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).

Background.  Plaintiff was the former Director of Business Development of the Company’s wind power division.  He had experience in tracking project costs and approving project contracts.  Additionally, through his participation in the Company’s leadership program, Plaintiff learned about the Company’s accounting process for reporting losses from high-ranking employees and accounting personnel.  Specifically, Plaintiff was concerned that the Company delayed reporting losses to inflate the appearance of profitability and subsequently its stock price.  In July 2014, Plaintiff met with an Executive Vice President (EVP) to discuss his alleged concerns that the Company’s accounting practices did not comply with federal securities law.  Approximately two months later, Plaintiff sent an email to the EVP and the Human Resources Director further detailing his alleged concerns regarding accounting practices.  Within an hour of sending the email, Plaintiff received a call from another official allegedly informing him that that he “had no future” at the Company.  Although Plaintiff received an apology, he was notified that his employment would be terminated at the end of January 2015.  Plaintiff’s termination became finalized approximately two months later.

Rulings.  Plaintiff filed suit in the Northern District of New York under Dodd-Frank, claiming he was retaliated against for protected whistleblowing.  The Company moved to dismiss pursuant to Rule 12(b)(6), arguing that Plaintiff failed to sufficiently plead that his termination was caused by his raising concerns of potential securities law violations, and that he failed to show that his belief of accounting fraud was objectively reasonable. The district court denied the motion.  First, the court stressed that the termination occurred several months after the protected activity and that Plaintiff was told he “had no future” with the Company just an hour after raising concerns.  According to the court, this temporal proximity supported “an inference of causation at the motion-to-dismiss stage[.]”  Second, the court determined that Plaintiff adequately demonstrated that he possessed an objectively reasonable belief that the Company violated securities laws.  The court found that “[a]lthough [Plaintiff] is not an accountant[,]” his concerns were not “unduly speculative” due to his experience and conversations with high-ranking Company officials.  Despite the fact that a jury may ultimately disagree that the Plaintiff’s belief was reasonable, the court could not “choose between competing explanations on a 12(b)(6) motion.”

Implications.  There is still a chance that the defendant may prevail later in this litigation, but this case shows that courts may rely on temporal proximity at the motion to dismiss stage and may defer questions bearing on the objective reasonableness of a plaintiff’s belief to the summary judgment stage.

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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 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.