Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 1 of 69 1 2 3 4 5 6 David M. deRubertis, State Bar No. 208709 Shahane A. Martirosyan, State Bar No. 295471 The deRubertis Law Firm, APC 4219 Coldwater Canyon Avenue Studio City, California 91604 Telephone: (818) 761-2322 Facsimile: (818) 761-2323 E-Mail: David@deRubertisLaw.com E-Mail: Shahane@deRubertisLaw.com Attorneys for Plaintiff Tri Huynh 7 UNITED STATES DISTRICT COURT 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NORTHERN DISTRICT OF CALIFORNIA TRI HUYNH, ) ) Plaintiff, ) ) ) v. ) ) ) WAL-MART STORES, INC., a ) Delaware Corporation; WAL-MART ) ASSOCIATES, INC., a Delaware ) Corporation; WAL-MART.COM, ) INC., a Delaware Corporation; and ) DOES 1 through 50, inclusive. ) ) ) ) ) ) Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No.: COMPLAINT FOR: 1. Whistleblower Retaliation in Violation of the Sarbanes-Oxley Act (18 U.S.C. §1514A, et seq.); 2. Retaliation in Violation of California Labor Code §1102.5; 3. Disability Discrimination in Violation of California Fair Employment and Housing Act; 4. Failure to Accommodate in Violation of California Fair Employment and Housing Act; 5. Failure to Engage in a Good Faith Interactive Process in Violation of the California Fair Employment and Housing Act; 6. Retaliation in Violation of the California Fair Employment and Housing Act; 7. Failure to Prevent Discrimination and Retaliation in Violation of the California Fair Employment and Housing Act; 8. Wrongful Termination in Violation of Public Policy. -1COMPLAINT (JURY TRIAL DEMAND) Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 2 of 69 INTRODUCTION 1 2 “Personal and moral integrity is one of our basic fundamentals, and it has to start with each of us.” 3 “Don’t compromise your reputation. It’s a precious commodity. Don’t compromise your integrity ... have a good name.” 4 5 6 1. These are the words of Wal-Mart founder Sam Walton who built Wal- 7 Mart into America’s largest corporation by recognizing that honesty and integrity 8 were critical components of a long-term successful business strategy. But this case 9 shows that Wal-Mart has forgotten its roots and betrayed the principles of its 10 Founder. For the first time since it had become the undisputed champion of retail, 11 Wal-Mart faced a serious long-term threat: Amazon. Wal-Mart had been asleep at 12 the wheel and was slow to react to the seismic shift in retail purchasing dollars 13 away from traditional brick-and-mortar retail and into the land of E-commerce. 14 Wal-Mart sat there idly on the sidelines as Amazon built its business model around 15 the fact that long-term retail success would be driven by E-commerce success. By 16 July 2015, Wal-Mart’s world was rocked when Amazon’s market capitalization 17 exceeded Wal-Mart’s. Soon, a massive decline in Wal-Mart share value ensued. 18 Wal-Mart’s senior leadership knew it had to act fast and decisively to swiftly 19 change the short-term market perspective on its E-commerce progress to keep its 20 share price up. It thus embarked on an overly-aggressive push to show meteoric 21 growth in its E-commerce business by any means possible – even, illegitimate ones. 22 In short, Wal-Mart sacrificed and betrayed its Founder’s key principles of integrity 23 and honesty, pushing those core values aside in its rush to win the E-commerce war 24 at all costs. In doing this, it realized it must silence any whistleblower who spoke 25 up against its “win at all costs” approach to e-Commerce growth. This case is 26 brought by one of Wal-Mart’s key E-commerce executives who refused to be 27 silenced in the face of demands that he look the other way to unlawful conduct 28 occurring with Wal-Mart’s E-commerce business. -2COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 3 of 69 JURISDICTION, VENUE AND EXHAUSTION 1 2 2. This court has federal question jurisdiction based on 28 U.S.C. § 1331, 3 the Sarbanes-Oxley Act, 18 U.S.C. §1514A, et seq. The first claim for relief arises 4 directly under federal law. 5 6 7 8 9 3. This court has supplemental jurisdiction over the second through eighth claims for relief pursuant to 28 U.S.C. § 1367. 4. The City of San Bruno in San Mateo County, is where the majority of the acts and omissions alleged occurred. 5. Venue is properly laid in this District pursuant to 28 U.S.C. § 10 1391(b)(1) & (2). The acts and omissions complained of herein occurred within 11 this District and this Division, and Mr. Huynh’s employment was within this 12 District and this Division. 13 14 15 6. Excluding interest and costs, the amount in controversy exceeds the statutory minimum of $75,000. 7. Plaintiff has exhausted any and all administrative remedies required to 16 file this complaint. Plaintiff timely filed a complaint of Sarbanes-Oxley retaliation 17 with the United States Department of Labor and the Department did not issue 18 findings or recommendations within the statutory one hundred and eighty days, thus 19 permitting a direct lawsuit by Plaintiff in federal court. Moreover, Plaintiff has 20 filed charges with the California Department of Fair Employment and Housing and 21 has received a “right to sue” notice from that agency. Plaintiff has given notice of 22 his intent to seek remedies under the Labor Code Private Attorney Generals Act of 23 2004 (PAGA) with the Labor and Workforce Development Agency and is awaiting 24 the expiration of the statutory period. Upon expiration of the statutory waiting 25 period, Plaintiff will amend this complaint to allege a claim seeking remedies under 26 PAGA. 27 28 -3COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 4 of 69 PARTIES 1 2 8. Mr. Huynh is a resident of the State of Washington. 3 9. Defendants WAL-MART STORES, INC., a Delaware Corporation; 4 WAL-MART ASSOCIATES, INC., a Delaware Corporation; and WAL- 5 MART.COM, INC., a Delaware Corporation (collectively referred to as Wal-Mart), 6 are, and at all times relevant hereto were, a publicly traded company with securities 7 registered under section 12(g) of the Securities Exchange Act of 1934 (“the 8 Exchange Act”). Specifically, and upon information and belief, WAL-MART 9 STORES, INC., a Delaware Corporation, is believed to be the parent company of 10 wholly-owned subsidiaries WAL-MART ASSOCIATES, INC., a Delaware 11 Corporation; and WAL-MART.COM, INC., a Delaware Corporation. At all times 12 herein mentioned, Wal-Mart was required to file periodic reports pursuant to 13 section 13 of the Exchange Act, including annual reports (10Ks), quarterly reports 14 (10Qs), and reports when certain events occur (8Ks). These periodic reports must 15 include or incorporate by reference types of information that would help investors 16 decide whether Wal-Mart’s securities are a good investment. At all times herein 17 mentioned, Wal-Mart was also required by 15 U.S.C. §78m(b)(2) to “(A) make and 18 keep books, records, and accounts, which, in reasonable detail, accurately and fairly 19 reflect the transactions and dispositions of the assets of the issuer; and (B) devise 20 and maintain an adequate system of internal accounting controls sufficient to 21 provide reasonable assurances that – (i) transactions are executed in accordance 22 with management’s general or specific authorization; (ii) transactions are recorded 23 as necessary (I) to permit preparation of financial statements in conformity with 24 generally accepted accounting principles or any other criteria applicable to such 25 statements, and (II) to maintain accountability for assets; (iii) access to assets is 26 permitted only in accordance with management’s general or specific 27 authorization....” 28 -4COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 5 of 69 1 10. Moreover, at all relevant times, Wal-Mart was subject to the 2 requirements of 15 U.S.C. §78m(b)(5), which prohibited attempts to “knowingly 3 circumvent or knowingly fail to implement a system of internal accounting controls 4 or knowingly falsify any book, record, or account described in paragraph 12.” 5 11. The true names and capacities, whether individual, corporate, agent, 6 representative, or otherwise of defendants named herein as DOES 1 through 50, 7 inclusive, are unknown to plaintiff at this time, who therefore sues these defendants 8 by fictitious names. Plaintiff will seek leave of court to amend this complaint to 9 allege their true names and capacities once that information has been ascertained. 10 On information and belief, and based on such information and belief, plaintiff 11 alleges that each of the fictitiously named defendants is responsible in some 12 manner, way or form and to some extent for acts, events and occurrences alleged in 13 this complaint. Wherever appearing in this complaint, each and every reference to 14 “defendants” is intended to be and shall be a reference to all defendants in this 15 action, and each of them, including but not limited to all fictitiously named 16 defendants. 17 12. Each of the defendants named herein was doing business as the agent, 18 principal, servant, representative, employer, employee, joint venturer, partner, 19 parent, subsidiary, affiliate and/or alter ego of each and every other defendant and 20 in doing the things hereinafter alleged was acting within the course or scope of such 21 authority as the agent, principal, servant, representative, employer, employee, joint 22 venturer, partner, parent, subsidiary, affiliate or alter ego with the permission and 23 consent of the remaining defendants. 24 SUBSTANTIVE ALLEGATIONS 25 26 A. Wal-Mart’s historical domination of the retail sector. 27 13. For years, Wal-Mart has dominated the retail sector as the undisputed 28 champion of America’s (if not the world’s) brick-and-mortar retail market. -5COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 6 of 69 1 14. Founded in 1962, by the late-1980s, Wal-Mart had become the most 2 profitable retailer in America, beating-out then rivals Kmart and Sears though both 3 had existed for decades longer than Wal-Mart. By 1990, Wal-Mart was America’s 4 largest retailer by revenue and, by the mid-1990s, was widely recognized as 5 America’s largest, most dominant retailer. It then began to expand internationally 6 stretching into Mexico and Canada in the early- to mid-1990s and then spreading 7 beyond North America into other continents in the mid- to late-1990s. 8 15. By 2002, Wal-Mart achieved the top spot on the Fortune 500 list of 9 America’s largest corporations with annual revenue of nearly $220 billion and 10 annual profits of $6.7 billion. 11 16. By 2005, Wal-Mart reported $312.4 billion in annual sales, more than 12 6,200 facilities worldwide – including 3,800 stores within the United States alone – 13 and it employed more than 1.6 million associates making it the largest private 14 employer in the country and largest private corporation in the world. 15 17. While Wal-Mart encountered its share of public relations and 16 regulatory challenges during these years of rapid expansion and monumental 17 growth, none of these challenges fundamentally threatened its status as America’s 18 most dominant retailer. Even in the face of repeated and consistent public backlash 19 against Wal-Mart’s market-dominance strategies, Wal-Mart retained its 20 indisputable status as America’s largest, most dominant and most profitable 21 retailer.1 22 23 24 25 26 27 28 1 Paragraphs 13 through 17 are plead on information and belief. -6COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 7 of 69 1 B. With the rise of E-commerce, Amazon becomes Wal-Mart’s 2 greatest long-term threat. Wal-Mart knows this. It is thus 3 desperate to gain the ground it had long lost to Amazon as a result 4 of Wal-Mart’s “tortoise-like ... pace” in pursuing the online retail 5 market. 6 18. Wal-Mart’s path to market dominance was paved by its traditional 7 brick-and-mortar retail business. But as society has progressed and evolved 8 technologically, so too have consumers’ purchasing practices for both day-to-day 9 necessities and luxury items. With the rise of E-commerce – that is, online retail 10 platforms – a growing segment of the purchasing dollars have shifted away from 11 traditional brick-and-mortar purchases into the online retail space. Each year, more 12 and more purchasing power has been diverted away from traditional brick-and- 13 mortar store purchases into the online E-commerce segment. And each year, the 14 predictions have been for this trend to continue at a more rapid pace year-after-year. 15 19. For years, Wal-Mart’s senior leadership recognized the trend: 16 expansion of the E-commerce market with a corresponding contraction of the 17 traditional brick-and-mortar market. Eventually, E-commerce sales will likely 18 exceed traditional brick-and-mortar retail sales. Thus, senior leadership identified 19 the need to catch-up in the E-commerce space, fearing that the growth of E- 20 commerce competition, and Wal-Mart’s “tortoise-like”2 entry into the E-commerce 21 sphere, posed the first serious long-term threat to Wal-Mart’s retail market- 22 dominance. 23 24 20. By at least 2011 forward, Wal-Mart’s senior leadership publicly, and repeatedly, acknowledged that its E-commerce business would continue to play an 25 26 27 28 2 “Walmart Slowly Makes Strides in E-Commerce,” by Jennifer Saba. New York Times (Dec. 27, 2016). Found at: https://www.nytimes.com/2016/12/27/business/dealbook/walmart-slowly-makesstrides-in-e-commerce.html -7COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 8 of 69 1 increasingly important role across its business segments. Wal-Mart thus knew it 2 needed to focus on and improve its E-commerce business to remain competitive on 3 a long-term basis. Yet, while Wal-Mart’s senior leadership acknowledged the need 4 to do so, it did not react swiftly enough to this long-term risk posed to Wal-Mart by 5 this shift in purchasing dollars and customer focus away from traditional brick-and- 6 mortar and into E-commerce. 7 21. In 2014 and 2015, Wal-Mart’s slow reaction to this significant shift in 8 consumer purchasing practices towards E-commerce began to be more apparent, 9 and to produce more immediate negative consequences. 10 22. In February 2014, Wal-Mart announced its year-end Fiscal Year 2014 11 numbers, reporting a 5.7% drop in full-year net income, a 3.2% drop in full-year 12 earnings per share and disappointing fourth quarter in-store sales. Analysts and 13 financial reporters continued to raise concern about Wal-Mart’s long-term position 14 following these reports. Then, in February 2015, following Wal-Mart’s report of its 15 Fiscal Year 2015 year-end numbers – including that its E-commerce growth fell 16 short of expectations – Wal-Mart’s share price dropped 3% wiping out $6 billion in 17 its market value. Still, Wal-Mart’s leadership continued to preach the message that 18 Wal-Mart was well-positioned in the E-commerce space. 19 23. At the same time, the market-leader of E-commerce (Amazon) reported 20 continued meteoric growth. On July 23, 2015, when Amazon reported a quarterly 21 profit of $.19 cents per share (contrary to predictions of a loss per share), Amazon’s 22 stock price soared to a staggering number exceeding $560 per share. Amazon’s 23 market capitalization of $262.7 billion now exceeded Wal-Mart’s market 24 capitalization of $233.5 by 12%. 25 24. It was not just Amazon’s growth that struck fear into Wal-Mart’s 26 senior leadership. Amazon also showed other key signs of being well-positioned to 27 maintain its status as the undisputed E-commerce champion into the future. For 28 -8COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 9 of 69 1 example, in 2014, an industry study reported that Amazon on average charged 9% 2 lower than Wal-Mart for comparable products. 3 25. Amazon had now solidified its status as the e-Commerce market- 4 dominator, and its meteoric rise was widely noted by analysts who began to saturate 5 the market with reports about the battle between Amazon and Wal-Mart for 6 dominance in the E-commerce space. Analysts and news reports began to depict 7 Amazon’s continued assault on Wal-Mart’s role as the market-dominator in stark 8 and understandable terms like that set forth below: 9 10 11 12 13 14 15 26. For the first time in decades, Wal-Mart faced a real threat. Analysts 16 began to report that Wal-Mart may be in long-term trouble. And Wal-Mart’s stock 17 began to plummet. 18 27. By late-2015, Wal-Mart’s stock price was in steep decline. On 19 October 18, 2015, Wal-Mart’s share price dropped ten percent (10%) – its biggest 20 single-day stock drop in twenty-five years – wiping out $21 billion in value. In 21 November 2015, Wal-Mart’s stock price reached a historic low of just under $57 22 per share, stock price having dropped ten percent (33%) since January 2015. 