The key litigated issue in Wiest v. Lynch was whether the district court had properly dismissed the plaintiff's complaint under Section 806 of the Sarbanes-Oxley Act (SOX) because he failed to allege communications that "definitively and specifically" related to a federal law or Securities and Exchange Commission (SEC) rule or regulation listed in Section 806.

Jeffrey Wiest worked in the accounting department of Tyco Electronics Corporation for over 30 years. For the last ten years of his employment, Wiest's office was under a high level of audit scrutiny because of the corporate scandal involving its former parent company, Tyco International, and its CEO. Between 2007 and 2009, Wiest questioned several expenses that failed to satisfy accounting standards or securities and tax laws, including expenses related to:

In 2009, Wiest was placed under investigation for incorrectly reporting the receipt of two basketball game tickets earlier that year, for having a relationship with a co-worker ten years earlier and for allegedly making sexually-oriented remarks to co-workers. Wiest went on medical leave after learning of the investigation and was terminated seven months later.

Wiest sued Tyco and several of its officers and directors, claiming he was terminated in retaliation for reporting improper expenditures in violation of SOX Section 806, which prohibits certain employers from discriminating against employees for reporting information that they reasonably believe constitutes a violation of one of several listed provisions relating to fraud and securities regulations. Wiest also asserted several state law claims, and his wife brought a claim for loss of consortium.

To establish a prima facie case under Section 806, an employee must allege:

The district court held that Wiest failed to allege that his communications (the protected activity in this case) "definitively and specifically" related to a statute or rule listed in Section 806, relying on the DOL Administrative Review Board (ARB)'s decision in Platone v. FLYI, Inc. and related court decisions endorsing that standard. Finding Wiest's allegations failed to meet this standard and declining to exercise supplemental jurisdiction over his state law claims, the district court dismissed his complaint.

Wiest then filed a motion for reconsideration, arguing for the first time that the ARB had overruled Platone's "definitive and specific" standard in favor of a "reasonable belief" standard in Sylvester v. Parexel Int'l LLC in 2011. The district court found that Sylvester was not an intervening change in the controlling law because the opinion preceded the court's ruling, even though the ARB issued its decision after the parties completed briefing on Tyco's motion to dismiss. Wiest appealed.

On March 19, 2013, the US Court of Appeals for the Third Circuit issued an opinion overruling the district court. The Third Circuit found that the ARB rejected Platone's "definitive and specific" standard in Sylvester, and that the ARB's decision in Sylvester was entitled to deference under Chevron, U.S.A., Inc. v. Natural Resources Defense Council Inc.

Under Chevron, if a court determines that Congress has not directly addressed the precise question at issue, the issue for the court is whether the relevant agency's answer is based on a permissible construction of the statute. In Platone, the ARB (which has authority to review appeals and issue final agency decisions under SOX Section 806) found that to be protected, a communication must "definitively and specifically" relate to one of the rules or statutes listed in Section 806. However, the Platone test originated in cases under the whistleblower provision in the Energy Reorganization Act (ERA), which contains a catch-all provision to protect employees who assist or participate in any proceeding or other action designed to carry out the purposes of the ERA. Because the ERA does not define "any other action," courts interpreted the phrase to require that an employee's activity definitively and specifically implicate safety, since the ERA's purpose was to protect employee actions involving nuclear safety.

By contrast, SOX Section 806 does not contain similar catch-all language, but instead expressly lists the laws and rules to which it applies. As such, the ARB decided in Sylvester that it was inappropriate to apply the "definitive and specific" standard to the definition of protected activity under SOX Section 806. The Platone standard could actually conflict with the statutory language of Section 806, which prohibits retaliation against employees for reporting information they "reasonably believe" violates SOX. Although SOX does not define what constitutes a reasonable belief, the ARB held in Sylvester that a plaintiff must have a subjective belief that his employer's conduct violates a provision listed in SOX Section 806 and that belief must be objectively reasonable, meaning a reasonable person in the same factual circumstances with the same training and experience as the employee would find the plaintiff's belief reasonable.

Applying the Sylvester standard, the Third Circuit found sufficient facts to support a plausible inference that:

The Third Circuit reversed the district court's dismissal with respect to these events, but affirmed its dismissal of Wiest's other claims.

In reaching its decision, the Third Circuit held that the fact that the ARB reconsidered and abandoned the "definitive and specific" standard did not preclude court deference to its subsequent "reasonable belief" standard, as according to the US Supreme Court, agency inconsistency is not a basis for declining to analyze the agency's interpretation under Chevron. The Third Circuit also found that, under Sylvester:

The Third Circuit's decision in Wiest v. Lynch lowers the bar for plaintiffs bringing whistleblower claims under SOX Section 806 by requiring them to have only a reasonable belief that their employer either has violated or will violate one of the enumerated laws or rules. Employers in the Third Circuit should be aware that under the Sylvester standard, plaintiffs' claims may more easily survive motions to dismiss.

For more information on whistleblower claims under SOX Section 806, see Practice Note, Whistleblower Protections under Sarbanes-Oxley and the Dodd-Frank Act.