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Gryga v. Henkles & Mccoy Group, Inc.

United States District Court, N.D. Illinois, Eastern Division

August 6, 2019




         For the reasons explained below, defendants' motion to dismiss the amended complaint is granted in part and denied in part.


         Plaintiff, Nicholas Gryga, brought this suit against his former employer, Henkels & McCoy, Inc., as well as Henkels & McCoy Group, Inc., who defendants say is its parent company. Henkels & McCoy, Inc., to which the Court will refer as “H&M, ” is “a privately-owned engineering firm” that “builds, installs, designs and offers project management services to commercial and industrial corporations.” (ECF No. 10, Am. Compl. ¶ 17.)

         Gryga, who was a field director for H&M and generally responsible for project management, alleges that shortly after starting work there in 2015, he learned that a group of H&M executives were defrauding Spectra Energy, a publicly-traded company and one of H&M's largest clients, “on the AIM project, one of H&M's biggest construction projects.” (Id. at 1, ¶¶ 18-19.) Gryga alleges that certain H&M employees participated in a scheme to inflate estimates for construction projects, negotiate contracts that were based on those inflated estimates, and then submit invoices on such projects that falsely inflated the hours worked on the project and the amount of materials used. Furthermore, according to Gryga, “certain executives at Spectra were active participants in the fraud” and “accept[ed] kickbacks and other inappropriate perks from H&M executives in exchange for accepting inflated invoices.” (Id. at 1, ¶ 27.) A third-party inspection company whose principal was the spouse of a Spectra executive “verified and approved” the work described in the false invoices. (Id. ¶ 40.) Gryga says that he reported the fraud to the H&M “division controller” and the “head of internal audit” but was told that he was being labeled a “whistleblower” and that he could have a long career in the company if he refrained from being a “troublemaker.” (Id. ¶¶ 28-29.)

         Thereafter, Gryga was instructed not to return to the job sites where he had discovered the fraud, and to leave the matter alone. He experienced a series of demotions and salary decreases. When other employees contacted Gryga to report continuing fraud with regard to Spectra, Gryga told them to contact the “fraud hotline” and copy senior management on the communications. (Id. ¶ 33.) Gryga was then told to stop giving such advice to those employees. In May 2016, H&M sent Gryga to Chicago to open a Midwest division; the move involved a substantial pay cut.

         In February 2017, Gryga requested a meeting with his new division head to discuss the fraud and “abuses” by his supervisor. (Id. ¶ 43.) The day before Gryga was scheduled to fly to Houston for the meeting, the supervisor called him and told him to cancel the trip. The following day, Gryga's employment was terminated on the ground that Gryga had been engaged in a pattern of sexual harassment. Gryga says that this reason is “purely pretextual” and that just weeks prior, he had received an outstanding review and was identified as an “upcoming leader in the company at their annual corporate meeting.” (Id. ¶¶ 45-46.) According to Gryga, “a day before [he] could finally reveal the scheme to someone who might listen, ” his supervisor “cut him off at the knees by terminating him.” (Id. ¶ 46.)

         Gryga alleges that after he was fired, H&M hampered his efforts to find new employment by repeating to other companies and headhunters the “lie” that Gryga was fired for sexual harassment. (Id. ¶¶ 47-49.) The industry is “highly consolidated, ” and former H&M employees are in senior management roles at many leading companies. (Id. ¶ 51.) Gryga “was forced to take a job” for a non-unionized company, with a significant reduction in title and compensation. (Id. ¶ 52.) In early 2019, he applied with KS Energy Services for a position for which he was completely qualified. The human-resources representative there had previously worked at H&M, and she said that before making a decision she was going to reach out to H&M to discuss Gryga's work there. Gryga did not get the position and was not provided an explanation; he believes that H&M “again repeated the same untrue allegations of sexual misconduct and harassment.” (Id. ¶ 55.)

         On June 20, 2017, Gryga filed a whistleblower complaint against H&M with the United States Department of Labor (the “DOL”), pursuant to the Sarbanes-Oxley Act of 2002 (the “Act”), in which he alleged that H&M had engaged in fraud with respect to the AIM project and had wrongfully terminated his employment because he had reported construction fraud and a weakness of internal controls and had questioned fraudulent collusion by H&M and Spectra executives. (ECF No. 14-3.)[1] Three days later, the DOL dismissed the complaint on the grounds that H&M was not a covered entity under the Act and Gryga was not an employee within the meaning of the Act. (ECF No. 14-4.) Gryga objected to the DOL's findings and requested a hearing before an Administrative Law Judge. (ECF No. 14-5.) H&M moved to dismiss the matter. (ECF No. 14-6.) On December 11, 2017, the ALJ dismissed Gryga's administrative complaint on the same grounds cited by the DOL, and cancelled the scheduled hearing. (ECF No. 14-7.) On December 26, 2017, Gryga submitted a petition to the Administrative Review Board (“ARB”) for review of the ALJ's decision. (Am. Compl. ¶ 13.) Within thirty days, the ARB accepted the petition and ordered briefing. (Id. ¶ 14.) The parties briefed the petition, and, as of April 10, 2019, the ARB had not issued a decision.[2] (Id. ¶ 15.)

         In this action, Gryga brings a claim for violation of the Sarbanes-Oxley Act's anti-retaliation provisions as well as state-law claims for retaliatory discharge, defamation, and defamation per se. Defendants move under Federal Rule of Civil Procedure 12(b)(1) to dismiss the federal claim and under Federal Rule of Civil Procedure 12(b)(6) to dismiss the entire amended complaint.


         For purposes of a motion to dismiss under Rule 12(b)(1) or Rule 12(b)(6), the Court construes the complaint in the light most favorable to the plaintiff, accepts as true all well-pleaded facts therein, and draws all reasonable inferences in plaintiff's favor. Bultasa Buddhist Temple of Chi. v. Nielsen, 878 F.3d 570, 573 (7th Cir. 2017); Bell v. City of Chi., 835 F.3d 736, 738 (7th Cir. 2016). To survive a Rule 12(b)(6) motion, a complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). A Rule 12(b)(1) motion, in contrast, challenges federal jurisdiction, and the plaintiff bears the burden of establishing that the elements necessary for jurisdiction, including a ripe controversy, are met. Scanlan v. Eisenberg, 669 F.3d 838, 841-42 (7th Cir. 2012).


         A. ...

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