Can An Employer’s Disclosure Of An Employee’s Lawsuit In A Required SEC Disclosure Constitute Prohibited Retaliation?
If you’re a fan of unusual employment law cases, the saga between SigmaTron International, Inc. and its former employee, Maria Gracia, has been the gift that keeps on giving for the past eight years. Four years after filing her first lawsuit against SigmaTron (in which she eventually won over $300,000), Ms. Gracia sued her former employer a second time (in September 2015) after learning that the company identified her and disclosed the reasons for her termination in public disclosure statements filed with the U.S. Securities and Exchange Commission (SEC). Although Judge John Z. Lee of the Northern District of Illinois shut down Ms. Gracia’s second lawsuit for failing to provide evidence of damages, the case (Gracia v. SigmaTron Int’l, Inc., No. 16-C-7297, 2019 U.S. Dist. LEXIS 44571 (N.D. Ill. Mar. 19, 2019)) serves to remind publicly traded companies to exercise caution when disclosing information concerning employment litigation in SEC filings.
The First Lawsuit
SigmaTron is an Illinois-based electronics manufacturer that has more than 2,500 employees worldwide. Ms. Gracia began working for SigmaTron in 1999 and was an assembly supervisor there from 2006 to 2008. In late 2009, the company warned her about her declining performance, noting that she was late to work 90% of the time between April 2008 and July 2008 and that she was failing to ensure that employees were following customer specifications for soldering (i.e., the process of joining together two or more electronic components). Ms. Gracia responded by filing a charge of discrimination with the U.S. Equal Employment Opportunity Commission (EEOC) alleging that, during that same time period, her supervisor had harassment her by sending sexually suggestive e-mails, asking her to spend the night at his apartment, and pursuing a romantic relationship with her against her wishes. SigmaTron fired Ms. Gracia on December 5, 2008—four days after she filed her charge. After receiving a right-to-sue letter from the EEOC, Ms. Gracia sued SigmaTron in October 2011 in the Northern District of Illinois federal court, alleging sexual harassment and retaliation under Title VII and the Illinois Human Rights Act.
After a trial and several post-trial motions, in April 2015, the court awarded Ms. Gracia more than $300,000 in damages on her retaliation claims. SigmaTron appealed to the United States Court of Appeals for the Seventh Circuit (which later affirmed the District Court’s rulings). While that appeal was pending, however, Ms. Gracia’s attorney discovered that SigmaTron identified Ms. Gracia by name and provided its side of the story in describing her termination in the company’s 2015 SEC filings. After notifying his client about the disclosure, Ms. Gracia filed a new lawsuit against SigmaTron.
The Second Lawsuit
SigmaTron is a publicly-traded company. Public companies are subject to specific regulations that are enforced by the SEC. Among those regulations is a requirement that public companies disclose material legal proceedings to which it or its subsidiaries are a party. In its 2015 SEC filings, SigmaTron disclosed an “employment-related lawsuit” with Ms. Gracia, stating:
On December 5, 2008, Ms. Gracia’s employment as an assembly supervisor was terminated after she knowingly permitted an assembly line to run leaded boards in a lead-free room with lead-free solder, contrary to a customer’s specifications as prohibited by Company policy. . . . Ms. Gracia openly admitted to permitting this to take place.
Because the SEC’s filings are publicly available online, Ms. Gracia took exception to SigmaTron’s characterization of the previous litigation. Even though she admittedly was happily employed with another company (and had been for more than five years at the time she learned of SigmaTron’s SEC filing), Ms. Gracia claimed in her September 2015 lawsuit that its SEC disclosures constituted unlawful retaliation because, she alleged, it called into question her professional competence. In support, Ms. Gracia relied on prior cases for the proposition that “naming [an] EEOC claimant in publicly available SEC filings could dissuade a reasonable worker from making or supporting a charge of discrimination—the essence of a materially adverse employment action.”
Although it acknowledged that a company’s public SEC filing could constitute an adverse employment action in certain circumstances, the District Court nonetheless granted SigmaTron’s motion for summary judgment because it found that Ms. Gracia could not show that she suffered any damages related to SigmaTron’s disclosure. Specifically, the District Court noted that: (1) Ms. Gracia was employed at the time of the disclosure and expressed no interest in leaving her current job; (2) she was not aware of anyone who had seen the SEC disclosures; and (3) she could not identify any harm she suffered as a result of SigmaTron’s SEC disclosure.
Although the District Court denied Ms. Gracia’s claim, it did so only because she could not show that she had been harmed by SigmaTron’s disclosure. The outcome here could have been different had the facts shown, for example, that she was unable to obtain a job specifically because of the disclosure. Thus, publicly traded companies should be aware that identifying specific employees and their claims can constitute an adverse employment action in the right circumstances. With this in mind, publicly traded companies should exercise caution in drafting their disclosures and should consult with counsel if any questions arise in process.