Federal Appeals Court Denies En Banc Review of Decision Liberalizing SOX Whistleblowing Standards

The Third Circuit Court of Appeals has denied Tyco Electronics Corp.’s petition for an en banc review of the three-judge Third Circuit panel decision in Wiest v. Lynch, No. 11-4257 (3d Cir. Mar. 19, 2013). The panel had previously decided 2-1 to revive the whistleblowing claims of a former Tyco accountant, Jeffrey Wiest, under the Section 806 whistleblower provisions of the Sarbanes-Oxley Act (“SOX” or the “Act”). The panel found that a whistleblower under SOX need only possess a “reasonable belief” that his or her employer violated or may violate the law or Securities and Exchange Commission rules. (For more on this decision, please see our article, Employer Seeks En Banc Review of Federal Appeals Court Decision Liberalizing SOX Whistleblowing Standards.)

By adopting the worker-friendly “reasonable belief” standard first articulated by the Department of Labor’s Administrative Review Board (“ARB”) in Sylvester v. Parexel International, LLC, ARB No. 07-123, ALJ Nos. 2007-SOX-39, 42 (ARB May 25, 2011), the Third Circuit relaxed the pleading standards and rejected a prior standard, which held an employee had to allege his disclosures to supervisors “definitively and specifically” related to an existing violation. This represents the first affirmative acceptance of the Sylvester standard by a circuit court of appeals.

The company had filed its petition for en banc review on April 2, 2013, claiming the decision brought the Third Circuit into conflict with nine other circuits. Nonetheless, a majority of the circuit judges voted not to rehear the case.