Bechtel et al v. Competitive Tech, Inc
Filing
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ORDER granting 3 Motion for Preliminary Injunction . Signed by Judge Alfred V. Covello on 5/13/05. (Montgomery, A.) Additional attachment(s) added on 5/13/2005 (Walker, J.).
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
JOHN SCOTT BECHTEL,
and WILLIE JACQUES, JR.,
Plaintiffs,
UNITED STATES DEPARTMENT
OF LABOR,
Intervening Plaintiff,
VS.
COMPETITIVE TECHNOLOGIES,
INC.,
Defendant.
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Civil No. 3:05CV629 (AVC)
RULING ON THE PLAINTIFFS’ APPLICATION FOR
PRELIMINARY INJUNCTION
This is an action for equitable relief brought in connection
with a failed employment relationship.
The plaintiffs, John
Bectel and Willie Jacques, assert that the defendant, Competitive
Technologies, Inc. (“CTI”), terminated their employment in
retaliation for conduct protected by § 806 of the Corporate and
Criminal Fraud Accountability Act of 2002 (“Sarbanes-Oxley Act”),
18 U.S.C. § 1514A.
The plaintiffs, joined by the intervening
plaintiff United States Secretary of Labor, seek an injunction
enforcing a preliminary order of the Secretary requiring CTI to
reinstate the plaintiffs to their previous positions.
The issues presented are: (1) whether the court has subject
matter jurisdiction to enforce a preliminary order of
reinstatement under the Sarbanes-Oxley Act; and (2) whether
enforcement requires the plaintiffs to prove the material
elements required for a preliminary injunction.
For the reasons
hereinafter set forth, the court concludes that it has subject
matter jurisdiction to enforce the Secretary’s preliminary order
and, further, the plaintiffs are entitled to this relief
regardless of whether they have also met the standard for
awarding injunctive relief.
The application is therefore
GRANTED.
FACTS
Examination of the record disclosed the following
undisputed, material facts.
The plaintiffs, Scott Bechtel and
Wil Jacques, are former vice presidents of the defendant,
Competitive Technologies, Inc., (“CTI”).
On three separate
occasions before their job terminations, Bechtel and Jacques
raised concerns with several members of CTI’s management
concerning CTI’s financial reporting.
Specifically,
Bectel and Jacques
voiced concerns that certain oral agreements
entered into by the CEO John Nano with
consultants and [Bechtel and Jacques] were
material and should be disclosed on the SEC
reports and to the shareholders. [Bechtel
and Jacques] were told that any oral
agreements were not material. However,
the materiality of these oral agreements
was later . . . verified by their inclusion
in the SEC 10-K report for the fiscal
year ending July 31, 2004. Following the
March 2003 disclosure meeting, [Bechtel
and Jacques] refused to sign off on the
report because their concerns regarding
the oral agreements had not been addressed.
Nano held a meeting with [Bechtel and
Jacques] and assured them that their
concerns would be addressed by the next
disclosure meeting. [Bechtel and
Jacques] finally signed off on the report.
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Nano’s attitude toward [them] changed after
this meeting. He criticized and attempted
to embarrass them at staff meetings and
in front of co-workers. Nano’s hostility
continued until [Bechtel and Jacques] were
terminated on June 30, 2003.
(February 2, 2005 Findings of the Occupation Safety and Health
Administration at 2).
After CTI terminated their employment, Bectel and Jacques
filed a complaint with the Secretary of Labor pursuant to the
Sarbanes-Oxley Act, 18 U.S.C. § 1514A(b)(1)(A).
They alleged
that CTI terminated their employment on account of issues they
raised at quarterly disclosure committee meetings.
After CTI had
the opportunity to respond to the allegations pursuant to 29
C.F.R. § 1980.104, on February 2, 2005, the Secretary, acting
through her agent, the regional administrator for the
Occupational Safety and Health Administration (“OSHA”)
issued a preliminary order finding that CTI violated the
Sarbanes-Oxley Act, 18 U.S.C. § 1514A(b)(1)(A), and ordered CTI
to “reinstate [Bechtel and Jacques] to the same positions and
provide them with salaries and all other benefits commensurate
with the position of vice president.”
