Delmore v. Hill-McGraw Companies Inc

Filing 13

ORDER signed by Judge J P Stadtmueller on 7/12/13 granting 8 Defendant's Motion to Dismiss; and DISMISSING this case. See Order. (cc: all counsel) (nm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
BRIAN E. DELMORE,
Plaintiff,
v.

Case No. 12-CV-1306-JPS

MCGRAW-HILL COMPANIES, INC.,
Defendant.

ORDER

Plaintiff Brian E. Delmore (“Delmore”) filed this suit against defendant
McGraw-Hill Companies, Inc., (“McGraw-Hill”), alleging that McGraw-Hill
discharged him in retaliation for whistleblowing activity, in contravention of
the Sarbanes-Oxley Act of 2002 (“SOX”) and the American Recovery and
Reinvestment Act of 2009 (“ARRA”). (Docket #1). Presently before the court
is McGraw-Hill’s motion to dismiss. (Docket #8). In its motion, McGraw-Hill
argues that the court must dismiss Delmore’s complaint because the court
lacks subject-matter jurisdiction.1 As explained below, the court now grants
McGraw-Hill’s motion.
1.

Background
The requisite facts for disposal of this motion are briefly stated.

Delmore was employed by McGraw-Hill Construction, a division of
McGraw-Hill, until December 21, 2011, when he was terminated. Delmore
alleges that McGraw-Hill violated federal securities laws and made false
statements to its customers, and that he repeatedly advised McGraw-Hill of
1

McGraw-Hill also argues in the alternative that dismissal is required
because Delmore fails to state a claim upon which relief may be granted. Because
the court grants McGraw-Hill’s motion on its primary jurisdictional argument, the
alternative ground is not discussed.

those violations in the years leading up to his termination. Delmore claims
that his termination was in retaliation for his whistleblowing regarding
McGraw-Hill’s allegedly illegal practices. Along with a letter dated May 11,
2012, plaintiff’s counsel mailed a complaint addressed to Hilda L. Solis,
Secretary of the United States Department of Labor, asserting that Delmore’s
termination violated SOX. On December 21, 2012, Delmore filed his civil
complaint in the Eastern District of Wisconsin, asserting claims under SOX
and ARRA.
2.

Legal Standards
McGraw-Hill moved to dismiss Delmore’s complaint under Federal

Rule of Civil Procedure 12(b)(1). A 12(b)(1) motion to dismiss asserts the
absence of subject-matter jurisdiction over a civil complaint. When
considering a factual challenge to jurisdiction, the court “may properly look
beyond the jurisdictional allegations of the complaint and view whatever
evidence has been submitted on the issue to determine whether in fact
subject matter jurisdiction exists.” Apex Digital, Inc. v. Sears, Roebuck & Co.,
572 F.3d 440, 444 (7th Cir. 2009) (quoting Evers v. Astrue, 536 F.3d 651, 656-57
(7th Cir. 2008)) (further citations omitted). “In all cases, the party asserting
federal jurisdiction has the burden of proof to show that jurisdiction is
proper.” Travelers Property Cas. v. Good, 689 F.3d 714, 722 (7th Cir. 2012) (citing
McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189 (1936)). When a
federal court does not have jurisdiction over a claim, it must dismiss the
claim; it is “fundamental that if a court is without jurisdiction of the subject
matter it is without the power to adjudicate….” Stewart v. United States, 199
F.2d 517, 519 (7th Cir. 1952).

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3.

Analysis
McGraw-Hill argues that the court must dismiss the complaint

because Delmore did not exhaust his administrative remedies, and, therefore,
this court lacks jurisdiction to consider the complaint. The federal regulations
specifying procedures for SOX complaints establish that “[t]he complaint
should be filed with the OSHA [Occupational Safety and Health
Administration] office responsible for enforcement activities in the
geographical area where the employee resides or was employed, but may be
filed with any OSHA officer or employee.” 29 C.F.R. § 1980.103(c).2 Then,
copies of the complaint will be sent to the respondent, to the complainant or
the complainant’s counsel, and to the Securities and Exchange Commission.
29 C.F.R. § 1980.104(a). The respondent may submit responsive materials
within 20 days of notice of the complaint, and the agency may investigate the
matter. 29 C.F.R. § 1980.104(b), (c). Following any investigation, the agency
then issues written findings regarding the alleged violation. 29 C.F.R.
§ 1980.105. Parties may object to the agency’s findings and request a hearing.
29 C.F.R. § 1980.106. The parties have further opportunities to appeal within
the administrative branch. 29 C.F.R. §§ 1980.108, 1980.109, and 1980.110.
Following administrative appeals, if a final order is issued, any aggrieved

2

In addition to this regulation, a notice of delegation was in place at the time
of Delmore’s termination that specified OSHA as the proper venue for SOX
complaints. Delegation of Authority and Assignment of Responsibility, 75 Fed. Reg.
55355 (Sept. 10, 2010) (“The Assistant Secretary for Occupational Safety and Health
is delegated authority and assigned responsibility for administering the safety and
health, and whistleblower programs and activities of the Department of Labor[…]
under the designated provisions of the following laws: […] Sarbanes-Oxley Act of
2002, 18 U.S.C. 1514A.”)

