Court Opinion

ID: 3062732
Source: CourtListenerOpinion
Date Created: 2015-10-14 20:50:28.898178+00
Date Added: 2024-06-11T11:49:35.273746
License: Public Domain

[DO NOT PUBLISH]

                  IN THE UNITED STATES COURT OF APPEALS

                            FOR THE ELEVENTH CIRCUIT
                              ________________________          FILED
                                                       U.S. COURT OF APPEALS
                                    No. 08-14232         ELEVENTH CIRCUIT
                                                             JUNE 25, 2010
                              ________________________
                                                              JOHN LEY
                                                               CLERK
                                 Agency No. ARB 06-083

MICHAEL GALE,

                                                                                   Petitioner,

                                           versus

U.S. DEPARTMENT OF LABOR,

                                                                                Respondent,

WORLD FINANCIAL GROUP, INC.,

                                                                                 Intervenor.

                              ________________________

                         Petition for Review of a Decision of the
                                   Department of Labor
                              _________________________
                                      (June 25, 2010)

Before EDMONDSON and BIRCH, Circuit Judges, and HODGES,* District
Judge.

       *
         Honorable Wm. Terrell Hodges, United States District Judge for the Middle District of
Florida, sitting by designation.
PER CURIAM:

       Michael Gale (“Gale”) petitions for review of the final order of the U.S.

Department of Labor’s Administrative Review Board (“ARB”) denying his

whistleblower claim brought under Section 806 of the Sarbanes-Oxley Act of 2002

(“SOX”), 18 U.S.C. § 1514(A)(a)(1). Gale contends that the ARB’s conclusion

that he did not engage in protected activity as contemplated by SOX is not

supported by substantial evidence. We disagree and DENY the petition.

                                   I. BACKGROUND

       In 2003, Gale filed a whistleblower complaint with the Occupational Safety

and Health Administration (“OSHA”), in which he claimed that World Financial

Group (“WFG”) violated SOX when it terminated his employment. Specifically,

Gale alleged he was discharged because

       he, among other things, provided information and opposed decisions
       made by Company Officers relating to waste and misuse of Corporate
       Monies that resulted in loss of Stockholders equity and because of
       raising concerns regarding the violation of the SEC [Securities and
       Exchange Commission] rules and regulations in the operation of a
       Broker Business by World Financial Group operating under the name
       of World Group Securities.

Doc. 21, Exh. 1.1 WFG markets the products of insurance and financial services

companies through affiliated businesses. World Group Securities (“WGS”) is

       1
       Document numbers correspond to the certified list of documents filed with us on 11
September 2008.
                                           2
WFG’s affiliated broker dealer. Prior to his termination, Gale served as the Chief

Operations Officer and as a Director of WGS.

       OSHA investigated Gale’s complaint and determined that WFG did not

violate SOX because WFG was not a covered employer under SOX. Gale

appealed that decision to an Administrative Law Judge (“ALJ”) of the Department

of Labor. The ALJ allowed discovery, including depositions and information

exchanges. During Gale’s deposition, the following exchange occurred:

       Q: Well, did you, during the time that you were employed at – by
       World Financial Group or at World Group Securities, believe that the
       company was engaging in any kind of illegal, fraudulent or
       racketeering activity?

       A: I was uncomfortable with some of the practices that I observed.

       Q: That was not the question that I asked you. The question was, did
       you believe that the company was engaging in any kind of illegal or
       fraudulent activities?

       A: I did not believe that.

Doc. 18 at Exh. D, p. 205-06.

       Prior to a hearing before the ALJ, WFG filed a motion for summary

decision.2 WFG asserted that Gale’s case was without merit because (1) WFG is

not a covered employer under SOX, and (2) Gale did not engage in any protected

       2
         Summary decision is akin to a grant of summary judgment under Federal Rule of Civil
Procedure 56. See 29 C.F.R. § 18.40(d) (2010). Thus, summary decision is warranted if the
pleadings and other materials in the record “show that there is no genuine issue as to any
material fact.” Id.
                                                3
activity under SOX, as evidenced in part by his deposition testimony that he did

not believe WFG’s conduct violated the law. The ALJ denied summary decision

on the first ground, finding that a genuine issue of material fact existed as to

WFG’s covered status. With regard to the second issue, however, the ALJ found

“no factual basis that [Gale] had an actual or subjective belief” that WFG

committed illegal or fraudulent acts prohibited by SOX. Doc. 26 at 10.

Furthermore, the ALJ found that “none of [Gale’s] expressed concerns identified

any unlawful or fraudulent activity, whether viewed objectively or subjectively.”

Id. at 11. Gale’s complaint thus lacked the essential element that he reasonably

believed WFG’s activities were illegal or fraudulent in nature. The ALJ

recommended that WFG’s motion for summary decision be granted and that Gale’s

complaint be dismissed.