CTI objected to the Secretary’s preliminary finding and,
pursuant to C.F.R. § 1980.107, requested a hearing before an
administrative law judge.
With this request,
all provisions of the preliminary order
[were] stayed, except for the portion
requiring preliminary reinstatement. The
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portion of the preliminary order
requiring reinstatement will be effective
immediately upon the [defendant’s]
receipt of the findings and preliminary
order, regardless of any objections
to the order.
29 C.F.R. § 1980.106 (emphasis added).
The administrative law
judge then scheduled the matter for trial de novo commencing May
16, 2005.
Although the rule required CTI to immediately
reinstate [Bechtel and Jacques], CTI did not do so.
Instead, CTI
filed a motion to stay the reinstatement order.
On May 29, 2005,
the administrative law judge denied the motion.
CTI has refused
to comply with the preliminary order of reinstatement.
On April 18, 2005, the plaintiffs filed suit in this court
seeking enforcement of the preliminary order of reinstatement
with an application for injunctive relief.
On April 27, 2005,
the court heard argument on the application.
DISCUSSION
The plaintiffs, John Bectel and Willie Jacques, joined by
the intervening plaintiff, the United States Secretary of Labor,
have applied for a preliminary injunction to enforce a
preliminary order of the Secretary requiring CTI to reinstate
them to their former positions.
In response, CTI maintains that
the court does not have subject matter jurisdiction to hear this
case and that, even if it does, Bectel and Jacques have failed to
show entitlement to injunctive relief.
contention below.
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The court considers each
1.
Jurisdiction
CTI first argues that the court lacks subject matter
jurisdiction to order the reinstatements because the Department
of Labor has not issued a final order and, in CTI’s view, the
relevant statute, i.e., the Sarbanes-Oxley Act, 18 U.S.C. §
1514A, fails to confer jurisdiction upon this court to review a
preliminary order.
The court does not agree.
“The starting point in statutory construction is, of course,
the language of the statute itself.”
Tallentire, 477 U.S. 207, 236 (1986).
Offshore Logistics, Inc. v
It is a “cardinal
principle of statutory construction that courts must give effect,
if possible, to every clause and word of a statute.”
Williams v.
Taylor, 529 U.S. 362, 404, 120 S.Ct. 1495 (2000).
The Sarbanes-Oxley Act “provides that no company subject to
the Securities Exchange Act of 1934 may retaliate against an
employee who lawfully cooperates with an investigation concerning
violations of the Act or fraud on the shareholders.” Hanna v. WCI
Communities, Inc., 348 F. Supp. 2d 1322, 1325 (S.D. Fla. 2004).
A employee “who alleges discharge or other discrimination by any
person in violation of [the Act] may seek relief . . . by
(A)
filing a complaint with the Secretary of
Labor; or
(B)
if the Secretary has not issued a final
decision within 180 days of the filing
of the complaint and there is no showing
that such delay is due to the bad faith
of the claimant, [the claimant may]
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bring[] an action at law or equity for
de novo review in the appropriate district
court. . .
18 U.S.C. § 1514A(b)(1)(A) and (B).
The procedure for
adjudication of the complaint is governed by the rules and
procedures set forth in the Wendell H. Ford Aviation Investment
and Reform Act for the 21st Century (“AIR21"), 49 U.S.C. §
42121(b).
See Sarbanes-Oxley, 18 U.S.C. § 1514A(2)(A)
(incorporating the provisions of 49 U.S.C. § 42121(b)).
Under
this provision, the Secretary of Labor conducts an investigation
and determines whether reasonable cause exists to believe that a
violation has occurred.
See 49 U.S.C. § 42121(b)(2).
