Main Menu

Administrative Law Judge Dismisses Sarbanes-Oxley Complaint Against KM&M Client

November 28, 2007

On November 20, 2007, an Administrative Law Judge for the United States Department of Labor granted KM&M’s motion to dismiss Complainant’s Sarbanes-Oxley Complaint without a hearing, and before any discovery had been taken.

The Complainant alleged that her former employer violated the Sarbanes-Oxley Act (the “Act”) by terminating her employment in retaliation for her internal complaints that her supervisor had violated Company policy by sharing confidential information with competitors.

KM&M moved to dismiss the complaint on the grounds that the Complainant’s alleged actions did not constitute protected activity under the Act.  Most significantly, KM&M argued that the Complainant’s internal complaints focused exclusively on her supervisor’s alleged violations of internal Company policies, and that those complaints did not refer to any of the Act’s protected categories.  KM&M further asserted that the Act was not meant to cover all internal complaints regarding conduct that might theoretically cost organizations money, and that the Complainant’s allegations were far too attenuated from the Company’s financial condition to be covered by the Act.

In opposition to our motion to dismiss, Complainant argued that her complaints alleged both a wire fraud and a fraud against shareholders because Complainant’s supervisor faxed information to competitors which could have led to a decrease in the Company’s profits.  Complainant further argued that the ALJ should not take the extraordinary step of dismissing an administrative proceeding prior to a hearing because information might be uncovered in discovery or at the hearing that would implicate the Act.

The ALJ rejected Complainant’s arguments, finding that she had failed to demonstrate that her actions constituted protected activity under the Act.  Specifically, the ALJ ruled that there was no evidence that Complainant communicated to the Company a reasonable belief that her supervisor was engaged in wire fraud, fraud against shareholders or any other category of fraud enumerated in the Act.  Accordingly, the ALJ granted the motion to dismiss in favor of KM&M’s client, dismissing the action in its entirety.