FRIVOLOUS COMPLAINT; SANCTIONS; COMPLAINANT'S PARTICIPATION IN WRONGFUL CONDUCT
[Last Updated Jan. 16, 2013]
FEDERAL COURT DECISIONS
DEFENDANT'S REQUEST FOR ATTORNEYS' FEES AS SANCTION; SANCTION FOR FILING THE CLAIM NOT WARRANTED WHERE THERE WAS NO EVIDENCE THAT THE CLAIM WAS BROUGHT IN BAD FAITH; SANCTION FOR OPPOSING SUMMARY JUDGMENT MOTION NOT WARRANTED WHERE THERE WAS NO INDICATION THAT THE OPPOSITION WAS UNREASONABLE OR VEXATIOUS AS REQUIRED FOR 28 U.S.C. 1927 SANCTIONS OR IN BAD FAITH AS REQUIRED FOR SANCTIONS BASED ON COURT'S INHERENT AUTHORITY
In Boyd v. Accuray, Inc. , No. 11-CV-01644-LHK, 2012 WL 4936591 (N.D.Cal. Oct. 17, 2012) case below ALJ No. 2012-SOX-18), after the court granted the Defendant's motion for summary judgment against the Plaintiff, finding that the Plaintiff's claims arising from termination of his employment were insufficient as a matter of law under several theories, including the whistleblower provision of the Sarbanes-Oxley Act ("SOX"), 18 U.S.C. § 1514A, the Defendant moved for a grant of attorneys' fees. The Defendant's motion was based on several theories, one of which was that that the Plaintiff's lack of sufficient evidence on two elements of his SOX claim warranted sanctions pursuant to 28 U.S.C. § 1927 and the court's inherent authority.
The court noted that it was unclear whether the Defendant's motion was based on a sanction for bringing the claim to begin with, or for opposing summary judgment. As regards the former, the court ruled that section 1927 does not apply to initial pleadings, and therefore it could not be the basis for sanctions for filing the SOX claim. Thus, the only available source is the court's inherent power, and there was no evidence that the claim was brought in bad faith.
In regard to the opposition to the summary judgment motion regarding the SOX claim, the court found no indication that the opposition was "unreasonable" or "vexatious," as required for § 1927 sanctions, or in bad faith, as required for inherent power sanctions. The court stated that "the grant of summary judgment establishes only that Plaintiff had not marshaled enough evidence to support his claim - not that the claim was so lacking in merit as to be frivolous." The court therefore denied the Defendant's request for sanctions on the Plaintiff's SOX claim.
PRECLUSION ORDER BASED ON WHISTEBLOWER'S VEXATIOUS LITIGATION
In Thanedar v. Time Warner, Inc. , No. 08-20734 (5th Cir. Nov. 3, 2009) (unpublished) (ALJ No. 2006-SOX-79), the appellant argued that the district court's preclusion order - which prevented him from filing any motions, actions, or complaints in that district court that directly or tangentially raised an issue adjudicated in the instant case without first obtaining leave of the court - violated his due process rights and was not based on any evidence of record. The Fifth Circuit noted:
It is well-settled that a plaintiff's pro se status does not give him a "license to harass others, clog the judicial machinery with meritless litigation, and abuse already overloaded court dockets." Farguson v. MBank Houston, N.A. , 808 F.2d 358, 359 (5th Cir. 1986). There is no constitutional right to prosecute frivolous actions, and preclusion orders are appropriate tools for deterring vexatious filings. Kaminetzky v. Frost Nat'l Bank of Houston , 881 F. Supp. 276, 277-78 (S.D. Tex. 1995). When issuing such an order, however, a court must ensure that it is "tailored to protect the courts and innocent parties, while preserving the legitimate rights of litigants." Farguson , 808 F.2d at 360.
The court found that in the instant case there had been an ample basis for the preclusion order based on the appellant's behavior in a prior Title VII lawsuit and in his litigation tactics in the instant SOX claim, and that the district court's order had been narrowly tailored.
