SOX Whistleblowers Protection

Allen v. Administrative Review Board (5th Cir. 1/22/08)

Yesterday the Fifth Circuit Court of Appeals issued a ruling on a SOX Whistleblower’s appeal of a ruling by an Administrative Law Judge.  The opinion is attached.

The Fifth Circuit found that:

1)   an employee’s complaint must “definitively and specifically relate” to one of the six enumerated categories found in § 1514A: mail, wire, bank or securities fraud, any rule or regulation of the SEC, or any provision of federal law relating to fraud against shareholders;

2)   an employee’s reasonable belief of such a violation must be scrutinized under both a subjective and objective standard;

3)   an employee’s reasonable but mistaken belief that an employer engaged in conduct that constitutes a violation of one of the six enumerated categories is protected;

4)   the “objective reasonableness” standard applicable to SOX whistleblower claims is similar to the “objective reasonableness” standard applicable to Title VII retaliation claims;

5)   while that can sometimes be decided as a matter of law, if there is a genuine issue of material fact it cannot be;

6)   as to the catch all provision (federal law relating to fraud against shareholders), the employee must reasonably believe that his or her employer acted with a mental state embracing intent to deceive, manipulate, or defraud its shareholders.

7)   since one of the plaintiffs was a CPA, an “expert standard” had to be applied in reviewing the “objective standard.”

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