       On appeal, the Administrative Review Board (“ARB”)3 agreed with the

ALJ’s findings and recommendation. The ARB concurred that a genuine issue of

material fact existed with regard to WFG’s covered status. Nonetheless, like the

ALJ, the ARB concluded that summary decision was appropriate because “Gale

has not presented sufficient evidence to create a genuine issue of fact that he

engaged in SOX-protected activity, an essential element of his claim.” Doc. 32 at

       3
         The ARB has the authority to issue final agency decisions under SOX’s employee
protection provisions. See 29 C.F.R. § 1980.110(a) (2010).
                                                4
5. The ARB explained that Gale failed to produce evidence that he reasonably

believed that WFG was violating the fraud statutes, SEC rules or regulations, or a

federal law concerning fraud against shareholders. To the contrary, “Gale’s

deposition testimony indicates that he did not believe WFG engaged in any illegal

or fraudulent activity.” Id. at 4. Accordingly, the ARB granted WFG’s motion for

summary decision and denied Gale’s complaint.

      In his petition for review, Gale argues that the ARB erred in determining

that he did not engage in SOX-protected activity. He questions whether it is

necessary for an employee to subjectively believe that his employer engaged in

unlawful conduct. In Gale’s view, he voiced sufficient concerns about his

employer’s practices to establish a reasonable belief that his employer was

engaging in prohibited activity under the SOX.

                               II. DISCUSSION

      Our review of the ARB’s decision is governed by the Administrative

Procedure Act. See Fields v. United States Dep’t of Labor Admin. Review Bd.,

173 F.3d 811, 813 (11th Cir. 1999) (per curiam). We may not reweigh the

evidence or substitute our judgment in place of the ARB’s. See id. at 814. Rather,

we must affirm the ARB’s decision so long as it is supported by substantial

evidence and it is not “arbitrary, capricious, an abuse of discretion, or otherwise

not in accordance with [the] law.” Id. at 813 (quotation marks and citation
                                           5
omitted). Substantial evidence means relevant evidence that “a reasonable mind

might accept as adequate to support a conclusion.” Stone & Webster Eng’g Corp.

v. Herman, 115 F.3d 1568, 1571 (11th Cir. 1997) (quotation marks and citation

omitted). Although we review matters of law de novo, we must apply due

deference to the Secretary of Labor’s interpretation of the statutes which he

administers. See id.

      The whistleblower protection provision of SOX prohibits a publicly traded

company or their officers from discharging an employee for providing information

to a supervisory authority about conduct that the employee “reasonably believes”

constitutes a violation of federal laws against mail fraud, wire fraud, bank fraud,

securities fraud, any SEC rule or regulation, or any provision of federal law

relating to fraud against shareholders. 18 U.S.C. § 1514A(a)(1) (2009).

Department of Labor regulations provide that a complaint alleging a violation of

SOX “shall be dismissed unless the complainant has made a prima facie showing

that protected behavior or conduct was a contributing factor in the unfavorable

personnel action alleged in the complaint.” 29 C.F.R. § 1980.104(b) (2010). To

make this showing, the employee must prove by a preponderance of the evidence

that (1) he engaged in protected activity, (2) the employer knew or suspected that

the employee engaged in a protected activity, (3) the employee suffered an

unfavorable personnel action, and (4) the protected activity was a contributing
                                           6
factor in the unfavorable action. See id. § 1980.104(b)(1); Allen v. Admin. Review

Bd., 514 F.3d 468, 475-76 (5th Cir. 2008). Both the ALJ and the ARB determined

here that Gale failed to establish the first element (that he engaged in a protected

activity) because he did not reasonably believe his employer’s conduct was illegal

or fraudulent.

       Although we have not had occasion to define what “reasonably believes”

means under § 1514A(a)(1), all of our sister circuits which have addressed this

issue have uniformly held that it encompasses both a subjective and an objective

component. See Van Asdale v. Int’l Game Tech., 577 F.3d 989, 1000 (9th Cir.

2009); Harp v. Charter Comm., Inc., 558 F.3d 722, 723 (7th Cir. 2009); Day v.

Staples, Inc., 555 F.3d 42, 54 (1st Cir. 2009); Welch v. Chao, 536 F.3d 269, 275

(4th Cir. 2008), cert. denied, ___ U.S. ___, 129 S. Ct. 1985 (2009); Allen, 514 F.3d

at 477.4 We find their reasoning to be persuasive. As the Fourth Circuit has

explained, a common sense interpretation of the statute’s language dictates that the

employee has an actual belief, as well as an objectively reasonable belief, that his

company’s conduct is illegal or fraudulent:

       To “reasonably believe” that company conduct “constitutes a
       violation” of law, as those terms are used in § 1514A(a)(1), [an

       4
          In an unpublished opinion, the Eighth Circuit favorably cited Allen, 514 F.3d at 477, for
the proposition that an “employee’s reasonable belief must be scrutinized under both subjective
and objective standard[s].” Pearl v. DST Sys., Inc., No. 08-2196, 2010 WL 27066, at *1 (8th
Cir. Jan. 7, 2010) (per curiam) (unpublished).
                                                 7
      employee] must show not only that he believed that the conduct
      constituted a violation, but also that a reasonable person in his
      position would have believed that the conduct constituted a violation.
      It would make no sense to allow [an employee] to proceed if he
      himself did not hold the belief required by the statute, and the
      language of the statute itself requires that the belief be a “reasonable”
      one.

