NON-PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Case No: 04-2075
TIMOTHY E. FLAKE,
Petitioner
v.
U.S. DEPARTMENT OF LABOR,
ADMINISTRATIVE REVIEW BOARD
Respondent
New World Pasta Company,
Intervenor
(*Pursuant to Clerk's Order of 8/30/06)
On Petition for Review from the Administrative
Review Board,
U.S. Department of Labor
ARB Case No.: 03-126
Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
September 19, 2007
Before: SLOVITER, SMITH, and GARTH, Circuit Judges
(Filed: September 21, 2007)
OPINION
SMITH, Circuit Judge.
Petitioner
Timothy E. Flake asks this Court to reverse the decision of the Administrative
Review Board (“ARB”) of the U.S. Department of Labor and hold that
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his former employer, New World Pasta Company, was covered by the whistleblower protection
provision of the Sarbanes-Oxley Act. Respondent is the Secretary of the U.S. Department
of Labor.[1] The
Secretary maintains that Flake’s whistleblower claim was discharged when New
World Pasta emerged from Chapter 11 bankruptcy. New World Pasta intervened in
this case to assert that Flake’s claim was discharged and, in the alternative,
that the ARB’s decision was correct. We will deny the petition.
I.
In 1999, New World Pasta registered an issue, due in 2009, of 9¼ percent Senior Subordinated
Notes in the principal amount of $160 million with the Securities Exchange Commission.
At all times since the issue, there have been fewer than 300 record holders of
the notes. The indenture agreement governing the notes required New World Pasta
to file a copy of “all quarterly and annual financial information that would be
required to be contained in a filing with the [Securities Exchange] Commission
on Forms 10-Q and 10K if the Company were required to file such forms,” and
“all current reports that would be required to be filed with the Commission on
Form 8-K if the Company were required to file such reports.” According to the
agreement, such filings were to be made “[w]hether or not [they were] required
by the Commission.”
Flake was employed by New World Pasta as its Corporate Controller and Chief
Page 3
Accounting Officer. Flake was suspended by New World Pasta on November 11, 2002. On
January 29, 2003, he filed a complaint with the Occupational Safety and Health Administration
(“OSHA”) pursuant to the whistleblower protection provision of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. § 1514A (“the Act”). He alleged that New World Pasta
retaliated against him because he had informed his supervisor of material accounting
irregularities. Flake’s employment was terminated on March 21, 2003.
OSHA investigated Flake’s complaint and, on April 9, 2003, found that New World
Pasta had not violated the Act. See 49 U.S.C. § 42121(b)(2) and 29 C.F.R. §
1980.105(a)(2) and (b). On May 12, 2003, Flake filed objections to OSHA’s
findings and requested a hearing before an Administrative Law Judge (“ALJ”). See
49 U.S.C. § 42121(b)(2)(A) and 29 C.F.R. § 1980.106(a). On July 7, 2003, the
ALJ granted New World Pasta’s motion for summary decision on the grounds that
New World Pasta was not covered by the whistleblower protection provision of
the Act.
Flake appealed to the ARB on July 21, 2003. On February 25, 2004, the ARB affirmed
the ALJ’s decision and dismissed the complaint. On April 20, 2004, Flake petitioned
this Court for review of the ARB’s decision.[2]
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On May 10, 2004, New World Pasta filed a voluntary petition for relief under Chapter
11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Middle District
of Pennsylvania. See 11 U.S.C. § 101 et seq. On or about May 27, 2004,
Flake was served with notice of the bankruptcy case by mail. On June 7, 2004,
Flake filed a letter which was construed as a motion for a suggestion of
bankruptcy in this Court, and which was granted on June 22, 2004. The appeal
was stayed until either the automatic stay in the bankruptcy case was lifted or
the claims discharged. New World Pasta emerged from bankruptcy on December 7,
2005. The plan of reorganization discharged all pre-petition claims against the
company and enjoined the prosecution of discharged claims. See 11 U.S.C.
§ 1141; 11 U.S.C. § 524.
II.
Flake asserts that the ARB’s decision that the terms of 18 U.S.C. § 1514A(a) do
not apply to New World Pasta is erroneous. The relevant portions of section 1514A
provide that
No company with a class of securities registered
under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l),
or that is required to file reports under section 15(d) of the Securities
Exchange Act of 1934 (15 U.S.C. 78o(d)), ... may discharge, demote, suspend,
threaten, harass, or in any other manner discriminate against an employee in
the terms and conditions of employment because of any lawful act done by the employee–(1)
to provide information ... regarding any conduct which the employee reasonably
believes constitutes a violation of section 1341, 1343, 1344, or 1348, any rule
or regulation of the Securities and Exchange Commission, or any provision of
Federal law relating to fraud against shareholders, when the information or
assistance is provided to ... (C) a person with supervisory authority over the
employee....
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Id. Flake does not contest that New World Pasta does not have a class of securities registered
under section 12 of the Securities Exchange Act. Instead, Flake asserts that New
World Pasta was subject to the whistleblower protection provision in § 1514A(a)
because it had publicly traded debt and it was required to file reports under
section 15(d) of the Securities Exchange Act. New World Pasta asserts that
because it had fewer than 300 record holders at the time Flake was hired
through his termination, it was not required to make any filings with the
Commission pursuant to section 15(d).