23 28. Bottom line: Having been late to the E-commerce game, Wal-Mart was 24 continuously playing catch-up. And Wal-Mart’s senior leadership knew that if it 25 did not seriously catch-up in the E-commerce race, Wal-Mart’s long-term status as 26 the undisputed champion of retail was in serious jeopardy. And with any signs of 27 long-term jeopardy or risk, the market would negatively react in the short-term 28 causing a corresponding hit to the stock-price and immediate negative impact on the -9COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 10 of 69 1 incentive compensation pay-outs of senior executive leadership. This is the 2 backdrop that explains everything that follows.3 3 4 C. and paints a misleadingly optimistic picture of its progress. 5 6 Wal-Mart pushes for massively aggressive E-commerce growth 29. Seeing the writing on the wall, Wal-Mart reacted by painting an 7 overly-optimistic picture of its current status in the race to catch-up in the E- 8 commerce space. 9 30. Wal-Mart knew that – no matter how well it performed in trying to 10 regain ground in the E-commerce land – at best, it would show only slow, 11 incremental progress. In other words, Wal-Mart knew that making true progress in 12 closing the gap with Amazon could only be a long-term goal that would take many, 13 many years. But if Wal-Mart did not show a positive short-term picture, the result 14 would be further dilution of its share value and corresponding hits to senior 15 leadership’s cashing-in on substantial incentive compensation. Thus, Wal-Mart’s 16 senior leadership knew they had to manage the market’s perception of its current 17 and short-term progress in achieving its long-term goals. Wal-Mart thus 18 endeavored to paint an overly-optimistic picture of its current and short-term 19 progress in the catching-up in the E-commerce space. 20 31. This was the consistent message, and the company stuck to it whenever 21 it could at all try to justify doing so. Indeed, in Wal-Mart’s view, there was no 22 room for an alternative message. If it wanted to preserve its status as the retail 23 market-dominator, Wal-Mart had to convince analysts, investors, the purchasing 24 public and the market that it could compete long-term with Amazon and others who 25 dominated the E-commerce space. It thus had a motive to silence anyone who 26 questioned its core efforts to gain ground and meaningfully compete in the E- 27 28 3 Paragraphs 18 through 28 are alleged on information and belief. - 10 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 11 of 69 1 commerce space – regardless of whether those questioning Wal-Mart’s practices 2 had valid, viable concerns.4 3 4 D. September 2014: Wal-Mart hires Tri Huynh as its Director of 5 Business Development, Marketplace Business. 6 1. 7 32. Tri Huynh’s background before Wal-Mart Tri Huynh was born in Vietnam to parents who resided in Long Xuyen 8 South Vietnam. At twelve years-old, Tri Huynh was separated from his parents and 9 sent to a refugee camp in Thailand with his aunt and two cousins. In 1980, Tri 10 Huynh was sponsored by his aunt’s daughter who had previously immigrated to the 11 United States right after the fall of Saigon to come to America. He thus left 12 Thailand and made his way to New York. 13 33. Tri Huynh’s family wanted him to immigrate to the United States for 14 the same reasons as so many other American immigrants. Their country was torn 15 apart by civil unrest and America promised a brighter future. Grateful for the 16 opportunities that America promised, Tri Huynh worked hard to achieve the 17 “American Dream.” 18 34. Tri Huynh spent his teenage years in a tough inner city neighborhood 19 in Queens. Struggling to master the English language, Mr. Huynh still graduated 20 near the top of his high school class. He then went on to obtain a Bachelor’s of 21 Engineering (B.E.) in Electrical Engineering, a Masters of Science (M.S.) in 22 Manufacturing Engineering from New York University - Polytechnic School of 23 Engineering and a Master of Business Administration (M.B.A.) with a focus on 24 Strategy and Finance from Harvard Business School. 25 26 35. Before he began at Wal-Mart, Mr. Huynh had a successful career as an executive building and leading business development and category management 27 28 4 Paragraphs 29 through 31 are alleged on information and belief. - 11 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 12 of 69 1 teams. His experience ranged from up-and-coming start-ups to large international 2 corporations. Some of his key experience included: 3 4 ! For approximately four years, Mr. Huynh led project teams at Booz Allen 5 & Hamilton, a global management consulting firm, where he focused on 6 solving complex business problems for clients in strategy development and 7 operational transformation. In this position, Mr. Huynh: designed and 8 executed post-merger integration of key supported functions for a firm client; 9 assisted in developing and implementing a transformative strategy to reduce 10 substantially a client’s overhead by operational standardizations and 11 centralization; led a “turnaround” of a subsidiary of a multinational 12 corporation focusing on redesigning the company’s organizational structure 13 and streamlining customer facing and support functions, etc. 14 15 ! At Infosys Technologies, a large global IT consulting company, Mr. Huynh 16 was responsible for managing and growing the profit and loss of multiple 17 client accounts. He was also involved in driving strategic deal pursuits using 18 a consultative selling framework to target new strategic accounts. 19 20 ! Mr. Huynh also served important roles in various start-up or fledgling 21 companies including: (1) at Array Networks, he was a founding member 22 focused on fund raising, strategic planning, product management and 23 marketing; (2) at Motif, Inc., he served as Vice President of Strategy and 24 Operations Effectiveness working directly with the Chief Executive Officer 25 to develop and implement a turnaround and go-to-market strategy to drive 26 accelerated revenue growth; and (3) at Mu Sigma, Inc., he served as Regional 27 Head, Client Engagement where he was responsible for managing multiple 28 - 12 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 13 of 69 1 teams to deliver analytics projects for various clients to generate strategic 2 insights that drive action to enhance their business. 3 4 36. Moreover, and most important from Wal-Mart’s perspective, Mr. 5 Huynh spent approximately three years working as a Category Leader in Amazon’s 6 Marketplace/3P Consumer Electronics Business. In this role, Mr. Huynh: owned 7 the profit and loss for the Consumer Electronics 3P (“third-party”) Business; 8 managed and lead teams that executed seller acquisition and scaling, selection 9 expansion, catalog data quality, and other similar duties. In his work at Amazon, 10 Mr. Huynh gained experience that would be invaluable for Wal-Mart in its efforts 11 to ramp-up its E-commerce segment. Specifically, at Amazon, Mr. Huynh had the 12 opportunity to work with two members of Amazon’s senior leadership (S-Team 13 reporting directly to Amazon founder Jeff Bezos) where he learned firsthand how to 14 deliver value and drive a superior shopping experience for the customers. He also 15 drove to fruition several strategic projects for Amazon – e.g., led a twenty-one (21) 16 month project to develop and roll out a new Customer Electronics Accessories 17 category, etc. 18 2. 19 division. 20 21 Tri Huynh’s hiring into Wal-Mart and its E-commerce 37. On or about September 2, 2014, Mr. Huynh began working for Wal- 22 Mart’s E-commerce division as its Director of Business Development Marketplace 23 Business. 24 38. When he accepted the position at Wal-Mart, Mr. Huynh resided with 25 his wife and two children – then ages twelve (12) and fifteen (15) – in Seattle, 26 Washington. Because his young children were settled in school at critical ages, he 27 and his wife were concerned about uprooting his family to relocate to California. 28 Instead, Mr. Huynh accepted the position working in San Bruno for Wal-Mart - 13 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 14 of 69 1 commuting weekly at his own expense between San Bruno and Seattle leaving his 2 family each week to work for Wal-Mart. 3 39. Wal-Mart’s E-commerce division offers customers the ability to 4 purchase items online via Wal-Mart’s website (www.Walmart.com) through two 5 different methods. The first method – called “first party” or “1P” – involves Wal- 6 Mart offering its inventory of products direct-to-customer by the customer 7 purchasing an item via Wal-Mart’s website. Wal-Mart then fills and processes this 8 “first party” order through Wal-Mart’s inventory and supply chain. The second 9 method – called “third party” or “3P” – involves Wal-Mart permitting third-party 10 sellers to sell their products from their inventory via Wal-Mart’s website. In this 11 “third-party” or “3P” model, Wal-Mart provides “third-party” sellers the ability to 12 offer their products for purchase on Wal-Mart’s “third-party” marketplace at 13 Walmart.com, and Wal-Mart then charges a commission to the “third-party” seller 14 for each completed sales transaction. Wal-Mart’s “third-party” E-commerce 15 business is referred to at times as its “Marketplace.” 16 40. At the outset, as the Director of Business Development, Marketplace 17 Business, Mr. Huynh’s duties included both recruiting new “third-party”/“3P” 18 sellers and handling their onboarding once the new seller became an authorized 19 Wal-Mart “third party” seller through www.Walmart.com. As the Director of 20 Business Development for the Marketplace business, Mr. Huynh led a team of 21 approximately forty (40) business development associates. 22 23 E. performance. 24 25 Mr. Huynh performs well, and Wal-Mart recognizes his positive 41. During his employment, Wal-Mart recognized and rewarded Mr. 26 Huynh for positive work performance. For example, and not by way of limitation 27 but merely by way of illustration: 28 - 14 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 15 of 69 1 ! On April 3, 2015, Mr. Huynh was given his Fiscal Year 2015 written 2 performance evaluation. In his Fiscal Year 2015 written performance 3 evaluation, Mr. Huynh received an overall rating of “Solid Performer” and 4 either “Exceeds Expectations” or “Solid Performer” in every single 5 individual category. 6 7 ! In October 2015, Mr. Huynh was granted a discretionary grant of two 8 hundred thousand dollars ($200,000.00) worth of Restricted Stock Options 9 (RSUs) in a special grant vesting over three years. This RSU grant was not a 10 required component of Mr. Huynh’s compensation package. Rather, it was a 11 discretionary grant and Mr. Huynh, suggesting management’s positive view 12 of Mr. Nuynh’s performance. 13 14 ! In or about mid-2015 through 2016, Mr. Huynh was repeatedly selected to 15 be a spokesperson for the Global E-Commerce Group to present to newly- 16 elected officers who came to the San Bruno location where Mr. Huynh 17 worked. 18 19 ! In early-2016, Mr. Huynh was assured that if he met his year-end goal of 20 recruiting three thousand (3,000) new sellers, he would be promoted to a 21 Senior Director. 22 23 ! In March 2016, Mr. Huynh was selected by Global Marketplace Senior 24 Vice President Seth Beal (Mr. Huynh’s then direct supervisor) and Suri Priya 25 (VP of Human Resources) to attend the shareholder meeting in Bentonville in 26 June 2016, which selection was approved by the Walmart.com leadership. 27 28 - 15 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 16 of 69 1 ! In March 2016, Mr. Huynh was given his Fiscal Year 2016 written 2 performance evaluation. This evaluation was even better than his Fiscal Year 3 2015 evaluation. Mr. Huynh received an overall rating of “Exceeds 4 Expectations,” and achieved one “Role Model,” eight “Exceeds 5 Expectations,” and five “Solid Performer” individual category ratings. The 6 review confirmed that “FY 16 marked a significant success for Tri as a 7 Marketplace leader and emerging organizational leader. Tri was able to 8 channel his high intellect and skill set to tackle challenging problems and 9 objectives while continually adjusting in an environment of constant change. 10 He was able to drive material value to the goals, even beyond his immediate 11 domain area, demonstrating his passion for the customer, seller, and the 12 success of the Marketplace program. He repeatedly took methodical 13 analytical approaches to devise and revise strategies through the year, which 14 places his team and function in position for continued success and rapid 15 scaling. Tri should feel very proud for exceeding his goals and 16 competencies, and look to FY17 to continue his progress and develop a 17 broader more far reaching leadership profile.” This review praised Mr. 18 Huynh for his successful acquisition and onboarding of sellers which was 19 noted to be “not only effective and accurate, [but it] also demonstrated Tri’s 20 strategic leadership, resourcefulness, and his ability to deviate from 21 conventional approaches when necessary to create a new best practice.” 22 23 42. In short, Mr. Huynh performed well for Wal-Mart and Wal-Mart 24 recognized his positive performance – that is, until Mr. Huynh refused to back- 25 down when repeatedly instructed to stop raising concerns about conduct he 26 reasonably believed violated the law within Wal-Mart’s E-commerce business. 27 28 - 16 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 17 of 69 1 F. Mr. Huynh observes, identifies and reports concerns that he 2 reasonably believed were violations of the law. Instead of 3 meaningfully investigating his concerns, Wal-Mart retaliates 4 against Mr. Huynh. 5 43. During his employment, Mr. Huynh observed and/or learned of what 6 he reasonably believed were violations of the law, which he disclosed and/or 7 reported to his superiors and others who had the authority to act upon his reports 8 and/or disclosures. Mr. Huynh’s conduct, his reports and his disclosures were 9 protected by SOX’s anti-retaliation provisions because Mr. Huynh reasonably 10 believed the things he was reporting were, inter alia, violations of Wal-Mart’s 11 internal controls, an indication that Wal-Mart failed to have or maintain proper and 12 sufficient internal controls, violations of generally accepted accounting principles 13 (GAAP), potential fraud against shareholders, potential securities fraud, and/or mail 14 and/or wire fraud, etc. 15 44. One example: Mr. Huynh reported concerns about the design of, and 16 specifications used in, Wal-Mart’s Global Marketplace Platform’s (GMP), 17 including (but not limited to) the GMP’s inability to categorize properly sellers’ 18 products into the correct product contract categories. 19 45. When a customer purchases a “third-party” seller’s item on Wal-Mart’s 20 online GMP, Wal-Mart charges a commission on the purchase to the “third-party” 21 seller. The applicable commission percentage for the transaction is spelled-out in 22 the contract between Wal-Mart and the “third-party” seller. When a transaction 23 occurs, Wal-Mart’s online GMP categorizes the product sold into a product 24 category on a product-by-product basis. Wal-Mart’s online GMP does this through 25 a machine learning program that tries to identify the proper category for the item 26 upon each transaction being made. 27 28 46. But Wal-Mart’s online GMP’s categorization process does not work as well as it should work. Rather, Wal-Mart’s online GMP regularly fails to find the - 17 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 18 of 69 1 correct category for the item, even though the correct category does exist and 2 should be found. The result: the GMP categorizes the item as “unrecognized.” 3 47. The mis-categorization of products into an “unrecognized” category 4 typically results in charging an excessive commission fee because the default 5 commission percentage for “unrecognized” products was fifteen percent (15%). In 6 contrast, many of the products that were truly driving Wal-Mart’s GMV of its 7 online efforts were products that were subject to smaller commissions percentages. 8 For example, electronics and personal computers typically constitute a significant 9 percentage of Wal-Mart’s GMP. But these items tend to have smaller commission 10 percentages in the six to eight percent (6-8%) range. Thus, by consistently mis- 11 categorizing these items, Wal-Mart charged excessive commission fees on them 12 (and many other items) to its third-party sellers. 