The supreme court ruling in bechtel v competitive technologies inc. upheld which federal law?

Filing 3

MOTION for Temporary Restraining Order and Preliminary Injunction by ELAINE L. CHAO. (Attachments: # 1 Brief, # 2 Text of Proposed Order)(dc, )

Christopher J. Christie United States Attorney 970 Broad Street, Suite 700 Newark, NJ 07102 Tel. 973 645-2828 Fax. 973 297-2010 email: UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY -----------------------------------------------------ELAINE L. CHAO, Secretary of Labor, : United States Department of Labor : Plaintiff, : v. : The Charles Schwab Corporation, Charles Schwab & Co, Inc., : Charles Schwab Bank, Defendant. : ------------------------------------------------------MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF'S MOTIONS FOR A TEMPORARY RESTRAINING ORDER AND FOR A PRELIMINARY INJUNCTION TO ENFORCE SECRETARY'S ORDER OF PRELIMINARY REINSTATEMENT Civil Action No. Christopher J. Christie United States Attorney 970 Broad Street, Suite 700 Newark, NJ 07102 On the Brief: Daniel J. Gibbons Assistant U.S. Attorney TABLE OF CONTENTS TABLE OF AUTHORITIES ................................................................................ -iiPRELIMINARY STATEMENT .......................................................................... -1STATEMENT OF PROCEDURAL HISTORY AND FACTS ........................... -3STATUTORY BACKGROUND ......................................................................... -5ARGUMENT ........................................................................................................ -8I. THE DISTRICT COURT HAS THE STATUTORY AUTHORITY TO ENFORCE THE SECRETARY OF LABOR'S PRELIMINARY ORDER OF REINSTATEMENT UNDER SECTION 806 OF SOX. ................. -8A. The Plain Language of SOX Establishes A Cause of Action for Enforcement of A Preliminary Reinstatement Order ...................................... -8The Secretary's Reading of the Statute is Supported by SOX's Overall Structure and is Consistent with Congressional Intent .................................. -11- B. II. PLAINTIFF HAS FULFILLED THE LEGAL STANDARDS FOR OBTAINING TEMPORARY INJUNCTIVE RELIEF TO RESTRAIN THE DEFENDANT FROM CONTINUING TO VIOLATE THE PRELIMINARY ORDER. ........................... -16- CONCLUSION ................................................................................................... -23- -i- TABLE OF AUTHORITIES Cases Bailey v. Gulf Coast Transp., Inc., 280 F.3d 1333 (11th Cir. 2002) ............................................................... -19Bechtel v. Competitive Technologies, Inc., 448 F.3d 469 (2d Cir. 2006) .............................................................. -11--13Brock v. Casey Truck Sales, 839 F.2d 872 (2d. Cir. 1988) .................................................................... -21Jackson Transit Auth. v. Local Div. 1285, Amalgamated Transit Union, 457 U.S. 15 (1982) .................................................................................. -12Jackson v. Birmingham Board of Education, 544 U.S. 167 (2005) ................................................................................ -15Lyons v. Ga.-Pac. Corp. Salaried Employees Retirement Plan, 221 F.3d 1235 (11th Cir. 2000) ............................................................... -10M.A. ex rel. E.S. v. State-Operated Sch. Dist., 334 F.3d 335 (3d Cir. 2003) ............................................................. -10-, -13Martin v. Yellow Freight System, Inc., 983 F.2d 1201 (2d Cir. 1993) .......................................................... -15-, -21McNeil Nutritionals, LLC v. Heartland Sweeteners, LLC, 511 F.3d 350 (3d Cir. 2007) ..................................................................... -16Mitchell v. DeMario Jewelry, Inc., 361 U.S. 288 (1960) ................................................................................. -21Molloy v. Metropolitan Transp. Auth., 94 F.3d 808 (2d Cir. 1996) ....................................................................... -17Pennsylvania Federation of Sportsmen's Clubs, Inc. v. Kempthorne, 497 F.3d 337 (3d Cir. 2007) .................................................................... -10- -ii- Rosenberg v. XM Ventures, 274 F.3d 137 (3d Cir. 2001) .................................................................... -10Saks v. Franklin Covey Co., 316 F.3d 337 (2d Cir. 2003) .................................................................... -10SEC v. Management Dynamics, Inc., 515 F.2d 801 (9th Cir. 1975) .................................................................... -17Shire U.S. Inc. v. Barr Labs. Inc., 329 F.3d 348 (3d Cir. 2003) ..................................................................... -16United States v. First National City Bank, 379 U.S. 378 (1965) ................................................................................. -17Statutes 15 U.S.C. � 78l ..................................................................................................... -318 U.S.C. � 1514A ............................................................................ -2--8-, -18--2042 U.S.C. � 5851 ................................................................................................. -1949 U.S.C. � 31105 ............................................................................................... -1549 U.S.C. � 42121 .................................................................... -2-, -6--12-, -18--20Regulations 29 C.F.R. Part 1980 .......................................................................... -2-, -5--8-, -20- -iii- PRELIMINARY STATEMENT This memorandum of law is submitted in support of the motions by the plaintiff, United States Secretary of Labor ("Secretary" or "plaintiff"), for a temporary restraining order and preliminary injunction to restrain and enjoin the defendant The Charles Schwab Corporation, Charles Schwab & Co., Inc., and Charles Schwab Bank (collectively "Schwab" or the "defendant") from failing to comply with the October 21, 2008 preliminary order of reinstatement duly issued by the United States Department of Labor's ("DOL") Regional Administrator for the Occupational Safety and Health Administration ("OSHA"), pursuant to section 806 of the Sarbanes-Oxley Act of 2002 ("SOX" or "the Act"), 18 U.S.C. � 1514A, and its implementing regulations at 29 C.F.R. Part 1980.1 The Sarbanes-Oxley Act was designed to restore investor confidence in the nation's financial markets by improving corporate responsibility and the transparency of financial reporting. To further these goals, Congress enacted whistleblower provisions at 18 U.S.C. � 1514A to protect employees of publicly traded companies who report fraudulent activity. 1 The Secretary has delegated responsibility for receiving and investigating whistleblower complaints under the Sarbanes-Oxley Act to the Assistant Secretary for Occupational Safety and Health. See Secretary's Order 5-2002, 67 Fed. Reg. 65008 (Oct. 22, 2002). The Assistant Secretary has further delegated that authority to the Regional Administrators, pursuant to ADM 01-00-003, Redelegation of Authority and Responsibility of the Assistant Secretary for Occupational Safety and Health, March 3, 2003. -1- In this case, plaintiff investigated a complaint of retaliatory discharge and determined that reasonable cause existed to believe complainants Rick Liebchen and Scott Werling (hereinafter the "Complainants") were terminated from defendant Schwab's employment in violation of the whistleblower protection provisions of the Act. On October 21, 2008, the Secretary issued a preliminary order of reinstatement, pursuant to 49 U.S.C. � 42121(b)(2)(A) (incorporated by 18 U.S.C. � 1514A(b)(2)(A)) and 29 C.F.R. � 1980.105, in the matter styled: The Charles Schwab Corporation, Charles Schwab & Co, Inc., Charles Schwab Bank, Larry Goldstein, Scott Jensen & John Foy / Liebchen & Werling / 2-2140-07-008 (18 U.S.C. � 1514A) -- Secretary's Findings/Preliminary Order. To date, the defendant has failed to comply with the Secretary's reinstatement order. Further delay in complying with the Secretary's reinstatement order is not only detrimental to the Complainants, who strongly desire to be reinstated, but also is detrimental to the purposes of the Sarbanes-Oxley whistleblower provision. Therefore, the Secretary respectfully requests this Court to issue a temporary restraining order and preliminary injunction prohibiting the defendant from continuing to fail to comply with the Secretary's order to reinstate the defendant's employees, Rick Liebchen and Scott Werling, as ordered on October 21, 2008, pending completion of the administrative litigation. -2- STATEMENT OF PROCEDURAL HISTORY AND FACTS The Complainants filed a timely complaint with OSHA alleging that Schwab had terminated their employment in violation of the whistleblower protection provisions of the Sarbanes-Oxley Act. On June 26, 2008, OSHA informed Schwab that based upon its initial investigation, reasonable cause existed to believe that the defendant had violated section 806 when it terminated the Complainants' employment. OSHA offered Schwab an additional opportunity to present contrary evidence. On July 28, 2008, Schwab submitted a response to OSHA, which was followed up with a meeting with the OSHA investigator and supervisory investigator, at Schwab's request, on August 2, 2008. Little new evidence was proffered in this meeting, and on October 21, 2008, the Regional Administrator issued Findings and a Preliminary Order to, inter alia, reinstate the Complainants. The Regional Administrator's Findings and Order are annexed to the Petition and incorporated therein. To summarize these facts, defendant Schwab is a company with a class of securities registered under section 12 of the Securities Exchange Act (15 U.S.C. � 78l) within the meaning of section 806(a) of SOX (18 U.S.C. � 1514A(a)). On or about March 16, 2002, Schwab hired Complainant Rick Liebchen as a Financial Consultant in the branch located in Millburn, New Jersey. Liebchen held a variety of securities licenses. On or about July 30, 2004, Schwab hired Scott Werling as a Financial Consultant in the same office. Werling -3- also held a variety of securities licenses. The Complainants, both of whom are employees covered under 18 U.S.C. � 1514A, allege that their employment was terminated because they objected to and refused to participate in a scheme to falsify entries in the Multi-channel Acquisition Relationship Sales ("MARS") software system. The MARS system is a recordkeeping system used by Schwab. As a registered investment advisor and broker-dealer, Schwab is subject to recordkeeping regulations promulgated by the United States Securities and Exchange Commission under both the Securities Exchange Act of 1934 (see, e.g., Rule 17a-3 