## Facts

- Jeffrey A. Wiest worked in Tyco Electronics Corporation’s accounting department for about 31 years, in an environment of heightened audit scrutiny after prior corporate scandals.
- Beginning around 2007, Wiest repeatedly questioned and refused to process certain expenditures he believed did not comply with accounting standards and securities or tax laws.
- Wiest objected to expenses for a proposed corporate event at the Atlantis Resort in the Bahamas (about $350,000), including entertainment, decorative items, and high-cost hotel rooms.
- Wiest also raised concerns about other transactions, including expenses for a global sales meeting and alleged reimbursement of personal expenses as business expenses.
- Wiest communicated his objections internally to supervisors via email and other communications.
- After these objections, Tyco initiated a human resources investigation; Wiest was terminated in April 2010.
- Wiest alleged Tyco’s stated reasons for termination were pretextual and that the real reason was retaliation for his internal reports.

## Issues

1. Whether SOX § 806 requires a whistleblower’s internal reports to “definitively and specifically” relate to an existing violation of enumerated fraud or securities laws, or whether a subjectively and objectively reasonable belief of covered misconduct suffices.
2. Whether the complaint plausibly alleged SOX-protected activity and causation sufficient to survive a Rule 12(b)(6) motion to dismiss.

## Decision

- The Third Circuit rejected the “definitively and specifically” requirement applied by the district court as too demanding and inconsistent with SOX’s text.
- The court held an employee engages in protected activity if the employee provides information based on a subjectively and objectively reasonable belief that the complained-of conduct constitutes conduct covered by 18 U.S.C. § 1514A.
- Applying that standard, the court concluded Wiest plausibly alleged protected activity based on internal objections to expenditures and accounting treatment that could mislead shareholders or violate SEC rules.
- The court held Wiest sufficiently alleged retaliation and causation at the pleading stage for at least some SOX claims.
- The court reversed in part the dismissal of the SOX claims, vacated dismissal of the state-law claims, and remanded for further proceedings.

## Legal Principles

- SOX § 806 protects an employee who reports information to a supervisor when the employee subjectively believes, and a similarly situated person could objectively believe, the conduct implicates mail fraud, wire fraud, bank fraud, securities fraud, SEC rule violations, or federal law relating to fraud against shareholders.
- Protected activity does not require pleading or proving an actual, completed violation; it is sufficient that the employee reasonably believes the conduct could violate covered laws or rules if carried out or recorded as planned.
- At the motion-to-dismiss stage, a plaintiff need not identify the precise statutory provision violated; factual allegations must plausibly support an inference of a reasonable belief tied to § 1514A’s enumerated categories.
- Internal compliance and accounting objections can qualify as protected activity even when not labeled as “fraud,” if they reasonably implicate shareholder or securities-related deception.

## Conclusion

The Third Circuit reinstated Wiest’s SOX retaliation case in part, holding that SOX protects internal whistleblowing based on a reasonable belief standard rather than a requirement that reports “definitively and specifically” identify an existing statutory fraud violation, and it remanded for further proceedings on the federal and related state claims.


Wiest v. Lynch, 710 F.3d 121 (3d Cir. 2013)