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In a major setback for whistleblowers, a panel of the Ninth Circuit U.S. Court of Appeals has decided that going to the media can never be protected activity under the Sarbanes-Oxley Act (SOX).

The decision, issued in the case of Tides v. Boeing Corporation, upheld the firing of two Boeing employees, Nicholas P. Tides (a compliance specialist) and Matthew C. Neumann (an auditor) after they provided the Seattle Post-Intelligencer with credible allegations of unethical activity and fraud.

The National Whistleblowers Center (NWC) filed an amicus curiae ("friend of the court") brief on behalf of the whistleblowers. The employees were represented by Seattle attorney John J. Tollefsen, of Tollefsen Law PLLC.

According to Stephen M. Kohn, Executive Director of the NWC: "This ruling is a major setback. Permitting companies to fire workers who talk to the press will have a chilling effect on whistleblowers, and stifle the ability of the government to learn about misconduct."

Mr. Kohn added, "The ruling is illogical. Under this decision, corporate insiders can discuss fraud among themselves, but if an employee attempts to alert investors or the news media, they can be fired. The news media has historically played a vital role in informing government officials and the public about potential wrongdoing. We hope that Nicholas Tides and Matthew Neumann appeal this ruling."

Loyola Law School professor Michael Waterstone told the Los Angeles Times that this decision, "certainly makes it less likely that [employees will] report behavior to journalists or members of the media."

I am disappointed that the panel did not even mention the prior Ninth Circuit cases that adopted a balancing test to determine if employee disclosures are protected under other laws.  See Wrighten v. Metropolitan Hosp., Inc., 726 F.2d 1346, 1355 (9th Cir. 1984) (protecting a press conference under Title VII); O’Day v. McDonnell Douglas Helicopter Co., 79 F.3d 756 (9th Cir. 1996) (ADEA). On page 8, footnote 6, the Tides court says that it would not consider whether going to the media might be protected under 18 U.S.C. § 1514A(a)(2). The court now points practitioners to raise media disclosure cases under § 1514A(a)(2), Hopefully, though, the rest of the Ninth Circuit will be moved to correct this unfortunate panel decision before any new cases reach the court.

CASE UPDATE:  On May 16, 2011, attorneys for Nicholas Tides and Matthew Neumann filed a petition for rehearing en banc. This means that the other judges of the Ninth Circuit will have a chance to vote on whether they want to reconsider this terrible panel decision that denied protection for disclosures to the media.  Hopefully, the other judges of the Ninth Circuit will remember the Wrighten and O'Day decisions and apply their holding here for the benefit of Tides and Neumann.

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The Ninth Circuit Court of Appeals has scheduled oral argument in a case that will decide if disclosures to the media can be protected under the Sarbanes-Oxley Act (SOX). The oral argument will be on Friday, April 15, 2011, at the William K. Nakamura U.S. Courthouse,
1010 Fifth Avenue, 7th Floor, Courtroom #2, in Seattle, WA 98104. The argument is scheduled to start at 9:00 a.m. Pacific time. However, if all the other cases take all their allotted time, then the argument will start at 11:00 a.m. The Court has granted special permission to Stephen M. Kohn, Executive Director of the National Whistleblowers Center (NWC) to present oral argument in the case.  You can read NWC's amicus brief here, and Boeing's opposition brief here. Attorney John Tollefsen will be presenting oral argument for the employees, Matt Neumann and Nick Tides.  The case is Tides v. The Boeing Corporation.

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On behalf of the National Whistleblowers Center (NWC), David Colapinto and I filed a friend-of-the-court brief last week arguing that the Sarbanes-Oxley Act (SOX) can protect corporate whistleblowers who make disclosures through the media. We filed the brief with the U.S. Court of Appeals for the Ninth Circuit in the case of Tides v. The Boeing Company, Case No. 10-35238. The brief examines the history of how whistleblowers have used the public attention of the media to spur government action on matters of public concern. In the 1970's, Congress began enacting statutes to protect whistleblowers. Courts and the Department of Labor quickly recognized that when whistleblowers use media outlets to raise their safety concerns, their use of the media can and should be protected. It is now one of the recognized ways in which whistleblowers can "cause" information to be disclosed to law enforcement agencies and others who can correct violations or set enforcement policy. This case law was well developed when Congress enacted SOX in 2002, and is fully consistent with the legislative purposes behind SOX.

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The Ninth Circuit U.S. Court of Appeals reinstated a Sarbanes-Oxley case and made some helpful comments about SOX. In a decision issued last month, the Court reversed a dismissal by a Nevada magistrate judge and sent the case back so Lena and Shawn Van Asdale can have their day in court. "The success, or failure, of the Van Asdales’ lawsuit does not depend on their ability to show any actual fraud, only that they reasonably believed that fraud had occurred," the Court says.  Here, here. "An employee need not cite a code section he believes was violated," the opinion adds. The case is Van Asdale v. Int'l Game Technology, ___ F.3d. ___, No. 07-16597 (9th Cir. Aug. 13, 2009).

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