____________________________________________________
03-9186
______________
United States Court of Appeals for the Second Circuit
______________
CHRYSTINA NICOLAOU,
Plaintiff-Appellant,
-against-
HORIZON MEDIA,
Defendant-Appellee.
______________
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
______________
BRIEF OF THE SECRETARY OF LABOR
AS AMICUS CURIAE IN SUPPORT OF APPELLANT
FOR REVERSAL
______________
HOWARD M. RADZELY
Solicitor of Labor
TIMOTHY D. HAUSER
Associate Solicitor
ELIZABETH HOPKINS
Counsel for Special Litigation
GAIL ANN PERRY
Trial Attorney
U.S. Department of Labor
Office of the Solicitor
Plan Benefits Security Division
200 Constitution Avenue, N.W.
Washington, D.C. 20210
(202) 693-5600
Attorneys for the Secretary of Labor
TABLE OF CONTENTS
QUESTION PRESENTED
INTEREST OF THE SECRETARY
STATEMENT OF THE CASE
I.
Facts
II.
Procedural Background
SUMMARY OF ARGUMENT
ARGUMENT
I.
By Its Terms, ERISA Section 510 Broadly Protects Those Who
Give Information
In Any Inquiry, And Is Distinguishable From
The FLSA’s
Anti-Retaliation Language .
II.
The Ninth Circuit Has Correctly Read Section 510 to Protect
Claimants Who
Initiate or Participate In Internal Inquiries, While
The Fourth Circuit
Has Misinterpreted This Provision
III.
Strong Policy Considerations Support Reading Section 510 to
Protect Internal
Inquiries
CONCLUSION
TABLE OF AUTHORITIES
CASES
Anderson
v. Electronic Data Systems Corp.,
11
F.3d 1311 (5th Cir. 1994)
Authier
v. Ginsberg,
757
F.2d 796 (6th Cir. 1985)
Bechtel
Construction Company v. Secretary of Labor,
50
F.3d 926 (11th Cir. 1995)
Bick
v. The City of New York,
1997
WL 381801 (S.D.N.Y. July 10, 1997)
Blackburn
v. Reich,
79
F.3d 1375 (4th Cir. 1996)
Brennan
v. Maxey's Yamaha, Inc.,
513
F.2d 179 (8th Cir. 1975)
Brock
v. Casey Truck Sales, Inc.,
839
F.2d 872 (2nd Cir. 1988)
Brock
v. Richardson,
812
F.2d 121 (3rd Cir. 1987)
Brogan
v. United States,
522
U.S. 398 (1998)
Brown
& Root v. Donovan,
747
F.2d 1029 (5th Cir. 1984)
Central States, Southeast & Southwest Areas Pension
Fund
v. Central Transport, Inc.,
472
U.S. 559 (1985)
Clean
Harbors Environmental Services, Inc. v. Herman,
146
F.3d 12 (1st Cir. 1998)
Consolidated
Edison of New York, Inc. v. Donovan,
673
F.2d 61 (2nd Cir. 1982)
Couty
v. Dole,
886 F.2d 147 (8th Cir. 1989)
Coyle
v. Madden,
2003
WL 22999222 (E.D.Pa. Dec. 17, 2003),
Crowley
v. Pace Suburban Business Division of Regional
Transport
Authority,
938
F.2d 797 (7th Cir. 1991)
Department
of Housing and Urban Development v. Rucker,
535
U.S. 125 (2002)
EEOC
v. Romeo Community Schools,
976
F.2d 985 (6th Cir. 1992)
EEOC
v. White & Son Enterprises,
881
F.2d 1006 (11th Cir. 1989)
Griffen
v. Oceanic Contractors, Inc.,
458
U.S. 564 (1982)
Haley
v. Retsinas,
138
F.3d 1245 (8th Cir. 1998)
Hashimoto
v. Bank of Hawaii,
999
F.2d 408 (9th Cir. 1993)
International
Union of Operating Engineers v. Flair Builders, Inc.,
406 U.S. 487 (1972)
King
v. Marriott International, Inc.,
337
F.3d 421 (4th Cir. 2003)
Kotcher
v. Rosa and Sullivan Appliance Center,
957
F.2d 59 (2nd Cir. 1992)
Lambert
v. Ackerly,
180
F.3d 997 (9th Cir. 1999)
Lambert
v. Genesee,
10
F.3d 46 (2nd Cir. 1993)
Love
v. RE/MAX of America, Inc.,
738
F.2d 383 (10th Cir. 1984)
Massachusetts
Mutual Life Insurance Co. v. Russell,
473
U.S. 134 (1985)
McLean
v. Carlson Companies, Inc.,
777
F.Supp. 1480 (D. Minn. 1991)
Mertens
v. Hewitt,
508
U.S. 248 (1993)
Nicolaou
v. Horizon Media, Inc.,
2003
WL 22208356 (S.D.N.Y. Sept. 23, 2003)
Nicolaou
v. Horizon Media, Inc.,
