Taylor v. Federal National Mortgage Association ( 2014 )

D A S STRICT COURT f
“N‘T§IS?L§TE@’F"C@LUMBIA Fl 15 9
AUG 2 5 20th
KEITH TAYLOR, Clerk, U.S. District & Bankruptcy
Courts for the District of Columt)ia
Plaintiff,
v. Civ. Act. No. l1-cv-01l89 (RCL)
FANNIE MAE, and DAVID
MAGIDSON,
Defendants.
MEMORANDUM OPINION
Plaintiff Keith Taylor ("Taylor") seeks declaratory relief and damages for alleged
retaliatory employment termination. Taylor alleged that defendants, Fannie Mae and David
Magidson (individual, "F annie Mae" and "Magidson", or collectively "defendants"), retaliated
against him by wrongfully terminating his employment because he raised concerns that
Magidson was reporting fraudulent data to federal regulators. Taylor alleged that his termination
violated the Dodd-Frank Act, l5 U.S.C. § 78u~6 (2012), and the Sarbanes-Oxley Act ("SOX"),
18 U.S.C. § 15 l4A (2012),1 and that his termination was a wrongful discharge in violation of
public policy.z Defendants seek summary judgment of plaintiffs claims pursuant to F ederal
Rule of Civil Procedure 56. Defendants argue that plaintiff did not engage in any activity
protected by SOX and that his public policy claim is deficient For the following reasons,
defendants’ Motion for Summary Judgment will be granted.
l The parties agree that Taylor’s Sarbanes-Oxley claim is coextensive with his claim under the Dodd-Frank
Act. Pl.’s Opp’n to Defs. Mot. for Summ. J., ECF No. 25, 22 n.4.
2 'l``aylor’s Complaint also included a Bz``vens action against Magidson for violation of his First Amendment
right to speak freely on matters of public concem. Taylor conceded that this Court’s decision in Herron v. Fannie
Mae, 857 F. Supp. 2d 87 (D.D.C. 20l2) rendered his Bivens claim moot. P1’s Opp’n to Defs. Mot. for Summ. J.,
ECF N0.25, ln.1.
I. BACKGROUND
Taylor was hired by Fannie Mae as an Operational Risk Analyst III in spring 2()10. On
September 27, 2010, Magidson, Fannie Mae’s vice president of Risk and Controls for Operations
and Technology and Taylor’s second-level supervisor, asked Taylor to provide him with
information regarding trending in operational incidents. At the time, F annie Mae was
implementing a process called the software development life-cycle ("SDLC"). Magidson sought
information from Taylor to determine whether SDLC efforts had reduced operational incidents.
From the information Taylor provided, Magidson mistakenly calculated that technology-related
operation incidents had dropped 60% from 2009 to 2010. The mistaken statistic was then
disseminated to Fannie Mae employees and presented to F annie Mae’s Senior Management
Group and the Federal Housing Finance Agency ("FHFA"), Fannie Mae’s regulator. After
several questions about the reliability of the 60% statistic, Magidson scheduled a meeting with
Taylor and Taylor’s immediate supervisor, Jill Oliver ("Oliver"), to discuss the data. During that
meeting on November 4, 201 l, Magidson realized that his calculations were incorrect and that he
had misunderstood the data Taylor provided, Magidson then prepared a retraction of the
incorrect 60% statistic.
Fannie Mae has a SOX Business Team that is a designated internal organization with
expertise to determine whether an identified risk has SOX implications. Fannie Mae makes
available to its employees an operational incident database, ACCORD. Operational risk
professionals who suspect that they are confronted with an operational incident that has SOX or
financial reporting implications are required to log the incident in ACCORD so that the SOX
Business Team may evaluate the incident. Fannie Mae also has a Compliance and Ethics
Department. The Fannie Mae Code of Conduct requires all employees to report any suspicions
about potential violations of law. Neither Taylor nor Oliver contacted the SOX Business Team
or the Compliance and Ethics Department and nor did they log an incident in the ACCORD
system regarding Magidson’s use of the incorrect statistic.
In early 201 l, Magidson was instructed by his manager and second-level supervisor to
"shape-shift" his organization. To accommodate this instruction, Magidson engaged in a
reduction-in-force which resulted in Taylor’s termination on April 2l, 201 l. After his
termination, Taylor filed a claim with Fannie Mae’s Compliance and Ethics Department that
Magidson had violated the company’s Code of Conduct. Taylor filed suit against F annie Mae in
this Court on June 28, 201 l. Compl., ECF No. l. This Court dismissed the case for arbitration
on March 20, 2012. Order, ECF No. 13. On September 6, 2013, the case was reopened after the
conclusion of a nonbinding arbitration process. Order, ECF No. l8. On December 30, 2012,
defendants moved for summary judgment. Defs. Mot. for Summ. J., ECF No. 24. Taylor filed
his Opposition to the Motion for Summary Judgment on January 29, 2014. Pl.’s Opp’n to Defs.
