Perez v. Citigroup, Inc. (agency decision, September 30, 2019)

Plain-English summary

Antonio Perez worked entirely in Mexico for a Mexican subsidiary of Citigroup and alleged retaliation after reporting misconduct involving a U.S. account. The ALJ dismissed his Sarbanes-Oxley Act complaint because it required an impermissible extraterritorial application of Section 806. The Board held that the employee's permanent or principal worksite is the key factor in deciding whether a Section 806 claim is domestic. Perez was hired, worked, reported the alleged misconduct, and separated from employment in Mexico. The involvement of a U.S. account and possible effects on U.S. shareholders did not make the retaliation claim domestic, so the Board affirmed dismissal.

Decision snapshot

• Cited authorities: 18 U.S.C. § 1514A; 49 U.S.C. § 42121; 29 C.F.R. § 18.72
• Outcome: The ALJ's summary dismissal was affirmed and the SOX complaint was denied.
• Key point: A foreign employee's principal worksite controls the domestic-application inquiry, and U.S. financial effects alone did not bring this Mexico-based retaliation claim within Section 806.

Full text (DOL official public release)

U.S. Department of Labor Administrative Review Board
200 Constitution Avenue, N.W.
Washington, D.C. 20210

  In the Matter of:


  ANTONIO JOSE JIMENEZ                              ARB CASE NO. 2017-0031
  PEREZ,
                                                    ALJ CASE NO. 2015-SOX-00014
                  COMPLAINANT,
                                                    DATE: September 30, 2019
         v.

  CITIGROUP, INC.,

                  RESPONDENT.


  Appearances:

  For the Complainant:
        Kathleen M. Kundar, Esq.; Amit Shertzer, Esq.; Fox Horan &
        Camerini LLP; New York, New York

  For the Respondent:
        A. Michael Weber, Esq.; Meredith Kaufman, Esq.; Littler Mendelson,
        P.C.; New York, New York

  Before: William T. Barto, Chief Administrative Appeals Judge; James A.
  Haynes and Thomas H. Burrell, Administrative Appeals Judges.


                          FINAL DECISION AND ORDER

        PER CURIAM. This case arises under the whistleblower provision of the
  Sarbanes-Oxley Act of 2002 (Section 806 or SOX), 18 U.S.C. § 1514A (2010), as
  amended, and its implementing regulations at 29 C.F.R. Part 1980 (2019). At the
  time in question, Antonio Perez was an employee of Servicios Ejectivos, a foreign



  subsidiary of Citigroup, Inc., a publicly traded U.S. company. Perez filed a
  complaint alleging that his employer began taking adverse actions against him in
  violation of the whistleblower provisions of Section 806 because he made SOX-
  protected reports. Citigroup, Inc., filed a motion for summary decision in which it
  argued that the complaint should be dismissed because it presents an impermissible
  extraterritorial application of Section 806. 1 The Administrative Law Judge (ALJ)
  granted the motion, concluding that the complaint required an extraterritorial
  application of Section 806 of the SOX such that it had to be dismissed. We affirm.



                                      BACKGROUND 2

        Complainant was an employee of Servicios Ejectivos, which is a subsidiary of
  Respondent and a company incorporated in Mexico. D. & O. at 32. Respondent is a
  Delaware corporation headquartered in New York City, and is registered under
  Section 12 of the Securities and Exchange Act of 1934, 15 U.S.C. 78l.

         It is undisputed that Complainant worked entirely in Mexico. Id. at 44.
  Complainant asserts that although he worked for and was paid by Servicios
  Ejectivos, he reported SOX-protected activities in May to July 2014, including a
  report concerning large amounts of money going through a “concentration account”
  that Banamex USA, a Servicios Ejectivos parent company (and also a subsidiary of
  Respondent), maintained in the U.S. and managed in U.S. dollars. Id. at 33. He also
  asserts that Respondent’s U.S. shareholders were affected by the activity he
  reported. Id. at 31.

        On August 6, 2014, Complainant met with his supervisor in Mexico City to
  discuss the outstanding balance on Complainant’s corporate credit card. Id. at 35.
  In exchange for severance, Complainant resigned from his position. Id. He signed a
  settlement agreement dated August 6, 2014. Id.



  1     Respondent also argued in its summary decision motion that it was not a proper
  respondent because it was not Complainant’s employer and took no adverse action against
  him and that Complainant was unable to establish a prima facie case. D. & O. at 22.

  2      We restate facts taken from the ALJ’s Decision and Order. We make no independent
  findings of fact on appeal.



         Complainant filed a SOX complaint with the Occupational Safety and Health
  Administration (OSHA) on or about January 20, 2015. OSHA dismissed the case on
  March 9, 2015, because there was no protected activity as the adverse action took
  place in Mexico and there was no indication that a U.S. parent company was
  involved. Complainant filed objections on or about April 15, 2015, with the Office of
  Administrative Law Judges.

         Before the assigned ALJ, Respondent filed a motion for summary decision
  asserting that SOX does not apply to employees working outside of the U.S., citing
  Morrison v. Nat’l Australia Bank, Ltd., 561 U.S. 247 (2010). Complainant filed an
  opposition, Respondent filed a reply, and Complainant filed a surreply brief.

