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Decided: May 12, 2014

The Fourth Circuit affirmed the district court’s grant of summary judgment by holding that the appellant failed to make a prima facie showing of his Sarbanes-Oxley Act of 2002 (“SOX”), 18 U.S.C. § 1514A, claims because he did not sufficiently prove that the alleged protected activities were a contributing factor to his termination.

Appellant argued that he was unlawfully fired in retaliation for engaging in activities protected under SOX.  These activities included: (1) reporting to the Board of Directors (Board) and the federal government about the potentially illegal exports with SAFE Source; (2) objecting to falsified Board meeting minutes; (3) objecting to leaks of information by the Outside Directors to Carrington; and (4) notifying the government of suspected insider trading.  The district court granted summary judgment to the Appellees, and held that plaintiffs failed to make a prima facie showing of their SOX claims because they did not sufficiently prove that the alleged protected activities were a contributing factor to their respective terminations.  Appellant filed a timely appeal and argued that the district court erred by holding that these activities did not contribute to his termination.  Appellant also argued that the district court erred by failing to decide whether Appellees had sufficiently demonstrated that he would have been fired regardless of these activities.

The SOX protects whistleblowers of publicly traded companies by prohibiting employers from retaliating against employees that provide information about potentially illegal conduct.  The Court applies a burden-shifting framework to SOX whistleblower claims.  The plaintiff must first establish a prima facie case by proving, by a preponderance of the evidence, that: “(1) he engaged in protected activity; (2) the employer knew that he engaged in the protected activity; (3) he suffered an unfavorable personnel action; and (4) the protected activity was a contributing factor in the unfavorable action.”  If the employee meets this burden, the defendant must then “rebut the employee’s prima facie case by demonstrating by clear and convincing evidence that the employer would have taken the same personnel action in the absence of the protected activity.”  This appeal centers on the fourth prong.  The Court found that the appellant failed to satisfy his light burden of showing by a preponderance of evidence, and that the activities tended to affect his termination in at least some way.

First, the Court found that there is no temporal proximity between appellant’s most significant protected activities because his reports regarding SAFE Source occurred roughly twenty months before his termination.  The Court reasoned that such a lengthy gap in time weighed against a finding that it is more likely than not that the alleged protected activities played a role in his termination.  Second, and most significantly, the Court noted that the appellant took a contradicting action that constituted a legitimate intervening event further undermining a finding that his long-past protected activities played any role in the termination.  While the Court mentioned that in SOX cases the contributing factor standard is meant to be broad and forgiving, it also emphasized the history of antagonism between the appellant, his employers, and the above referenced intervening events.  Furthermore, the Court opined that, under the particular circumstances here, the standard would be toothless if it held that a preponderance of the evidence showed that the long-past activities affected appellant’s termination.

Full Opinion

Grace Faulkenberry