Arnold Nance v. Time Warner Cable, Inc.

FILED
NOT FOR PUBLICATION MAY 09 2011
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
ARNOLD NANCE, an individual, No. 09-56912
Plaintiff - Appellant, D.C. No. 2:08-cv-07340-R-FFM
v.
MEMORANDUM *
TIME WARNER CABLE, INC., a
corporation or other form of legal entity,
Defendant - Appellee.
Appeal from the United States District Court
for the Central District of California
Manuel L. Real, District Judge, Presiding
Argued and Submitted May 3, 2011
Pasadena, California
Before: SILVERMAN, TALLMAN, and CLIFTON, Circuit Judges.
Arnold Nance appeals from the summary judgment granted by the district
court in favor of Time Warner Cable. We affirm.
Nance’s complaint alleges a violation of California tort law under Tamney v.
Atlantic Richfield Co., 610 P.2d 1330 (Cal. 1980), which recognized the tort of
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
wrongful termination in violation of public policy. Under California law, the first
step in analyzing a Tamney claim is to determine whether the former employee was
“engaged in a protected activity.” Loggins v. Kaiser Permanente Int’l, 151 Cal.
App. 4th 1102, 1109 (Cal. Ct. App. 2007).
Nance contends he was engaged in protected activity because he brought to
light accounting misstatements and SEC violations in TWC’s financial reports.
Therefore, he argues, his conduct is a protected activity under the whistleblower
protection provision of the Sarbanes-Oxley Act (SOX). See Stevenson v. Superior
Court, 941 P.2d 1157, 1161 (Cal. 1997) (protected activity must be based on
“either constitutional or statutory provisions”).
Under § 1514A of SOX an employee cannot be terminated for providing
information “regarding any conduct which the employee reasonably believes
constitutes a violation of [a federal fraud statute], any rule or regulation of the
Securities and Exchange Commission, or any provision of Federal law relating to
fraud against shareholders.” 18 U.S.C. § 1514A(a)(1). In order to be protected by
the anti-retaliatory provision an “employee’s communications must ‘definitively
and specifically’ relate to one of the listed categories of fraud or securities
violations” in § 1514A. Van Asdale v. Int’l Game Tech., 577 F.3d 989, 996–97
(9th Cir. 2009) (quoting Platone v. FLYi, Inc., 25 IER Cases 278, 287 (Dep’t of
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Labor Sept. 29, 2006). Additionally, the employee must have “a subjective belief
that the conduct being reported violated a listed law” and “this belief must be
objectively reasonable.” Van Asdale, 577 F.3d at 1000. Nance has failed to meet
any of these requirements.
The issue about which Nance communicated with his superiors, possible
errors in Comcast’s subscriber count, did not relate to one of the listed categories
of fraud or securities violations, let alone definitively and specifically. Nance told
his superiors about an inconsistency between the way Comcast and TWC
calculated their subscriber counts prior to the purchase of Comcast by TWC. None
of Nance’s statements linked the inconsistency to fraud or to a securities violation.
Nance was not required to use the word “fraud” or to cite the code section he
believed was violated, see id. at 997, but his statements must still be related to
fraudulent or otherwise illegal conduct in order to be protected.
Nor did he suggest that TWC was violating SEC regulations by not reporting
the problem. In his e-mail informing his superior of the exceptions he intended to
make, Nance identified one of the other exceptions as a possible SOX violation but
made no similar statement about the subscriber count issue. Even when Nance
suggested to another TWC official that the information should be disclosed, his
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reason was that it “impacts other partners in the partnership,” not that failure to
disclose it would be a securities violation.
Nance’s statements about the subscriber count inconsistency also
demonstrate that, at the time, he did not have a subjective belief that TWC was
engaging in fraudulent or illegal activities. Additionally, Nance signed
representation letters every quarter and made no mention of the problem in any of
the representation letters he signed between January of 2007, when he first raised
the issue orally to Feldstein, and the December 2007 representation letter.
Moreover, in the same December 2007 representation letter in which he finally did
raise the issue, he also certified that he did not believe that there had been any
fraudulent activity in regards to TWC’s financial statements. While this provision
was part of the boilerplate language of the letter, so were the other provisions to
which Nance made his exceptions.
Finally, Nance’s purported belief that TWC had engaged in fraudulent or
illegal activities would not have been objectively reasonable. In order to have an
objectively reasonable belief, “the complaining employee’s theory of such fraud
must at least approximate the basic elements of a claim of securities fraud.” Van
Asdale, 577 F.3d at 1001. Nance’s theory of fraud was deficient in several key
ways. Notably, it was missing the element of materiality because the alleged
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problems, according to Nance, had a financial impact of an amount which TWC’s
outside auditor, when referred the question by TWC management, concluded was
immaterial to a corporation the size of TWC. Nance’s theory was also missing any
ground to support or infer scienter.
As Nance was not engaged in a protected activity, a necessary element to his
claim, summary judgment was appropriate.
AFFIRMED.
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