Wiggins v. ING U.S., Inc. et al
Filing
42
RULING granting in part insofar as the court compels arbitration of Count III and denying in part insofar as the court does not compel the arbitration of Counts I and II re 13 Motion to Stay; granting 14 Motion to Dismiss as to Counts I and II. Rather than staying the case pending arbitration of Count III, the case is dismissed. Wiggins is granted leave to file an Amended Complaint no later than 21 days from the entry of this Ruling. The Clerk is directed to close the case after 21 days unless Wiggins files an Amended Complaint within the allotted time. Signed by Judge Janet C. Hall on 6/17/2015. (Malone, P.)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
EVA WIGGINS,
Plaintiff,
CIVIL ACTION NO.
3:14-CV-1089 (JCH)
v.
ING U.S., INC. et al.,
Defendants.
JUNE 17, 2015
RULING RE: DEFENDANTS’ MOTION TO STAY (DOC. NO. 13)
AND DEFENDANTS’ MOTION TO DISMISS (DOC. NO. 14)
I.
INTRODUCTION
Plaintiff Eva Wiggins brings this action against defendants ING U.S., Inc., and
ING Life Insurance and Annuity Company (collectively, “ING”), Wiggins’ former
employers, alleging that ING took adverse employment actions against her because she
acted as a whistleblower. In the Complaint (Doc. No. 1), she raises claims invoking the
Sarbanes-Oxley Act of 2002 (“SOX”), see 18 U.S.C. § 1514A(b)(1)(B) (Count I); the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”),
see 15 U.S.C. § 78u-6(h)(1)(B)(i) (Count II); and section 31-51q of the Connecticut
General Statutes (Count III). In their Motion to Stay (“MTS”) (Doc. No. 13) and Motion
to Dismiss (“MTD”) (Doc. No. 14), the defendants ask that this court stay this action on
the basis of pending arbitration proceedings as to all of Wiggins’ claims or, in the
alternative, that the court dismiss the entirety of the Complaint for failure to state a claim
upon which relief can be granted.
1
II.
FACTS AND STATUTORY SCHEME 1
When Eva Wiggins began working for ING in February 2006, she completed and
signed a Form U-4, a condition of her employment. Declaration of Michael Trotter (Doc.
No. 13-2) ¶ 3. The Form U-4 contained a term that provided:
I agree to arbitrate any dispute, claim or controversy that may arise between me
and my firm, or a customer, or any other person, that is required to be arbitrated
under the rules, constitutions, or by-laws of the SROs [self-regulatory
organizations] indicated in Section 4 (SRO REGISTRATION) as may be
amended from time to time and that any arbitration award rendered against me
may be entered as a judgment in any court of competent jurisdiction.
Rev. Form U4 (10/2005) (“U-4” or “Form U-4”) (Doc. No. 13-2/22-1 (redacted) at 4–17)
(emphases in original).
Already enacted into law at this time was the Sarbanes-Oxley Act of 2002. See
Pub. L. No. 107-204, 116 Stat. 745 (2002). SOX established a private right of action to
vindicate the rights of employees of certain companies who are discharged for, inter
alia, “provid[ing] information . . . regarding any conduct which the employee reasonably
believes constitutes a violation of [certain securities laws] to . . . a person with
supervisory authority over the employee . . . .” 18 U.S.C. § 1514A(a)(1)(C).
In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act of
2010, Pub. L. No. 111-203, 124 Stat. 1376 (2010), was enacted into law. Dodd-Frank
established a private right of action against an employer who, inter alia, “discharge[s]
. . . a whistleblower . . . because of any lawful act done by the whistleblower . . . in
1
Different legal standards apply to the Motion to Stay and the Motion to Dismiss addressed in the
present Ruling. In order to streamline the presentation of facts for present purposes, this Part of the
Ruling presents facts relevant to the Motion to Dismiss drawing reasonable inferences in favor of the
plaintiff and presents the facts material to the Motion to Stay, all of which are undisputed, in the light most
favorable to the Wiggins, who is the non-moving party. See Bensadoun v. Jobe-Riat, 316 F.3d 171, 175
(2d Cir. 2003) (review of facts using summary judgment standard is appropriate when evaluating a motion
to stay pending arbitration).
2
making disclosures that are required or protected under the Sarbanes-Oxley Act of
2002.” 15 U.S.C. § 78u-6(h)(1)(A)(iii). For purposes of the foregoing section provision,
a “whistleblower” is defined as: “any individual who provides . . . information relating to a
violation of the securities laws to the [Securities and Exchange] Commission, in a
manner established, by rule or regulation, by the Commission.”
Dodd-Frank also amended section 1514A of title 18, the section containing the
SOX right of action, to provide: “No predispute arbitration agreement shall be valid or
enforceable, if the agreement requires arbitration of a dispute arising under this
section.” 18 U.S.C. § 1514A(e)(2).
In 2011, Wiggins received and responded to an email containing attachments
referred to as “the IFA [ING Financial Advisers] Written Supervisory Procedures and
Compliance Manual,” a “complaince bulletin,” and a “corresponding attachment.”
Declaration of Monica White (Doc. No. 13-3) ¶ 4. The first of these documents
contained the following sentence: “When an individual becomes registered with IFA, he
or she agrees to resolve any dispute, claim or controversy with IFA or a customer with
binding arbitration.” Id. ¶ 6. The email instructed:
Please read [the attached documents]. To make this process as easy as
possible, please reply to this e-mail by selecting the “Yes, I Confirm” voting
button in the upper left hand corner of this e-mail. A box will pop up which will ask
you if you want to send the response or edit your response before sending.
Choose the first button, “Send the response now”, and you are done!
By replying to this e-mail, you:
* Acknowledge receipt of Compliance Bulletin #01/11 and the corresponding
attachment;
* Confirm that you have read the ING Financial Advisors [sic], LLC Written
Supervisory Procedures and Compliance Manual in its entirety; and
* Acknowledge that the Manual and all additions and replacements to policy are
confidential and the property of IFA and must not be disclosed to persons not
3
affiliated with lNG (except for securities regulators and other law enforcement
officials on official business).
