Labor & Employment Law Daily Wrap Up, EMPLOYEE STATUS—5th Cir.: On appeal, whistleblower showed employer-employee relationship, (Jun 5, 2025)

By Rodney F. Tonkovic, J.D.

Who's the boss? The Fifth Circuit panel clarified a hotly contested factual issue.

Finding that it was plausible that a whistleblower established an employee relationship, a Fifth Circuit panel reversed and remanded his SOX claim to the district court. In this case, the district court had concluded that the plaintiff had failed to properly plead that his employer was one of the named defendants. The panel disagreed, concluding that the plaintiff pleaded sufficient facts to raise a plausible inference about his employer and that "magic words" were not required (Vuoncino v. Forterra, Incorporated, No. 24-10308 (5th Cir. June 3, 2025)).

The plaintiff-appellant is a corporate finance professional who was retained as a consultant in 2013 by United States Pipe Holdings. He later became a direct employee of a subsidiary, USP Fabrication, LLC. USP Holdings and its subsidiaries were acquired in 2016 by defendant-appellee Forterra, Inc. After the acquisition, the plaintiff was promoted to Vice President of Operations for USP Fabrication.

Creative accounting. Forterra went public in 2016. At the time, Forterra's CEO told the plaintiff that Fabrication’s earnings were disappointing, and USP Fabrication executives came up with a plan to increase its projected earnings that involved rebates for inter-company sales, resulting in higher profits on USP Fabrication's books.

The plaintiff expressed concern about the propriety of these inter-company transactions at the time. His objections intensified when he learned that the rebates were actually being recognized as an immediate profit, which the plaintiff considered to be fraudulent accounting. The plaintiff, convinced that the company was cooking the books to inflate its profits, continued to raise objections with executives during meetings and was ultimately terminated due to a "decision to restructure."

Who's the boss? The plaintiff complained of retaliatory discharge to OSHA, which did not respond within 180 days. He then sued Fabrication, Forterra, and two Forterra executives for violating the Sarbanes-Oxley Act’s anti-retaliation provision. The district court denied the plaintiff's motion to amend and add more defendants and then dismissed the complaint in full, finding that the plaintiff failed to sue his employer and failed to state a claim for alter-ego liability.

Employee relationship. In the district court's view, the plaintiff failed to sue his employer. The panel disagreed, reversing the dismissal as to USP Fabrication because the complaint plausibly alleged that the company employed the plaintiff.

A "hotly contested factual issue" before the district court was exactly which Forterra subsidiary (or subsidiaries) actually employed the plaintiff. The plaintiff asserted that he was an employee of USP Fabrication and that Forterra controlled or was an alter ego of that entity. The complaint, however, lacked specific allegations showing that the plaintiff was employed by any named defendant.

Taking the allegations as true, however, the panel said they raised a plausible inference that USP Fabrication employed the plaintiff. For example, the plaintiff alleged that he “worked for” USP Fabrication, held specific managerial and executive positions “for” and “over” USP Fabrication, and supervised all USP Fabrication branches, and that his position was eliminated due to restructuring within USP Fabrication. The plaintiff, the panel said, was not required to plead the specific words “employee of” or “employed by” or other such precise terminology to state a SOX claim against USP Fabrication.

The panel went on to find that the district court correctly dismissed the SOX claim against the remaining defendants. First, the plaintiff failed to plead that Forterra, as a parent company, had such complete control over its subsidiary that an alter-ego claim would survive. Since the claim against Forterra failed, so fell the plaintiff's claims against its officers.

Leave to amend. The panel also affirmed the district court's denial of leave to amend. While the district court did not provide reasoning, in an order denying reconsideration, it explained that the proposed amendments were time-barred. The panel agreed, concluding that the amendments were untimely and did not relate back to the original complaint and that the plaintiff was not entitled to equitable tolling.

The case is No. 24-10308.

Judge: Per curiam.

Attorneys: Steven I. Adler (Mandelbaum Barrett PC) for Raymond Vuoncino. Angela Christine Zambrano (Sidley Austin LLP) for Forterra, Inc. and U.S. Pipe Fabrication, L.L.C.

Companies: Forterra, Inc.; U.S. Pipe Fabrication, L.L.C.

Cases: EmployeeStatus Whistleblowers Retaliation LouisianaNews MississippiNews TexasNews