13 48. The Securities and Exchange Commission (SEC) regulations define 14 internal controls as including “a process designed ... to provide reasonable 15 assurance regarding the reliability of financial reporting and the preparation of 16 financial statements for external purposes in accordance with generally accepted 17 accounting principles....” 17 C.F.R. §240.13a-15(f). These SEC regulations further 18 state that internal controls include “those policies and procedures that” ... “(1) 19 Pertain to the maintenance of records that in reasonable detail accurately and fairly 20 reflect the transactions and dispositions of the assets of the issuer; (2) Provide 21 reasonable assurance that transactions are recorded as necessary to permit 22 preparation of financial statements in accordance with generally accepted 23 accounting principles, and that receipts and expenditures of the issuer are being 24 made only in accordance with authorizations of management and directors of the 25 issuer ....” 17 C.F.R. §240.13a-15(f)(1), (2). Here, while Wal-Mart’s charging of 26 excessive commissions resulted from a system design flaw, it also exposed a failure 27 to have proper, robust controls and/or a control environment that would detect and 28 promptly remedy the problems. These failures had a direct impact on financial - 18 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 19 of 69 1 reporting because, by charging excessive commissions, Wal-Mart was actually 2 over-stating its revenue to the extent that it would be later required to pay-back the 3 excess commissions. Finally, by listing and stating to sellers that the commission 4 charged one be one amount, yet by knowingly continuing to charge a different 5 amount, these acts could constitute mail and/or wire fraud. 6 49. Mr. Huynh reported and disclosed his concerns that the GMP design 7 and system flaws would cause negative consequences to Wal-Mart (and its 8 shareholders), including, inter alia, because it would excessively mis-designate 9 products as “unrecognized” products thereby overcharging third-party sellers. 10 Overcharging sellers could create liability – including, but not limited to, mail 11 and/or wire fraud liability for Wal-Mart – and it could overstate Wal-Mart’s 12 revenues to the extent that the improperly charged commissions were included on 13 Wal-Mart’s financials when, in fact, they were required to repaid back to the 14 overcharged seller. 15 50. Mr. Huynh’s concerns about the improper design of Wal-Mart’s GMP 16 were not theoretical, nor were they misplaced concerns. Rather, his concerns 17 proved true. As just one example, and not by way of limitation, but merely by way 18 of illustration, in March 2016, a “third-party” seller reported to Wal-Mart that 19 “commission accuracy is a big issue” and that it had sixteen (16) open tickets for 20 commission errors in the last sixteen (16) weeks. This “third-party” seller 21 complained of having to spend a tremendous amount of time reconciling the 22 commission fees charged by Wal-Mart to the “third-party” seller, and it estimated 23 that only ten percent (10%) of the errors it spotted had been resolved. 24 51. Mr. Huynh also learned of another problem within Wal-Mart’s online 25 Marketplace platform, including a major flaw or error within Wal-Mart’s Pangaea 26 system. In or about March 2016, Wal-Mart received a complaint from a large third- 27 party seller that Wal-Mart had failed to process three thousand (3,000) customer 28 return orders. Wal-Mart looked into the complaint and concluded that there was a - 19 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 20 of 69 1 coding and system error within the Pangaea system that caused Wal-Mart to serially 2 and systematically fail to process certain returns or refund orders from certain 3 “third-party” sellers since September 8, 2015. In short, Wal-Mart had improperly 4 failed to process customer returns worth over seven million dollars ($7,000,000), 5 which resulted in an inflation of GMV/sales by that amount from September 2015 6 through the discovery of the issue in March 2016. 7 52. Suffice it to say, the above issues were warning signs of potentially 8 serious problems within Wal-Mart’s online Marketplace platform. And they were 9 also serious signs of Wal-Mart’s failure to have proper internal controls for 10 financial reporting purposes because, inter alia, Wal-Mart’s existing control system 11 failed to detect and/or remedy the problems on a timely basis. Indeed, Wal-Mart’s 12 leadership internally described the nearly half a year failure to process certain 13 “third-party” seller returns as a “colossal issue,” and some within Wal-Mart 14 acknowledged that these issues exposed the need to create an effective audit 15 process within its Marketplace and to improve the existing controls within Wal- 16 Mart’s Marketplace. Wal-Mart also internally questioned whether this failure to 17 process returned item issues would require any additional, or corrected, financial 18 reporting. Bottom line: These issues implicated Sarbanes-Oxley compliance 19 concerns directly. 20 53. Throughout approximately March through May of 2016, Mr. Huynh 21 continued to raise concerns and make disclosures about the above issues, pressing 22 his superiors to address the bigger picture systemic flaws including the overall lack 23 of effective internal controls regarding these issues. Mr. Huynh continued to press 24 forward his concern that if Wal-Mart did not properly address these issues, its 25 failure to do so could have serious long-term implications for its critically- 26 important E-commerce business. Mr. Huynh also pressed the need to develop better 27 internal controls for risk management, compliance and financial reporting purposes. 28 In response, Mr. Huynh was told to stop raising these concerns and not to email at - 20 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 21 of 69 1 all about them or document any similar concerns, and then he was retaliated against 2 for continuing to press his concerns despite having been warned not to do so. 3 4 G. management subtly turns on him. 5 6 As Mr. Huynh continues to press his concerns forward, his 54. In early-2016, Marketplace Senior Vice President Seth Beal told Mr. 7 Huynh that if he met his goal of recruiting three thousand (3,000) new sellers that 8 year, he would be promoted the next fiscal year to Senior Director. To that end, Mr. 9 Huynh was told he would undergo a 360-degree feedback process in calendar year 10 2016 as a tool to prepare him for the anticipated promotion. 11 55. To this point in his time at Wal-Mart, the message Mr. Huynh had been 12 told by his superiors since his hire by Wal-Mart was clear: He was performing 13 above expectations and he would continue to have a promising future within Wal- 14 Mart’s growing E-commerce business. In fact, most recently, his FY 2016 15 performance evaluation specifically noted that “FY16 marked a significant success 16 for [Mr. Huynh] as a Marketplace leader and emerging organizational leader,” and 17 acknowledged that Mr. Huynh should “look to FY 17 to continue his progress and 18 develop a broader more far reaching leadership profile.” 19 56. But when, as discussed above, Mr. Huynh continued to press forward 20 his concerns after he was told to stop doing so, things began to change. First, Mr. 21 Huynh’s superior told him directly and emphatically to stop reporting or disclosing 22 things like the above issues and to not email about any concerns of this nature. In 23 response to Mr. Huynh’s continuing to raise these concerns, his direct supervisor 24 threatened Mr. Huynh to “stay within your job’s boundaries or I’ll find someone 25 else.” Second, instead of the 360-degree feedback being used as a tool to train him 26 for the future promotion, Mr. Huynh learned from a member of his team that the 27 360-degree feedback process seemed designed to develop negative responses about 28 Mr. Huynh more than anything else. Third, Mr. Huynh began to be isolated from - 21 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 22 of 69 1 certain projects, meetings or parts of the job – often, and not coincidentally, this 2 isolation had the effect of removing Mr. Huynh from areas of the job that would 3 have naturally led him to discover more and more of the above described problems 4 within Wal-Mart’s E-commerce business. 5 6 H. Mr. Huynh gives notice of his ADHD disability. Wal-Mart does 7 not provide any accommodations. Instead, his superiors continue 8 to criticize him for disability-based conduct. 9 57. In late-May of 2016, after Mr. Huynh was criticized for refusing to 10 follow the direction of “staying within the boundaries” of his job – even if that 11 meant turning a blind-eye to concerns of unlawful conduct – Mr. Huynh shared 12 with his direct supervisor and human resources that he suffered from a hidden 13 mental disability – Attention Deficit Hyperactivity Disorder (ADHD). Mr. Huynh 14 provided his supervisor and human resources with a detailed presentation about his 15 ADHD, his progress in trying to treat and manage it, and how it impacts his day-to- 16 day behavior and functioning. Mr. Huynh directly explained that his ADHD caused 17 challenges and limitations in emotional self-regulation, but he also explained how 18 he is and has been committed to improving himself in that regard. 19 58. Neither human resources, nor anyone from Wal-Mart, offered any 20 accommodations to assist Mr. Huynh. Instead, later on, his management continued 21 to criticize Mr. Huynh for disability-related conduct. 22 23 I. Fall of 2016: Senior leadership continues to report misleadingly 24 optimistic E-commerce results to the investing public – still, based 25 on indirect measures and notwithstanding the known (yet 26 concealed) internal control and process and procedure failures. 27 28 59. Wal-Mart files consolidated financials for all of its business segments, each of which wrap-up to the parent company’s financials. Wal-Mart’s E- 22 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 23 of 69 1 commerce business is a segment of Wal-Mart’s global business. Thus, Wal-Mart’s 2 E-commerce financial results are reported as part of Wal-Mart’s overall operations 3 within its consolidated financials and filings. Therefore, Wal-Mart does not report 4 to the investing public its actual E- commerce figures, nor does it breakdown the 5 figures by “first-party” versus “third-party.” However, traditionally, “third-party” 6 marketplaces tend to be far more profitable than a “first-party” online business. 7 60. Consequently, when the investing public tries to determine the success 8 or failure of Wal-Mart’s E-commerce business, it must do so inferentially by 9 extrapolating from indirect measures (e.g., SKU number growth, seller number 10 growth, GMV, etc.) rather than by simply reviewing actual, published financial 11 results specific to the E-commerce segment and distinguishing between “first-party” 12 versus “third-party” figures. Wal-Mart thus has an incentive to boost-up these 13 indirect measures of the profitable “third-party” business even if doing so does not 14 actually substantially contribute to Wal-Mart’s actual E-commerce success. By 15 boosting-up these indirect measures, Wal-Mart paints a picture of E-commerce 16 growth and success (including specifically in the typically more profitable “third- 17 party” Marketplace) that, in fact, misleads the investing public. And, these indirect 18 measures are easy to manipulate to produce the appearance of growth even if the 19 legitimate and sustainable growth is not truly occurring. 20 61. Keenly aware of the importance of these indirect measures, in the 21 second half of 2016, Wal-Mart’s leadership continued to report massive growth in 22 them to the investing public. For example, and not by way of limitation but merely 23 by way of illustration: In its August 18, 2016 second quarter FY17 earnings call, 24 Wal-Mart’s Chief Executive Officer Doug McMillon reported that Wal-Mart had 25 added seven million (7,000,000) SKUs to its Marketplace offerings since the 26 beginning of the year and now reached fifteen million (15,000,000) SKUs on its 27 Marketplace. Thus, forty-six percent (46%) of the total SKUs Wal-Mart then 28 offered were newly-obtained within the last eight (8) months. - 23 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 24 of 69 1 62. Likewise, in an internal communication in early-October 2016, one 2 senior leader within Wal-Mart’s E-commerce business boasted that the “third- 3 party” Marketplace had reached two thousand and seventy-four (2,074) sellers up 4 from a mere one hundred and eighty (180) at the beginning of the year, that it 5 expected to reach three thousand (3,000) sellers by the Holidays. This same senior 6 leader also reported and boasted that Wal-Mart currently had sixteen million five 7 hundred thousand (16,500,000) unique SKUs compared to six million two hundred 8 thousand (6,200,000) at year’s beginning. Mr. Huynh realized these numbers 9 would be later reported to the public in a quarterly earnings call or otherwise. 10 63. Even these massive growth results were not enough in senior 11 leadership’s eyes. After all, to Wal-Mart, nothing was enough in its race to regain 12 lost ground in E-commerce. When Mr. Huynh’s recruiting team crushed aggressive 13 targets, leadership just responded by increasing targets even more. Thus, for 14 example and not by way of limitation but merely by way of illustration, while the 15 goal for seller recruitment at Fiscal Year 2017’s beginning (in March 2016) was to 16 recruit an additional three thousand (3,000) new “third-party” sellers, that goal 17 more than doubled during the fiscal year to a goal of recruiting seven thousand 18 (7,000) new “third-party” sellers. 19 64. Mr. Huynh became increasingly concerned that the pressure to boost 20 these indirect measures (e.g., total number of sellers, total SKU numbers, etc.) was 21 being met, at least in part, by improperly sacrificing quality by lowering standards 22 for product listings and then failing to properly monitor the “third-party” seller’s 23 performance, and product listings, through a robust control system after the seller 24 went live on Wal-Mart’s Marketplace. An online Marketplace provider like Wal- 25 Mart must balance the desire to have a large number of third-party sellers (and, 26 therefore, likely a greater number of products as well as greater product availability) 27 against the need to ensure quality sellers. Poor quality sellers – e.g., poor customer 28 service, excessive prices, low-quality products/SKUs, etc. – can impair the - 24 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 25 of 69 1 customer experience and hurt customer development and retention. Failing to 2 properly monitor poor quality “third-party” sellers can also result in those sellers 3 listing inappropriate products and/or having their redundant SKUs improperly 4 counted as unique SKUs (thereby falsely inflating SKU growth). Wal-Mart’s rush 5 to appear in the short-term to be making astronomical strides in gaining ground 6 long lost to Amazon made it reduce “third-party” seller standards to the point of 7 compromising its Marketplace quality, thereby compromising and jeopardizing the 8 Wal-Mart’s online Marketplace. 9 65. Mr. Huynh had previously reported concerns that the reduction in 10 “third-party” seller pre-launch or go-live standards to accelerate the speed by which 11 the sellers go-live on Wal-Mart’s Marketplace (thereby boosting total SKUs, etc.) 12 would result in lower-quality sellers and SKUs infiltrating Wal-Mart’s Marketplace. 13 Mr. Huynh also expressed concerns that this was being done in an environment 14 which already lacked proper controls to mitigate against potential risks of this 15 speedy ramp-up of go-live acceleration. 16 66. In fact, as Mr. Huynh knew, by early-October 2016, Wal-Mart’s E- 17 commerce senior leadership could not deny the existence of these serious control 18 problems. For example, the same senior leader who boasted in early-October 2016 19 that the “third-party” Marketplace now had two thousand and seventy-four (2,074) 20 and sixteen million five hundred thousand (16,500,000) unique SKUs 21 acknowledged in this same supposed “good news” report that Wal-Mart’s E- 22 commerce business had hit “some headwinds in the past couple of weeks” including 23 that: (1) Wal-Mart had to suspend its third-largest “third-party” seller as a result of 24 continued and repeated problems with poor customer service and an excessively 25 high cancellation rate; and (2) Wal-Mart’s Marketplace had suffered serious public 26 embarrassment when inappropriate items were listed on its Marketplace by “third- 27 party” sellers. 