Van Asdale v. Intl Game Technology ( 2009 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SHAWN VAN ASDALE; LENA VAN 
ASDALE,
Plaintiffs-Appellants,
v. No. 07-16597
INTERNATIONAL GAME TECHNOLOGY,
Defendant-Appellee,  D.C. No.
CV-04-00703-RAM
v. OPINION
BARRY F. IRVIN; KIRKLAND &
ELLIS,
Third-party-defendant.

Appeal from the United States District Court
for the District of Nevada
Robert A. McQuaid, Magistrate Judge, Presiding
Argued and Submitted
March 12, 2009—San Francisco, California
Filed August 13, 2009
Before: J. Clifford Wallace, Sidney R. Thomas, and
Jay S. Bybee, Circuit Judges.
Opinion by Judge Bybee
11061
11066 VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY
COUNSEL
Margo Piscevich (argued), Mark J. Lenz, Piscevich & Fenner,
Reno, Nevada, for the plaintiffs-appellants.
Richard G. Campbell Jr. (argued), Lance P. Maiss, Armstrong
Teasdale LLP, Reno, Nevada, Gordon E. Krischer, Nathaniel
L. Dilger, Mark W. Robertson, O’Melveny & Myers LLP,
Los Angeles, California, for the defendant-appellee.
OPINION
BYBEE, Circuit Judge:
This case presents our first opportunity to examine the sub-
stantive requirements necessary to establish a claim under the
whistleblower-protection provisions of the Sarbanes-Oxley
Act, 18 U.S.C. § 1514A. Plaintiffs Shawn and Lena Van
Asdale appeal from the district court’s summary judgment in
favor of their former employer, International Game Technol-
ogy (“IGT”), on their claim of retaliatory discharge in viola-
tion of § 1514A, as well as the district court’s dismissal of
their factually-related Nevada state-law claims. We conclude
VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY 11067
that the Van Asdales raised a genuine issue of material fact
regarding the cause of their terminations and that summary
judgment should not have been granted. We reverse the dis-
trict court’s summary judgment in favor of IGT on the Van
Asdales’ Sarbanes-Oxley claim and vacate the dismissal of
their state-law claims.
I. FACTS AND PROCEEDINGS BELOW
IGT is a publicly-traded, Nevada-based company specializ-
ing in computerized gaming machines and similar products.
The company hired Shawn and Lena1 in January 2001 to work
as in-house intellectual property (“IP”) attorneys in Nevada.
Both had previously worked for law firms in Chicago. During
all periods relevant to this suit, neither plaintiff was admitted
to practice law in any state other than Illinois.
Both Shawn and Lena were initially hired for the position
of Associate General Counsel. In September 2002, Shawn
was promoted to Director of Strategic Development, a posi-
tion in which he was generally responsible for overseeing
IGT’s IP litigation. Similarly, Lena was promoted in the
Spring of 2003 to Director of IP Procurement, and was
responsible for the transactional side of IGT’s IP division,
which included managing IGT’s patents, trademarks, and
copyrights. After their promotions, both Shawn and Lena
reported directly to IGT’s General Counsel. When Shawn and
Lena began their employment with IGT, that position was
held by Sara Beth Brown; Brown was replaced by David
Johnson in November 2003.
In 2001, IGT began merger negotiations with Anchor Gam-
ing (“Anchor”). The gist of this lawsuit is that the Van
Asdales contend they were terminated for reporting possible
shareholder fraud in connection with that merger. We provide
1
We will refer to each individual plaintiff by their first name, but the
plaintiffs collectively as the Van Asdales.
11068 VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY
some general facts surrounding the merger as background.
We emphasize that our discussion of possible fraud is based
on concerns the Van Asdales held and that they allegedly
shared with their supervisors; our account should not be taken
as proof of any actual fraud. Indeed, the success, or failure,
of the Van Asdales’ lawsuit does not depend on their ability
to show any actual fraud, only that they reasonably believed
that fraud had occurred. See Part II.B.1.a infra.
In September 2001, prior to Anchor’s merger with IGT,
Bally Gaming (“Bally”), one of Anchor’s competitors, began
advertising a new “Monte Carlo” slot machine featuring a
“bonus wheel.” Two high-level Anchor employees, Mark
Hettinger, the head of Anchor’s IP Department, and T.J. Mat-
thews, Anchor’s CEO, asserted that the Monte Carlo machine
infringed on a particular patent owned by Anchor known as
the “wheel” patent. Bally argued, however, that the wheel
patent was invalidated by prior art, specifically, Bally’s vin-
tage 1970’s Monte Carlo machine. By all accounts the wheel
patent was a very valuable part of Anchor’s holdings.
According to Shawn, as part of his department’s due dili-
gence in connection with the proposed IGT-Anchor merger,
he investigated this dispute by arranging to purchase a vintage
Monte Carlo machine in Chicago and sending it to IGT’s out-
side patent litigation counsel so that counsel could assess the
impact of the machine on Anchor’s patent. Shawn subse-
quently met with outside counsel to discuss the possibility
that the wheel patent could be redrafted. After IGT’s inner
circle had discussed the issue, the company decided to go for-
ward with the merger, a decision in which Shawn evidently
concurred.
In August 2003, well after Anchor and IGT had merged,
the U.S. Patent and Trademark Office issued IGT a new
patent. In anticipation of pending litigation against Bally,
IGT’s outside litigation counsel Barry Irwin contacted Het-
tinger to discuss defenses to patent infringement claims Bally
VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY 11069
had previously raised. Hettinger responded that Bally had sent
written materials outlining such defenses to Joe Walkowski,
Anchor’s patent prosecution counsel prior to that company’s
merger with IGT. Irwin contacted Walkowski, who found the
written materials, including an “Australian Flyer”—which
described an Australian version of the Monte Carlo machine
—and emailed them to Irwin and Lena. Shawn reviewed the
materials and he and Irwin subsequently agreed that the Aus-
tralian Flyer had the effect of invalidating the 2003 patent and
undermining IGT’s claims against Bally. Potentially, if
Anchor’s wheel patent was invalid, the benefits of the merger
may have been overvalued.
