La Belle v. Barclays Capital Inc.

664 F.Supp.3d 391

Brian LA BELLE, Plaintiff, v. BARCLAYS CAPITAL INC., Defendant.

19-CV-3800 (JPO)

United States District Court, S.D. New York

Signed March 24, 2023

Steven Karl Barentzen, The Law Office of Steven Barentzen, Washington, DC, for Plaintiff.

Allen Baron Roberts, Ronald M. Green, James David MacKinson, John Francis Fullerton, III, Epstein Becker & Green, P.C., New York, NY, Elizabeth Kiernan McManus, Ballard Spahr LLP, Philadelphia, PA, for Defendant.

OPINION AND ORDER

J. PAUL OETKEN, District Judge:

Plaintiff Brian La Belle brings this action against Barclays Capital Inc., his former employer, asserting claims under Section 806 of the Sarbanes-Oxley Act of 2002 ("SOX"), codified at 18 U.S.C. § 1514A. Before the Court are Defendant's motion for summary judgment and Plaintiff's cross-motion for summary judgment. For the reasons that follow, Defendant's motion for summary judgment is granted, and Plaintiff's cross-motion for summary judgment is denied.

I. Background

The following facts are from Defendant's Local Rule 56.1 Statement (ECF No. 224 ("Def.'s SOF")), Plaintiff's Opposition to Defendants' Local Rule 56.1 Statement (ECF No. 243) ("Pl.'s SOF Opp.")¹, Plaintiff's Local Rule 56.1 Statement (ECF No. 244 ("Pl.'s SOF")), Defendant's Opposition to Plaintiff's Local Rule 56.1 Statement (ECF No. 263 ("Def.'s SOF Opp.")), and Defendant's Reply to Plaintiff's Opposition to Defendant's Local Rule 56.1 Statement (ECF No. 264 ("Def.'s SOF Reply")), and the underlying evidence cited therein.² The facts recited here are undisputed unless otherwise noted, and construed in the light most favorable to the non-movant.

A. Parties and Key Personnel

La Belle joined Barclays, a multinational bank, in July of 2015. (Def's SOF at ¶ 7; Pl.'s SOF at ¶ 408.) La Belle began his employment with Barclays as a Vice President in Securitized Products. In March 2016, Barclays promoted him to Director and Head of CMBS Primary Trading and Distribution. (Def.'s SOF at ¶ 17.) At all relevant times La Belle's role involved risk management, that is, "dealmaking and risk-taking." (Def.'s SOF at ¶¶ 21 - 24.)

Initially, La Belle reported primarily to Larry Kravetz, the Managing Director and Barclays' Head of Primary Commercial Mortgage-Backed Securities ("CMBS") Origination. (Def's SOF at ¶ 7.) As a result of a reorganization in 2016, La Belle's position changed such that he also officially reported to Brian Wiele, Managing Director and Barclays' Global Head of Securitized Products-Syndicate. (Def's SOF at ¶ 8.) Even after this change, most of La Belle's work continued to be for the CMBS desk, and he continued to report to Kravetz as well. At the CMBS desk La Belle also worked with Eric Wu, who was then the Managing Director and Barclay's Head of Originations for Large Loan Commercial Real Estate. (Def.'s SOF at ¶ 12.)

B. Mandatory Block Leave

This action and Barclays' motion to for summary judgment revolve around mandatory block leave ("MBL"), an element of Barclays' "enterprise risk management framework." (Pl.'s SOF at ¶ 443.) Functionally, Barclays' MBL policy requires certain "covered individuals" to take ten consecutive business days per year out of the office and without access to Barclays' systems; the policy thus by necessity prohibits them from performing certain business activities during this time. (Def.'s SOF at ¶ 23.) Upon completing their MBL, covered employees must submit a signed attestation that they did not engage in prohibited activities during their MBL. (Def.'s SOF at ¶ 40.) The employee's manager then approves this attestation. (Def.'s SOF at ¶ 40.) Though employees are required to complete MBL each calendar year, they can obtain an extension until March 31 of the following year if necessary. (Def.'s SOF at ¶ 44.) La Belle's work at Barclays meant that he was one such "covered individual" and correspondingly required to take MBL. (Pl.'s SOF at ¶ 444.)

MBL is "an important internal safeguard against internal fraud." (Def.'s SOF at ¶ 33; Pl.'s SOF at ¶ 442 - 43.) The theory of MBL is that it protects the firm from undetected fraud and embezzlement by individual employees "because most frauds or embezzlements require the continued presence of the wrongdoer." (Pl.'s SOF at ¶ 442.) In other words, Barclays' MBL policy is meant to help the firm detect traders who are secretly conducting unauthorized activity while under Barclays' umbrella, and potentially at its expense, by restricting their access to firm resources for a continuous period of ten days. This prevents wrongdoers from covering their tracks during that time, increasing the likelihood that their illicit activity will be discovered. Of necessity, employees are intended not to perform any of their actual work during this period and to delegate their work to others at the firm. (Def.'s SOF at ¶ 23; Pl.'s SOF at ¶ 542.)