28 - 25 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 26 of 69 1 2 67. Among other things, and merely by way of example and not by way of limitation, Wal-Mart’s online “third-party” Marketplace had items listed such as: 3 4 ! “Tranny Granny” Costume: An offensive, inappropriate Halloween 5 costume mocking transgender people: 6 7 8 9 10 11 12 13 14 15 ! “Razor Blade Suicide Scar Wound Latex Costume Make Up”: A highly 16 disturbing supposed Halloween costume that mocks and makes light of the 17 tragedy of suicide and the challenge of mental health struggles: 18 19 20 21 22 23 24 25 26 68. Wal-Mart cannot defend products like this being listed on its site, nor 27 did it in real-time. Rather, it removed these items (belatedly) and publicly 28 acknowledged that they were inappropriate and never should have made their way - 26 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 27 of 69 1 onto Wal-Mart’s online offerings. For example, Wal-Mart has described the suicide 2 costume as “appalling” and “unacceptable for a third-party seller to list it on our 3 marketplace,” which “clearly violated our prohibited items policy....” 4 69. But, Wal-Mart’s action was too little, too late. It had already failed to 5 prevent these inappropriate items from being listed on its site, and the public 6 backlash to Wal-Mart’s failure was already occurring as various media outlets 7 reported that these inappropriate items were listed on Wal-Mart’s online 8 Marketplace. 9 70. Worse, while it acknowledged the inappropriate nature of these and 10 other product listings, Wal-Mart continued to fail to address, or to address 11 adequately, the underlying source of the problem. The aggressive push to ramp-up 12 the indirect measures of E-commerce success (e.g., SKU numbers, etc.) – including 13 without proper controls in place to monitor them – had allowed unproven sellers to 14 list low-quality assortments/SKUs resulting in their inappropriate products 15 infiltrating Wal-Mart’s online Marketplace. 16 71. With time, Mr. Huynh came to conclude that Wal-Mart was 17 intentionally pushing for massive growth of these indirect measures (e.g., SKU 18 growth, etc.) as a way to misleading the investing public because Wal-Mart’s E- 19 commerce leadership knew that these indirect measures did not tell the true picture 20 of the state of Wal-Mart’s E-commerce growth and actually overstated that growth. 21 One way to rapidly increase the number of SKUs offered was to rapidly recruit new 22 “third-party” sellers all of which would bring a series of new SKUs onto Wal- 23 Mart’s Marketplace. The more “third-party” sellers operating in Wal-Mart’s 24 Marketplace, the more growth in SKUs would result. Yet, Mr. Huynh came to 25 conclude that Wal-Mart’s rapid push to recruit, without proper support post- 26 recruitment, led to Wal-Mart falsely reporting its SKU growth, inter alia and not by 27 way of limitation by: (a) covering-up the inability to properly scale for the majority 28 of sellers post-recruitment, Wal-Mart resorted to catalogue stuffing – that is, - 27 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 28 of 69 1 allowing a small number of lower-quality “third-party” sellers to upload a massive 2 number of SKUs without ensuring the SKUs were quality (e.g., relevant to 3 customer, excessive pricing, buyable, etc.); (b) listing redundant SKU numbers (that 4 is, identical SKUs were being treated as different, separate SKUs); and (c) allowing 5 non-buyable SKUs to be included in its total Marketplace SKU count. Moreover, 6 with the continued push to recruit at a meteoric pace, but without a corresponding 7 ramp-up of back-end support at onboarding and seller management stages, these 8 problems would simply continue and compound on themselves. In short, Wal-Mart 9 was reporting a misleading picture of its online Marketplace growth. 10 11 J. swiftly responds with more retaliation. 12 13 Fall 2016: Mr. Huynh continues to press his concerns. Wal-Mart 72. Also during this time period and in recent months, Mr. Huynh 14 continued to learn of both continued, as well as other troubling, concerns. For 15 example, and without limitation and merely by way of illustration: 16 17 ! Some sellers continued to report that Wal-Mart had continued to fail to 18 timely pay it or them. 19 20 ! In September 2016, a “third-party” seller reported continued examples of 21 Wal-Mart’s failure to pay the proper and correct commission rates. 22 Specifically, the seller provided evidence that Wal-Mart’s online platform 23 stated that the commission rate Wal-Mart charged the “third-party” seller on 24 a cell phone purchase would be fifteen percent (15%) – contrary to other 25 documents and Wal-Mart’s representations that stated that a cell phone 26 commission rate of eight percent (8%). Then, when the seller brought this to 27 the attention of Wal-Mart, the internal dialogue within Wal-Mart revealed 28 that certain associates within Wal-Mart’s E-commerce business claimed to - 28 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 29 of 69 1 believe that the erroneous fifteen percent (15%) commission rate was actually 2 correct. By this time, Mr. Huynh’s concerns about the commission 3 overcharge issue had become more serious in his mind. He had originally 4 reported these concerns as early as December 2014. He then reiterated them 5 in writing in December 2015. By March 2016, there were clear and 6 documented examples of this issue occurring. Yet, six months later, Wal- 7 Mart had not remedied the problem nor, to Mr. Huynh’s understanding, had it 8 taken serious and sufficent steps to try to remedy it. Given the entire history 9 of the issue, Mr. Huynh had come to conclude that Wal-Mart had 10 intentionally perpetrated this fraud or, at least, intentionally allowed it to 11 continue after knowing it was occurring. Indeed, by continuing to represent a 12 certain commission percentage for certain items to “third-party” sellers, while 13 knowing its system would often overcharge, Mr. Huynh was concerned that 14 Wal-Mart was committing a continuing mail and/or wire fraud: lying to the 15 “third-party” sellers about what commission rate it would actually charge and 16 then actually charging a higher commission. 17 18 ! In September 2016, as part of the Marketplace’s review of its third quarter 19 FY2017 progress, Mr. Huynh received confirmation that: 20 21 - Wal-Mart recognized that it needed to reduce its “refund failure rate.” 22 Specifically, Wal-Mart acknowledged its need to “[i]dentify root 23 causes of GMP refund ‘failures’ and work with internal teams to 24 resolve and implement future prevention steps.” In other words, Wal- 25 Mart recognized a known weakness in its E-commerce internal 26 controls that needed to be fixed because it continued to leave the 27 company vulnerable. Yet, though the issue was identified in March 28 - 29 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 30 of 69 1 2016, half a year later the “status” on this necessary control fix was 2 merely that Wal-Mart was now “ready to start.” 3 4 - Wal-Mart likewise recognized that it needed to achieve a “resolution 5 of chronic tech issues” and, to do this, it needed to “[l]everage data to 6 drive resolution on chronic issues.” Even though this was admittedly a 7 “chronic issue” – yet again – the status of this critical need was merely 8 “ready to start.” 9 10 - Wal-Mart recognized that it needed to increase its seller satisfaction 11 scores by identifying, investigating and resolving “issues driving low 12 seller satisfaction,” but – yet again – this chronic, longstanding issue 13 was merely determined to be merely “ready to start.” 14 15 - Wal-Mart similarly recognized it had needed to “improve level of 16 support to Category Managers” by, among other things, revising its 17 relevant internal controls so that they were based on Marketplace- 18 centric parameters, which it had previously failed to do. 19 20 - Wal-Mart also recognized the need to “[r]educe customer escalation 21 rate” by identifying “poor performing sellers” and getting back to its 22 roots of having a “customer-centric focus,” which its E-commerce 23 business had not lived up to. 24 25 73. In or about October 2016, Mr. Huynh (contrary to his boss’ demand) 26 steadfastly pressed forward his concerns about, inter alia: the lack of proper 27 controls and weaknesses within Wal-Mart’s internal controls; commission 28 overcharging concerns; structural flaws with Wal-Mart’s online platform which - 30 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 31 of 69 1 were still unresolved and also exposed a lack of sufficient controls; Wal-Mart’s 2 inability to scale at the rate being demanded in terms of E-commerce growth – that 3 is, the disconnect between the recruitment pace and the post-recruitment ability to 4 onboard and manage the “third-party” seller quality; timely payment issues; 5 misrepresentation of Wal-Mart’s Marketplace true growth to the public; etc. Mr. 6 Huynh raised these issues at this time both with his direct supervisor (who again 7 told him to just worry about recruiting more sellers and not worry about what 8 happens after recruitment) as well as with others. 9 74. Among other things in or about October and November 2016, Mr. 10 Huynh disclosed that there was a serious disconnect between the push to continue 11 recruiting new “third-party” sellers at a meteoric pace, and the ability of the 12 onboarding and seller management teams to support that rapid seller growth. Yet, 13 Wal-Mart continued to paint an overly-optimistic, misleading report about the 14 success of Wal-Mart’s rapid Marketplace expansion. In Mr. Huynh’s words, it was 15 like his business development (recruitment) team was at the front end operating 16 with a twelve inch pipe but then the pipe narrowed to a two inch pipe in the back- 17 end – hence, the systemic commission accuracy issues, seller satisfaction issues, 18 reputational issues, refund and payment issues, etc. Mr. Huynh expressed concerns 19 that the “pipe was going to burst,” all of which would expose that Wal-Mart was 20 painting a false rosy picture about the status of its E-commerce business through the 21 inflation of the indirect measures like SKU growth. Mr. Huynh also reported his 22 concerns that negative word of mouth would spread through the seller community 23 that Wal-Mart ripped-off “Mom and Pop” sellers by overcharging commissions or 24 that, through the relaxed pre-launch/go-live standards necessary to achieve the rapid 25 growth management demanded, had allowed price-gouging sellers into its 26 Marketplace contrary to Wal-Mart’s fundamental message: Save Money, Live 27 Better. 28 - 31 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 32 of 69 1 75. In or about September 2016, Wal-Mart acquired one of its competitor 2 online marketplaces (Jet.com) for $3.3 billion dollars. Going forward, the plan was 3 to integrate some aspects of Jet.com and Walmart.com. The Jet.com team, and the 4 Wal-Mart E-commerce team, would work together in some respects. Among other 5 things, Wal-Mart’s E-commerce business would now have a new set of eyes 6 looking over it – those of Jet.com’s Founder Marc Lore who became Wal-Mart’s 7 Chief Executive Officer (CEO) of E-commerce U.S. This created an additional 8 incentive for those who had created, contributed to, ignored, and/or allowed the 9 concerns Mr. Huynh had pressed forward to continue without appropriate, timely 10 fixes to hide or conceal their failures, and get rid of anyone who might expose their 11 failures to new management. Presumably realizing that a fresh set of eyes may see 12 things the way Mr. Huynh’s eyes had seen them, soon after Mr. Huynh reiterated 13 the above concerns to his boss in early-October 2014, Mr. Huynh’s boss circulated 14 an email acknowledging some of the concerns and asking questions like whether: 15 “commissions [are] being correctly charged?”; “our financial systems correctly 16 report[] commissions?,”; “our management systems [are] correctly reporting 17 commissions”; etc. 18 76. But even though at least some of Mr. Huynh’s concerns were thereby 19 at least indirectly acknowledged by his superior to be valid and legitimate, his 20 superiors were angry and annoyed at him for continuing to raise them – especially, 21 because his direct boss had told him to stop doing so. They also knew or suspected 22 that he would likely continue to express these same concerns to the new 23 management team from the Jet.com acquisition if he continued to work with the 24 new Jet.com team long enough. Thus, not surprisingly, the retaliation swiftly 25 followed his continued raising of these issues (upon information and belief, likely 26 to discourage him from reporting them to any new set of ears from the Jet.com 27 management team). 28 - 32 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 33 of 69 1 77. For example, not by way of limitation but merely by way of example: 2 In or about mid-October 2016, Mr. Huynh (in a meeting with a human resources 3 representative) was accused of engaging in misconduct at a trade show. The 4 accusation was either manufactured or blown out of proportion; the benign 5 accusation did not rise to the level of justifying discipline. Likewise, around this 6 same time Mr. Huynh was accused of a mishap during a press interview at a trade 7 show. This, too, was an unfair attack. Nonetheless, ultimately, on November 17, 8 2016, Mr. Huynh was presented with a “Written Warning (Coaching)” that made 9 bogus attacks on him – including the bogus allegation that his conduct at a 10 conference had “ultimately put into question [his] ability to exercise good 11 judgment” and that his “documented behaviors and comments were inconsistent 12 with [his] responsibilities as the leader of the Marketplace Business Development 13 Team.” The write-up was the combined effort of Mr. Huynh’s direct boss and 14 human resources. According to Wal-Mart’s policies, this write-up would remain on 15 Mr. Huynh’s record for one year and would prevent or impede his ability to 16 transfer, promote, etc. during that one year period. 17 78. The bogus write-up, alone, was bad enough. It was not deserved but 18 instead was retaliatory for the ongoing disclosures of the above concerns. But, 19 adding insult to injury, Wal-Mart also demanded that Mr. Huynh take a generic 20 training course on “Emotional Intelligence” given to supervisors as part of basic 21 management training. 22 79. “Emotional intelligence” is defined as “the capacity to be aware of, 23 control, and express one’s emotions, and to handle interpersonal relationships 24 judiciously and empathetically.” But, Mr. Huynh had specifically shared with his 25 direct boss and human resources that emotional regulation and impulse control were 26 symptoms of his underlying ADHD disability – indeed, he had even presented a 27 Powerpoint presentation about his condition to them in an effort to educate them 28 about his struggles with his disability. To the extent that there were any real issues - 33 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 34 of 69 1 involving Mr. Huynh’s emotional regulation or impulse control, they should have 2 been dealt with through a proper interactive process that was appropriately tailored 3 to his specific disability. But, instead, his disability’s role was being ignored and he 4 was told he must take this course that was inappropriate for him under the 5 circumstances of his disability. 6 80. Moreover, the bogus allegations leveled against him in the November 7 2016 write-up were not issues of “emotional intelligence,” emotional regulation or 8 impulse control. Thus, forcing him to attend an “emotional intelligence” class was 9 a non-sequitur in terms of addressing the purported issues set forth in the November 10 2016 Written Warning. 11 81. After the November 2016 write-up, Mr. Huynh reported both to his 12 direct boss, and to human resources, that he believed he had been subject to 13 discrimination based on his disability and that the discipline was discriminatory and 14 retaliatory. He made such reports or protected opposition on multiple occasions 15 thereafter. 