Shawn spoke with Brown, IGT’s General Counsel at the
time. He informed her of his view that litigation against Bally
could not go forward. Surprised by this news, Brown called
IGT’s merger counsel to see if the Australian Flyer had been
included in the due diligence files provided to IGT prior to the
merger. In a follow-up meeting, Shawn expressed concern
that the Australian Flyer had not been disclosed to IGT prior
to the merger; Brown told him that the matter warranted
investigation and promised to look into it. Around the same
time, Shawn also brought the issue to the attention of Rich
Pennington, IGT’s Vice President of Product Development.
In the meantime, management had changed at IGT after the
merger with Anchor. Matthews was named CEO, and he
asked Johnson to replace Brown as IGT’s General Counsel.
Johnson had previously served as General Counsel at Anchor
during the months surrounding Anchor’s merger with IGT.
Shawn and Lena both met with Johnson on November 24.
The parties sharply dispute what occurred during this meet-
ing. Shawn, Lena, and Johnson all agree that Shawn and Lena
raised the subject of the Australian Flyer and its impact on the
August 2003 patent. According to Johnson, however, the
three only discussed the topic to address the possibility that
11070 VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY
Bally would assert a defense of fraud on the Patent Office in
pending litigation against IGT.2
Within a few months of this meeting, both Shawn and Lena
were terminated. According to Johnson, he decided sometime
around Thanksgiving of that year—just three days after his
meeting with Shawn and Lena—that he did not believe
Shawn should continue in his current position. Johnson
planned to deliver this news to Shawn around that time but he
was unable to schedule a meeting—initially because Shawn
was on a business trip overseas and later because Shawn con-
tracted cancer. Upon Shawn’s return to IGT in January 2004,
Johnson told him that he and other IGT executives felt that he
should be removed from his position. Although Johnson evi-
dently expressed some hope in January that Shawn could con-
tinue at the company in a different capacity, Shawn was
formally terminated on February 11.
Johnson testified that at the time he terminated Shawn he
had no similar plans to end Lena’s employment. However,
Johnson claimed that, within weeks of Shawn’s termination,
he received complaints from the Engineering Department that
Lena’s demeanor “had become very odd” and “that she had
2
As we discuss in Part II.B.1, this factual dispute is complicated by the
manner in which this issue was litigated in the district court. After Shawn,
Lena, and Johnson completed their deposition testimony in this case, IGT
filed a motion for summary judgment. It construed Shawn and Lena’s
deposition testimony as alleging only that they informed Johnson of a pos-
sible fraud on the Patent Office, and asserted that this type of disclosure
was not protected conduct under § 1514A. Shawn then submitted a sworn
declaration in which he stated that he had “consistently told [his] supervi-
sors of two possible frauds, the first a general fraud on IGT (including
[Shawn] and other IGT shareholders) arising out of the omissions by
Anchor during due diligence affecting the value of its Wheel patents, and
the second, a specific fraud against the U.S. Patent Office arising out of
the non-disclosure of what have been called the ‘Trask-Britt documents.’ ”
Shawn stated in his declaration that, in questioning him at the deposition,
IGT’s counsel had focused on only the second possible type of fraud, and
that, had he been asked, he would have also testified about the first type.
VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY 11071
become extremely difficult and extremely unfriendly.” A dif-
ferent IGT employee also learned in early 2004 that Lena had
twice requested access to allegedly sensitive information
related to “Class 2” gaming. Johnson terminated Lena shortly
thereafter.
On December 1, 2004, the Van Asdales brought the present
action in the United States District Court for the District of
Nevada. The complaint sought relief under the whistleblower
protection provisions of Sarbanes-Oxley; both plaintiffs also
brought state-law claims for tortious discharge and intentional
interference with contractual relations. Lena brought a sepa-
rate state-law claim for retaliation and Shawn brought a sepa-
rate state-law claim for intentional infliction of emotional
distress.
IGT moved for summary judgment on November 22, 2006.
On June 13, 2007, the district court issued a published deci-
sion granting IGT’s motion for summary judgment. Van
Asdale v. Int’l Game, Tech., 498 F. Supp. 2d 1321 (D. Nev.
2007). After the district court denied the Van Asdales’ motion
for reconsideration, the Van Asdales timely appealed to this
court.
II. ANALYSIS
We review the district court’s grant of summary judgment
de novo. Evanston Ins. Co. v. OEA, Inc., 566 F.3d 915, 918
(9th Cir. 2009). In doing so, “[w]e must determine, viewing
the evidence in the light most favorable to [the Van Asdales]
. . . whether there are any genuine issues of material fact and
whether the district court correctly applied the substantive
law.” Olsen v. Idaho State Bd. of Med., 363 F.3d 916, 922
(9th Cir. 2004).
A. Attorney-Client Privilege
In addition to defending the district court’s summary judg-
ment on the Van Asdales’ Sarbanes-Oxley claim, IGT argues
11072 VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY
that we should affirm the district court’s judgment because (1)
the Van Asdales are prohibited from maintaining the action
under their ethical obligations as Illinois-licensed attorneys
and (2) notwithstanding the particular requirements of Illinois
law, we should not permit this case to go forward because the
Van Asdales cannot establish their claim without using
attorney-client privileged information. Although the district
court rejected both of these arguments, “[w]e may affirm on
any ground supported by the record, even if it differs from the
district court’s rationale.” S. Cal. Painters & Allied Trades,
Dist. Council No. 36 v. Rodin & Co., Inc., 558 F.3d 1028,
1034 n.5 (9th Cir. 2009) (internal quotation marks omitted)
(alteration in original). We address each argument in turn.
