Chrystina Nicolaou v. Horizon Media, Inc.

The defendant in this action, Horizon Media, Inc. (" Horizon"), is a New York corporation

with its principal place of business located in New York City. 2. The plaintiff, Chrystina

Nicolaou, was hired by Horizon in July 1998 as its Director of Human Resources and

Administration. 6. In this capacity, Nicolaou served as a fiduciary and trustee of Horizon's

401( k) employee benefits plan (" the Plan"), which is regulated by the Employee Retirement and

Income Security Act, 29 U. S. C. §§ 1001– 1461. 9. Nicolaou was also a participant in the Plan.

9. Shortly after she began working at Horizon, Nicolaou "discovered a serious payroll

discrepancy involving underpayment of overtime to all non-exempt employees of the [New York

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City] and Los Angeles offices." 10. This "discrepancy" had apparently existed for more than a

decade, resulting in what the complaint terms "a historical under funding of Horizon's 401( k)

plan." 13, 20. Nicolaou immediately brought this problem to the attention of Jerry Riley,

Horizon's Chief Financial Officer, who advised her to let the matter drop. 8, 11. She then

raised the issue on two occasions with Stewart Linder, Horizon's Controller, who declined to

address it. 8, 12, 14-17.

By October 1999 Nicolaou became "convinced that Horizon was unwilling to rectify" the

funding problem. 18. She therefore contacted Mark Silverman, who is identified in the

complaint simply as "an attorney for Horizon," in the hope "that Horizon would finally address

the overtime issue by conducting an investigation into the issue." 18. Silverman in fact

"expressed enormous concern regarding how detrimental the information was" and Nicolaou

"promised to remain available to assist or provide additional information in connection with the

investigation." 22-23. Silverman apparently undertook his own inquiry into the funding

problem, upon the conclusion of which he told Nicolaou that "he had confirmed her findings

concerning the payroll issue." 25.

During November 1999 Nicolaou and Silverman met with William Koenigsberg, the

President of Horizon. 8, 26. We note that the amended complaint does not specify by whom

this meeting was arranged. It is clearly alleged, however, that in addition to informing him of the

existence of the payroll discrepancy, Silverman urged Koenigsberg to see that the problem would

be promptly rectified. 27-29. Koenigsberg, however, made no such commitment during the

meeting, but instead "appeared disturbed . . . and not at all pleased that this issue was being

brought to his attention." 30.

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The amended complaint alleges that a campaign of retaliation was then initiated against

Nicolaou. "Within days" of the meeting just described, "Koenigsberg announced that he was

bringing a ‘real' Human Resources professional into the organization that [ sic] would report

directly to him." 32. Soon afterward, "Nicolaou was formally advised that she was being

replaced as the Director of Human Resources and Administration and that her job title would

thereafter be Office Manager." 36. Horizon subsequently hired two individuals, who together

assumed virtually all of Nicolaou's former responsibilities. 37-40. This process of what the

amended complaint characterizes as "professional trashing" ended with Nicolaou being

terminated by Horizon on November 7, 2000. 44.

Nicolaou filed her initial complaint in this action on January 31, 2001, and, as already

noted, filed an amended complaint on April 24, 2001. The amended complaint states two causes

of action for illegal retaliation arising from its allegations that Horizon demoted and eventually

terminated Nicolaou after she had raised concerns about Horizon's funding of its 401( k) plan: (1)

a violation of Sections 15 and 16 of the Fair Labor Standards Act (" FLSA "), 29 U. S. C. §§

201– 219, and (2) a violation of Section 510 of the Employee Retirement Income Security Act

(" ERISA"), 29 U. S. C. §§ 1001– 1461. 48, 51.

Horizon moved to dismiss the amended complaint pursuant to Federal Rule of Civil

Procedure 12( b)( 6). The district court granted this motion in an unreported opinion, entered on

September 25, 2003. The court held that Nicolaou had no cause of action under FLSA because

Sections 15 and 16 do not make it illegal for a firm to retaliate against an employee for bringing

complaints within the firm; those provisions only make it illegal for a firm to retaliate against an

employee who has filed a formal complaint with a regulatory agency, or who has taken part in a

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regulatory agency's proceeding against the firm. The district court dismissed Nicolaou's ERISA

claim because it construed the amended complaint as seeking only damages, and not equitable

relief, as required by the statute. See 29 U. S. C. § 1132( a)( 3).

Nicolaou moved for reconsideration of the district court's dismissal of her ERISA claim

after informing the court by letter that the amended complaint in fact seeks injunctive relief in the

form of reinstatement of her employment with Horizon. The district court issued an opinion in

response, entered on October 15, 2003, which agreed that reconsideration was warranted, but

went on to again dismiss the ERISA claim. The opinion concludes that, as with FLSA, "§ 510 of

ERISA does not protect an employee who participates in an internal inquiry , [and because

Nicolaou] has not alleged that she participated in a protected activity [ she] therefore has failed to

state a cause of action under ERISA." Nicolaou v. Horizon Media, Inc., No. 01 Civ. 0785, 2003

WL 22852680, at *3, 2003 U. S. Dist. LEXIS 18341, at *9 (S. D. N. Y. Oct. 15, 2003).