UNCLEAN HANDS; INVOLVEMENT BY COMPLAINANT IN POTENTIAL SOX VIOLATION PRIOR TO REPORTING IS NOT A BAR TO A SOX WHISTLEBLOWER COMPLAINT
In Ciavarra v. BMC Software, Inc. , No. 4:07-CV-00413 (S.D.Tex. Feb. 7, 2008), the Plaintiff alleged that the Defendants had retaliated against him because he reported to his superiors at the company and to outside auditors that a $67million invoice was not properly recognizable as income because it was not collectible. The invoice would have been a factor in calculation of the Plaintiff's supervisor's bonus. The court denied the Defendants' motion to amend to their answer to the Plaintiff's SOX complaint to assert that the Plaintiff had unclean hands because he had stated in a pleading that he could "no longer" go along with the plan to recognize revenue from the invoice. The court wrote: "Regarding the unclean hands defense, Defendants cite no legal authority for their statement that a person who had any involvement in a potential Sarbanes-Oxley violation is barred from pursuing a retaliatory discharge claim if he later reports the alleged violation and, as a result, is discharged."
ADMINISTRATIVE REVIEW BOARD DECISIONS
WARNING THAT PREFILING RESTRICTIONS MAY BE IMPOSED ON COMPLAINANT WHO FILES DUPLICATIVE COMPLAINTS
In Pittman v. Dell, Inc. , ARB No. 12-065, ALJ No. 2012-SOX-6 (ARB Aug. 16, 2012), the ARB dismissed the Complainant's appeal where he failed to file a brief in compliance with the ARB's briefing order. In a footnote, the ARB noted the ALJ's observation that the Complainant had filed duplicative complaints and suggestion that the ARB impose prefiling restrictions on the Complainant similar to those imposed on a different complainant. The ARB wrote: "We suggest that Pittman keep this request in mind if he files additional complaints of a 'duplicative' nature with the Department of Labor." USDOL/OALJ Reporter at 3, n.5.
TIMELINESS OF COMPLAINT; COMPLAINT BROUGHT THREE YEARS AFTER END OF LIMITATIONS PERIOD FOUND NOT TO JUSTIFY PAYMENT OF $1000 BY PRO SE COMPLAINANT
In Greene v. Omni Visions, Inc. , ARB No. 09-109, ALJ No. 2009-SOX-44 (ARB Mar. 9, 2011), the Complainant was terminated from her employment, and 213 days later she filed a False Claims Act complaint in federal district court. 517 days after she voluntarily dismissed the False Claims Act complaint, and 1024 days after her termination from employment, she filed a SOX whistleblower complaint with OSHA. Both OSHA and the ALJ found that the complaint was not timely filed. The ALJ rejected the Complainant's arguments why equitable tolling should apply. On appeal, the ARB affirmed the denial. The Complainant first argued that she had been misled by her attorney because he had told her that filing a SOX complaint was not an option while the False Claims Act complaint was pending. The ARB found that the Complainant freely chose her attorney and must bear the consequences of any acts or omissions by that attorney. The Complainant argued that tolling should apply because the Respondent had not disclosed to her that it was an "employee stock ownership plan corporation." The ARB found that the Complainant did not explain why the fact that she did not know about the Respondent's corporate structure precluded the timely filing of her SOX complaint, or why the Respondent had an obligation to inform her of the corporate structure. The ARB found no support for the contention that the False Claims Act was a filing of the precise claim in the wrong forum, and that even if it was an extraordinary event that prevented a timely filing, she still waited 517 days after that complaint was dismissed to file her SOX complaint. The ARB also rejected the arguments that the SOX complaint should not be dismissed because of the serious nature of her concerns with the Respondent's business practice and because of a lack of prejudice to the Respondent. The ARB stated that neither of those factors are a basis for equitable tolling.
The Respondent moved for an award of $1,000 in attorney fees pursuant to 29 C.F.R. § 1980.110(e), on the ground that the Complainant filed the SOX three years after the limitations period had expired, with no recognized basis for doing so. The ARB found some merit to the request, but because of the Complainant's pro se status declined to find that the complaint was totally baseless or brought in bad faith. Thus, the ARB denied the motion.
