A California federal court—in Erhart v. BofI Holding, Inc., 2017 U.S. Dist. LEXIS 14755, Case No. 15-cv-02287 (S.D. Cal. Sept. 11, 2017)—recently denied BofI Federal Bank’s (“BofI’s”) motion to dismiss the Sarbanes-Oxley whistleblower claims plead in their former internal auditor Charles Erhart’s amended complaint. The court also denied BofI’s motion as to Erhart’s defamation claim, allowing it to proceed, but dismissed Erhart’s claims for (i) violation of the Confidentiality of Medical Information Act (“CMIA”); (ii) intentional infliction of emotional distress; and (iii) breach of the implied covenant of good faith and fair dealing.
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.