Eagerly awaited decisions from the Tenth and Third Circuit Courts of Appeals could be the first appellate rulings to squarely tackle the Department of Labor’s (“DOL”) employee-friendly interpretation of the Sarbanes-Oxley Act’s (“SOX”) whistleblower provisions. These rulings will serve as indicators on the future of the DOL’s expansive interpretation on SOX and possibly creating a circuit split that attracts Supreme Court review. The DOL’s Administrative Review Board (“ARB”) has issued a string of rulings that took a broad view of what constitutes SOX-protected activity. Management-side lawyers have complained that the ARB was reshaping SOX as a general worker-protection statute while losing sight of lawmakers’ true intent of protecting investors from fraud.
The Tenth Circuit is currently considering Lockheed Martin’s challenge to a February 2011 ARB ruling that held employee complaints do not have to implicate fraud against shareholders to be protected by SOX. Lockheed Martin Corp. v. Dep’t of Labor, No. 11-9524 (10th Cir. 2011). According to the ruling, a communications director claimed she was forced to quit after making an ethics complaint about the defense contractor’s vice president of communications. Brown v. Lockheed Martin Corp., No. 10-050, (Dep’t of Labor Feb. 28, 2011). The vice president, who ran a pen pal program between Lockheed employees and United States soldiers in Iraq, allegedly had sexual relationships with roughly 10 soldiers, sent X-rated materials to troops overseas, and used company funds to buy a soldier a laptop. The ARB affirmed an administrative law judge’s recommendation that Brown be reinstated and awarded damages under SOX’s whistleblower protections.
The Third Circuit is expected to rule soon on the request by a former Tyco International employee to revive his SOX whistleblower suit. Wiest v. Lynch, No. 11-4257 (3d Cir. Feb. 15 2012). The employee claimed the company targeted him with a retaliatory investigation after he questioned the treatment of certain event expenditures that he thought were improper in the wake of the scandal involving ex-Tyco CEO Dennis Kozlowski. The employee claimed that the trial court wrongly held that, in order to garner SOX protection, a complaint has to “definitively and specifically” relate to one of several laws laid-out in SOX. Wiest v. Lynch, No. 10-3288 (E.D. Pa. July 21, 2011). He argued that the ARB eschewed that standard in a 2011 ruling.