and 17a-4) and the Investment Advisors Act of 1940 (see, e.g., Rule 204-2). In addition, Self Regulatory Organization (SRO) rules and regulations carry penalties for firms and employees who falsify customer records (see, e.g., NASD/FINRA Conduct Rule 3110 � Books and Records). On March 20, 2007, both Liebchen and Werling were fired, purportedly for "inappropriate behavior and horseplay in the branch." The defendant contends that the Complainants were fired for hitting golf balls in the office--a practice that was encouraged and joked about in the office. Schwab continues to refuse to comply with the Regional Administrator's October 21, 2008 preliminary order to reinstate the Complainants, despite the Complainants' strong desire to return to their jobs. Accordingly, the Secretary brings this action to enforce the duly issued order of reinstatement. -4- STATUTORY BACKGROUND Section 806 of the Sarbanes-Oxley Act was enacted in the wake of the Enron and WorldCom accounting fraud scandals and was "designed to protect investors by ensuring corporate responsibility, enhancing public disclosure, and improving the quality and transparency of financial reporting and auditing. The whistleblower provisions were intended to protect employees who report fraudulent activity that can mislead investors in publicly traded companies." 69 Fed. Reg. 52104 (Aug. 24, 2004). See S. Rep. No. 107-146, at 1-3 (July 3, 2002). Section 806 of SOX provides that: (a) . . . No company with a class of securities registered under section 12 of the Securities Exchange Act of 1934 . . . may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee-(1) to provide information . . . regarding any conduct which the employee reasonably believes constitutes a violation of . . . any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders, when the information or assistance is provided to or the investigation is conducted by . . . (C) a person with supervisory authority over the employee. 18 U.S.C. � 1514A (emphases supplied). This statute, together with the Secretary's procedural rules for implementing the Act (29 C.F.R. Part 1980), provide that an employee of a publicly traded corporation who reasonably believes he or she has been discharged by his or her employer in retaliation for having engaged in protected activities may file a -5- complaint with the Secretary for unlawful discharge. 18 U.S.C. � 1514A(b)(1)(A); 29 C.F.R. � 1980.103. Proceedings under the Act are governed by the rules and procedures, as well as by the burdens of proof, of the aviation safety whistleblower provisions contained in the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century ("AIR21"), 49 U.S.C. � 42121. 1514A(b)(2)(A) and (C). Upon receipt of a complaint, the Secretary notifies the employer of the filing of the complaint, the allegations contained in the complaint, and of the substance of evidence supporting the complaint. 49 U.S.C. � 42121(b)(1); 29 C.F.R. � 1980.104(a). Thereafter, the Secretary, through OSHA, conducts an investigation to determine whether there is reasonable cause to believe that a violation of the Act has occurred. 49 U.S.C. � 42121(b)(2)(A); 29 C.F.R. � 1980.104(e). If, on the basis of the information gathered, the Secretary has reason to believe that a violation has occurred, the Secretary, through the Regional Administrator for OSHA, notifies the employee and the employer of the findings of violation, and accompanies the findings with a preliminary order of relief. 42121(b)(2)(A); 29 C.F.R. � 1980.105(a). 2 2 See 18 U.S.C. � 49 U.S.C. � Specifically, section 806 provides the following remedies: (1) In general.-- An employee prevailing in any action under subsection (b)(1) shall be entitled to all relief necessary to make the employee whole. (2) Compensatory damages.-- Relief for any action under paragraph (1) shall include-- -6- Section 806(c)(2) of the Act prescribes the relief, where a violation is found, to include reinstatement of the employee to his or her former position, together with back pay. 18 U.S.C. � 1514A(c)(2). Either the employer or the employee may, within 30 days, file objections to the Secretary's initial findings or preliminary order, or both, and request a hearing on the record before the United States Department of Labor, Office of Administrative Law Judges. 49 U.S.C. � 42121(b)(2)(A); 29 C.F.R. � 1980.106(b)(1). The statute expressly provides that the filing of objections does not stay the Secretary's preliminary order reinstating the employee. 49 U.S.C. � 42121(b)(1)(A) (incorporated by 18 U.S.C. � 1514A(b)(2)(A)) ("The filing of objections shall not operate to stay any reinstatement remedy contained in the preliminary order."). The regulations also explicitly mandate immediate reinstatement of an employee following the preliminary order of reinstatement by the Regional Administrator. 