Bechtel v. Admin. Review Bd., U.S. Dep't of Labor

• Decision Date: 05 March 2013
• Docket Number: Docket No. 11–4918–ag.
• Citation: 710 F.3d 443
• Parties: J. Scott BECHTEL, Petitioner, v. ADMINISTRATIVE REVIEW BOARD, UNITED STATES DEPARTMENT OF LABOR, Competitive Technologies Incorporated, Respondents.
• Court: U.S. Court of Appeals — Second Circuit

710 F.3d 443

J. Scott BECHTEL, Petitioner,

v.ADMINISTRATIVE REVIEW BOARD, UNITED STATES DEPARTMENT OF LABOR, Competitive Technologies Incorporated, Respondents.

Docket No. 11–4918–ag.

United States Court of Appeals, Second Circuit.

Submitted: Dec. 7, 2012.

Decided: March 5, 2013.

Kirstin Marie Jahn, Jahn & Associates, LLC, Boulder, CO; David Bruce Shine, Law Office of D. Bruce Shine, Kingsport, TN, for Petitioner.

Dean A. Romhilt, Trial Attorney; M. Patricia Smith, Solicitor of Labor; Jennifer S. Brand, Associate Solicitor; Megan E. Guenther, Counsel for Whistleblower Programs, U.S. Department of Labor, Washington, DC, for Respondent Administrative Review Board, Department of Labor.

Garrick A. Sevilla, Mary E. Pivec, Williams Mullen, Raleigh, NC, and Washington, DC, for Respondent Competitive Technologies, Inc.

Before: CABRANES, RAGGI, and HALL, Circuit Judges.

JOSÉ A. CABRANES, Circuit Judge:

Petitioner J. Scott Bechtel seeks review of a September 30, 2011 final decision and order of the Administrative Review Board (“ARB”) of the United States Department of Labor (“DOL”), affirming an administrative law judge's (“ALJ”) order dismissing Bechtel's retaliation claim under the Sarbanes–Oxley Act (the “Act”), 18 U.S.C. § 1514A. We take this opportunity to clarify the burden-shifting framework applicable to whistleblower retaliation claims under the Act. For the reasons stated below, the petition for review is denied.

BACKGROUND

Competitive Technologies, Inc. (“CTI”) is a publicly held company that acts as an agent for patent-holders seeking to license or sell technologies to entities that will bring the technologies to market. CTI hired Bechtel in February 2001 to serve as vice president of technology commercialization. Bechtel's job consisted of identifying clients, acquiring rights to their technologies, and licensing those technologies to generate licensing fees for CTI. At the time Bechtel was hired, CTI was not profitable—indeed, CTI reported net operating losses for the fiscal years ending July 31, 2001, July 31, 2002, and July 31, 2003.

In June 2002, CTI hired John Nano to serve as president and CEO. Nano aimed to generate immediate revenue for the company, in order to prevent bankruptcy. Soon after Nano joined the company, he and Bechtel began to disagree. For example, in October 2002, Bechtel reported to CTI's general counsel that he suspected Nano of not complying with certain legal requirements, though it is unclear whether those suspicions had any firm foundation.

In December 2002 and March 2003, CTI asked Bechtel to join a committee to review CTI's financial transactions and make recommendations regarding the Act's disclosure requirements. During both meetings, Bechtel argued that certain aspects of the company's finances should be disclosed, pursuant to the Act. The other members of the committee disagreed. Bechtel, worried about his own liability under the Act, refused to sign the relevant disclosure forms.

Meanwhile, CTI's financial condition did not improve. In May 2003, CTI's board of directors approved Nano's proposal to reduce operating costs by, among other things, discharging personnel, including Bechtel. On June 30, 2003, after CTI's situation had further deteriorated, Nano fired Bechtel.

As this case already has a lengthy procedural history, we recount only the relevant events here. In September 2003, Bechtel filed a Sarbanes–Oxley Act whistleblower complaint with the Occupational Safety and Health Administration (“OSHA”), an agency within the DOL, alleging principally that CTI illegally retaliated against him because he refused to sign the Sarbanes–Oxley Act disclosure forms. In February 2005, after investigating the complaint, the Regional Administrator of OSHA determined that there was reasonable cause to believe that CTI had violated the Act. Based on this ruling, OSHA ordered that Bechtel receive, among other relief, reinstatement, back wages, and compensatory damages.

