Allen v. Administrative Review Bd.
| Decision Date | 22 January 2008 |
| Docket Number | No. 06-60849.,06-60849. |
| Citation | 514 F.3d 468 |
| Parties | Patricia ALLEN; Laura Waldon; Dana Breaux, Petitioners, v. ADMINISTRATIVE REVIEW BOARD, United States Dept. of Labor, Respondent. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Before JONES, Chief Judge, and DeMOSS and STEWART, Circuit Judges.
Patricia Allen, Dana Breaux, and Laura Waldon ("the Petitioners") filed a Sarbanes-Oxley ("SOX") whistleblower complaint against their employer, Stewart Enterprises, Inc. ("Stewart"). They claim that Stewart retaliated against them for engaging in protected activity, created a hostile work environment, and then terminated them through inclusion in a company-wide reduction-in-force ("RIF"). After a hearing on the merits, the Administrative Law Judge ("ALJ") dismissed the Petitioners' complaint. On appeal, the. Administrative Review Board ("ARB") affirmed the ALJ's decision, which constituted, the final order of the of the Secretary of Labor ("Secretary"). The Petitioners filed a timely petition for review of the Secretary's final order with this Court. Because we conclude that the Petitioners did not engage in protect ed activity, we affirm.
Allen, Breaux, and Waldon are former employees of Stewart, a publicly-traded company that has been in the funeral home and cemetery business for over 90 years. Stewart is headquartered in New Orleans and has four operating divisions: Eastern, Central, Southern, and Western. The company also has a Corporate Division in New Orleans, which consists of employees working at the corporate office and employees working at the Shared Services Center ("SSC"). Much of the accounting and financial data generated by the SSC is reported to the Securities and Exchange Commission ("SEC").
Stewart employed Allen and Breaux as Quality Assurance Representatives ("QAs"). QAs served as a liaison between the four operating divisions and the SSC. Although Allen worked for the Central Division and Breaux for the Eastern Division, both employees were based in New Orleans and worked together. Waldon was Director of Administration ("DOA") for the Central Division. As the DOA, Waldon was responsible for managing Funeral Security Plans ("FSP") in Kansas City, as well as supervising three Records Management Centers ("RMCs"), which were located in Kansas City, Dallas, and New Orleans.
Stewart uses the AS400 computer system ("AS400") to calculate balances for customer accounts. In late 2000, during an internal audit of cash receipts, Stewart discovered a malfunction in its computer system for calculating interest when customers prepaid their installment contracts for services or merchandise to be provided in the future. The AS400 did not correctly calculate interest in quoting the amount the customer owed, and thus many of these "payoff" amounts were erroneous. The AS400 only calculated interest correctly when a customer paid the full amount on the due date. Upon discovering the error, Stewart immediately began working on a new computer program to calculate interest. Further, to remedy the error, Stewart's Special Projects group, a division under the SSC headed by Patricia Beatty, performed manual amortizations on all accounts that showed credit balances with a history of pre-payments on principal.
Beginning in April 2003, all three Petitioners expressed concerns to their supervisors about the faulty functioning of the AS400. As QAs for the Eastern and Central Division, Allen and Breaux were responsible for gathering supporting data needed to resolve certain issues involving customer refunds. Allen and Breaux complained that Special Projects, which performed the manual amortizations, was uncooperative and unresponsive in handling adjustments that Allen, Breaux, and Waldon submitted to correct overcharged accounts. Moreover, when they submitted an adjustment to Special Projects to correct an AS400 interest calculation problem, Beatty told them that these errors would be charged to their division on the contract error reports issued monthly for each division. Allen and Waldon testified that these errors were linked to their overall performance records and bonuses, and they believed that they were being penalized for their protected activity of pointing out these errors.