16 17 K. November - December 2016: Mr. Huynh continues to see more and 18 more troubling information, and he continues to make protected 19 disclosures. 20 82. In November and December 2016, Mr. Huynh continued to observe 21 more of the same type of troubling concerns, as well as others, including by way of 22 illustration and not by way of limitation, the examples set forth below. 23 83. Seller feedback indicated that Wal-Mart’s Marketplace was incorrectly 24 merging product listings. Wal-Mart’s system was treating variations of the seller’s 25 products as all being one single and identical product type when, in fact, they were 26 different variations of a single product type. The customer also explained to Wal- 27 Mart the “[r]amifications if this [issue] is not fixed” – including that: 28 - 34 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 35 of 69 1 ! “Customers will regularly receive incorrect orders, disappointing them, and 2 perhaps making them go elsewhere.” 3 4 ! “Merchants will have to deal with a greater number of returns & refunds 5 than necessary, raising costs.” 6 7 ! “Merchants will be forced to cancel more orders than necessary, skewing 8 your metrics.” 9 10 ! “If the scope of the problem turns out to be really bad, and unfixable, it 11 might force larger merchants to withdraw form the marketplace to avoid 12 problems with automation. It is impossible to scale order management when 13 every single order needs to be human checked for accuracy.” 14 15 84. This customer further warned Wal-Mart that others could not “take on 16 Amazon ... only Walmart can. But if too many customers have bad experiences 17 purchasing products from third party merchants due to data problems ... Walmart 18 will not win this battle.” 19 85. Also in December 2016, Wal-Mart received reports of more “third- 20 party” seller discontent because Wal-Mart had failed to pay, or failed to correctly 21 pay, sellers. This particular week, the aggregate amount of seller payments Wal- 22 Mart was required to make was its single-week largest to date. Wal-Mart’s 23 payment system “failed under that much load” due to the “payment system being 24 unreliable.” 25 86. Still, despite these and other known systemic post-recruitment 26 scalability problems that were continuing to be exposed, management still 27 demanded even more aggressive E-commerce growth. The Fiscal Year 2018 Plan 28 set operational targets of ending Fiscal Year 2018 (i.e., February 2018) with twenty - 35 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 36 of 69 1 thousand (20,000) Marketplace “third-party” sellers and one hundred million 2 (100,000,000) SKUs – this, even though the Marketplace’s control system was still 3 showing significant weaknesses and/or voids. 4 87. Mr. Huynh also continued to see more and more evidence confirming 5 his previous beliefs that senior leadership was presenting a false, overly-optimistic 6 view of Wal-Mart’s E-commerce growth. For example, in its November 18, 2016 7 third quarter FY17 earnings call, Wal-Mart’s Chief Executive Officer Doug 8 McMillon began his portion of the earnings report highlighting “some recent 9 developments in e-commerce” including that Wal-Mart was “scaling fast – adding 8 10 million SKUs over the past 3 months alone” within its Marketplace. 11 88. But just a month or so later, Mr. Huynh observed an internal 12 presentation where it was reported that “[s]eller SKU ramp up [was] not progressing 13 as aggressively as we would have liked,” which was attributed to the fact that 14 “[m]any sellers aren’t ramping up their SKU count to the number of SKUs 15 committed in their applications.” This internal presentation was contrary to the 16 message being delivered externally. In other words, there was a disconnect 17 between what Wal-Mart was telling the investing public about its SKU ramp-up 18 versus what Wal-Mart internally recognized was actually the case. 19 20 89. Indeed, Wal-Mart was misrepresenting the true SKU count numbers including, by way of illustration and not by way of limitation: 21 22 ! Wal-Mart’s publicly reported SKU numbers include SKUs that are not 23 actually buyable to the public via its Marketplace. That is, Wal-Mart reports 24 to the public the SKU totals listed in its internal product catalogue databases. 25 However, significant portions of the SKUs listed in Wal-Mart’s internal 26 product catalogue databases are not offered to the public to be purchased on 27 the Marketplace. That is, the SKUs are not buyable. By reporting to the 28 public SKU growth numbers that includes non-buyable SKUs not even listed - 36 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 37 of 69 1 for purchase on the Marketplace, Wal-Mart was misrepresenting its true SKU 2 growth. 3 4 ! A significant portion of Wal-Mart’s reported massive SKU growth during 5 Fiscal Year 2017 was attributable to Wal-Mart’s acquisition of Jet.com and 6 its product listings. Indeed, Wal-Mart’s Fiscal Year 2017 Annual Report 7 reported that “[t]he acquisition of jet.com is in line with the Company’s 8 strategic framework of accelerating e-commerce growth.” But in conducting 9 post-merger due diligence and strategy research, Mr. Huynh compared 10 internal salesforce.com data for Jet.com and Walmart.com. Mr. Huynh 11 determined that a high percentage of the product sale lists between Jet.com 12 and Walmart.com overlapped – that is, they contained redundant SKUs. Yet 13 Wal-Mart was reporting the redundant SKU numbers as if they were separate, 14 non-redundant, thereby misrepresenting and artificially and falsely inflating 15 SKU growth numbers. 16 17 90. Likewise, Mr. Huynh continued to see evidence that the lowering of 18 seller go-live or pre-launch standards had continued to bring low-quality sellers into 19 Wal-Mart’s Marketplace. Some examples – again, merely by way of illustration 20 and not by way of limitation: 21 22 ! Wal-Mart continued to be plagued by offensive and inappropriate products 23 being listed on its Marketplace, such as mugs displaying the offensive 24 phrases “got hitler?” and “got retard?”: 25 26 27 28 - 37 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 38 of 69 1 2 3 4 5 6 91. The foregoing concerns were material in that, inter alia and not by way 7 of limitation but merely by way of example, they would influence the judgment of a 8 reasonable investor. Among other things, and not by way of limitation but merely 9 by way of example: 10 11 ! Wal-Mart’s E-commerce business is recognized by Wal-Mart, and the 12 investing community, as a key component of Wal-Mart’s future success – 13 indeed, perhaps more so than any other segment of Wal-Mart’s operations. 14 Wal-Mart’s leadership has repeatedly publicly emphasized the long-term 15 importance of its E-commerce growth including “organic growth” in Wal- 16 Mart’s profitability outlook. And, in doing so, Wal-Mart’s senior executives 17 have repeatedly and consistently highlighted the indirect measures such as 18 SKU growth as signs of the compnay’s positive profitability outlook. 19 20 ! Given the critical role of its E-commerce business in long-term profitability 21 and success, Wal-Mart knew and expected that statements regarding its E- 22 commerce growth or lack thereof would produce either a positive or negative 23 market-reaction. Analysts consistently considered Wal-Mart’s E-commerce 24 growth in analyzing whether to buy or sell Wal-Mart stock. 25 26 ! Product assortment and SKU growth – including the inflated SKU numbers 27 – have been relied on by key analysts in evaluating Wal-Mart’s stock. For 28 example, and not by way of limitation but merely by way of illustration, Bank - 38 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 39 of 69 1 of America Merrill Lynch gave a positive buy rating and reported that 2 Walmart “remains a top pick” relying on Wal-Mart’s representation that “the 3 majority of Walmart’s US online growth was organic and came through 4 Walmart.com and was supported by” four factors with the first listed factor 5 being “continued marketplace expansion (now 40mn online SKUs vs. 35 mm 6 in F4Q and 10mn last year ....” 7 8 ! In recent times, discussions between analysts and Wal-Mart’s management 9 have largely focused on Wal-Mart’s E-commerce performance and outlook 10 more so than any other single segment or factor in Wal-Mart’s business. 11 12 ! Upon information and belief, some of the misrepresentations may have 13 been essential to management’s hitting incentive compensation. They thus 14 were a strategy of “earnings management” to maximize the likelihood of 15 executives hitting incentive compensation targets. In some of the relevant 16 time periods, Wal-Mart’s senior executives narrowly hit their financial 17 incentive compensation targets and, upon information and belief, some of the 18 misrepresentations were necessary to achieve those incentive compensation 19 targets. 20 21 ! During most of the relevant time period since Wal-Mart has begun to 22 report its alleged “organic growth” within its E-commerce segment, Wal- 23 Mart’s stock price had skyrocketed. From approximately November 2015 24 through January 2018, Wal-Mart’s stock typically rose (without only slight 25 and occasional declines) until it reached a record-high of over $109 dollar per 26 share in late-January 2018. But then, then on February 20, 2018, Wal-Mart’s 27 stock plummeted over ten percent (10%) in a single day in response to its 28 quarterly earnings call’s revelation that the company failed to meet its E- 39 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 40 of 69 1 commerce projections. As one analyst noted, “[t]he most eye-catching 2 development was Walmart’s e-commerce sales growth in the United States 3 that slowed to 23% in the fourth quarter, making a sharp decline from 50% in 4 the prior quarter.” Articles immediately filled the world wide web with titles 5 such as “Walmart’s online sales growth slips, rattling investors.” And, 6 according to one report, “CEO Doug McMillon struggled on this morning’s 7 conference call to provide a succinct reason for the online sales miss.” 8 9 92. In October and November 2016, Mr. Huynh continued to report and 10 disclose some of the above concerns to his superiors or those with authority to take 11 remedial action. 12 13 L. formal report to Wal-Mart’s Global Ethics Hotline. 14 15 December 2016: Mr. Huynh escalates his disclosures through a 93. On or about December 20, 2016, Mr. Huynh submitted a formal, 16 detailed disclosure to Wal-Mart’s Global Ethics department formally reporting 17 concerns, inter alia, that “Marketplace Business and Walmart Labs leadership team 18 members have been manipulating various operating levers to portray an inaccurate 19 picture of the state of Walmart in the long run.” 20 94. In this formal complaint, and an attached detailed PowerPoint 21 presentation with detailed and specific data presented in it, Mr. Huynh 22 demonstrated how Wal-Mart’s Marketplace was still plagued by serious concerns 23 such as, without limitation and merely by way of example: 24 25 ! Contrary to its core mantra of “Every Day Low Prices” so its customers can 26 “Save Money, Live Better,” Wal-Mart’s push to ramp-up SKU numbers 27 allowed a known price-gouging seller to load one million (1,000,000) SKUs 28 onto Wal-Mart’s Marketplace platform in FY 2017. Mr. Huynh had - 40 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 41 of 69 1 previously raised concerns about this price-gouging seller back in November 2 2014, citing specific examples of this seller listing some products on Wal- 3 Mart’s Marketplace at triple the price as the identical item could be 4 purchased at Amazon.com or Toys R’ Us. Yet, as of December 2016, this 5 seller still had excessively priced products on Wal-Mart’s site. Worse, this 6 known price-gouging seller was actually ranked as the second-highest seller 7 in terms of the total number of newly-published SKUs added YTD compared 8 to all other “third-party” sellers on Wal-Mart’s Marketplace. Allowing a 9 known price-gouger to dump a ton of low-quality, high-priced SKUs on Wal- 10 Mart’s Marketplace was the fundamental opposite of Wal-Mart’s core 11 message: “Every Day Low Prices.” 12 13 ! The push to ramp-up SKU and seller growth had brought about low-quality 14 sellers, such as the offensive “got Hitler?” and “got retard” mugs. Mr. Huynh 15 presented evidence that this third-tier seller with no established market track 16 record and doing less than one million dollars ($1,000,000) in sales in other 17 Marketplaces was somehow allowed to add one million (1,000,000) SKUs 18 into Wal-Mart’s Marketplace making it the fourth-ranked seller in terms of 19 the total number of newly-published SKUs added YTD compared to all other 20 “third-party” sellers on Wal-Mart’s Marketplace. 21 22 ! The failure to fully and finally resolve the issue of incorrect commission 23 charges “could result in both financial and PR Risks.” 24 25 95. Mr. Huynh specifically reported in the attached PowerPoint 26 presentation his concerns that “Marketplace Business and Walmart Labs leadership 27 team members manipulated various operating levers to hype up the Marketplace 28 KPIs including: - 41 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 42 of 69 1 ! “Accelerated the weekly rate of new sellers going live by relaxing the 2 enforcement of prelaunch standards such as lowering the number of required 3 published SKUs, % of published items that are discoverable, % of 4 commission accuracy rate, % of image with acceptable quality, etc.” 5 6 ! “A large percentage of live sellers got stuck with a limited number of 7 published SKUs ... on Walmart.com given the complexity of [Wal-Mart’s] 8 Universal Spec/Item ingestion process” but that “[t]o compensate for this 9 limitation, [E-commerce leaders] accelerated the total number of published 10 SKUs on Walmart.com from (6.2 Million SKUs to 30 Million SKUs by ... 11 [a]llowing a small number of sellers (the top 1% of sellers [50] added 50% of 12 the new published SKUs) to stuff our catalog with items that are not [Every 13 Day Low Price] [3X the market price], non-relevant assortment for 14 customers, and High PR risk items such as ‘Got Hitler’ and ‘Got Retard’ 15 Mugs.” 16 17 ! “Sellers were not charged and/or overcharged for commission fees on 18 items sold on Walmart.com in the last several months because their published 19 items could not be categorized properly. This could lead to financial 20 compliance and/or PR risks for Walmart.com.” Most important, Mr. Huynh 21 specifically emphasized the point that “[t]here is no solution in sight to 22 increase accuracy,” and that Wal-Mart had been clawing back overpayments 23 from sellers without giving them adequate notice. 24 25 96. Given these and other concerns, Mr. Huynh reported that leadership 26 had misrepresented the true status of Wal-Mart’s E-commerce business, and its 27 success and progress, to the investing public. Mr. Huynh explicitly raised the 28 concern of “[s]hareholder trust/dissatisfaction,” noting that “[i]naccurately - 42 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 43 of 69 1 communicating the state of the Marketplace Business will set the wrong future 2 expectation for investors which could lead to dissatisfaction and legal/regulatory 3 risks.” Mr. Huynh requested that the Global Ethics team “investigate further into 4 this matter and ensure Walmart acts with integrity and ethics toward our 5 shareholders, customers, and seller community” and noted that “taking the 6 appropriate corrective actions in a timely manner will protect our great institution 7 from risks so we can continue to fulfill our mission to Millions of American 8 families (Saving People Money So They Can Live Better).” 9 97. Thereafter, Mr. Huynh supplemented his initial report with additional 10 details. However, initially, he received no substantive response other than mere 11 boilerplate acknowledgments of receipt of his report and his additional submissions. 12 13 M. January 4, 2017: Given Global Ethics’ inaction, Mr. Huynh 14 reports his concerns directly to Marc Lore (Wal-Mart U.S. E- 15 commerce’s Chief Executive Officer) and Michael Bender 16 (Executive Vice President & Chief Operations Officer). 17 98. Given the apparent failure of the Global Ethics office to take his report 18 seriously, on January 4, 2017 at 8:00 a.m., Mr. Huynh emailed another formal, 19 detailed report (with an even more detailed and expanded version of the PowerPoint 20 presentation attached to his Global Ethics complaint) directly to Wal-Mart U.S.’s E- 21 commerce C.E.O. Marc Lore as well as its Executive Vice President and Chief 22 Operations Officer Michael Bender. 