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4th Circuit Sarbanes-Oxley Whistleblower Decision Goes Against Plaintiff

Published by on March 25, 2008

In Livingston v. Wyeth, Inc., No. 06-1939 (4th Cir. 2008), the U.S. Court of Appeals for the Fourth Circuit affirmed the dismissal of a whistleblower claim under the Sarbanes-Oxley Act of 2002, 18 USC 1514A because it concluded that no objectively reasonable basis existed for the plaintiff to have believed that the defendant was violating […]

In Livingston v. Wyeth, Inc., No. 06-1939 (4th Cir. 2008), the U.S. Court of Appeals for the Fourth Circuit affirmed the dismissal of a whistleblower claim under the Sarbanes-Oxley Act of 2002, 18 USC 1514A because it concluded that no objectively reasonable basis existed for the plaintiff to have believed that the defendant was violating the securities laws.  Judge Michael wrote a lengthy dissenting opinion.

For those interested in the Sarbanes-Oxley whistleblower provisions, the opinion contains a lengthy discussion of the elements of the cause of action and the defenses available.  One defense is for the company to show by clear and convincing evidence that it would have taken the same unfavorable personnel action in the absence of the alleged protected activity.  In interpreting the statute, the court did note that section 1514A (the whistleblower provision) requires both a subjective belief and an objectively reasonable belief that the company’s conduct constitutes a violation of the relevant law.

For those less interested in the legal nuances of the case, the facts are more interesting. 

According to the opinion, the event that precipitated the plaintiff’s termination was a company lunch party for members of the training staff, of which the plaintiff was the Associate Director.  Apparently the Director of Human Resources for the defendant’s North Carolina facility came to the party without an invitation from the plaintiff, who had sponsored the party.  After an exchange between the two, the plaintiff told the HR Director “If you do not leave, I’m going to ask the police escorting holiday traffic downstairs . . . to escort you out.”  The following Monday, the defendant suspended the plaintiff and, after a three-day investigation, terminated his employment.  (The plaintiff was apparently already on a performance improvement plan and had been counseled in the past.)

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