Wallace v. Tesoro Corp.
796 F.3d 468
| 5th Cir. | 2015Background
- Wallace, a Tesoro VP, alleged he was fired in March 2010 in retaliation for investigating and reporting suspected unlawful practices: booking taxes as revenue, an Idaho Falls antitrust "side agreement," self-reports on annual compliance certificates, and suspected wire fraud (price signaling and inconsistent discounts).
- Wallace filed an OSHA SOX retaliation complaint in May 2010 mentioning booking taxes as revenue, the Idaho Falls antitrust matter, and his compliance-certificate answers; he did not mention price signaling, inconsistent discounts, or wire-fraud specifics.
- OSHA dismissed; after 180 days passed without a final ARB decision, Wallace sued in district court under 18 U.S.C. § 1514A. He amended several times; the district court dismissed most claims for failure to state a claim and dismissed the wire-fraud allegations for failure to exhaust administrative remedies.
- On appeal, Wallace abandoned challenge to the Idaho Falls holding and did not contest the 2008 certificate dismissal; he pressed that (1) SOX imposes no exhaustion limit beyond filing, and (2) he plausibly alleged protected activity about taxes-booked-as-revenue.
- The Fifth Circuit held that SOX claims are limited by administrative exhaustion measured by the Title VII/Thomas standard (scope of investigation reasonably expected to grow from the charge), affirmed dismissal of unexhausted wire-fraud claims, but reversed dismissal of the taxes-as-revenue claim and remanded.
Issues
| Issue | Plaintiff's Argument (Wallace) | Defendant's Argument (Tesoro) | Held |
|---|---|---|---|
| Whether SOX litigation is limited by administrative exhaustion scope | Filing an OSHA complaint that meets OSHA's filing threshold is enough; de novo review allows broader district-court claims | OSHA filing must identify the conduct complained of; district suit limited to claims the OSHA investigation would reasonably cover | Court: SOX claims are limited by exhaustion using the Title VII/Thomas standard (scope of investigation reasonably expected to grow from the agency charge); affirmed dismissal of wire-fraud claims as unexhausted |
| Whether Wallace plausibly alleged protected activity re: booking taxes as revenue (objective reasonableness) | He plausibly alleged he reasonably believed reporting violated SEC rules/GAAP and had informed management | Tesoro: Wallace, an accounting expert, should have known no SEC rule was violated; Tesoro disclosed excise-tax treatment in SEC filings | Court: Reversal — the objective-reasonableness question cannot be resolved at 12(b)(6); Wallace pleaded sufficient facts to survive dismissal |
| Whether Rule 9(b) particularity applies to SOX retaliation pleading | Rule 9(b) should not apply; plaintiffs need only plead a reasonable belief of fraud, not particulars of the alleged fraud | Tesoro: Allegations sounding in fraud require Rule 9(b) particularity | Court: Rule 9(b) does not apply to §1514A retaliation claims; pleading reasonable belief is different from pleading fraud particulars |
| Whether the 2009 annual Certificate/check-box constitutes protected activity | Wallace: checking "yes" and submitting the certificate reported observed retaliation and was protected | Tesoro: A checked box without specifics and an offer to discuss privately is not protected disclosure | Court: Wallace did not develop this argument on appeal; district-court dismissal of 2009 certificate not disturbed (court declines to decide if internal compliance process is a "proceeding") |
Key Cases Cited
- Allen v. Admin. Review Bd., 514 F.3d 468 (5th Cir. 2008) (sets objective/subjective reasonable-belief test for SOX protected activity)
- Thomas v. Texas Dep’t of Criminal Justice, 220 F.3d 389 (5th Cir. 2000) (Title VII exhaustion scope: charge limits court suit to investigation scope reasonably expected to grow from charge)
- Lawson v. FMR LLC, 134 S. Ct. 1158 (U.S. 2014) (timing rule: complainant may sue after 180 days without final ARB decision)
- McClain v. Lufkin Indus., Inc., 519 F.3d 264 (5th Cir. 2008) (administrative exhaustion preserves agency’s opportunity to investigate/resolve claims)
- Villanueva v. U.S. Dep’t of Labor, 743 F.3d 103 (5th Cir. 2014) (quotes ARB focus on whether employee reasonably believed conduct violated federal law)
- Jones v. Southpeak Interactive Corp. of Del., 777 F.3d 658 (4th Cir. 2015) (SOX exhaustion analyzed under same framework as Title VII)
- Lone Star Ladies Inv. Club v. Schlotzsky’s Inc., 238 F.3d 363 (5th Cir. 2001) (Rule 9(b) principle: inadequately pleaded fraud allegations are disregarded but suit not automatically dismissed if other claims survive)