On February 21, 2014, the District of Puerto Rico strayed from a prominent decision out of the First Circuit that employed the “definitively and specifically” standard governing protected activity under Section 806 of SOX, choosing instead to defer to the ARB’s rather expansive standard.  Stewart v. Doral, No. 13-cv-1349 (D.P.R. Feb. 21, 2014).   This decision underscores the conflicts in this evolving area of SOX jurisprudence and the attendant risks to employers saddled with SOX whistleblower retaliation claims.


Plaintiff Ronald Stewart (Plaintiff), who was a Senior Vice President and Principal Accounting Officer at Doral Financial Corporation (Bank), allegedly expressed concerns regarding “deficiencies in the Bank’s program of internal controls.”  He allegedly sent a letter to the Bank’s Audit Committee stating that the Bank’s CEO’s statements expressing indifference to regulators and a down-sizing program without consideration for lack of internal controls could lead to “inaccurate disclosures of the company’s financial information.”  According to Plaintiff, the CEO “asserted that he wanted the Bank’s leverage ratio above 9% even if it meant booking assets in later periods,” and that “regulators were not going to tell him what he could or could not do when all he was trying to accomplish was to raise the Bank’s capital by $200MM.”  His employment was terminated weeks later, and he filed suit under the whistleblower protection provisions in Section 806 of SOX, asserting he was retaliated against for lodging his complaints.


Denying the Bank’s motion to dismiss, the court ruled that Plaintiff pled facts sufficient to meet the reasonable belief standard required to establish protected activity as articulated by the ARB in Sylvester v. Parexel, ARB No. 07-123, 2011 WL 2165854 (ARB May 25, 2011).  According to the court, given the facts that led Plaintiff to believe that there were “imminent violations to the financial disclosure requirements set forth under Sarbanes-Oxley,” Plaintiff’s beliefs were reasonable because “if a public company ‘cooks the books’ and reports inaccurate financial information, the Principal Accounting Officer would be amongst the first individuals being investigated for potential Sarbanes-Oxley violations.”  In so concluding, the district court chose not to employ the more exacting “definitively and specifically” standard that was previously embraced by an oft-cited First Circuit decision, and instead adopted the ARB’s reasonable belief standard.


This decision further adds to the confusion over the standard governing a determination of whether an employee engaged in protected activity under Section 806 of SOX.  While some other courts (e.g., the Third Circuit, addressed in our post) have followed the ARB’s standard,  various other federal courts, such as the Sixth Circuit and a recent decision by the Southern District of New York, have applied the more rigorous “definitively and specifically” requirement.  We will continue to monitor developments in this area and keep our loyal readers up to date.

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Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular…

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular focus on defending companies against claims of employment discrimination, retaliation and harassment; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations. He has successfully tried cases in multiple jurisdictions, and defended one of the largest Illinois-only class actions in the history of the U.S. District Court for the Northern District of Illinois. He also secured one of only a few ex parte seizures orders that have been issued under the Defend Trade Secrets Act, and obtained a world-wide injunction in federal litigation against a high-level executive who jumped ship to a competitor.

Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Steven was recognized as Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He is a Fellow of the College of Labor and Employment Lawyers.  Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven has served on Law360’s Employment Editorial Advisory Board and is a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is regularly quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.