“If the
Secretary of Labor concludes that [such cause exists], the
Secretary shall accompany the Secretary’s findings with a
preliminary order providing the relief prescribed by paragraph
(3)(B) [i.e., the section governing final orders].” 49 U.S.C. §
42121(b)(2).
Under paragraph (3)(B) of 49 U.S.C. § 42121(b), the
defendant must reinstate the complainant to his former position
(including backpay) with the same compensation, terms,
conditions, and privileges associated with his employment.
U.S.C. § 42121(b)(3)(B)(ii).
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The employer has the right to file
objections to the preliminary order and to a hearing before an
administrative law judge on the merits of the retaliation claim.
49 U.S.C. § 42121(b)(2)(A).
However, the filing of objections
does not operate to stay any reinstatement remedy contained in
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the preliminary order.
Id.
See also 29 C.F.R. § 1980.105 (c)
(“the portion of any preliminary order requiring reinstatement
will be effective immediately upon receipt of the findings and
preliminary order.”)
Although the court agrees with CTI that the agency has not
issued a final order, the statute explicitly authorizes
jurisdiction in this court to enforce a preliminary order as if
it were a final order.
See 49 U.S.C. § 42121(b)(2) (“the
Secretary shall accompany the Secretary’s findings with a
preliminary order providing the relief prescribed by paragraph
(3)(B) [i.e., the section governing final orders]”).
A finding
to the contrary would negate the plain words of the statute that
preliminary orders of reinstatement may not be stayed pending an
appeal of the Secretary’s order.
Accordingly, the court
concludes that it has jurisdiction to enforce the order of
reinstatement.
2.
Injunctive Relief
CTI next argues that Bectel and Jacques are not entitled to
a preliminary injunction because they have failed to demonstrate
the material elements for such relief.
In response, Bectel and
Jacques, and the Secretary of Labor, argue that the elements for
a preliminary injunction are not relevant here as they are
entitled to an injunction based exclusively on the Secretary’s
findings.
The court agrees with the plaintiffs.
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The Sarbanes-Oxley Act makes clear that the Secretary of
Labor and not the court makes the determination of whether an
order of reinstatement is appropriate.
The statutory scheme is
similar to the whistle blower protections under the Surface
Transportation Assistance Act (“STAA”), now codified at 49 U.S.C.
§ 31105.
Like the Sarbanes-Oxley Act, the STAA provides
preliminary orders to protect whistle blowers.
31105 (b)(2)(A).
See 49 U.S.C. §
An employer under the STAA can obtain a hearing
by filing objections to the reasonable cause finding.
§ 31105 (b)(2)(B).
49 U.S.C.
Like Sarbanes-Oxley, however, the filing of
objections does not result in a stay of the reinstatement order.
See Id.
This scheme has been the subject of challenge in
Brock v. Roadway Express, Inc., 481 U.S. 252, 107 S.Ct. 1740
(1987).
In Brock, the Supreme Court observed that Congress could
invest the Secretary of Labor with the authority to order
reinstatement on the basis of an investigation, provided that the
investigation met minimum dues process standards that are not at
issue in this case.
Brock, 481 U.S. at 259.
See id. (the
“statute reflects a careful balancing of the relevant interests
of the Government, employee, and employer”).
Accordingly, the
court concludes that the plaintiffs are entitled to an injunction
enforcing the Secretary’s preliminary order regardless of whether
the elements for preliminary injunctive relief have also been
established.
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CONCLUSION
For the foregoing reasons, the application for preliminary
injunction (document no. 3) is GRANTED.
The court orders CTI to
immediately reinstate Bectel and Jacques to their former
positions of employment with CTI.
Further, the court orders CTI
to pay Bectel and Jacques all salary, benefits and other
compensation that would have been earned had CTI complied with
the preliminary order issued on February 2,2005.
It is so ordered this 13th day of May, 2005 at
Hartford, Connecticut.
__/s/_________________________
Alfred V. Covello
United States District Judge
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