Harp v. Charter Communications, Inc.

• Decision Date: 16 March 2009
• Docket Number: No. 07-1445.,07-1445.
• Citation: 558 F.3d 722
• Parties: Mary L. HARP, Plaintiff-Appellant, v. CHARTER COMMUNICATIONS, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

558 F.3d 722

Mary L. HARP, Plaintiff-Appellant, v. CHARTER COMMUNICATIONS, INC., Defendant-Appellee.

No. 07-1445.

United States Court of Appeals, Seventh Circuit.

Argued January 17, 2008.

Decided March 16, 2009.

Ferne P. Wolf (argued), Sowers & Wolf, St. Louis, MO, for Plaintiff-Appellant.

Thomas W. Alvey, Jr., Thompson Coburn, Belleville, IL, Krissa P. Lubben (argued), Patricia J. Martin, Thompson Coburn, St. Louis, MO, for Defendant-Appellee.

Before RIPPLE, ROVNER, and TINDER, Circuit Judges.

ROVNER, Circuit Judge.

Plaintiff-Appellant Mary Harp was an employee at Charter Communications, Inc., which held the cable franchise for the City of St. Louis and surrounding areas, including parts of southern Illinois. In February 2004, she was terminated as part of a reduction in force ("RIF") that resulted in the loss of employment for approximately 50 people. At the time, she was the supervisor for the Technical Audit Department for the St. Louis marketing area and the entire audit department was eliminated as part of the RIF. Harp subsequently brought this action, alleging that her termination was in retaliation for her whistleblowing activities as an employee of Charter, in violation of the Sarbanes-Oxley Act. See 18 U.S.C. § 1514A(a). Harp asserts that she reported, within the proper channels in the company, that payments were being authorized to a contractor for work that was not performed. The district court granted judgment in favor of Charter, and Harp appealed.

Section 1514A(a) of the Sarbanes-Oxley Act provides whistleblower protection for employees of publicly-traded companies by prohibiting employers from retaliating against them for "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" mail fraud, bank fraud, securities fraud, or violation of any rule or regulation of the SEC, or any federal law relating to fraud against shareholders, when the information or assistance is provided to a person with investigatory authority. 18 U.S.C. § 1514A(a). That provision adopts the burden-shifting framework applicable to whistleblower claims brought under the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century, 49 U.S.C. § 42121(b) (2000), and the relevant burdens of proof are set forth in 29 C.F.R. § 1980.104(b)(1) (2007) and numerous court opinions:

To prevail under this provision, an employee must prove by a preponderance of the evidence that (1) she engaged in protected activity; (2) the employer knew that she engaged in the protected activity; (3) she suffered an unfavorable personnel action; and (4) the protected activity was a contributing factor in the unfavorable action.... If the employee established these four elements, the employer may avoid liability if it can prove "by clear and convincing evidence" that it "would have taken the same unfavorable personnel action in the absence of that [protected] behavior."

Allen v. Administrative Review Board, 514 F.3d 468, 475-76 (5th Cir.2008); Livingston v. Wyeth, Inc., 520 F.3d 344, 351 (4th Cir.2008); Welch v. Chao, 536 F.3d 269, 275 (4th Cir.2008); 18 U.S.C. § 1514A(b)(2)(C); 49 U.S.C. § 42121. The Act requires that the employee "reasonably" believe in the unlawfulness of the employer's actions. We agree with the courts that have held that the reasonableness must be scrutinized under both a subjective and objective standard, and in fact the parties do not argue that we should depart from that interpretation. See Day v. Staples, 555 F.3d 42, 54 (1st Cir.2009); Livingston, 520 F.3d at 352; Allen, 514 F.3d at 477. Therefore, Harp must actually have possessed that belief, and that belief must be objectively reasonable. Objective reasonableness "is evaluated based on the knowledge available to a reasonable person in the same factual circumstances with the same training and experience as the aggrieved employee." Allen, 514 F.3d at 477.

Harp's claim of retaliation rests on her belief that Barry Wilson, her supervisor and the Senior General Manager of the St. Louis Key Marketing Area ("KMA") at Charter, authorized payments to a contractor, MSTA¹, for work that MSTA had not in fact performed under its contract with the company. The genesis of this claim is somewhat convoluted, but will be briefly described insofar as it is relevant to the particular claim before us.

