The Southern District of Florida recently denied a Rule 12(b)(6) motion to dismiss a former employee’s Sarbanes-Oxley and Dodd-Frank whistleblower retaliation claims, finding that the plaintiff sufficiently alleged that she had an objectively reasonable belief regarding alleged securities violations.  Thomas v. Tyco Int’l Mgmt. Co., LLC, No. 16-cv-80501 (Mar. 31, 2017).  This case is noteworthy because it takes an expansive view of the scope of protected activity under SOX with respect to complaints involving internal controls and data security.

Background.  Plaintiff was a former Manager of Financial Reporting for the Company.  She allegedly learned during her employment that an applicant for a manager position misrepresented her educational qualifications in her resume.  Additionally, she allegedly believed that the applicant did not have sufficient training in generally accepted accounting principles (“GAAP”).  According to her complaint, despite raising these concerns with her direct supervisor, the Company hired the applicant for the new manager position.  Plaintiff claimed that the new manager was responsible for reporting $4 billion per year to the Company’s headquarters and ultimately to the SEC.  Plaintiff also allegedly began doubting the reliability of a new monthly “tie-out” process the Company used to ensure that the financial data in the Company’s ledger system was consistent with the consolidated financial data reported to the SEC.  In December 2013, Plaintiff filed a complaint with the internal ombudsman regarding the new manager’s credentials and the tie-out process.  The ombudsman found no wrongdoing.  In March 2014, Plaintiff filed a whistleblower retaliation complaint with OSHA.  In May 2014, her employment was terminated on the grounds that she allegedly improperly accessed another employee’s records.

The Northern District of New York recently denied a Rule 12(b)(6) motion to dismiss a former employee’s Dodd-Frank whistleblower retaliation claim, finding that the plaintiff sufficiently alleged that he had an objectively reasonable belief with respect to alleged securities violations and causation.  McManus v. Tetra Tech Construction, Inc., No. 16-cv-894 (May 11, 2017).

The U.S. District Court for the Eastern District of Virginia recently granted a Rule 12(b)(6) motion to dismiss a Dodd-Frank whistleblower retaliation claim brought by an ex-project manager, finding that Plaintiff failed to allege that her protected activity involved any disclosures to the SEC.  Smith v. Raytheon Co., No. 17-cv-00438 (E.D. Va. Aug. 11, 2017).

The Northern District of Illinois recently dismissed an Indiana-based employee’s claims for retaliatory discharge in violation of common law pursuant to Illinois public policy, focusing on the nature of the connection (or lack thereof) to Illinois and noting that the plaintiff possessed adequate statutory remedies under federal whistleblower laws.  O’Risky

The Southern District of New York recently dismissed Dodd-Frank whistleblower retaliation claims brought by an employer’s ex-President and an ex-Director pursuant to Rule 12(b)(6) on res judicata grounds, determining that retaliation claims had already been decided in arbitration and that the Dodd-Frank claims filed in federal court for the first time were therefore barred. Wendt v. The BondFactor Co. LLC, No. 16-cv-7751 (S.D.N.Y. Aug. 2, 2017).

The Ninth Circuit recently affirmed a grant of summary judgment in an employer’s favor, dismissing a SOX and Dodd-Frank whistleblower retaliation case based on the plaintiff’s lack of an objectively reasonable belief of violations of securities law.  Rocheleau v. Microsemi Corporation, Inc., 680 Fed. Appx. 533 (2017).

Background.  Defendant, a publicly traded company, hired Plaintiff as an independent contractor in 2006.  Plaintiff claimed that beginning in 2008, she began voicing concerns internally that Defendant misclassified her and others as independent contractors.  In addition, she began filing complaints with the government, including a complaint with the OFCCP on January 10, 2010, and she claimed she was asked to retroactively change hiring and recruiting data in violation of OFCCP regulations.  Her employment was subsequently terminated on February 17, 2010.  She then filed a lawsuit before the United States District Court for the Central District of California, claiming violations of the SOX and Dodd-Frank’s respective anti-retaliation provisions.  In support, she alleged that Defendant’s actions constituted fraud against its shareholders because they allegedly created an unreported risk factor to Defendant’s business and engaged in payroll tax fraud.  Defendant moved for summary judgment on the grounds that Plaintiff failed to establish a prima facie case under either statute, as Plaintiff could not hold an objectively reasonable belief that Defendant’s alleged actions would cause it and its shareholders to suffer significant losses.  The district court granted Defendant summary judgment and Plaintiff appealed.

On July 27, 2017, the SEC announced that it was paying a $1.7 million bounty award to a whistleblower, even though the whistleblower: (1) had some culpability in the fraud; (2) unreasonably delayed reporting the fraud; and (3) failed to comply with a Dodd-Frank rule requiring whistleblowers to submit inside information in writing in certain circumstances. The SEC did not provide the identity of the whistleblower or the company at issue.

The United States District Court for the Western District of Tennessee recently emphasized the limited scope of what constitutes protected activity under the Dodd-Frank Act’s (the Act) whistleblower protection provision, noting that the Act protects only “certain kinds of whistleblowers who report certain kinds of violations.”  Boyle v. Evolve Bank & Trust et al, No. 16-02171, 2017 U.S. Dist. LEXIS 111964 (W.D. Tenn. July 19, 2017).