Livingston v. Wyeth, Inc., 520 F.3d 344, 352 (4th Cir. 2008). In addition to the

plain language of the statute, the statute’s legislative history contemplates the use

of the “‘normal reasonable person standard used and interpreted in a wide variety

of legal contexts.’” Van Asdale, 577 F.3d at 1000-01 (quoting S. Rep. No. 107-

146, at 19 (2002)); Day, 555 F.3d at 54 n.9. The “reasonable belief” standard that

we have applied in the context of other retaliation statutes, such as Title VII,

requires both a subjective and an objective element. See Weeks v. Harden Mfg.

Corp., 291 F.3d 1307, 1311-12 (11th Cir. 2002) (“‘A plaintiff must not only show

that he subjectively (that is, in good faith) believed that his employer was engaged

in unlawful employment practices, but also that his belief was objectively

reasonable in light of the facts and record presented.’”). Accordingly, like our

sister circuits, we conclude that § 1514A(a)(1) requires an employee to

demonstrate both a subjective belief and an objectively reasonable belief that the

company’s conduct violated a law listed in that section. A subjective belief means

that the employee “actually believed the conduct complained of constituted a

                                           8
violation of pertinent law.” Welch, 536 F.3d at 277 n.4; accord Day, 555 F.3d at

54 n.10.

      Here, the record contains substantial evidence to support the ALJ and ARB’s

finding that Gale did not actually believe that WFG’s activities were illegal or

fraudulent. Gale was specifically asked if he believed, during his employment,

“that the company was engaging in any kind of illegal or fraudulent activities,” and

Gale responded, “I did not believe that.” Doc. 18, Exh. D at 206. Besides this

admission, Gale made several other statements indicating his lack of a subjective

belief. For example, although Gale “expressed reservations” about a proposed

“ASAP program” which permitted unregistered brokers to watch sales

presentations by registered brokers, he did not personally know at the time whether

this practice was prohibited under the rules of the National Association of

Securities Dealers. Id. at 114-17. Likewise, Gale raised concerns about the

program’s proposal to initially pay the registration fees for individual brokers,

which Gale said departed from his previous experience where brokers paid

registration fees up front. Yet Gale conceded that “[t]o the best of my

understanding,” there was nothing improper or illegal about a company paying a

broker’s registration fees. Id. at 156-57. Moreover, Gale could not recall ever

communicating any concerns that the ASAP program, as it was ultimately

implemented, violated or potentially violated any law or regulation.
                                           9
      Gale also described an incident which made him feel “really uncomfortable”

and “uneasy,” wherein WFG reimbursed a client for an improper sale. Doc. 21,

Exh. 7 at 10; Doc. 18, Exh. D. at 39. In Gale’s view, the client was entitled to

reimbursement, but the individual broker rather than WFG should have paid for the

$17,000 loss incurred in the rescinded sale. Gale claimed a similar situation

happened a month earlier, and he became concerned that the firm’s

reimbursements set a precedent involving a “moral hazard issue,” meaning that

individual brokers would continue to execute improper sales if they were not

personally punished. Doc. 18, Exh. D at 55, 79-80. However, Gale admitted that

he did not know at the time whether such reimbursement by the firm was illegal;

nor did he communicate to anyone that he felt it was illegal.

      In sum, substantial evidence supports the ARB’s determination that Gale

failed to create a genuine issue of material fact that he engaged in SOX-protected

activity. As the ALJ found, and the ARB concurred, Gale’s own statements

establish that “he had no belief, let alone a reasonable belief,” that WFG was

engaging in any illegal or fraudulent conduct prohibited under § 1514A(a)(1).

Doc. 26 at 11. Absent this reasonable belief, Gale cannot establish a prima facie

case of retaliation. See 29 C.F.R. § 1980.104(b). The ARB therefore correctly

granted summary decision to WFG on Gale’s whistleblower claim.

                                          10
                               III. CONCLUSION

     Gale petitions for review from the final order of the ARB denying his

whistleblower claim brought under the Sarbanes-Oxley Act. Because we conclude

that the ARB’s decision is supported by substantial evidence, we DENY his

petition for review.

      PETITION DENIED.

                                        11