Mot. for Summ. J., ECF No. 25. Defendants filed their Reply to the Opposition on February l2,
2014. Reply to Opp’n to Defs. Mot. for Summ. J., ECF No. 26.
II. LEGAL STANDARD
Summary judgment is appropriate when "the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.
R. Civ. P. 56(a). See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Celotex Corp.
v. Catrett, 477 U.S. 317, 322 (1986); Washinglon Post Co. v. U.S. Dep ’t ofHealth and Human
Servs., 865 F.2d 320, 325 (D.C. Cir. 1989). All justifiable inferences are to be drawn in favor of
the nonmoving party, and the moving party has the burden of demonstrating the absence of any
genuine issue of material fact. Anderson, 477 U.S. at 255; Celotex, 477 U.S. at 322.
"A fact is ‘material’ if a dispute over it might affect the outcome of a suit under
governing law; factual disputes that are ‘irrelevant or unnecessary’ do not affect the summary
judgment determination." Holcomb v. Powell, 433 F.3d 889, 895 (D.C. Cir. 2006)
(quoting Anderson, 477 U.S. at 248). An issue is genuine if "the evidence is such that a
reasonable jury could return a verdict for the nonmoving party." Ana’erson, 477 U.S. at 248.
"The non-moving party’s opposition must consist of more than mere unsupported allegations or
denials, and must be supported by affidavits, declarations or other competent evidence setting
forth specific facts showing that there is a genuine issue for trial." MDB Commc ’ns, Inc. v.
Hartfora’ Cas. Ins. C0., 479 F. Supp. 2d 136, 140 (D.D.C. 2007). "[l]f the evidence is merely
colorable, or is not significantly probative, summary judgment may be granted." Anders0n,_477
U.S. at 249-50.
III. ANALYSIS
A. Violati0n of the Sarbanes-Oxley ("SOX") Act
SOX whistleblower provisions protect employees of publicly traded companies who
provide information or assist in an investigation regarding any conduct which the employee
reasonably believes constitutes a violation of one of six enumerated federal fraud provisions. 18
U.S.C. § l5l4A(a)(l); 29 C.F.R. § l980.l02(a)(l) (20l4). The information or assistance must
be provided to or the investigation must be conducted by a Federal regulatory or law
enforcement agency, any Member or committee of Congress, or a person with supervisory
authority over the employee (or such other person working for the employer who has the
authority to investigate and resolve misconduct). 18 U.S.C. § l5l4A(a)(l); 29 C.F.R.
§ 1980.l02(a)(l ). An employer may not discharge, demote, suspend, threaten, harass or in any
other manner retaliate against the employee in the terms and conditions of employment because
of the employee’s engagement in SOX-protected activity. 18 U.S.C. § 15l4A(a)(1); 29 C.F.R.
§ 1980.102(3)(1).
To establish a prima facie SOX whistleblower retaliation claim, Taylor must show that:
(i) he engaged in protected activity; (ii) the defendants knew of the protected activity; (iii) he
suffered an unfavorable personnel action; and (iv) circumstances exist to suggest that the
protected activity was a contributing factor to the unfavorable action. 29 C.F.R.
§ 1980.104(€)(2); Fela'man v. Law Enforcement Assocs. Corp., 752 F.3d 339, 344 (4th Cir.
2014); Lockheed Martz``n Corp. v. Admin. Review Bd., 717 F.3d 1121, 1129 (lOth Cir. 2013);
Bechtel v. Admin. Review Ba’., 710 F.3d 443, 447 (2d Cir. 2013); Wiest v. Lynch, 710 F.3d 12l,
129 (3d Cir. 20l3).
Defendants dispute whether Taylor engaged in a protected activity. Defendants argue
that Taylor failed to "definitively and specifically" relate his communication to Magidson about
Magidson’s mistake to one of the six enumerated violations listed in 18 U.S.C. § 1514A(a)(1).
As the Administrative Review Board ("ARB") has recognized, Taylor need not show that the
protected activity related "definitively and specifically" to one of the six enumerated categories.
Sylvester v. Paraxel Inz’l LLC, No. 07-123, 2011 WL 2165854, *14-15 (DOL Adm. Rev. Bd.
May 25, 201 1). Instead, to demonstrate that he engaged in SOX-protected activity, Taylor must
show that he reasonably believed that Magidson’s conduct violated one of the six categories.
Taylor must show that he had both a subjective belief and an objectively reasonable
belief that "the conduct he complained of constituted a violation of relevant law." Sylvester,
2011 WL 2165 854, at *11. "Subjective reasonableness requires that the employee ‘actually
believed the conduct complained of constituted a violation of pertinent law."’ Id. (quoting Welch
v. Chao, 536 F.3d 269, 275 (4th Cir. 2008)). Objective reasonable belief "‘is evaluated based on
the knowledge available to a reasonable person in the same factual circumstances with the same
training and experience as the aggrieved employee." Ia’. (quoting Harp v. Charter Commc ’ns,
558 F.3d 722, 723 (7th Cir. 2009)). The legislative history of SOX makes clear that its
protections were "‘intended to include all good faith and reasonable reporting of fraud, and there
should be no presumption that reporting is otherwise."’ Van Asa’ale v. Int ’l Game Tech., 577 F.3d
989, 1002 (9th Cir. 2009) (quoting 148 Cong. Rec. S74l8-01 (daily ed. July 26, 2002)). "The
critical focus is on whether the employee reported conduct that he or she reasonably believes
constituted a violation of federal law." Sylvester, 2011 WL 2165854, at *15; Wz``est, 710 F.3d at
131 (finding that the Sylvester interpretation of "reasonable belief’ was entitled to Chevron
deference).
