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Jordan v. Sprint Nextel Corp.

United States District Court, District of Kansas

March 11, 2014

JACK R. JORDAN, Plaintiff,
v.
SPRINT NEXTEL CORPORATION, et al., Defendants.

MEMORANDUM AND ORDER

ERIC F. MELGREN, UNITED STATES DISTRICT JUDGE

Plaintiff Jack R. Jordan brings a retaliation claim under § 806 of the Sarbanes-Oxley Act of 2002 (“SOX”) (18 U.S.C. § 1514A) against Defendant Sprint Nextel Corporation, Inc. and Defendant Gary Foresee. He claims that Defendants constructively discharged him and retaliated against him in several other ways. Defendants seek dismissal of Plaintiff’s lawsuit arguing that (1) the statute of limitations or statute of repose has run, (2) the doctrine of laches bars Plaintiff’s claim, and (3) Plaintiff fails to adequately state a claim against Defendants. For reasons explained in more detail below, the Court denies in part and grants in part Defendants’ motion. Several other motions are also before the Court, and the Court denies these motions for the reasons stated below.

I. Factual and Procedural Background

The Parties

Plaintiff Jack R. Jordan worked as an attorney for Defendant Sprint[1] in the Corporate Secretary’s Group of Sprint’s Law Department from January 13, 2003 through April 25, 2005.

Defendant Gary Forsee was the CEO of Sprint from approximately March 19, 2003 through October 8, 2007. Forsee was also a member of Sprint’s Board of Directors from August 13, 2005, through October 8, 2007, and the Chairman of Sprint’s Board of Directors from approximately December 12, 2006 through October 8, 2007.

Events Leading up to Jordan’s Departure from Sprint

Under SEC rules, Sprint was allegedly required to describe in each of its proxy statements and annual reports any transaction or series of transactions in the previous year amounting to more than $60, 000 directly or indirectly between Sprint and any executive officer or board member or their family members (“Related Party Transaction”). Sprint was required to disclose the dollar amount of each Related Party Transaction. Sprint was also required to disclose transactions such as the purchase of a Sprint executive officer’s residence, describing the principle followed in determining Sprint’s purchase price and the name of the person making such determination.

Jordan reported to Claudia Toussaint, who was the Sprint Vice President in charge of the Corporate Secretary’s Group of Sprint’s Law Department. Alternatively, Jordan could report to Sprint’s General Counsel, Thomas Gerke. In 2003, and effective through the remainder of Jordan’s employment, Toussaint assigned Jordan primary responsibility for the following duties: (1) preparing annual questionnaires for officers and directors, including Related Party Transactions; (2) analyzing the results of officers’ and directors’ responses to those questionnaires; and (3) preparing Sprint’s disclosures in SEC filings regarding Related Party Transactions and the strength of Sprint’s corporate governance.

In 2003 and 2004, Sprint allegedly engaged in a number of transactions with certain executive officers, including Forsee, Bruce Hawthorne (Forsee’s Chief Staff Officer), Howard Janzen, and Michael Stout. Sprint purchased the former residences of Forsee, Hawthorne, and Janzen in 2003 for $2, 920, 0000, $1, 150, 000, and $372, 000, respectively.[2] In 2003, Janzen and Stout also received loans directly or indirectly from Sprint of $250, 000 and $100, 000, respectively. Jordan refers to the foregoing transactions as the “Relocation-Related Transactions.” In January and February 2004, Jordan believed that in connection with the proxy statement that Sprint later filed on March 16, 2004, Sprint officers were preparing to violate SEC rules requiring disclosures of Related Party Transactions that were related to executive officers’ relocations in 2003. In late January and early February 2004, Jordan allegedly repeatedly informed Toussaint that SEC rules and regulations required executive officers’ relocation-related Related Party Transactions to be disclosed in Sprint’s 2004 proxy statement.

In 2004, Jordan did not know the specific details of the Relocation-Related Transactions. Jordan, however, knew of the benefits of Sprint’s relocation program because he participated in it when he relocated to Kansas City in 2003, and he had received benefits and a loan in connection with his relocation. Jordan (a mid- level attorney) alleges that the amount of his relocation benefits were significantly higher than the amounts that other executive officers’ reported relocation expenses were. In addition, Jordan alleges that his official notice from Sprint of the amount of his relocation benefits was significantly less than the amount Toussaint had previously informed Jordan that he had received. Thus, Jordan allegedly told Toussaint that he believed that Sprint’s most highly compensated executives had received loans that were required to be disclosed in Sprint’s 2004 proxy statement.

In late January 2004, Toussaint reassigned responsibility for addressing Sprint’s March 2004 proxy statement disclosures of the 2003 Relocation-Related Transactions benefits from Jordan to another Sprint attorney. Toussaint did not inform Jordan of her decision to do so. Toussaint also allegedly excluded Jordan from all conversations with Sprint attorneys or outside counsel regarding any details of any Relocation-Related Transactions or Sprint’s obligations to disclose them.

The disclosures of Related Party Transactions as they existed in the February 6, 2004, draft of Sprint’s proxy statement failed to include any information about the Relocation-Related Transactions. But in a telephone conversation on or about February 7, 2004, among Toussaint, Jordan, and a third Sprint attorney, Toussaint allegedly pressured Jordan to agree that those disclosures were complete and accurate. Jordan told Toussaint that he could not make this statement until he had been given access to the information regarding the 2003 relocation benefits of senior executive officers. Toussaint allegedly discouraged Jordan from further opposition by claiming that she had obtained a memorandum from outside counsel explaining why additional disclosure was not required. Toussaint then allegedly told Jordan to cease working on those issues.

