Zahara v. SLM Corp., 2006-SOX-130 (ALJ Nov. 1, 2007)

May 9, 2009

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Zahara v. SLM Corp., 2006-SOX-130 (ALJ Nov. 1, 2007)

U.S. Department of Labor Office of Administrative Law Judges
90 Seventh Street - Suite 4-800
San Francisco, CA 94103 DOL Seal

Issue Date: 01 November 2007
CASE NO.: 2006-SOX-00130
In the Matter of
MICHAEL ZAHARA,
      Complainant,
v.
SLM CORPORATION,
      Respondent.

DECISION AND ORDER OF DISMISSAL GRANTING RESPONDENT'S
THIRD MOTION TO DISMISS AND ORDER CANCELING HEARING
   This action involves a complaint under the employee protection provisions of the Corporate and Criminal Fraud and Accountability Act, Title VIII of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A, et seq. ("Sarbanes-Oxley," "SOX," or "the Act"), and its implementing regulations at 29 C.F.R. Part 1980.

PROCEDURAL BACKGROUND
   On September 18, 2006, I issued a notice of hearing setting this case for trial on October 30, 2006, in Las Vegas, Nevada. On October 12, 2006, I issued an order denying Respondent's first motion to dismiss without prejudice, but admonishing Complainant to comply with all pretrial orders, applicable regulations, and statutes because he failed to provide Respondent with a copy of his notice of appeal as required by 29 C.F.R. § 1980.106(a). At that time, I also warned Complainant that "[f]ailure to properly respond to my orders or applicable statutes and/or regulations may result in sanctions including dismissal of the complaint or answer, as applicable."
   On June 21, 2007, Respondent filed its second motion to dismiss based on Complainant's failure to identify an appropriate protected activity in support of his prima facie case, and failure to comply with the discovery statutes by providing proper responses. On July 5, 2007, Complainant responded to the motion to dismiss, primarily arguing that: (1) while Complainant has failed to properly respond to Respondent's discovery requests, he would respond further through his upcoming deposition in Las Vegas; (2) the investigative

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United States Department of Labor's Occupational Safety and Health Administration's ("OSHA's") file should contain all the information Respondent needs for trial; and (3) to the extent that Complainant has withheld evidence, there is no harm to Respondent because Complainant also cannot use this withheld evidence at trial.
   On July 3, 2007, Respondent filed a supplement to its earlier motion to dismiss ("supplemental motion") which incorporated some of Complainant's deposition testimony but also reiterated its previous arguments in favor of dismissal. Respondent's supplemental motion also added an alternate request that Complainant be compelled to further respond to Respondent's original discovery requests, including interrogatories and requests for production of documents.
   On July 18, 2007, Complainant filed his response to Respondent's supplemental motion, arguing that Respondent's motion was moot because sufficient answers to Respondent's discovery requests were provided during Complainant's deposition on July 12, 2007. Complainant also asserted that Respondent's discovery requests were unnecessary because this case simply turns on the question of whether Respondent's decision to suspend and terminate Complainant's employment for e-mailing social security numbers to his personal email address should have been overturned once Complainant informed Respondent that he sent the email as part of a SOX investigation. Alternatively, Complainant requested a confidential ex parte meeting to discuss the alleged confidential information responsive to discovery requests.
   On July 27, 2007, Respondent filed its reply to Complainant's response to Respondent's supplemental motion. Respondent argued that the action should be dismissed for Complainant's failure to comply with my prior orders and failure to respond to discovery requests. Respondent also discovered that Complainant turned over the requested relevant documents to unnamed third parties and actually deleted or destroyed certain relevant evidence, such as his July 15, 2005 email containing the social security numbers of five student loan applicants. Respondent's 10/4/07 Motion to Dismiss, EX. "1" at 271-75. Alternatively, Respondent asked that Complainant be compelled to cooperate and make a good faith attempt to produce documents. Respondent also asked that Complainant be compelled to fully respond under oath to the outstanding interrogatories and to continue his deposition via telephone in order to answer questions which he refused to answer at his July 12, 2007 deposition.
   On August 20, 2007, I conducted a telephone status conference and heard oral argument from counsel for both parties regarding the pending motions. Both parties stipulated to, and substantial evidence supported, the following undisputed facts:

1. Complainant engaged in only one alleged protected activity in this case when he emailed five (5) social security numbers ("confidential information") to his personal email address on July 15, 2005.
2. Upon discovering that Complainant had emailed confidential information to his personal email address, Respondent made the decision to suspend and terminate Complainant's employment on August 11, 2005.