Id. ¶ 4. Wiggins sent a reply email confirming that she had received and read the ING
Financial Advisers, LLC Written Supervisory Procedures and Compliance Manual in its
entirety in its entirety. Id. ¶ 7.
Beginning in or about May 2008, Wiggins “noticed widespread problems with the
internal policies and procedures put in place by Defendants, and the implementation
and application of these internal policies and procedures.” Complaint ¶ 11. These
problems included, but are not limited to (see also, e.g., id. ¶¶ 26, 27): “the violation of
SOX audit requirements,” id.; “that market value assessments . . . were consistently
incorrect” and that, even after Wiggins “borught the issue . . . to the attention of her
supervisors and managers . . . the inaccuracies persisted because . . . management
failed to take corrective action regarding these problems,” id. ¶¶ 12, 13; “that deferred
sales charges were frequently being incorrectly imposed” to the benefit of ING and the
loss of customers, id. ¶ 14; “that plans which had accounting issues or errors were
frequently removed from [a] database used by auditors [in the course of their quarterly
SOX audits] to identify [which] plans [would] be audited,” id. ¶ 16; that, where Wiggins
“refused to sign off on work [in the course of her review duties] that she had not yet had
time to review, or that was inaccurate or incomplete,” “frequently . . . management
[would direct another individual to approve the work], even though it was incomplete or
contained errors,” id. ¶ 17; that “the files and assets were sent out to new carriers prior
to the receipt of authorization by the client,” or “the wrong plan[s] were sent to [ ] new
carrier[s],” resulting in potential or actual harm to clients, id. ¶¶ 20, 22.
4
Wiggins reported these events to her supervisors. Id. ¶¶ 12–24. After her
reporting activities, Wiggins was subjected to a series of actions that she characterizes
as retaliatory. Id. ¶¶ 25–38. In February 2013, Wiggins’ employment was terminated.
Id. ¶ 39.
In July 2014, Wiggins filed the present lawsuit. The Complaint alleges three
claims. Count I claims that her termination constituted illegal retaliation for her
opposition to the aforementioned “widespread problems” in violation of section
1514A(a)(1)(C) of title 18 of the United States Code, giving rise to a cause of action as
provided in section 1514A(b)(1)(B) of the same title. Count II claims that the same
actions violated section 78u-6(h)(1)(A)(iii) of title 15 of the United States Code (based
on this provision’s incorporation of the very same prohibitions of certain behavior given
in the statutes that form the basis for Count I), giving rise to a cause of action as
provided in section 78u-6(h)(1)(B)(i) of the same title. Finally, Count III claims that the
same actions also violated Wiggins’ rights under the free speech provisions of the
Connecticut Constitution, as guaranteed by section 31-51q of the Connecticut General
Statutes.
III.
DISCUSSION
The basic thrust of the Complaint is that, in the course of Wiggins’ work at ING,
she noticed certain events or activities that gave her concern; she reported her
concerns to certain individuals at ING; and, because she reported these issues, she
was terminated. Wiggins argues that her termination constituted illegal retaliation for
protected activity under SOX (Count I), Dodd-Frank (Count II), and section 31-51q of
the Connecticut General Statutes (Count III).
5
ING argues that Rule 12(b)(6) of the Federal Rules of Civil Procedure requires
dismissal of all of these three claims, see Motion to Dismiss (Doc. No. 14), but also that
Wiggins was and is required to pursue each of her claims through arbitration rather than
in court, so that the case should be stayed, see Motion to Stay (Doc. No. 13).
The court must first decide whether Wiggins’ claims must be pursued through
arbitration; only for those claims that may be heard in court may the court rule on ING’s
Motion to Dismiss. See AT&T Techs., Inc., v. Comm’ns Workers of Am., 475 U.S. 643,
649 (1986). Accordingly, the court first decides which claims must be arbitrated and
concludes that only one of them must be. See Part III.A infra. The court proceeds to
rule on ING’s Motion to Dismiss as to the remaining two claims and determines that
dismissal of these claims with leave to replead is appropriate. See Part III.B infra.
Because, on the pleadings before the court, none of Wiggins’ claims warrants further
adjudication by this court, the court dismisses the case in its entirety rather than staying
the case, as it would consider doing were at least one claim to survive dismissal. See
Part III.C infra.
A.
Whether the claims are subject to mandatory arbitration
ING argues that Wiggins must pursue all of her three claims through arbitration
rather than in court.
In determining whether to stay the case pursuant to the Federal Arbitration Act,
Pub. L. No. 68-401, 43 Stat. 883 (1925), three issues may be relevant: (1) whether a
valid agreement to arbitrate disputes exists; (2) to the extent that a valid agreement
exists, whether the asserted claims are covered by the agreement and their coverage is
not rendered void by law; and (3) if the court concludes that some, but not all, of the
6
claims in the case are arbitrable, whether staying the remaining claims pending
arbitration is appropriate. See JLM Indus., Inc. v. Stolt–Nielsen SA, 387 F.3d 163, 169
(2d Cir. 2004).
The court will treat each of these issues in turn. In so doing, the court reviews
the submissions before it using a standard equivalent to the one applicable on a motion
for summary judgment. See Bensadoun v. Jobe-Riat, 316 F.3d 171, 175 (2d Cir. 2003).
“[O]rdinary state-law principles that govern the formation of contracts” are relevant to
the first two questions. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944
(1995); Kurz v. Chase Manhattan Bank USA, N.A., 319 F. Supp. 2d 457, 461 (S.D.N.Y.
2004) (“Whether the parties agreed to arbitrate is determined by state contract law.”). 2
1.
Prima facie enforceability of arbitration clauses
As to the first issue—whether a valid agreement to arbitrate disputes exists—ING
argues that arbitration clauses in two different documents, the Form U-4 and the ING
2
The Federal Arbitration Act (FAA) provides that “[a] written provision in . . . a contract evidencing
a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such
contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist
at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The FAA reflects “both a liberal
federal policy favoring arbitration, and the fundamental principle that arbitration is a matter of contract.”
