The U.S. District Court for the Northern District of Texas recently ruled that a plaintiff had the right to a de novo review of her SOX whistleblower claims in federal district court even though she had already participated in two levels of administrative review before the Department of Labor (DoL).  Candler v. URS Corp., No. 13-cv-1306-B (N.D. Texas Sept. 13, 2013).  This decision raises the stakes and costs for employers by requiring them to submit to duplicative discovery and dispositive motion practice and potentially yet another evidentiary hearing.

Background

Plaintiff Jamie Candler, a former employee of Defendant URS Corporation (URS) claimed her employment was terminated because, after URS acquired Lopez Garcia Group (LGG) in 2009, she began noting accounting irregularities, which she reported first internally and then externally to an OSHA investigator.  Plaintiff asserts that she was demoted and ultimately terminated because of these complaints.  URS, on the other hand, maintains that Plaintiff was demoted due to her poor performance on work assigned after the acquisition of LGG and that she was discharged when URS was forced to eliminate a number of positions due to economic difficulties during the recession. 

Procedural History

Plaintiff’s employment was terminated on January 14, 2011.  On May 26, 2011, she filed a complaint against URS with the DoL under Section 806 of SOX.  OSHA issued a report on October 21, 2011, finding “no reasonable cause to believe [URS] violated SOX .  . . .”  On November 19, 2011, Plaintiff appealed, objecting to OSHA’s determination, and requested a hearing before an ALJ at the DoL.  After a two-day hearing, on March 6, 2013, the ALJ issued a Decision and Order denying Plaintiff’s complaint.  On March 20, 2013, Plaintiff filed a petition for review with the ARB, which the ARB accepted on March 26, 2013.

Three days later, on March 29, 2013, Plaintiff filed her complaint in the U.S. District Court for the Northern District of Texas, requesting a de novo review of her SOX whistleblower claim.  URS moved to dismiss for lack of subject matter jurisdiction, or, in the alternative for a writ of mandamus directing the ARB to complete its review.

District Court’s Ruling

The district court denied URS’s motion.  It determined that it had jurisdiction under Section 806 because the two requisite preconditions were met:  (1) the Secretary of the DOL had not issued a final decision within 180 days of the filing of the administrative complaint; and (2) there was no showing that the delay was due to the bad faith of the claimant. 

Further, the court stated that “[a]llowing Candler to exercise her statutory right to de novo review in federal court after completing two levels of administrative review is not – based on the bulk of case authority – the sort of result that is so bizarre that Congress could not have intended it.”  It added that “SOX does not indicate that a court should dismiss a complaint in order to prevent a claimant from obtaining – in the words of URS – ‘a second bite at the apple.’”  And it noted that it could not “deny Candler her statutory right simply to avoid duplicative proceedings.” 

Implications

This decision—which may be construed to countenance claimant attempts to take another bite at the apple—is troubling for employers where they have already incurred the disruption attendant to robust discovery and an evidentiary hearing before the DoL.  It underscores the importance of appreciating from the outset that SOX whistleblower litigation can sometimes require a lengthy process, and employers should develop long-term strategies and perspectives accordingly.