29 C.F.R. �� 1980.105(c), 1980.106(h)(i). (A) reinstatement with the same seniority status that the employee would have had, but for the discrimination; (B) the amount of back pay, with interest; and (C) compensation for any special damages sustained as a result of the discrimination, including litigation costs, expert witness fees, and reasonable attorneys fees. 18 U.S.C. � 1514A(c). See also 29 C.F.R. � 1980.105(a)(1). -7- ARGUMENT I. THE DISTRICT COURT HAS THE STATUTORY AUTHORITY TO ENFORCE THE SECRETARY OF LABOR'S PRELIMINARY ORDER OF REINSTATEMENT UNDER SECTION 806 OF SOX. A. The Plain Language of SOX Establishes A Cause of Action for Enforcement of A Preliminary Reinstatement Order To assure compliance with temporary reinstatement orders, Congress authorized the Secretary to seek enforcement of a preliminary reinstatement order and authorized the district courts to order injunctive relief. See 49 U.S.C. �� 42121(b)(5) and (b)(6), as incorporated by 18 U.S.C. � 1514A(b)(2)(A);3 see also 29 C.F.R. � 1980.113. AIR21 explicitly authorizes the district courts to enforce a preliminary reinstatement order as if it were a final order. See 49 U.S.C. � 42121(b)(2)(A) ("[T]he Secretary shall accompany the Secretary's findings with a 3 Subsection (b)(5) states: Whenever any person has failed to comply with an order issued under paragraph [(b)](3), the Secretary of Labor may file a civil action in the United States district court for the district in which the violation was found to occur to enforce such order. In actions brought under this paragraph, the district courts shall have jurisdiction to grant all appropriate relief including, but not limited to, injunctive relief and compensatory damages. 49 U.S.C. � 42121(b)(5). Subsection (b)(6) similarly states: A person on whose behalf an order was issued under paragraph [(b)](3) may commence a civil action against the person to whom such order was issued to require compliance with such order. The appropriate United States district court shall have jurisdiction, without regard to the amount in controversy or the citizenship of the parties, to enforce such order. 49 U.S.C. � 42121(b)(6). -8- preliminary order providing the relief prescribed by paragraph (3)(B) [i.e., the section governing final orders].").4 AIR21 plainly maps out the method by which preliminary orders issued pursuant to the statute can be enforced in district court. Subsection (b)(6) of 49 U.S.C. � 42121 provides for enforcement of orders issued under subsection (b)(3). Subsection (b)(3)(B)(ii) provides that the Secretary shall order the person who has committed a violation to reinstate the complainant to his or her former position. See 49 U.S.C. � 42121(b)(3)(B)(ii) ("If, in response to a complaint filed under paragraph (1), the Secretary of Labor determines that a violation [of SOX] has occurred, [she] shall order the person who committed such violation to . . . reinstate the complainant to his or her former position."). Subsection (b)(2)(A) instructs the Secretary to accompany any reasonable cause finding that a violation occurred with a preliminary order containing the relief prescribed under subsection (b)(3), including reinstatement. This subsection also specifically states that any (b)(3)(B) relief of reinstatement contained in a preliminary order is not stayed upon the filing of objections. See 49 U.S.C. � 4 49 U.S.C. � 42121(b)(2)(A) states, in pertinent part: If the Secretary of Labor concludes that there is probable cause to believe that a violation of subsection (a) has occurred, the Secretary shall accompany the Secretary's findings with a preliminary order providing the relief prescribed by paragraph (3)(B). Not later than 30 days after the date of notification of findings under this paragraph, either the person alleged to have committed the violation or the complainant may file objections to the findings or preliminary order, or both, and request a hearing on the record. The filing of such objections shall not operate to stay any reinstatement remedy contained in the preliminary order. -9- 42121(b)(2)(A). Thus, under the plain meaning of the statute, enforceable orders issued under subsection (b)(3) include preliminary orders, which contain the relief of reinstatement prescribed by subsection (b)(3)(B). This plain reading of the statute is not altered by section 42121(b)(3)'s title "Final order," because it is a well-settled rule of statutory construction that the title of a statutory section generally cannot be used to constrict the plain language of the statute. See Pennsylvania Federation of Sportsmen's Clubs, Inc. v. Kempthorne, 497 F.3d 337, 352 n.8 (3d Cir. 2007) (citing M.A. ex rel. E.S. v. State-Operated Sch. Dist., 334 F.3d 335, 348 (3d Cir. 2003); see also Lyons v. Ga.-Pac. Corp. Salaried Employees Retirement Plan, 221 F.3d 1235, 1246 (11th Cir. 2000) ("We have previously observed that `reliance upon headings to determine the meaning of a statute is not a favored method of statutory construction.'") (citation omitted). Indeed, a focus on the heading of subsection (b)(3) would negate Congress's statutory scheme as a coherent whole. See Rosenberg v. XM Ventures, 274 F.3d 137, 1415 (3d Cir. 2001) ("To determine whether the statutory language is ambiguous, we must examine the language itself, the specific context in which that language is used, and the broader context of the statute as a whole.") (internal citation and quotation marks omitted); see also Saks v. Franklin Covey Co., 316 F.3d 337, 345 (2d Cir. 2003) ("The text's plain meaning can best be understood by looking to the statutory scheme as a whole and placing the particular provision -10- within the context of that statute."). It is evident from the language and structure of section 42121 that the statute provides for enforcement of preliminary reinstatement orders, not only final orders issued by the Secretary. B. The Secretary's Reading of the Statute is Supported by