The opinion of the court was delivered by: J. Paul Oetken, District Judge:
MEMORANDUM OPINION AND ORDER
This case concerns whistleblower claims brought under Section 806 of the Sarbanes- Oxley Act of 2002 ("Sarbanes-Oxley"), codified at 18 U.S.C. § 1514A(a) ("Section 806"),*fn1 as amended by Section 929A of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Pub. L. No. 111--203, 124 Stat. 1376, 1852 (2010) ("Dodd-Frank"). Plaintiff, Phillip Leshinsky, alleges that Defendants Telvent GIT, S.A., Telvent Farradyne, Inc., Telvent Caseta, Inc., Glenn Deitiker, and Alfredo Escriba (collectively, "Defendants") wrongfully terminated his employment in violation of the whistleblower provisions of Sarbanes-Oxley.
The present motion requires resolution of a novel question. Prior to its amendment in 2010, Sarbanes-Oxley protected "employees of publicly traded companies" against retaliation for whistleblowing. 18 U.S.C. § 1514A(a). Dodd-Frank amended the statute to clarify that it protects employees of subsidiaries of public companies-not just those employed directly by public companies. Plaintiff's claims in this case arose prior to the 2010 Dodd-Frank amendment, and the Court therefore must address whether that amendment should be applied retroactively.
Because the amendment is a clarification of Congress's intent with respect to the Sarbanes-Oxley whistleblower provision, the Court concludes that it applies retroactively. Accordingly, the Court has subject matter jurisdiction over Plaintiff's claims.
This case was previously before the Honorable Victor Marrero, United States District Judge. At a status conference held on July 15, 2011 before Judge Marrero, Defendants raised an argument that the Court lacked subject matter jurisdiction over this case under Sarbanes-Oxley. In particular, Defendants argued that Section 806, by its plain language, applies only to employees of publicly traded companies, but that Plaintiff was employed only by non-public subsidiaries (specifically, Telvent Farradyne, Inc. and Telvent Caseta, Inc.) of the publicly traded defendant, Telvent GIT, S.A. ("Telvent GIT"). Because Plaintiff was never directly employed by Telvent GIT, Defendants argue that Section 806 does not apply to this case.
The Court initially scheduled an evidentiary hearing on these jurisdictional issues for October 18, 2011. In the meantime, on October 4, 2011, the case was reassigned to the undersigned pursuant to this District's Rules for the Division of Business Among District Judges governing the reassignment of cases to new District Judges.
The evidentiary hearing was ultimately held on December 21, 2011 and January 9, 2012. Each side submitted proposed findings of fact and conclusions of law following the hearing.
Plaintiff argues that he has sustained his burden of establishing subject matter jurisdiction because the statute, as amended by Dodd-Frank, makes explicit that non-public subsidiaries of publicly traded companies may be liable under Sarbanes-Oxley's whistleblower provisions. Plaintiff argues that these provisions should be applied retroactively to this case because they served to clarify the earlier statute. Plaintiff also argues that, in any event, the evidence establishes that Defendants could be liable under the earlier version of the statute.
Defendants' written and oral arguments are treated as a motion to dismiss for lack of subject matter jurisdiction pursuant to Federal Rules of Civil Procedure 12(b)(1).
The summary set forth below is drawn from the parties' submissions and the evidence adduced at the hearing.
Telvent GIT is an international information technology company headquartered in Spain. Shares in Telvent GIT are traded in the United States on the NASDAQ exchange. Telvent GIT operates through an array of subsidiaries. In 2008, Telvent GIT and its approximately thirty subsidiaries had approximately 6,100 employees located in 40 different countries and annual revenues of approximately $1.2 billion.*fn2 Telvent GIT itself had approximately a dozen employees.
In May 2006, Telvent GIT announced that it was acquiring the Farradyne Division of Parsons Brinckerhoff, a large engineering company ("PB Farradyne"). At that time, Plaintiff was an employee of PB Farradyne, which was headquartered in Rockville, Maryland and was involved in the transportation and tolling industry.
