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Jacqueline Wong v. Ckx

September 11, 2012


The opinion of the court was delivered by: John G. Koeltl, District Judge:


The plaintiff Jacqueline Wong brings this action against the defendant CKX, Inc. ("CKX") under the whistleblower provision of the Sarbanes-Oxley Act, 18 U.S.C. § 1514A. The plaintiff claims that CKX terminated her in 2009 in retaliation for her raising concerns about the tax status of an acquisition CKX made in 2005. The defendant now moves to dismiss the complaint, pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), on the grounds that the plaintiff has allegedly failed to exhaust her administrative remedies. In the alternative, the defendant moves to compel arbitration.


When presented with a motion under Rule 12(b)(1) to dismiss for lack of subject matter jurisdiction and Rule 12(b)(6) to dismiss for failure to state a claim upon which relief can be granted, the Court must first analyze the Rule 12(b)(1) motion to determine whether the Court has subject matter jurisdiction necessary to consider the merits of the action. See Rhulen Agency Inc., v. Ala. Ins. Guar. Ass'n, 896 F.2d 674, 678 (2d Cir. 1990); McKevitt v. Mueller, 689 F. Supp. 2d 661, 664 (S.D.N.Y. 2010); see also S.E.C. v. Rorech, 673 F. Supp. 2d 217, 220 (S.D.N.Y. 2009)

In defending a motion to dismiss for lack of subject matter jurisdiction, the plaintiff bears the burden of proving the Court's jurisdiction by a preponderance of the evidence. Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). When considering such a motion, the Court generally must accept the material factual allegations in the complaint as true. See J.S. ex rel. N.S. v. Attica Cent. Schs., 386 F.3d 107, 110 (2d Cir. 2004). The Court does not, however, draw all reasonable inferences in the plaintiff's favor. Id. Indeed, where jurisdictional facts are disputed, the Court has the power and the obligation to consider matters outside the pleadings such as affidavits, documents, and testimony to determine whether jurisdiction exists. See Filetech S.A. v. Fr. Telecom S.A., 157 F.3d 922, 932 (2d Cir. 1998); Kamen v. Am. Tel. & Tel. Co., 791 F.2d 1006, 1011 (2d Cir. 1986). In so doing, the Court is guided by that body of decisional law that has developed under Federal Rule of Civil Procedure 56. See, e.g., Kamen, 791 F.2d at 1011.

In deciding a motion to dismiss pursuant to Rule 12(b)(6), the allegations in the complaint are accepted as true and all reasonable inferences must be drawn in the plaintiff's favor. McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007). The Court's function on a motion to dismiss is "not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985). The Court should not dismiss the complaint if the plaintiff has stated "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While the Court should construe the factual allegations in the light most favorable to the plaintiff, "the tenet that a court must accept as true all of the allegations contained in the complaint is inapplicable to legal conclusions." Id.

When presented with a motion to dismiss pursuant to Rule 12(b)(6), the Court may consider documents that are referenced in the complaint, documents that the plaintiff relied on in bringing suit and that are either in the plaintiff's possession or that the plaintiff knew of when bringing suit, or matters of which judicial notice may be taken. *fn1 See Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002); Taylor v. Vt. Dep't of Educ., 313 F.3d 768, 776 (2d Cir. 2002).


The following facts are undisputed, unless otherwise noted. CKX is a corporation involved with the entertainment industry. (Compl. ¶ 7.) The company focuses on acquiring entertainment content and related assets such as the rights to the names and images of various celebrities. (Compl. ¶ 7.) On March 17, 2005, CKX acquired the stock of 19 Entertainment Limited ("19E"), a United Kingdom ("UK") company that held a two-thirds interest in the popular television franchise "American Idol." (Compl. ¶ 11.) Freemantle Media ("Freemantle"), a separate UK company with offices in the United States, continued to hold a one-third interest in "American Idol." (Compl. ¶ 12.)