AT&T Mobility LLC v. Concepcion, 563 U.S. 321, 131 S. Ct. 1740, 1745 (2011) (internal quotation marks
and citations omitted). “[T]he FAA was enacted to replace judicial indisposition to arbitration, and is an
expression of a strong federal policy favoring arbitration as an alternative means of dispute resolution.”
Ross v. Am. Express Co., 547 F.3d 137, 142 (2d Cir. 2008) (internal quotation marks and citations
omitted).
At the same time, arbitration “is a matter of consent, not coercion.” Id. at 143 (quoting Volt Info.
Scis. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989)). Because arbitration is a
matter of contract, “a party cannot be required to submit to arbitration any dispute which he has not
agreed so to submit.” Republic of Ecuador v. Chevron Corp., 638 F.3d 384, 392 (2d Cir. 2011); Vera v.
Saks & Co., 335 F.3d 109, 116 (2d Cir. 2003). “Persons are generally entitled to have their dispute
settled by the ruling of a court of law. It is essentially only by making a commitment to arbitrate that one
gives up the right of access to a court of law in favor of arbitration.” Sokol Holdings, Inc. v. BMB Munai,
Inc., 542 F.3d 354, 358 (2d Cir. 2008) (citation omitted). “While the FAA expresses a strong federal
policy in favor of arbitration, the purpose of Congress in enacting the FAA was to make arbitration
agreements as enforceable as other contracts, but not more so.” Cap Gemini Ernst & Young, U.S., LLC
v. Nackel, 346 F.3d 360, 364 (2d Cir. 2003) (emphasis in original) (internal quotation marks and citation
omitted). “[C]ourts must place arbitration on an equal footing with other contracts, and enforce them
according to their terms.” Concepcion, 131 S. Ct. at 1745.
7
Financial Advisers Written Supervisory Procedures and Compliance Manual
(“IFAWSPACM”), each constitute enforceable agreements to submit claims to
arbitration. Wiggins disputes ING’s contentions as to both agreements.
The court concludes that, for purposes of summary judgment, ING has only
established the U-4 is enforceable.
As a condition of her employment with ING, Wiggins executed the Form U-4 in
February 2006. The following term is included in the U-4:
I agree to arbitrate any dispute, claim or controversy that may arise between me
and my firm, or a customer, or any other person, that is required to be arbitrated
under the rules, constitutions, or by-laws of the SROs [self-regulatory
organizations] indicated in Section 4 (SRO REGISTRATION) as may be
amended from time to time and that any arbitration award rendered against me
may be entered as a judgment in any court of competent jurisdiction.
Form U-4, Part 15A.5. As the Second Circuit has held, reviewing a clause substantially
identical for present purposes in what appears to be a prior version of the Form U-4 at
issue in this case, this document “is a contract” and the arbitration clause quoted above
is “binding.” See Thomas James Assocs., Inc. v. Jameson, 102 F.3d 60, 62, 65 (2d Cir.
1996). This clause plainly imposes a general requirement on the parties to arbitrate
disputes such as the present one. 3
However, ING has not established that the IFAWSPACM is enforceable. The
arbitration clause in the IFAWSPACM states, “When an individual becomes registered
with [ING Financial Advisers, LLC], he or she agrees to resolve any dispute, claim or
3
In their papers, the parties contest whether any distinction in identity between the defendants
named in this action and those parties named in the Form U-4 matter. See, e.g., MTS Opp. at 16.
However, there appears to be no dispute that any distinction between the two named defendants and the
third entity, ING Financial Advisers, LLC,is illusory. Wiggins means to bring this suit against her former
employer because her employer terminated her, and Wiggins’ execution of the Form U-4 occurred as a
condition of her employment by the same party.
8
controversy with IFA or a customer with binding arbitration.” This statement does not
appear to be an agreement so much as an acknowledgment of a prior agreement—
perhaps a reference to Form U-4. This case is thus unlike those in which a handbook
explicitly states that its arbitration clause was binding. See, e.g., Topf v. Warnaco, Inc.,
942 F. Supp. 762, 764–65 (D. Conn. 1996).
ING submits no other evidence sufficient to establish beyond triable dispute that
IFAWSPACM contained any binding arbitration agreement. Its only representation in
this respect is that Wiggins responded when she received the IFAWSPACM by email
with a “[c]onfirm[ation] that [she] had read” the IFAWSPACM and an
“[a]cknowledg[ment] that the [IFAWSPACM] and all additions and replacements to
policy are confidential . . . .” Declaration of Monica White (Doc. No. 13-3) ¶¶ 4–7. ING
has not submitted the entire IFAWSPACM to the court, making it especially difficult to
determine whether, in light of any other of its terms, or the agreement taken as a whole,
it might be construed to constitute a binding agreement. From what is presently before
it, the court cannot say that the IFAWSPACM (let alone the arbitration clause
specifically) constitutes a binding agreement relevant to the present dispute.
2.
Whether each of Wiggins’ claims must be submitted to arbitration
Because the U-4’s arbitration clause is binding, the court proceeds to the second
issue—whether the clause covers each of Wiggins’ claims or whether the law requires
that the parties not be compelled to arbitrate the claims. See JLM Indus., Inc. v. Stolt–
Nielsen SA, 387 F.3d 163, 169 (2d Cir. 2004).
9
i.
Submission of the SOX claim (Count I) to arbitration is not
required
ING argues that Wiggins is required to submit her SOX claim to arbitration
because it is covered by the U-4’s arbitration clause and section 1514A(e)(2) does not
apply retroactively to free Wiggins from her agreement to arbitrate this claim. See
Memorandum in Support of Motion for Stay Pending Arbitration (“MTS Mem.”) (Doc. No.
13-1) at 12. 4 The court disagrees, concluding that, without regard to what the arbitration
clause provides, federal law provides that Wiggins may not be compelled 5 to arbitrate
this claim. 6
Congress amended SOX in 2010 to prohibit pre-dispute arbitration agreements
as to claims such as the SOX claim that Wiggins presently brings. See 18 U.S.C.