FRIVOLOUS OR BAD FAITH COMPLAINT; AWARD OF ATTORNEY'S FEES AND COSTS
The ARB declined to impose attorney's fees and costs against the Complainant under 49 U.S.C.A. § 42121(b)(3)(C) and 29 C.F.R. § 1980.110(e) where the complaint contained at least an arguable basis in law and where the Respondent did not make a convincing showing that the complaint or the appeal were brought for vexatious reasons. Reddy v. Medquist, Inc. , ARB No. 04-123, ALJ No. 2004-SOX-35 (ARB Sept. 30, 2005).
ADMINISTRATIVE LAW JUDGE DECISIONS
ATTORNEY FEES FOR FRIVOLOUS OR BAD FAITH CLAIM
In Pittman v. Siemens AG , 2007-SOX-15 (ALJ July 26, 2007), the Respondent requested that it be awarded $1,000 in attorney fees under 29 C.F.R. § 1980.109(b). The ALJ agreed that the complaint was unmeritorious, but found that it was not completely frivolous and that the pro se Complainant demonstrated a deep belief in his claims. The ALJ therefore denied the request.
FRIVOLOUS CLAIM; ATTORNEY'S FEES; REASONABLE ATTEMPT TO EXPAND BOUNDARIES OF LAW
The Respondent requested attorney's fees pursuant to 29 C.F.R. § 1980.105(b) and 29 C.F.R. § 1980.106(a), which permit an ALJ to award attorney's fees when a complaint is frivolous or brought in bad faith. The Respondent alleged that the Complainant knew that the Employer was not a publicly traded company. The ALJ declined to award fees because the Complainant was proceeding pro se, she had made a non-frivolous complaint under OSHA or environmental protection laws, there was no evidence of bad faith or improper motives, and "[f]inally, given the relative newness of the Act and the limited body of interpretive case law, I find that it was not unreasonable for the Complainant to try to expand the boundaries of the law, which she did most creatively." Minkina v. Affiliated Physician's Group , 2005-SOX-19 (ALJ Feb. 22, 2005).
ATTORNEY FEE SANCTION; A WEAK CASE IS NOT NECESSARY A FRIVOLOUS CASE
In Grant v. Dominion East Ohio Gas , 2004-SOX-63 (ALJ Mar. 10, 2005), the ALJ declined to impose an attorney fee sanction against the Complainant under 29 C.F.R. § 1980.109(b). The ALJ observed that the strength of the case was in serious question, but found that it did not rise to the level of being frivolous. The ALJ noted that the Complainant had consulted an attorney, and that even though he did not have a strong case that he engaged in protected activity as defined by the Act, this did not mean that he did not have a sincere belief that a legitimate claim could be brought.
FRIVOLOUS COMPLAINT SANCTION; NEW LAW REGARDING WHICH PARAMETERS OF COVERAGE NOT YET WELL DEFINED
In Hopkins v. ATK Tactical Systems , 2004-SOX-19 (ALJ May 27, 2004), the Respondent moved for reimbursement of attorney fees up to $1,000 under 29 C.F.R. § 1980.110(b), which permits such a sanction if the ALJ determines that the complaint was frivolous or brought in bad faith. The ALJ reviewed an ALJ and an ARB decision interpreting a similar provision under the AIR21 whistleblower law, and interpretations of frivolous legal actions related to FRAP 38 and 28 U.S.C. § 1915(e)(2). Although she concluded that the complaint bordered on frivolous as a SOX complaint, it would not have been frivolous if properly filed under the environmental whistleblower statutes (the complaint about release of sludge by a water authority having been filed only under SOX). Although the pro se Complainant had not responded to the ALJ's order to show cause on jurisdiction, the ALJ observed that such a lack of response might evidence a concession that the case should be dismissed rather than continued pursuit of a frivolous claim. The ALJ also found lack of an assertion of prejudice by the Respondent, nor of bad faith, harassment or improper motives on the part of the Complainant. Most important in the ALJ's view was the fact that the SOX was relatively new and consequently its parameters are not certain. Thus, "it would be difficult to conclude that any complaint alleging that the reporting of wrongful activity by a publicly traded corporation [leading] to an adverse employment action ... would lack 'an arguable basis in law or fact.'" Slip op. at 9. The ALJ had dismissed the complaint on summary decision based in part on the failure of the complaint to relate to securities fraud.]