Stone v. Instrumentation Laboratory Co.
| Decision Date | 31 December 2009 |
| Docket Number | No. 08-2196.,No. 08-1970.,08-1970.,08-2196. |
| Citation | 591 F.3d 239 |
| Parties | David R. STONE, Plaintiff-Appellant, v. INSTRUMENTATION LABORATORY COMPANY; Brian Durkin; Ann Defronzo; Ramon Benet, Defendants-Appellees, and Instrumentation Laboratory Spa, Defendant. Government Accountability Project; National Whistleblower Legal Defense and Education Fund, Amici Supporting Appellant. David R. Stone, Plaintiff-Appellant, v. Instrumentation Laboratory Company; Brian Durkin; Ann Defronzo; Ramon Benet, Defendants-Appellees, and Instrumentation Laboratory Spa, Defendant. Government Accountability Project; National Whistleblower Legal Defense and Education Fund, Amici Supporting Appellant. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Adam Augustine Carter, Employment Law Group, PC, Washington, D.C., for Appellant. Robert Michael Shea, Morse, Barnes-Brown & Pendleton, PC, Waltham, Massachusetts, for Appellees.
ON BRIEF:
R. Scott Oswald, Employment Law Group, PC, Washington, D.C., for Appellant. Scott J. Connolly, Morse, Barnes-Brown & Pendleton, PC, Waltham, Massachusetts, for Appellees. Richard R. Renner, National Whistleblower Legal Defense and Education Fund, Washington, DC; Thomas Devine, Legal Director, Kasey Dunton-Dermont, Government Accountability Project, Washington, DC, for Amici Supporting Appellant.
Before NIEMEYER and SHEDD, Circuit Judges, and Mark S. DAVIS, United States District Judge for the Eastern District of Virginia, sitting by designation.
Vacated and remanded by published opinion. Judge DAVIS wrote the opinion, in which Judge NIEMEYER and Judge Shedd Joined.
In this appeal, we address the interpretation of a provision of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A, governing the filing of whistleblower lawsuits in federal district court. The parties acknowledge that the Sarbanes-Oxley Act expressly provides a United States District Court jurisdiction to entertain a whistleblower action. However, they disagree as to whether a whistleblower plaintiff, during the pendency of an administrative appeal of an Administrative Law Judge's ("ALJ") ruling, has the right to a de novo proceeding in district court. In the absence of guidance from this Court, or other circuit courts, the district court granted the defendants' motion to dismiss the district court action in favor of remand to the appropriate administrative body for further proceedings. In light of the language of the statutory provisions at issue, we reverse the district court and remand for further proceedings consistent with this opinion.
David Stone ("Stone" or "Appellant") was employed by Instrumentation Laboratory Company ("ILC") from 1999 through 2006. ILC is in the business of developing, manufacturing, and distributing critical care and diagnostic instruments, as well as other related products and services, for use primarily in hospital laboratories. Stone began as an ILC Sales Representative in 1999, was promoted to Sales Manager in 2002, and was again promoted in 2005 to Director of National Accounts. During his employment at ILC, Stone received numerous accolades for his performance.1
As Director of National Accounts, one of Stone's responsibilities was working with Group Purchasing Organizations ("GPOs"), which are strategic affiliations of hospitals that concentrate buying power in order to negotiate lower prices. ILC had contracts with various GPOs requiring that, among other things, ILC maintain a GPO membership database, offer contractually negotiated prices and terms to GPO members, and pay administrative fees to GPOs equal to three percent of sales revenue generated from member purchases. ILC has acknowledged in public disclosures to shareholders that GPOs are a critical part of its distribution strategy.
After assuming his role as Director of National Accounts, Stone learned that Brian Durkin ("Durkin"), one of Stone's superiors at ILC, was not accurately tracking, reporting, and paying the required administrative fees to GPOs. Durkin's omissions resulted in a multi-year cumulative liability of at least half a million dollars and threatened ILC's ability to sell products to most of its customers. Stone's Complaint asserts that Durkin's failure to maintain adequate internal controls and track administrative fees resulted in ILC "misrepresenting its financial condition to shareholders." (Compl. ¶ 70.) Stone's discovery regarding administrative fees prompted him to perform additional investigation into ILC's internal controls, and such investigation revealed numerous weaknesses.
