Ninth Circuit Rules That SOX Whistleblower Claims Accrue When Employee Learns Of Adverse Action, And Rejects Equitable Tolling And Estoppel Arguments

On November 30, 2010, the Ninth Circuit Court of Appeals ruled that an employee’s claim under the whistleblower protection provisions in Section 806 of the Sarbanes-Oxley Act of 2002 (SOX) was barred by the then-operative 90-day statute of limitations (the Dodd-Frank Act recently doubled that statute of limitations). Coppinger-Martin v. Nordstrom, Inc., Case No. 08-067. The court rejected the employee’s argument that her complaint was timely because she did not learn of the employer’s retaliatory motive until months after she was discharged and/or because the employer fraudulently concealed its motive in discharging her. The court also took a conservative approach in rejecting her equitable tolling and estoppel arguments.

Coppinger-Martin held the position of Chief Technical Architect in Nordstrom’s Business Information Systems Strategic Planning Group. In the summer of 2005, she told her supervisor that she believed security vulnerabilities in Nordstrom’s information systems exposed the company to potential violations of federal securities laws. Although Coppinger-Martin previously received favorable performance reviews, she received an unfavorable evaluation shortly thereafter, and in November 2005, was told that her employment was being terminated. Her last day of work was April 21, 2006. On May 22, 2006, Coppinger-Martin’s attorney contacted Nordstrom’s counsel to discuss her severance agreement and possible legal claims against the company.

On October 13, 2006, Coppinger-Martin filed a SOX whistleblower complaint with OSHA, claiming Nordstrom discharged her in retaliation for reporting potential securities law violations. OSHA dismissed her claim, and the Administrative Law Judge ruled that the complaint was untimely because it was not filed within 90 days of her discharge. The Administrative Review Board (ARB) affirmed the dismissal, and Coppinger-Martin appealed to the Ninth Circuit.

The Ninth Circuit upheld the ARB’s ruling. At the outset, the court stated: “Our sister circuits agree, in a variety of employment discrimination contexts, that a claim accrues when a plaintiff discovers the injury rather than the legalwrong.” (emphasis added). The court then held that Coppinger-Martin’s claim “similarly accrued, and the statute of limitations began to run, when she learned of the actual injury, i.e., that Nordstrom had decided to terminate her employment. . . . Even if that decision to terminate her employment was initially unclear, it was unquestionably communicated to her by her final day of work.” (emphasis added). Thus, the court concluded, Coppinger-Martin’s claim was time-barred because her final day of work was April 21, 2006, and she did not file her complaint with OSHA until October 13, 2006 (over 90-days later).

The court went on to reject Coppinger-Martin’s argument that the statute of limitations was equitably tolled because she was not aware of Nordstrom’s retaliatory motive until July 19, 2006, when she learned that other employees were performing many of her job duties. The court gave the following two reasons for rejecting this argument: “First, Coppinger-Martin is charged with constructive knowledge of the law’s requirements once she retained counsel [which occurred before May 22, 2006]. … Second, under the burden-shifting framework of the SOX whistleblower-protection provision, Coppinger-Martin had sufficient information to make out a prima facie case by April 21, 2006, when the decision to terminate her employment had unquestionably been made and communicated to her.” The court found that Coppinger-Martin had all the information required to meet her SOX whistleblower pleading burden on her last day of work, if not sooner.

The court also rejected Coppinger-Martin’s argument that Nordstrom should be equitably estopped from asserting a statute of limitations defense because (she claimed) it fraudulently concealed its motive in terminating her employment. The court explained that for equitable estoppel principles to apply, a plaintiff must point to some conduct by the defendant “above and beyond” the wrongdoing upon which the claim is based that prevented her from filing a timely complaint, and held that Coppinger-Martin had not done so. Importantly, this outcome differs from the one the ARB reached in Hyman v. KD Resources, Case No. 09-076 (ARB Mar. 31, 2010). There, the ARB took a rather expansive approach to applying equitable estoppel principles, finding that the employee reasonably forestalled the filing of his OSHA complaint based upon alleged representations of the defendant’s officials and/or agents.

Please contact any member of Seyfarth Shaw’s SOX Whistleblower Team with any questions.