section 804 states:

(b) Effective Date.--The limitations period provided by section 1658(b) of title 28, United States Code, as added by this section, shall apply to all proceedings addressed by this section that are commenced on or after the date of enactment of this Act.
(c) No Creation of Actions.--Nothing in this section shall create a new, private right of action.

28 USC §1658(b), (c). Because Congress did not provide a similar explicit prohibition for retroactive application in § 806 of Sarbanes-Oxley, "Protection for Employees of Publicly Traded Companies Who Provide Evidence of Fraud," the statutory construction concept of negative implication becomes relevant. In other words, based on the fact that Congress included express language disapproving retroactivity in § 804 of Sarbanes-Oxley, does the absence of similar language in § 806 manifest an intention by Congress to authorize retroactive application, and thereby permit Complainant's claim?

The doctrine of the "negative pregnant" in statutory construction occurs when "an express statutory requirement here, contrasted with statutory silence there, shows an intent to confine the requirement to the specified instance." Field v. Mans, 516 U.S. 59, 67 (1995). However, in Field, the Court found that the negative implication that arose by examining the entirety of the Bankruptcy Code could not dispositively resolve the statutory inconsistency because the implication produced a result that Congress surely would have affirmatively addressed if it had intended to upset well settled expectations. Id. at 67 ("Without more, the inference might be a helpful one, But there is more here, showing why the negative pregnant argument should not be elevated to the level of interpretive trump card."). The Court in Field reasoned:

[i]f Congress really had wished to bar discharge to a debtor who made unintentional and wholly immaterial misrepresentations having no effect on a creditor's decision, it could have provided that. It would, however, take a very clear provision to convince anyone of anything so odd, and nothing so odd has ever been apparent to the courts that have previously construed this statute . . .

Id. at 68 (emphasis added). In this case, § 804 is purely an amendment to the statute of limitations of a law already in existence, whereas § 806, as a whole, is the creation of a new substantive law.⁵ The logical reason why Congress affirmatively prohibited retroactive application to § 804, and not § 806, is because § 804 is only a procedural amendment, and but for the explicit language by Congress, § 804 might otherwise be permissibly applied retroactively.⁶ See Landgraf, at 275 (stating that procedural rules may be applied retroactively because they "regulate secondary rather than primary conduct."). A retroactive application of § 806

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would stand at odds with the well-established legal principle of presumption against retroactive application of new laws that confer substantive rights and duties on parties. As in Field, the negative implication arising from Congress's silence with regard to the temporal application of § 806 is not a reasonable interpretation of the statute as a whole and leads to a result that surely Congress would have affirmatively addressed if it was intended. Therefore, the normal rules of statutory construction preclude a finding that Congress intended § 806 to apply retroactively.

3. Does Sarbanes-Oxley have a Retroactive Effect?

Because § 806 of Sarbanes-Oxley is silent with regard to retroactive application of this law, our analysis shifts from congressional intent to the effect of the law. "[E]very statute, which takes away or impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already past, must be deemed retrospective . . . ." Landgraf, 511 U.S. at 269 (quoting Society for the Propagation of the Gospel v. Wheeler, 22 F.Cas. 756 (No. 13,156) (CCNH 1814)). When determining if a statute is retroactive, a court should evaluate the "familiar considerations of fair notice, reasonable reliance, and settled expectations." Landgraf, at 270. "Elementary considerations of fairness dictate that individuals should have an opportunity to know what the law is and to conform their conduct accordingly; settled expectations should not be lightly disrupted." Id. at 265. Applying these principles, the Court in Landgraf found the provisions of the Civil Rights Act of 1991, which allow punitive and compensatory damage recovery, could not be applied retroactively because the provisions "can be seen as creating a new cause of action." Landgraf, at 283; see also Scheidemann v. I.N.S., 83 F.3d 1517, 1522 (3d Cir. 1996) (explaining that the punitive damage recovery provision in Landgraf "increased the deterrent and retributive aspects of the statute," and the compensatory provision "was the type of legal change that would have an impact on private parties' planning and would attach an important new legal burden to the defendant's conduct") (internal citations omitted).

In this vein, Employer argues that § 806 of Sarbanes-Oxley cannot be applied retroactively because it creates a new federal private right of action with a new set of federal remedies, including reinstatement.⁷ Complainant disagrees. He argues that Employer is not saddled with a new legal burden because under Pennsylvania common-law there is a public policy exception to at-will employment under which this case could proceed.⁸ Complainant's argument fails for two reasons: 1) a cause of action does not exist in Pennsylvania common law for an at-will employee who allegedly suffered whistleblower retaliation; and 2) the remedies created by Sarbanes-Oxley impose significant new liabilities on employers making its application on past conduct retroactive.

In regard to Complainant's first argument, Complainant failed to provide any authority finding that a cause of action arising out of alleged whistleblowing retaliation could be maintained under Pennsylvania common law. In fact, the first of the two cases cited on this point by Complainant held that an action for wrongful termination of an at-will

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employee that allegedly pointed out the unsafe nature of oil and gas industry products was not a violation of a clear mandate of public policy and did not justify creating a new non-statutory cause of action. Geary v. United States Steel Corp., 456 Pa. 171, 180, 319 A.2d 174 (1974) ("In sum, while we agree that employees should be encouraged to express their educated views on the quality of their employer's products, we are not persuaded that creating a new non-statutory cause of action of the sort proposed by appellant is the best way to achieve this result."). In the second case cited by Complainant, the cause of action arose out of an alleged termination for absence from work due to jury duty service. Reuther v. Fowler & Williams, Inc., 225 Pa. Super. 28, 386 A.2d 119 (1978). Although the court in Reuther vacated the trial court's nonsuit and order, the facts and public policy involved in Reuther are inapplicable to the policies and facts at bar. Hence there is no authority to hold that Pennsylvania common law has carved out an exception to the at will employment doctrine for whistleblowers.