From September of 2005 until March of 2006, Stone repeatedly voiced his concerns about deficient internal controls and unpaid GPO fees to Durkin and two other ILC managers.2 Stone's efforts were repeatedly met with resistance and even unequivocal refusals to correct the problems. Stone contends that Appellees retaliated against him after he brought such deficiencies to light, and that such retaliation culminated in Stone's termination in March of 2006.
On June 19, 2006, pursuant to the Sarbanes-Oxley Act, Stone filed a retaliation claim with the Occupational Safety and Health Administration ("OSHA"), which hears such claims on behalf of the Secretary of Labor ("the Secretary"). OSHA issued its preliminary findings on January 3, 2007, more than 180 days after Stone's claim was filed. Pursuant to the governing regulations, Stone timely objected to OSHA's findings and requested a hearing before an ALJ. On March 1, 2007, Appellees filed a motion for summary decision before the ALJ. In response, Stone moved to delay consideration of such motion to permit him to take discovery. Stone's motion for discovery was denied,3 and the ALJ granted Appellees' motion for summary decision on September 6, 2007. Stone thereafter successfully petitioned the Administrative Review Board ("ARB") for review of the ALJ's order. On October 1, 2007, the ARB established a briefing schedule, which was thereafter modified by the ARB on Stone's motion.
On November 8, 2007, more than a month before Stone's initial brief was due under the modified briefing schedule, Stone filed a notice with the ARB stating his intention to bring a de novo action in federal district court. The ARB then issued an order to show cause why the administrative appeal should not be dismissed. After Appellees failed to respond, and after receiving notice from Stone that he had in fact filed suit in federal court, the ARB dismissed the administrative appeal. Such dismissal was not based on the merits, but appears to be an acknowledgment that, no "bad faith" having been alleged by ILC, the ARB lost jurisdiction over the matter once Stone's complaint was filed in district court.
Stone's Sarbanes-Oxley Act whistleblower suit was filed in the United States District Court for the District of Maryland on November 26, 2007. On March 27, 2008, Appellees timely filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). After the matter was fully briefed, on July 1, 2008, the district court granted such motion based on preclusion principles, finding that the ALJ's ruling was a "final judgment on the merits" for purposes of collateral estoppel. (J.A. 168-69.) In so ruling, the court rejected Stone's claim that he did not have a "full and fair opportunity to litigate his claims before the ALJ" and indicated that permitting Stone to pursue relief in federal district court would be "wasteful." (J.A. 169.) The district court did, however, "issue a mandamus to the [Department of Labor] to re-instate proceedings" and further ordered the ARB "to rule on the merits of Stone's appeal within 90 days. . . ." (J.A. 169.)
Although the district court granted the motion to dismiss and ordered further administrative proceedings, it did not dismiss the civil action before it, opting instead to stay the proceedings. Stone thereafter sought certification to file an appeal to this Court, but that motion was ultimately denied. Stone declined to further prosecute his administrative appeal before the ARB because he believed that the filing of his complaint in district court divested the ARB of jurisdiction. Based on Stone's failure to prosecute, the ARB entered a final order of dismissal and Stone thereafter obtained a final judgment from the district court on his dismissed whistleblower claim. Stone now appeals the dismissal of his district court action.
The instant appeal presents a question of statutory interpretation, which is a question of law that we review de novo. United States v. Turner, 389 F.3d 111, 119 (4th Cir.2004). Appellant argues that the plain meaning of the relevant statute could not be clearer, and that as a Sarbanes-Oxley whistle-blower complainant he is entitled to a de novo review in federal district court because the Secretary did not reach a "final decision" within 180 days, as required by the Sarbanes-Oxley Act. In contrast, Appellees contend that the language of the Sarbanes-Oxley Act and its regulations do not abrogate the district court's long-recognized power to apply principles of preclusion to avoid duplicative litigation. Both sides agree that there is no apparent guidance from federal circuit courts on the proper interpretation of the relevant provision of this relatively new statute.4
"When interpreting statutes we start with the plain language." U.S. Dep't of Labor v. N.C. Growers Ass'n, 377 F.3d 345, 350 (4th Cir.2004). Under the first and "cardinal canon" of statutory construction, "courts must presume that a legislature says in a statute what it means and means in a statute what it says." Conn. Nat'l Bank v. Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992). Accordingly, when a statute is unambiguous, "this first canon is also the last: `judicial inquiry is complete.'" Id. at 254, 112 S.Ct. 1146 (quoting Rubin v. United States, 449 U.S. 424, 430, 101 S.Ct. 698, 66...
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