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Van Elswyk v. RBS Securities, Inc.

United States District Court, D. Connecticut

August 9, 2017

BRICE VAN ELSWYK, Plaintiff,
v.
RBS SECURITIES, INC., Defendant.

          RULING RE: MOTION FOR SUMMARY JUDGMENT (DOC. NO. 44)

          JANET C. HALL UNITED STATES DISTRICT JUDGE.

         TABLE OF CONTENTS

         I. INTRODUCTION ...................................................................................................... 2

         II. FACTS ...................................................................................................................... 3

         A. Van Elswyk's Employment at RBS ........................................................................ 3

         B. The Ritchie Portfolio: Assets and Accounting ........................................................ 7

         C. Van Elswyk's Allegedly Protected Activities .......................................................... 9

         D. Procedural History ............................................................................................... 16

         III. LEGAL STANDARDS .......................................................................................... 16

         A. Motions for Summary Judgment .......................................................................... 16

         B. Sarbanes-Oxley and Dodd-Frank ........................................................................ 17

         IV. DISCUSSION ...................................................................................................... 18

         A. Protected Activity ................................................................................................. 19

         1. Subjectively Genuine Belief of SOX-Enumerated Violations ............................ 20

         2. Objectively Reasonable Belief of SOX-Enumerated Violations ........................ 21

         3. Provision of Information Regarding SOX-Enumerated Violations .................... 25

         B. Knowledge of the Protected Activity .................................................................... 28

         C. Protected Activity as a Contributing Factor in an Adverse Personnel Action ....... 29

         D. Evidence that Termination Would have Occurred in the Absence of Protected Activity ................................................................................................................. 32

         V. CONCLUSION ....................................................................................................... 33

         I. INTRODUCTION

         Plaintiff Brice Van Elswyk (“Van Elswyk”) instituted this action in late 2015 against defendant RBS Securities, Inc. (“RBS”). See Compl. (Doc. No. 1) at 1. Van Elswyk claims that RBS violated whistleblower provisions in the Sarbanes-Oxley (“SOX”) and Dodd-Frank Wall Street Reform and Consumer Protection (“Dodd-Frank”) Acts, when RBS fired Van Elswyk in February 2012. See generally Compl. at 7-9 ¶¶ 29-43 (citing 18 U.S.C. § 1514A and 15 U.S.C. § 78u-6). Specifically, Van Elswyk alleges that his employment was terminated at least in part because he engaged in protected activity within the meaning of SOX and Dodd-Frank, when he expressed concern regarding the accounting practices and valuation methodologies RBS applied to certain life-insurance-based financial assets. See id. Van Elswyk primarily demands money damages. See id. at 9.

         Following discovery, RBS filed a Motion for Summary Judgment, see generally Notice of Mot. for Mot. for Summ. J. [sic] (“Motion”) (Doc. No. 44), [1] accompanied by a Memorandum of Law, see generally Mem. of Law in Supp. of Def.'s Mot. for Summ. J. (“Mem. in Supp.”) (Doc. No. 44-1), and a Local Rule 56(a)1 Statement, see generally Def.'s Statement of Undisputed Material Facts in Supp. of Mot. for Summ. J. (“Def.'s L.R. 56(a)1”) (Doc. No. 44-2). That Motion is now pending. Van Elswyk opposes the Motion, see generally Pl.'s Mem. of Law in Opp'n to Def.'s Mot. for Summ. J. (“Mem. in Opp'n”) (Doc. No. 48), and has filed his responsive Local Rule 56(a)2 Statement, see generally Pl.'s Local Rule 56(a)(2) Statement in Opp'n to Defs.' [sic] Mot. for Summ. J. (“Pl.'s L.R. 56(a)2”) (Doc. No. 49). RBS replied in a timely manner. See generally Reply Mem. of Law in Further Supp. of Def.'s Mot. for Summ. J. (“Reply”) (Doc. No. 54).

         For the reasons set forth below, RBS's Motion for Summary Judgment (Doc. No. 44) is DENIED.

         II. FACTS

         A. Van Elswyk's Employment at RBS

         In March 2011, RBS hired Van Elswyk to work in its Stamford, Connecticut office. Def.'s L.R. 56(a)1 at 1 ¶ 2; Pl.'s L.R. 56(a)2 at 1 ¶ 2. He was hired as a Managing Director and Head of North American Insurance Structuring, responsible for increasing RBS's product offerings to insurance companies and for generating revenue derived from products involving life insurance or property and casualty insurance. Def.'s L.R. 56(a)1 at 1-2 ¶ 3; Pl.'s L.R. 56(a)2 at 1 ¶ 3. Before joining RBS, Van Elswyk had worked in financial areas including complex asset structuring with regulated entities, marketing structured products, and cross-border tax transactions. See Def.'s L.R. 56(a)1 at 31 ¶ 149; Pl.'s L.R. 56(a)2 at 14 ¶ 149. He also held Series 7, 63, and 65 licenses. Def.'s L.R. 56(a)1 at 31 ¶ 151; Pl.'s L.R. 56(a)2 at 15 ¶ 151. Immediately prior to joining RBS, Van Elswyk worked at Credit Suisse, where he focused on life insurance products, including life settlements. See Def.'s L.R. 56(a)1 at 31 ¶ 152; Pl.'s L.R. 56(a)2 at 15 ¶ 152.