Almost a year later, in February 2006, CKX hired the plaintiff to serve as its Senior Tax Counsel. (Compl. ¶ 9.) Wong's duties as Senior Tax Counsel included finding ways to reduce CKX's tax liability. (Compl. ¶ 9.) In 2006, Wong determined that if 19E were to conduct business through a permanent establishment ("PE") in the United States -- and thus have its income taxed primarily in the United States rather than in the UK -- it would substantially reduce CKX's effective tax rate. (Compl. ¶ 18.)

At some point after this determination, Wong discovered that 19E might already have a PE in the United States through 19E's relationship with Freemantle. (Compl. ¶ 22.) Wong repeatedly raised concerns to the senior management of CKX regarding the fact that if 19E did have a PE in the United States, as she believed it did, CKX would be subject to United States taxes on 19E's income from the 2005 fiscal year onward. (Compl. ¶¶ 23-31.) CKX was then paying UK taxes on 19E's income and that was reflected in the defendant's filings with the Securities Exchange Commission ("SEC"). (Compl. ¶¶ 13-14.) If, in its SEC filings, CKX were to change 19E's tax status to the position Wong believed was correct the company would be liable for nearly 100 million dollars in back taxes to the United States government. (Compl. ¶ 5.)

On September 14, 2009, CKX terminated Wong's employment. (Compl. ¶ 32.) Over two months later, on November 25, 2009, Wong filed a demand for arbitration alleging breach of the employment agreement. (Burrows Decl., Ex. 3 ("Arb. Demand").) On December 10, 2009, Wong filed a complaint with the Occupational Safety and Health Administration of the Department of Labor ("OSHA") seeking damages for retaliatory termination pursuant to Section 806 of the Sarbanes-Oxley Act, 18 U.S.C. § 1514A. (Burrows Decl., Ex. 4, ("OSHA Complaint").) In her OSHA complaint, Wong alleged that "she was terminated in retaliation for her repeated complaints to management about the tax structure of [CKX's] subsidiary, [19E], which she alleges should have been taxed primarily in the United States, not the United Kingdom, which created a potential tax liability that should have been reported on the company's tax returns." (Burrows Decl., Ex. 6, ("OSHA Findings") at 1.)

On May 11, 2010, OSHA, after completing its investigation, dismissed Wong's complaint. (OSHA Findings at 1-2.) Wong then requested, in accordance with the procedures called for under the Sarbanes-Oxley Act, that her matter be referred to an Administrative Law Judge ("ALJ"), and proceedings began in late 2010. (Burrows Decl. ¶ 14.) In March 2011, an ALJ held a three-day evidentiary hearing. (Burrows Decl. ¶ 18.) The matter remained pending before the ALJ until July 19, 2011, when Wong notified the ALJ that pursuant to 29 C.F.R. § 1980.114 she intended to terminate the proceedings with the ALJ and "file an action for de novo review in the appropriate District Court of the United States." (Burrows Decl., Ex. 12.) Accordingly, on Sept. 8, 2011, Wong filed her complaint in this Court, seeking relief under the whistleblower provision of the Sarbanes-Oxley Act. (Burrows Decl., Ex. 1.)

The defendant argues that this Court lacks jurisdiction over the plaintiff's complaint because the plaintiff failed to exhaust her administrative remedies. Alternatively, the defendant argues that even if the plaintiff has exhausted her administrative remedies, this dispute should be resolved in arbitration pursuant to a clause in the plaintiff's employment contract.



An employee seeking relief under the Sarbanes-Oxley Act must first file a complaint with OSHA, the agency with delegated authority to receive such complaints. 29 C.F.R. § 1980.103(c) (1998); see 18 U.S.C. § 1514A(b)(1)(A) (2006). The complaint need not be in any "particular form." 29 C.F.R. § 1980.103(b). However, the complaint must contain the following allegations: "(i) [t]he employee engaged in a protected activity or conduct; (ii) [t]he [employer] knew or suspected, actually or constructively, that the employee engaged in the protected activity; (iii) [t]he employee suffered an unfavorable personnel action; and (iv) [t]he circumstances were sufficient to raise the inference that the protected activity was a contributing factor in the unfavorable action." Id. at § 1980.104(b)(1). Once the employee has filed the complaint, OSHA then has ...

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