Gonzalez v. The Colonial Bank, 2004-SOX-39 (ALJ Aug. 9, 2004)

USDOL/OALJ Reporter

Gonzalez v. The Colonial Bank, 2004-SOX-39 (ALJ Aug. 9, 2004)

U.S. Department of Labor

Office of Administrative Law Judges
800 K Street, NW, Suite 400-N
Washington, DC 20001-8002

Issue Date: 09 August 2004
Case No. 2004-SOX-39

....................................................................
In the Matter of:

ANTHONY F. GONZALEZ,
Complainant,

COLONIAL BANCGROUP,
Respondent.
.....................................................................

ORDER DENYING MOTION TO DISMISS

Respondent, Colonial Bank, moves to dismiss this matter filed under § 806 of the Sarbanes-Oxley Act ("Act"), because of a pending lawsuit by Complainant, Anthony F. Gonzalez, against Respondent in the United States District Court for the Middle District of Florida which Respondent asserts seeks the same relief on the same facts as in the present proceeding.¹ Respondent contends that allowing this matter to proceed would constitute impermissible claim-splitting. Respondent submitted a Supplemental Brief on June 15, 2004 and Complainant filed an Answer In Opposition on June 16, 2004.

The present complaint was filed by the Complainant with the Department of Labor Occupational Safety and Health Administration on July 11, 2003. On July 18, 2003 Complainant filed a complaint in the Circuit Court for Hillsborough County, Florida against Colonial Bank for an award of damages under the Florida Whistleblower Statute, Section 448.101� 448.105, Florida Statutes (2002), and based on defamation. The Florida proceeding was transferred to the United States District Court on motion of the Respondent.

Respondent argues that the complaint here should be dismissed because the Complainant did not transfer it to U.S. District Court as permitted by the Sarbanes-Oxley Act. The Act provides that if the Secretary has not issued a final decision within 180 days of the filing of the complaint and there is no showing of bad faith on the behalf of the Complainant then the Complainant may bring an action for de novo review in the United States District Court. The 180 day period expired on January 7, 2004, prior to the Administrator issuing his ruling on the complaint. Thus Complainant has had the right but not the obligation to transfer his case to U.S. District Court since January 7, 2004. 29 C.F.R. § 1980.114. Respondent cites Koziara v. City of Casselberry, 239 F. Supp. 2d 1245 (M.D. Fla. 2002), Woods v. Dunlop Tire Corp, 972 F.2d 36 (2d Cir. 1992) and Puerto Rico Maritime Shipping Authority v. FMC, 75 F.3d 63 (1stCir. 1996) in support of the proposition that the present action must be dismissed as it is based on the same facts and seeks the same relief as the claim filed under the Florida Whistleblower Act and thus is contrary to the rule against claim-splitting. The Respondent explains the purpose of the prohibition as promoting judicial economy, preventing the wasting of time and resources, and preventing the possibility of inconsistent results reached by two different triers of the same facts.

[Page 2]

None of the cases referenced by Respondent support its argument. All three were decided based on the issue of res judicata or claim preclusion, and in all three cases the first filed claim had proceeded to judgment.² In Koziara the Defendant's motion for summary judgment was granted by the United States District Court on the Plaintiffs' motion for an injunction against the Defendant City for allegedly violating Plaintiffs' constitutional rights. The Court held that the Plaintiffs' claims were barred by the doctrine of res judicata or issue preclusion because of a final state court judgment on the same claims. In Woods, summary judgment was granted for the defendant in a Title VII claim because the plaintiff failed to raise the claim in a previous unsuccessful U.S. District Court case under the Labor Management Relations Act. The Puerto Rico Maritime Shipping Authority case involved a finding that res judicata or claim preclusion barred a shipper's complaint before the Federal Maritime Commission (FMC) challenging as illegal under the Shipping Act an attorney provision in a bill of lading, as the complaint that the provision in bill of lading was illegal could have been raised as an affirmative defense in a prior court action in which the carrier sought to recover unpaid freight charges. Here, Respondents do not contend that any of the issues raised by the Complainant have been previously decided by another court.