2003
WL 22852680 (S.D.N.Y. Oct. 15, 2003)
Passaic
Valley Sewerage Comm'rs v. U.S. Department of Labor,
992
F.2d 474 (3rd Cir. 1993)
Reiter
v. Sonotone Corp.,
442
U.S. 330 (1979)
Secretary
of Labor v. Fitzsimmons,
805
F.2d 682 (7th Cir. 1986) (en banc)
United
States v. Gonzales,
520
U.S. 1 (1997)
Valerio
v. Putnam Associates Inc.,
173
F.3d 35 (1st Cir. 1999)
Vasquez
v. Zenith Travel,
2000
WL 1532953 (S.D.N.Y. Oct. 16, 2000)
Yellow
Freight Systems, Inc. v. Reich,
38
F.3d 76 (2d. Cir. 1994)
STATUTES
Employee
Retirement Income Security Act (ERISA)
..... 29 U.S.C. § 1001, et seq
..... 29 U.S.C. §§ 1104, 1105, 1106, and
1109
Section
510, 29 U.S.C. § 1140 passim
Section
502(a)(3), 29 U.S.C. 1132(a)(3)
Sarbanes-Oxley
Act
..... 18 U.S.C. § 1514A
Fair
Labor Standards Act (FLSA)
..... 29 U.S.C. § 215
..... 29 U.S.C. § 15(a)(3)
..... 29 U.S.C. § 215(a)(3)
Title
VII
..... 42 U.S.C. § 2000e-3(a)
Occupational
Safety and Health Act
..... 29 U.S.C. § 660(c)
Migrant
and Seasonal Agricultural Worker Protection Act
..... 29 U.S.C. § 1855(a)
Clean
Water Act
..... 33 U.S.C. § 1367(a)
Surface
Transportation Assistance Act
..... 49 U.S.C. § 31105(a)
Fed.
R. Civ. P. 11(b)
Fed.
R. Civ. P. 26(g)
Hawaii
Whistle Blowers' Protection Act, Haw. Rev.
Stat.
§§ 378-61 et seq
Energy
Reorganization Act (ERA)
Safety
Transportation Assistance Act
Federal
Deposit Insurance Act
Atomic
Energy Act
OTHER
AUTHORITIES
119
Cong. Rec. 30044 (1973)
H.R.
No. 93-453, reprinted in 1974 U.S.C.C.A.N. 4639, 4655
S.
Rep. No. 93-127, reprinted in 1974 U.S.C.C.A.N.4838, 4871
QUESTION PRESENTED
Whether section 510 of ERISA, 29 U.S.C. § 1140,
protects from retaliation a plan participant and fiduciary who complains to
management concerning possible ERISA violations.
INTEREST OF THE
SECRETARY
The Secretary of
Labor has primary enforcement authority for Title I of the Employee Retirement
Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq. The Secretary's interests include promoting
uniformity of law, protecting beneficiaries, enforcing fiduciary standards, and
ensuring the financial stability of employee benefit assets. Secretary of Labor v. Fitzsimmons,
805 F.2d 682 (7th Cir. 1986) (en banc).
ERISA section 510, 29 U.S.C. § 1140, protects
participants against retaliation for exercising rights granted to them by ERISA
or their plan and for giving information in proceedings related to ERISA. At issue in this case is whether the
protection of section 510 of ERISA for "any person because he has given
information or has testified or is about to testify in any inquiry or proceeding
relating to this Act" applies to a participant and fiduciary of an
ERISA-covered plan who initiates or takes part in an internal, informal
investigation of possible ERISA violations.
The district court
held that section 510's protections extend only to those who make formal,
external inquiries. The Secretary has a
significant interest in ensuring that ERISA section 510 is interpreted broadly
to protect participants and fiduciaries who uncover and attempt to remedy statutory
violations. In addition, the Court's
decision here may affect the interpretation of the numerous other
anti-retaliation provisions that the Secretary administers. See, e.g., 29 U.S.C. § 660(c)
(Occupational Safety and Health Act); id. § 1855(a) (Migrant and
Seasonal Agricultural Worker Protection Act); 33 U.S.C. § 1367(a) (Clean Water
Act); 49 U.S.C. § 31105(a) (Surface Transportation Assistance Act); 18 U.S.C. §
1514A (Sarbanes-Oxley Act).