DISCUSSION

Our review of a district court's dismissal of a complaint under Rule 12( b)( 6) is de novo.

See Ontario Pub. Serv. Employees Union Pension Trust Fund v. Nortel Networks Corp., 369

F. 3d 27, 30 (2d Cir. 2004). Nicolaou has elected to only appeal the dismissal of her claim under

Section 510 of ERISA.

Section 510 of ERISA, codified at 29 U. S. C. § 1140, reads in relevant part as follows:

It shall be unlawful for any person to discharge, fine, suspend, expel, or discriminate against any person because he has given information or has testified or is about to testify in any inquiry or proceeding relating to this chapter . . . .

Other federal statutes contain provisions which prevent employers from retaliating against

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employees who have raised an issue concerning the employer's compliance with the regulatory

program set forth in the statute. It is useful to compare the language of Section 510 with the

analogous "whistleblower provisions" of FLSA and Title VII of the Civil Rights Act of 1964, 42

U. S. C. §§ 2000e– 2000e-17. Section 15( a)( 3) of FLSA, codified at 29 U. S. C. § 215( a)( 3), makes

it unlawful to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or
instituted or caused to be instituted any proceeding under or related to this chapter, or has testified or is about to testify in any such proceeding. Section 704( a) of Title VII, codified at 42 U. S. C. § 2000e-3( a), provides as follows:

It shall be an unlawful employment practice for an employer to discriminate against any of his employees . . . because he has opposed any practice made an unlawful employment practice by this subchapter, or because he has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under this subchapter.

In dismissing Nicolaou's claim under Section 510 of ERISA, the district court relied on

our decision in Lambert v. Genesee Hospital, 10 F. 3d 46 (2d Cir. 1993). In that case, this Court

held that Section 15( a)( 3) of FLSA does not apply to retaliation taken in response to internal

complaints, as opposed to retaliation occurring after an employee has cooperated with an

investigation brought by a regulatory agency. In doing so, the Court relied upon a comparison of

FLSA Section 15( a)( 3) with the whistleblower provision contained in Title VII:

The phrase "opposed any practice" [in Section 704( a) of Title VII] encompasses an individual's complaints to supervisors regardless of whether she also files an EEOC charge. Kotcher v. Rosa &
Sullivan Appliance Ctr., Inc., 957 F. 2d 59, 65 (2d Cir. 1992).

In contrast, . . . [t] he plain language of [FLSA Section 15( a)( 3)]

2 We note that, based largely upon the reasoning of the district court in this case, another
court in the Southern District of New York has also held that a "protected activity" for the
purposes of Section 510 does not encompass complaints made to supervisors regarding possible
ERISA violations. See Monaco v. Smith, No. 00 Civ. 5845, 2004 WL 203009, at *12-* 13, 2004
U. S. Dist. LEXIS 1334, at *42-* 46 (S. D. N. Y. Feb. 2, 2004).

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limits the cause of action to retaliation for filing formal complaints, instituting a proceeding, or testifying, but does not encompass complaints made to a supervisor.

Id. at 55.

The district court here declared that it could "find no distinction" between FLSA's

whistleblower provision and Section 510 of ERISA. Nicolaou, 2003 WL 22852680, at *2, 2003

U. S. Dist. LEXIS 18341, at *7. Following Lambert, it therefore concluded that "the inquiry

contemplated by § 510 can only be a formal, external inquiry. Participation in an internal inquiry

is not a protected activity under § 510." Id. 2 We do not agree, however, with the district court

that Lambert is decisive here. Our conclusion is based upon the plain language of ERISA

Section 510, which is unambiguously broader in scope than Section 15( a)( 3) of FLSA.

First, the whistleblower provision of FLSA extends protection against retaliation to any

person who "has filed any complaint or instituted or caused to be instituted any proceeding under

or related to" FLSA. 29 U. S. C. § 215( a)( 3). By contrast, Section 510 of ERISA applies to "any

inquiry or proceeding relating to" ERISA. 29 U. S. C. § 1140 (emphasis added). We agree with

the Secretary of Labor's assertion here that "[ w] hatever level of formality is implied by the term

‘proceeding'" in FLSA, the use of the somewhat less formal term "inquiry" in ERISA is

indicative of an intent "to ensure protection for those involved in the informal

gathering of information." Congress manifested such an intent when it chose, in drafting Section

510, to conjoin to the term "proceeding," found in FLSA Section 15( a)( 3), the additional term

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"inquiry," which is not contained in Section 15( a)( 3) and which has a distinct definition. While

"proceeding" refers to the progression of a lawsuit or other business before a court, agency, or

other official body, "inquiry" refers broadly to any request for information. Compare, e. g.,

Black's Law Dictionary 1241 (8th ed. 2004) (defining "proceeding" as "[ t] he regular and orderly

progression of a lawsuit," "[ a] ny procedural means for seeking redress from a tribunal or

agency," or "[ t] he business conducted by a court or other official body") and Webster's Third