Charter's Technical Audit Department was responsible for conducting house-to-house audits to determine whether households were unlawfully obtaining cable services. The audits were performed both internally and through the use of outside contractors. Charter contracted with MSTA to perform certain auditing services required for Charter's business. Those services included visiting the homes of non-subscribers to determine whether they had access to cable for which they were not paying. MSTA claimed that the contract also directed it to visit the homes of subscribers to ensure that they were only receiving the cable services for which they paid. Charter, and particularly Harp, disputed that the contract included payment for visiting the homes of subscribers. As part of her job as supervisor of the Technical Audit Department, Harp was responsible for ensuring that MSTA performed the services for which it sought payment. Harp determined that MSTA was seeking payments for services that it either had not performed, or for services not authorized by the contract.

By Harp's own admission, her supervisor Barry Wilson was initially receptive to Harp's complaint as to MSTA's billing practices. Wilson acknowledged that MSTA was notorious for improper billing, encouraged Harp to look for proof of falsification, and instructed her to meet with Charter's in-house counsel, Hunt Brown. Harp agrees that those actions by Wilson support an inference that Wilson was taking MSTA's fraudulent billing seriously. On January 12, 2004, Wilson assembled a meeting which included Harp, Wilson, Tom Baker, and a representative from MSTA. The meeting devolved into accusations by Harp of discrepancies in the services performed and the invoices submitted by MSTA—with specific documentation of problems—and MSTA's denials and challenges to those positions. Although Harp was prepared with specific examples of improper billings by MSTA, she did not have a summary of numbers that she believed were proper or figures that would represent a just resolution of the matter. Ultimately, Wilson abruptly terminated the meeting. It is that action, and the directive given by Wilson at that time, that forms the crux of Harp's allegation here.

According to Harp, in summarily terminating the meeting, Wilson "rescued MSTA's representatives" from having to answer direct questions about their wrongdoings. Harp then asserts that at the close of that meeting, Wilson directed Baker to pay MSTA the full contract amount. On appeal, Harp's allegation of fraud relies specifically on that alleged directive to pay the full amount, as she states in her reply brief:

Wilson abruptly ended the meeting and ordered Tom Baker to pay MSTA the full contract amount (App. 997; 956, p. 315), not a negotiated amount, which would have been more suggestive of the inference Charter asks the court to draw, i.e. that Harp could have viewed Barry Wilson's conduct only as a legitimate negotiated settlement.

Reply Brief at 3. Harp further noted that prior to that meeting, she had reported directly to Wilson as her immediate supervisor, but that a restructuring was implemented that interposed Baker between herself and Wilson in the command chain. She maintains that the sudden inclusion of Baker was a means of avoiding Harp, in that Wilson could then instruct Baker to pay the entire contract amount. After that January 12th meeting, Harp spoke with the contract administrator, Mary Capstick, and informed her that Wilson had assigned the project to Tom Baker to get together with MSTA and determine how much Charter would have to pay to "make the matter go away." Two days later, Harp filed an oral report with Brooke Wilson, who was authorized to handle such complaints, alleging that Barry Wilson's conduct violated Charter's ethics code.

Harp's claim therefore rests on the apparent change of heart by Wilson as evidenced in that January 12th meeting, and Harp's subsequent reporting of the alleged misconduct through the proper investigatory channels at the company. We note initially that although the testimony is that Harp reported a violation of the code of ethics, as opposed to a violation of federal laws, the critical focus is on whether the employee reported specific conduct that constituted a violation of federal law, not whether the employee correctly identified that law. See Welch, 536 F.3d at 276. If the specific conduct reported was violative of federal law, the report would be sufficient to trigger Sarbanes-Oxley protection even if the employee did not identify the appropriate federal law by name. Id.

The problem with Harp's case, however, is that the record does not support Harp's characterization of that January 12th meeting. Specifically, the record does not indicate that Wilson ordered payment of the full amount to MSTA, or even that he ordered payments of any amounts not properly earned. In the deposition testimony upon which she relies for this point, Harp does not recite any statements by Wilson. Instead, Harp relates a conversation with Baker, in which she asks him what he thinks Wilson intended after ending the meeting. Baker replied that with respect to the invoices, "he had accrued for them, so he thought they were going to be paid." When Harp was then asked if she knew what amount accrued, and whether it was the excess amounts she did not authorize, Harp replied that she did not know. Therefore, Harp's allegation of fraud in this case rests on a conversation with Baker in which she...