The Petitioners testified that they never thought that Stewart intentionally programed the AS400 to overcharge customers. They knew that Special Projects was performing manual amortizations as an internal control until the computer problem was fixed. Although the Petitioners knew that Stewart was actively working on a solution for the problem, they believed that Stewart was taking too long to fix the problem and the delay was due to Stewart's desire to keep the problem a secret. All three Petitioners were concerned that Stewart might be overcharging customers who did not complain and that the refunds were incorrectly calculated.
Allen and Breaux met separately with Beth Schumacher, Stewart's Director of Internal Audit. They complained to Schumacher that the SSC personnel were "stonewalling" their efforts to accomplish their work. They also complained about the SSC's failure to communicate with the QAs, the untimely refunds, and the inaccurate interest calculations. Breaux told Schumacher that she was concerned about manual amortizations and that the RMCs should have an amortization schedule so they could do their own amortizations.
Correcting the AS400 problem was listed as one of the goals in Stewart's strategic plan for 2002-03, In June 2003, the QAs convened a quality assurance conference in Dallas, at which both Breaux and Allen discussed the interest calculation problem, refund requests, and payoffs with field office directors. Stewart sponsored the conference and paid for the attendees' travel and lodging expenses.
Special Projects, which calculated refunds and payoffs, had a significant backlog. In the Central Division, Special Projects took four to six weeks to calculate refunds. Allen, Breaux, and Waldon testified that they believed that delayed refunds exposed the company to litigation from customers that could thereby affect shareholders. They were particularly concerned that the delayed refunds violated Missouri and. Texas state law requirements that refunds be issued within 30 and 15 days, respectively. They were afraid that this delay could lead to state sanctions, including revocation of Stewart's license, which would adversely affect shareholders.
Allen and Breaux were also concerned about Stewart's POS system and reported their concerns to Beatty and the CFOs. Stewart's POS accounts are accounts that a third party, such as an insurance company, pays fully or partially. In situations where the customer paid his or her part of the account balance, but the third party did not pay its part, the customer mould receive a statement showing a zero balance. Allen and Breaux believed that this POS billing system made it difficult for the company to collect the unpaid balance from the customer and would affect revenue if the other source did not pay the balance. Stewart managers, however, testified that the POS billing system did not prevent the company from collecting the balance because customers with these accounts were contractually obligated to pay any amount not paid by the third party, and the company used collection agencies to collect from customers who refused to pay.
In 2000, the SEC staff issued Staff Accounting Bulletin 101 ("SAB-101"), which prohibits publicly-traded companies from recognizing sales revenue before they deliver merchandise to the customer. Prior to this bulletin, Stewart had recognized revenue at the time of sale. SAB-101 required that Stewart change its accounting practice and recognize revenue at the time Stewart actually delivered merchandise,
After reviewing internal accounting reports and speaking with Beau Royster, head of internal audit, Waldon became concerned that Stewart was not complying with SAB-101. Waldon was aware that Stewart did not submit these internal accounting reports to the SEC, but she was concerned that the company was overstating its gross profit. She later discovered that the company was making adjustments for SAB-101 compliance.
Waldon discussed her concerns about SAB-101 compliance with Mike Hymel, Stewart's Chief Accounting Officer, who assured her that Stewart was working on making adjustments to its system for fiscal year 2003. Waldon did not ask Hymel about SAB-101 compliance for fiscal years 2001 and 2002.
The internal consolidated financial statements for the Central Division are not the statements submitted to the SEC, but rather working documents for managers to compare costs from year to year. According to Hymel, this internal document did not contain the SAB-101 "top-side adjustments." Budde testified that in fiscal year 2001, which commenced November 1, 2000, Stewart began making SAB-101 adjustments to the documents it submitted to the SEC. Waldon does not believe the improper recording of costs was done intentionally by Stewart, but she does believe that understating costs will result in an overstatement of the company's gross profit, thus misleading shareholders.
Allen, Breaux, and DoCampo (the Southern District QA), testified that the QA department work spaces were moved at least four times during their employment. In October...
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