SOX's Overall Structure and is Consistent with Congressional Intent The language and overall structure of AIR21, as well as the circumstances of SOX's enactment, clearly indicate that Congress intended to permit district courts to enforce preliminary reinstatement orders. A reading of section 42121(b) that does not allow for enforcement of preliminary reinstatement orders in district court is inconsistent with the legislative intent that these orders be effective immediately. As Judge Straub noted in Bechtel v. Competitive Technologies, Inc., 448 F.3d 469, 485 (2d Cir. 2006) (Jacobs, J., Leval, J., Straub, J.), the various provisions of AIR21's enforcement scheme, "taken together, reflect Congress's sense that timely reinstatement is essential to prevent the chilling effects of employer retaliation."5 In drawing this conclusion, Judge Straub looked, inter alia, 5 Bechtel involved an appeal of a district court injunction enforcing a preliminary reinstatement order issued by OSHA under section 806 of SOX. The decision does not have a majority opinion, as each judge on the panel issued a separate opinion. See id. at 484 (Straub, J.) ("I note that, because of the form our disposition of the case has taken, there is no majority rule of law from which I need dissent.") Two judges ruled to vacate the court's injunction, but did so for different reasons. Judge Jacobs concluded that the plain language of SOX does not permit district court enforcement of preliminary reinstatement orders. Id. at 471-76. Without resolving that primary issue, Judge Leval concluded that the reinstatement order at issue in the case was unenforceable because OSHA's investigation had not given the defendant reasonable notice of the evidence against it. Id. at 479-82. Judge Straub would have upheld the district court's injunction, concluding both that section 806 -11- to the language of 49 U.S.C. � 42121(b)(2) (providing that when the Secretary finds reasonable cause to believe that a violation has occurred, she "shall accompany her findings with a preliminary order providing the relief prescribed by paragraph (3)(B)," and noting specifically that a remedy of reinstatement is not to be stayed by an objection to that order) (emphasis added), in conjunction with section 42121(b)(3)(B) (providing that the Secretary must order the employee's reinstatement if after a full investigation she concludes that there has been a violation). The emphasis on preliminary reinstatement remedies in this statutory scheme, Judge Straub stated, "makes clear that immediate reinstatement is paramount, which cuts against any interpretation that would allow an employer to ignore a reinstatement order with impunity." 448 F.3d at 484. That Congress intended preliminary reinstatement orders to be enforceable merely effectuates the usual legal consequences of this statutory scheme. See, e.g., Jackson Transit Auth. v. Local Div. 1285, Amalgamated Transit Union, 457 U.S. 15, 20-21 (1982) ("[I]t is reasonable to conclude that Congress expected the [statutorily created] agreement and the collective-bargaining agreement, like ordinary contracts, to be enforceable by private suit upon a breach.") (citation omitted). In SOX, as Judge Straub correctly noted, "the statute's mandatory language and strict deadlines" reflect not only the importance of preliminary confers authority on district courts to enforce preliminary reinstatement orders and that the defendant had been provided with sufficient evidence to satisfy its due process rights. Id. at 484-90. -12- reinstatement but of "effective preliminary reinstatement," which is impossible without an enforcement mechanism. Bechtel, 448 F.3d at 485 (emphasis in original); see also id. at 478 (Leval, J.) ("[E]ven if Judge Jacobs is correct that there are good reasons why a preliminary order should not be enforced, these considerations do not explain why Congress would provide that a preliminary order is not stayed if despite the statute's denial of a stay, the employer without adverse consequence may effectively stay the order simply by declining to obey it.").6 6 In the wake of Enron and WorldCom, Congress was mindful that whistleblowers were essential both to uncovering corporate fraud and mismanagement and to alerting corporate or government officials of the same: In the `Background and Need for Legislation of the Senate Report, which narrated the epic demise of Enron, the Committee explained that the cover-up efforts of Enron management included `discourag[ing] at nearly every turn' attempts by `employees at both Enron and [its auditor] Andersen . . . to report or `blow the whistle' on fraud. . . . This `corporate code of silence' not only hampers investigations, but also creates a climate where ongoing wrongdoing can occur with virtual impunity. The consequences of this corporate code of silence for investors in publicly traded companies, in particular, and for the stock market, in general, are serious and adverse, and they must be remedied. Bechtel, 448 F.3d at 485-86 (2d Cir. 2006) (citing S. Rep. No. 107-146, at 2 (2002)). Judge Straub found this legislative intent to "evince a strong Congressional preference for reinstatement as a means of encouraging whistleblowing": Congress's preference, moreover, makes eminent sense. The Act's provision for immediate orders of preliminary reinstatement encourages whistleblowing, by assuring potential