Fifth Circuit Reinstates SOX Whistleblower Claim Against Tesoro Corp.

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A unanimous panel of the Fifth Circuit U.S. Court of Appeals issued a decision last Friday reinstating Plaintiff Kevin Wallace’s Sarbanes-Oxley Act (SOX) whistleblower claim against Tesoro Corp. 

Wallace worked for the petroleum company Tesoro as Vice President of Pricing and Commercial Analysis. He discovered structural flaws in Tesoro’s accounting system that garbled important financial results and tax reporting used by management, the Board of Directors, and Tesoro’s public filings. Wallace confirmed his findings with company experts and reported them internally. On March 12, 2010, Wallace reported internally that he was being retaliated against by management. He was fired within hours of this report.

The district court had previously dismissed the case based on several procedural motions filed by Tesoro. Tesoro argued that the case needed to be plead pursuant to FRCP 9(b)'s strict fraud pleading requirements. Tesoro also argued that the lawsuit raised factual issues that had not been presented with particularity to OSHA (the administrative agency charged with conducting initial investigation into SOX charges).

The Fifth Circuit reversed the dismissal and remanded the case back to district court for further proceedings and discovery. In rejecting Tesoro's arguments, the Court stated:

The requirements of Rule 9(b) show how poorly it would work as a benchmark for reasonable belief that fraud is occurring. “At a minimum, Rule 9(b) requires allegations of the particulars of time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby.” Benchmark Elecs., Inc. v. J.M. Huber Corp., 343 F.3d 719, 724 (5th Cir. 2003). But an employee who is providing information about potential fraud or assisting in a nascent fraud investigation might not know who is making the false representations or what that person is obtaining by the fraud; indeed, that may be the point of the investigation. Leaving those employees unprotected would have grave consequences for the statutory scheme of employee protection embodied in § 1514A and would do so in a way that appears completely unrelated to whether a belief actually is reasonable.

SOX was enacted as a reaction to a number of major corporate and accounting scandals, including Enron, and Worldcom. The law protects employees from retaliation for engaging in protected activity, which is defined as:

"any lawful act done by the employee to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of section 1341 [mail fraud], 1343 [wire fraud], 1344 [bank fraud], or 1348 [securities fraud], any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders . . ."


The undersigned is counsel for Mr. Wallace, co-counseling with San Antonio attorney Alex Katzman and Washington D.C. attorney Richard Renner. The U.S. Department of Labor, Office of the Solicitor of Labor, participated with an amicus brief asking the Fifth Circuit to reverse.


Download: Wallace v. Tesoro Corp., No. 13-51010 (5th Cir. 7-31-2015).

EEOC Begins a Rollout of New Online Charge-Handling System

ACT Digital Pilot Program Allows Online Interaction With Employers


Last week the EEOC announced that 11 of its 53 offices will begin a pilot program called ACT Digital to digitally transmit documents between the EEOC and employers regarding discrimination charges. This is the first step in the EEOC's move toward an online charge system that will streamline the submission of documents, notices and communications in the EEOC's charge system. This system applies to private and public employers, unions and employment agencies.

The EEOC receives about 90,000 charges per year, making its charge system the agency's most common interaction with the public. The EEOC's ACT Digital initiative aims to improve customer service, ease the administrative burden on staff, and reduce the use of paper submissions and files.

The first phase of ACT Digital allows employers against whom a charge has been filed to communicate with the EEOC through a secure portal to download the charge, review and respond to an invitation to mediate, submit a position statement, and provide and verify their contact information. The newly designed EEOC notice of a charge will provide a password-protected log in for the employer to access the system in the pilot offices. Employers will also have the option of opting out of the pilot program and receiving and submitting all documents and communications in paper form.

EEOC Chair Jenny R. Yang commended ACT Digital as an innovative first step in streamlining the agency's charge system.

"The EEOC's pilot of a digital charge system is an important step forward that will benefit the public and our staff," Chair Yang noted. "This will improve our responsiveness to the public, efficiently utilize our resources, and protect the security of documents in our online system. We encourage employers to provide candid feedback and suggestions during the pilots so we can make adjustments to strengthen the system."

