Katzel v. American International Group, Inc.

Background

Aaron Katzel sued his former employer, American International Group, Inc. (AIG). He alleged that AIG terminated him in retaliation for reporting violations of federal fraud and securities laws, in violation of Section 806 of the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act. He also brought New York claims for breach of contract and tortious interference with contract, alleging that he was denied AIG stock and other equity awards under a Long-Term Incentive Plan. He alleged damages exceeding $1.2 million.

In an earlier opinion, the court granted AIG summary judgment on the federal whistleblower claims but declined to exercise supplemental jurisdiction over the state-law claims. The Clerk then entered judgment for AIG. AIG later moved to amend that judgment so the court could decide the state-law claims in this case. Katzel had asserted the same state-law claims in another case pending before the court.

Motion to Amend the Judgment

The court held that it had an independent basis for jurisdiction over the state-law claims: diversity jurisdiction. The opinion states that Katzel is a California resident, AIG is a citizen of Delaware and New York for jurisdictional purposes, and the amount in controversy exceeds $75,000. The court also found that the claims had already been fully litigated through discovery and summary-judgment briefing. It therefore exercised its discretion to amend the judgment and address the state-law claims rather than require the claims to be litigated anew.

Federal Whistleblower Claims

The court reaffirmed its prior grant of summary judgment to AIG on Katzel’s Sarbanes-Oxley and Dodd-Frank retaliation claims. For the Sarbanes-Oxley claim, the court held that Katzel could not establish that he engaged in protected activity. Although he reported certain conduct to a supervisor, the court found that he lacked both a subjective and objectively reasonable belief that AIG had violated a covered federal law. Katzel had certified that he knew of no violations of AIG policy or law, including fraud, and later testified that he had completed those certifications truthfully and in good faith. The court held that his later statements that he believed federal mail- and wire-fraud laws had been violated did not create a genuine factual dispute about his earlier subjective belief.

The court also held that Katzel’s concerns about AIG’s failure to maximize shareholder value, internal conflicts-of-interest policies, and document preservation did not amount to reports of conduct covered by the Sarbanes-Oxley whistleblower provision. Separately, the court found that AIG did not know Katzel was engaging in protected whistleblowing because his supervisors did not understand his reports as allegations of fraud or legal violations. The court concluded that Katzel could not show that his termination was motivated by protected activity, so AIG was entitled to summary judgment on the federal retaliation claims.

State-Law Claims

Under New York law, the court held that Katzel’s breach-of-contract claim failed because he was eligible to receive Long-Term Incentive Plan compensation only if he accepted the applicable award agreement for the 2017 plan and signed a required release and waiver of claims for all plan compensation. The court found that Katzel satisfied neither condition, so AIG was not required to provide the compensation.

The court also held that Katzel’s tortious-interference claim failed. It found that his injury resulted from his own failure to sign the release and waiver, rather than wrongful conduct by AIG or the third-party plan administrator. The court further stated that Katzel had not identified a valid and enforceable contract between himself and AIG supporting the claim.

Disposition

Judge Alvin K. Hellerstein granted AIG’s motion to amend the judgment. The court directed the Clerk to enter judgment in AIG’s favor with costs, terminate the motion, and mark the case closed.