whistleblowers that they will remain employed, integrated in the workplace, professionally engaged, and well-situated in the job market; such orders also facilitate whistleblowing, by enabling whistleblowers to continue on as observers and potential witnesses to corruption. Moreover, when a whistleblower is immediately reinstated, this assures his co-workers that they are protected and thereby encourages them to come forward as well. The alternative is likely to discourage initial whistleblowing and, where a whistleblower has been removed pending the administrative and judicial process, to send a chilling signal to co-workers who notice the sudden (and to all appearances permanent) disappearance. -13- AIR21's legislative history also provides evidence that Congress intended preliminary reinstatement orders to be enforced. The AIR21 whistleblower protection provisions were modeled on those contained in the Surface Transportation Assistance Act ("STAA"): There are currently over a dozen Federal laws protecting whistleblowers including laws protecting nuclear plant workers, miners, truckers, and farm laborers when acting as whistleblowers. For example, section 2305 of the Surface Transportation Assistance Act of 1978, 49 U.S.C. � 2305, prohibits retaliation for filing a complaint or instituting any proceeding relating to violations of motor vehicle safety rules or refusing to operate an unsafe vehicle. There are no laws specifically designed to protect airline employee whistleblowers. H.R. Rep. 106-167(I), 106th Cong., 1st Sess. 1999, 1999 WL 355951, *85 (emphasis added). Thus, when AIR21 was passed, Congress specifically referred to STAA as an example of an existing whistleblower protection statute. Congress was undoubtedly aware that at that time STAA alone, among the many whistleblower statutes administered by the Department of Labor, authorized the Secretary to issue orders of preliminary reinstatement upon a finding of reasonable cause and that such preliminary orders were not stayed by the filing of objections.7 See, e.g., Id. at 486. 7 Using language strikingly similar to that found in 49 U.S.C. � 42121(b)(2)(A), STAA provided in pertinent part: [T]he Secretary shall conduct an investigation, decide whether it is reasonable to believe the complaint has merit, and notify the complainant and the person alleged to have committed the violation of the findings. If the Secretary decides it is reasonable to believe a violation -14- Martin v. Yellow Freight System, Inc., 983 F.2d 1201, 1203 (2d Cir. 1993) (ALJ's reinstatement order under STAA is immediately enforceable by the district court). The inclusion of the very similar preliminary reinstatement provisions in AIR21 indicates that Congress intended AIR21 to provide aviation employees with the same protections that it previously had provided in STAA to employees operating motor vehicles. In light of the overwhelming evidence that Congress intended to implement a statutory scheme that would encourage whistleblowers to report corporate fraud without fear of reprisal, it is appropriate to conclude that the statute creates a cause of action for enforcement of preliminary reinstatement orders issued under SOX. See Jackson v. Birmingham Board of Education, 544 U.S. 167, 179 (2005) (concluding that Title IX's objective of preventing the use of federal funds to perpetuate discrimination "would be difficult, if not impossible, to achieve if persons who complain about sex discrimination did not have effective protection occurred, the Secretary shall include with the decision findings and a preliminary order for the relief provided under paragraph (3) of this subsection [which includes reinstatement]. 49 U.S.C. � 31105(b)(2)(A) (1999). STAA also provided that the complainant, the employer, or both may file objections to the Secretary's findings and preliminary order within 30 days, but, as in AIR21, "The filing of objections does not stay a reinstatement ordered in the preliminary order." Id. at � 31105(b)(2)(B) (1999) (emphasis added). Under 49 U.S.C. 31105(d) (1999), "[i]f a person fails to comply with an order issued under subsection (b) of this section, the Secretary shall bring a civil action to enforce the order in the district court of the United States for the judicial district in which the violation occurred." On August 3, 2007, STAA's whistleblower protection provisions were amended as part of the Implementing Recommendations of the 9/11 Commission Act of 2007, Pub. L. 110-53, 121 Stat. 266. The provisions, however, still contain the language providing for the enforcement of preliminary reinstatement orders issued upon a finding of probable cause. See 49 U.S.C. � 31105(b)(2)(A) (2008). -15- against retaliation. . . . If recipients were permitted to retaliate freely, individuals who witness discrimination would be loathe to report it") (citations and internal quotation marks omitted). There is little question but that Congress envisioned preliminary reinstatement to be an important component of the SOX legislative scheme, and that immediate enforcement of such orders is necessary to effectuate the statute's purpose. II. PLAINTIFF HAS FULFILLED THE LEGAL STANDARDS FOR OBTAINING TEMPORARY INJUNCTIVE RELIEF TO RESTRAIN THE DEFENDANT FROM CONTINUING TO VIOLATE THE PRELIMINARY ORDER. The Secretary's burden to secure the order of enforcement from this Court is to show that