The Seventh Circuit affirms summary judgment in a Sarbanes-Oxley (SOX) case, holding that the plaintiff lacked an objectively reasonable basis for believing that her employer was engaged in unlawful behavior when it negotiated with a contractor over the size of its bill. A dissent is filed, laying out a parallel, alternative version of events. The Fourth Circuit, in an unpublished opinion, reverses dismissal of a Title VII retaliation case at the pleadings stage.
Harp v. Charter Communications, Inc., No. 07-1445 (7th Cir. Mar. 16, 2009): The employee, Ms. Lane -- an auditor -- believed that her employer was about to sign-off on paying a contractor (MSTA) in full for services that it did not perform. After Harp complained about overbilling at a January 12, 2004 meeting with the contractor's representatives, ticking through the alleged misstatements, the meeting ended abruptly:
"According to Harp, in summarily terminating the meeting, [her supervisor] Wilson 'rescued MSTA's representatives' from having to answer direct questions about their wrongdoings. Harp then asserts that at the close of that meeting, Wilson directed Baker to pay MSTA the full contract amount. On appeal, Harp's allegation of fraud relies specifically on that alleged directive to pay the full amount . . . ."
Within six weeks, Harp was terminated (along with her entire audit department) as part of a reduction in force.
The panel majority holds that because the employee lacked any objectively reasonable basis for believing that the contractor was in fact overpaid, that she did not engage in a protected activity governed by SOX:
"The problem with Harp's case, however, is that the record does not support Harp's characterization of that January 12th meeting. Specifically, the record does not indicate that Wilson ordered payment of the full amount to MSTA, or even that he ordered payments of any amounts not properly earned. In the deposition testimony upon which she relies for this point, Harp does not recite any statements by Wilson. Instead, Harp relates a conversation with Baker, in which she asks him what he thinks Wilson intended after ending the meeting. Baker replied that with respect to the invoices, 'he had accrued for them, so he thought they were going to be paid.' When Harp was then asked if she knew what amount accrued, and whether it was the excess amounts she did not authorize, Harp replied that she did not know."
Picking through the balance of the record, including Harp's complaint and interogatory responses, the panel majority finds no basis for Harp's belief that her employer was collaborating in fraud. (In fact, the company did not pay the full invoiced amount, in the end.) The panel majority finds, in any event, that the employee could not show that the RIF of some 25 employees in her group (herself included), and 50 employees overall, was motivated by SOX retaliation:
"Harp simply has no evidence indicating that her termination was attributable to something other than the financial problems that necessitated the RIF. She relies entirely on the timing of the RIF, which is concededly proximate to the MSTA issues, but is also temporally tied to St Louis KMA's failure to make its budget which Harp does not contest. Harp analyzes the temporal proximity issue as if she were the only person subjected to the RIF, in which case the timing might suggest that the allegation of misconduct played a role. But the sheer scope of the RIF is relevant to what inference may reasonably be drawn. Harp points to evidence that the employer may have wanted to retaliate for her report of misconduct, and the ambiguity as to when the financial directive was issued, as evidence that 'the entire reduction of force was a ruse.' It is simply not a reasonable inference that despite the need to address the budget shortfalls, the RIF was actually an effort to retaliate against her for her complaint. The jury would have to conclude that in an effort to cover up the retaliatory action against Harp, Charter laid off the entire audit department as well as approximately 25 other individuals in other departments."
The dissent conceives of the case, though, as one where the protected act was heading off a fraud possibly in the making:
"This seems to me to be a very close case that vividly illustrates the dilemma facing an employee who thinks she may be able to stop a fraud from occurring. Employees who catch corporate misconduct in its formative stages are protected by the language and purpose of Sarbanes-Oxley (SOX). Yet, raising concerns before questionable practices are entirely resolved can be very awkward. An employee with a reasonable belief that she has detected corporate fraud as it is underway should not be discouraged from reporting it. Such a belief must be grounded in facts known to the employee, but the employer's response to a disclosure of those facts may be suspicious enough to add support to a reasonable belief that fraud is afoot. The employee should not have to wait until the fraud has been accomplished to register a concern."
(What may surprise those familiar with this court is that Judge Rovner, joined by Senior Judge Ripple, made up the panel majority affirming summary judgment, while recent appointee Judge Tinder authored the dissent.)
Prince-Garrison v. Maryland Department of Health, No. 08-1090 (4th Cir. Mar. 13, 2009): The Fourth Circuit --while affirming dismissal of most of the employee's claims for Title VII discrimination and hostile-work-environment -- remands the plaintiff's retaliation claim, holding that she adequately alleged an adverse action:
"The district court found that Prince-Garrison failed to state a claim of retaliation because she did not show a materially adverse employment action. The court noted the fact that an internal settlement between the parties retracted a five-day suspension and a prospective termination, and gave Prince-Garrison backpay. The court found a one-day suspension that remained was not objectively material. Moreover, the court found that Prince-Garrison failed to allege a causal connection between the protected activity and any adverse action because three months separated her initial complaint of discrimination and the purported retaliatory conduct.
"We conclude that under notice pleading requirements, Prince-Garrison stated a claim of retaliation sufficient to survive a motion to dismiss. Prince-Garrison engaged in protected activity during the complaint process with the Maryland Commission on Human Rights and when she repeatedly complained of discrimination to staff at MHDH. Prince-Garrison states that after her complaints she was prospectively terminated and immediately suspended. After these actions were rescinded, Prince-Garrison contends, she was micromanaged and treated with hostility. Prince-Garrison asserts she was also threatened with a cultural discrimination complaint to be filed by her supervisor if she did not rescind her complaints. While the activities Prince-Garrison complained of do not amount to actual discrimination or harassment prohibited by Title VII, it is enough for a retaliation claim that Prince-Garrison reasonably believed she was engaging in protected activity by complaining about them. Jordan, 458 F.3d at 339-40. Moreover, the district court is incorrect in concluding that the mediation and settlement resolved all adverse employment actions. Prince-Garrison was threatened with suspension at least three times and with termination twice, and despite later remedial action, there remains an inference of retaliation for engaging in a protected act. We conclude that because Prince-Garrison's complaint sufficiently creates an inference that retaliation occurred, the district court erred in finding that Prince-Garrison failed to state a claim of retaliation."