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Sarbanes-Oxley determination precludes later discrimination lawsuit involving same facts

Sarbanes-Oxley determination precludes later discrimination lawsuit involving same facts
Source: Jackson Lewis LLP. Reproduced with permission. Copyright © 2009, Jackson Lewis. Originally published by Jackson Lewis, LLP, at www.jacksonlewis.com. All rights reserved.

In Tice v Bristol-Myers Squibb, No. 07-3977, the U.S. Circuit Court of Appeals affirmed a federal district court's decision that resolved a case that was initiated pursuant to the Sarbanes-Oxley Act.* It is likely that the theory underlying both the District Court?s and the Circuit Court?s rulings would be advanced in situations where a public employee decides to cite a Whistle Blower statute** in the course of defending himself or herself in an administrative disciplinary action but abandons the administrative appeal procedure in favor of filing a federal or state lawsuit alleging unlawful discrimination under State and Federal civil rights laws based on the same facts.

Jackson Lewis? summary of the Tice decision:

In a case of first impression, a federal appeals court in Philadelphia has issued a decision that demonstrates the significance of claims brought under the Sarbanes-Oxley Act (SOX). An employee may be precluded by statute from filing claims of discrimination pursuant to Title VII of the Civil Rights Act, the Age Discrimination in Employment Act and the Pennsylvania Human Relations Act against her former employer, where those claims are based on the same facts that supported her earlier, unsuccessful administrative SOX claim, the Third Circuit has ruled in an unpublished opinion.

SOX generally applies to companies listed on publicly traded stock exchanges and contains a whistleblower provision protecting from retaliation employees who complain of efforts to defraud shareholders.

The plaintiff, Carol Tice, was terminated for falsifying sales reports and failing to account for her assigned inventory. Subsequently, Tice filed an administrative claim with the Occupational Safety and Health Administration of the U.S. Department of Labor, alleging she was terminated because she reported illegal corporate activity, a violation of SOX. Specifically, she claimed the employer forced employees to falsify sales call reports, and she was terminated for reporting this corporate practice.

A Department of Labor Administrative Law Judge rejected Tice?s contentions, finding that the employer terminated her employment because she falsified her own sales call reports. The ALJ also determined that the employer demonstrated that it would have terminated or disciplined Tice for her misconduct regardless of her internal complaint.

Instead of appealing the ALJ?s decision, as provided by SOX, Tice commenced a lawsuit in federal court, asserting claims of age discrimination in violation of the ADEA and gender discrimination in violation of Title VII and the Pennsylvania statute. Tice relied upon the same set of facts in her federal lawsuit as in her administrative SOX case ? she alleged the employer terminated her for reporting SOX violations while younger, male employees were not discharged.

The federal district court found that Tice should not get ?a second bite at the apple.? The plaintiff may not re-litigate the basis for her termination after an ALJ expressly found that the employer had established a legitimate, non-pretextual reason for her termination. Accordingly, it held, previously adjudicated claims in a SOX proceeding are not entitled to review in a subsequent Title VII or ADEA lawsuit. The district court concluded its ruling was consistent with SOX, which provides that when a federal agency issues a final determination in a SOX claim, the decision cannot be attacked in any other forum.

The Third Circuit affirmed. It held that where an employee asserts a subsequent discrimination claim grounded in facts raised in a prior SOX administrative proceeding, the only avenue of relief ? as stated in the statute ? is to appeal the administrative agency?s decision.

The Court pointed out that a decision in a SOX proceeding does not prevent the claimant from arguing a termination was unlawful for different reasons in another forum. However, where claims pursuant to SOX have been adjudicated in an administrative proceeding, the Third Circuit will give deference to the findings of the administrative agency. Moreover, the Court will not allow the subsequent re-litigation of issues decided during the SOX proceeding, even were the issues later asserted under a federal (or corollary state) anti-discrimination law.

Tice is significant for employers. Its holding allows employers to avoid litigating multiple claims arising from the same set of facts, at least where SOX is concerned. Employers, of course, should ensure that an employee?s termination is supported by legitimate, non-discriminatory reasons, which may be raised in defending a variety of claims. Furthermore, employers should consider carefully any adverse action against an employee who complains of policy violations or corporate wrongdoing.

* The Sarbanes-Oxley Act of 2002 , also known as the Public Company Accounting Reform and Investor Protection Act of 2002, is commonly called SOX.

** See, for example, Civil Service Law Section 75-B.

The Tice decision is posted on the Internet at:
http://www.ca3.uscourts.gov/opinarch/073977np.pdf

Full post as published by New York Public Personnel Law on May 15, 2009 (boomark / email).