First, IGT argues that the Van Asdales, as Illinois-licensed
attorneys, cannot maintain this action because to do so would
violate state rules of professional conduct. See ILL. RULES OF
PROF’L CONDUCT R. 8.5(b)(2)(I) (“[I]f the lawyer is licensed to
practice only in this jurisdiction, the rules to be applied shall
be the rules of this jurisdiction.”).
[1] IGT relies on Balla v. Gambro, Inc., 584 N.E. 2d 104(Ill. 1991), for support, but this case is distinguishable. In that
case, the Illinois Supreme Court held that “in-house counsel
do not have a claim under the tort of retaliatory discharge.”
Id. at 108. However, the court in Balla further explained that
it “base[d its] decision as much on the nature and purpose of
the tort of retaliatory discharge, as on the effect on the
attorney-client relationship that extending the tort would
have.” Id. The court then offered a detailed analysis of the
purposes served by the Illinois tort of retaliatory discharge.
[2] We have found no cases, and IGT cites none, where
Balla has been applied to bar suits by in-house attorneys
based on non-Illinois law. Indeed, it appears that federal
courts in Illinois have uniformly declined to apply Balla to
claims based on federal law. See, e.g., Stinneford v. Spiegel
Inc., 845 F. Supp. 1243, 1246-47 (N.D. Ill. 1994) (holding
VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY 11073
that in-house counsel may bring suit under the Age Discrimi-
nation in Employment Act); Rand v. CF Indus., Inc., 797 F.
Supp. 643, 645 (N.D. Ill. 1992) (same); Hoskins v. Droke, No.
94 C 5004, 1995 WL 318817, at *3 (N.D. Ill. May 24, 1995)
(holding that in-house counsel may pursue a retaliation claim
under Title VII against his former employer). We thus reject
this argument.
IGT next argues that, irrespective of the specific rules
applicable to Illinois-licensed attorneys, the Van Asdales
should not be permitted to maintain their Sarbanes-Oxley
claim because doing so requires use of attorney-client privi-
leged information. IGT reasons that the Van Asdales’ only
evidence of protected activity consists of a conversation the
two had with Johnson regarding a pending litigation matter
involving the company.
[3] There are few federal circuit court cases addressing the
right of in-house counsel to use attorney-client privileged
information in a retaliation suit. In Willy v. Administrative
Review Board, 423 F.3d 483 (5th Cir. 2005), an in-house
attorney brought suit against his former employer, alleging
retaliation as a result of a report he had written; it was undis-
puted that the contents of the report were covered by the
attorney-client privilege. Id. at 494 n.48. The Fifth Circuit
allowed the suit to go forward, rejecting the notion “that the
attorney-client privilege is a per se bar to retaliation claims
under the federal whistleblower statutes, i.e., that the attorney-
client privilege mandates exclusion of all documents subject
to the privilege.” Id. at 500. However, Willy involved a claim
before an administrative law judge and the Fifth Circuit
expressly reserved the question of whether its holding would
apply to “a suit involving a jury and public proceedings.” Id.
at 500-01.
Similarly, in Kachmar v. SunGard Data Systems, Inc., 109
F.3d 173 (3d Cir. 1997), the Third Circuit held that a former
in-house attorney could maintain a Title VII suit for retalia-
11074 VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY
tory discharge; the Third Circuit reasoned that “concerns
about the disclosure of client confidences in suits by in-house
counsel” did not alone warrant dismissal of the plaintiff ’s
action. Id. at 181. Rather, the Third Circuit suggested that a
district court should “balanc[e] the needed protection of sensi-
tive information with the in-house counsel’s right to maintain
the suit,” while considering any protective measures that
might be taken at trial to safeguard confidential information.
Id. at 182.
[4] Although neither case is precisely on point, we agree
with the careful analysis of the Third and Fifth Circuits and
hold that confidentiality concerns alone do not warrant dis-
missal of the Van Asdales’ claims. As a threshold matter, it
is not at all clear to us to what extent this lawsuit actually
requires disclosure of IGT’s confidential information. Shawn
and Lena allege that they raised claims of shareholder fraud
at their November 24, 2003 meeting with Johnson and that
they were terminated in retaliation for these allegations. There
is no reason why the district court cannot limit any testimony
regarding this meeting to these alleged disclosures, while
avoiding testimony regarding any litigation-related discus-
sions that also took place. To the extent this suit might none-
theless implicate confidentially-related concerns, we agree
with the Third Circuit that the appropriate remedy is for the
district court to use the many “equitable measures at its dis-
posal” to minimize the possibility of harmful disclosures, not
to dismiss the suit altogether. Id. at 182.
We also note that the text and structure of the Sarbanes-
Oxley Act further counsel against IGT’s argument. Section
1514A(b) expressly authorizes any “person” alleging discrim-
ination based on protected conduct to file a complaint with the
Secretary of Labor and, thereafter, to bring suit in an appro-
priate district court. Nothing in this section indicates that in-
house attorneys are not also protected from retaliation under
this section, even though Congress plainly considered the role
attorneys might play in reporting possible securities fraud.
VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY 11075
See, e.g., 15 U.S.C. § 7245. We thus agree with the district
court that dismissal of the Van Asdales’ claims on grounds of
attorney-client privilege is unwarranted.
B. Sarbanes-Oxley Act
We now address whether the district court correctly granted
IGT summary judgment on the Van Asdales’ Sarbanes-Oxley
claim. We observe at the outset that there are no published
cases in this circuit setting forth the substantive elements of
a Sarbanes-Oxley claim. The text of the statute and regula-
tions promulgated by the Department of Labor, however, set
forth the general framework governing such actions.
