New Jersey Federal Judge Rules That Federal Courts Lack Subject-Matter Jurisdiction to Enforce a Department of Labor Preliminary Order

On April 19, 2023, in Gulden v. Exxon Mobil Corp., a federal district judge in New Jersey concluded that federal courts lack subject matter jurisdiction to enforce preliminary orders to reinstate former employees under the Sarbanes-Oxley Act of 2002 (“SOX”).  In so doing, the district judge declined to enforce OSHA’s preliminary orders requiring ExxonMobil to reinstate two former employees to their jobs for the remainder of the agency’s investigation into the pair’s whistleblower complaint, reasoning that the statutory text only confers federal district courts authority to enforce final orders.  Gulden is a win for employers because it joins the growing chorus of federal district courts that have concluded that the Department of Labor may not force a company to preliminarily reinstate an alleged whistleblower before the Secretary of Labor’s final order. 

Background

SOX permits OSHA to issue a preliminary order with relief necessary to make an employee, against whom the agency has reasonable cause to believe the employer has unlawfully retaliated, whole, including immediate reinstatement.  But, to date, there has been uncertainty as to whether federal courts have jurisdiction to enforce such orders.  Moreover, courts that have addressed this question have taken opposing views.  For instance, in Bechtel v. Competitive Techs., Inc. and Welch v. Cardinal Bankshares Corp., the Second Circuit Court of Appeals and District of West Virginia each concluded that federal courts lack jurisdiction to enforce preliminary reinstatement orders; however, in Solis v. Tennessee Commerce Bancorp. Inc., the Sixth Circuit held otherwise and concluded that federal courts may enforce a preliminary order for reinstatement.

The Facts in Gulden

The two plaintiffs, Lindsey Gulden and Damian Burch, worked for ExxonMobil as computational scientists, where they analyzed the company’s oil projects.  In 2019, ExxonMobil’s CEO made public statements to investors regarding the company’s Delaware Basin project.  According to the plaintiffs’ allegations, the CEO’s statement overestimated the project’s “anticipated future oil and gas production” by billions of dollars, to which the plaintiffs internally voiced their objections.  Months later, in September 2020, the Wall Street Journal published an article that echoed the plaintiff’s exact objections – that ExxonMobil had “overestimated how quickly it could drill” and “inflated the Delaware Basin’s estimated output by $10 billion,” and cited “unnamed current and former employees” as its source.  Three months later, ExxonMobil terminated the plaintiffs, citing one for mishandling proprietary company information and the other for a “negative attitude.”

The plaintiffs filed a whistleblower complaint under SOX, which prompted the Secretary of Labor to order OSHA to investigate.  Based on this investigation, the Secretary issued a preliminary order instructing ExxonMobil to reinstate the plaintiffs to their former positions immediately and to pay the pair more than $800,000 in back wages, interest, and compensatory damages.  After ExxonMobil objected to and ignored the preliminary order, the plaintiffs moved in the federal district court to enforce the preliminary reinstatement order.  ExxonMobil counter-moved to dismiss the complaint, arguing that the court lacked subject matter jurisdiction to enforce a preliminary order of reinstatement. 

The Decision

The federal district court judge declined to enforce OSHA’s preliminary order, concluding that the Wendell H. Ford Aviation Investment and Reform Act of the 21^st Century (“AIR21”), which governs SOX’s procedures, denies federal district courts authority to enforce preliminary orders.  In doing so, the judge reasoned that the plain language in 49 U.S.C. §§ 42121 (b)(5)-(6)(A) reads to allow federal district courts to enforce an order “in which the violation was found to occur,” and, therefore, does not include preliminary orders because a violation “has not been ‘found to occur’ until the Secretary issues a final order.”  Taken together, the judge concluded that “the expeditious nature of the review process counsels against judicial enforcement of preliminary reinstatement orders absent statutory language.” 

Employer Takeaways

Gulden is a favorable decision for employers because it reinforces that former employees cannot use federal district courts to enforce a preliminary order of reinstatement issued under whistleblower statutes such as SOX and AIR21. Employers, however, should consult with employment counsel to weigh the risks and benefits of refusing such an order, as the law is, as noted, divergent across jurisdictions.