The ARB’s rejection of the "definitive and specific" requirement is entitled to deference
under Chevron, U.S.A. v. N.R.D.C., 467 U.S. 837 (1984). When Congress "has not directly
addressed the precise question at issue . . . the question for the court is whether the agency’s
answer is based on a permissible construction of the statute." 1d. at 842-43. lf the statute is
"‘silent or ambiguous with respect to the specific issue’ the court must defer to the agency’s
interpretation if it is reasonable." Citizens Coal Council v. Norton, 330 F.3d 478, 481 (D.C. Cir.
2003) (quoting Chevron, 467 U.S. at 843). Congress has not defined what "reasonable belief"
means in the SOX context. We find that the ARB’s interpretation of "reasonable belief" is
reasonable in light of this ambiguity and is entitled to Chevron deference.
Taylor has not demonstrated that he reasonably believed his conversation with Magidson
on November 4, 2011 was SOX-protected activity. Taylor has not shown that he possessed the
subjective belief that Magidson’s actions were illegal or fraudulent because he did not report his
concerns about Magidson’s use of the 60% statistic. Taylor had at least three possible avenues
for reporting his concerns about the 60% statistic, but he did not do so until after his termination.
As an operational risk professional, Taylor had knowledge of these reporting devices and their
importance. Magidson actually scheduled the meeting with Oliver and Taylor to understand the
data, and at no time did Taylor go beyond his assigned job duties to inform or assist in the
investigation of Magidson’s actions. Additionally, Taylor does not disagree that the "main
purpose" of the meeting with Oliver and Magidson was to make sure "that it was understood
from [Oliver] and [Magidson] that [he] was cleared of doing anything wrong." Defs. Mot. for
Summ. J., Ex. 14. Taylor has not demonstrated that he "actually believed" the conduct
complained of constituted a violation of SOX.
Taylor has also failed to demonstrate that a reasonable person would consider
Magidson’s use of the 60% statistic to be a violation of SOX. Like Taylor, Oliver was an
operational risk professional and she had knowledge of the various mechanisms for reporting
illegal or potentially fraudulent activity at Fannie Mae. Oliver did not report any concerns about
Magidson’s use of the 60% statistic. Oliver did not believe Magidson’s use of the 60% statistic
to be a violation of the SOX provisions. Instead Oliver recognized that "there was incorrect
information being shared" and she "suspected it was just a management issue." Defs. Mot. for
Summ. J., Ex. 2. A reasonable person would not consider Magidson’s mistaken use of the 60%
statistic as anything more than a misunderstanding. Upon discovering the mistake, Magidson
sought to resolve the misunderstanding by discussing the data with Taylor and Oliver. The
mistaken data, once understood, was retracted.
B. Wrongful Discharge in Violation of Public Policy
In the District of Columbia, a "very narrow" exception to the at-will employment
doctrine exists for plaintiffs who can demonstrate that they were terminated in violation of public
policy. Liberatore v. Melville Corp., 168 F.3d 1326, 1329 (D.C. Cir. 1999); Potts v. Howard
Um'v. Hosp., 736 F. Supp. 2d 87, 97 (D.D.C. 2010). ‘“Such an action must be firmly anchored in
either the Constitution or in a statute or regulation which clearly reflects the particular ‘public
policy’ being relied upon." Potts, 736 F. Supp. 2d at 97 (quoting Warren v. Coastal Int’l Secs.,
Inc., 96 Fed. App’x. 722, 722-23 (D.C. Cir. 2004)).
The District of Columbia has recognized that where there is already a statutory
framework in place, there is "no need to create a new exception to the at-will employment
doctrine." Carter v. District of Columbia, 980 A.2d l2l7, 1225-26 (D.C. 2009); LeFande v.
District ofColumbia, 864 F. Supp. 2d 44, 50-51 (D.D.C. 2012). Taylor looks to 18 U.S.C.
§ l001(a), a prohibition against knowingly or willfully making a material statement within the
jurisdiction of a branch of the U.S. government, as the anchor for his public policy claim, 18
U.S.C. § l00l(a), however, already includes a statutory remedy for violation and a suitable
remedy for termination in violation of the policy expressed in this statute already exists under the
Sarbanes-Oxley and Dodd-Frank statutes. Taylor’s claims do not fit within the narrow exception
to the at-will employment doctrine.
IV. CONCLUSION
For the foregoing reasons, defendants’ Motion for Summary Judgment will be granted.
A separate Order accompanies this Memorandum Opinion.
Signed Royce C. Lamberth, United States District Judge, on August 21, 2014.