STATEMENT OF THE CASE
I. Facts
On July 22, 1998,
Horizon Media, Inc. (Horizon or Appellee), hired Appellant Chrystina Nicolaou
as Director of Human Resources and Administration. [JA-8] The complaint [JA-1] alleges that, as HR
Director, Nicolaou served as a discretionary trustee and thus as a
fiduciary to Horizon's 401(k) plan. [JA-8] Nicolaou was also a plan participant. Initially, Nicolaou reported to Jerry Riley, the company's chief
financial officer (CFO). In October
1998, Nicolaou began reporting to William Koenigsberg, the president of the
company and to Stewart Linder, the controller. [JA-8]
Sometime after commencing her employment, Nicolaou
discovered payroll discrepancies involving the underpayment of overtime to
certain employees. [JA-8] Nicolaou also
discovered that Horizon had been underpaying these employees for approximately
ten years, which caused the Horizon 401(k) plan to be underfunded. [JA-9]
When she first discovered the payroll underpayment
issue, Nicolaou advised CFO Riley of the payroll discrepancy, but he took no
action. [JA-8 – JA-9] In January or
February 1999 and again in August 1999, Nicolaou raised the underpayment
payroll issue with Controller Linder, who, like Riley, took no action.
[JA-9] Convinced by then that she had
not received an adequate response, Nicolaou contacted Mark Silverman, counsel
for Horizon, to request an investigation of the illegal payroll practice.
[JA-9] Nicolaou emphasized to
Silverman, as she had to both Riley and Linder, that the failure to pay
overtime also resulted in underfunding of the 401(k) plan. [JA-9] Nicolaou contends that by initiating an
investigation of Horizon's underfunding of the 401(k) plan, she was acting in
her capacity as fiduciary of the 401(k) plan. [JA-9 – JA-10]
.Shortly after her meeting with Horizon's attorney,
Silverman confirmed Nicolaou's findings regarding the payroll issue.
[Ja-10] In November 1999, both
Silverman and Nicolaou met with Horizon President, Koenigsberg. At the November 1999 meeting, Silverman
described the payroll discrepancy and the under-funding of the 401(k) pension
plan. Silverman stressed the need for
immediate resolution of the violations. [JA-10] Within a few days of the November meeting, Ms. Nicolaou was
demoted from Director of Human Services and Administration to Office Manager.
[JA-10 – JA-11] Horizon hired two
additional people to assume all the duties of the Director position.
[JA-11] On November 7, 2000, Ms.
Nicolaou was terminated. [JA-12]
II. Procedural Background
Appellant filed
her complaint against Horizon alleging that Horizon violated the
anti-retaliation provision in ERISA section 510, as well as the similar
provision in section 15 of the Fair Labor Standards Act (FLSA), 29 U.S.C. §
215. [JA-1] Nicolaou brought her ERISA
claim pursuant to ERISA section 502(a)(3), which allows a plan participant,
beneficiary or fiduciary to sue for "appropriate equitable relief" to
remedy a violation of the Act. 29
U.S.C. 1132(a)(3). Horizon moved to
dismiss for failure to state a claim.
In an opinion dated September 19, 2003, the district court granted
Horizon's motion, dismissing both the ERISA and FLSA claims. In dismissing the ERISA claim, the court
reasoned that the plaintiff had not sought equitable relief within the meaning
of section 502(a)(3). The court did
not, however, decide whether Nicolaou had stated a viable claim under ERISA
section 510. Nicolaou v. Horizon
Media, Inc., 2003 WL 22208356 (S.D.N.Y. Sept. 23, 2003). [JA-23]
On
reconsideration, the district court found that Plaintiff was, in fact, seeking
an equitable remedy. The court
nevertheless affirmed its decision dismissing the ERISA claim, concluding that
ERISA's anti-retaliation provision only applies to formal, external
investigations or proceedings relating to the statute. Nicolaou v. Horizon
Media, Inc., 2003 WL 22852680 (S.D.N.Y. Oct. 15, 2003). [JA-32] The court reasoned that the relevant
language in section 510 cannot be distinguished from language in the
anti-retaliation provisions in the FLSA and Title VII, which the Second Circuit
had construed not to apply to informal, internal complaints. Lambert v. Genesee, 10 F.3d 46 (2d
Cir. 1993) (holding that the plain language of FLSA section 15(a)(3) did not
provide a cause of action for retaliation for an informal complaint to a
supervisor). [JA-36] The district court
also relied on another decision from the Southern District of New York
construing a similar phrase in Title VII as limited to formal complaints,
although the court there ultimately concluded that Title VII does protect
internal complaints because that Act contains additional broad language protecting
those who "oppose" illegal employment practices. Bick v. The City of New York, 1997 WL
381801 (S.D.N.Y. July 10, 1997). [JA-35]
The court below rejected, as unreasoned, the district court's holding in
Vasquez v. Zenith Travel, 2000 WL 1532953 (S.D.N.Y. Oct. 16, 2000), that
"formative inquiries" about discrepancies in a participant's plan
account were a protected activities under section 510. [JA-37 – JA-38, footnote
3] Finding no basis to distinguish ERISA
section 510 from the provision at issue in Genesee, the district court
rejected plaintiff's claim that her participation in an internal inquiry
regarding possible ERISA violations was protected under section 510. [JA-38]
After the district court denied her motion for
reconsideration, Nicolaou filed the instant appeal on November 7, 2003.