CTI then filed objections to OSHA's findings and requested a formal hearing before an ALJ. On October 5, 2005, after a hearing, the ALJ denied the relief sought by Bechtel and dismissed Bechtel's complaint. Bechtel appealed that decision to the ARB, which, on March 26, 2008, remanded the case to the ALJ after determining that the ALJ had not applied the appropriate legal standard under the Act. On remand, the ALJ once again dismissed the complaint in a decision and order dated January 20, 2009. Finally, on September 30, 2011, the ARB affirmed the ALJ's second order dismissing the complaint. See Bechtel v. Competitive Technologies, Inc., ARB Case No. 09–052, 2011 WL 4889269 (ARB Sept. 30, 2011).

This appeal followed.

DISCUSSION

When reviewing a final decision and order of the ARB regarding a whistleblower retaliation claim brought pursuant to 18 U.S.C. § 1514A, Courts of Appeals are directed to use the rules and procedures set forth in the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 701–06. 49 U.S.C. § 42121(b)(4)(A) (“Review [by a Court of Appeals] shall conform to [5 U.S.C. §§ 701–06].”).¹ We will uphold a decision by the ARB if it is not “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” 5 U.S.C. § 706(2)(A), or “unsupported by substantialevidence,” id. § 706(2)(E). Under this deferential standard of review, “we must assess, among other matters, whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment.” Judulang v. Holder, 565 U.S. ––––, 132 S.Ct. 476, 484, 181 L.Ed.2d 449 (2011) (internal quotation marks omitted). We will set aside the ARB's decision only if it

has relied on factors which Congress had not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.

Nat'l Assoc. of Home Builders v. Defenders of Wildlife, 551 U.S. 644, 658, 127 S.Ct. 2518, 168 L.Ed.2d 467 (2007) (quotation marks omitted).

A. Statutory Framework

Section 806 of the Sarbanes–Oxley Act, 18 U.S.C. § 1514A, seeks to combat what Congress identified as a corporate “culture, supported by law, that discourage[s] employees from reporting fraudulent behavior not only to the proper authorities, such as the FBI and the SEC, but even internally.” S.Rep. No. 107–146, at 5 (2002). To accomplish this goal, § 1514A “protects ‘employees when they take lawful acts to disclose information or otherwise assist ... in detecting and stopping actions which they reasonably believe to be fraudulent.’ ” Guyden v. Aetna, Inc., 544 F.3d 376, 383 (2d Cir.2008) (quoting S.Rep. No. 107–146, at 19). Specifically, § 1514A makes it unlawful for publicly traded companies to “discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of 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 a violation of” certain laws, rules, and regulations addressing various types of fraud.²18 U.S.C. § 1514A(a)(1).

The relevant burdens of proof for whistleblower retaliation claims under § 1514A are contained in the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (“AIR 21”), 49 U.S.C. § 42121(b), see18 U.S.C. § 1514A(b)(2),³ and the Code of Federal Regulations at 29 C.F.R. §§ 1980.100– 1980.115. Although we have not previously described the elements and burdens of proof set forth by these provisions, see49 U.S.C. § 42121(b)(2)(B)(iii), (iv); 29 C.F.R. § 1980.109(a), (b),⁴ our sister Courts of Appeals have. As they have explained:

“To prevail under [§ 1514A], 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 establishe[s] 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.’ ”

Harp v. Charter Commc'ns, Inc., 558 F.3d 722, 723 (7th Cir.2009) (alterations omitted) (quoting Allen v. Admin. Review Bd., 514 F.3d 468, 475–76 (5th Cir.2008), in turn quoting 49 U.S.C. § 42121(b)(2)(B)(iv)). We agree that this framework is established by the relevant regulations and is consistent with the statute.⁵See49 U.S.C. § 42121(b)(2)(B)(iii), (iv); 29 C.F.R. § 1980.109(a), (b).

B. The ALJ's Standard

Bechtel's central argument on appeal is that, even after the ARB remanded the case, the ALJ persisted in applying an erroneous legal standard. He argues that, for this reason, the ARB's second and final decision, affirming the ALJ's determination, ought to be reversed.

In the words of the ARB, the ALJ's second decision “is not easily deciphered.” Bechtel, 2011 WL 4889269, at *1. In that decision, the ALJ, relying upon the ARB's 2008 remand order, stated clearly and accurately the correct legal framework for evaluating a claim under § 1514A. See Joint App'x 114. Unfortunately, the ALJ then proceeded to make further elaborations. She explained that until the employee meets his or her burden of proof, the employer “need only articulate a legitimate business reason for its action.” Id. According to the ALJ, if the employer presents evidence of a legitimate reason for the adverse action, the employee may prevail by proving “by a preponderance of the evidence that the employer's articulated legitimate reason is pretext for discrimination,” id.—apparently an alternative to proving...