The merger was structured such that a holding company (with no employees) called Telvent Traffic North America, Inc. ("TTNA") acquired PB Farradyne. TTNA was owned, in turn, by Telvent Trafico y Transporte, S.A. ("TTYT"), which was owned by Telvent Energia, a wholly-owned subsidiary of Telvent GIT. The only publicly traded entity among these companies was Telvent GIT. After the merger, PB Farradyne became Telvent Farradyne, Inc. ("Farradyne").
All of the former PB Farradyne employees, including Plaintiff, were offered positions at Farradyne. The president of PB Farradyne, Lawrence Yermack, became president of Farradyne. Plaintiff was employed by Farradyne as Vice President, Toll Systems.
Defendant Alfredo Escriba was, for a period of time relevant to this case, the general manager of Farradyne.
In or about April 2007, Telvent GIT acquired Caseta Technologies, Inc., an Austin, Texas company, which developed and maintained software used in automated toll collection. The merger was effected through the same holding company, TTNA, that had acquired PB Farradyne. The acquisition of Caseta Technologies, Inc. brought Farradyne (and Telvent) into the business of selling tolling systems in the United States. Caseta Technologies, Inc. was renamed Telvent Caseta ("Caseta").
Defendant Glenn Deitiker was the founder of Caseta Technologies, Inc., and subsequently became president of Caseta.
Plaintiff, along with the two other Farradyne employees working in the tolling business, was assigned to Caseta after the acquisition. Plaintiff remained formally employed by Farradyne during this time, but he reported to Deitiker, in addition to continuing to report to Yermack.
There is no dispute that at all times relevant to this case Telvent GIT included the financial information of its subsidiaries, including Farradyne and Caseta, in its consolidated financial statements.
B. Relationship Among Telvent GIT, Farradyne, and the other Telvent Subsidiaries
After the Farradyne acquisition, the Telvent companies became organized by areas of business-referred to as "verticals"-rather than geography. Thus, Yermack, as president of Farradyne, reported to Jose Maria Flores, who lived and worked in Spain, and was the Executive Vice President of the Telvent companies' "transportation vertical." Flores reported to Jose Montoya, who also worked in Spain. Flores and Montoya were employed by TTYT, and were not directly employed by the parent entity, Telvent GIT.
Budgets were created within each operating company, followed by negotiations with the management of the relevant vertical. The parties to the budget negotiations for Farradyne were generally Yermack, Escriba, Flores and Manuel Sanchez Ortega, Chief Executive Officer of Telvent GIT. Actions within the budget did not require further approval, but expenditures above the budget required approval by TTYT.
Telvent's subsidiaries all adhered to certain corporate branding guidelines for the Telvent family of companies. Thus, Farradyne employees were given "telvent.com" email addresses, and the email system was switched from Microsoft Outlook to Lotus Notes, which was the program used by the Telvent companies. Telvent companies used a uniform font for public documents, and adopted a uniform "Telvent" logo and color (a particular shade of orange). Public documents contained the slogan, "The Global Real Time IT Company." Press releases from Telvent companies all referenced "Telvent GIT S.A. (NASDAQ TLVT), the Global RealTime IT Company."
Human Resources functions for Farradyne were administered by employees of other Telvent subsidiaries, located in Houston, Texas; Calgary, Canada; and Madrid, Spain. Farradyne's in-house counsel reported to the general counsel for North America, located in Calgary, who was formally employed by a different Telvent subsidiary. Telvent GIT provided guidelines for human resources policies for the subsidiaries, though the subsidiaries could request that certain policies be changed or customized to that particular company. Information technology support was provided by employees of a different Telvent subsidiary in Calgary.
