Court Opinion

ID: 9498926
Source: CourtListenerOpinion
Date Created: 2023-08-05 17:32:37.010293+00
Date Added: 2024-06-11T17:59:10.232544
License: Public Domain

STRAUB, Circuit Judge,
dissenting from the result.
The questions before us are (1) whether, under the whistleblower provisions of the Sarbanes-Oxley Act of 2002, when the Department of Labor (“Department”) finds sufficient cause to order that an employee be reinstated but the employer flouts this order, we have jurisdiction to enforce the order; and, if so, (2) whether, in this case, the procedure followed by the Department in finding sufficient cause and ordering reinstatement constituted due process. The District Court answered *484both questions in the affirmative, and ordered Competitive Technologies, Inc. (“CTI”) to reinstate Bechtel pursuant to the Department’s order.
My colleagues, for different reasons, conclude that the case should instead be dismissed. Judge Jacobs finds that we do not have jurisdiction to enforce preliminary orders, whereas Judge Léval finds that the Department failed to provide CTI with due process. Because I find that the statute-though internally inconsistent-is best read to provide jurisdiction, and that the Department’s procedure did not violate CTI’s due process rights, I would affirm the District Court’s injunction. I note that, because of the form our disposition of the case has taken, there is no majority rule of law from which I need dissent.
I. Jurisdiction
Congress enacted the Sarbanes-Oxley Act of 2002 (“Act”) in response to an acute crisis: Revelations of mass corporate fraud, most vividly in connection with the Enron Corporation, threatened to destroy investors’ faith in the American financial markets and, in so doing, to jeopardize those markets and the American economy. Congress recognized that the problem was an intractable one, and that a number of strong enforcement tools would be neees-sary-from new regulations and reporting requirements, to expanded oversight, to new criminal provisions. Congress also recognized that for any of these tools to work, the law had to protect whistleblow-ers from retaliation, because “often, in complex fraud prosecutions, ... insiders are the only firsthand witnesses to the fraud.” S.Rep. No. 107-146, at 10 (2002). Congress therefore made whistleblower protection central to the Act, creating a procedure whereby wrongfully discharged employees can seek redress, including immediate preliminary reinstatement, first through the Department of Labor and then through the courts.
The text of the Sarbanes-Oxley Act, when read as a whole and in light of this urgent statutory purpose, firmly supports our exercise of jurisdiction to enforce the Secretary of Labor’s (“Secretary”) preliminary reinstatement order. Paragraph 42121(b)(2) of Title 49 of the United States Code provides that, if an individual files a whistleblower complaint and the Secretary, after investigating, finds reasonable cause to believe that a violation has occurred, “the Secretary shall accompany the Secretary’s findings with a preliminary order providing the relief prescribed by paragraph (3)(B)” (emphasis added). Sub-paragraph (3)(B), in turn, requires the Secretary to provide certain relief if she finds, after a full investigation, that a violation occurred; among other relief, the Secretary must order the employee’s reinstatement. Finally, subparagraph (5) authorizes the Secretary to bring an action in district court to enforce “an order issued under paragraph (3)” against a non-compliant employer, and subparagraph (6)(A) authorizes a similar action by the employee. Although an order is not necessarily “issued under” a provision simply because it provides “the relief prescribed by” that provision, I conclude that Congress intended to equate the two for purposes of mapping out judicial enforcement procedures.
Such a reading of paragraph (2) is necessary to make sense of the overall statutory scheme. The text of the statute makes clear that immediate reinstatement is paramount, which cuts against any interpretation that would allow an employer to ignore a reinstatement order with impunity.1 To begin with, the statute requires *485the Secretary to respond promptly to a complaint, deciding within 60 days whether reasonable cause exists. 49 U.S.C. § 42121(b)(2). If the Secretary does find reasonable cause, she must issue a preliminary reinstatement order, and this order has immediate effect notwithstanding any subsequent objections and requests for an administrative hearing by the employer. Id. (“The filing of ... objections shall not operate to stay any reinstatement remedy contained in [a] preliminary order.”) Paragraph (b)(2) then provides for “expeditious!] ]” hearings upon the filing of any objections, presumably in large part to minimize the burdens on the employer of preliminary reinstatement before the merits are fully determined.
