Schmidt v. Levi Strauss & Co., No. C-04-01026 RMW.

CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
Writing for the CourtRonald M. Whyte
Citation621 F.Supp.2d 796
PartiesRobert SCHMIDT and Thomas Walsh, Plaintiffs, v. LEVI STRAUSS & CO., Laura Liang, and Does 1 through 50, inclusive, Defendants.
Docket NumberNo. C-04-01026 RMW.
Decision Date28 March 2008
621 F.Supp.2d 796
Robert SCHMIDT and Thomas Walsh, Plaintiffs,
v.
LEVI STRAUSS & CO., Laura Liang, and Does 1 through 50, inclusive, Defendants.
No. C-04-01026 RMW.
United States District Court, N.D. California, San Jose Division.
March 28, 2008.

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Joseph Heathcliff Ainley, Philip Edward Kay, John Franklin McIntyre, Jr., for Plaintiffs.

Adi Herzberg, Rebecca Justice Lazarus, Erin E. Schneider, Austin Van Schwing, Jeffrey Alan Leon, for Defendants.

Sheila Marie Pierce, for Miscellaneous.

ORDER GRANTING DEFENDANTS' MOTION TO STRIKE JURY DEMAND FOR SARBANES-OXLEY CLAIM

RONALD M. WHYTE, District Judge.


Defendants Levi Strauss & Co. ("Levi") and Laura Liang ("Liang") move to strike plaintiffs Robert Schmidt's ("Schmidt") and Thomas Walsh's ("Walsh") demand for a jury trial as to plaintiffs' claim pursuant to section 806 of the Sarbanes-Oxley Act of 2002, codified at 18 U.S.C. § 1514A. Defendants argue that there is no right to a jury trial conferred by either § 1514A or the Seventh Amendment of the United States Constitution. Plaintiffs oppose the motion. The court has read the moving and responding papers and considered the arguments of counsel. For the reasons set forth below, the court GRANTS defendants' motion to strike plaintiffs' demand for jury trial with respect to their Sarbanes-Oxley Act, 18 U.S.C. § 1514A, claim. However, in light of the lack of appellate authority addressing this issue, defendants' motion is granted without prejudice to plaintiffs' renewing a demand for jury trial if later legal authority supports such a demand.

I. BACKGROUND

Levi manufactures and sells clothing worldwide. Compl. ¶ 9. Although its outstanding stock is privately-held, it has debt securities registered pursuant to the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq. and is required to file reports thereunder. Schmidt and Walsh are former employees in Levi's global tax department. Compl. ¶ 13. Walsh worked at Levi from September 27, 1999 to December 10, 2002. Id. ¶ 16. Schmidt worked at Levi from June 18, 2001 to December 10, 2002. Id. ¶ 17. Both Schmidt and Walsh reported directly to defendant Liang, Levi's vice president of international tax. Id. ¶ 18.

Plaintiffs allege that Levi engaged in a number of improper tax transactions, particularly with respect to their foreign operations. See id. ¶¶ 28-71. Plaintiffs further

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allege that they were assigned to certain tax research and reconciliation projects that caused them to become aware of the purported tax schemes. Id. ¶¶ 72, 76, 87. Plaintiffs allege that they confronted Liang and Liang's superior Vincent Fong, about their concerns of improper tax transactions and accounting and were either told to "forget" the issue, id. ¶ 78, or had their roles and responsibilities reduced, id. ¶¶ 79, 83, 90. Plaintiff Schmidt also alleges that he became "subject to a series of petty harassments and disciplines by Liang." Id. ¶ 83. Liang terminated Schmidt's and Walsh's employment with Levi on December 10, 2002. Id. ¶¶ 84, 90.

Plaintiffs filed the present suit alleging a number of state claims, although apparently the parties have stipulated to only proceed on the defamation claim in this suit on which a motion for summary judgment is pending, as well as a claim for violation of section 806 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A. In addition to reinstatement and back pay, plaintiffs seek, and the statute authorizes, "compensation for any special damages sustained as a result of the discrimination, including litigation costs, expert witness fees, and reasonable attorney['s] fees pursuant to 18 U.S.C. [§] 1514A(c)(2)(C)" for their Sarbanes-Oxley claim. Compl., Prayer, ¶ 4; see also id. ¶ 96 (alleging special damages).