Plaintiff's employment agreement was written on "Telvent" letterhead, and was signed by Yermack, as president of PB Farradyne, Inc., and Jose Maria Flores, as Director of TTNA, the holding company used to acquire PB Farradyne. The agreement referred to "Telvent" benefits and vacation entitlements, as well as "Telvent" employee application forms.
The parent company was involved, to an extent, in the day-to-day management of its subsidiaries. One way this was accomplished was by appointing general managers of the subsidiaries in order to integrate them into the Telvent brand. Thus, Manuel Sanchez Ortega (the CEO of the ultimate parent, Telvent GIT) initially appointed Jose Ramon Aragon, an employee of a Telvent entity in Spain, to be general manager of Farradyne. Aragon worked at the headquarters of Farradyne in Rockville, Maryland and reported to Yermack. Aragon stated to Plaintiff, Yermack, and others that he reported directly to Sanchez Ortega, though the extent to which that was actually the case is not clear.
Later, after complaints about harassing behavior by Aragon, Aragon was removed from his position as general manager of Farradyne and returned to Spain. He was replaced as general manager of Farradyne by Alfredo Escriba. Sanchez Ortega was directly involved in the removal of Aragon and his replacement by Escriba. Sanchez Ortega also signed a letter to Plaintiff, stating the results of the internal investigation of the complaints about Aragon's behavior, and reiterating Telvent's policies against harassment and retaliation for complaints about harassment.
Sanchez Ortega met periodically with the managers of Farradyne, and served as one of six directors on Farradyne's board until April, 2008. In the summer of 2008 (either at approximately the same time as Plaintiff's termination, or shortly thereafter), Sanchez Ortega moved his office, along with those of certain members of his staff, to the Rockville, Maryland premises of Farradyne. In a letter contained in an internal newsletter announcing the move, Sanchez Ortega explained that the move was made because Telvent was continuing to grow its North American business, and that, "from now on, we can, and we must, say that Telvent is a company headquartered in Madrid and in Rockville." (Plaintiff's Proposed Findings of Fact and Conclusions of Law, Dkt. No. 35, ("Pl. Proposed Findings") ¶ 42.).)
C. Plaintiff's Termination
In July 2008, Plaintiff's employment was terminated. The decision to terminate Plaintiff was made after discussions involving Yermack, Deitiker, Escriba, Carrie Glidden (who was in-house counsel at Farradyne), as well as Scott Doering and Gonzalo Sanchez Arias, who were managers of Caseta. The meeting at which Plaintiff was told he would be terminated was held with Deitiker and Escriba; Lynne Cox, a human resources employee at a Telvent subsidiary in Calgary, led the meeting over the phone. A termination letter was signed by Escriba. A subsequent letter accelerating Plaintiff's termination date was signed by Lynne Cox.
Plaintiff alleges that he was terminated as a result of his raising objections to a proposal to use fraudulent information in connection with a bid to have Caseta obtain a contract with the New York Metropolitan Transit Authority ("MTA") for the maintenance and repair of the electronic toll registry system for the MTA bridges and tunnels E-Z Pass System. Plaintiff alleges that his termination was in violation of Section 806 of Sarbanes-Oxley, which prohibits retaliation against corporate whistleblowers.
This decision does not address the merits of Plaintiff's claim. The Court holds only that it does have subject matter jurisdiction over the case under Section 806 of Sarbanes-Oxley.
A. Sarbanes-Oxley Section 806
Plaintiff brings this claim under Section 806 of Sarbanes-Oxley, which is codified at 18 U.S.C. § 1514A. At the time of the events giving rise to this case, Section 806 of Sarbanes-Oxley read as follows:
(a) Whistleblower protection for employees of publicly traded companies.
No company with a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l), or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)), or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee-
(1) to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of section 1341, 1343, 1344, or 1348, any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders, when the information or assistance is provided to or the investigation is conducted by-
(A) a Federal regulatory or law enforcement agency;
(B) any Member of Congress or any committee of ...