§ 1514A(e)(2) (“No predispute arbitration agreement shall be valid or enforceable, if the
agreement requires arbitration of a dispute arising under this section.”). Although the
court recognizes that there is a split of authority on this issue, for the reasons
thoughtfully elaborated by Judge Koeltl in the Wong case, the court concludes that
section 1514A(e)(2) establishes that the U-4 is neither “valid [n]or enforceable” insofar
4
The court cites to the page numbers assigned by CM/ECF after a document is filed, not the
page numbers put on each page by counsel, to the extent that the two differ.
5
When it speaks in this Ruling of whether arbitration will be “compelled,” the court does not mean
to suggest that Wiggins may be affirmatively required to pursue her claims, only that she may be required
to pursue them in a particular forum if she does opt to pursue them.
6
The U-4 arbitration clause, executed by Wiggins in February 2006, states that Wiggins agrees:
to arbitrate any dispute, claim or controversy that may arise between me and my firm . . . that is
required to be arbitrated under the rules, constitutions, or by-laws of the SROs [self-regulatory
organizations] indicated in Section 4 (SRO REGISTRATION) as may be amended from time to
time and that any arbitration award rendered against me may be entered as a judgment in any
court of competent jurisdiction.
Form U-4 at Part 15A.5.
10
as it is an “agreement requir[ing] arbitration of a dispute arising under” the SOX
provision that Wiggins invokes. See Wong v. CKX, Inc., 890 F. Supp. 2d 411, 420–23
(S.D.N.Y. 2012) (citing cases reaching contrary conclusions at 424 n.2). 7
ii.
Submission of the Dodd-Frank claim (Count II) to arbitration
is not required
ING argues that, because section 78u-6 has no anti-arbitration provision
analogous to section 1514A(e)(2), the Dodd-Frank claim must be resolved through
arbitration even if 1514A(e)(2) bars the compulsion of arbitration of Wiggins’ SOX claim.
See MTS Mem. at 14; Reply Brief in Support of Motion for Stay Pending Arbitration
(“MTS Reply”) (Doc. No. 31) at 5. Wiggins argues that, because her Dodd-Frank claim
is predicated on unlawful activities by ING that are elaborated in section 1514A(a) and
incorporated into section 78u-6 only by cross-reference, see 15 U.S.C. § 78u6(h)(1)(A)(iii), the Dodd-Frank claim is, like the SOX claim, “a dispute arising under
[section 1514A],” and thus likewise excluded from coverage under an arbitration clause.
Precedent supports ING’s argument. See Khazin v. TD Ameritrade Holding
Corp., 773 F.3d 488, 492–95 (3d Cir. 2014); Murray v. UBS Securities, LLC, No. 12-cv5914, 2014 WL 285093, at *8–*9 (S.D.N.Y. Jan. 27, 2014); Ruhe v. Masimo Corp., No.
SACV 11-00734, 2011 WL 4442790, at *4 (C.D. Cal. Sept. 16, 2011). In essence,
these cases reason that a cause of action “arises under” the statute that creates it and
that section 78u-6 creates the applicable claim (in this case, what the court refers to as
Wiggins’ Dodd-Frank claim). Accordingly, these cases conclude, this Dodd-Frank claim
7
Even if the IFACM were enforceable and otherwise applicable, see discussion Part III.A.1 supra,
and irrespective of the court’s present retroactivity conclusion, it would likewise fail to require Wiggins to
arbitrate her SOX or Dodd-Frank claims because it was only presented to Wiggins well after the
enactment of Dodd-Frank’s anti-arbitration amendment to section 1514A.
11
does not “aris[e] under” section 1514A and section 1514A(e)(2)’s anti-arbitration policy
has no application to Wiggins’ Dodd-Frank claim.
These cases actually oversimplify the applicable case law. As the Supreme
Court explained in Jones v. R.R. Donnelley & Sons Co., a cause of action not only
“arises under” the provision literally explicitly stating that a private right of action exists
(“an individual may bring an action in the appropriate United States District Court” and
so forth), but also under any law that “provides a necessary element of the plaintiff's
claim for relief.” 541 U.S. 369, 376 (2004) (deciding whether cause of action “arose
under” a statute “enacted after” a certain date where the statutory section existed prior
to the date but was amended after the date). “[N]othing in our case law supports an
interpretation [of ‘arising under’] . . . under which [the phrase] means something akin to
‘based solely upon.’” Id. at 383 (emphasis added).
The Donnelley Court also noted in that case that “[i]n order to ascertain
Congress’ intent [to have a broader or narrower meaning of ‘arising under’] . . . we must
look beyond the bare text of [the applicable provision] to the context in which it was
enacted and the purposes it was designed to accomplish.” Id. at 377. However, neither
party presents, nor does the court discern, any clear congressional intent to broaden or
narrow the plain meaning of “arising under” in section 1514A(e)(2). See also Holmes
Group, Inc. v. Vornado Air Circulation Syss., Inc., 535 U.S. 826, 830 (2002) (a claim
“‘arises under’ patent law” if, inter alia, “‘the plaintiff's right to relief necessarily depends
on resolution of a substantial question of federal patent law’”); Drexel Burnham Lambert
Group, Inc. v. Vigilant Ins. Co., 130 B.R. 405, 407 (Bankr. S.D.N.Y. 1991) (“Actions that
12
‘arise under’ title 11 involve claims ‘predicated on a right created by a provision of title
11.’”).
Accordingly, the court relies on the plain meaning of “arising under” and
concludes that Wiggins’ Dodd-Frank claim, although enabled by section 78u6(h)(1)(B)(i) (the provision creating the cause of action) and section 78u-6(h)(1)(A)(iii)
(the provision referring to the prohibited conduct), also “aris[es] under” section 1514A
(the section that actually defines the prohibited conduct). Thus, for the same reason
that the court concludes that the SOX claim is outside the scope of the Form U-4
arbitration clause, the court similarly concludes that the Dodd-Frank claim is outside the
scope of the Form U-4 arbitration clause and thus does not need to be submitted to
arbitration.
iii.