[5] Section 1514A(a)(1) of Title 18 prohibits employers of
publicly-traded companies from “discriminat[ing] against an
employee in the terms and conditions of employment” for
“provid[ing] information . . . regarding any conduct which the
employee reasonably believes constitutes a violation of sec-
tion 1341 [mail fraud], 1343 [wire fraud], 1344 [bank fraud],
or 1348 [securities fraud], any rule or regulation of the Securi-
ties and Exchange Commission, or any provision of Federal
law relating to fraud against shareholders.”
[6] Section 1514A(b)(2) further specifies that § 1514A
claims are governed by the procedures applicable to whistle-
blower claims brought under 49 U.S.C. § 42121(b). Section
42121(b)(2)(B), in turn, sets forth a burden-shifting procedure
by which a plaintiff is first required to make out a prima facie
case of retaliatory discrimination; if the plaintiff meets this
burden, the employer assumes the burden of demonstrating by
clear and convincing evidence that it would have taken the
same adverse employment action in the absence of the plain-
tiff ’s protected activity. We first address whether the Van
Asdales have made out a prima facie showing of retaliatory
discrimination.
11076 VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY
1. Prima Facie Case
[7] Regulations promulgated by the Department of Labor
set forth four required elements of a prima facie case under
§ 1514A: (a) “[t]he employee engaged in a protected activity
or conduct”; (b) “[t]he named person knew or suspected, actu-
ally or constructively, that the employee engaged in the pro-
tected activity”; (c) “[t]he employee suffered an unfavorable
personnel action”; and (d) “[t]he circumstances were suffi-
cient to raise the inference that the protected activity was a
contributing factor in the unfavorable action.” 29 C.F.R.
§ 1980.104(b)(1)(i)-(iv). We address each element in turn.
a. Protected Activity
[8] In Platone v. FLYi, Inc., 25 IER Cases 278, 287 (Dep’t
of Labor Sept. 19, 2006), the Administrative Review Board of
the Department of Labor (“ARB”) held that, to constitute pro-
tected activity under Sarbanes-Oxley, an “employee’s com-
munications must ‘definitively and specifically’ relate to
[one] of the listed categories of fraud or securities violations
under 18 U.S.C.[ ] § 1514A(a)(1).” The three circuits that
have addressed the issue have all agreed with the ARB’s
interpretation, see Day v. Staples, Inc., 555 F.3d 42, 55 (1st
Cir. 2009) (“The employee must show that his communica-
tions to the employer specifically related to one of the laws
listed in § 1514A.”); Welch v. Chao, 536 F.3d 269, 275 (4th
Cir. 2008) (“[A]n employee must show that his communica-
tions to his employer definitively and specifically relate to
one of the laws listed in § 1514A.”) (internal alteration and
quotation marks omitted); Allen v. Admin. Review Bd., 514
F.3d 468, 476 (5th Cir. 2008) (“We agree with the ARB’s
legal conclusion that an employee’s complaint must defini-
tively and specifically relate to one of the six enumerated cat-
egories found in § 1514A.”) (internal quotation marks
omitted), and we similarly defer to the ARB’s reasonable
interpretation of the statute.
VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY 11077
[9] We agree with the district court that Shawn’s conversa-
tions with Brown and Pennington satisfy this “definitively and
specifically” standard. According to Brown’s deposition testi-
mony, Shawn told her that Hettinger and Mathews “knew
more than they were saying,” that they were aware of the
Australian Flyer and had not disclosed it prior to the merger,
and that “there’s a possibility it could go to the top.” Brown
testified that it was her impression after the meeting that
Shawn believed that IGT had been misled regarding Anchor’s
value prior to the merger.
With respect to Shawn’s conversation with Pennington,
Pennington testified that Shawn told him that documents
received from Walkowski contained prior art that Anchor
knew or should have known about prior to the merger but did
not disclose. In his deposition testimony, Pennington indi-
cated that his recollection was that Shawn merely intimated
that the omission was a mistake but conceded that it was pos-
sible Shawn suggested at that meeting that the omission was
intentional. Shawn, for his part, asserts that Pennington told
him that he believed Matthews had intentionally concealed
the Australian Flyer and that the merger never would have
happened if the Flyer had been disclosed.
[10] To be sure, Brown testified that she did not believe
Shawn used the words “fraud,” “fraud on shareholders,” or
“stock fraud” and she could only say that Shawn “may have”
used the term “Sarbanes-Oxley” or “SOX”; the record simi-
larly contains no evidence that Shawn used any such language
in his conversation with Pennington. However, as the Fourth
Circuit has recognized, “[a]n employee need not cite a code
section he believes was violated” to trigger the protections of
§ 1514A. Welch, 536 F.3d at 276 (internal quotation marks
omitted). It is clear to us that, taking the facts in the light most
favorable to the Van Asdales, Shawn’s statements to both
Brown and Pennington reported conduct that definitively and
specifically related to shareholder fraud. That is all that
§ 1514A requires.
11078 VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY
The parties also dispute whether the Van Asdales similarly
engaged in protected conduct during their November 24, 2003
meeting with Johnson. As noted above, IGT asserts that the
meeting only involved discussions of a potential fraud on the
Patent Office defense in pending litigation and the district
court accepted this argument.
We agree with the district court that if IGT’s characteriza-
tion of the Van Asdales’ meeting with Johnson is taken as
true, the conversation did not involve activity protected under
§ 1514A. The Van Asdales’ theory of shareholder fraud con-
cerns the possibility that Anchor harmed IGT’s shareholders
by intentionally withholding information from IGT in late
2001. By contrast, the parties agree that any discussion of
fraud on the Patent Office concerned a defense Bally might
assert in future litigation, a defense that would be based upon
IGT’s admitted failure to disclose the same information to the
Patent Office in 2003. This latter topic has nothing to do with
shareholder fraud and is certainly not “definitively and specif-
ically” related to it. However, this was not the uncontroverted
evidence before the district court.
