Feldman-Boland v. Stanley
| Decision Date | 13 July 2016 |
| Docket Number | 15cv6698 |
| Parties | JAIME FELDMAN-BOLAND, et ano., Plaintiffs, v. MORGAN STANLEY, et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Plaintiffs Jaime Feldman-Boland ("Feldman") and James Boland ("Boland"), a married couple, bring claims against their former employer Morgan Stanley, Morgan Stanley & Co. (f/k/a Morgan Stanley Smith Barney) (together, "Morgan Stanley"), and their former supervisor David Turetzky. Plaintiffs allege that they were fired in violation of the whistleblower protection provisions of Sarbanes-Oxley ("SOX"), 18 U.S.C. § 1514A, and Dodd-Frank, 15 U.S.C. § 78u-6(h)(1). Defendants move to dismiss all claims pursuant to Fed. R. Civ. P. 12(b)(6), and to strike Plaintiffs' claims for emotional distress damages under SOX and "special damages" under Dodd-Frank. Defendants' motion to dismiss is granted with respect to the SOX claims against Turetzky, and otherwise denied.
The following facts are gleaned from the Complaint and presumed true for purposes of this motion. In 2008, Feldman joined Morgan Stanley as a financial advisor. (Compl. ¶ 8.) At that time, she executed an agreement requiring her to split commissions from high-net-worth clients with a more senior Morgan Stanley advisor. In 2010, her husband, Boland, joined Morgan Stanley as a "trainee." (Compl. ¶¶ 13-15.)
Feldman alleges that her advisor—Michael Silverstein—ignored prospects that she pitched to Morgan Stanley. As a result, she failed to meet her production goals. (Compl. ¶ 10.)
In March 2011, Plaintiffs claim they witnessed Morgan Stanley employees violating federal securities laws and mail and wire fraud statutes. Among other things, they observed: (1) unlicensed employees executing trades; (2) cold calling clients using deceitful practices (such as promising unrealistic annual returns to entice individuals to transfer 401(k) retirement plans into risky mutual funds); (3) retroactive alterations of clients' risk profiles to permit riskier investments; and (4) employees working without branch office supervision. (Compl. ¶¶ 17-25.)
In April 2011, Feldman met with Turetzky to complain about a variety of problems with Silverstein. She also raised concerns regarding the fraudulent activity she had observed. Turetzky became agitated and instructed her to leave his office. (Compl. ¶ 32.) Later, he requested a list of Feldman's clients and prospects. Feldman claims that Turetzky sought permission to fire her on the pretext of substandard performance. (Compl. ¶¶ 33-34.)
In May 2011, Feldman had an altercation with Silverstein that she reported to Turetzky. She also reiterated her complaint that Silverstein failed to supervise brokers. Rather than investigate her complaints, Morgan Stanley rejected a profitable commodities deal that she had proposed without any explanation. (Compl. ¶¶ 36-38, 44.)
In June 2011, Boland wrote to Morgan Stanley's CEO, alerting him to "discriminatory, unethical and perhaps illegal practices" that could "escalate a very negative, public perception of the Firm." (Compl. ¶ 46.) Boland reiterated those concerns in follow-up communications with the Human Resources Department. (Compl. ¶ 48.)
In July 2011, Feldman and Boland submitted identical complaints to the SEC regarding fraudulent conduct. (Compl. ¶ 55.) In response, FINRA investigators met with Plaintiffs for six hours in early August. (Compl. ¶ 56.) Later that month, FINRA audited the Morgan Stanley branch where Plaintiffs worked. FINRA's investigation focused on allegations of unsupervised employees and deceptive cold calling. Plaintiffs overheard Morgan Stanley risk officers discussing their concerns about the specificity of FINRA's investigation. (Compl. ¶¶ 59-61.) Morgan Stanley's Regional Risk Officer concluded that Plaintiffs' complaints were "unsubstantiated," even though she never interviewed them. (Compl. ¶¶62-63.)
In late August, Turetzky fired Feldman for substandard performance, despite the fact that she had just signed a $1.8 million account. (Compl. ¶¶ 66-69.) Boland claims that, thereafter, Morgan Stanley undermined his ability to develop business. (Compl. ¶¶ 70-78.) In September 2011, Boland informed Morgan Stanley risk officers that he had filed complaints with the SEC and FINRA. (Compl. ¶ 74.)
In early November, Boland was permitted to take medical leave to care for Feldman, who was scheduled to undergo surgery. Less than 48 hours after he returned to work, Morgan Stanley fired Boland under the pretext of substandard performance. (Compl. ¶¶ 79-83.)