Submission of the section 31-51q claim (Count III) to
arbitration is required
Wiggins argues that she is not required to submit her Count III claim (under
section 31-51q of the Connecticut General Statutes) to arbitration because it is based
on the same set of operative facts as her claim (in Count I) under section 1514A. As
with her argument regarding the Dodd-Frank claim (in Count II), she again rests on
section 1514A(e)(2), which provides that “a dispute arising under [section 1514A]” is not
subject to mandatory arbitration. As with the other claims, if this were the case, then
Rule 13201(b) would put it outside the reach of the Form U-4 arbitration clause.
However, this argument fails. Indeed, it is simply a non sequitur. To say that
one claim rests on the same set of facts as another claim is irrelevant to whether the
two claims arise under—i.e., are made possible by—the same provision of law. These
claims arise under entirely different provisions of law.
13
The only two decisions of which the court is aware that address the question
whether to compel arbitration of otherwise-arbitrable claims arising from the same set of
operative facts as a SOX claim, Stewart v. Doral Fin. Corp., 997 F. Supp. 2d 129, 139–
40 (D.P.R. 2014), and Laubenstein v. Conair Corp., No. 5:14-cv-5227, 2014 WL
6609164, at *3 (W.D. Ark. Nov. 19, 2014), came to the opposite conclusion from the one
this court reaches. Those courts held that, when a non-SOX claim is “entangled with”
and “arise[s] from the same nucleus of operative facts” as a SOX claim (to which
section 1514A(e)(2) applies), compelling arbitration is inappropriate because doing so
would “frustrate the purpose of 18 U.S.C. § 1514A(e)(2) [and] place a substantial
financial and temporal burden on all parties involved.” Stewart, 997 F. Supp. 2d at 140.
Firstly, it is not at all clear how any purpose of section 1514A would be frustrated
by compelling arbitration of Count III. And the idea that compelling arbitration would
“place a substantial financial and temporal burden on all parties involved” is similarly far
from obvious; indeed, one of the main justifications given for seeking arbitration is that it
reduces such burdens.
More to the point, however, is that it is simply inappropriate to decide whether to
compel arbitration on these grounds that have no basis in the statutory text. “The best
evidence of [a statute’s] purpose is the statutory text adopted by both Houses of
Congress and submitted to the President.” W. Va. Univ. Hosps., Inc. v. Casey, 499
U.S. 83, 98 (1991). The court is aware of nothing in the text of the applicable statutes
or rules indicating that “entangled” claims or claims that simply arise from the same set
of operative facts as nonarbitrable claims escape otherwise-valid pre-dispute arbitration
clauses, or that the financial or other burdens on the parties is relevant to the
14
determination whether to enforce an arbitration clause in this context. Accordingly, the
court declines to follow Stewart and Laubenstein and concludes that Wiggins’ claim
under section 31-51q must be submitted to arbitration.
B.
Whether to dismiss SOX and Dodd-Frank claims
The court has now determined that two of the three counts of Wiggins’ Complaint
need not be submitted to arbitration. Accordingly, this court may address the substance
of these claims. However, this conclusion does not resolve the Motion to Stay in its
entirety: having “conclude[d] that some, but not all, of the claims in the case are
arbitrable, [a court] must then decide whether to stay the balance of the proceedings
pending arbitration.” Oldroyd v. Elmira Savs. Bank, 134 F.3d 72, 76 (2d Cir. 1998).
“The decision to stay the balance of the proceedings pending arbitration is a
matter largely within the district court's discretion to control its docket.” Genesco, Inc. v.
T. Kakiuchi & Co., 815 F.2d 840, 856 (2d Cir. 1987). A stay is “particularly appropriate if
the arbitrable claims predominate the lawsuit and the nonarbitrable claims are of
questionable merit.” Id.
In light of the “particular[ ] appropriate[ness]” of determining whether the claims
that need not be arbitrated “are of questionable merit,” the court exercises its discretion
to evaluate ING’s Motion to Dismiss as to the two claims that the court will not compel
the parties to arbitrate.
1.
Legal standard for motion to dismiss under Rule 12(b)(6)
A court reviewing a motion to dismiss under Rule 12(b)(6) takes all well-pleaded
“factual allegations of the complaint to be true and draw[s] all reasonable inferences in
the plaintiff’s favor.” Warren v. Colvin, 744 F.3d 841, 843 (2d Cir. 2014). Dismissal of a
15
claim is appropriate if, despite this favorable reading, the complaint fails to allege
“enough facts to state a claim for relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 547 (2007). The requirement to allege “facts” means that “bald
assertions” and “merely conclusory allegations” do not suffice. Jackson v. Cnty. of
Rockland, 450 F. App’x 15, 19 (2d Cir. 2011); see also Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009). A complaint is “plausible on its face” if the facts that the plaintiff pleads
“allow[ ] the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Iqbal, 556 U.S. at 678. That is, the complaint must raise “more
than a sheer possibility that a defendant has acted unlawfully.” Id. “Determining
whether a complaint states a plausible claim for relief [is] a context-specific task that
requires the reviewing court to draw on its judicial experience and common sense.” Id.
at 679.
2.
The Dodd-Frank claim (Count II): Wiggins’ “whistleblower” status
The gravamen of Wiggins’ Dodd-Frank claim is that Wiggins is a protected
whistleblower under the statute and that ING retaliated against her for alerting certain
individuals at ING to activities that she had witnessed during the course of her
employment at ING. The relevant substantive protection provided by Dodd-Frank is
this:
(h) Protection of whistleblowers
(1) Prohibition against retaliation
(A) In general
No employer may discharge, demote, suspend, threaten, harass, directly
or indirectly, or in any other manner discriminate against, a whistleblower
in the terms and conditions of employment because of any lawful act done
by the whistleblower-(i) in providing information to the Commission in accordance with this
section;
16
(ii) in initiating, testifying in, or assisting in any investigation or judicial
or administrative action of the Commission based upon or related to
such information; or
(iii) in making disclosures that are required or protected under the
Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.), this chapter,
including section 78j-1(m) of this title, section 1513(e) of Title 18, and
any other law, rule, or regulation subject to the jurisdiction of the
Commission.
15 U.S.C. § 78u-6(h)(1)(A) (emphases added).
ING contends that Wiggins failed to allege that she is protected under DoddFrank because she has not alleged that she is a “whistleblower” under the statute.