Sprint’s 2004 proxy statement did not contain these Relocation-Related Transactions. The portion of Sprint’s 2004 proxy statement that should have contained these disclosures was incorporated by reference into Sprint’s 2003 annual report. On March 9, 2004, and November 9, 2004, Sprint’s 2003 annual report was filed with the SEC.

In January 2005, Sprint’s outside counsel informed Jordan that SEC rules required Sprint’s 2005 joint proxy statement/prospectus to include disclosures of Related Party Transactions for the years 2002 through 2004. In early January 2004 and 2005, a Director and Officer Questionnaire was forwarded to Forsee asking him to provide information to Jordan, including all Related Party Transactions in 2003. Forsee did not include any information about his Relocation-Related Transactions.

In February 2005, Jordan asked Forsee to provide information to Jordan or allow Jordan access to information specifically about the Relocation-Related Transaction in connection with the preparation of Sprint’s 2005 joint proxy statement/prospectus. Forsee allegedly withheld this information.

In February 2005, Jordan informed Gerke about Jordan’s concerns that Sprint had violated in 2004, and was preparing to violate in 2005, SEC rules in connection with the Relocation-Related Transactions. Jordan allegedly informed Gerke that he was raising his concerns in compliance with his obligations under the SOX 307 Rules (Rules of Professional Responsibility for Attorneys). Gerke allegedly said “[t]hey didn’t affect the price of Sprint stock. It’s not like it was an $11 billion accounting fraud.”[3]

Jordan met with Forsee on or about February 18, 2005, and informed him that he was doing so to comply with the requirements imposed on Jordan by the SOX 307 Rules. Forsee allegedly reacted with hostility. Jordan alleges that because of this February 18, 2005, meeting, Forsee caused Sprint’s failure to disclose in 2004 the Relocation-Related Transactions.

On or about March 3, 2005, Jordan reported to Sprint’s entire Board information about the alleged violations he had previously reported to Forsee and other Sprint officers. Jordan requested and was granted unpaid leave, in part, for the purpose of permitting him to pursue employment opportunities outside of Sprint. Jordan was on unpaid leave from March 4, 2005, until March 23, 2005.

On March 15, 2005, Sprint disclosed in an SEC filing some of the information that Forsee and others had failed to disclose to shareholders in 2004 and were attempting to allegedly conceal in 2005.[4] On March 18, 2005, Gerke allegedly disclosed to Jordan that Jordan’s concerns had been substantiated regarding Sprint’s failure in 2004 and its pending failure in 2005 to comply with SEC rules. Jordan believed that he could then return to work at Sprint and informed Sprint that he intended to return to work on March 23, 2005.

On or about March 20, 2005, Sprint officers suspended Jordan, instructing him to remain out of the office until April 12, 2005. On April 7, 8, and 10, Jordan forwarded to Sprint officers and directors additional information and analysis regarding alleged evidence of violations of SEC rules. On April 7, 2005, Jordan informed Gerke that he believed that Sprint officers were attempting to cause Sprint authorities to rely on information that they knew to be false and that Forsee and other officers were attempting to fraudulently deprive Jordan from his employment at Sprint.

On April 11, 2005, [5] Sprint allegedly instructed Jordan that he must leave the Sprint campus and not return, discontinued Jordan’s voicemail account, and terminated his electronic access to Sprint’s document system. Jordan returned to work on April 12, 2005, but he alleges that within an hour of returning to work, he was suspended indefinitely and told that he was relieved of all duties. Jordan also claims that Forsee and Sprint officers seized Jordan’s laptop computer to search and seize any information that would permit Sprint to terminate his employment.

On or about April 19, 2005, Jordan submitted notice to Gerke that he believed that he was being constructively discharged and stated he would resign effective April 25, 2005. Jordan claims that his belief in the SEC rules required him to resign. Sprint allegedly did not address Jordan’s concerns and accepted Jordan’s resignation on April 20, 2005. On May 10, 2005, Jordan wrote to Sprint’s board of directors to inform them that he believed that he had been discharged in retaliation for his protected activities. Jordan alleges that Sprint engaged in multiple adverse actions against Jordan subsequent to Jordan’s employment with Sprint. These alleged adverse actions include making disparaging statements to the SEC about Jordan.

Jordan’s Administrative Complaints and Proceedings

Jordan filed three complaints with the Occupational Safety and Health Administration (“OSHA”). On April 11, 2005, Jordan filed his first complaint (“Jordan I”).[6] In this complaint, Jordan alleged that Forsee and other Sprint officers were harassing Jordan and subjecting him to a hostile work environment. On April 28, 2005, Jordan supplemented Jordan I to allege that Forsee and other Sprint officers had prevented Jordan from returning to work since March 23, 2005, had caused Jordan to be suspended from work on April 12, 2005, and had constructively discharged Jordan from Sprint. On March 14, 2006, the Administrative Law Judge (“ALJ”) assigned to Jordan I denied Defendants’ Motion to Dismiss and/or for Summary Decision. The ALJ, however, granted Defendants’ request to certify to the Department of Labor’s Administrative Review Board (“ARB”) the question of whether Jordan would be permitted to rely on attorney-client privileged information in an effort to substantiate his whistleblower retaliation allegations. The ALJ stayed the proceedings in Jordan I until the ARB issued its ruling upon that question. The ARB did not rule upon the question until September 30, 2009.

In the meantime, on March 20, 2006, Jordan filed a second complaint (“Jordan II”)[7] with OSHA alleging that Forsee and other Sprint officers blacklisted or harassed Jordan by making false or misleading professionally damaging statements about Jordan. Those allegations included statements that Sprint allegedly made in a letter to the SEC in December 2005. On June 23, 2006, the ALJ consolidated Jorda ...


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