the Regional Administrator duly issued a preliminary order of reinstatement, and that the employer has refused to comply. The Secretary is entitled to a temporary restraining order under the standards applied in this circuit pursuant to FRCP Rule 65(a). Generally, to prevail on a motion for injunctive relief, the moving party must show (1) the likelihood success on the merits; (2) the extent to which he or she will suffer irreparable harm without injunctive relief; (3) the extent to which the nonmoving party will suffer irreparable harm if the injunction is issued; and (4) the public interest favors the relief requested. See McNeil Nutritionals, LLC v. Heartland Sweeteners, LLC, 511 F.3d 350, 356-57 (3d Cir. 2007);Shire U.S. Inc. v. -16- Barr Labs. Inc., 329 F.3d 348, 352 (3d Cir. 2003). The government, however, when seeking a statutory injunction in the public interest, need not show "irreparable injury" or "that the balance of hardship is in its favor" to obtain equitable relief. See Wright and Miller, 14 Federal Practice and Procedure, � 3653 n. 13 (3d ed. 2005) ("In statutory enforcement cases in which the government has met the `probability of success' prong of the preliminary injunction test, the government is presumed to have met the `possibility of irreparable injury' prong, as passage of a statute is itself an implied finding by Congress that violations will harm the public."); see also United States v. First National City Bank, 379 U.S. 378, 383 (1965); Molloy v. Metropolitan Transp. Auth., 94 F.3d 808, 811 (2d Cir. 1996); SEC v. Management Dynamics, Inc., 515 F.2d 801, 807-08 (9th Cir. 1975). In the present case, on October 21, 2008, pursuant to 49 U.S.C. � 42121(b)(2)(A) (incorporated into 18 U.S.C. � 1514A(b)(2)(A)), OSHA issued findings and a preliminary order of reinstatement styled: The Charles Schwab Corporation, Charles Schwab & Co, Inc., Charles Schwab Bank, Larry Goldstein, Scott Jensen & John Foy / Liebchen & Werling / 2-2140-07-008 (18 U.S.C. � 1514A) -- Secretary's Findings/Preliminary Order. As these findings indicate, the Regional Administrator found, following an investigation, reasonable cause to believe that the defendant's March 20, 2007 discharge of the Complainants was a violation of section 806 of the Act, in that the Complainants protected "whistle- -17- blower" activities were a contributing factor in their discharge.8 As a result of these findings, OSHA issued an order directing that the defendant immediately reinstate the Complainants to the position of Financial Consultants that they occupied prior to the unlawful discharge. An employee engages in protected activity when he provides information to a supervisory authority that he "reasonably believes" that the actions of his employer are in violation of securities laws. See 18 U.S.C. � 1514A(a)(1). The Secretary found that it was reasonable for the Complainants to believe that Schwab's practice of falsifying entries in the MARS software system was a violation of the securities laws. The Complainants raised their concerns to their supervisors after a staff meeting that occurred sometime after August 16, 2006. The Secretary is likely to prevail on the merits of this temporary retraining order application. Under the statute, reinstatement is appropriate once the Secretary issues an order finding reasonable cause to believe that a violation occurred. See 49 U.S.C. � 42121(b)(2)(A). Unless Schwab can establish that OSHA's determination that reasonable cause exists to believe that the 8 A complainant who seeks protection under Section 806 must establish by a preponderance of the evidence that the protected activity "was a contributing factor in the unfavorable personnel action alleged in the complaint." 49 U.S.C. � 42121(b)(2)(B)(iii). The complainant must be able to show that "(i) the employee engaged in a protected activity or conduct; (ii) the named person knew or suspected, actively or constructively, that the employee engaged in the protected activity; (iii) the employee suffered an unfavorable personnel action; and (iv) the circumstances were sufficient to raise the inference that the protected activity was a contributing factor in the unfavorable action." 29 C.F.R. � 1980.104. -18- Complainants protected activity was a contributing factor in their discharge was improper under the statute, the Secretary is entitled to the enforcement of her preliminary order requiring Schwab to reinstate the Complainants. Any other scheme would subvert Congress's intent that the filing of objections to the Secretary's preliminary findings "shall not operate to stay any reinstatement remedy." 