A jury should decide whether two corporate attorneys were terminated in violation of the Sarbanes-Oxley Act, the Ninth Circuit decides, overturning a lower court’s dismissal.
The two attorneys contended that they were wrongfully terminated for reporting possible shareholder fraud in connection with a company merger, but a federal district court granted summary judgment for the employer.
In reviewing the lower court’s decision, the Ninth Circuit looks at the Act, as well as U.S. Dept. of Labor rules in outlining a general framework to establish a SOX claim. The Court observes that the law prohibits employers of publicly-traded companies from discriminating against employees for providing information regarding “any conduct which the employee reasonably believes constitutes a violation” of SOX, including mail fraud, wire fraud, bank fraud, securities fraud, “or any provision of Federal law relating to fraud against shareholders.” Further, the Court notes, SOX claims are governed by the procedures “applicable to whistleblower claims brought under 49 U.S.C. § 42121(b), which sets forth a burden-shifting procedure by which a plaintiff is first required to make out a prima facie case of retaliatory discrimination; if the plaintiff meets this burden, the employer assumes the burden of demonstrating by clear and convincing evidence that it would have taken the same adverse employment action in the absence of the plaintiff’s protected activity.”
The Ninth Circuit emphasizes that its “discussion of possible fraud is based on concerns the [plaintiffs] held and that they allegedly shared with their supervisors; our account should not be taken as proof of any actual fraud. Indeed, the success, or failure, of the [plaintiff’s] lawsuit does not depend on their ability to show any actual fraud, only that they reasonably believed that fraud had occurred.” The Court says that it is “not critical” for the retaliation claim that the company actually engaged in fraud in connection with the merger; rather, the plaintiffs “only need show that they reasonably believed that there might have been fraud and were fired for even suggesting further inquiry.” Van Asdale v. International Game Technology
