Exxon, Whistleblowers Spar Over Reinstatement Order Enforcement

Exxon Mobil Corp. and two of its former computational scientists will argue before a federal appeals court over whether courts can enforce preliminary US Labor Department orders in whistleblower cases.

Attorneys for Exxon and former employees Lindsey Gulden and Damian Burch are set to square off at oral arguments Wednesday in the US Court of Appeals for the Third Circuit over a federal district judge’s refusal to enforce a reinstatement order from the DOL’s Occupational Safety and Health Administration.

The judge determined that he lacked jurisdiction under the Sarbanes-Oxley Act to enforce the order while final agency action on the scientists’ retaliation claims remained pending.

The case gives the Third Circuit the opportunity to clarify the scope of federal courts’ authority to enforce such preliminary reinstatement orders, a crucial remedy for workers who claim retaliation in violation of Sarbanes-Oxley’s whistleblower protection provisions. The law safeguards workers from adverse employment decisions arising from their reporting of employee conduct that they reasonably believe constitutes mail, wire, bank, or securities fraud, a violation of any US Securities and Exchange Commission regulation, or rules protecting shareholders against fraud.

The dispute drew several amicus briefs on both sides, including the DOL and the National Whistleblower Center backing the workers and a joint brief supporting Exxon from the US Chamber of Commerce, the Association of American Railroads, the National Association of Manufacturers, and the Washington Legal Foundation.

Third Circuit Judges Kent A. Jordan, Peter J. Phipps, and Arianna J. Freeman will hear the case. The DOL and the Chamber will also participate in oral arguments.

Reinstatement Order Ignored

Gulden and Burch argued they were illegally fired in retaliation for leaking information to the Wall Street Journal in 2020 that Exxon may have inflated production estimates and the value of its oil and gas assets in Texas and New Mexico as part of a filing with the SEC.

The article cited unnamed current and former Exxon employees, but neither of the scientists was revealed as a source.

After an investigation, OSHA—which is charged with enforcing the whistleblower protections of more than 20 federal laws—issued an order preliminarily reinstating the two workers.

The agency also ordered Exxon to shell out more than $800,000 in back wages, interest, and compensatory damages. An administrative hearing Exxon requested on the scientists’ anti-retaliation claims was set for March 4, court papers said.

Exxon, which objected to the findings and chose to ignore the order, maintained that Gulden and Burch were fired for reasons unrelated to their whistleblowing.

After the WSJ revealed that it had sensitive company information, Exxon investigated the email accounts of 10 workers—including the scientists—who had access to confidential information, court papers said. The scientists were fired after the company discovered “certain activities” of concern, it said.

A federal district court in New Jersey last year dismissed Gulden and Burch’s complaint seeking enforcement of the DOL order.

‘Effective Mechanism’

In their appellate brief, Gulden and Burch argued that Exxon didn’t ask the DOL to put its preliminary ruling on hold and that a simple objection doesn’t constitute a stay request.

Allowing the district court’s order to remain intact would undercut Sarbanes-Oxley’s anti-retaliation protections, which Congress enacted to avoid discouraging employees from blowing the whistle and to help enforce anti-fraud laws, the scientists said.

Sarbanes-Oxley’s administrative procedures are governed by the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR21)'s anti-retaliation provisions for whistleblowers in the air carrier industry.

By interpreting Sarbanes-Oxley as not providing authority to enforce preliminary reinstatement orders, the district court leaves the law “without an effective mechanism” to ensure that companies comply, the brief said. It also disregards AIR21’s provision that “objections shall not operate to stay preliminary reinstatement orders, as well as the Department of Labor’s implementing regulations that contemplate that a complainant will be able to seek enforcement of preliminary reinstatement relief in federal court,” the scientists said.

The district court’s interpretation of Sarbanes-Oxley doesn’t allow either the federal government or private parties to enforce post-investigation preliminary reinstatement orders, the DOL said in its amicus brief. This contradicts Congress’ explicit mandate “that such orders must be effective immediately and would significantly weaken Sarbanes-Oxley’s whistleblower protections,” it said.

But Exxon insisted that the district judge was correct because of “a strong presumption that federal courts lack jurisdiction to enforce non-final agency action.” That lack of authority has been endorsed by the Sixth and Second circuits, the company said in its brief.

The argument that Sarbanes-Oxley and AIR21 support court enforcement of a preliminary agency order is an “attempt to circumvent the plain language of” the laws by introducing ambiguity where there is none, Exxon argued.

The joint amicus brief backing Exxon accused the DOL of stretching the law to create a cause of action that Congress didn’t enact.

“Preliminary reinstatement orders have meaningful effect even absent a judicial enforcement order, including by impacting an employee’s duty to mitigate damages,” the filing said. “And limiting review to final orders, particularly when considered alongside the other ways in which SOX makes it easier for whistleblowers to obtain relief, represents a reasonable balance between protecting whistleblowers and conserving judicial resources.”

The case is Gulden v. Exxon Mobil Corp., 3d Cir., No. 23-01859, oral argument scheduled 3/6/24.