23 99. In the body of the email, Mr. Huynh explained that he was reporting 24 “ethics violation/intentional dishonesty at the executive level” that was “already 25 negatively impacting Walmart’s brand/reputation with our customers, employees, 26 shareholders, and sellers as well as exposing Walmart to PR, financial, legal, and 27 compliance risks (GAAP and SOX) and will continue to do so unless we take 28 appropriate corrective action soon.” Mr. Huynh explained he had already reported - 43 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 44 of 69 1 issues to the Global Ethics team, but was reaching out to C.E.O Lore and E.V.P. 2 and COO Bender to make them “aware of the deceptive actions ... to manipulate 3 various operating levers (falsely inflating the KPIs) to portray an inaccurate/rosy 4 picture of the state of the MP Business to Walmart’s Senior Leaders.” 5 100. In the body of the email, Mr. Huynh further explained that E- 6 commerce leaders “inflated the total # of new sellers launched and the rapid MP 7 assortment expansion on Walmart.com to overstate the MP KPIs,” which Mr. 8 Huynh opined was why “the GMV (output) only grew at 118% YOY even though 9 the inputs such as total # of new sellers launched, and the total # of published SKUs 10 grew rapidly at 2,500% and 400% YOY respectively.” In other words, Mr. Huynh 11 illustrated what was obvious to Wal-Mart (yet ignored): the numbers did not make 12 sense. The extreme disconnect between the year-over-year growth on the input 13 versus output sides reflected the fact that the input numbers were not legitimate. 14 They were manipulated and inflated. 101. Mr. Huynh explained that the lax pre-launch or go-live standards 15 16 increased the “weekly throughput rate for new sellers launched and the total # of 17 live sellers on the platform (trading quality for quantity), but does not adequately 18 prepare the live sellers to navigate and operate efficiently within the complexities of 19 the Global MP platform (Universal Item spec, item ingestion and categorization) 20 and an insufficient seller support model (the Business Development team spent 21 about 10-15% of our bandwidth to help connect sellers to the right support 22 person).” Mr. Huynh also explained that Wal-Mart had allowed its Marketplace 23 catalogue to be stuffed “with many published SKUs that are not buyable by 24 customers (non-buyable published SKUs are useless for customers),” and noted the 25 extreme disconnect between this metric on Wal-Mart’s own “first-party” system 26 versus its “third-party” Marketplace: “The ratio of total # of buyable SKUs to total 27 # of in-stock SKUs for 1P and Marketplace are 99% and 29% respectively (a 70% 28 delta). - 44 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 45 of 69 1 102. Finally, Mr. Huynh also pointed out in the body of the email serious 2 concerns regarding the overall function and adequacy of Wal-Mart’s E-commerce 3 internal controls. For example, he pointed out that leadership had “covered up the 4 inadequacies/insufficient controls of key systems and business processes like seller 5 payment, commission billing, and customer return chargeback.” Likewise, he noted 6 that “key Marketplace internal systems and processes such as commission fee 7 billing, seller payment, and customer returns charged back to sellers etc. are not 8 robust and scalable enough which resulted in an environment with insufficient 9 controls to support the current 4,702 live sellers let alone [the] plan of having 10 20,000 live sellers and 100 Mil SKUs on Walmart.com in FY 18 (further exposing 11 Walmart to PR, shareholder, financial, legal, and compliance risk.” 12 103. In the detailed, forty-two (42) page PowerPoint presentation that 13 accompanied his email to Lore and Bender, Mr. Huynh gave detailed, specific and 14 concrete examples of the above concerns. 15 104. Additionally, after he submitted this report to Lore and Bender, Mr. 16 Huynh accessed his Global Ethics complaint on Wal-Mart’s online system and 17 submitted additional supplemental materials consisting of the content of his report 18 email to Lore and Bender. 19 20 N. Within days of his formal report to E-commerce C.E.O. Lore and 21 E.V.P. and C.O.O. Bender, Mr. Huynh is abruptly terminated 22 allegedly as part of a reduction-in-force that had not yet occurred. 23 The very day before his termination, RetaiLeader.com honored 24 Mr. Huynh as one of “17 [Retail] Leaders to Watch in 2017.” 25 105. Mr. Huyhn hoped that his report to Lore and Bender would result in his 26 concerns being addressed. Instead, however, at 4:40 p.m. the very day that Mr. 27 Huynh reported his concerns to Lore and Bender, Mr. Huynh received an out-of- 28 - 45 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 46 of 69 1 the-blue email entitled informing him that the Global Ethics “investigation is now 2 complete, and appropriate action has been taken in response to your concerns.” 3 106. This made little sense. First, Mr. Huynh had not even been 4 interviewed or spoken with by anyone involved in the purported “investigation.” 5 Second, Mr. Huynh had not heard from anyone else in E-commerce that they had 6 been spoken with or interviewed as part of any so-called “investigation.” The 7 “investigation” was apparently a phantom investigation done without speaking to 8 those who logically would have been spoken to had a real investigation been done. 9 Third, of course, given the scope and magnitude of the allegations Mr. Huynh had 10 brought forward, it simply defied credibility to believe that these issues were 11 investigated in any meaningful fashion between his December 20, 2016 complaint 12 and January 4, 2017 – smack in the middle of the year-end Holiday rush that 13 typically produced chaos in retail environment like Wal-Mart. 14 107. Thus, the next day, January 5, 2017, Mr. Huynh reached back-out to 15 the Global Ethics office via the online portal and inquired: “Hi, I sent the PDF 16 presentation to ethics@wal-mart.com that I sent to Michael [Bender] and Marc 17 [Lore]. Did you receive the presentation? Please advise. Tri.” 18 19 20 108. Mr. Huynh request’s was ignored. Thus, during the day of January 10, 2017, he followed-up again. Again, this request also was ignored. 109. But then that same afternoon (January 10, 2017), Wal-Mart delivered 21 Mr. Huynh the final, permanent response to his repeated reports and disclosures: he 22 was terminated abruptly under false pretenses. In short, Mr. Huynh was told he was 23 being terminated because of the combination of alleged recent performance issues 24 (the November 2016 write-up) and a company reorganization and restructuring. 25 Mr. Huynh was then presented a termination letter dated January 24, 2017 – 26 basically, a form letter for lay-offs that were set to occur on January 24, 2017 as a 27 result of the referenced restructuring. 28 - 46 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 47 of 69 1 110. Mr. Huynh’s abrupt termination on January 10, 2017 overshadowed a 2 significant event that occurred the day before. On January 9, 2017, 3 RetailLeader.com published its list of “17 Leaders to Watch in 2017” nationwide. 4 One Wal-Mart employee made the list: Mr. Huynh. Indeed, the day before his 5 abrupt termination, the industry honored Mr. Huynh as one of the key industry 6 leaders to watch in the upcoming year. 7 111. Mr. Huynh’s January 4, 2017 report to U.S. E-commerce C.E.O. Lore 8 and E.V.P. and C.O.O. Bender contained additional evidence, support and back-up 9 for his reports that was not contained in his December 20, 2016 submission to 10 Global Ethics. By rushing to terminate Mr. Huynh within days of his report to Lore 11 and Bender (and without any investigation into the new or expanded reported 12 concerns), Wal-Mart prevented Mr. Huynh from obtaining any additional internal 13 Wal-Mart evidence of its wrongdoing and shut down any investigation into the 14 allegations in the January 4, 2017 before it even began. This way, upon information 15 and belief, Wal-Mart could avoid having to conduct a real investigation that would 16 have confirmed the validity of Mr. Huynh’s concerns. 17 112. The termination reasons were pretextual. They were false reasons 18 offered to cover-up the truth: retaliation and discrimination motivated the 19 termination. Among other things, and not by way of limitation but merely by way 20 of limitation: (a) the issues that led to the November 2016 written warning were 21 bogus – either manufactured or blown out of proportion in order to justify 22 discipline; (b) Mr. Huynh was terminated before the restructuring terminations 23 actually occurred – to his understanding, anyone else terminated as part of the 24 restructuring was not notified until weeks later; (c) there was still an ongoing need 25 for the work Mr. Huynh was performing; duties were not restructured away but 26 remained essential following the restructuring and he was more than qualified to 27 continue to perform; and (d) others at his level in the organizational structure who 28 were not perceived as whistleblowers were treated more favorably than Mr. Huynh - 47 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 48 of 69 1 in the restructuring either because they were retained or alternative positions 2 secured for them. 3 113. Moreover, Wal-Mart did not stop at termination. Adding more insult 4 to injury, Wal-Mart then used the bogus November 2016 Written Warning to reduce 5 Mr. Huynh’s incentive compensation for the prior year’s work. 6 7 O. Mr. Huynh reaches back out to Wal-Mart’s Global Ethics after his 8 termination. Nobody helps. Instead, he learns that the claimed 9 “investigation” consisted of the “fox guard the henhouse.” 10 Apparently, Wal-Mart chose not to learn the billion dollar lesson 11 from its Mexico bribery scandal. 12 114. After he was terminated, Mr. Huynh again reached out to Global Ethics 13 reporting that he has “been terminated ... on January 10, 2017” yet still “[n]o one 14 from the Global Ethics Team has reached out to interview me and my direct reports 15 regarding the case.” Global Ethics ignored this too. 16 115. Then, Mr. Huynh followed-up again on January 18, 2017 noting that 17 “[i]t has been more than a month since I have opened this case but I have not heard 18 anything back from Global Ethics on the status.” 19 116. Finally, on January 30, 2017, Mr. Huynh heard back from Global 20 Ethics by an entry on Wal-Mart’s online portal signed by “Global Ethics” (without 21 identifying a human being responsible for it) stating: “We have reviewed and 22 appropriately handled this matter. ... We partnered with the business to address the 23 concerns.” 24 117. If any investigation was truly done, and if it consisted as stated of Wal- 25 Mart “partnering with the business to address [Mr. Huynh’s] concerns,” this was 26 totally inappropriate, and Wal-Mart knew better. The “business” was a key part of 27 the alleged wrongdoer here. Thus, upon information and belief, the supposedly 28 neutral Global Ethics office “partnering with the business” was an exercise in “the - 48 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 49 of 69 1 fox guarding the henhouse.” A core purpose of the Global Ethics department was 2 (supposedly) to provide a neutral, unbiased set of eyes, including specifically to 3 investigate serious allegations against high-ranking executive leadership. This was 4 precisely such a situation. By, upon information and belief, involving the 5 wrongdoers in the investigation into themselves, any semblance of neutrality was 6 destroyed. 7 118. By December 2016, Wal-Mart cannot claim it did not know better than 8 to let the “fox guard the henhouse” in a situation like Mr. Huynh brought forward. 9 Upon information and belief, choosing to do a biased, skewed “investigation” that 10 allowed the wrongdoers to participate in and/or otherwise control the so-called 11 investigation into themselves was one of the core problems with how Wal-Mart 12 responded when, in 2005, an internal whisteblower reported that Wal-Mart’s rapid 13 expansion into Mexico was paved by widespread bribery of Mexican government 14 officials. 15 119. Upon information and belief, after Wal-Mart’s Mexico bribery scandal 16 broke publicly, one of revelations was that initial efforts to investigate the 17 allegations were swept under the rug by Wal-Mart. Among other things, it was 18 reported that Wal-Mart retained a reputable international law firm skilled in Foreign 19 Corrupt Practice Act (FCPA) investigations. This law firm proposed a detailed 20 “investigation plan” for a “thorough investigation” that would take a number of 21 months to complete given the scope of the allegations. Wal-Mart rejected that 22 proposed comprehensive investigation plan, and instead decided it should merely 23 conduct a “far more limited” internal two-week “Preliminary Inquiry” done by Wal- 24 Mart’s internal Corporate Investigations and International Internal Audit Services 25 (‘IAS’) departments.” By keeping the investigation in-house, and allowing those 26 who were the wrongdoers to be involved in or otherwise control the investigation, 27 Wal-Mart concealed the allegations from the public and investors, and chose not to 28 remedy them – until the news media broke the story. Nonetheless, even though it - 49 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 50 of 69 1 kept the investigation in-house rejecting the outside law firm’s recommendation to 2 do a “thorough investigation,” Wal-Mart’s own inadequate investigation 3 nonetheless concluded that “There is reasonable suspicion to believe that Mexican 4 and USA laws have been violated.” Wal-Mart’s choice to conceal the allegations 5 was wrong, and it made the problem worse. 120. Upon information and belief, Wal-Mart did not expand the 6 7 investigation even after its inadequate internal investigation still found “reasonable 8 suspicion to believe that Mexican and USA laws have been violated. Instead, Wal- 9 Mart executives dismissed the investigators as “overly aggressive” and control over 10 the investigation was transferred to one of the investigation’s initial targets. It was 11 obviously wrong to transfer the investigation’s oversight to the business unit being 12 investigated – let alone, to a particular person alleged to have been part of the 13 problem. Thus, the General Counsel of Wal-Mart’s Mexican operations reported to 14 senior Wal-Mart executives that “[t]he wisdom of assigning any investigative role 15 to management of the business unit being investigated escapes me.” This General 16 Counsel then resigned from Wal-Mart soon after this. Predictably, Wal-Mart’s “fox 17 guarding the henhouse” investigation soon cleared Wal-Mart’s Mexican operations 18 of any wrongdoing. 121. Upon information and belief, cleared of any wrongdoing by its biased 19 20 internal investigation done by partnering with the accused to investigate 21 themselves, Wal-Mart did not disclose the Mexican bribery allegations to investors 22 until 2012 – over six years later – and only after the New York Times broke the 23 story. 24 122. Upon information and belief, Wal-Mart eventually had to acknowledge 25 it did wrong in dealing with the Mexican bribery scandal. It has been reported that 26 Wal-Mart spent over eight hundred million dollars ($800,000,000) investigating the 27 FCPA allegations and overhauling its entire Global Ethics and Compliance 28 programs as a result. Wal-Mart has also disclosed in public filings that it has - 50 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 51 of 69 1 reserved almost three hundred million dollars ($300,000,000) to resolve the FCPA 2 action brought against it by the Department of Justice and the Securities and 3 Exchange Commission. Thus, the FCPA scandal was a more than billion dollar 4 lesson. 5 123. Upon information and belief, one result of this billion dollar lesson 6 was supposedly the complete overhaul of Wal-Mart’s Global Ethics and 7 Compliance program. One of the apparent architects of this complete overhaul of 8 Wal-Mart’s compliance program was Jay Jorgensen, now Wal-Mart’s Executive 9 Vice President and Global Chief Ethics and Compliance Officer. Jorgensen was 10 recently quoted as stating that he and Wal-Mart have built “a world-class global 11 ethics and compliance program.” Jorgensen was also recently quoted as 12 acknowledging that “[f]rom the earliest days of the company Walmart has 13 considered even the appearance of impropriety unacceptable....” 