Flake’s argument that New World Pasta is required to file reports under section 15(d)
of the Securities Act of 1934, 15 U.S.C. § 78o(d), is premised on the terms of
the indenture agreement. He asserts that even if New World Pasta was not
statutorily required to file reports, the agreement with its debtholders is
sufficient to show that the company was required to make such filings “under
section 15(d).” We do not need to resolve this question, however, because
Flake’s claim was discharged in the bankruptcy proceeding.
The confirmation order of New World Pasta’s
reorganization plan was issued on November 21, 2005. The order stipulated that
[A]ll existing Claims against ... the Debtors shall be, and shall be deemed, discharged
and terminated, and all holders of Claims ... shall be precluded and enjoined
from asserting against the Debtors ... any other or further Claim ... based
upon any act or omission, transaction, or other activity of any kind or nature
that occurred prior to the Effective Date....
* * *
[E]ach holder ... of a Claim ... shall be deemed to
have forever waived, released, and discharged the Debtors, to the fullest
extent permitted by section 1141 of the Bankruptcy Code, of and from any and
all Claims, rights, and liabilities that arose prior to the Effective Date.
Upon the Effective Date, all such persons forever shall be precluded and
enjoined,
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pursuant to section 524 of the Bankruptcy Code,
from prosecuting or asserting any such discharged Claim against ... the
Debtors.
Flake received multiple notices regarding the bankruptcy proceedings. His name and address
appeared on the service lists for the “Notice of Commencement of Chapter 11 Bankruptcy
Cases,” dated June 4, 2004; the “Notice of Motion of Debtors for Order Establishing
a Bar Dates For Filing Proofs of Claim and Approving the Manner and Notice
Thereof,” dated August 13, 2004; a notice of various motions by the debtors, including
scheduling a hearing and establishing a hearing for confirmation of the reorganization
plan, dated July 29, 2005; and on “Schedule F–Creditors Holding Unsecured
Non-Priority Claims.”
As a known creditor of New World Pasta, Flake was entitled to actual written notice
of the bankruptcy filing and bar date for claims. See, e.g., City of New York v. New York,
N.H. & H.R. Co., 344 U.S. 293, 296 (1953); Chemetron
Corp. v. Jones, 72 F.3d 341, 346 (3d Cir. 1995). The bankruptcy filings
indicate that he was served with the requisite notice, and he does not suggest
otherwise. To the contrary, Flake wrote to this Court that he had been
“informed by counsel for New World Pasta Corporation that they have filed for
bankruptcy,” and expressed his opinion that his “appeal must be stayed pending
the completion of the bankruptcy proceeding.” His letter was construed as a suggestion
of bankruptcy and was accepted. Accordingly, Flake received due process of law.
See, e.g., Jones v. Chemetron Corp., 212 F.3d 199, 209 (3d Cir. 2000)
(“[I]f a potential claimant lacks sufficient notice of a bankruptcy proceeding,
due process
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considerations dictate that his or her claim cannot be discharged by a confirmation order.”).
As in Chemetron Corp. v. Jones, “[e]xcept for narrow statutory exceptions not
relevant here, confirmation of the debtor’s reorganization plan discharges all
prior claims against the debtor.” 72 F.3d at 346; see also 11 U.S.C. §
1141(d)(1)(A); 11 U.S.C. § 524(a)(2). Flake filed his complaint with OSHA on
January 29, 2003, over a year before New World Pasta’s petition for bankruptcy
relief. That complaint constituted a claim under 11 U.S.C. § 101(5)(A), which
was subsequently discharged by the terms of the reorganization plan for New
World Pasta. Because his claim was discharged and he is statutorily precluded
from continuing to prosecute it, we will dismiss Flake’s petition for review of
the ARB’s decision.[3]
[1]
The case was filed under the heading Flake v. United States Department of
Labor, Administrative Review Board. However, the Secretary of the
Department of Labor is the respondent in this appeal. The ARB is the entity
whose decision Flake asks us to review.
[2]
The Secretary of the Department of Labor had subject matter jurisdiction over
Flake’s complaint based on 18 U.S.C. § 1514A(b)(1)(A). The Assistant Secretary
of OSHA had responsibility for receiving and investigating whistleblower
complaints per Secretary’s Order 5-2002; Delegation of Authority and Assignment
of Responsibility to the Assistant Secretary for Occupational Safety and
Health, 67 Fed. Reg. 65,008 (Oct. 22, 2002). See also 29 C.F.R. §§
1980.104 and 1980.105. We have jurisdiction to review the Secretary’s order
under 49 U.S.C. § 42121(b)(4)(A).
[3]
Alternatively, even if Flake’s claim was not discharged in bankruptcy, our independent
review of the record reveals that the Administrative Review Board was not clearly
erroneous in finding that the whistleblower provision under Section 806 of the Sarbanes-Oxley
Act does not apply to New World Pasta and thus does not make relief available
to Flake. Because there have been fewer than 300 holders of New World Pasta registered
securities since its inception, the company’s duty to file reports under
Section 15(d) of the Securities Exchange Act of 1934 was automatically
suspended by statute. See 15 U.S.C. § 78o(d). Flake’s arguments
regarding the legislative history and public policy underlying the
Sarbanes-Oxley Act are without merit, since 15 U.S.C. § 78o(d) expressly excludes
closely-held companies such as New World Pasta from the Act’s provisions, which
are aimed at widely-held public corporations.
