Federal Court Dismisses SOX Whistleblower Retaliation Claim
The US District Court for the Eastern District of Pennsylvania has dismissed a claim made by an accounting employee who claims he was terminated in retaliation for acting as a Sarbanes-Oxley whistleblower. The plaintiff had questioned expenses incurred at client and employee events occurring at high-end resorts, which were similar events to those that resulted in prosecutions at a former affiliate company. The Court opined that the plaintiff merely questioned the characterization of certain expenses for tax and accounting purposes but never indicated that the treatment could result in securities fraud or a violation of Sarbanes-Oxley. Also, the Court indicated that the defendant generally did follow-up on his requests to review the expenses. The plaintiff argued that he was ultimately terminated because he questioned expenses.
OUR TAKE: This is a very narrow reading of Sarbanes-Oxley’s anti-retaliation provisions. The plaintiff questioned expenses that were similar to those that resulted in prior prosecutions. It seems a bit technical and unreasonable to make the plaintiff, who is not a lawyer, specifically allege securities fraud or a SOX violation at the time he questioned the expenses. This case may be another example of the federal courts showing hostility to private securities plaintiffs.