New International Dictionary 1807 (1993) (defining "proceedings" as "the course of procedure in

a judicial action or in a suit in litigation") with Black's Law Dictionary 808 (8th ed. 2004)

(defining "inquiry" as "[ a] request for information") and Webster's Third New International

Dictionary 1167 (1993) (defining "inquiry" as "the act or an instance of seeking truth,

information, or knowledge about something" or "a request for information"). The "informal

gathering of information" thus falls within the plain meaning of "inquiry," and we need go no

further to conclude that it is protected by Section 510. We presume that Congress intends that its

statutory text be read in accordance with its plain meaning, see BedRoc Ltd. v. United States, 541

U. S. 176, ___, 124 S. Ct. 1587, 1593 (2004), and we presume that none of the language enacted

by Congress is superfluous, see TRW Inc. v. Andrews, 534 U. S. 19, 31 ( 2001). Congress's

decision to include both terms, rather than merely the single term " proceeding" that it included in

FLSA Section 15( a)( 3), strongly indicates an intention "to give the nouns their separate, normal

meanings," Garcia v. United States, 469 U. S. 70, 73 (1984) (citing FCC v. Pacifica Found., 438

U. S. 726, 739-40 (1978)), and thus to go beyond the protections afforded by FLSA. Our

conclusion is further buttressed by the fact that Section 510 covers not only the act of testifying

in a formal proceeding, as does FLSA Section 15( a)( 3). Rather, its protections are extended to

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"any person [who has] given information or has testified or is about to testify in any inquiry or

proceeding relating to" possible violations of ERISA. 29 U. S. C. § 1140 ( emphasis added).

With this statutory language in mind, we return to the facts of this case. The alleged

event that appears to have triggered Nicolaou's termination was the November 1999 meeting at

which Nicolaou and Silverman informed Horizon's President, Koenigsberg, of their belief that

the company's 401( k) plan had for years been underfunded. The amended complaint alleges that

"[ w] ithin days" of this meeting, a campaign of retaliation was directed at Nicolaou which

culminated in her termination. 32.

The meeting with Koenigsberg had its genesis in Nicolaou's prior meeting with

Silverman, at which she expressed her belief that the Plan was being underfunded. The amended

complaint alleges that after this first meeting, Silverman conducted his own investigation of the

Plan and reached the same conclusion as had Nicolaou. Although the amended complaint is

unclear on the matter, Nicolaou's counsel asserted at oral argument that it was Silverman's

suggestion that they meet with Koenigsberg. Silverman's precise status is also unclear in the

amended complaint, but we were informed at oral argument that he served as outside counsel to

Horizon. Certainly, if Nicolaou can demonstrate that she was contacted to meet with Koenigsberg

in order to give information about the alleged underfunding of the Plan, her actions would fall

within the protection of Section 510. Thus, the district court erred in concluding that, as a matter

of law, Nicolaou's allegations could not survive a motion to dismiss because they do not

establish the existence of "a formal, external inquiry." 2003 WL 22852680, at *2, 2003 U. S.

Dist. LEXIS 18341, at *7. The meeting with Koenigsberg was something less than a formal

3 Although we agree with the Fourth Circuit that Section 510 protects those who engaged
in "something more formal than written or oral complaints made to a supervisor," we disagree
that Congress's use of the phrase "testify or about to testify" dictates that result. As we read the
statutory text, the reference to testimony is wholly irrelevant to our understanding of the language
"given information . . . in any inquiry or proceeding," which is at issue in this case. Our
interpretation of Section 510 is based on the respective meanings of the terms "inquiry" and
"proceeding," not the juxtaposition of those terms with any reference to testimony.

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proceeding, but we believe it was sufficient to constitute an "inquiry" within the meaning of

Section 510. Finally, contrary to Horizon's reading of the case, we do not believe that our holding is in

conflict with the Fourth Circuit's recent decision in King v. Marriott Int' l, Inc., 337 F. 3d 421,

427 (4th Cir. 2003), which read Section 510's use of the phrase "inquiry or proceeding" as

reaching only "the legal or administrative, or at least . . . something more formal than written or

oral complaints made to a supervisor." Id. at 427. 3 In any event, as we have explained, the

proper focus is not on the formality or informality of the circumstances under which an

individual gives information, but rather on whether the circumstances can fairly be deemed to

constitute an "inquiry." Nicolaou's meeting with Koenigsberg regarding possible violations of

ERISA – a meeting that was initiated at Silverman's behest – falls within the definition of an

"inquiry" and, therefore, the protection of Section 510.

CONCLUSION

The district court's dismissal of the amended complaint pursuant to Rule12( b)( 6) is

reversed. As indicated above, we believe that certain allegations made in the amended complaint

are ambiguous, and only became less so when supplemented by assertions made by Nicolaou's

counsel during oral argument on this appeal. Thus, upon remand, we direct the district court to

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afford Nicolaou the opportunity to file a revised amended complaint which will serve to

eliminate these ambiguities.