Specifically, ING points to an earlier portion of the same statutory section, which
provides:
The term “whistleblower” means any individual who provides . . . information
relating to a violation of the securities laws to the [Securities and Exchange]
Commission, in a manner established, by rule or regulation, by the Commission.
15 U.S.C. § 78u-6(a)(6). As Wiggins implicitly concedes, she did not “provide [any]
information . . . to the [SEC].” See Opposition to Defendants’ Motion to Dismiss (“MTD
Opp.”) (Doc. No. 25) at 16 (stating simply that “Plaintiff is entitled to the protection of
subsection (iii) because . . . she engaged in protected activity under SOX,” and not
asserting that Wiggins made any disclosure to the SEC).
Wiggins contends that the fact that the statute’s “whistleblower” definition
requires more than simply making disclosures protected by SOX (i.e., reporting to the
SEC) is an “ambiguity.” Id. at 17. To resolve this ambiguity, she argues, the court
should look to regulations promulgated by the SEC. She also asserts that “[t]he DoddFrank whistleblower protection provisions were intended to enhance protections for
whistleblowers, and create new incentives that would encourage more employees to
report violations of securities laws,” and that excluding individuals (such as her) who
17
have not provided information to the SEC defeats this statutory purpose. See MTD
Opp. at 18. She further complains that “an employee who report[s] violations of
securities laws internally to her employer . . . in order to resolve the issue before filing
an external complaint to a regulatory agency . . . would [have an] employer [who is]
incentivized to retaliate against [her] before she had a chance to report her complaint to
the S.E.C.” Id.
A number of district courts have addressed the legal question of who may state a
claim as a “whistleblower” under this statute. 8 These district court authorities are split
on how to answer this question. Compare Memorandum of Law in Support of
Defendants’ Motion to Dismiss (“MTD Mem.”) (Doc. No. 14-1) at 15 (collecting cases
concluding that those who do not make any report to the SEC are not “whistleblowers”
under Dodd-Frank) with MTD Opp. at 19 (collecting cases arriving at contrary
conclusion).
Having reviewed the relevant authorities, including all of those cited by the
parties, the court concludes that the better reading of this statute is that found in, inter
alia, Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620 (5th Cir. 2013), 9 which requires
8
The court has also taken notice of the briefing in the recent case of Liu Meng-Lin v. Siemens
AG, No. 13-4385-cv (2d Cir.), in which case the parties raised this issue, although the Court of Appeals
expressly declined to decide it. See Liu Meng-Lin v. Siemens AG, 763 F.3d 175, 183 (2d Cir. 2014)
(“[W]e need not determine . . . whether Liu's internal reporting of alleged misconduct, with or without his
subsequent disclosures to the SEC, qualified him as a “whistleblower” under the Dodd–Frank Act, . . . and
we express no views on th[is] issue[ ].”). This briefing includes the Brief of the Securities and Exchange
Commission, Amicus Curiae in Support of the Defendant (“SEC Amicus Brief”) (Doc. No. 26-2), filed
directly with this court as well.
9
Asadi is the only decision in which a Court of Appeals has reached this issue, as far as the court
is aware. The parties raised this issue before the Second Circuit in Liu Meng-Lin v. Siemens AG, 763
F.3d 175 (2d Cir. 2014), but the court left the issue unresolved, see id. at 183.
18
the conclusion that Wiggins is (according to her own allegations) not a whistleblower
under Dodd-Frank and is thus unable to state a claim under Dodd-Frank.
“[C]ourts must presume that a legislature says in a statute what it means and
means in a statute what it says there.” Conn. Nat’l Bank v. Germain, 503 U.S. 249,
253–54 (1992). Here, the court concludes from the clear language used in the statute
that Congress did not intend to include someone in Wiggins’ position within the
protections extended under the Dodd-Frank Act. Wiggins already has a whistleblower
cause of action under SOX. While some class of individuals who have causes of action
as “whistleblowers” under Dodd-Frank already had causes of action under SOX, the
statutory language indicates that Congress concluded that it is persons who report to
the SEC who should receive the further protection of a separate cause of action under
Dodd-Frank, in contrast to those who report what a person might reasonably believe to
be a violation of securities laws to their supervisors, as Wiggins alleges she did.
Congress’ considered judgment appears to have been that the former activity merited
additional protections.
In its amicus brief, the SEC argues that Congress could not have meant to
impose the additional requirement (i.e., reporting to the SEC) on Dodd-Frank plaintiffs
like Wiggins (who base their retaliation claims on internal reporting rather than reporting
to the SEC) because, in short, whether this element requires that the employerdefendant know of the reporting to the SEC, such a requirement “would be utterly
ineffective as a preventive measure.” SEC Amicus Brife at 31. The arguments raised in
the SEC Amicus Brief do not persuade this court that the Fifth Circuit’s conclusion—that
19
there is no statutory ambiguity and thus no avenue for Chevron deference to any
“interpretation” of the statute—is flawed.
Assuming that the additional liability imposed under the Dodd-Frank cause of
action is imposed only with some scienter requirement for the employer as to the
employee’s section 78u-6(a)(6) whistleblower (i.e., to the SEC) status, see SEC Amicus
Brief at 32, it may be that Congress wanted to make clear that an employee need not
prove that she was retaliated against for her external whistleblowing rather than internal
whistleblowing. And, at a more basic level, Congress may have deemed protecting
internal whistleblowing (of the kind protected under SOX) done after external
whistleblowing worth protecting with a cause of action over and above what had been
available under SOX.
Nor does the court think it unreasonable that Congress might have seen fit to
impose liability under the Dodd-Frank cause of action as a strict liability matter with
respect to an employee’s section 78u-6(a)(6) whistleblower status. See SEC Amicus
Brief at 32 n.15. Whether or not imposing strict liability with respect to this one element
of the cause of action somehow eliminates the value of this scheme over and above the
SOX cause of action that had already existed, the court cannot say that Congress did
not intend to impose liability in this manner irrespective of this consideration.