[JA-40] Nicolaou challenges the
district court's dismissal of her claim under ERISA section 510, but does not
here challenge the court's dismissal of her FLSA claim.
SUMMARY OF ARGUMENT
This Court has not addressed the question whether
internal inquiry into alleged ERISA violations is statutorily protected
activity under ERISA section 510. The
broadly-worded anti-retaliation provision in section 510 can and should be
interpreted to protect internal inquiries relating to possible ERISA
violations. Although the Second Circuit
has held that the anti-retaliation provision in the FLSA does not protect
internal complaints, the language of ERISA 510 distinguishes it from the FLSA
whistleblower provision. Given this
broad language, the Secretary agrees with the Ninth Circuit that section 510
protects from retaliation employees who complain to company management, and
disagrees with the Fourth Circuit's more cramped reading of the scope of this
provision. Furthermore, strong policy
considerations favor a broad interpretation of the statutory language to
include informal, internal inquiries or proceedings, particularly where, as
here, the complainant is a fiduciary charged with the critical duty to protect
the interests of participants and the plan's financial soundness.
ARGUMENT
I. By Its Terms, ERISA
Section 510 Broadly Protects Those Who Give Information In Any Inquiry, And Is
Distinguishable From The FLSA's Anti-Retaliation Language
As in any case involving statutory interpretation,
to determine whether section 510 prohibits an employer from taking adverse
action against someone who participates in an internal corporate investigation
or inquiry relating to ERISA, "the starting point must be the language
employed by Congress." Reiter
v. Sonotone Corp., 442 U.S. 330, 337 (1979). In pertinent part, section 510 provides:
It shall be unlawful for any person
to discharge, fine, suspend, expel, or discriminate against any person because
he has given information or has testified or is about to testify in any
inquiry or proceeding relating to this Act or the Welfare and Pension
Disclosure Act. The provisions of
section 502 shall be applicable in the enforcement of this section.
29 U.S.C. § 1140 (emphasis
added). By its terms, section 510
extends protection in any of three situations: (1) when a person has given
information in any inquiry or proceeding relating to ERISA; (2) when a person
has testified in any inquiry or proceeding relating to ERISA; or (3) when a
person is about to testify in any such inquiry or proceeding.
The text of
ERISA section 510 is broad and most naturally read to encompass retaliation for
providing information in both informal, internal inquiries and formal, external
investigations and court proceedings. A
person who, like respondent, has provided information about possible ERISA
violations in an informal inquiry internal to the company that sponsors the
ERISA plan has "given information . . . in any inquiry . . . relating to [ERISA]" within the meaning
of this provision. The terms
"information" and "inquiry" are both extremely broad in
scope, and they are not naturally understood as limited to formal submissions
in official, external proceedings. The
breadth of those terms is reinforced by their juxtaposition with the narrower
terms "testify" and "proceeding," which may connote more
formal submissions. By using not only
the term "testify" but also the term "give[] information,"
and by using not only the term "proceedings" but also the term
"inquiry," Congress made clear that it intended to protect all
provision of information in all kinds of investigations – whether formal or
informal, internal or external. The use
of the modifier "any" before the word "inquiry" provides
further indication that Congress did not intend to limit the kinds of
investigations that are covered by the anti-retaliation provision. See Department of Housing and
Urban Development v. Rucker, 535 U.S. 125, 131 (2002) ("
As
we have explained, 'the word 'any' has an expansive meaning, that is, 'one or
some indiscriminately of whatever kind.'"),
quoting United States v. Gonzales,
520 U.S. 1, 5 (1997); accord Brogan v. United States, 522
U.S. 398, 400 (1998); International Union of Operating Engineers v. Flair
Builders, Inc., 406 U.S. 487, 491 (1972).