14 124. Upon information and belief, Jorgensen apparently has chosen to 15 ignore the billion dollar lesson, and Wal-Mart has continued to say one thing while 16 doing another. Its actions continue to speak louder than its words. 17 125. Specifically, Mr. Huynh’s December 20, 2016 formal report to Global 18 Ethics was not just sent to the Global Ethics hotline through an online submission, 19 but Mr. Huynh also separately emailed the report directly to E.V.P. and Global 20 Ethics and Compliance Officer Jorgensen. Jorgensen obviously knew better than to 21 do what Wal-Mart had done in Mexico: allow the “fox to guard the henhouse” and 22 conduct an investigation that does not even afford adequate time to investigate the 23 nature of what is being alleged. Yet, upon information and belief, Jorgensen 24 apparently allowed exactly this to happen; he allowed Wal-Mart to repeat history in 25 a very, very bad way. Upon information and belief, just like happened in Mexico 26 after it learned its employees were bribing the Mexican officials, Wal-Mart 27 responded in the same way to Mr. Huynh’s reports to Jorgensen and his Global 28 Ethics department. First, Global Ethics “partnered with the business” to permit the - 51 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 52 of 69 1 “fox to guard the henhouse.” Second, an investigation that should have taken 2 months to complete – if a thorough, fair and honest process was occurring – was 3 wrapped up relatively instantaneously with no evidence of any actual investigation 4 occurring. 5 126. Indeed, Mr. Huynh has no reason to believe, and has seen no evidence 6 to suggest, that his concerns were reported to Wal-Mart’s Audit Committee in real- 7 time as a result of his disclosures even though under Wal-Mart’s policies they 8 clearly should have been. Without any question, the serious allegations Mr. Huynh 9 raised were required to be reported not only to Wal-Mart’s Audit Committee, but 10 also to Wal-Mart’s external auditors at Earnst & Young. However, upon 11 information and belief, this did not occur. 12 127. In short, upon information and belief, while Wal-Mart has long told the 13 world that it learned its lesson from its FCPA scandal, this case proves that Wal- 14 Mart’s actions speak louder than its words. Over a decade later, it resorted to the 15 same improper tactics to silence and cover-up serious allegations of corporate 16 wrongdoing that reach the highest-levels of the corporation. And, to this day, Wal- 17 Mart’s senior leaders and outside auditors continue to certify that Wal-Mart’s 18 internal controls are adequate and contain no material weaknesses, contrary to all of 19 the evidence disclosed by Mr. Huynh and others. 20 128. Finally, and upon information and belief, both this latest chapter and 21 Wal-Mart’s Mexican bribery scandal share another feature in common: the same 22 underlying core motive. In both cases, instead of competing with ethics, honesty, 23 integrity and merit like Sam Walton taught, Wal-Mart cut corners and cheated in a 24 race to expand and gain market-share. It cheated in Mexico by bribing public 25 officials to expedite its rapid expansion. It is cheating today in the race with 26 Amazon by lying to the investing public about its real progress in E-commerce. 27 28 - 52 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 53 of 69 1 FIRST CLAIM FOR RELIEF FOR 2 WHISTLEBLOWER RETALIATION IN VIOLATION 3 OF THE SARBANES-OXLEY ACT OF 2002 4 ( 18 U.S.C. § 1514A, et seq.) 5 129. Plaintiff repeats and realleges each and every allegation contained in 6 all paragraphs before and after this paragraph as though set forth in full in this 7 Claim for Relief. 8 130. Plaintiff was an employee, and Defendants are employers, within the 9 meaning of the Sarbanes-Oxley Act of 2002, Public Law 107-204, 18 U.S.C. 10 section 1514A, et seq. 11 131. Plaintiff engaged in activity that is legally-protected under the 12 Sarbanes-Oxley Act by, inter alia, and not by way of limitation but merely by way 13 of example, reporting or disclosing to his supervisors or individuals with authority 14 to investigate/remedy the following concerns which he reasonably and in good faith 15 believed violated the law as detailed above including, without limitation and merely 16 by way of example: 17 18 ! Securities fraud, violations of the rules and regulations of the SEC and/or 19 any provision of law relating to fraud against shareholders with respect to the 20 misrepresentations detailed herein relating to E-commerce growth and status; 21 22 ! Mail and/or wire fraud relating to commission overcharging, including the 23 continued overcharging after Wal-Mart was clearly aware of the problem. 24 Relatedly, securities fraud, violations of the rules and regulations of the SEC 25 and/or any provision of law relating to fraud against shareholders with 26 respect to the commission overcharging issue given the fact that Wal-Mart 27 retained the excess commissions and reported them on their public financials; 28 - 53 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 54 of 69 1 ! Mail and/or wire fraud in failing to process customer returns on a timely 2 basis yet retaining the funds collected from the underlying purchases. 3 Relatedly, securities fraud, violations of the rules and regulations of the SEC 4 and/or any provision of law relating to fraud against shareholders with 5 respect to the customer returns issue given the fact that Wal-Mart retained the 6 funds that should have been returned to customers and reported them on their 7 public financials; and 8 9 ! Violations of internal controls, failure to have a sufficient system of 10 internal controls, and/or the failure to correct and remedy known 11 inadequacies in key controls. Specifically, as detailed herein, Mr. Huynh’s 12 reports and disclosures included reports of Wal-Mart’s failure to “devise and 13 maintain a system of internal accounting controls sufficient to provide 14 reasonable assurance that – (i) transactions are executed in accordance with 15 management’s general or specific authorization; (ii) transactions are recorded 16 as necessary (I) to permit preparation of financial statements in conformity 17 with generally accepted accounting principles or any other criteria applicable 18 to such statements, and (II) to maintain accountability for assets; (iii) access 19 to assets is permitted only in accordance with management’s general or 20 specific authorization....” 15 U.S.C. §78m(b)(2)(B); see also 17 C.F.R. 21 §240.13a-15(f). Moreover, Mr. Huynh disclosed instances of and/or attempts 22 to “knowingly circumvent or knowingly fail to implement a system of 23 internal accounting controls ....” 15 U.S.C. §78m(b)(3)(5). Finally, these 24 disclosures were also reasonably believed to be disclosures that Wal-Mart’s 25 senior corporate executives and outside auditors had been improperly 26 certifying the effectiveness of Wal-Mart’s key controls as required as part of 27 regular financial reporting, despite the lack of a proper factual basis to make 28 such certifications. See e.g., 15 U.S.C. §§7241 & 7262. - 54 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 55 of 69 1 132. Plaintiff’s protected activities as detailed herein were a contributing 2 factor to Defendants’ decision to take adverse actions including: (1) the pattern of 3 ostracism, exclusion, etc.; (2) the November 2016 write-up; and (3) the termination. 4 133. As a proximate result of the foregoing retaliatory actions, Mr. Huynh 5 has been damaged (economically and otherwise) and seeks all appropriate relief 6 available under the whistleblower retaliation provisions of the Sarbanes-Oxley Act 7 of 2002, including but not limited to full compensatory relief and all other 8 necessary make-whole relief in an amount according to proof. 9 10 134. Moreover, Plaintiff has been forced to and has incurred attorney’s fees and costs to prosecute this action, which Plaintiff seeks to recover on this claim. 11 12 SECOND CLAIM FOR RELIEF FOR 13 WHISTLEBLOWER RETALIATION IN VIOLATION 14 OF THE CALIFORNIA LABOR CODE 15 (Cal. Labor Code § 1102.5.) 16 135. Plaintiff repeats and realleges each and every allegation contained in 17 all paragraphs before and after this paragraph as though set forth in full in this 18 Claim for Relief. 19 136. During his employment, Plaintiff engaged in activities protected under 20 California Labor Code section 1102.5 as set forth herein. For example, without 21 limitation and merely by way of example, among other things, Plaintiff engaged in 22 activity that is legally-protected under the Sarbanes-Oxley Act by, inter alia, and 23 not by way of limitation but merely by way of example, reporting or disclosing to 24 his supervisors or individuals with authority to investigate/remedy the following 25 concerns which he reasonably and in good faith believed violated the law as 26 detailed above including, without limitation and merely by way of example: 27 28 - 55 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 56 of 69 1 ! Securities fraud, violations of the rules and regulations of the SEC and/or 2 any provision of law relating to fraud against shareholders with respect to the 3 misrepresentations detailed herein relating to E-commerce growth and status; 4 5 ! Mail and/or wire fraud relating to commission overcharging, including the 6 continued overcharging after Wal-Mart was clearly aware of the problem. 7 Relatedly, securities fraud, violations of the rules and regulations of the SEC 8 and/or any provision of law relating to fraud against shareholders with 9 respect to the commission overcharging issue given the fact that Wal-Mart 10 retained the excess commissions and reported them on their public financials; 11 12 ! Mail and/or wire fraud in failing to process customer returns on a timely 13 basis yet retaining the funds collected from the underlying purchases. 14 Relatedly, securities fraud, violations of the rules and regulations of the SEC 15 and/or any provision of law relating to fraud against shareholders with 16 respect to the customer returns issue given the fact that Wal-Mart retained the 17 funds that should have been returned to customers and reported them on their 18 public financials5; and 19 20 ! Violations of internal controls, failure to have a sufficient system of 21 internal controls, and/or the failure to correct and remedy known 22 inadequacies in key controls. Specifically, as detailed herein, Mr. Huynh’s 23 reports and disclosures included reports of Wal-Mart’s failure to “devise and 24 maintain a system of internal accounting controls sufficient to provide 25 reasonable assurance that – (i) transactions are executed in accordance with 26 27 28 5 These same reports or disclosures were also disclosures of information Mr. Huynh reasonably and in good faith believed violated state laws regarding unlawful business practices, fraudulent or dishonest sales practices and other similar laws. - 56 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 57 of 69 1 management’s general or specific authorization; (ii) transactions are recorded 2 as necessary (I) to permit preparation of financial statements in conformity 3 with generally accepted accounting principles or any other criteria applicable 4 to such statements, and (II) to maintain accountability for assets; (iii) access 5 to assets is permitted only in accordance with management’s general or 6 specific authorization....” 15 U.S.C. §78m(b)(2)(B); see also 17 C.F.R. 7 §240.13a-15(f). Moreover, Mr. Huynh disclosed instances of and/or attempts 8 to “knowingly circumvent or knowingly fail to implement a system of 9 internal accounting controls ....” 15 U.S.C. §78m(b)(3)(5). Finally, these 10 disclosures were also reasonably believed to be disclosures that Wal-Mart’s 11 senior corporate executives and outside auditors had been improperly 12 certifying the effectiveness of Wal-Mart’s key controls as required as part of 13 regular financial reporting, despite the lack of a proper factual basis to make 14 such certifications. See e.g., 15 U.S.C. §§7241 & 7262. 15 16 137. Plaintiff’s conduct constituted a disclosure of and/or opposition to 17 conduct that Plaintiff had reasonable cause to believe disclosed a violation of state, 18 local and/or federal laws, rules, or regulations. Plaintiff made such disclosures to 19 person(s) with authority over Plaintiff or other employee(s) who had the authority 20 to investigate, discover, or correct the violation or non-compliance. Plaintiff also 21 refused to engage in activity that was illegal. Defendants also perceived, feared 22 and/or believed that Plaintiff may make protected disclosures in the future. 23 Plaintiff’s conduct was thus protected under section California Labor Code section 24 1102.5. 25 138. Defendants took adverse action against Plaintiff as detailed herein 26 (including the pattern of systematic retaliation, the November 2016 write-up and the 27 termination of Plaintiff’s employment), and Plaintiff’s protected activities, refusals 28 - 57 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 58 of 69 1 and/or opposition was/were a contributing factor to Defendants’ decision to take 2 those adverse actions against Plaintiff. 3 139. As a direct and foreseeable result of the aforesaid acts of said 4 Defendants, Plaintiff has suffered and will suffer harm for which Plaintiff is entitled 5 to general and special damages and all appropriate compensatory relief. 6 Defendants’ conduct was a substantial factor in causing that harm. 7 140. The above described acts of Defendants, including by and through 8 their managing agents, officers, or directors, were engaged in with a deliberate, 9 cold, callous, fraudulent, and intentional manner in order to injure and damage 10 Plaintiff and/or with a conscious disregard of Plaintiff’s rights. Such acts were 11 despicable and constitute malice, fraud, and/or oppression within the meaning of 12 Civil Code section 3294. Plaintiff requests an assessment of punitive damages 13 against Defendants in an amount to be assessed at time of trial. 14 15 THIRD CLAIM FOR RELIEF FOR 16 DISABILITY DISCRIMINATION IN 17 VIOLATION OF CALIFORNIA FAIR 18 EMPLOYMENT AND HOUSING ACT 19 (Cal. Gov. Code §12940(a)) 20 141. Plaintiff repeats and realleges each and every allegation contained in 21 all paragraphs before and after this paragraph as though set forth in full in this 22 Claim for Relief. 23 142. Defendants are entities and/or employers governed by the Fair 24 Employment and Housing Act (FEHA), Government Code section 12900 et seq., 25 including section 12940. 26 143. At all relevant times, Plaintiff had one or more mental and/or physical 27 disabilities; had a history of one or more disabilities; had a record of one or more 28 disabilities; and/or was perceived or regarded as having one or more disabilities that - 58 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 59 of 69 1 constituted protected characteristics under the FEHA including but not limited to 2 because of either present or future disabling effects. 3 4 5 144. Despite his disabilities, Plaintiff was able to perform the essential functions of his job with or without reasonable accommodations. 145. Defendants, and each of them, knew of Plaintiff’s disabilities and knew 6 or should have known that Plaintiff’s disabilities fell within the definition of a 7 disability under Government Code section 12926. Defendants further knew or 8 should have known that despite his disability, Plaintiff could perform the essential 9 functions of her job with or without reasonable accommodations. 10 146. Despite their knowledge of the foregoing, Defendants took adverse 11 action against Plaintiff, including, but not limited to the pattern of mistreatment, the 12 November 2016 write-up and terminating Plaintiff’s employment. Plaintiff’s 13 disabilities were a substantial motivating reason for Defendants’ conduct. 14 147. In engaging in the foregoing conduct, Defendants aided, abetted, 15 incited, participated in, coerced, and/or compelled unlawful employment practices 16 in violation of the FEHA and the announced policy of this State against such 17 practices. 