Fourth Circuit Breathes Life into Summary Judgment for Employers Defending SOX Whistleblower Claims

On May 12, 2014, the U.S. Court of Appeals for the Fourth Circuit issued a ruling upholding a grant of summary judgment in favor of the employer in Feldman v. Law Enforcement Assocs. Corp.,1 a Sarbanes-Oxley (SOX) whistleblower retaliation case filed by the defendant employer’s former president and chief executive officer. Section 806 of SOX2 creates a federal cause of action in favor of employees who allege that their employers retaliated against them for reporting violations of federal securities laws. In affirming the lower court’s decision, the circuit court concluded that the CEO failed to establish that his alleged protected activities were a “contributing factor” to the company’s decision to fire him. In what is a rare case of a court finding an employee failed to make a prima facie showing under a SOX whistleblower statute, the court determined that the plaintiff’s “light burden” was not satisfied due to the 20-month gap between his protected activities and his termination from employment and the existence of a “legitimate intervening event” that precipitated his firing.