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3. On August 11, 2005, Respondent suspended Complainant's employment without pay, but did not notify him that it had decided to terminate his employment.
4. After Respondent suspended Complainant's employment on August 11, 2005, Complainant, for the first time, notified Respondent that the transfer of confidential information to his personal email address on July 15, 2005 was a protected activity because he was participating in a SOX investigation with the Government Accountability Office and/or the Securities Exchange Commission.
5. On August 16, 2005, Respondent officially terminated Complainant's employment.

August 27 Order at p.3.
   On August 27, 2007, I issued an order denying Respondent's second motion to dismiss, granting Respondent's motion to compel discovery and for third continuance of trial, and extending filing deadlines. I found that Complainant had failed to properly respond to Respondent's discovery requests without identifying any proper privilege which would entitle him to limit his responses or refuse to turn over documents or answer interrogatories or deposition questions. In addition, I found that Complainant again failed to comply with my prior order to comply with 29 C.F.R. § 18, et. seq. and the Federal Rules of Civil Procedure, Rules 26, 30, 33, 34, and 37, by refusing to produce documents and respond to deposition and interrogatory questions after having waived all timely objections.
   I once again admonished Complainant to comply with all pre-trial orders, applicable regulations, and statutes because he failed to provide Respondent with a copy of his notice of appeal as required by 29 C.F.R. § 1980.106(a) and he also had failed to make a good faith attempt to comply with ordinary discovery requests. In addition, I gave Complainant and his counsel one further chance to fully respond to the outstanding discovery requests on or before September 28, 2007. I ordered Complainant to cooperate with Respondent's outstanding discovery requests, make a good faith attempt to answer interrogatories, produce documents, and answer questions relating to his communications with various government agencies that he refused to answer at his July 12, 2007 deposition. Again, I warned Complainant that "further failure to properly comply with my orders or applicable statutes and/or regulations may result in sanctions including dismissal of the complaint, as applicable.
   On October 4, 2007, Respondent filed a third motion to dismiss (the 3rd Motion to Dismiss"), alleging that Complainant had still produced virtually no documents and provided no additional responses to the Interrogatories.¹ Respondent supported those allegations with excerpts from Complainant's September 27, 2007 deposition, in which Complainant admitted that he had made almost no effort to obtain any documents since the August 20, 2007 teleconference.² Moreover, Complainant still refused to answer questions related to his

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communications with government agencies, again claiming that he was forbidden to answer by some unidentified court.³ Complainant again refused to provide the identity or location of the court, the nature of the action, the identity of the parties, or identity of the attorneys involved.⁴ Complainant also admitted to destroying evidence after filing this complaint, while represented by counsel.⁵
   This case is currently set for trial on Thursday, December 6, 2007. It has been continued three times due to Complainant's failure to timely serve his notice of appeal to Respondent, his intentional destruction of relevant evidence after retaining legal counsel and filing his complaint in this action, and his continuing failure to properly respond to ordinary discovery requests.
   Complainant has, as of this date, again failed to comply with another order of this Court – my August 27 Order by not filing any opposition to Respondent's 3rd Motion to Dismiss as ordered by me.

DISCUSSION
   Despite numerous notices, reminders, and admonishments, Complainant has repeatedly failed to comply with my pre-trial orders and deadlines. 29 C.F.R. subsection 18.6(d)(2)(v) gives an administrative law judge ("ALJ") the authority to render a decision against a party who fails to comply with an order. It states:

If a party or an officer or agent of a party fails to comply with … an order, including, but not limited to, an order for the taking of a deposition, the production of documents, or the answering of interrogatories, or requests for admissions, or any other order of the administrative law judge, the administrative law judge, for the purpose of permitting resolution of the relevant issues and disposition of the proceeding without unnecessary delay despite such failure, may take such action in regard thereto as is just, including but not limited to the following: . . .
(v) Rule that a pleading, or part of a pleading, or a motion or other submission by the non-complying party, concerning which the order or subpoena was issued, be stricken, or that a decision of the proceeding be rendered against the non-complying party, or both.

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29 C.F.R. 18.6(d)(2)(v) (emphasis added). This power is essential to an ALJ's management of a case. In Supervan, Inc., the Administrative Review Board explained:

If an ALJ is to have any authority to enforce prehearing orders, and so to deter others from disregarding these orders, sanctions such as dismissal or default judgments must be available when parties flagrantly fail to comply. . . . . The Aiken rationale must be applied to all situations involving flagrant non-compliance with discovery requests and orders. To hold otherwise would render the discovery process meaningless and vitiate an ALJ's duty to conclude cases fairly and expeditiously.