In interpreting
ERISA section 510, the district court here looked to Second Circuit law
interpreting the scope of the anti-retaliation provision in the FLSA. Section 15(a)(3) of FLSA, provides that
"it is unlawful for any person to discharge or in any other manner
discriminate against any employee because such employee has filed any complaint
or instituted any proceeding under or related to [FLSA], or has testified or is
about to testify in any such proceeding, or has served or is about to serve on
an industry committee." 29 U.S.C.
§ 215(a)(3). Most courts have
interpreted this language to cover plaintiffs who lodge informal complaints
with employers, and hold that an informal assertion of rights under the FLSA to
an employer triggers protection under the language of section 15(a)(3). See Lambert v. Ackerly, 180
F.3d 997 (9th Cir. 1999); Valerio v. Putnam Assocs. Inc., 173 F.3d 35
(1st Cir. 1999); EEOC v. Romeo Community Schools, 976 F.2d 985, 989 (6th
Cir. 1992); Crowley v. Pace Suburban Bus. Div. of Reg'l Transp. Auth.,
938 F.2d 797 (7th Cir. 1991); EEOC v. White & Son Enterprises, 881
F.2d 1006, 1011 (11th Cir. 1989); Brock v. Richardson, 812 F.2d 121,
124-25 (3d Cir. 1987); Love v. RE/MAX of Am., Inc., 738 F.2d 383, 387
(10th Cir. 1984); Brennan v. Maxey's Yamaha, Inc., 513 F.2d 179, 181
(8th Cir. 1975); Coyle v. Madden, 2003 WL 22999222, *3 (E.D. Pa. Dec.
17, 2003). The Secretary agrees with
these decisions and believes that this Court erred to the extent it held that
the "plain language of [FLSA section 15(a)(3)] limits the cause of action
to retaliation for filing formal complaints, instituting a proceeding, or
testifying, but does not encompass complaints made to a supervisor." Genesee, 10 F.3d at 55.
It is possible, however, to read Genesee
somewhat more narrowly than this broad language would suggest. But even if the Second Circuit reads Genesee
to foreclose FLSA whistleblower protection for all internal complaints related
to that statute, the language of section 510 is significantly different
and broader than the language in the FLSA and is more akin, though by no means
identical, to language in Title VII that the Second Circuit has recognized
encompasses internal complaints. See Kotcher v. Rosa and Sullivan
Appliance Center, 957 F.2d 59, 64 (2d Cir. 1992).
Under its terms,
the protections of the FLSA whistleblower provision are triggered only by: (1)
filing a complaint; (2) instituting any proceeding under or related to FLSA; or
(3) serving on an industry committee. 29
U.S.C. § 215(a)(3). Title VII's
anti-retaliation provision, on the other hand, makes it an "illegal
employment practice for an employer to discriminate against any of his
employees . . . because he has opposed any practice made an unlawful employment
practice under this section, or because he had made a charge, testified,
assisted, or participated in any manner in an investigation, proceeding or
hearing under this subchapter." 42
U.S.C. § 2000e-3(a). Although the Genesee
decision focused on Title VII's "opposition" language (forbidding
retaliation for opposing any unlawful employment practice) in concluding that
Title VII could be distinguished from the FLSA, 10 F.3d at 55, we believe that
it is also significant that Title VII, like ERISA but unlike the FLSA, also
broadly accords protection to participants with respect to "any
inquiry."
Thus, although
ERISA section 510 does not contain an "opposition" clause similar to
Title VII's provision, its expansive language likewise distinguishes it from
the FLSA provision. Section 510
protects from retaliation any person who " has given information or has
testified or is about to testify in any inquiry or proceeding relating
to" ERISA. Webster's Dictionary
defines "inquiry" primarily as "a request for information,"
and secondarily as "a systematic investigation often of a matter of public
interest." While the second
definition's use of the term "systematic" does connote a certain
level of formality, it does not imply an external setting. Moreover, the primary definition – "a
request for information" – is exceedingly broad and open-ended. This contrasts with the term
"proceeding," which is defined by Webster's as "an official
record of things said or done" (emphasis added), which presumably connotes
a somewhat more formal undertaking.
Thus, as one would expect, in choosing to use two different words –
"inquiry" and "proceeding" – Congress appears to have meant
two somewhat different things. Whatever
level of formality is implied by the term "proceeding, by using the term
"inquiry," Congress made clear its intent to ensure protection for
those involved in the informal gathering of information or investigation.
Nor does the
Secretary agree with the district court that the fact that the Secretary can
conduct investigations changes the analysis.
Nicolaou, 2003 WL 22852680, *2.