Mandatory block leave is not legally required. La Belle contends that this fact is in dispute, despite his failure to identify a specific rule or regulation requiring MBL. All the evidence provided by the parties, however, shows that MBL is recommended, but not required. This includes the evidence on which La Belle relies to argue that MBL is generally required by regulators as an "internal control." For example, La Belle cites Defendant's 56.1 Exhibit No. 29, a report on "Mandatory (Two-Week) Vacation Policy" by Practical Law Labor & Employment. (See ECF. No. 242 at 15.) This publication, however, describes the guidance on MBL thus: "Though not mandated by law, federal and state bank and securities regulatory agencies recommend implementing mandatory vacation policies as part of an effective internal control protocol." (ECF No. 225-30 at 2.) (emphasis added). Likewise, La Belle cites FINRA Regulatory Notice 08-18. (See ECF. No. 242 at 15; ECF No. 225-32.) That Notice, however, is explicitly classed under "Guidance" and describes MBL as one of several "sound practices for preventing and detecting unauthorized proprietary trading," which FINRA "urge[s] firms to consider adopting" but acknowledges "may not be feasible or reasonable for all firms." (ECF No. 224-32 at 3.) La Belle also refers to statements of Barclays employees in support of his belief that MBL was legally required.³ While these statements show that some employees at Barclays held mistaken beliefs about the law, they do not demonstrate that it was legally required. In short, it cannot be plausibly disputed that Barclays was not, in fact, required to specifically adopt MBL by SEC rule or regulation — which La Belle ultimately concedes. (See ECF No. 242 at 19 ("[T]here may be no specific SEC rule or regulation requiring Barclays to have MBL").)

C. Alleged Protected Reports ('Whistleblows')

1. Mandatory Block Leave Dispute and Events of January 4, 2018

La Belle first scheduled his 2017 MBL from August 28 through September 8, 2017. (Def.'s SOF at ¶ 79.) Work intervened, however, and La Belle cancelled this scheduled MBL after consultation with Kravitz and Wu.⁴ (Def.'s SOF at ¶ 81 - 82.) He then rescheduled his 2017 MBL for December 18 through December 29, 2017. (Def.'s SOF at ¶¶ 85 - 86.) La Belle spent his two weeks out of the office in the Bahamas and planned to be back in the office on February 3, 2018. (Def.'s SOF at ¶ 87.)

La Belle and Kravetz had a scheduled lunch with several clients of Barclays on January 4, 2018. (Def.'s SOF at ¶ 104; Pl.'s SOF at ¶ 462.) At 8:49 that morning, La Belle emailed Kravetz and the investors and told them that he would reschedule the lunch due to the inclement weather in New York. (Def.'s SOF at ¶ 106; Pl.'s SOF at ¶ 463.) Kravetz responded by asking whether La Belle intended to come into the office that day. (Def.'s SOF at ¶ 108; Pl.'s SOF at ¶ 463.) In response, La Belle sent the following email to Kravetz:

"[The investor] just called me to cancel lunch today because of the weather. Given the blizzard conditions I will be working from home today along with a few members of my team.

As you are aware I was able to field questions and calls from team Barclays and our clients while on my two week mandatory block leave resulting in a smooth closing on 225 PAS, Grand Lakes 57 Mezz A and keeping Red Roof alive, (all massively critical deals for Barclays per senior banking and risk management)

I'm fully capable of performing my role while working remotely. If this is an issue I'd be happy to discuss further." (Def.'s SOF at ¶ 109; Pl.'s SOF at ¶ 463.)⁵

Kravetz called La Belle at 9:02 AM in response to this email, demonstrably angry. Kravetz yelled and cursed, chastising La Belle for writing in an email that La Belle had worked during his MBL. He also expressed anger that La Belle alleged in the email that Kravetz knew he had worked during his block leave, which Kravetz denied knowing. La Belle's wife, who overheard the call, testified that Kravetz told La Belle he was "stupid for having put in writing that he worked on his block leave." (Def.'s SOF at ¶ 120.) Kravetz told La Belle not to contact Barclays' compliance department ("Compliance") regarding his MBL issue, saying that he (Kravetz) would do it himself. (Def.'s SOF at ¶ 117; Pl.'s SOF at ¶ 464.)

After Kravetz and La Belle got off the phone, La Belle called Anna Zhuravitsky, in Barclays Banking & Capital Markets Compliance. This time, La Belle surreptitiously recorded his portion of the call. (Def.'s SOF at ¶ 122.) La Belle conveyed to Zhuravitsky that he was shaken after his conversation with Kravetz and he was worried about "A, getting fired, or B, having [his] bonus." (Def.'s SOF at ¶¶ 123 - 25.)

Kravetz called La Belle back that afternoon after speaking with Compliance himself. (Def.'s SOF at ¶ 126.) This time, La Belle surreptitiously recorded both sides of the phone call. (Def.'s SOF at ¶ 127.) Kravetz told La Belle he had exhibited "horrible judgment." Kravetz also told La Belle he had not known that La Belle had worked during his MBL, and that after searching through his (Kravetz's) phone...