As already noted, see discussion supra citing MTD Opp. at 19, several district
court cases have reached a contrary result on this issue. This court respectfully
disagrees with these courts. The opinions arriving at contrary conclusions pay too little
heed to the definition of “whistleblower” in section 78u-6(a)(6)—the stipulation that only
certain actors may invoke the statute—and focus too much on the activities protected in
20
section 78u-6(h)(1)(A). Because the latter provision invokes the defined term
“whistleblower,” it is critical for courts to refer to, and apply, the limited definition of this
term.
For these reasons, as well as for the reasons laid out in more detail in the Fifth
Circuit’s Asadi decision, the court concludes that Wiggins states no cause of action
under Dodd-Frank.
3.
The SOX claim (Count I)
A plaintiff suing under section 1514A(b)(1)(B) of title 18, as Wiggins does in
Count I, her SOX claim, must establish
that (1) he or she engaged in a protected activity; (2) the employer knew that he
or she engaged in the protected activity; (3) he or she suffered an unfavorable
personnel action; and (4) the protected activity was a contributing factor in the
unfavorable action.
Bechtel v. Admin. Review Bd., U.S. Dep’t of Labor, 710 F.3d 443, 451 (2d Cir. 2013).
One protected activity under SOX is “provid[ing] information . . . regarding any conduct
which the employee reasonably believes constitutes a violation of [certain rules] to”
certain individuals or entities. 15 U.S.C. 1514A(a)(1). To plead that she engaged in this
activity, a plaintiff must set forth facts from which it may reasonably be inferred “not only
[1] that [s]he [subjectively] believed that the conduct constituted a violation, but also [2]
that a reasonable person in h[er] position would have believed that the conduct
constituted a violation [of a relevant rule].” Nielsen v. AECOM Tech. Corp., 762 F.3d
214, 221 (2d Cir. 2014) (internal quotation marks omitted).
ING argues that Wiggins’ Complaint fails to state a claim under section
1514A(b)(1)(B) in three respects. The court concludes that the one of ING’s arguments
21
is meritorious and another is partially meritorious. Because it will grant Wiggins leave to
amend the Complaint, the court addresses all three arguments.
i.
Subjective belief that violation of law occurred
ING’s first argument is that Wiggins fails sufficiently to allege that she had a
subjective belief that a violation of a relevant law had occurred when she made the
relevant reports to her superiors. See MTD Mem. at 11; Reply Brief in Support of
Defendants’ Motion to Dismiss (“MTD Reply”) (Doc. No. 30) at 5.
The court concludes that Wiggins has indeed failed to allege a subjective belief
that a relevant law violation occurred. Nowhere in the Complaint does the court discern
any allegation that Wiggins actually believed that such a violation had occurred. Nor
does Wiggins point to any such allegation in her Opposition; she only brushes over her
failure to make such allegations or mischaracterizes the “subjective belief” aspect of the
SOX claim’s “protected activity” element as a requirement that she simply believed in
the truth of the allegations she made in the course of her reports to supervisors. See,
e.g., MTD Opp. at 12 (“There is no reason to conclude that Plaintiff did not subjectively
believe the complaints that she was making . . . .”). This omission is not the kind of
trivial one that can be overlooked on the basis of “reasonable inferences in the plaintiff’s
favor”; indeed, the plaintiff’s subjective belief that the complained-of activity constituted
prohibited activity is a key element of the cause of action and quite distinct from the
question whether particular conduct constitutes a violation of the law. See, e.g.,
Complaint ¶ 22, second sentence (“Defendant’s action[ ] . . . is a violation of law . . .”).
Nowhere has the plaintiff alleged that the various conduct she alleges to be violations of
law were subjectively believed by her to be such violations. (The statement of the
22
element of the cause of action in paragraph 42 is not sufficient because it is merely
conclusory, and makes no reference to any specific actions by ING, any specific
reporting by her, or any laws that she believed were violated.)
Accordingly, the Motion to Dismiss is granted on this basis, without prejudice to
Wiggins’ repleading this claim, should she be able to do so consistent with Fed. R. Civ.
P. 11(b). If she chooses to replead, Wiggins could add language to the effect that,
“when she reported [the relevant actions by others at ING] to her supervisors, Wiggins
believed that the actions she was reporting were violations of law because . . . .”
On this basis, the Motion to Dismiss is granted with respect to the SOX claim,
without prejudice to Wiggins’ repleading this claim.
ii.
Objective reasonableness of belief that violations occurred
ING’s second argument is that Wiggins fails to allege
that it was objectively reasonable for h[er] to believe that the activity [s]he
reported constituted a violation of [any of] the laws [or] regulations listed in
§ 1514A: the federal mail fraud, wire fraud, bank fraud, and securities fraud
statutes, in addition to “any rule or regulation of the Securities and Exchange
Commission, or any provision of Federal law relating to fraud against
shareholders.”
Nielsen, 762 F.3d at 222. See MTD Mem. at 11–13; MTD Opp. at 4–16; MTD Reply at
5–8. Specifically, ING argues that Wiggins fails to allege that she had a belief that
provisions of law were violated that was not “wholly untethered from the[ ] [relevant]
provisions,” and that the violations were “material” rather than “trivial.” Nielsen, 762
F.3d at 222 & n.6.
The court rejects ING’s argument that Wiggins’ claim should be dismissed on this
basis because ING sweeps with too broad a brush, conclusorily casting Wiggins’
allegations as insufficient. See United States v. Fuentes, No. 09-cr-143, 2012 WL
23
4754736, at *3 (W.D.N.Y. Apr. 25, 2012) (finding waived arguments that were largely
conclusory). ING’s Memorandum makes little to no attempt to demonstrate the lack of
“tethering” between Wiggins’ beliefs and the statutes allegedly violated. See MTD
Mem. at 12. Meanwhile, Wiggins’ Opposition engages in a lengthy analysis of how the
complaints that she alleges she made meet Nielsen’s elaboration of the “objective
reasonableness” requirement. While the plaintiff, should she choose to amend the
Complaint, is advised to take note of ING’s points, the court declines to consider
dismissing the SOX claim at this time on the basis of so undeveloped an argument.