While it is true that the term "inquiry" could connote an
investigation by the Secretary of Labor, as the court below suggested, there is
no reason based on the language or structure of the statute, or its legislative
history as discussed below, to limit the term to such a situation. Cf. Fed. R. Civ. P. 11(b), 26(g) (requiring
reasonable inquiry by attorney or party before signing pleadings). Indeed, the Act clearly contemplates what
history has borne out: that private litigants will be the primary enforcers of
ERISA's requirements and duties. Thus,
reading the term "inquiries" to apply only to Secretarial
investigations is a very cramped interpretation of the term, which makes the
protection for "inquiries" rather illusory in the great majority of
situations. See Central States, Southeast & Southwest
Areas Pension Fund v. Central Transport, Inc., 472 U.S. 559 (1985)
(upholding plan trustees' authority to audit employers to ensure they contributed
required amounts to the plan).
Nothing in ERISA's
legislative history indicates that Congress used the term "inquiry"
to denote a formal, external setting.
The district court relies on an irrelevant passage of legislative
history, not related to section 510, where Congress used the word
"inquiry" synonymously with the term "investigations" and
"proceedings." 2003 WL
22852680, *2. There is, in fact, no
legislative history directly on point.
The little legislative history concerning section 510 indicates that
Congress intended plaintiffs to possess the same broad protection available
under Title VII. During the debates leading to the passage of
ERISA, Senator Javits of New
York characterized section 510 as "provid[ing] a remedy for any person fired such as is provided for a person
discriminated against because of
race or sex, for example." 119 Cong. Rec. 30044 (1973). Senator
Javits reemphasized that section 510 "gives the employee the same right[s]" as a person discriminated
against on the basis of race or sex
discrimination. Id. Still
other evidence indicates that Congress intended section 510 plaintiffs to possess the same broad equitable
remedies that are available under Title
VII. In enacting section 510, both houses of Congress specifically noted: "The enforcement
provisions have been designed
specifically to provide beneficiaries with broad remedies for redressing or preventing
violations of the Act. The intent of the Committee is to provide the full range of legal and equitable
remedies available in both state and
federal courts[.]" H.R. No. 93-453, reprinted in 1974 U.S.C.C.A.N. 4639, 4655; S. Rep. No. 93-127, reprinted in 1974
U.S.C.C.A.N. 4838, 4871.
II. The
Ninth Circuit Has Correctly Read Section 510 To Protect Claimants Who Initiate
or Participate In Internal Inquiries, While The Fourth Circuit Has
Misinterpreted This Provision
The Ninth Circuit
has addressed the need to broadly interpret ERISA's anti-retaliation provision,
and concluded that section 510 protects employees who report violations to
their employers. Hashimoto v. Bank
of Hawaii, 999 F.2d 408, 411 (9th Cir. 1993). In Hashimoto, the plaintiff was fired because she
complained to her superiors of "potential and/or actual violations by the
Bank of the reporting and disclosure requirements and fiduciary standards of
ERISA." Id. at 409. Plaintiff originally filed her claim in
state court alleging a violation of the Hawaii Whistle Blowers' Protection Act,
Haw. Rev. Stat. §§ 378-61 et seq. 999 F.2d at 411. The
defendant removed to federal district court and subsequently moved for summary
judgment, arguing that ERISA preempted the Hawaii whistleblower statute. Id. at 410. The district court granted defendant's motion, and dismissed the
claim. On appeal, the Ninth Circuit
agreed that ERISA preempted plaintiff's state law claim, but concluded that the
plaintiff's claim should be recharacterized and tried as a claim under ERISA
section 510. Id. at 409.
In holding that
the plaintiff had a claim under section 510 and that her state law claim was
thus preempted, the Ninth Circuit concluded that an employee who complains
about an alleged violation in connection with an ERISA plan is protected by
section 510 even if the complaint is not part of a formal inquiry. 999 F.2d at 411. The court reasoned that such employees should receive protection
at every step of the process. "The
normal first step in giving information or testifying in any way that might
tempt an employer to discharge one would be to present the problem first to the
responsible managers of the ERISA plan.
If one is then discharged for raising the problem, the process of giving
information or testifying is interrupted at its start: the anticipatory discharge discourages the
whistle blower before the whistle is blown." Id. at 411.
At least two
district courts have applied similar reasoning and likewise have concluded that
section 510 protects those who make internal complaints. See Vasquez , 2000 WL 1532953,
at *4 ("Although the body of 'whistleblower' cases under section 510 is
far from voluminous, I find that even plaintiff's formative inquiries as to a
discrepancy in her account would be considered 'protected activities' under
ERISA."); McLean v. Carlson Companies, Inc., 777 F. Supp. 1480,
1484 (D. Minn. 1991) (reasoning that because the plaintiff would be protected
if she had actually filed a suit against her employer, she should be protected
when informing her supervisors of violations).