         When Van Elswyk began his tenure at RBS, he reported to Miles Hunt and Joe Carney, who worked as Co-Heads of Structuring for the Americas. Def.'s L.R. 56(a)1 at 2 ¶ 4; Pl.'s L.R. 56(a)2 at 1 ¶ 4. In July 2011, Dan McGarvey, Head of Asset Backed Finance and Financial Institution Banking for the Americas, began supervising Van Elswyk as well. Def.'s L.R. 56(a)1 at 2 ¶ 4; Pl.'s L.R. 56(a)2 at 1 ¶ 4. At some point in the latter half of 2011, Hunt was transferred and Van Elswyk began reporting to Robert Fahrbach. See Def.'s L.R. 56(a)1 at 2 ¶ 4; Pl.'s L.R. 56(a)2 at 1 ¶ 4. Van Elswyk's supervisors in turn reported to Scott Eichel, the Head of Global Securities Products and U.S. Credit, as the Insurance Structuring business was within his purview. Def.'s L.R. 56(a)1 at 2 ¶ 5; Pl.'s L.R. 56(a)2 at 1 ¶ 5.

         When he began working at RBS, Van Elswyk was required to read and acknowledge receipt of certain internal RBS policies; he did so on April 5, 2011. See Def.'s L.R. 56(a)1 at 2 ¶ 6; Pl.'s L.R. 56(a)2 at 1 ¶ 6. Several of these policies included provisions that, on their face, prohibited employees from sending confidential materials to their personal email addresses or electronic devices. See Def.'s L.R. 56(a)1 at 2-3 ¶¶ 8-10; Pl.'s L.R. 56(a)2 at 2 ¶¶ 8-10.[2] Furthermore, Van Elswyk was required at the end of 2011 to certify his compliance with company policies, including information security policies. See Def.'s L.R. 56(a)1 at 2-3 ¶¶ 7, 11; Pl.'s L.R. 56(a)2 at 2 ¶¶ 7, 11.[3]

         Soon after he began working at RBS, Van Elswyk grew frustrated. He believed that he had been hired to effectuate a type of insurance transaction known as an “XXX” deal, but was unable to get internal approvals for them. See Def.'s L.R. 56(a)1 at 4 ¶ 13; Pl.'s L.R. 56(a)2 at 2 ¶ 13. Though a manager explained to Van Elswyk that the company proceeded cautiously with transactions that might be perceived as particularly risky, Van Elswyk complained to McGarvey that it was “embarrassing to work” at RBS and that he felt “insult[ed] the last couple of months, ” as the credit group asked him questions that he believed he had already answered. Def.'s L.R. 56(a)1 at 4 ¶ 14; Pl.'s L.R. 56(a)2 at 2 ¶ 14. Van Elswyk's managers suggested that he look for deals apart from the XXX transactions, a point that was stressed in his mid-year review in summer 2011. See Def.'s L.R. 56(a)1 at 4-5 ¶¶ 15-17, 11; Pl.'s L.R. 56(a)2 at 2 ¶¶ 15-17. Van Elswyk believed that the mid-year review unfairly portrayed his work to that point at RBS, specifically because it did not sufficiently underscore the difficulties he had in securing approval for the XXX deals. See Def.'s L.R. 56(a)1 at 5 ¶¶ 18-19; Pl.'s L.R. 56(a)2 at 3 ¶¶ 18-19.

         In November 2011, Van Elswyk voiced several of his complaints to his managers and to the Human Resources Department. He suggested that he had been promised both bonus compensation for 2011 and that he would be head of his group, and reiterated his dissatisfaction with being unable to do XXX deals. See Def.'s L.R. 56(a)1 at 5 ¶ 21; Pl.'s L.R. 56(a)2 at 3 ¶ 21. Several human resources employees investigated Van Elswyk's claims and informed him that they found no evidence that he had been guaranteed a bonus for 2011. Def.'s L.R. 56(a)1 at 6 ¶ 22; Pl.'s L.R. 56(a)2 at 3 ¶ 22.

         At the end of 2011, McGarvey and Carney met with Van Elswyk to discuss his year-end performance review and to look ahead to 2012. See Def.'s L.R. 56(a)1 at 7 ¶ 25; Pl.'s L.R. 56(a)2 at 3 ¶ 25. Though the parties agree that the meeting was constructive, they dispute the substance of the discussions at this meeting. RBS suggests that Van Elswyk indicated that he understood he needed to broaden his focus beyond the XXX transactions and that Van Elswyk's managers believed he could succeed if he did so. See Def.'s L.R. 56(a)1 at 7 ¶ 25. Van Elswyk, on the other hand, asserts that he was praised for his efforts to generate business, that he should continue work on XXX deals, and that he should prepare three business plans for those deals, each assuming a different risk tolerance on the part of RBS. See Pl.'s L.R. 56(a)2 at 3 ¶ 25.