The second reason Complainant's argument fails is that assuming arguendo, a cause of action for whistleblower retaliation could be maintained under Pennsylvania common law, the remedies imposed on employers by Sarbanes-Oxley are new and different from the relief that would be available under Pennsylvania common law. The remedies available under the employee protection provision of Sarbanes-Oxley are as follows:

(c) Remedies
(1) In General - An employee prevailing in any action under subsection (b)(1) shall be entitled to all relief necessary to make the employee whole.
(2) Compensatory Damages - Relief for any action under paragraph (1) shall include:
(a) reinstatement with the same seniority status that the employee would have held, but for the discrimination; (b) the amount of back pay, with interest; and (c) compensation for any special damages sustained as a result of the discrimination, including litigation costs, expert witness fees, and reasonable attorney fees.

18 USC § 1514A(c)(2) (emphasis added). Complainant has failed to provide a case arising under Pennsylvania common law where such comprehensive remedies, such as reinstatement, would be available. Furthermore, the courts have previously determined that federal whistleblower protection would have a retroactive effect on employers. See Caddell v. Department of Justice, 96 F.3d 1367, 1371 (Fed. Cir. 1996) (affirming decision that the Whistleblower Protection Act could not be applied to conduct occurring before effective date of Act because "the statute would have a retroactive effect" as the employer must now assure employment decisions are consistent with any circumstances implicating whistleblowing activity and the employer's liability has increased for past conduct). Because the remedial scheme of Sarbanes-Oxley confers new and increased liability upon employers, the application of Sarbanes-Oxley to conduct occurring prior to enactment would be retroactive, and therefore improper.

B. Is Retroactive Application of § 806 Justified Because Whistleblower Retaliation is an Issue of National Concern?

Complainant's last argument contends that even if the application of Sarbanes-Oxley in this case would be retroactive, retroactive application is justified because it would not result in any manifest injustice and this is an issue of great national concern.⁹ However, Complainant's argument is quickly dismissed because the assertion that Employer would not suffer manifest injustice is unsupported, and it directly contradicts the analysis of the Court in Landgraf. In Landgraf, the Court found that a retroactive application of a statute with a much broader remedial scheme than what was previously available was manifestly unjust.

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Moreover, even if retroactive application of Sarbanes-Oxley could be considered in the national interest, such would still not be a basis for interpreting its application to permit same. The Court in Landgraf reasoned: " It will frequently be true, as petitioner and amici forcefully argue here, that retroactive application of a new statute would vindicate its purpose more fully. That consideration, however, is not sufficient to rebut the presumption against retroactivity. Statutes are seldom crafted to pursue a single goal, and compromises necessary to their enactment may require adopting means other than those that would most effectively pursue the main goal." Landgraf at 283. Accordingly,

RECOMMENDED ORDER

It is HEREBY RECOMMENDED that the case be DISMISSED.

THOMAS M. BURKE
Associate Chief Judge

Washington, DC

Notice: Review of this Recommended Decision and Order is by the Administrative Review Board pursuant to ¶¶ 4.c.(43) of Secretary's Order 1-2002, 67 Fed. Reg. 64272 (Oct. 17, 2002). Regulations, however, have not yet been promulgated by the Department of Labor detailing the process for review by the Administrative Review Board of decisions by Administrative Law Judges under the employee protection provision of the Sarbanes-Oxley Act. Accordingly, this Recommended Decision and Order and the administrative file in this matter will be forwarded for review by the Administrative Review Board, U.S. Department of Labor, Room S-4309, 200 Constitution Ave, NW, Washington DC 20210. See generally 5 U.S.C. §§ 557(b).

[ENDNOTES]

¹Brief of Complainant, at 1; Brief of Employer at 2.

²October 7, 2002 determination letter from Regional Administrator, Occupational Safety and Health Administration, U. S. Department of Labor to Employer.

³Complainant's brief also outlined these principles for determining whether a new law should apply to conduct that occurred before the enactment date of the law. See Complainant's Brief, at 2-3, quoting Mathews v. Kidder, Peabody & Co., Inc., 161 F.3d 156, 161 (3d Cir. 1998).

⁴As pointed out by Employer, Complainant cannot cite to any case where the statute of limitations was construed as an affirmative grant of retroactive application by lawmakers. Employer's Brief, at 7.

⁵Section 804 of Sarbanes-Oxley lengthens the statute of limitations in private security fraud cases from the prior statute of limitations which was the earlier of three years from the date of the fraud or one year from the date of discovery. 148 Cong. Rec. S7418-21, 7420 (daily ed. July 26, 2002) (Legislative History of Title VIII of HR 2673: The Sarbanes-Oxley Act of 2002, Section-by-Section Analysis).

⁶Although the legislative history of § 806 is silent with regard to retroactive application, the general spirit of § 806's legislative history speaks to prospective application:

Although current law protects many government employees who act in the public interest by reporting wrongdoing, there is no similar protection for employees of publicly traded companies who blow the whistle on fraud and protect investors. [ . . . ] This provision would create a new provision protecting employees when they take lawful acts to disclose information or otherwise assist criminal investigators, federal regulators, Congress, their supervisors (or other proper people within a corporation), or parties in a judicial proceeding in detecting and stopping actions which they reasonably believe to be fraudulent.

148 Cong. Rec., at S7420 (emphasis added). Congress used the words "when they take" and thereby described the law applicable to future conduct rather than conduct that has already occurred.

⁷Employer's Brief, at 8.

⁸Complainant's Brief, at 4.

⁹Complainant's Brief, at 4-5.