The Fourth
Circuit, on the other hand, has held that section 510 does not extend its
protection to an employee who complained both orally and in writing to other
employees or her supervisor. King v.
Marriott International, Inc. 337 F.3d 421, 426-27 (4th Cir. 2003). The court of appeals concluded that ERISA's
anti-retaliation provision, although more expansive than FLSA's participation
provision, is nonetheless limited to a legal or administrative inquiry or
proceeding. Id. at 427. The court reasoned that "the use of the
phrase 'testify or is about to testify' does suggest that the phrase
'inquir[ies] or proceeding[s]' referenced in section 510 is limited to the
legal or administrative, or at least to something more formal than written or
oral complaints made to a supervisor.
The phrase 'given information' does no more than insure that even the
provision of non-testimonial information (such as incriminating documents) in a
inquiry or proceeding would be covered."
Id. at 427.
The Secretary
disagrees with the Fourth Circuit's cramped reading of the statute, which fails
to account in a satisfactory manner for the use of the term "inquiry"
in section 510, and runs contrary to the prophylactic purposes of section 510,
which we discuss in the next section.
The Secretary agrees instead with the reasoning asserted in the Hashimoto,
Vasquez, and McLean decisions and would urge this Circuit
likewise to extend the protections of section 510 to cover internal, informal
inquiries/complaints.
III. Strong Policy Considerations Support
Reading Section 510 To Protect Internal Inquiries
Here, as we have
shown, there is a strong textual basis for concluding that Congress meant to
protect internal inquiries as well as formal complaints brought in court or
before the Secretary of Labor. But even
if the Secretary's interpretation were not supported by the more natural
reading of the statutory language, there are a number of significant policy
considerations that warrant a broad construction of the statute in favor of
protecting the whistleblower. Blackburn
v. Reich, 79 F.3d 1375, 1378 (4th Cir. 1996) ("the overall purpose of
the statute – the protection of whistleblowers – militates against an
interpretation that would make anti-retaliation actions more difficult").
First and
foremost, of course, is the fact that anti-retaliation provisions such
as section 510 are designed to encourage employees to report illegal
activity. Passaic Valley Sewerage
Comm'r v. U.S. Dep't of Labor, 992 F.2d 474, 478 (3d Cir. 1993). Given the number of plan participants
covered by ERISA, the Secretary simply does not have the resources to monitor
all alleged ERISA violations. Instead,
she must rely on employees, particularly plan fiduciaries, to police their own
plans, a task they could not (or would not) perform without protection from
retaliation throughout the process. By
protecting informal inquiries or proceedings, provisions such as section 510
help avoid the chilling effect of preemptive retaliation, where an employee is
fired before she has the chance to initiate a formal proceeding. Clean Harbors Envtl. Servs., Inc. v.
Herman, 146 F.3d 12, 21 (1st Cir. 1998); Passaic Valley, 992 F.2d at
478-79. A contrary result undermines
the palliative effects of the anti-retaliation provision, without serving any
apparent countervailing interest.
Clearly this is the case under ERISA, where the internal resolution of
problems at an early stage is in everyone's interests, not only because this
avoids resort to costly litigation, but also because many plan funding and
investment problems can be minimized if addressed at the outset.
Furthermore, plan fiduciaries operate under exacting
fiduciary obligations of duty and loyalty with regard to the plan and its
participants. "Fiduciaries are
assigned a number of detailed duties and responsibilities, which include the
'proper management, administration, and investment of [plan] assets, the
maintenance of proper records, the disclosure of specified information, and the
avoidance of conflicts of interests.'"
Mertens v. Hewitt, 508 U.S. 248, 251-252 (1993) (citing Massachusetts
Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 142-143 (1985); see also
29 U.S.C. §§ 1104, 1105, 1106, and 1109.
In this case, as in many, the fiduciaries are employees appointed by the
employer. If such fiduciaries do not
receive section 510's protection during the initial stages of an internal
investigation, and have reason to fear that they may lose their jobs if they
raise or attempt to address concerns about the plan, they may be hesitant to
vigorously carry out these essential and mandated fiduciary functions. It would seem an absurd result to hold a
fiduciary to a high standard of loyalty and prudence, and to impose personal
liability on the fiduciary who fails to live up to these standards, but not to
extend section 510's protections to the
fiduciary who does so. See Griffen
v. Oceanic Contractors, Inc., 458 U.S. 564, 575 (1982)
("interpretations of a statute which would produce absurd results are to
be avoided if alternative interpretations consistent with the legislative
purpose are available").
