Federal Court of Appeals Rejects Sarbanes-Oxley Whistleblower’s Challenge to Department of Labor Ruling
Based on the statistics, it is nearly impossible to win a whistleblower claim brought under the Sarbanes-Oxley Act. In 2010, the Center for Public Integrity wrote that the U.S. Department of Labor, which administers those claims, had only upheld 25 out of the 1,091 claims brought since the Act was passed in 2002. That’s only a 2% success rate.
Although Scott Bechtel’s case took a longer path than most, it is now another statistic on the side of failure.
Bechtel was a vice president of technology commercialization at Competitive Technologies, Inc. (“CTI”). In late 2002, Bechtel became concerned about CTI’s balance sheet, and refused to sign Sarbanes-Oxley disclosure forms that did not mention certain aspects of its finances. Months later, after CTI’s financial situation had deteriorated further, Bechtel was fired. He then brought a claim under Sarbanes-Oxley’s whistleblower protection provision, claiming that he had been terminated for his refusal to sign the disclosure forms.
Initially, Bechtel succeeded before the Department of Labor’s Occupational Safety and Health Administration (“OSHA”), which handles the initial investigation and evaluation of Sarbanes-Oxley whistleblower claims. The OSHA Regional Administrator found reasonable cause to believe that CTI had in fact retaliated against Bechtel, and ordered CTI to reinstate him (i.e., give him his old job back) and pay him back wages.
But that’s when the roof caved in. CTI objected to the findings and asked for a formal hearing before an administrative law judge, and the ALJ denied Bechtel’s claim and dismissed his case. Bechtel appealed to the Department’s Administrative Review Board, which reversed the ALJ’s decision, finding that the ALJ had applied the wrong legal standard. Once again, however, the ALJ ruled for CTI. Bechtel appealed again, and on that appeal, the Administrative Review Board affirmed the dismissal, even though it wrote that the ALJ’s second opinion was “not easily deciphered” and had applied a legal standard that had no basis.
Undeterred, Bechtel appealed to the U.S. Court of Appeals for the Second Circuit. He argued that because of the ALJ’s legal error, the Administrative Review Board was required to reverse its decision and send back the case for another do-over. The Second Circuit agreed with Bechtel that the ALJ had applied the wrong standard. Bechtel v. Admin. Review Bd., No. 11-4918-ag (2d Cir. Mar. 5, 2013). However, it held that the ALJ’s error was immaterial because Bechtel had failed to prove that “his protected activity was a contributing factor in the adverse employment action.” Slip op. at 9. Because of this failure of proof, it wrote, the Administrative Review Board did not need to send Bechtel’s case back to the ALJ for a third try at getting the governing legal standard right.
The end result: after ten years of litigation and two erroneous ALJ opinions, Bechtel’s claim is one of the 98%.