These provisions, taken together, reflect Congress’s sense that timely reinstatement is essential to prevent the chilling effects of employer retaliation. Congress’s firm language would be rendered entirely ineffective if we interpreted the Act in such a way that courts had no power to enforce administrative orders of reinstatement. See Duncan v. Walker, 533 U.S. 167, 174, 121 S.Ct. 2120, 150 L.Ed.2d 251 (2001) (“[A] statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant” (citations omitted)).2
The importance of effective preliminary reinstatement is plain not simply from the statute’s mandatory language and strict deadlines but also from the purpose of the statute as a whole. See Connecticut ex rel. Blumenthal v. U.S. Dep’t of Interior, 228 F.3d 82, 89 (2d Cir.2000) (where text of statute is ambiguous, we must construct an interpretation consistent with the primary purpose of the statute as a whole), cert. denied, 532 U.S. 1007, 121 S.Ct. 1732, 149 L.Ed.2d 657 (2001). Congress made clear, in enacting the Sarbanes-Oxley Act, that it viewed corporate whistleblowers not simply as good guys who deserve reward but also as useful-indeed essential-combatants against corporate malfeasance.
The Senate Judiciary Committee’s report on the Act, for example, listed whis-tleblower protection as one of three main purposes of the Act (alongside criminal liability for wrongdoers and bars to bankruptcy discharge). S.Rep. No. 107-146, at 2 (2002) (“Senate Report”). In the “Background and Need for Legislation” section of the Senate Report, which narrated the epic demise of Enron, the Committee explained that the cover-up efforts of Enron’s management included “discourag[ing] at nearly every turn” attempts by “employees at both Enron and [its auditor] Andersen ... to report or ‘blow the whistle’ on fraud,” The Senate Report concluded that a “culture, supported by law,” existed at Enron and related companies:
that discourage[s] employees from reporting fraudulent behavior not only to the proper authorities, such as the FBI and the SEC, but even internally. This ‘corporate code of silence’ not only hampers investigations, but also creates a *486climate where ongoing wrongdoing can occur with virtual impunity. The consequences of this corporate code of silence for investors in publicly traded companies, in particular, and for the stock market, in general, are serious and adverse, and they must be remedied.
Id. at 5. The Committee also recognized the importance of these employees to any attempt to enforce new safeguards: “often, in complex fraud prosecutions, these insiders are the only firsthand witnesses to the fraud. They are the only people who can testify as to ‘who knew what, and when,’ crucial questions not only in the Enron matter but in all complex securities fraud investigations.” Id. at 10.
The language and history of the Act, then, evince a strong Congressional preference for reinstatement as a means of encouraging whistleblowing.3 Congress’s preference, moreover, makes eminent sense. The Act’s provision for immediate orders of preliminary reinstatement encourages whistleblowing, by assuring potential whistleblowers that they will remain employed, integrated in the workplace, professionally engaged, and well-situated in the job market; such orders also facilitate whistleblowing, by enabling whistleblowers to continue on as observers and potential witnesses to corruption. Moreover, when a whistleblower is immediately reinstated, this assures his coworkers that they are protected and thereby encourages them to come forward as well. The alternative is likely to discourage initial whistleblowing and, where a whistleblower has been removed pending the administrative and judicial processes, to send a chilling signal to coworkers who notice the whistleblower’s sudden (and to all appearances permanent) disappearance. As the Supreme Court explained in considering an analogous whistleblower provision in the Surface Transportation Assistance Act of 1982:
Congress ... recognized that the employee’s protection against having to choose between operating an unsafe vehicle and losing his job would lack practical effectiveness if the employee could not be reinstated pending complete review. The longer a discharged employee remains unemployed, the more devastating are the consequences to his personal financial condition and prospects for reemployment. Ensuring the eventual recovery of backpay may not alone provide sufficient protection to encourage reports of safety violations.
Brock v. Roadway Exp., Inc., 481 U.S. 252, 258-59, 107 S.Ct. 1740, 95 L.Ed.2d 239 (1987) (emphasis added).
Based on these same statutory and policy considerations, the Secretary has promulgated 29 C.F.R.1980.113, which provides that:
[wjhenever any person has failed to comply with a preliminary order of reinstatement or a final order or the terms of a settlement agreement, the Secretary or a person on whose behalf the order was issued may file a civil action seeking enforcement of the order in the United States district court for the district in which the violation was found to have occurred.