18 148. As a direct and foreseeable result of the aforesaid acts of said 19 Defendants, Plaintiff has suffered and will suffer harm for which he is entitled to 20 general and special damages. Defendants’ conduct was a substantial factor in 21 causing that harm. 22 149. The above described acts of Defendants, including by and through 23 their managing agents, officers, or directors, were engaged in with a deliberate, 24 cold, callous, fraudulent, and intentional manner in order to injure and damage 25 Plaintiff and/or with a conscious disregard of Plaintiff’s rights. Such acts were 26 despicable and constitute malice, fraud, and/or oppression within the meaning of 27 Civil Code section 3294. Plaintiff requests an assessment of punitive damages 28 against Defendants in an amount to be assessed at time of trial. - 59 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 60 of 69 1 2 3 4 150. Plaintiff will also seek and is entitled to recover attorney’s fees in connection with this cause of action under the FEHA. 151. Plaintiff specifically seeks declaratory and/or injunctive relief on this claim to the extent that Defendants’ assert a mixed-motive affirmative defense. 5 6 FOURTH CLAIM FOR RELIEF FOR 7 FAILURE TO ACCOMMODATE IN VIOLATION OF 8 CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT 9 (Cal. Gov. Code §12940(m)) 10 152. Plaintiff repeats and realleges each and every allegation contained in 11 all paragraphs before and after this paragraph as though set forth in full in this 12 Claim for Relief. 13 153. Defendants are entities and/or employers governed by the Fair 14 Employment and Housing Act, Government Code section 12900 et seq., including 15 section 12940. 16 154. At all relevant times, Plaintiff had one or more mental and/or physical 17 disabilities; had a history of one or more disabilities; had a record of one or more 18 disabilities; and/or was perceived or regarded as having one or more disabilities that 19 constituted protected characteristics under the FEHA including but not limited to 20 because of either present or future disabling effects. 21 155. Despite his disabilities, Plaintiff was able to perform the essential 22 functions of his job with or without reasonable 23 accommodations. 24 156. Defendants, and each of them, knew of Plaintiff’s disabilities and knew 25 or should have known that Plaintiff’s disabilities fell within the definition of a 26 disability under Government Code section 12926. Defendants further knew or 27 should have known that despite his disability, Plaintiff could perform the essential 28 functions of her job with or without reasonable accommodations. - 60 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 61 of 69 1 2 3 157. Despite their knowledge of the foregoing, Defendants failed to accommodate Plaintiff’s disabilities. 158. In engaging in the foregoing conduct, Defendants aided, abetted, 4 incited, participated in, coerced, and/or compelled unlawful employment practices 5 in violation of the FEHA and the announced policy of this State against such 6 practices. 7 159. As a direct and foreseeable result of the aforesaid acts of said 8 Defendants, Plaintiff has suffered and will suffer harm for which he is entitled to 9 general and special damages. Defendants’ conduct was a substantial factor in 10 causing that harm. 11 160. The above described acts of Defendants, including by and through 12 their managing agents, officers, or directors, were engaged in with a deliberate, 13 cold, callous, fraudulent, and intentional manner in order to injure and damage 14 Plaintiff and/or with a conscious disregard of Plaintiff’s rights. Such acts were 15 despicable and constitute malice, fraud, and/or oppression within the meaning of 16 Civil Code section 3294. Plaintiff requests an assessment of punitive damages 17 against Defendants in an amount to be assessed at time of trial. 18 19 161. Plaintiff will also seek and is entitled to recover attorney’s fees in connection with this cause of action under the FEHA. 20 21 FIFTH CLAIM FOR RELIEF FOR 22 FAILURE TO ENGAGE IN TIMELY, GOOD FAITH 23 INTERACTIVE PROCESS IN VIOLATION OF CALIFORNIA 24 FAIR EMPLOYMENT AND HOUSING ACT 25 (Cal. Gov. Code §12940(n)) 26 162. Plaintiff repeats and realleges each and every allegation contained in 27 all paragraphs before and after this paragraph as though set forth in full in this 28 Claim for Relief. - 61 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 62 of 69 1 163. Defendants are entities and/or employers governed by the Fair 2 Employment and Housing Act, Government Code section 12900 et seq., including 3 section 12940. 4 164. At all relevant times, Plaintiff had one or more mental and/or physical 5 disabilities; had a history of one or more disabilities; had a record of one or more 6 disabilities; and/or was perceived or regarded as having one or more disabilities that 7 constituted protected characteristics under the FEHA including but not limited to 8 because of either present or future disabling effects. 9 10 11 165. Despite his disabilities, Plaintiff was able to perform the essential functions of his job with or without reasonable accommodations. 166. Defendants also knew, or should have known, of the need to 12 accommodate Plaintiff’s disabilities, including the need to engage in the interactive 13 process to determine how to achieve a reasonable accommodation for Plaintiff. 14 However, Defendants failed and refused to engage in the interactive process with 15 Plaintiff despite notice of his disability and a need to consider accommodations. 16 167. Instead of engaging in the interactive process, Defendants took adverse 17 action against Plaintiff and failed to reasonably accommodate his disabilities. 18 168. In engaging in the foregoing conduct, Defendants aided, abetted, 19 incited, participated in, coerced and/or compelled unlawful employment practices in 20 violation of the FEHA and the announced policy of this State against such 21 practices. 22 169. As a direct and foreseeable result of the aforesaid acts of said 23 Defendants, Plaintiff has suffered and will suffer harm for which he is entitled to 24 general and special damages. Defendants’ conduct was a substantial factor in 25 causing that harm. 26 170. The above described acts of Defendants, including by and through 27 their managing agents, officers, or directors, were engaged in with a deliberate, 28 cold, callous, fraudulent, and intentional manner in order to injure and damage - 62 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 63 of 69 1 Plaintiff and/or with a conscious disregard of Plaintiff’s rights. Such acts were 2 despicable and constitute malice, fraud, and/or oppression within the meaning of 3 Civil Code section 3294. Plaintiff requests an assessment of punitive damages 4 against Defendants in an amount to be assessed at time of trial. 5 6 171. Plaintiff will also seek and is entitled to recover attorney’s fees in connection with this cause of action under the FEHA. 7 8 SIXTH CLAIM FOR RELIEF FOR 9 RETALIATION IN VIOLATION OF CALIFORNIA 10 FAIR EMPLOYMENT AND HOUSING ACT 11 (Cal. Gov. Code §12940(h)) 12 172. Plaintiff repeats and realleges each and every allegation contained in 13 all paragraphs before and after this paragraph as though set forth in full in this 14 Claim for Relief. 15 173. Defendants are entities and/or employers governed by the Fair 16 Employment and Housing Act, Government Code section 12900 et seq., including 17 section 12940. 18 174. During his employment by Defendants, Plaintiff opposed and objected 19 to what he reasonably believed were unlawful discriminatory and retaliatory 20 practices. Plaintiff also disclosed a disability and effectively sought 21 accommodations of his disabilities under the California Fair Employment & 22 Housing Act to the extent necessary. 23 24 25 26 27 28 175. After Plaintiff engaged in protected activities, he was subjected to adverse employment actions as described herein. 176. The foregoing described adverse employment actions were substantially motivated by Plaintiff’s protected activities described above. 177. In engaging in the aforementioned conduct, Defendants, and each of them, aided, abetted, incited, compelled, and/or coerced unlawful employment - 63 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 64 of 69 1 practices in violation of the FEHA and the announced policy of this State against 2 such practices. 3 178. As a direct and foreseeable result of the aforesaid acts of said 4 Defendants, Plaintiff has suffered and will suffer harm for which he is entitled to 5 general and special damages. Defendants’ conduct was a substantial factor in 6 causing that harm. 7 179. The above described acts of Defendants, including by and through 8 their managing agents, officers, or directors, were engaged in with a deliberate, 9 cold, callous, fraudulent, and intentional manner in order to injure and damage 10 Plaintiff and/or with a conscious disregard of Plaintiff’s rights. Such acts were 11 despicable and constitute malice, fraud, and/or oppression within the meaning of 12 Civil Code section 3294. Plaintiff requests an assessment of punitive damages 13 against Defendants in an amount to be assessed at time of trial. 14 15 16 17 180. Plaintiff will also seek and is entitled to recover attorney’s fees in connection with this cause of action under the FEHA. 181. Plaintiff specifically seeks declaratory and/or injunctive relief on this claim to the extent that Defendants’ assert a mixed-motive affirmative defense. 18 19 SEVENTH CLAIM FOR RELIEF FOR 20 FAILURE TO PREVENT DISCRIMINATION 21 AND RETALIATION IN VIOLATION OF CALIFORNIA 22 FAIR EMPLOYMENT AND HOUSING ACT 23 (Cal. Gov. Code §12940(k)) 24 181. Plaintiff repeats and realleges each and every allegation contained in 25 all paragraphs before and after this paragraph as though set forth in full in this 26 Claim for Relief. 27 28 182. Defendants, and/or their agents/employees, failed to take all reasonable steps necessary to prevent discrimination and retaliation in employment from - 64 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 65 of 69 1 occurring. Further, said Defendants knew or should have known of the 2 discrimination and retaliation against Plaintiff described above, yet failed to 3 conduct an adequate investigation into the nature and substance of the 4 discrimination and retaliation and failed to take immediate and appropriate 5 corrective action so as to discipline any of the offenders. 6 183. The response of Defendants, and/or their agents/employees, to that 7 knowledge was so inadequate as to establish a deliberate indifference to, or tacit 8 authorization of, the offensive practices, and an affirmative causal link existed 9 between Defendants’ inaction and the injuries suffered by Plaintiff. 10 184. By failing to take all reasonable steps necessary to prevent 11 discrimination and retaliation, and by failing to properly investigate and remedy the 12 discrimination and retaliation that occurred, Defendants committed unlawful 13 employment practices as described and prohibited in Government Code section 14 12940(k). 15 185. In engaging in the aforementioned conduct, Defendants, and each of 16 them, aided, abetted, incited, compelled, and/or coerced unlawful employment 17 practices in violation of the FEHA and the announced policy of this State against 18 such practices. 19 186. As a direct and foreseeable result of the aforesaid acts of said 20 Defendants, Plaintiff has suffered and will suffer harm for which he is entitled to 21 general and special damages. Defendants’ conduct was a substantial factor in 22 causing that harm. 23 187. The above described acts of Defendants, including by and through 24 their managing agents, officers, or directors, were engaged in with a deliberate, 25 cold, callous, fraudulent, and intentional manner in order to injure and damage 26 Plaintiff and/or with a conscious disregard of Plaintiff’s rights. Such acts were 27 despicable and constitute malice, fraud, and/or oppression within the meaning of 28 - 65 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 66 of 69 1 Civil Code section 3294. Plaintiff requests an assessment of punitive damages 2 against Defendants in an amount to be assessed at time of trial. 3 4 188. Plaintiff will also seek and is entitled to recover attorney’s fees in connection with this cause of action under the FEHA. 5 6 EIGHTH CLAIM FOR RELIEF FOR 7 WRONGFUL TERMINATION VIOLATION 8 OF PUBLIC POLICY 9 189. Plaintiff repeats and realleges each and every allegation contained in 10 all paragraphs before and after this paragraph as though set forth in full in this 11 Claim for Relief. 12 190. Defendants terminated Plaintiff’s employment in violation of 13 fundamental public policies of the State of California and the United States of 14 America including, without limitation and merely by way of illustration: the right to 15 engage in protected activity under the Sarbanes-Oxley Act of 2002; the right to 16 protections against discrimination in employment because of a disability; the right 17 to accommodations of a disability (including a good faith interactive process); the 18 right to freedom from retaliation for engaging in protected activity under the Fair 19 Employment and Housing Act; the right to report or disclose suspected unlawful 20 activity; (including the California Family Rights Act, which is part of the FEHA); 21 the right to freedom from retaliation for opposing, complaining, disclosing, 22 protesting, or refusing to participate in an activity constituting (or that the employee 23 reasonably believes constitutes) a violation of a state or federal statute, rule, or 24 regulation (including but not limited to, and offered as illustrations and not by way 25 of example, securities laws, securities fraud laws, mail and/or wire fraud laws, 26 consumer fraud laws, common law fraud laws, unfair and fraudulent business 27 practice laws, etc.). 28 - 66 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 67 of 69 1 2 3 191. These fundamental public policies inure to the benefit of the public and not just the private interests of the employer and employee. 192. As set forth above, Defendants’ conduct was wrongful and in violation 4 of the fundamental principles of the public policy of the State of California as 5 reflected in its laws, objectives, and policies. Said laws, which establish these 6 fundamental public policies include, without limitation and merely by way of 7 example: the Sarbanes-Oxley Act of 2002 and related laws and Regulations, 8 including but not limited to laws relating to internal accounting controls, securities 9 fraud laws, laws relating to fraud on shareholders and laws relating to mail and wire 10 fraud; common law fraud laws; statutory fraudulent business practice laws; 11 California Labor Code section 1102.5; the FEHA – Government Code section 12 12900, et seq. 13 193. As a direct and foreseeable result of the aforesaid acts of said 14 Defendants, Plaintiff has suffered and will suffer harm for which he is entitled to 15 general and special damages. Defendants’ conduct was a substantial factor in 16 causing that harm. 17 194. The above described acts of Defendants, including by and through 18 their managing agents, officers, or directors, were engaged in with a deliberate, 19 cold, callous, fraudulent, and intentional manner in order to injure and damage 20 Plaintiff and/or with a conscious disregard of Plaintiff’s rights. Such acts were 21 despicable and constitute malice, fraud, and/or oppression within the meaning of 22 Civil Code section 3294. Plaintiff requests an assessment of punitive damages 23 against Defendants in an amount to be assessed at time of trial. 24 PRAYER 25 26 WHEREFORE, plaintiff prays for relief as set forth above and as follows: 27 1. 28 Damages for lost wages and any other economic losses, including but not limited to back and front pay; - 67 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 68 of 69 1 2. Damages for emotional distress and other general damages; 2 3. Special damages according to proof at trial; 3 4. Pre-judgment interest; 4 5. Reasonable costs, including reasonable attorney’s fees and expert 5 witness fees, as permitted by the relevant statutes; 6 6. For punitive damages according to proof; and 7 7. For injunctive and/or declaratory relief; 8 8. For such other and further relief as the court deems just and proper. 9 10 11 12 13 Dated: March 15, 2018 The deRubertis Law Firm, APC / s / David M. deRubertis By______________________________ David M. deRubertis Attorneys for Plaintiff Tri Huynh 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 68 COMPLAINT Case 3:18-cv-01631 Document 1 Filed 03/15/18 Page 69 of 69 DEMAND FOR JURY TRIAL 1 2 Plaintiff hereby demands a trial by jury on all issues so triable in this 3 complaint or any subsequent amended complaint or any other pleading filed in this 4 action. 5 Dated: March 15, 2018 6 7 8 The deRubertis Law Firm, APC / s / David M. deRubertis By______________________________ David M. deRubertis Attorneys for Plaintiff Tri Huynh 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 69 COMPLAINT