Johnson executed a sworn declaration stating that neither
Shawn nor Lena made any suggestion to him regarding a
potential fraud on the shareholders; however, this declaration
directly contradicted Shawn’s affidavit. Typically, of course,
such a stark factual dispute must be decided by a fact finder
and cannot be resolved on summary judgment. In this case,
however, the district court disregarded the portion of Shawn’s
declaration in which he said that he raised concerns of share-
holder fraud with Johnson, because the district court viewed
this portion of the declaration as contradicting Shawn’s depo-
sition testimony.
“The general rule in the Ninth Circuit is that a party cannot
create an issue of fact by an affidavit contradicting his prior
deposition testimony.” Kennedy v. Allied Mut. Ins. Co., 952
F.2d 262, 266 (9th Cir. 1991). Every circuit has some form of
VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY 11079
“sham affidavit” rule similar to our own. See Cleveland v.
Policy Mgmt. Sys. Corp., 526 U.S. 795, 806-07 (1999) (col-
lecting cases).
The Supreme Court has explained that “[s]ummary judg-
ment procedure is properly regarded not as a disfavored pro-
cedural shortcut, but rather as an integral part of the Federal
Rules as a whole, which are designed to secure the just,
speedy and inexpensive determination of every action.”
Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (internal
quotation marks omitted). Some form of the sham affidavit
rule is necessary to maintain this principle. This is because, as
we have explained, “if a party who has been examined at
length on deposition could raise an issue of fact simply by
submitting an affidavit contradicting his own prior testimony,
this would greatly diminish the utility of summary judgment
as a procedure for screening out sham issues of fact.” Ken-
nedy, 952 F.2d at 266 (quoting Foster v. Arcata Assocs., Inc.,
772 F.2d 1453, 1462 (9th Cir. 1985)).
At the same time, however, it must be recognized that the
sham affidavit rule is in tension with the principle that a
court’s role in deciding a summary judgment motion is not to
make credibility determinations or weigh conflicting evi-
dence. Aggressive invocation of the rule also threatens to
ensnare parties who may have simply been confused during
their deposition testimony and may encourage gamesmanship
by opposing attorneys. We have thus recognized that the sham
affidavit rule “should be applied with caution.” Sch. Dist. No.
1J v. ACandS, Inc., 5 F.3d 1255, 1264 (9th Cir. 1993); see
also Nelson v. City of Davis, ___ F.3d ___ (9th Cir. 2009).
More specifically, we have fashioned two important limita-
tions on a district court’s discretion to invoke the sham affida-
vit rule. First, we have made clear that the rule “does not
automatically dispose of every case in which a contradictory
affidavit is introduced to explain portions of earlier deposition
testimony,” Kennedy, 952 F.2d at 266-67; rather, “the district
11080 VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY
court must make a factual determination that the contradiction
was actually a ‘sham.’ ” Id. at 267. Second, our cases have
emphasized that the inconsistency between a party’s deposi-
tion testimony and subsequent affidavit must be clear and
unambiguous to justify striking the affidavit. Thus, “the non-
moving party is not precluded from elaborating upon, explain-
ing or clarifying prior testimony elicited by opposing counsel
on deposition [and] minor inconsistencies that result from an
honest discrepancy, a mistake, or newly discovered evidence
afford no basis for excluding an opposition affidavit.” Mess-
ick v. Horizon Indus., 62 F.3d 1227, 1231 (9th Cir. 1995).
[11] In the present case, neither of these two conditions are
satisfied. As to the first, the district court simply asserted that,
“[b]ecause [the relevant] portion of [Shawn’s] declaration
contradicts [his] deposition testimony it must be disregarded.”
498 F. Supp. 2d at 1331. This statement is directly contrary
to the rule set forth in Kennedy that the sham affidavit “rule
does not automatically dispose of every case in which a con-
tradictory affidavit is introduced to explain portions of earlier
deposition testimony.” 952 F.2d at 266-67. The district court
did not make a specific factual finding that the affidavit was
a sham as it was required to do prior to striking it.
[12] If this were the only defect in the district court’s analy-
sis of Shawn’s affidavit, we would simply remand this case
to allow the district court to make the necessary factual find-
ings. See, e.g., id. at 267 (“At the time the district court found
Kennedy’s later declaration to be an attempt to create a ‘sham
issue of fact,’ we had not yet made clear that [the sham affida-
vit rule] does not apply to every instance when a later affida-
vit contradicts deposition testimony . . . . Accordingly we
remand this case to the district court so that it may make that
necessary determination.”). We decline to do so, however,
because we conclude that the minor conflicts between
Shawn’s earlier deposition testimony and subsequent declara-
tion, if there are any, do not justify invocation of the sham
affidavit rule.
VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY 11081
[13] Contrary to the district court’s determination, nothing
in Shawn’s declaration “flatly contradicts,” id., his earlier
deposition testimony. Shawn’s declaration clarifies that at the
November 24, 2003 meeting with Johnson, he raised allega-
tions of shareholder fraud in addition to a specific fraud on
the Patent Office defense. This statement does not contradict
his earlier deposition testimony. At the deposition, IGT’s
counsel began by asking Shawn about the content of any dis-
cussion regarding “deliberate nondisclosure of [the Australian
Flyer and related] documents.” Shawn claimed that he told
Johnson “[t]hat it at least appears suspicious and there is a
potential of fraud.” In response to a subsequent question,
Shawn made clear that he did not remember Johnson saying
“anything in response to that statement.” Only after IGT’s
counsel asked him if he recalled any “other statements” did
Shawn begin discussing the need to investigate defenses Bally
might assert in any future patent prosecution. Because of the
line of questioning pursued by IGT’s counsel, Shawn “pro-
vided only cursory testimony” regarding his initial statements
to Johnson regarding fraud, see SEC v. Phan, 500 F.3d 895,
910 (9th Cir. 2007); his subsequent declaration was a legiti-
mate attempt to “explain[ ] or clarify[ ] prior testimony elic-
ited by opposing counsel on deposition.” Messick, 62 F.3d at
1231.
