On August 26, 2015, the U.S. District Court for the Northern District of Illinois granted summary judgment on a whistleblower retaliation claim under Section 806 of SOX, holding that Plaintiff Ivor Hill failed to establish a prima facie case and that Komatsu America Corp. (Company) would have terminated his employment even in the absence of any alleged protected activity.  Hill v. Komatsu America Corp., Case No. 14-cv-02098 (Darrah, J).

Background

Plaintiff was a Vice President of the Company’s Mining Division.  In March 2012, the Company’s CEO and CFO raised concerns about his allegedly improper expenditures.  The Company’s Compliance Committee conducted an investigation and concluded that Plaintiff violated Company policies by submitting improper expenses.  In addition, in August 2012, Plaintiff complained to the CEO that certain of the Company’s financial reserves used to cover future liabilities might be underfunded, and he recommended addressing the issue at the next board meeting.  That recommendation was rejected.  Plaintiff did not indicate that the low reserves might have a negative effect on investors or that securities fraud was occurring.  On October 4, 2012, Plaintiff’s employment was terminated as a result of the findings of the Committee’s investigation.  He subsequently filed suit under Section 806 of SOX, claiming his employment was terminated in retaliation for his complaint.

Ruling

The District Court granted the Company summary judgment on Plaintiff’s SOX whistleblower claim.  As an initial matter, the court ruled that Plaintiff could not show that he engaged in protected activity.  According to the court, there was no evidence that his concern about the allegedly underfunded reserves implicated fraud or other potential unlawful activity.  Plaintiff also failed to establish that his concern contributed to the decision to terminate his employment.  In fact, over a month had passed between Plaintiff’s internal complaint and his termination.  And at no point in the investigation was any member of the Committee investigating Plaintiff’s expense reports informed of his concern.  In addition, the undisputed evidence showed that his employment would have been terminated regardless of any protected activity as the investigation concluded that he violated Company policies.

Implications

One feature of this decision that stands out is that the body investigating the plaintiff’s alleged misconduct was unaware of his alleged protected activity.  That dynamic facilitates an employer’s ability to show that the termination decision was not tainted by protected whistleblowing.