MEMORANDUM
WILLIAM J. HAYNES, JR., District Judge.
Plaintiff, Hilda Solis, the Secretary of Labor, filed this action under Section 806 of the Sarbanes-Oxley Act of 2002 (“SOX”), 18 U.S.C. § 1514A, the Wendell H. Fort Aviation Investment and Reform Act for the 21st Century (“AIR 21”), 49 U.S.C. § 42121(b)(2)(A) and (b)(3) and the Rules implementing Section 806 of SOX, 29 C.F.R. Part 1980 against the Defendants, Tennessee Commerce Bancorp, Inc. and Tennessee Commerce Bank. The Secretary cites the Defendants' refusal to obey her preliminary order to reinstate George Fort, the Defendant's former chief financial officer, whom the Secretary found reasonable cause to believe was unlawfully discharged by Defendants in violation of Section 806(a) of the SOX and entitled to preliminary injunctive relief.
Before the Court is the Secretary's motion for a temporary restraining order and preliminary injunction (Docket Entry No. 2) and Defendants' motion to dismiss (Docket Entry No. 5). In her motion, the Secretary asserts that after investigation and consultations with the Defendants, she found that Fort's “protected activity was a contributing factor in the adverse actions taken against him” and that such conduct warrants the Secretary's Order awarding Fort preliminary injunctive relief, including reinstatement, back-pay, restoration of benefits and attorney fees.
In response to the Secretary's motion, Defendants filed a motion to dismiss, contending, in sum, that the Court lacks jurisdiction to enforce the Secretary's preliminary orders, citing, inter alia
Bechtel v. Competitive Technologies, Inc., 448 F.3d 469 (2d Cir.2006). In addition, Defendants argue that the Secretary's order violates the Defendants' due process rights because the preliminary order results in a permanent and irreparable loss to the Defendants of the permanent deprivation of payments and wages pending a final resolution of the Secretary's proceedings against the Defendants.
The Court set an argument 1 on the Secretary's motion and also entertained argument on the Defendants' motion with its jurisdictional and due process challenges as well as a response to the Secretary's motion. By agreement of the parties, given the critical jurisdictional and public interest issue, the Court issues this ruling without further hearing and briefing.
Based upon the attachments to her complaint, the Secretary issued detailed “Secretary's Findings” that support her preliminary order. In relevant part, these “Secretary's findings” were as follows.
On April 4, 2008, Complainant filed a complaint with the Secretary of Labor and amended the complaint on May 9, 2008, alleging Tennessee Commerce Bancorp discriminated against him in violation of SOX. As this complaint was filed within 90 days of the alleged adverse actions, it is deemed timely.
Complainant was hired by Tennessee Commerce Bank on February 1, 2004 as the Vice President of Finance and promoted to Chief Financial Officer (CFO) on September 1, 2005. Complainant entered into an employment contract with Tennessee Commerce Bank as the CFO on January 19, 2006 with an annual pay rate of $110,000.00. Complainant was also a member of the SOX Steering Committee and Tennessee Commerce Bank's SOX and Securities and Exchange Commission (SEC) Compliance officer.
Three months after Complainant was promoted to CFO, Tennessee Commerce Bancorp became publicly traded on the NASDAQ. As Tennessee Commerce Bank's SOX and SEC compliance officer, Complaint was responsible for identifying policies and procedures that would bring Tennessee Commerce Bank into compliance with SEC guidelines. SEC compliance was required starting in 2007.
On January 20, 2006, Chief Executive Officer Arthur Helf wrote a letter to Complainant to acknowledge the fine job Complainant was doing by handling a myriad of details and procedures necessary to bring everything in line for the SEC, Tennessee Department of Financial Institutions (TDFI) and Federal Deposit Insurance Corporation (FDIC), as well as facilitating Tennessee Commerce Bank's year end closing. Mr. Helf noted that Complainant handled the challenges well.
On August 6, 2006, Mr. Helf issued a memo to Complainant, in recognition for Complainant's performance as CFO, with a compensation increase to an annual salary of $150,000 and year-end bonus of $150,000. On June 1, 2007, Complainant, President Mike Sapp, Chief Administrative Officer (CAO) Lamar Cox and Mr. Helf received significant pay increases of over 100% each. Complainant's pay increased to $335,000.00 per year. Because of the large pay increases to Complainant, Mr. Helf, Mr. Sapp and Mr. Cox on June 1, 2007, three board members resigned. In January of 2008, Complainant, Mr. Sapp, Mr. Cox and Mr. Helf received bonuses equal to their annual salary.