49 U.S.C. � 42121(b)(2)(A) (incorporated by 18 U.S.C. � As the Supreme Court recognized in Brock v. Roadway 1514A(b)(2)(A)). Express, Inc., 481 U.S. 252, 266 (1987), regarding the similar statutory scheme under STAA: [T]he primary function of the investigator is not to make credibility determinations, but rather to determine simply whether reasonable cause exists to believe that the employee has been discharged for engaging in protected conduct. . . . Final assessments of the credibility of supporting witnesses are appropriately reserved for the administrative law judge, before whom an opportunity for complete cross-examination of opposing witnesses is provided. Congress could have provided for an employee's temporary reinstatement only after an evidentiary hearing, as it did under the whistleblower protection provisions of the Energy Reorganization Act. See 42 U.S.C. � 5851(b)(2)(A). Having decided instead to require reinstatement at an earlier stage, Congress clearly balanced what it perceived as the competing interests of the various parties involved. See, e.g., Bailey v. Gulf Coast Transp., Inc., 280 F.3d 1333, 1335 (11th Cir. 2002) (preliminary reinstatement under the FLSA's anti-retaliation provision -19- enhances compliance with substantive provisions, because "[e]mployees may be much less likely to stand up for their substantive rights under the statute if they know that months or years will pass before a court can act to halt prohibited intimidation by their employer").9 As Schwab cannot establish that the Regional Administrator's order requiring preliminary reinstatement of the Complainants was improperly issued under the Sarbanes-Oxley Act, the Secretary is likely to prevail on the merits of this action. The Secretary's October 21, 2008 order directed that the defendant immediately reinstate the Complainants to the position of Financial Consultants that they occupied prior to their March 20, 2007 unlawful discharge. From October 21, 2008 to the present, the defendant has failed to comply with the Secretary's order to reinstate the Complainants. Accordingly, the Secretary requests, pursuant to 49 U.S.C. � 42121(b)(5) and 29 C.F.R. � 1980.113, that this Court exercise its statutory authority to enforce her October 21, 2008 order of preliminary reinstatement by entering an Order to temporarily restrain and enjoin 9 Regarding STAA's similar preliminary reinstatement scheme, the Supreme Court stated that it "evidences a legislative determination that the preliminary investigation and finding of reasonable cause by the Secretary, if followed `expeditiously' by a hearing on the record at the employer's request, provide effective protection to the employee and ensure fair consideration of the employer's interest in making unimpaired hiring decisions." Roadway Express, 481 U.S. at 259 (internal quotation marks and citations omitted). SOX also instructs that ALJ hearings be conducted "expeditiously." See 18 U.S.C. � 1514A(b)(2)(A) (incorporating AIR21 time frames). The Secretary expects that, particularly in those cases in which preliminary reinstatement has been ordered, the ALJ will hold expeditiously any evidentiary hearing requested by the employer. -20- the defendant from failing and refusing to comply with the Secretary's order to reinstate the Complainants to their former positions with the defendant. A failure to enforce the Secretary's order of reinstatement will discourage employees from reporting improper accounting practices of their employers, and encourage managers to retaliate against meritorious complainants, in direct contravention of the Act's purpose. Indeed, the Supreme Court has long recognized the importance to effective law enforcement of whistleblower protections. "Plainly, effective enforcement could thus only be expected if employees felt free to approach officials with their grievances. . . . For it needs no argument to show that the fear of economic retaliation might often operate to induce aggrieved employees quietly to accept substandard conditions." Mitchell v. DeMario Jewelry, Inc., 361 U.S. 288, 292 (1960). As the Second Circuit has recognized, an employer who retaliates against workers obtains a silence, which "until broken by a judgment against the employer, provides the employer an opportunity for continued wrongdoing and strikes at the complaint-based enforcement mechanism contemplated by the [Act]." Brock v. Casey Truck Sales, 839 F.2d 872, 880 (2d. Cir. 1988); see also Yellow Freight System, 983 F.2d at 1203 (ALJ's reinstatement order under STAA is immediately enforceable by the district court, because "enforcement of an ALJ's reinstatement -21- order is consistent with congressional intent to protect whistle-blowers, and . . . failure to enforce such an order undermines the goal of the legislation"). For all the foregoing reasons, the Secretary respectfully seeks a Temporary Restraining Order to enforce the Regional Administrator's October 21, 2008 preliminary order of reinstatement. -22- CONCLUSION The Complainants must be reinstated to their former positions to promote the public's interest in the reliability and integrity of financial reports of publicly traded corporations. WHEREFORE, the Secretary respectfully asks the Court to: (1) enter a temporary restraining order enforcing the October 21, 2008 preliminary order of reinstatement of the OSHA Regional Administrator and restraining the defendant from failing and refusing to reinstate the Complainants; and, (2) direct the defendant to appear at a hearing set to commence within ten (10) days of the issuance of the temporary restraining order in this proceeding, and show cause why a preliminary injunction should not be entered. DATED: November 17, 2008 Newark, New Jersey Respectfully submitted, CHRISTOPHER J. CHRISTIE United States Attorney ss/ Daniel J. Gibbons BY: ___________________________ DANIEL GIBBONS Deputy Chief, Civil Division GREGORY F. JACOB Solicitor of Labor PATRICIA M. RODENHAUSEN Regional Solicitor -23- MARGARET A. TEMPLE Attorney U.S. Department of Labor, Attorneys for Elaine L. Chao, Secretary of Labor. -24-

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