II. ANALYSIS

Fed.R.Civ.P. 39 provides in relevant part: "When trial by jury has been demanded as provided in Rule 38, the action shall be designated upon the docket as a jury action. The trial of all issues so demanded shall be by jury, unless ... the court upon motion ... finds that a right of trial by jury of some or all of those issues does not exist under the Constitution or statutes of the United States." The issue here is whether plaintiffs are entitled to a jury trial on their § 1514A claim pursuant to the Seventh Amendment. This is a matter of first impression in this district, and few other district courts have addressed it. "[B]efore inquiring into the applicability of the Seventh Amendment, we must `first ascertain whether a construction of the statute is fairly possible by which the [constitutional] question may be avoided.'" City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687, 707, 119 S.Ct. 1624, 143 L.Ed.2d 882 (1999) (quoting Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340, 345, 118 S.Ct. 1279, 140 L.Ed.2d 438 (1998)) (additional citations omitted).

A. Section 1514A of the Sarbanes-Oxley Act

Plaintiffs' first claim alleges a violation of § 1514A. Section 1514A provides "whistleblower protection" for employees of publicly traded companies who are "discharge[d], demote[d], suspende[d], threatene[d], harasse[d], or in any other manner discriminate[d] against ... in the terms and conditions of employment because of any lawful act done by the employee":

(1) 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 section 1341, 1343, 1344, or 1348, any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders, when the information or assistance is provided to or the investigation is conducted by—

(A) a Federal regulatory or law enforcement agency;

(B) any Member of Congress or any committee of Congress; or

(C) a person with supervisory authority over the employee (or such other person

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working for the employer who has the authority to investigate, discover, or terminate misconduct); or

(2) to file, cause to be filed, testify, participate in, or otherwise assist in a proceeding filed or about to be filed (with any knowledge of the employer) relating to an alleged violation of section 1341, 1343, 1344, or 1348, any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders.

18 U.S.C. § 1514A(a).

Section 1514A may be enforced by filing a timely complaint with the Secretary of Labor and, if the Secretary of Labor has not issued a final decision within 180 days and there is no showing of delay due to bad faith on the part of the complaining employee, by "bringing an action at law or equity for de novo review in the appropriate district court of the United States, which shall have jurisdiction over such an action without regard to the amount in controversy." 18 U.S.C. § 1514A(b)(1).

Section 1514A provides for specific remedies:

(1) In general.—An employee prevailing in any action under subsection (b)(1) shall be entitled to all relief necessary to make the employee whole.

(2) Compensatory damages.—Relief for any action under paragraph (1) shall include—

(A) reinstatement with the same seniority status that the employee would have had, but for the discrimination;

(B) the amount of back pay, with interest; and

(C) compensation for any special damages sustained as a result of the discrimination, including litigation costs, expert witness fees, and reasonable attorney fees.

18 U.S.C. § 1514A(c).

B. Construction of Statute

Defendants argue that § 1514A, by its plain and unambiguous terms, does not provide for a statutory right to a jury trial. Plaintiffs argue that the terms are not unambiguous and legislative history supports congressional intent to provide for a right to a jury trial. Two district courts have analyzed the issue of the right to a jury and concluded that there is no such right, Walton v. Nova Information Systems, 514 F.Supp.2d 1031 (E.D.Tenn.2007) and Murray v. TXU, 2005 WL 1356444 (N.D.Texas 2005). Two other district courts have denied without prejudice motions to strike jury demands because of the uncertainty in the law. Those cases are Fraser v. Fiduciary Trust Co. Int'l, 417 F.Supp.2d 310, 325 (S.D.N.Y.2006), and Hanna v. WCI Communities, Inc., 348 F.Supp.2d 1332, 1334 (S.D.Fla.2004). They left open the possibility of later striking the jury demands. See Fraser, 417 F.Supp.2d at 325 ("At this time, the Court denies Defendants' motion to strike a jury trial on the SOX claims without prejudice to bring this motion again prior to trial. At that later juncture, the Court might have the benefit of guidance from additional courts that have considered the issue."); Hanna, 348 F.Supp.2d at 1334 ("Rather than address the issue at this time, the court will deny the defendants' motion to strike a jury trial in this case without prejudice to bring this motion again if all of the parties' case-dispositive motions have been denied prior to trial. At that time, the court might have the benefit of guidance from other courts that have considered the availability of jury trials under the Sarbanes-Oxley Act.").