Mr. Helf sent an email to Complainant with a copy to Mr. Sapp on June 11, 2007, in which Mr. Helf said
“I would like to exercise my options this week. I will be out Thursday and Friday ... Let me know how much cash I will need for taxes. I would (like) to sell these prior to any blackout.” Total options were 165,872 shares for a total of $1,134.360.00. Mr. Helf said
“Let me
know if you envision any problems bringing this off” This transaction was questionable to Complainant because he knew Mr. Helf had insider knowledge that the large pay increases would soon be publicized in an 8k and that the three board members were going to resign because of the large pay increases. Complainant cautioned Mr. Helf about the timing of the transaction and that it could cause Tennessee Commerce Bank's stock to drop. Mr. Helf told Complainant the sale had been approved by Tennessee Commerce Bank's law
firm so Complainant did not pursue the issue at that time.
Complainant engaged in numerous protected activities, as follows:
Complainant requested via emails to Mr. Sapp and Mr. Helf that position descriptions be put in place on May 26, 2006, November 6, 2006, November 16, 2006, December 5, 2006, January 31, 2007, May 22, 2007, July 10, 2007, November 28, 2007 and January 31, 2008. In the January 31, 2007 email, Complainant specifically noted that position descriptions would help address many of the
“internal control issues” that were making it hard for him to have confidence in the financials. Complainant also stated in the email that the
“job description would address internal control issues
that are inherent in the reporting structure at Tennessee Commerce Bank.” Complainant further addressed a concern about some of Mr. Cox's areas of responsibility that should be under Complainant as the CFO.
On or about August 31, 2007, the Deposit Operations Manager, who reported to Mr. Cox, confronted Complainant and one of Complainant's employees. In the days after the incidents, Complainant accused Mr. Helf and Mr. Sapp of not sufficiently addressing the situation. Complainant sent a memo to Mr. Helf describing the confrontation and expressing concerns about work place safety. Mr. Helf made memos to the file about Complainant's subsequent behavior on September 12, September 13 and September 17, 2007. Mr. Helf also made a memo to the file about his investigation of the “dust up” but did not terminate the Deposit Operations Manager.
On September 3, 2007, Complainant sent an email to Mr. Helf, Mr. Sapp and Mr. Cox about new policies and revisions. Complainant noted that they had locked down the policies and procedures and suggested it would prevent a SOX noncompliance if the procedures for changing policy are followed.
Complainant sent an email to Mr. Helf and Mr. Sapp on September 30, 2007 about file maintenance procedures not being followed. Complainant noted after meeting with internal and external auditors that it appears Tennessee Commerce Bank would not be able to pass SOX compliance. Complainant complained this area was “completely out of my control” and asked for Mr. Helf and Mr. Sapp to make the issue a priority.
Complainant sent an email to the
“TEAM” on October 16, 2007 regarding
“Insider Trading”. Complainant said there had been several questions that came up recently about stock trading and provided a copy of Tennessee Commerce Bank's
“Insider Trading Policy” which should answer most of their questions. Complainant advised if they had any questions to contact him.
Mr. Helf made a memo to the file on November 6, 2007 about a stock purchase that he made on August 9, 2007. Mr. Helf noted in that memo that he and Mr. Sapp met with attorneys Marlee Mitchell, Sheila Sawyer and Waverly Crenshaw of the Waller Lansden law firm at their office to discuss their dissatisfaction with Complainant's behavior. Mr. Helf noted that he had concerns regarding Complainant's SEC expertise. Mr. Helf also recorded that Ms. Mitchell discussed Complainant's allegation that Mr. Helf caused SEC violations by making trades when Complainant was out of the office. At the end of the memo, Mr. Helf stated
“George has a serious problem.”
As part of Crowell and Crowell's (Tennessee Commerce Bank's internal auditors) audit, they identified suspicious activity
in employee accounts on or about November 30, 2007. The suspicious activity was shared with Complainant but he did not receive a copy of the report until January 17, 2008. Complainant shared Crowell and Crowell's verbal findings with Mr. Helf and Mr. Sapp on or about December 19, 2007. Complainant raised concerns again with Mr. Helf and Mr. Sapp on January 18, 2008 and January 24, 2008.
Complainant informed Mr. Sapp and Mr. Helf on January
...