         Van Elswyk received his written year-end review shortly thereafter. The review articulated displeasure with certain of Van Elswyk's work habits, as well as with his pursuit of XXX transactions. See Def.'s L.R. 56(a)1 at 7-8 ¶ 26; Pl.'s L.R. 56(a)2 at 3 ¶ 26; Motion, Ex. S (Doc. No. 44-22) at 2-9.[4] As he did with his mid-year review, Van Elswyk disputed the comments set out in his year-end review, and this time set forth his objections in an email to McGarvey and Carney. See Def.'s L.R. 56(a)1 at 8-9 ¶¶ 27-31; Pl.'s L.R. 56(a)2 at 3-4 ¶¶ 27-31; Motion, Ex. T (Doc. No. 44-23).

         Van Elswyk's managers and various HR officials met on February 6, 2012 to decide how they would respond to Van Elswyk's rebuttal to the year-end review. Def.'s L.R. 56(a)1 at 10 ¶ 33; Pl.'s L.R. 56(a)2 at 4 ¶ 33. At some point, during that meeting or shortly thereafter, the decision was made to search Van Elswyk's emails. See Def.'s L.R. 56(a)1 at 10-11 ¶ 34; Pl.'s L.R. 56(a)2 at 4-5 ¶ 34. When HR employees requested and reviewed Van Elswyk's emails, they saw that he had sent emails from his RBS email address to his personal email account. Def.'s L.R. 56(a)1 at 11 ¶ 33; Pl.'s L.R. 56(a)2 at 4 ¶ 33. These emails included presentations on internal strategy and other confidential documents. Def.'s L.R. 56(a)1 at 11 ¶¶ 35-36; Pl.'s L.R. 56(a)2 at 5 ¶¶ 35-36.[5]

         Van Elswyk was notified that RBS was terminating his employment on February 10, 2012. See Def.'s L.R. 56(a)1 at 11 ¶¶ 35-36; Pl.'s L.R. 56(a)2 at 5 ¶¶ 35-36.

         B. The Ritchie Portfolio: Assets and Accounting

         Van Elswyk's allegations in this case center on his claim that he was fired in retaliation for voicing concerns about the way RBS accounted for a group of assets known as the “Ritchie portfolio.” Def.'s L.R. 56(a)1 at 12 ¶ 43; Pl.'s L.R. 56(a)2 at 5 ¶ 43. The Ritchie portfolio consisted of two insurance-based assets: life settlements and premium financing. See Def.'s L.R. 56(a)1 at 13 ¶ 46; Pl.'s L.R. 56(a)2 at 6 ¶ 46. Life settlements are life insurance policies that policyholders sell to third parties, in exchange for a fraction of the death benefit. The purchaser becomes responsible for continuing premium payments, but receives the benefit upon the death of the insured. Def.'s L.R. 56(a)1 at 12 ¶ 44; Pl.'s L.R. 56(a)2 at 5 ¶ 44. On the other hand, when a lender loans funds to a person or company to cover the costs of an insurance premium, that arrangement is known as premium financing. In a premium financing, unlike in a life settlement, the policy beneficiary may still receive some of the death benefit if he or she dies before the loan amount reaches a certain amount. Def.'s L.R. 56(a)1 at 12 ¶ 45; Pl.'s L.R. 56(a)2 at 6 ¶ 45.

         RBS inherited the Ritchie portfolio when it acquired another bank. Def.'s L.R. 56(a)1 at 13 ¶ 46; Pl.'s L.R. 56(a)2 at 6 ¶ 46. The Ritchie portfolio included four, subsidiary portfolios: AA Genco (the largest, by a substantial margin), PFP1, PFP2, and K1. The entire Ritchie portfolio had a $2.2 billion face value and was accounted for internally at approximately $485 million. AA Genco assets were held in a limited liability company that was, in turn, a wholly owned subsidiary of an RBS offshoot based in the Cayman Islands. See Def.'s L.R. 56(a)1 at 13 ¶ 47; Pl.'s L.R. 56(a)2 at 6 ¶ 47.

         The Financial Accounting Standards Board (“FASB”) has issued guidance on how to account for life settlement contracts. See generally Motion, Ex. BB (“FSP”) (Doc. No. 44-31).[6] Though the particulars of these methods are not important for the purposes of this Ruling, the definitions of each is set out in the margin.[7] Relevant here, investors may “elect to account for its investments in life settlement contracts using either the investment method or the fair value method.” See FSP at 2. That selection “shall be made on an instrument-by-instrument basis and is irrevocable.” Id. However, when investors choose to account for life settlements by the investment method, they must “test an investment in a life settlement contract for impairment if [they] become[ ] aware of new or updated information that indicates that the expected proceeds from the insurance policy will not be sufficient” to cover various costs. See id. If those costs exceed the expected undiscounted cash inflows from the policy, the investor “shall recognize an impairment loss . . . .” See id. “If an impairment loss is recognized, the investment shall be written down to fair value.” Id.

         C. Van Elswyk's Allegedly ...


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