A close examination of Shawn’s deposition testimony
offers at least three additional reasons why it is otherwise con-
sistent with his subsequent declaration. First, at one point in
Shawn’s deposition testimony, Shawn stated that he and John-
son discussed Hettinger’s claim that he had not previously
seen the Australian Flyer. Although Hettinger’s possible prior
knowledge of the Australian Flyer might have some tangential
relevance in a discussion about Bally’s possible legal defenses
in a patent prosecution, it would seem to be precisely the sort
of subject one would expect to come up in a discussion about
possible fraud in connection with the IGT-Anchor merger.
Second, after IGT’s counsel asked about the “deliberate non-
disclosure of Trask-Britt documents,” Shawn responded by
11082 VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY
stating that he told Johnson the nondisclosure “appear[ed]
suspicious.” Again, it seems strange that Shawn would take
the drastic step of characterizing a co-employee’s actions as
“suspicious” if the discussion was merely aimed at analyzing
possible legal defenses of a potential opposing party. Finally,
the Van Asdales’ interpretation is consistent with deposition
testimony regarding Shawn’s earlier conversations with Pen-
nington and Brown, in which he appears to have clearly sug-
gested that Matthews and Hettinger had wrongfully withheld
the Flyer during the merger process.3
[14] The analysis above is not intended as an endorsement
of the factual account provided in Shawn’s declaration. A jury
could find Shawn’s account not credible and thus conclude
that the meeting with Johnson did not qualify as protected
activity under § 1514A. But it is not our place to make this
determination. Shawn’s declaration suffices to raise a genuine
issue of material fact regarding the nature of the Van Asdales’
3
IGT also points to two occasions in which, according to them, “the Van
Asdales candidly admit that they made conscious decision not to blow the
whistle.” The first example is Lena’s deposition testimony that she raised
no complaints about “shareholder fraud,” or “Sarbanes-Oxley violations,”
and her rationalization that “obviously, if any of that occurred, we may
have been accusing our boss at the time, who was T.J. Matthews.” How-
ever, these comments concerned a much larger meeting with upper man-
agement, not the later meeting with Johnson. Moreover, in this testimony
Lena was referring to everyone in attendance at the meeting, not herself
personally.
IGT also points to Shawn’s statement that he did not “want to go out
and just start saying that T.J. committed fraud on shareholders to the tune
of 1.4 billion without having more to rely on.” However, this deposition
testimony concerned Shawn’s statements at his August meeting with Pen-
nington; moreover, the testimony surrounding this statement indicates that
Shawn and Pennington were discussing the possibility that Matthews had
unlawfully withheld the Flyer. The statement quoted by IGT thus appears
to simply indicate that Shawn was concerned about raising such serious
allegations prematurely; this is perfectly consistent with a claim that
Shawn felt the issues should be raised in a private meeting with Johnson
three months later.
VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY 11083
disclosures to Johnson, and the district court should not have
disregarded it. We thus conclude that, taking the facts in the
light most favorable to the Van Asdales, their meeting with
Johnson involved disclosures “definitively and specifically”
related to shareholder fraud.
[15] This conclusion, as well as our analysis of Shawn’s
meetings with Brown and Pennington, do not settle the ques-
tion of whether the statements constituted protected activity
under § 1514A. As noted above, § 1514A prohibits discrimi-
nating against an employee for “provid[ing] information . . .
regarding any conduct which the employee reasonably
believes constitutes a violation of” a listed law. The plain lan-
guage of this section, as well as the statute’s legislative his-
tory and case law interpreting it, suggest that to trigger the
protections of the Act, an employee must also have (1) a sub-
jective belief that the conduct being reported violated a listed
law, and (2) this belief must be objectively reasonable. See
Harp v. Charter Commc’ns, Inc., 558 F.3d 722, 723 (7th Cir.
2009); Day, 555 F.3d at 54; Welch, 536 F.3d at 275; Allen,
514 F.3d at 477 (“We agree that an employee’s reasonable
belief must be scrutinized under both a subjective and objec-
tive standard.”); S. Rep. No. 107-146, at 19 (2002)
(“[S]ubsection (a)(1) . . . is intended to impose the normal rea-
sonable person standard used and interpreted in a wide variety
of legal contexts.”).
[16] We first address whether the circumstances in which
the Van Asdales found themselves permitted them to form an
objectively reasonable belief that the apparent failure to dis-
close the Australian Flyer to IGT prior to the merger consti-
tuted shareholder fraud. We agree with the First Circuit that,
“[t]o have an objectively reasonable belief there has been
shareholder fraud, the complaining employee’s theory of such
fraud must at least approximate the basic elements of a claim
of securities fraud.” Day, 555 F.3d at 55. The Supreme Court
has explained that a private action for securities fraud “resem-
bles, but is not identical to, common-law tort actions for
11084 VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY
deceit and misrepresentation,” and that its elements include a
material misrepresentation or omission, scienter, a connection
with the purchase or sale of a security, reliance, economic
loss, and loss causation. Dura Pharms., Inc. v. Broudo, 544
U.S. 336, 341-42 (2005). Similarly, we have held that, in
order to prove securities fraud under Rule 10b-5, a plaintiff
must demonstrate “(1) a material misrepresentation or omis-
sion of fact, (2) scienter, (3) a connection with the purchase
or sale of a security, (4) transaction and loss causation, and
(5) economic loss.” In re Daou Sys., Inc., 411 F.3d 1006,
1014 (9th Cir. 2005).
[17] We conclude that the Van Asdales’ theory of fraud
approximates a securities fraud claim. It seems clear that the
wheel patent was an important asset that Anchor brought to
the merger with IGT. Matthews stated in his declaration that
the “Wheel Patents, and the machines that are covered by the
patents, generate a substantial portion of IGT’s total income.”