If informal complaints or inquiries do not receive
protection, employee participants and fiduciaries will inevitably be stymied in
their efforts to address and resolve problems related to their employee benefit
plans before they can make a formal complaint.
Equally troublesome, such a result discourages employees from bringing
possible ERISA violations to the attention of the company, which can
investigate and attempt to correct any problems in a far more cost-effective
manner than can be achieved through litigation or other more adversarial
proceedings. Moreover, under such a
reading of section 510, fiduciaries who are also employees will be placed in
the untenable position of risking their jobs if, by fulfilling their statutory
obligations to monitor plans and investigate the prudence of actions taken with
respect to those plans, they displease their superiors.
Indeed, Nicolaou presents a compelling case for
section 510's protections. Acting as a
plan fiduciary to her company's pension plan, she discovered an employer
practice that adversely affected the funding of the plan. Although she quite properly raised and
attempted to address the problem first with her supervisors, and ultimately
with the company president, she was rebuffed and ultimately demoted and then
terminated. The Secretary urges this
Court to view Nicolaou's persistence in raising her concerns up the company
chain of command as an appropriate precursor to requesting an investigation by
the Department of Labor or to filing, as a fiduciary to the plan, a lawsuit
against the company. Appellant's
internal actions should be protected not only in order to ensure that those
charged with protecting plans are able to carry out their duties, but also in
order to encourage resolution at the corporate level, rather than creating a
situation in which protecting whistleblowers from retaliation requires a formal
legal proceeding, the use of limited government resources, and the depletion of
plan assets.
CONCLUSION
For the reasons set forth above, the Secretary
requests that this Court reverse the district court's decision and conclude
that ERISA's anti-retaliation provision extends its protection to internal
inquiries or investigations.
Dated: March ______, 2004 Respectfully Submitted
HOWARD
M. RADZELY
Solicitor
of Labor
TIMOTHY
D. HAUSER
Associate
Solicitor
ELIZABETH
HOPKINS
Counsel
for Special Litigation
_______________________________
GAIL
ANN PERRY
Trial
Attorney
U.S.
Department of Labor
Office
of the Solicitor, Room N-4611
Plan
Benefits Security Division
200
Constitution Avenue, N.W.
Washington,
D.C. 20210
(202)
693-5600
Attorneys
for the Secretary of Labor
Footnotes:
Many courts have interpreted
variously-worded whistleblower provisions in other statutes to extend
protection to employees who make informal and/or internal complaints. See, e.g., Consolidated Edison of New
York, Inc. v. Donovan, 673 F.2d 61 (2d Cir. 1982) (employee received
statutory protection under the Energy Reorganization Act (ERA) for complaining
about nuclear safety hazards in the workplace); Clean Harbors Envtl.
Servs., Inc. v. Herman, 146 F.3d 12 (1st Cir 1998) (employee protected under Safety
Transportation Assistance Act for reporting violations to supervisors and corporate compliance
personnel); Haley v. Retsinas, 138 F.3d 1245 (8th Cir. 1998) (employee
memorandum containing "information regarding any possible violation of
law" or information regarding an "abuse of authority," was
protected by Federal Deposit Insurance Act's whistleblower provision); Bechtel Constr. Company v. Secretary of
Labor, 50 F.3d 926 (11th Cir. 1995) (employee's actions that questioned supervisors
instructions on safety procedures and raised particular, repeated concerns
about safety procedures was tantamount to a "complaint" under the ERA);
Passaic Valley Sewerage Comm'rs v. U.S. Dep't of Labor, 992 F.2d 474 (3d
Cir. 1993) (agreeing with the Department's interpretation of the Clean Water
Act as applying to intracorporate complaints); and Couty v. Dole, 886
F.2d 147 (8th Cir. 1989) (temporal proximity between employee's discharge and his threats to
bring safety complaints to attention of Nuclear Regulatory Commission was
sufficient to establish inference of retaliatory motive for engaging in
protected activity under Atomic Energy Act); but see e.g.,
Brown & Root v. Donovan, 747 F.2d 1029 (5th Cir. 1984) (holding that
the Energy Reorganization Act was not broad enough to protect the activity of
filing purely internal quality reports); cf. Yellow Freight Systems,
Inc. v. Reich, 38 F.3d 76 (2d Cir. 1994) (reading Surface Transportation
Assistance Act to protect driver who was fired for refusing to drive truck he
alleged to be unsafe).