There is one part of ING’s Memorandum in which it asserts with more specificity
how the Complaint is inadequate. ING points to Wiggins’ allegation that “various
inaccuracies she allegedly complained of violated the company’s obligation to maintain
accurate ‘books and records.’” MTD Mem. at 12. Even this portion of the Complaint,
ING argues, does not correlate to activity as to which Wiggins could have had an
objectively reasonable belief that a material violation of a relevant law had occurred,
because “not . . . every [ ] mistake [of the kinds alleged] amounts to a violation of 15
U.S.C. § 78m(b).” Id. That is, ING argues that Wiggins has not alleged that ING’s
behavior meets the scienter requirements of the statute that it purportedly violated. See
id. (citing 15 U.S.C. § 78m(b)(5) (proscribing “knowingly circumvent[ing] or knowingly
fail[ing] to implement [certain kinds of] s ystem[s] of internal accounting controls or
knowingly falsify[ing] [certain kinds of] book[s], record[s], or account[s]”)).
ING’s showing here is inadequate to demonstrate that Wiggins does not allege
any violations of laws that could have formed the basis of an objectively reasonable
24
belief that a material violation of a relevant law had occurred. In fact, with respect to
this activity, the Complaint alleges that Wiggins
noticed that plans which had accounting issues or errors were frequently
removed from the database used by auditors to identify plans to be audited
during these quarterly SOX audits. In extreme cases, the files of “problem” plans
which were identified for audit went missing completely, only being located after
the SOX audit was finished.
Complaint ¶ 16. Reading this paragraph and drawing reasonable inferences in Wiggins’
favor actually indicates just the opposite, i.e., knowing and intentional behavior possibly
in violation of the very statutory provision cited by ING.
Although the Complaint may be faulty in places, and although Wiggins would
serve the court and herself by pleading her case with specificity approaching that
employed in her Opposition so as to put the defendant on more precise notice of the
nature of her claims, ING has not shown that Wiggins fails to meet the Nielsen standard
here. Absent more specific indications of inadequacy and accompanying analysis by
ING, the court rejects this argument for lack of a sufficient showing that dismissal is
warranted.
iii.
Limitations period
Finally, ING argues that the limitations period for SOX claims is 180 days prior to
a claimant’s OSHA complaint, that Wiggins filed her OSHA complaint on August 9,
2013, and that, accordingly, any cause of action based on an adverse action alleged to
have occurred prior to February 8, 2013 is barred. See MTD Mem. at 14–15. While
Wiggins alleges having been terminated within the 180 days preceding her OSHA
complaint, many of her other allegations are about events occurring more than 180 days
before Wiggins’ filing of the OSHA complaint. Wiggins does not directly respond to this
25
argument. 10 The court thus concludes that she abandons any independent cause of
action that she may originally have intended to raise based on events more than 180
days before her OSHA complaint. See Jackson v. Fed. Express, 766 F.3d 189, 198 (2d
Cir. 2014). To the extent that any of these events might be construed as a separate
“retaliatory adverse employment [action] constitut[ing] a separate actionable ‘unlawful
employment practice,’” Nat’l R.R. Passenger Corp. v. Morgan, 536 U.S. 101, 114
(2002), any such “separate [cause of] action[ ]” is dismissed.
C.
Whether to stay the case pending arbitration
Having determined that Wiggins must pursue Count III of the Complaint through
arbitration and that dismissal of Counts I and II is appropriate, the court returns to the
ultimate question “whether to stay the balance of the proceedings pending arbitration.”
Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 856 (2d Cir. 1987); see also Part III.B
supra.
“Section 3 of the FAA directs a district court to enter a ‘stay of proceedings’ in a
case where the asserted claims are ‘referable to arbitration.’ See 9 U.S.C. § 3.
However, . . . where all of the issues raised in the Complaint must be submitted to
arbitration, the Court may dismiss an action rather than stay proceedings.” Reynolds v.
de Silva, No. 09 Civ. 9218, 2010 WL 743510, at *8–*9 (S.D.N.Y. Feb. 24, 2010)
(quotation marks omitted from second sentence). This court has, as the Reynolds court
did, “dismissed [some of the plaintiff’s claims], and all of [her] remaining claims must be
10
Wiggins’ two-sentence response to ING’s argument on this front appears to confuse a motion
to dismiss a complaint with a motion to strike allegations from a complaint. ING does not ask to strike
these allegations. Accordingly, to the extent that such events may be “relevant to establish retaliatory
motive” for her ultimate termination, as Wiggins argues, she need not presently be concerned that these
allegations will “be dismissed [sic] from the Complaint.” MTD Opp. at 16.
26
referred to arbitration.” Id. Because “[i]t would be an inefficient use of the Court's
docket to stay the action,” the court will “exercise[ ] its discretion to dismiss the action,
without prejudice.” Id.
However, the court’s dismissal of the Complaint is with leave to amend. Should
Wiggins exercise her right to amend, ING is, of course, free to file a renewed motion to
stay these proceedings. The court expects that, if this course of events plays out, ING
will, having the benefit of knowing precisely which claims will and will not be arbitrated
or resolved in court, explain in somewhat greater detail than it has in the Memorandum
accompanying the present Motion to Stay why “resolution of those claims [as to which
the court has compelled] arbitration . . . would . . . simplify the resolution of [any] claim[s
still pending in this court,] if not resolve [them] altogether.” MTS Mem. at 19.
IV.
CONCLUSION
The Motion to Stay is GRANTED IN PART insofar as the court compels
arbitration of Count III and DENIED IN PART insofar as the court does not compel the
arbitration of Counts I and II. The Motion to Dismiss is GRANTED as to Counts I and II.
Rather than staying the case pending arbitration of Count III, the case is dismissed.
Wiggins is granted leave to file an Amended Complaint no later than 21 days from the
entry of this Ruling. The Clerk is directed to close the case after 21 days unless
Wiggins files an Amended Complaint within the allotted time.
27
SO ORDERED.
Dated at New Haven, Connecticut this 17th day of June 2015.
/s/ Janet C. Hall
Janet C. Hall
United States District Judge
28
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