   Supervan, ARB No. 00-008, ALJ No. 94-SCA-14 (Sept. 30, 2004) (quoting Cynthia E. Aiken, BSCA No. 92-06 (July 31, 1992)); see also Powers v. Pinnacle Airlines, Inc., ARB No. 05-022, ALJ No. 2004-AIR-32 (Jan. 31, 2006). However, dismissal is a severe sanction, and is usually reserved for flagrant or repeated violations of orders. See Supervan, ARB No. 00-008.
   Furthermore, the authority to dismiss a case also comes from an ALJ's inherent power to manage and control his or her docket and to prevent undue delays in the orderly and expeditious disposition of pending cases. See Link v. Wabash Railroad Co., 370 U.S. 626 (1962).
   Here, Complainant has repeatedly refused to answer questions related to his communications with government agencies. Complainant has not identified any proper privilege which would entitle him to limit his responses, refuse to turn over documents, or answer interrogatories or deposition questions. Moreover, his refusal to answer questions during his September 27, 2007 deposition was a flagrant violation of my express August 27, 2007 order to the contrary. Furthermore, I further find that Complainant's communications with government agencies are directly relevant to Respondent's defense. Therefore, I find that Complainant's refusal to answer such questions unfairly prejudices Respondent.
   Complainant has also refused to produce documents or answer interrogatories in good faith. Complainant admits that, other than sending a single email and providing a portion of one pay stub, he made no other efforts to comply with my August 27, 2007 order to produce documents or answer interrogatories. Because Respondent's discovery requests are critical to defending this claim, I find that Complainant's refusal to produce documents or answer interrogatories in good faith unfairly prejudices Respondent and is a flagrant violation of my express August 27, 2007 order.
   Complainant also admitted to destroying evidence after filing this complaint, while represented by counsel. Respondent's 10/4/07 Motion to Dismiss, EX. "1" at 271-75.
   Because Complainant has violated my express orders, and because those violations are flagrant, repeated, and prejudicial to Respondent, I find it just to dismiss Complainant's complaint pursuant to subsection 18.6(d)(2)(v).

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   Finally, I find that Complainant's repeated failure to comply with my orders and deadlines is causing undue delay to the orderly and expeditious disposition of this case and others pending in my docket. I also dismiss the claim under my inherent authority to do so in order to manage and control my docket. See Link, 370 U.S. 626 (1962).

DECISION AND ORDER
   For the reasons stated above:
   IT IS ORDERED that, pursuant to 29 C.F.R. 18.6(d)(2)(v), Respondent's October 4, 2007 Motion to Dismiss is GRANTED.
   IT IS FURTHER ORDERED that Complainant Michael Zahara's complaint is DISMISSED with prejudice and without cost or attorneys' fees to either party. Accordingly, the formal hearing scheduled for December 6, 2007, in Las Vegas, Nevada, is CANCELLED.

            GERALD M. ETCHINGHAM
            Administrative Law Judge
San Francisco, California

NOTICE OF APPEAL:

NOTICE OF APPEAL RIGHTS: To appeal, you must file a Petition for Review ("Petition") with the Administrative Review Board ("Board") within ten (10) business days of the date of the administrative law judge's decision. See 29 C.F.R. § 1980.110(a). The Board's address is: Administrative Review Board, U.S. Department of Labor, Room S-4309, 200 Constitution Avenue, NW, Washington, DC 20210. Your Petition is considered filed on the date of its postmark, facsimile transmittal, or e-mail communication; but if you file it in person, by hand-delivery or other means, it is filed when the Board receives it. See 29 C.F.R. § 1980.110(c). Your Petition must specifically identify the findings, conclusions or orders to which you object. Generally, you waive any objections you do not raise specifically. See 29 C.F.R. § 1980.110(a).
At the time you file the Petition with the Board, you must serve it on all parties as well as the Chief Administrative Law Judge, U.S. Department of Labor, Office of Administrative Law Judges, 800 K Street, NW, Suite 400-North, Washington, DC 20001-8002. The Petition must also be served on the Assistant Secretary, Occupational Safety and Health Administration and the Associate Solicitor, Division of Fair Labor Standards, U.S. Department of Labor, Washington, DC 20210.
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If no Petition is timely filed, the administrative law judge's decision becomes the final order of the Secretary of Labor pursuant to 29 C.F.R. § 1980.109(c). Even if you do file a Petition, the administrative law judge's decision becomes the final order of the Secretary of Labor unless the Board issues an order within thirty (30) days after the Petition is filed notifying the parties that it has accepted the case for review. See 29 C.F.R. §§ 1980.109(c) and 1980.110(a) and (b).

[ENDNOTES]
¹ Respondent claims that Complainant produced exactly one piece of paper, a portion of a pay check from his current employer.
² Respondent's 10/4/07 ("3rd") Motion to Dismiss, Exh. 1 at 260-66.
³ Id. at 267-274.
⁴ Id. at 269.
⁵ Id. at 271-75.