Feldman v. Law Enforcement Associates Corp.
752 F.3d 339
4th Cir.2014Background
- Paul Feldman was President/CEO of Law Enforcement Associates (LEA) until his termination on August 27, 2009; LEA’s Board had two inside directors (Feldman, Perry) and three outside directors (Rand, Lindsay, Jordan).
- Starting in late 2007, acrimony existed between Feldman and the Outside Directors, partly over founder Carrington’s actions and Board control; Feldman learned Carrington owned SAFE Source, which had received LEA shipments potentially exported in violation of export restrictions.
- Feldman and Perry reported suspected illegal exports to the Department of Commerce in January 2008, prompting a federal investigation; Feldman also objected to alleged falsified Board minutes and refused to pay certain legal bills.
- Additional conflicts: Feldman moved headquarters without Board approval, criticized Outside Directors to shareholders (Wortleys) in July 2009, and later wrote the Outside Directors urging their resignation; termination followed less than one month after the Wortley meeting.
- Feldman filed EE complaints and amended his complaint to add a Sarbanes–Oxley (SOX) whistleblower claim after the 180-day OSHA/OSHA-Secretary period expired; the Fourth Circuit treated the SOX claim as properly before the district court by construing the amendment as a Rule 15(d) supplemental pleading.
- The district court granted summary judgment for defendants, holding Feldman failed to prove SOX’s contributing-factor element; the Fourth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction / timeliness: whether SOX claim was properly in federal court | Feldman argued his amended complaint adding the SOX claim should relate back or otherwise be permitted because the 180-day period had expired and defendants consented | Appellees argued the amended claim did not relate back and thus was premature (or barred) | Court construed the filing as a permissible Rule 15(d) supplemental pleading and found district court had jurisdiction over the SOX claim |
| Prima facie causation (contributing factor) requirement under SOX | Feldman contended his reports (SAFE Source, minutes, leaks, legal-bill refusal, insider-trading tip) were protected activities and were a contributing factor to his firing | Defendants argued long temporal gap, preexisting acrimony, and legitimate intervening events (e.g., Wortley meeting, alleged insubordination) severed causation | Court held Feldman failed to prove by a preponderance that his protected activity was a contributing factor to termination; affirmed summary judgment for defendants |
| Significance of temporal proximity and intervening events | Feldman argued recurring retaliatory animus connected past protected reports to later termination | Defendants emphasized lack of temporal proximity (SAFE Source report ~20 months earlier) and a recent intervening incident (Wortley meeting, letter to directors) motivating termination | Court found the long delay plus the intervening Wortley incident undermined causation; temporal gap weighed against contributing-factor finding |
| Burden-shifting under SOX once prima facie established | Feldman argued court should have shifted burden to defendants to prove they would have fired him anyway | Defendants asserted plaintiff failed prima facie; thus burden never shifted; alternatively they had legitimate business reasons (insubordination) | Court concluded plaintiff did not meet the prima facie contributing-factor element, so burden never shifted and it did not reach defendants’ alternative defense burden |
Key Cases Cited
- Welch v. Chao, 536 F.3d 269 (4th Cir.) (SOX whistleblower standard and elements)
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burden of proof standard)
- Hill v. Lockheed Martin Logistics Mgmt., Inc., 354 F.3d 277 (4th Cir.) (standard of appellate review for summary judgment)
- Stone v. Instrumentation Lab. Co., 591 F.3d 239 (4th Cir.) (jurisdiction under SOX/§1514A context)
- Stone v. Duke Energy Corp., 432 F.3d 320 (4th Cir.) (district court jurisdiction over SOX actions)
- Allen v. Admin. Review Bd., 514 F.3d 468 (5th Cir.) (articulation of SOX prima facie elements)
- Marano v. Department of Justice, 2 F.3d 1137 (Fed. Cir.) (discussion of contributing-factor standard in whistleblower context)
- Lockheed Martin Corp. v. Department of Labor, 717 F.3d 1121 (10th Cir.) (interpretation of broad contributing-factor standard)
- DeJarnette v. Corning Inc., 133 F.3d 293 (4th Cir.) (court will not second-guess employer personnel decisions)
- Smith v. Flax, 618 F.2d 1062 (4th Cir.) (relevance of employer’s perception of employee performance)