The pilot begins May 6, 2015 in the following EEOC offices: Charlotte, Greensboro, Greenville, Norfolk, Raleigh, Richmond and San Francisco. The EEOC offices in Denver, Detroit, Indianapolis and Phoenix will also begin their pilots by the end of May 2015.

Follow-Up Links


EEOC Releases 2014 Statistics

The Equal Employment Opportunity Commission (EEOC) today released a comprehensive set of fiscal year 2014 private sector data tables providing detailed breakdowns for the 88,778 charges of workplace discrimination the agency received. The fiscal year ran from Oct. 1, 2013, to Sept. 30, 2014.

The number of charges filed decreased compared with recent fiscal years, due in part to the government shutdown during the reporting period. While charge filings were down overall compared to the previous fiscal year, first quarter charge filings--which included the period of the shutdown--were 3,000 to 5,000 less than the other quarters.

Among the charges the EEOC received, the percentage of charges alleging retaliation reached its highest amount ever: 42.8 percent. The percentage of charges alleging race discrimination, the second most common allegation, has remained steady at approximately 35 percent. In fiscal year 2014, the EEOC obtained $296.1 million in total monetary relief through its enforcement program prior to the filing of litigation.

The number of lawsuits on the merits filed by the EEOC's Office of General Counsel throughout the nation was 133, up slightly from the previous two fiscal years. A lawsuit on the merits involves an allegation of discrimination, compared with procedural lawsuits, which are filed mostly to enforce subpoenas or for preliminary relief. Monetary relief from cases litigated, including settlements, totaled $22.5 million.

"Behind these numbers are individuals who turned to the EEOC because they believe that they have suffered unlawful discrimination," said EEOC Chair Jenny R. Yang. "The EEOC remains committed to meaningful resolution of charges and strategic enforcement to eliminate barriers to equal employment opportunity."

The updated data include the popular tables of Statutes by Issue and Bases by Issue. "Bases" refers to the protected characteristics giving rise to the discrimination, such as sex or age. In contrast "issue" is the discriminatory action, such as discharge or failure to promote.

More specifically, the charge numbers show the following breakdowns by bases alleged in descending order.

  • Retaliation under all statutes: 37,955 (42.8 percent of all charges filed)

  • Race (including racial harassment): 31,073 (35 percent)

  • Sex (including pregnancy and sexual harassment): 26,027 (29.3 percent)

  • Disability: 25,369 (28.6 percent)

  • Age: 20,588 (23.2 percent)

  • National Origin: 9,579 (10.8 percent)

  • Religion: 3,549 (4.0 percent)

  • Color: 2,756 (3.1 percent)

  • Equal Pay Act: 938 (1.1 percent) but note that sex-based wage discrimination can also be charged under Title VII's sex discrimination provision

  • Genetic Information Non-Discrimination Act: 333 (0.4 percent)

These percentages add up to more than 100 because some charges allege multiple bases, such as discrimination on the bases of race and color, or sex and retaliation.

In fiscal year 2014, 30 percent of the charges filed with EEOC alleged the issue of harassment on various bases, such as race harassment or harassment on the basis of disability. Preventing harassment through systemic enforcement and targeted outreach is a priority issue for the Commission. The January 14, 2015 Commission meeting focused on Workplace Harassment. The new table for All Harassment Charges includes sexual harassment as well as other forms of harassment. Sexual Harassment still remains as a separate table, joined by new tables showing charges of Race Harassment as well as Charges Alleging Harassment Other than Sexual Harassment.

Discharge continues to be the most common issue for all bases under Title VII, the ADEA and the ADA. Allegations of harassment for all bases were the next most frequently cited issue, with the exception of race. For the basis of race, discriminatory terms and conditions of employment was the second most frequently cited issue (9,332), with harassment being the third (9,023).

The updated tables also include Charges by State. The greatest number of charges were filed in Texas (8,035), followed by Florida (7,528) and California (6,363).

Preparing for Your Initial Consultation with an Employment Lawyer

Yesterday we discussed some basic tips to help you search for an employment attorney for your case.  So now you have an initial consultation set up with a lawyer who has been recommended to you by a trusted source or who you have found from doing your own research. How do you make sure you make the most of this initial meeting?