This agency rule, while by no means authoritative over this Court, is entitled to *487some minimal deference based on the Secretary’s experience enforcing the Act and on the need for national uniformity. United States v. Mead Corp., 533 U.S. 218, 234-35, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001).
Notwithstanding these considerations, my esteemed colleague, Judge Jacobs, makes three policy arguments against jurisdiction. I address them in turn. First, Judge Jacobs argues that any hardship resulting from an employer’s refusal to reinstate a complainant is. mitigated by the prospect of judicial review if the Secretary fails to issue a final decision within 180 days. However, when compared with the statute’s clear scheme of immediate reinstatement (in the ordinary case where the employer complies with the Secretary’s order), the remote prospect of reinstatement 180 days plus one legal action later hardly seems like a robust incentive to report wrongdoing. Moreover, Judge Jacobs’s interpretation would leave whistleblowers under AIR21, which contains identical review language except for the 180-day provision, remediless.
Judge Jacobs’s second and third arguments are similarly unavailing. As for the argument that preliminary orders should not be enforced because they rest on a “tentative and inchoate” basis, see ante, at 474, preliminary relief is often based on a finding of “reasonable cause” or a “prima facie case.” More importantly, Congress is entitled to make the policy decision, as it has here, that, where an employee has made out a substantial claim, a balance of harms analysis favors forced reinstatement. Brock, 481 U.S. at 259, 107 S.Ct. 1740 (upholding an analogous preliminary reinstatement provision, coupled with reasonable cause requirement and efficient post-reinstatement procedures, as a “legislative determination” reflecting a sufficient “balancing of the relative interests of the Government, employee, and employer”). At any rate, the harm to the employer feared by Judge Jacobs is minimal because,'even where an employee makes out a prima facie case, the Secretary must halt her investigation “if the employer demonstrates, by clear and convincing evidence, that the employer would have taken the same unfavorable personnel action in the absence of [whistleblowing] behavior.” 49 U.S.C. § 42121(b)(2)(B)(ii).
Judge Jacobs’s final argument is that deferred jurisdiction helps to “ensure that appeals work their way through the administrative system before the federal courts become involved” and helps to avoid the potential, chaos of multiple actions being filed at multiple stages in the administrative process. Ante, at 474. However, Congress has made clear that it wants employees reinstated while, not after, the administrative process goes forward. Nor does any chaos ensue from immediate enforcement because, as explained below, our task at this stage is not to assess the merits of the Secretary’s determination but merely, after assuring ourselves that due process has been afforded, to give it effect. Indeed, preliminary or interim reinstatement orders issued under other whistleblower statutes have been enforced by this Court, with no dire effects. See Martin v. Yellow Freight Sys., Inc., 793 F.Supp. 461 (S.D.N.Y.1992) (enforcing interim reinstatement order issued under the Surface Transportation Assistance Act of 1982), aff'd, 983 F.2d 1201 (2d Cir.1993).4
*488As set forth above, jurisdiction is appropriate and expedient; the alternative would undermine a key element of the Sarbanes-Oxley Act.
II. Due Process
.My other esteemed colleague, Judge Le-val, votes to dismiss the case even if we have jurisdiction because he concludes that the Department’s preliminary reinstatement order rested on a flawed procedure that violated CTI’s right to due process. With respect, I disagree.
The lead-and practically the only-case on this issue is Brock v. Roadway Express, Inc., 481 U.S. 252, 107 S.Ct. 1740, 95 L.Ed.2d 239 (1987). Brock held that:
minimum due process for the employer in this context requires notice of the employee’s allegations, notice of the substance of the relevant supporting evidence, an opportunity to submit a written response, and an opportunity to meet with the investigator and present statements from rebuttal witnesses. The presentation of the employer’s witnesses need not be formal, and cross-examination of the employee’s witnesses need not be afforded at this stage of the proceedings.
