Van Asdale v. Intl Game Technology

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. § 1908.101

11088 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.