In a word: Preparation.

Once you have a consultation with an employment lawyer scheduled, it is important that you prepare to make the most of the time you will have with the lawyer. Employment lawyers get dozens of contacts per week from potential clients and must be very selective about the cases they take. The initial consultation is your opportunity to make sure the attorney is well informed about the facts of your case. It is also your best chance to show the attorney that you are someone he or she wants to work with over the months and/or years that your matter may be pending on the firm’s docket.

Here are some important tips to keep in mind as you prepare for the meeting:

  • Take the meeting seriously and be prepared — Make sure you have good, clean copies (not originals) of any related documents with you when you arrive. Don’t expect the attorney to be your copy service and don’t leave your originals with the attorney.

  • Bring a fact chronology — Employment cases are complicated and fact intensive. A lawyer will not be able to tell you whether he can help you unless he knows most of the details of your case. The best way to do this is to bring a simple fact chronology that outlines the factual timeline of your case. A simple “Date — Fact” format will work fine in most cases. If at all possible it should be typed and not hand-written.

  • Be on time — Nothing says that you are not serious about your case like being late to your consultation. An attorney’s time literally is their money. Don’t waste it.

  • Pay the requested consultation fee on time or have it ready when you walk in the door — If the matter is not important enough for a consultation fee then don’t make the appointment to begin with. But if you do make the appointment, don’t put the lawyer in the position of trying to collect a fee from you at your first meeting. It’s not the way to get off to a good start.

  • Dress appropriately — How you dress communicates the level of seriousness you give the issue. You don't have to wear a suit. But showing up in a dirty T-shirt and flip-flops won't help convince the attorney that you are serious about your case. During the meeting the attorney is considering what a jury will think and whether they will take your testimony seriously. How you present yourself plays into this analysis.

  • Don’t bring unexpected guests — Attorney-client communications are privileged. This privilege can be lost if others sit in on the meeting. While someone else can certainly accompany you to the lawyer’s office, don’t expect them or ask for them to come into the meeting with you unless you cleared it in advance with the attorney. Dealing with this issue at the time of the meeting uses up valuable meeting time while the lawyer tries to assess whether they should be allowed into the meeting or not. Also, keep in mind that the lawyer wants to hear YOUR story and is less interested in your husband/wife, girlfriend/boyfriend or mother’s version of the story.

  • Don’t bring children — I love children. But they should not be brought to your attorney consultation. They are a distraction for you and the attorney and it can sometimes be difficult to discuss sensitive matters in front of them. Get a sitter or ask a friend or family member to watch them for you.

Following these steps should help you have a productive initial consultation and hopefully find a qualified attorney to handle your employment-related legal matter.

How to Hire An Employment Lawyer

So you need to hire an employment lawyer but you don’t know how to get started? This article is for you.

Hiring a lawyer to guide you through an employment-related dispute can be challenging. Unlike cases involving personal injury matters, there aren’t hundreds of employment lawyers running TV advertisements in an attempt to get you to “Call now!” Quite the opposite is true in fact.

Due to the complicated statutory nature of employment law practice, there are likely only a small handful of lawyers in even a relatively large city who are board certified to represent employees in employment-related disputes. The few who are qualified and have the years of experience you should be looking for will likely be extremely busy because there are so few of them. For this reason it is important that you do some research and get your own materials together before you start making calls.

To get you started, I've prepared a handy guide outlining some of the basic steps you need to take.

Step 1 - Do A Little Research Online. 

Before you pick up the phone and start making calls, pick up your mouse and start making clicks. Many good employment lawyers will have a website and/or a blog that will provide you with a lot of quality information about employment law issues. Take a look at what practice areas in which the lawyer claims he or she practices. You don’t want a jack-of-all-trades-master-of-none attorney for your case. You want someone who concentrates the majority of his/her practice on employment law issues. You could also search legal directory avvo.com to help you find local lawyers who represent employees. It isn’t a perfect system but it will give you a good list to start your research.