Id. at 264, 107 S.Ct. 1740. Because in Brock the Secretary had given the defendant employer no information about the evidence against it or the basis for its preliminary finding against the employer, the Supreme Court did not have occasion to elaborate on the above standard before concluding that the Department had not complied with due process requirements. Conversely, in what may be the only other case to analyze the due process requirements for preliminary whistleblower reinstatement orders, Martin v. Yellow Freight Sys., Inc., 793 F.Supp. 461 (S.D.N.Y.1992) (enforcing interim reinstatement order issued under the Surface Transportation Assistance Act of 1982), aff'd, 983 F.2d 1201 (2d Cir.1993), the district court found due process easily satisfied because the employer had received a full hearing on the merits. Neither case, therefore, suggests a clear-cut answer to the question before us.
Brock, however, does offer some guidance. To begin with, the Brock Court explained that, in determining how much process is due, courts must weigh three sets of “substantial” interests: 1) the government’s interest in encouraging whistle-blowing, 481 U.S. at 262, 107 S.Ct. 1740; 2) the employer’s interest in controlling the makeup of its staff, id. at 263, 107 S.Ct. 1740; and 3) the employee’s interest in his livelihood (which depends not merely on receiving backpay but also on being able to find another job), id. Although an employer’s interests must be protected by a pre-reinstatement investigative procedure that ensures a minimum degree of reliability, after a certain point the value of additional reliability is outweighed by the cost of “extending inordinately the period in which the employee must suffer unemployment.” Id. at 266, 107 S.Ct. 1740. Ultimately, in the context of whistleblower actions, the inquiry boils down to whether “the prereinstatement procedures establish a reliable initial check against mistaken decisions, and complete and expeditious review is available.” Id. at 263, 107 S.Ct. 1740 (quotation omitted).
Judge Leval finds that the Department’s investigation fails the Brock test because “CTI was not given reasonable notice of the evidence”-as opposed to the allegations-“against it.” Concurring Op. at [14— 15], My conclusion to the contrary is based largely on the Department’s initial letter to CTI (“Notice”), dated June 24, *4892004, which (in four pages of small, single-spaced print) provided CTI with a highly detailed summary and analysis of the allegations and evidence against it. In addition, the Department gave CTI “a copy of Bechtel’s initial complaint, a description of his allegations, and opportunities to submit written responses to those allegations!,] to present statements from rebuttal witnesses,” and to meet with investigators. Concurring Op. at 480.
The Notice, first, set out exactly what Bechtel’s alleged whistleblowing activities were and when they occurred. In brief, Bechtel, a Vice President at CTI, raised concerns about CTI’s alteration, to avoid SEC disclosure, of its employee “incentive compensation plan,” under which employees received a share of incoming revenue. Bechtel also stated his opinion that CTI was illegally concealing various oral agreements to compensate inventors, salespersons and attorneys with a percentage of the revenue-anywhere from 10 % to 70 %- from specific projects they helped realize, even though these agreements would materially affect CTI’s net profits and losses. The Notice detailed Bechtel’s allegation that, on March 14, 2003, he (and Wil Jacques, a colleague and co-complainant who has since settled with CTI) met privately with CTI’s Chief Executive Officer, John Nano, and agreed to sign off on a SEC report, albeit with a written reservation from Jacques, in return for a performance review for Bechtel and a promised raise for Jacques.
The Notice set forth specific alleged acts of retaliation by Nano against Bechtel and Jacques, culminating in their termination on June 30, 2003, ostensibly for poor performance. The Notice discussed CTI’s admitted lack of documentary evidence that Bechtel or Jacques performed poorly, as well as the evidence to the contrary (in the form of annual bonuses, positive performance reviews, and an enthusiastic memorandum from Nano to Jacques). The Notice then discussed CTI’s assertion that it had economic reasons for firing Bechtel and Jacques. The Notice cited to evidence to the contrary, ie., the fact that CTI had replaced Bechtel and Jacques with “consultants” who held titles of Vice President, derived their entire income from CTI, functioned like regular employees, and at the time of the Notice had not produced significant revenues.
Notwithstanding the specificity of this letter, Judge Leval finds that the Department provided CTI only with allegations, not “evidence” (as that term was used in Brock). In so finding, Judge Leval focuses on what he calls the “mishmash” of a witness summary provided to CTI in lieu of full or redacted witness statements. Concurring Op. at 481 & n. 2 (quoting the summary in full). While I agree that this summary is not a masterwork of drafting, it does provide a straightforward summary of what witnesses said about the main contested issue in the case: ie., whether Nano fired Bechtel for legitimate business reasons. It is true that, under Department regulations, prior to issuing a preliminary order, the Secretary:
will ... contact the named [respondent] to give notice of the substance of the relevant evidence .... including] any witness statements, which will be redacted to protect the identity of confidential informants where statements were given in confidence; if the statements cannot be redacted without revealing the identity of confidential informants, summaries of their contents will be provided.