Johnson, for his part, testified that “the wheel patent is of such
importance to IGT that it utterly eclipses the relative impor-
tance of any . . . other claimed accomplishments. It’s [sic]
wheel is the Crown Jewel of IGT’s intellectual property port-
folio.” Moreover, Shawn testified that Pennington told him
that the merger would not have occurred if IGT had been
made aware of the Flyer. Given the potential importance of
the Australian Flyer and related documents, the top manage-
ment positions at IGT occupied by several former Anchor
officials, and their alleged financial motives favoring nondis-
closure, we hold that it was objectively reasonable for Shawn
and Lena to suspect that the non-disclosure of the Flyer prior
to the merger could have been deliberate.
[18] In reaching this conclusion, we wish to make abso-
lutely clear that we are not suggesting that former Anchor
officials actually did engage in wrongdoing prior to the
merger with IGT. As IGT points out, there is no evidence that
anyone at Anchor instructed the company’s outside counsel
not to disclose the Australian Flyer prior to the merger. It is
VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY 11085
also possible that the Australian Flyer and related documents
were, in any event, not as important to the validity of the
wheel patent as the Van Asdales claim, though IGT has not
pressed this argument on appeal. It is not critical to the Van
Asdales’ claim that they prove that Anchor officials actually
engaged in fraud in connection with the merger; rather, the
Van Asdales only need show that they reasonably believed
that there might have been fraud and were fired for even sug-
gesting further inquiry. To encourage disclosure, Congress
chose statutory language which ensures that “an employee’s
reasonable but mistaken belief that an employer engaged in
conduct that constitutes a violation of one of the six enumer-
ated categories is protected.” Allen, 514 F.3d at 477. We think
that the Van Asdales have met this minimal threshold require-
ment.
We also conclude that the Van Asdales had a subjective
belief that the conduct that they were reporting violated a
listed law. The legislative history of Sarbanes-Oxley makes
clear that its protections were “intended to include all good
faith and reasonable reporting of fraud, and [that] there should
be no presumption that reporting is otherwise, absent specific
evidence.” 148 Cong. Rec. 57420 (daily ed. July 26, 2002)
(statement of Sen. Leahy). In this case, there is no evidence
that Shawn’s various complaints were made in bad faith and
IGT does not suggest otherwise.
By contrast, the district court held that no reasonable jury
could find that Lena subjectively believed that shareholder
fraud had occurred. The testimony on which the district court
appeared to rely in support of this conclusion went as follows:
Q Prior to retaining [legal counsel], did you have any
personal belief that a fraud had been perpetrated on
the shareholders of IGT?
A I had a belief that something had happened in the
due diligence with Anchor and IGT and that an
11086 VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY
investigation needed to be conducted to see if a fraud
had occurred.
Q So you didn’t have a specific belief that a fraud
had occurred or not?
A I had a belief that an investigation needed to
occur.
Q So you hadn’t reached a conclusion one way or
another as to fraud?
A No, because we were not allowed to do an investi-
gation.
Q Okay. But you had a strong belief that an investi-
gation needed to be done?
A Yes.
The district court’s conclusion that this testimony pre-
cluded Lena from claiming protection under the Sarbanes-
Oxley Act is contrary to the language of § 1514A. Although
Lena acknowledged that she “hadn’t reached a conclusion” as
to whether fraud had occurred, the context of this statement
was Lena’s discussion of the need for an investigation. More-
over, in passing the Sarbanes-Oxley Act, Congress noted the
existence of “a culture, supported by law, that discourage[s]
employees from reporting fraudulent behavior not only to the
proper authorities, such as the FBI and the SEC, but even
internally.” S. Rep. No. 107-146, at 5 (2002). Requiring an
employee to essentially prove the existence of fraud before
suggesting the need for an investigation would hardly be con-
sistent with Congress’s goal of encouraging disclosure.
[19] We thus conclude that, taking the facts in the light
most favorable to the Van Asdales, as we must for the pur-
poses of summary judgment, Shawn’s communications with
VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY 11087
Brown and Pennington, as well as the Van Asdales’ meeting
with Johnson, involved activities protected by § 1514A.
b. Knowledge of Decision-Maker
To establish a prima facie case under § 1514A, the Van
Asdales also must establish that “[t]he named person knew or
suspected, actually or constructively, that the employee
engaged in the protected activity.” 29 C.F.R.
§ 1980.104(b)(1)(ii).4 This language is hardly a model of clar-
ity (for example, it is not at all clear to us how one can con-
structively suspect someone of engaging in protected activity)
but under any interpretation this element is satisfied here. As
we have stated above, taking the Van Asdales’ deposition tes-
timony and Shawn’s sworn declaration as true, the Van
Asdales engaged in protected activity during the November
24, 2003 meeting with Johnson, as well as with Brown, and
Pennington. It is undisputed that these persons have “supervi-
sory authority” over the Van Asdales. 18 U.S.C.
§ 1514A(a)(1)(c).
c. Unfavorable Personnel Action
IGT does not dispute that the Van Asdales satisfy this
required element.
d. Contributing Factor
The final element of a prima facie case under § 1514A is
that “[t]he circumstances were sufficient to raise the inference
that the protected activity was a contributing factor in the
unfavorable action.” 29 C.F.R. § 1980.104(b)(1)(iv). As the
district court correctly observed, the Van Asdales have not put
forth any direct evidence that their protected activity was a
4
Section 1980.101, in turn, defines “named person” as “the employer
and/or the company or company representative named in the complaint
who is alleged to have violated the Act.” 29 C.F.R. § 1908.10111088 VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY
contributing factor to their termination. The primary evidence
on this issue is circumstantial: the proximity of the Van
Asdales’ terminations to the November 24, 2003 meeting with
Johnson.
