The Eleventh Circuit clarified the reasonable-belief standard for whistleblowers alleging unlawful retaliation under the Sarbanes-Oxley Act, in Ronnie v. Office Depot, LLC, No. 20-14214, ___ F.4th ___ (11th Cir. Sept. 25, 2023). SOX broadly prohibits discrimination against employees for providing information that they “reasonably believe constitutes” mail, wire, bank, or securities fraud (or a violation of SEC regulations). 18 U.S.C. § 1514A(a)(1). While some federal courts of appeals have held that employees do not have to show an objectively reasonable belief with respect to the specific elements of fraud or a potential SEC violation, other courts have required would-be whistleblowers to make at least some showing of scienter, materiality, reliance, or loss to secure SOX whistleblower protections.
In an opinion by Judge Wilson, the Eleventh Circuit took the latter approach:
In determining what information sufficiently paints a picture of reasonable belief, we employ a totality of the circumstances test based on knowledge available to a reasonable person in the same factual circumstances—and with the same training and experience—as the complainant. Relevant to the totality of the circumstances is whether the employer acted with the requisite scienter, whether the misstatement was material, whether the misstatement was relied upon, and whether it yielded economic loss.
In adopting a totality of the circumstances test, we also note that while the employee need not “definitively and specifically” prove each element of fraud, he must make more than a conclusory allegation. Mere speculation or suspicion is insufficient to establish a genuine issue of material fact as to reasonable belief.
Ronnie, No. 20-14214, op. at 10–11 (internal footnote and citations omitted).
Given the facts of the case, which involved alleged errors related to projected sales figures, the court concluded that the employee’s “failure to demonstrate key factors of fraud—notably, scienter and materiality—does not support a conclusion that a reasonable person in his same position with his same education, training, and experience would believe the data error constituted a violation” of laws related to shareholder fraud. The Eleventh Circuit’s Ronnie opinion highlights some of the ongoing uncertainty in federal whistleblower law. Earlier this year, the Supreme Court resolved two circuit splits over the Government’s authority to seek dismissal of qui tam whistleblower suits over the relator’s objection. United States ex rel. Polansky v. Exec. Health Res., Inc., 143 S. Ct. 1720 (2023). And earlier this month, the Supreme Court heard oral argument in a case concerning an employee’s burden (or not) to prove retaliatory intent to support a SOX whistleblower claim. Murray v. UBS Securities, LLC, No. 22-660 (U.S. argued Oct. 10, 2023). Whether the Supreme Court will weigh in on the split discussed in the Eleventh Circuit’s Ronnie opinion remains to be seen.