29 C.F.R. § 1980.104(e). However, it may well be that the Secretary was justified in providing only witness summaries; given that CTI only had approximately seventeen employees, any disclosure of witness statements (even in a reasonably redacted *490form) might have revealed the witnesses’ identities. Even if the Secretary should have provided statements under § 1980.104(e), this fact alone could not constitute a due process violation. Torres-Rosado v. Rotger-Sabat, 335 F.3d 1, 10 (1st Cir.2003) (“An agency’s failure to follow- its own rules may be significant in administrative law, but the federal Due Process Clause does not incorporate the particular procedural structures enacted by state or local governments.”).
From other documents in the record, we know that CTI responded to the Notice on July 14, 2004; that the Department responded in turn on November 3, 2004; and that CTI submitted further information on November 15, 2004-information which the Secretary later characterized as “lengthy but largely non-responsive.” Only as of February 2, 2005, after numerous communications between the Secretary and CTI and after investigators met twice with CTI’s General Counsel and outside counsel, did the Secretary issue her findings of reasonable cause and her preliminary reinstatement order.
The Secretary’s February 5, 2005, letter engaged substantively with CTI’s defenses. The letter explained that CTI’s defense, which had focused on Bechtel’s failure to bring in new revenue, was contradicted by its own SEC filings, which reveal a “business model” under which Bechtel’s job was not to generate short-term income but rather “to close transactions that would create future, recurring income streams-that is, to obtain licenses.” In this respect, the Department noted “that Bechtel and Jacques obtained at least three licenses during their employment,” a record that the Department found, based on its investigation, “[could not] be characterized as [a] poor performance.” The Department also restated its earlier observation that CTI did not appear to have profited financially in any way from its replacement of Bechtel and Jacques with full-time Vice President “consultants.”
In my view, this record reflects a methodical investigation and ample notice to CTI of the evidence, as well as the allegations, against it. Whether or not the Department, in an ideal world, should have provided any further information to CTI, its investigation constituted “a reliable initial check against mistaken decisions,” Brock v. Roadway Exp., Inc., 481 U.S. 252, 263, 107 S.Ct. 1740, 95 L.Ed.2d 239 (1987) (quotation omitted), and therefore merits enforcement.
CONCLUSION
As set forth above, I would exercise jurisdiction and affirm the District Court’s injunction that CTI reinstate Bechtel pending the completion of the Department’s investigation. Accordingly, I respectfully dissent from the result reached today.

. At oral argument, none of the parties was aware of any alternative mechanisms avail*485able to the Secretary to immediately enforce her orders.

. Admittedly, my reading of the Act is in some tension with other language in section 42121-namely, paragraph 42121(b)(3)'s heading (“Final order") and paragraph 42121(b)(4)’s provision that “[a]ny person adversely affected or aggrieved by an order issued under paragraph (3) may obtain review of the order [in a Court of Appeals].” These tensions suggest that Congress may not have specifically considered the possibility that employers would flout or judicially challenge preliminary reinstatement orders. As set forth above, however, there is no possible reading that will make perfect sense of every aspect of the statute, and I have chosen the one that, in my view, leaves the statutory text and purpose most intact.

. While I agree with Judge Leval that nothing in the legislative history speaks specifically to the enforceability of preliminary orders, the history does make plain Congress's preference for immediate reinstatement whenever probable cause exists, which ought to inform our attempt to reconcile apparently conflicting statutory language in determining whether, in cases where an employer chooses to flout a preliminary order, we have jurisdiction to enforce that order to preserve the status quo.

. Additionally, Judge Jacobs suggests that immediate enforcement might result in a “rapid sequence of reinstatement and discharge and a generally ridiculous state of affairs.” Ante, at 474. There is no dispute, however, that Congress provided for immediate reinstatement regardless of whether the employee ultimately prevailed. At any rate, the scenario Judge Jacobs presents is hardly more “ridicu-*488Ions” than a statutorily-mandated preliminary order that is utterly unenforceable.