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party may file a petition for review in the United States Court of Appeals. 29
C.F.R. § 1980.112. The regulations further provide that:
[i]f the Secretary has not issued a final decision within 180 days
of the filing of the complaint, and there is no showing that
there has been delay due to the bad faith of the complainant,
the complainant may bring an action at law or equity for de
novo review in the appropriate district court of the United
States, which will have jurisdiction over such an action without
regard to the amount in controversy.
29 C.F.R. § 1980.114.
For support that a district court lacks jurisdiction if these
administrative remedies are not exhausted, McGraw-Hill cites two district
court cases, both from districts within the Seventh Circuit. In Mart v. Forest
River, Inc., the Northern District of Indiana dismissed a plaintiff’s SOX claim
upon finding that the plaintiff’s administrative complaint was untimely filed.
854 F.Supp.2d 577, 608 (N.D. Ind. 2012). Due to this untimeliness, the court
concluded that the plaintiff had not exhausted his administrative remedies,
and further concluded that it had no jurisdiction because “…a failure to
exhaust administrative remedies with OSHA deprives a district court of
subject matter jurisdiction over a plaintiff’s SOX claim.” Id. In Nieman v.
Nationwide Mut. Ins. Co., the Central District of Illinois dismissed the
plaintiff’s SOX claims on the plaintiff’s admission that he did not follow the
administrative procedures as SOX requires, and on the legal conclusion that
the court lacks jurisdiction where the plaintiff fails to follow the required
administrative procedures. 706 F. Supp. 2d 897, 907 (C.D. Ill. 2010). This court

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agrees with the legal conclusion reached by both of these district courts,3 and
likewise concludes that a plaintiff’s failure to follow the administrative
procedure as prescribed in SOX deprives the district court of jurisdiction to
hear that plaintiff’s SOX claim.
Delmore argues that the court has jurisdiction to hear his complaint;
as the party asserting federal jurisdiction, Delmore “has the burden of proof
to show that jurisdiction is proper.” Travelers Property Cas. v. Good, 689 F.3d
at 722. In response to McGraw-Hill’s argument, Delmore submits the
following argument:
However, Mr. Delmore did send a detailed complaint to the
Secretary, believing that was the appropriate venue to allege
his termination by McGraw[-]Hill was illegal. The Defendant
has provided the court with this filing in its Motion to Dismiss.
What is clear is that Mr. Delmore attempted to avail himself of
the process outlined by SOX legislation. And it is also clear
from the plain language of the SOX legislation that a wronged
worker has a way around the administrative requirement upon
the passage of time and the dearth of communication. After 180
days had passed, Mr. Delmore was permitted to file his action
with this Court under SOX. He did so and availed himself of
the relief procedure written into the Sarbanes-Oxley Act itself
by Congress.
Brief in Opposition (Docket #11) at 2. The above-quoted passage is the entire
argument Delmore offers; the court concludes that this argument does not
satisfy Delmore’s burden to show that jurisdiction is proper. First, Delmore

3

While it appears that no federal Circuit Court has directly confronted the
question, several district courts from outside the Seventh Circuit have also reached
the same conclusion. See e.g. Malin v. Siemens Med. Solutions Health Svcs., 638
F.Supp.2d 492, 496 (D. Md. 2008); Zhu v. Federal Housing Finance Bd., 389 F.Supp.2d
1253, 1272 (D. Kan. 2005); Collins v. Beazer Homes USA, Inc., 334 F.Supp.2d 1365, 1373
(N.D. Ga. 2004); Murray v. TXU Corp., 279 F.Supp.2d 799, 802 (N.D. Tex. 2003).

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cites no authority for any of his arguments. It is well-established in the
Seventh Circuit that the failure to support an argument with relevant legal
authority constitutes waiver. See, e.g., U.S. v. Berkowitz, 927 F.2d 1376, 1384
(7th Cir. 1991) (“We repeatedly have made clear that perfunctory and
undeveloped arguments, and arguments that are unsupported by pertinent
authority, are waived….”); U.S. v. Amerson, 185 F.3d 676, 689 (7th Cir. 1999)
(“Given our adversarial system of litigation, ‘[i]t is not the role of this court
to research and construct the legal arguments open to parties, especially
when they are represented by counsel.’”). This quote from Amerson brings
the Court to its next point, namely: Delmore was represented by counsel at
the time of his submission to Secretary Solis. While district courts should
liberally construe pro se complaints to avoid disposal on technical grounds,
Henderson v. Sheahan, 196 F.3d 839, 845-46 (7th Cir. 1999), it is understood that
represented parties are held to follow proper procedure. In the end, Delmore
does not dispute that: (1) the administrative procedure for SOX claims
requires a complainant to file a complaint with OSHA; and (2) that Delmore
did not file a complaint with OSHA. As Delmore did not exhaust the
administrative remedies laid out in SOX and applicable regulations, this
court lacks jurisdiction to consider Delmore’s SOX claim.
Similarly, the court lacks jurisdiction to consider Delmore’s claim
under ARRA. In its motion to dismiss, McGraw-Hill argues that Delmore has
not shown that he exhausted administrative remedies as provided in ARRA,
namely: submitting a complaint to the inspector general of the agency
allocating the allegedly misused funds, and then coming to district court only
if the agency head denies relief, or if it issues no decision within 210 days of
the complaint. Pub. L. No. 111-5, §§ 1553 (b)(1), 1553(c)(2), 1553(c)(3); 123 Stat.
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115, 297-98 (2009). Delmore offers no argument in an attempt to satisfy its
burden of proving that jurisdiction over any ARRA claim is proper; the court
thus concludes that it lacks jurisdiction over Delmore’s ARRA claim, and the
claim is dismissed. Accordingly,
IT IS ORDERED that McGraw-Hill’s motion to dismiss (Docket #8)
be and the same is hereby GRANTED; and
IT IS FURTHER ORDERED that this case be and the same is hereby
dismissed.
The Clerk of Court is directed to enter judgment accordingly.
Dated at Milwaukee, Wisconsin, this 12th day of July, 2013.
BY THE COURT:

J.P. Stadtmueller
U.S. District Judge

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