On February 24, 2014, in Stewart v. Doral Financial Corp., the San Juan District Court denied the employer’s motion to dismiss SOX claims and applied the standard for protected activity set forth in the seminal Administrative Review Board (“ARB”) decision, Sylvester v. Parezel Int’l, which requires the whistleblower to show that he reported conduct which he/she “reasonably believed” amounted to a violation of the federal law. In Sylvester, the ARB rejected the more onerous standard previously set forth by the ARB in Platone v. FLYiwhich required plaintiffs in a SOX claim to demonstrate that the whistleblower’s complaints have to “definitively and specifically” relate to one of the categories of fraud or securities law violations listed in Section 806.
The decision is controversial because the district court sits in the First Circuit and has failed to follow the First Circuit’s decision inDay v. Staples which adopted the more stringent Plantone test. That said, the district court’s decision is in line with the recent decisions in the Third and Tenth Circuit, which have expressly adopted the holding in Sylvester. The Sylvester decision is quickly turning into the law of the land.