Katzel v. American International Group, Inc.

Background

Aaron Katzel worked for American International Group, Inc. (AIG) for ten years and ultimately led its Legal Operations Center. He alleged that AIG had engaged in or tolerated violations of federal law involving fraud against shareholders and investors, executive and employee misconduct, and weaknesses in internal controls. Katzel alleged that he reported these concerns to AIG's Compliance Department in January 2017 and that Peter Solmssen, who led that department, fired him soon afterward despite positive performance evaluations.

Katzel later filed a complaint with the Occupational Safety and Health Administration (OSHA). He alleged that AIG retaliated against him through Lucy Fato, who was AIG's General Counsel and later Interim Head of Human Resources, by terminating his performance-related equity interests and destroying records relating to his one million dollars of equity. After more than 180 days passed without a final agency decision, Katzel filed this federal lawsuit against AIG, Fato, and Solmssen.

The complaint asserted retaliation claims under the Sarbanes-Oxley Act against AIG and Solmssen; post-termination retaliation claims under Sarbanes-Oxley and the Dodd-Frank Act against AIG and Fato; a breach-of-contract claim against AIG; and a state-law claim that AIG and Fato interfered with Katzel's contract.

Motions for reconsideration

The defendants initially moved to dismiss for lack of subject-matter jurisdiction and failure to state a claim. The court denied that motion because it relied on facts outside the complaint and the court believed the issues should instead be considered on a fuller record. Fato and Solmssen then separately moved for reconsideration under Local Rule 6.3. AIG accepted the earlier order and did not join their motions.

The court explained that reconsideration is an extraordinary remedy and requires the moving party to identify controlling law or factual matters that the court overlooked and that could reasonably change its decision. The court concluded that the record was complete and that delaying a decision about Fato's and Solmssen's status would unnecessarily increase defense costs.

Sarbanes-Oxley exhaustion requirement

The court held that Katzel had not exhausted the required administrative remedies against Fato or Solmssen. Under the court's reading of Sarbanes-Oxley's exhaustion requirement and Second Circuit precedent, the OSHA proceeding had to identify the particular defendant against whom the federal claim would later be brought. Katzel's OSHA proceeding named AIG, but did not name Fato or Solmssen as respondents.

The court rejected Katzel's argument that the individuals received fair notice of the charges. It held that factual involvement was not enough because OSHA had not been given notice to investigate and fully adjudicate claims against Fato and Solmssen. The court therefore dismissed Katzel's claims against them for lack of subject-matter jurisdiction.

Dodd-Frank claim against Fato

The court separately held that Katzel failed to state a claim against Fato under Dodd-Frank's anti-retaliation provision. The court contrasted Dodd-Frank, which refers to retaliation by an employer, with Sarbanes-Oxley, which expressly covers a company and certain officers, employees, contractors, subcontractors, and agents. The court concluded that Dodd-Frank's provision does not impose liability on company officers or employees who were not the plaintiff's employer.

Katzel alleged that AIG employed him and that Fato was AIG's General Counsel and Interim Head of Human Resources. The court also noted that Fato was hired after Katzel's termination. It dismissed the Dodd-Frank claim against Fato.

Contract-interference claim against Fato

The court also dismissed Katzel's claim that Fato tortiously interfered with his contract. It explained that a corporate officer acting for the corporation within the scope of her authority generally cannot be held personally liable for inducing the corporation to breach a contract unless she committed separate wrongful acts. The court found that Katzel alleged Fato acted in her corporate role and did not allege that she acted independently or outside her authority.

The court further found that the complaint did not allege actions by Fato that interfered with Katzel's equity-related agreement with UBS. According to the allegations, Fato assumed responsibility for Human Resources months after the equity interests were terminated. The court also declined to exercise supplemental jurisdiction over the contract-interference claim against Fato, because it viewed that issue as a significant departure from the remaining federal claims against AIG.

Disposition

The court granted the motions for reconsideration by Fato and Solmssen. Fato and Solmssen were dropped from the action, and the claims against them were dismissed. The order states that Counts One, Two, and Three remained against AIG. Katzel was directed to file an amended complaint with a revised caption removing the dismissed claims against Fato and Solmssen; AIG was directed to file an amended answer.