Botta v. PricewaterhouseCoopers LLP

Background

Mauro Botta worked as a PwC auditor for close to two decades. In November 2016, he filed a confidential complaint with the Securities and Exchange Commission (SEC), alleging that PwC put profits and client satisfaction ahead of auditor-independence requirements. His allegations concerned accounting errors and internal-control deficiencies he said he had identified during audits for Cavium Inc. and Harmonic Inc.

The SEC investigated but took no enforcement action against PwC. Botta alleged that PwC retaliated against him in several ways during the period before his termination, including removing him from three audit engagements, underutilizing him, declining to staff him on a Pacific Biosciences of California Inc. project, and threatening to fire him. PwC fired him on August 17, 2017, while the SEC investigation was ongoing. Botta also claimed that PwC breached his employment agreement by terminating him without advance notice.

Findings About the Alleged Retaliation

The court found that the timing of Botta’s SEC complaint and termination suggested a possible connection, but that the timing was not supported by other evidence. The court credited testimony from Walter Brown, outside counsel who investigated PwC’s Cavium audits, that Botta admitted creating and documenting an internal control that did not exist. Botta’s own earlier writings supported Brown’s testimony. Mark Simon, the PwC official who fired Botta, testified that creating such a control or lying about doing so violated PwC policy and justified termination.

The court found that Botta did not prove that his SEC complaint contributed to the termination decision. Brown and Simon testified that they did not know or suspect that Botta had filed the complaint, and Simon testified that he alone decided to fire Botta because of the alleged firm-policy violation.

The court also found that PwC removed Botta from the Cavium, Harmonic, and Gigamon engagements because of complaints about his treatment of clients and coworkers, project-management problems, and related concerns—not because he identified possible accounting errors. The court found that his lower utilization rate resulted from assignment to an internal Center of Excellence project that could have benefited his career, and that PwC continued to assign him other work. The court found no proof that his exclusion from the Pacific Biosciences project was connected to his audit concerns; PwC credibly explained that it staffed the project with employees in its life-science group, while Botta was in the semiconductor group.

The court also credited testimony that Botta was not threatened with termination for raising audit concerns. Finally, the court found that Botta’s employment agreement required advance notice only if PwC terminated him for reasons other than professional, legal, ethical, or firm-policy violations. PwC proved that it terminated him for a firm-policy violation.

Legal Claims and Rulings

Botta brought five claims: retaliation under the Sarbanes-Oxley Act, retaliation under California Labor Code sections 1102.5 and 98.6, wrongful termination in violation of public policy, and breach of contract.

For the Sarbanes-Oxley claim, Botta had to prove protected activity, adverse action, and that his protected activity was a contributing factor in PwC’s actions. The court held that he did not prove the required connection between his complaints and his termination, removal from audits, or exclusion from the Pacific Biosciences project. The court also held that he did not prove that the lower utilization rate materially affected his employment or that the alleged termination threat occurred. Judgment on this claim was entered for PwC.

The court entered judgment for PwC on the California Labor Code claims because Botta did not prove the required causal link between protected activity and an adverse employment action. The court also entered judgment for PwC on the public-policy claim because Botta did not prove that PwC violated the asserted public policy or that his termination was substantially motivated by such a violation.

On the contract claim, the court held that PwC did not breach the employment agreement. The agreement’s advance-notice requirement did not apply when the termination was for a professional, legal, ethical, or firm-policy violation, and the court found that PwC terminated Botta for a firm-policy violation.

Disposition

The court concluded that Botta did not prove retaliation, wrongful termination, or breach of his employment agreement. Judgment on all claims was entered for PricewaterhouseCoopers LLP. The court separately denied PwC’s motion to strike Botta’s supplemental brief filed after closing arguments; the court considered the brief but stated that it did not affect the findings or conclusions.