Step 2 - Check For Board Certification

Lawyers are not required to be Board Certified in employment law to practice it in Texas. Some states don’t even provide for board certifications. But in Texas, the State Bar of Texas does provide Board Certification to those lawyers who practice employment law for a sufficient period of time, provide recommendations from lawyers and judges who they have practiced with and who pass a lengthy examination process. You can learn more about Board Certification here.

Step 3 - Expect To Fill Out A Questionnaire And Pay A Fee For A Consultation

Many firms have developed questionnaires. These are not idle exercises. You must fill them out to help your lawyer understand your case so he can better help you. Plus, filling out these short (usually electronic) forms may save you money. Some attorneys use short electronic forms as an initial screening tool for the many potential client contacts they receive each day. Sometimes, the form indicates a simple question for which a quick answer can be provided. Other times, the type of case being described would be better handled by another lawyer who specializes in that specific niche — you can usually get that referral set up at no cost. Then, if the form indicates an issue on which a lawyer believes he or she can provide meaningful assistance, a full, in-person consultation can be scheduled.

Most attorneys charge a small consultation fee to review employment-related matters. Because employment law is very fact specific, an employment lawyer needs to know all the facts of your case before he or she can commit to representing you. This often takes time. If employment lawyers are not paid something for this, they cannot stay in business.

Step 4 - Prepare For Your Consultation

Once you have a consultation with an employment lawyer scheduled, it is important that you prepare to make the most of the time you will have with the lawyer. I have written an article discussing the initial consultation in more detail, including tips on what to bring and how to prepare for this important meeting.

Federal Judge: Anti-Discrimination Laws Have Been "Gutted"

As we prepare to celebrate the fiftieth anniversary of the March on Washington and the passage of the Civil Rights Act of 1964, that law has been gutted. This seems to be the growing consensus among academics, employment attorneys and judges. Harvard Law School professor and former federal judge Nancy Gertner writes about the sad state of affairs in this article. Judge Gertner now teaches law at Harvard and was for many years one of the most distinguished federal trial judges in the nation. Gertner writes about a study that was commissioned to review the 2011 and 2012 summary judgment orders in employment discrimination cases in the Northern District of Georgia. Of the 181 cases where the plaintiff had counsel, the Court dismissed 94 percent of them at least in part, and 81 percent in full. Racial hostile work environment claims were dismissed 100 percent of the time.

But don't go thinking that these results from Georgia are an aberration.  They aren't. As Judge Gertner points out, "[t]he Georgia results mirror the results nationwide. 60 percent of motions for summary judgment are granted in general, but in employment discrimination cases, the court dismisses from 70 to 95 percent of the cases."

The simple truth of the matter is that federal judges from trial courts to the Supreme Court have interpreted the Civil Rights Act virtually out of existence. This is so across judicial philosophies, across the political spectrum and even across presidential appointments. Gertner writes:

Women, minorities, people over forty and the disabled bring discrimination cases only to lose in overwhelming numbers. So little do the judges think of discrimination claims that they rarely allow them to get to a jury at all. Federal courts have legitimized practices that would have horrified the early supporters of the Act.

This is rapidly leading to a situation in which employees who have suffered discrimination can't even obtain qualified legal counsel to represent them. Fewer and fewer good lawyers will represent plaintiffs in these cases because the odds are stacked against them regardless of the strength of the case.

Unfortunately, if these trends don't change, the protections against discrimination envisioned by those who authored the Civil Rights Act may vanish forever. As the study cited by Judge Gertner points out, even cases with incredibly strong facts are statistically likely to be thrown out by a judicial system that has become hostile to even the most valid of discrimination claims.  Take the example case cited by Gertner's article - a racial harassment case in which the plaintiffs alleged that their employer had created a racially hostile environment:

Mr. Whorton used the N-word at manager meetings and went out of his way to use that term despite plaintiffs’ objections. Defendants used the N-word “on virtually every occasion” they were present at the club, and it “was not uncommon” for that term to be directed towards plaintiffs. On one occasion, Mr. Whorton called a staff meeting to address the issue of his use of the N-word. During that meeting, he stated that he was too old to change the way he spoke, and he invited anyone who did not like it to quit. On another occasion, Mr. Whorton stated, “What do your people want? When this was a white club, my customers used ashtrays. Ever since the n—–s have been in the club, the cigarettes have been put out on the floor. The difference between blacks and n—–s is that n—–s put their cigarettes out on the floor.” Plaintiffs allege four additional comments. First, Mr. Whorton once asked an unspecified person or persons whether “days like this [make] you wish you people had stayed in chains?” Another time, Mr. Whorton saw someone wearing a shirt with a monkey on it and asked, “Are the Obama shirts in?” Mrs. Whorton once said she realized she was using the classical form of the N-word when she should have been using the contemporary form. Lastly, Mr. Whorton complained to plaintiff that he could not trust African Americans, and said, “Dwayne . . . look at me! I know you don’t like this – n—–s don’t appreciate s–t.”Here, viewed in the light most favorable to the plaintiffs, the facts simply show that the Whortons are racist, bigoted, and/or offensive people. However, “Title VII is not a civility code, and not all profane or [racist] language or conduct will constitute discrimination in the terms and conditions of employment."

That's right, the court granted summary judgment against the plaintiffs in this case. The court held that this case was not even strong enough to warrant a jury trial.

Surprised by the result? Unfortunately, I am not. Any plaintiff-side employment lawyer can rattle off a long list of strong discrimination cases that the courts have poured them out on. It has become so bad that few new lawyers are willing to join the thinning ranks of plaintiff-side employment lawyers. Sadly, I can't blame them.

I learned of Judge Gertner's article while reading U.S. District Judge Richard Kopf's excellent Hercules and the Umpire blog article "When it comes to employment cases, judges are killing the Civil Rights Act of 1964." He has done a study of his own cases similar to the Georgia study (see here and here). Turns out his own dismissal rate of employment discrimination cases was just as bad as those courts studied in the Georgia study.  He writes: “The fact is that the law on summary judgment motions in employment cases favors the granting of summary judgment motions in a high percentage of the cases and, not surprisingly, that is what you see happening in the Northern District of Georgia and with ‘yours truly’ too.”

While I appreciate his candor, I do respectfully differ with Judge Kopf to the extent that he seems to imply that he feels his hands are tied with regard to this issue. The fact of the matter is that the letter of the law does not "favor the granting of summary judgment motions in a high percentage of [these] cases." Quite the opposite. The letter of the law states that summary judgment is a tool to be used sparingly and only to weed out the most meritless of cases. The default is always supposed to favor the resolution of factual disputes by a jury trial.

Unfortunately, many judges have, perhaps subconsciously, adopted a clear bias against victims of discrimination that has worked its way into the very fabric of how the judiciary approaches these cases. It has become the norm. It has become acceptable. But, it isn't in the letter of the law. It just isn't.

If there is a solution, it will have to start in the district courts. Summary judgment motions are primarily in the control of district court judges. Yes, courts of appeal weigh in but they generally support the district courts with regard to summary judgment rulings. Truly, the only way this situation can be remedied is if district court judges take a long hard look at their approach to discrimination cases and realize the degree to which bias has become a normal part of courts' analysis of summary judgment motions. The Supreme Court has never required that the idiotic McDonnell Douglas burden analysis be used in any case. In fact, a strong argument can be made that it violates F.R.C.P. 56 because of its rigidity. The only purpose McDonnell Douglas serves is as a way to make application of a bias appear to be application of a technicality. The lawyers and courts all know it isn't a legitimate test - that's why we don't ask juries to follow it in the few cases that make it to trial.

My modest proposal: dump the hyper-technical, bias-disguising tests. Get back to the basics. The letter of the law is actually quite simple - if there is a question of fact, the case must go to a jury. If there is any evidence that the decision at issue may have been motivated by illegal discriminatory bias then the case should not be summarily dismissed. It should be resolved by a jury trial. It really is just that simple.

As we approach the 50th anniversary of the passage of the Civil Rights Act of 1964, the question before us is whether we will we be celebrating a birthday or a funeral? The answer to that question is now in the hands of the district courts.