In February 2012, Feldman filed a complaint with the Occupational Safety and Health Administration ("OSHA") against Morgan Stanley, alleging that she was fired in retaliation for her complaints to regulators. Three months later, Boland filed a complaint with OSHA mirroring his wife's allegations.
On a motion to dismiss, the factual allegations in a complaint are accepted as true and all reasonable inferences are drawn in the plaintiff's favor. Rescuecom Corp. v. Google Inc.,562 F.3d 123, 127 (2d Cir. 2009). To survive a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 663, 678 (2009) (citation omitted); Ruston v. Town Bd. for Town of Skaneateles, 610 F.3d 55, 59 (2d Cir. 2010). However, a claim must rest on "factual allegations sufficient to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A pleading offering "labels and conclusions" or a "formulaic recitation of the elements of a cause of action" fails to state a claim. Iqbal, 556 U.S. at 678 (citation omitted).
Defendants move to dismiss on the grounds that: (1) Plaintiffs' claims are barred by collateral estoppel; (2) the Complaint fails to state a plausible SOX or Dodd-Frank claim; (3) Plaintiffs failed to exhaust their administrative remedies under SOX; and (4) certain damages sought by Plaintiffs are unavailable under SOX and Dodd-Frank.
Prior to filing this civil action, Feldman filed a gender-discrimination complaint with the New York City Commission on Human Rights ("NYCCHR"), and Boland filed a Family Medical Leave Act ("FMLA") complaint with the same agency. (Ranjo Decl. Ex. 3, 15.)1 After investigating their complaints, the NYCCHR issued No Probable Cause Determinations and Orders, finding that each of them was "terminated for legitimate non-discriminatory reasons and not because of discrimination or retaliation." (Ranjo Decl. Ex. 10, 23.) Defendants argue that these findings bar Plaintiffs' claims here.
Subject to certain statutory exceptions, "[t]he factual determinations of a state administrative agency, acting in a judicial capacity, are entitled to the same issue and claimpreclusive effect in federal court that the agency's determinations would receive in the State's courts." Kosakow v. New Rochelle Radiology Associates, P.C., 274 F.3d 706, 728 (2d Cir. 2001) (citing Univ. of Tennessee v. Elliott, 478 U.S. 788, 799 (1986)). To invoke collateral estoppel, a proponent must demonstrate that there was "identity of issue which has necessarily been decided and is decisive of the present action;" the burden then shifts to the party opposing collateral estoppel to demonstrate that they did not have "a full and fair opportunity to litigate the issue." Kosakow, 274 F.3d at 730 (citing Schwartz v. Public Adm'r, 246 N.E.2d 725 (N.Y. 1969)). "The doctrine [of collateral estoppel] is a flexible one" requiring a Buechel v. Bain, 97 N.Y.2d 295, 304 (2001) ().
Defendants argue that because the NYCCHR determined that both Feldman and Boland were discharged for legitimate non-retaliatory reasons, Plaintiffs' claims are collaterally estopped here. Plaintiffs counter that there is no identity of issues between their claims before the NYCCHR and their whistleblower retaliation claims.
The underlying claims need not be identical for collateral estoppel to apply. In Kosakow, the Second Circuit held that a New York State Division of Human Rights ("SDHR") judgment under the Americans with Disabilities Act addressed the identical issue as a federal FMLA case, despite the fact that the statutes and the fora applied different burdens of proof. Kosakow, 274 F.3d at 730-33. The Court of Appeals reasoned that because the SDHR "made the factual determination that [the plaintiff] was terminated for a legitimate business reason," and because such a finding would also dispose of the plaintiffs' FMLA claim, "the issue of whether[plaintiff] was terminated for [legitimate] reasons was necessarily decided in the prior action." Kosakow, 274 F.3d at 733.2
To prevail in her NYCCHR case, Feldman was required to "demonstrate by a preponderance of the evidence that [Morgan Stanley] discriminated in the terms and conditions of her employment, on the basis of her gender, that [Morgan Stanley] allowed or created a hostile work environment, and that she complained about this discrimination and was terminated from her employment because she complained." (Ranjo Decl. Ex. 10, at 2.) Similarly, Boland's NYCCHR case required him to "demonstrate by a preponderance of the evidence that [Morgan Stanley] retaliated against him because he opposed discrimination and because he was associated with a person who was disabled, and that he was terminated from his employment for these reasons." (Ranjo Decl. Ex. 23 at 2.) The NYCCHR concluded in both cases that it was "more likely than not that [Plaintiffs were] terminated for legitimate, non-discriminatory reasons and not because of discrimination or retaliation." (...
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