         On March 8, 2017, the ALJ granted Respondent’s motion for summary
  decision. The ALJ noted that the uncontroverted evidence of record was that
  Complainant was a Mexico-based employee of a Mexican subsidiary of Respondent,
  and worked entirely in Mexico. Complainant was interviewed, hired, and effectively
  terminated in Mexico, and his job included no business travel to the United States.
  D. & O. at 47, 48. Further, the protected activity and adverse action all occurred in
  Mexico. The ALJ reasoned that although the alleged fraudulent misconduct
  Complainant reported involved an account located in the U.S., this fact did not
  confer jurisdiction or authorize application of Section 806 of SOX to Complainant’s
  case. Id. at 49. Thus, the ALJ dismissed the complaint. Complainant appealed the
  ALJ’s decision to the Administrative Review Board (ARB or Board).



                       JURISDICTION AND STANDARD OF REVIEW

         The ARB has jurisdiction to review the ALJ’s decision under Secretary’s
  Order No. 01-2019 (Delegation of Authority and Assignment of Responsibility to the
  Administrative Review Board), 84 Fed. Reg. 13,072 (Apr. 3, 2019); 29 C.F.R. Part
  1980. The ARB reviews an ALJ’s grant of summary decision de novo. Siemaszko v.
  First Energy Nuclear Operating Co., Inc., ARB No. 09-123, ALJ No. 2003-ERA-013,
  slip op. at 3 (ARB Feb. 29, 2012). Under 29 C.F.R. § 18.72 (2019), an ALJ may enter
  summary decision for either party if the pleadings, affidavits, material obtained by
  discovery, or matters officially noticed show that there is no genuine issue as to any
  material fact and that based on the law a party is entitled to summary decision.




         To avoid summary decision, the non-moving party must rebut the motion and
  evidence presented by the moving party with contrary evidence sufficient to create a
  genuine issue of material fact. That rebuttal, or answer, “may not rest upon mere
  allegation or denials of his pleading, but must set forth specific facts showing that
  there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256
  (1986) (citing Federal Rule of Civil Procedure 56(e)). In assessing this, or any,
  summary decision, both the ARB and the ALJ must view the evidence, along with
  all reasonable inferences, in the light most favorable to the non-moving party.



                                       DISCUSSION

        Section 806’s employee-protection provision generally prohibits covered
  employers and individuals from retaliating against employees because they provide
  information or assist in investigations related to the categories listed in the SOX
  whistleblower statute.

         To state a claim under Section 806, a complainant must allege that his
  employer took an unfavorable action against him and that protected activity by the
  Complainant was a contributing factor in the adverse action. See Prioleau v.
  Sikorsky Aircraft Corp., ARB No. 10-060, ALJ No. 2010-SOX-003, slip op. at 5 (ARB
  Nov. 9, 2011). Under 18 U.S.C. § 1514A(b)(2)(C), SOX complaints are decided using
  the legal burdens of proof set forth in the employee-protection provision of the
  Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR
  21), 49 U.S.C. § 42121.

         It is undisputed that Complainant is a foreign citizen who worked for
  Servicios Ejectivos during all relevant periods in Mexico. It is likewise undisputed
  that Servicios Ejectivos is a foreign subsidiary of Respondent, a U.S. company
  registered under Section 12 of the Securities Exchange Act of 1934. Complainant
  alleges that he reported misconduct to his Mexican supervisors, and that the
  wrongdoing he reported concerned a U.S. account and fraud against Respondent’s
  shareholders. Id. at 31, 42.

         We have recently held that Section 806 is not extraterritorial in Hu v. PTC,
  Inc., ARB No. 2017-0068, ALJ No. 2017-SOX-00019, slip op. at 7-9 (ARB Sept. 18,
  2019). In Hu, we concluded that the primary focus of Section 806 was to deter and
  punish retaliation against an employee’s terms conditions and privileges of


  employment. This interpretation is consonant with the actual language of Section
  806, although we recognize that SOX, as an entire legislative enactment, has a
  number of goals. It is clear that an attempt to apply the terms and remedies of
  Section 806 outside the United States could lead to frequent conflict with the laws
  of foreign nations and potentially inconsistent results for employees. Therefore, to
  allow the adjudication of the complaint before us, it must be a domestic application
  of Section 806. 3 Id. at 10. When deciding the question, we have held that “the
  location of the employee’s permanent or principal worksite is the key factor to
  consider.” Id.

         Applying this analytical framework to this Section 806 complaint, we
  conclude that it does not represent a domestic application of Section 806. It is
  undisputed that Complainant’s only place of work was Mexico and never the United
  States. The only domestic contacts in this matter are that the fraud Complainant
  allegedly reported concerned an account in the U.S. and that U.S. shareholders
  were potentially affected by Complainant’s allegations. These facts, without more,
  do not create a domestic application of Section 806.



                                          CONCLUSION

        For the reasons explained above, we AFFIRM the ALJ’s decision as correct.
  Accordingly, the complaint is hereby DENIED.

         SO ORDERED.




  3      The two-step framework in Morrison requires analysis of (1) whether the statute at
  issue extends extraterritorially and, if not, (2) whether the activity comprising the focus of
  the statute occurred within the United States or outside of it. If the activity occurred within
  the U.S., then there is a permissible domestic application of the statute. If the activity
  occurred outside the U.S., then there is an impermissible extraterritorial application and
  the complaint must be dismissed. Hu, ARB No. 2017-0068, slip op. at 6, 10; Morrison, 561
  U.S. 266-70.