In Murray, the court concluded that there is no right to a jury trial under

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§ 1514A and struck the plaintiff's demand for a jury trial as to that claim.1 2005 WL 1356444, *1. The court first noted that the plain text of the Sarbanes-Oxley Act did not provide a right of trial by jury because the words "jury trial" do not appear anywhere in the text of the statute. Id. Next, the court rejected the plaintiff's argument that because the Act permits a claimant to bring "an action at law or equity for de novo review" it confers a right to a jury trial. Specifically, citing City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687, 707-08, 119 S.Ct. 1624, 143 L.Ed.2d 882 (1999), the court noted that the United States Supreme Court has held that the phrase "action at...

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4 practice notes
  • Stoneback v. ArtsQuest, NO. 12-3286
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • October 17, 2012
    ...discharge, and retaliatory discharge in particular. E.g., Spinelli, 12 F.3d 853, 856 (9th Cir. 1993); Schmidt v. Levi Strauss & Co., 621 F. Supp. 2d 796, 801 (N.D. Cal 2008). It isPage 17doubtful that analogous actions existed "during the eighteenth century, a time when employment relations......
  • Zwanziger v. O'Brien, No. 11–1548.
    • United States
    • Court of Appeals of Iowa
    • October 3, 2012
    ...US.C. § 1514A, prior to a 2010 legislative amendment specifically granting a right to a jury trial.8See Schmidt v. Levi Strauss & Co., 621 F.Supp.2d 796, 802–06 (N.D.Cal.2008) (concluding that “[b]ased on this court's review of the statutory text, purpose of the remedies, and overall statut......
  • Bethea v. Merchants Commercial Bank, Civil Action No. 11-51
    • United States
    • United States District Courts. 3th Circuit. District of the Virgin Islands
    • April 1, 2015
    ...12 F.3d 853 (9th Cir. 1993) (finding retaliatory discharge "a creature of the twentieth century"); Schmidt v. Levi Strauss & Co., 621 F. Supp. 2d 796, 801 (N.D. Cal. 2008) (finding wrongful discharge at common law)). Moreover, I find that the statute offers both legal and equitable relief b......
  • Zwanziger v. O'Brien, No. 2-390 / 11-1548
    • United States
    • Court of Appeals of Iowa
    • October 3, 2012
    ...§ 1514A, prior to a 2010 legislative amendment specifically granting a right to a jury trial.8 See Schmidt v. Levi Strauss & Co., 621 F. Supp. 2d 796, 802-06 (N.D. Cal. 2008) (concluding that "[b]ased on this court's review of the statutory text, purpose of the remedies, and overall statuto......
4 cases
  • Stoneback v. ArtsQuest, NO. 12-3286
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • October 17, 2012
    ...discharge, and retaliatory discharge in particular. E.g., Spinelli, 12 F.3d 853, 856 (9th Cir. 1993); Schmidt v. Levi Strauss & Co., 621 F. Supp. 2d 796, 801 (N.D. Cal 2008). It isPage 17doubtful that analogous actions existed "during the eighteenth century, a time when employment relations......
  • Bethea v. Merchants Commercial Bank, Civil Action No. 11-51
    • United States
    • United States District Courts. 3th Circuit. District of the Virgin Islands
    • April 1, 2015
    ...12 F.3d 853 (9th Cir. 1993) (finding retaliatory discharge "a creature of the twentieth century"); Schmidt v. Levi Strauss & Co., 621 F. Supp. 2d 796, 801 (N.D. Cal. 2008) (finding wrongful discharge at common law)). Moreover, I find that the statute offers both legal and equitable relief b......
  • Zwanziger v. O'Brien, No. 11–1548.
    • United States
    • Court of Appeals of Iowa
    • October 3, 2012
    ...US.C. § 1514A, prior to a 2010 legislative amendment specifically granting a right to a jury trial.8See Schmidt v. Levi Strauss & Co., 621 F.Supp.2d 796, 802–06 (N.D.Cal.2008) (concluding that “[b]ased on this court's review of the statutory text, purpose of the remedies, and overall statut......
  • Zwanziger v. O'Brien, No. 2-390 / 11-1548
    • United States
    • Court of Appeals of Iowa
    • October 3, 2012
    ...§ 1514A, prior to a 2010 legislative amendment specifically granting a right to a jury trial.8 See Schmidt v. Levi Strauss & Co., 621 F. Supp. 2d 796, 802-06 (N.D. Cal. 2008) (concluding that "[b]ased on this court's review of the statutory text, purpose of the remedies, and overall statuto......

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