[20] We conclude that the Van Asdales have raised a genu-
ine issue of material fact regarding whether their protected
activity was a contributing factor to their terminations. We
have previously held that “causation can be inferred from tim-
ing alone where an adverse employment action follows on the
heels of protected activity.” Villiarimo v. Aloha Island Air,
Inc., 281 F.3d 1054, 1065 (9th Cir. 2002). In Yartzoff v.
Thomas, 809 F.2d 1371, 1376 (9th Cir. 1987), we held that
causation could be inferred where the first adverse employ-
ment action took place less than three months after an
employee’s protected activity. We have since made clear that
“a specified time period cannot be a mechanically applied cri-
terion,” and have cautioned against analyzing temporal prox-
imity “without regard to its factual setting.” Coszalter v. City
of Salem, 320 F.3d 968, 977 (9th Cir. 2003).
In this case, Shawn was terminated approximately two and
a half months after the November 24 meeting with Johnson,
and Johnson acknowledged that he initially intended to termi-
nate Shawn within three days of the meeting; Lena was fired
several weeks after Shawn. Although we express no opinion
on the merits of the Van Asdales’ claims, we hold that a rea-
sonable fact finder could find that the Van Asdales’ alleged
disclosures were a contributing factor in their terminations
where, among other things, both Shawn and Lena were
removed from their positions within weeks of their alleged
protected conduct.
A closer examination of the “factual setting” of the Van
Asdales’ terminations also lends support to their theory of
unlawful retaliation. Both Shawn and Lena were hired in Jan-
uary 2001; after observing Shawn’s performance for eighteen
months, he was promoted to a high-level position, and Lena
VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY 11089
was similarly promoted several months later. On November
10, 2003, Shawn received an exceptional performance review.
Two weeks later, however, Shawn and Lena met with John-
son, where they allegedly accused high-level IGT executives
who had previously worked at Anchor of intentionally with-
holding material information prior to the merger. Johnson had
served as General Counsel for Anchor during the months
prior to the merger and he had worked with Matthews and
Hettinger; moreover, Matthews had also hired Johnson after
taking over as CEO of IGT. A mere three days after this meet-
ing, and only seventeen days after Shawn had received a posi-
tive performance review, Johnson had decided to terminate
Shawn, a decision that was delayed only because Shawn sub-
sequently became ill. Several weeks after that, Johnson termi-
nated Lena as well.
For its part, IGT asserts that Shawn was terminated for
poor job performance. Johnson testified that Matthews told
him that Shawn’s behavior and demeanor were causing diffi-
culties among various departments. Johnson also claimed that
conversations with several colleagues from other companies
that worked with IGT raised similar concerns about Shawn’s
work and attitude. Matthews generally corroborated John-
son’s assertions. This testimony, however, is in tension with
other contemporaneous evidence of Shawn’s strong perfor-
mance at IGT, including his promotion to Director of Strate-
gic Development and his strong evaluation from Brown just
weeks prior to his termination.
To be sure, IGT’s proffered reasons could be entirely legiti-
mate; IGT appears to have been in a period of transition in
late 2003 and Johnson was certainly not obligated to accept
his predecessor’s apparent belief that Shawn was performing
his job well. However, given the close proximity of Shawn’s
termination to his alleged protected activity, his seemingly
positive record at IGT, and the dearth of specific evidence in
the record supporting Johnson’s and Matthews’s claims about
11090 VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY
his performance, a reasonable fact finder could find that
Shawn’s protected activity contributed to his termination.
Our analysis with respect to Lena’s termination is similar.
Like Shawn, Lena was promoted shortly after joining IGT in
2001, and the record is bereft of specific evidence that she
was performing her job inadequately. In addition to claims
that she had become “extremely difficult and extremely
unfriendly,” after Shawn’s termination, IGT asserts that Lena
was terminated because she twice requested access to sensi-
tive information related to “Class 2” gaming, and IGT feared
that she was attempting to obtain information that could bene-
fit her husband. These attempts to access sensitive informa-
tion may well have constituted serious breaches of protocol
that were wholly beyond the scope of Lena’s job duties. How-
ever, IGT simply declares in conclusory terms that Lena’s
conduct was improper, while Lena counters that she accessed
this information in the normal course of her work. We are not
in a position to resolve this dispute; on the current record,
only a fact finder can. As with her husband’s claim, a fact
finder could reasonably determine that this asserted reason
was simply a pretext for unlawful retaliation.
2. Burden-Shifting Analysis
[21] Because we conclude that the Van Asdales have made
out a prima facie showing of retaliatory termination in viola-
tion of § 1514A, IGT cannot obtain summary judgment unless
it shows by clear and convincing evidence that it would have
terminated the Van Asdales even absent any protected activ-
ity. 18 U.S.C. § 1514A(b)(2)(A); 49 U.S.C. § 42121(b)(2)(B).
On appeal, IGT does not argue that it can satisfy this require-
ment. We thus hold that the district court erred in granting
IGT summary judgment on the Van Asdales’ Sarbanes-Oxley
claim.
C. State-Law Claims
[22] After granting summary judgment to IGT on the Van
Asdales’ sole federal claim, the district court exercised its dis-
VAN ASDALE v. INTERNATIONAL GAME TECHNOLOGY 11091
cretion under 28 U.S.C. § 1367(c)(3) and declined to retain
jurisdiction over their pendant state-law claims. Because we
reverse the district court’s grant of summary judgment on the
Sarbanes-Oxley claim, we vacate its dismissal of the Van
Asdales’ state-law claims and remand for reconsideration.
III. CONCLUSION
The Van Asdales raised a genuine issue of material fact
regarding whether they were wrongfully discharged in viola-
tion of § 1514A and we reverse the district court’s decision to
the contrary. In light of this disposition, we vacate the district
court’s dismissal of the Van Asdales’ state-law claims and
leave it to the district court on remand to address these claims
in the first instance.
REVERSED, VACATED, and REMANDED.