Ninth Circuit Holds that SOX Whistleblower Provisions Do Not Protect Leaks to the Media

Sheppard Mullin Richter & Hampton LLP

In Tides v. The Boeing Co., No. 10-35238, 2011 WL 1651245 (9th Cir. May 3, 2011), the United States Court of Appeals for the Ninth Circuit held that the whistleblower provisions of the Sarbanes-Oxley Act of 2002 ("SOX"), 18 U.S.C. § 1514A(a)(1), do not protect employees of publicly traded companies who disclose information to the media. Instead, the Court held, SOX protects employees only if they disclose certain types of information to the three groups identified in the statute: (1) federal regulatory and law enforcement agencies, (2) Congress and (3) employee supervisors. This case sets parameters for what is and what is not protected whistleblower activity under SOX for which an employee can receive damages under the law.

Tides was brought by two former employees of Boeing Company (“Boeing” or the “Company”) who worked at Boeing’s information technology SOX audit team. This team was responsible for helping the Company comply with SOX’s requirement to assess annually the effectiveness of Boeing’s internal controls and procedures for financial reporting. Plaintiffs allegedly believed that Boeing managers fostered a hostile work environment, pressuring them to rate the Company’s internal controls as “effective” despite problems with these controls. Plaintiffs allegedly communicated their concerns to a reporter from the Seattle Post-Intelligencer despite knowing about Boeing’s policy restricting the release of Company information to the media. Using this information, the Post-Intelligencer published an article, “Computer Security Faults Put Boeing at Risk,” on July 17, 2007.

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