The Complainant references the 11th Circuit Court decision in Aquatherm Industries, Inc v. Florida Power & Light Company, 84 F.3d 1388 (11th Cir. 1996) for the proposition that the general rule against splitting causes of action does not apply when suit is sought in a court that does not have jurisdiction over all of a party's claim. The Court framed the issue as whether a federal district court may give a Florida court judgment preclusive effect in a federal action brought under antitrust laws that are within the exclusive jurisdiction of the federal courts and therefore could not have been raised in the state court proceeding due to lack of subject matter jurisdiction. Id. at 1391. The Court answered in the negative, quoting the decision in Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 105 S.Ct. 1327 to the effect that, "[t]he rule that the judgment of limited jurisdiction concludes the entire claim assumes that the plaintiff might have commenced his action in a court in the same system of courts that was competent to give full relief (emphasis in original). Id. at 1394.

Section 806 of the Sarbanes-Oxley Act was enacted with the express purpose of protecting investors by improving the accuracy and reliability of corporate disclosures. Therefore, it differs materially from the Florida Whistleblower Act in that it imposes obligations on the Secretary of Labor, provides additional support to a Complainant, and implements an expedited process for resolution of the case.

Initially, the Act provides that the Assistant Secretary at his or her discretion may participate as a party or amicus curiae at any time in the administrative process. 29 C.F.R. §1980.108 of the regulations implementing the Act provides that the Assistant Secretary may exercise his or her discretion to prosecute the case in the administrative proceeding before an administrative law judge; or petition for review of a decision of an administrative law judge, including a decision based on a settlement agreement between Complainant and the named person. The Securities and Exchange Commission at the agency's discretion may also participate as amicus curiae at any time in the proceeding.

[Page 3]

The Act provides for expeditious handling by the Department of Labor, and in light of that provision the administrative law judge has broad authority to limit discovery, in that the Judge may limit the number of interrogatories, requests for production of documents or depositions allowed. 29 C.F.R. § 1980.107. Under § 1980.109(c) an administrative law judge's decision requiring reinstatement will be effective immediately and may not be stayed, and if the preliminary order of reinstatement or a final order of a settlement is not complied with, the Secretary of Labor has the authority to file a civil action seeking enforcement of the order in the United States District Court. 29 C.F.R. § 1980.113.

29 C.F.R. § 1980.111(c) provides that a withdraw of a complaint because of a settlement is effective only if the settlement is approved by the administrative law judge or the Administrative Review Board. Settlements must be reviewed by either the presiding administrative law judge or the Administrative Review Board to assure compliance with the Act. The Secretary and the Administrative Review Board have interpreted like provisions in the employee provisions of the Environmental Whistleblower Statutes as requiring consideration of not only the outcome of the action on the parties but also its impact on the public. Wampler v Pullman-Higgins Company, 84-ERA-3 (ARB Aug. 16, 1996). In fact, the ARB rejected a proposed settlement under the employer protection provisions of the Toxic Substance Control Act, 15 U.S.C. § 2622 (1988) because the agreement did not specify the amount of damages the Complainant would receive. The Court reasoned. "[t]he Secretary must know the amount Complainant will receive in order to determine if the settlement agreement is fair, adequate and reasonable. This amount affects not only the Complainant's individual interest, but impacts on the public interest as well, because if the amount is not fair, adequate and reasonable, other employees may be discouraged from reporting safety violations." See also Klock v. Tennessee Valley Authority, 95-ERA-20 (ARB May 1, 1996) and Biddy v. Alyeska Pipeline Service Co., 95-TSC-7 (ARB May 31, 1996.

Thus the present claim is materially different from the action under the Florida Whistleblower Statute and under Aquatherm Industries, Inc, supra, the rule against claim-splitting is inapplicable.

Accordingly, Respondent's motion to dismiss is denied because the present case is not barred by res judicata or claim-splitting as there in no prior judgment foreclosing the raising of the matters at issue here, the present claim was filed first and, of most significance, the present action differs materially from the Florida Whistleblower action in the procedure imposed, potential assistance provided to the Complainant and the obligations imposed upon the Secretary to assure compliance with the Sarbanes-Oxley Act.

Thomas M. Burke
Associate Chief Administrative Law Judge

[ENDNOTES]

¹ Respondent's motion also requests a stay. However, that request became moot as the result of a conference call held on May 12, 2003 with the parties followed by a scheduling order issued on May 19, 2004 canceling a May 25, 2004 hearing.

² It is noted that the present case filed before the Department of Labor was the first filed claim.