United States District Court, N.D. Mississippi, Aberdeen Division
PHILLIP A. HENDRICK PLAINTIFF
ITT ENGINEERED VALVES, LLC DEFENDANT
SHARION AYCOCK, UNITED STATES DISTRICT JUDGE
matter arises on Defendant's Motion for Summary Judgment,
wherein it argues that Plaintiff's claims under the
whistleblower protection provisions of the Sarbanes-Oxley Act
(SOX) should be dismissed.
and Procedural History
Hendrick began working for ITT around July 2013 as the
Operational Excellence Manager in its Amory, Mississippi
facility. Beginning in 2014, and as part of his job duties,
Hendrick instituted employee surveys to measure employee
morale in an attempt to improve productivity. Hendrick claims
that after instituting the surveys, he began to feel
ostracized by other Amory managers, namely Dennis Jackson,
Mike Steele, and David Flippo.
September of 2015, ITT began to respond to a declining
business by considering termination of certain employees.
According to ITT, Hendrick was one such employee. On
September 7, 2015, Hendrick sent Mike Sutter, then Vice
President and General Manager of Industrial Products for ITT,
an email recognizing that he may be included in a reduction
in force. He sent a similar email Fred Vos, the General
Manager and Executive Director. In both emails, he attempted
to shield himself from termination. He offered to take
Fridays off to reduce expense on the company.
that month, Hendrick claims that he observed fraudulent
inventory moves of raw plate steel, which he documented by
taking photographs. Hendrick claims that he provided these
photographs to a coworker, Steve Shirley. Shirley accessed
the inventory tracking system and saw that the steel had been
removed from the system, suggesting an intent to create
absorption. Shirley then submitted the photos to ITT along
with an anonymous ethics complaint describing the nature of
the matter as “inventory manipulation to ‘cook
the books.'” ITT began its investigation on October
14, and its reports noted that the reporter had been informed
by a co-worker of the supposed violation, but the
investigation was purportedly anonymous.
same day, three hours after the report was filed, Vos
informed Hendrick of a new restructuring plan that would
remove Hendrick from the umbrella of corporate management and
into local Amory management. Hendrick saw this as a demotion.
Also on October 14, Hendrick emailed Sutter regarding the
inventory moves. He said that he “was led to believe
that the financials are smoke and mirrors.” He
expressed dissatisfaction with what he perceived as the
ethical violation of falsely expensing material as though it
had been used and “fudging” the numbers. Sutter
advised Hendrick to report the moves to Amory managers.
and Shirley were both terminated from ITT in January 2016.
ITT cited reduction in force as its reason for the layoffs,
but Hendrick believes that he was terminated because he
reported fraudulent activity to Sutter and through
Shirley's anonymous ethics complaint. Hendrick alleges
that such retaliation constitutes a violation of the
whistleblower protection provisions of the Sarbanes-Oxley
Act, codified as 18 U.S.C. § 1514A(a)(1)(c).
judgment is warranted under Rule 56(a) of the Federal Rules
of Civil Procedure when the evidence reveals no genuine
dispute regarding any material fact and the moving party is
entitled to judgment as a matter of law. The rule
“mandates the entry of summary judgment, after adequate
time for discovery and upon motion, against a party who fails
to make a showing sufficient to establish the existence of an
element essential to that party's case, and on which that
party will bear the burden of proof at trial.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106
S.Ct. 2548, 91 L.Ed.2d 265 (1986).
party moving for summary judgment “bears the initial
responsibility of informing the district court of the basis
for its motion, and identifying those portions of [the
record] which it believes demonstrate the absence of a
genuine issue of material fact.” Id. at 323,
106 S.Ct. 2548. The nonmoving party must then “go
beyond the pleadings” and “set forth
‘specific facts showing that there is a genuine issue
for trial.'” Id. at 324, 106 S.Ct. 2548
(citation omitted). In reviewing the evidence, factual
controversies are to be resolved in favor of the nonmovant,
“but only when . . . both parties have submitted
evidence of contradictory facts.” Little v. Liquid
Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc).
Importantly, conclusory allegations, speculation,
unsubstantiated assertions, and legalistic arguments have
never constituted an adequate substitute for specific facts
showing a genuine issue for trial. TIG Ins. Co. v.
Sedgwick James of Wash., 276 F.3d 754, 759 (5th Cir.
2002); SEC v. Recile, 10 F.3d 1093, 1097 (5th Cir.
1997); Little, 37 F.3d at 1075.
anti-retaliation claim arises under § 806 of the
Sarbanes-Oxley Act, codified at 18 U.S.C. § 1514A, which
“creates a private cause of action for employees of
publicly-traded companies who are retaliated against for
engaging in certain protected activity.” Allen v.
Admin. Review Bd., 514 F.3d 468, 475-76 (5th Cir. 2008).
The Fifth Circuit recognizes that “[n]o [public
company] may discharge, demote, suspend, threaten, harass, or
in any other manner discriminate against an employee in the
terms and conditions of employment because of [certain
protected whistleblowing activity]” under the Act.
Halliburton, Inc. v. Admin. Review Bd., 771 F.3d
254, 258-59 (5th Cir. 2014) (changes in original). To prevail
on an anti-retaliation claim under this provision, the
employee must prove, by a preponderance of the evidence, that
(1) he engaged in protected whistleblowing activity, (2) the
employer knew that he engaged in the protected activity, (3)
he suffered an “adverse action, ” and (4) the
protected activity was a “contributing factor” in
the “adverse action.” Allen, 514 F.3d at
qualify as a protected activity, an employee's complaint
must definitively and specifically relate to an instance of
what he reasonably believes to be mail fraud, wire fraud,
bank fraud, securities fraud, a violation of any rule or
regulation of the SEC, or a violation of any provision of
federal law relating to fraud against shareholders.
Id. at 476-77. Upon an employee's showing of the
four required elements under § 1514A, an employer may
still avoid liability by showing with clear and convincing
evidence that it ...