Wade Clark Mulcahy LLP

<p style="text-align: justify;">Recently, the United States District Court for the Eastern District of Pennsylvania partially granted a Defendant’s motion for summary judgment on the basis that the Plaintiff lacked any reasonable belief that the company violated any law of the Sarbanes-Oxley Whistleblower (“SOX”) Act.</p>
<p style="text-align: justify;">In <em><a href="https://www.wcmlaw.com/wp-content/uploads/2021/05/Ngai-v.-Urban-Outfitters-Inc..pdf">Ngai v. Urban Outfitters Inc.</a>,</em> plaintiff, who was Director of Sourcing and Technical Design for Urban Outfitters, had made allegations of improper conduct by certain outside vendors Urban Outfitters worked with. Specifically, Plaintiff believed suppliers were purposely inflating production costs, paying kickbacks to senior executives, and creating conflicts of interest in violation of Urban Outfitter’s policies. Additionally, Plaintiff claimed his employer created a hostile work environment. Plaintiff complained to supervisors, then hired a lawyer, and five months thereafter, Plaintiff was terminated from his employment.</p>
<p style="text-align: justify;">Plaintiff sued, believing his termination was due to retaliation for his complaints of age and national origin discrimination. Defendant’s Motion for Summary Judgment was denied with respect to Plaintiff’s claim that his termination was motivated by age in violation of ADEA and his complaints about national origin and age discrimination.</p>
<p style="text-align: justify;">However, the Court held the Plaintiff failed to establish any reasonable belief his previous employer engaged in conduct under SOX. Section 806 of SOX prohibits publicly traded companies from retaliating against whistleblowers for providing information to their supervisors regarding any conduct which the employee reasonably believes constitutes a violation of various SOX sections. The Court determined Plaintiff failed to prove he had a subjectively reasonable belief of a violation because the Plaintiff believed he was reporting violations of company policies, not violations of federal statues covered by SOX.  Therefore, the Court held summary judgment in favor of the Defendant’s regarding Plaintiff’s SOX claim.  This decision highlights a whistleblower’s need to believe a violation of one of the provisions in SOX is reasonable, in addition to claiming a violation of company policies.</p>
<p style="text-align: justify;">Thanks to Madeline Troutman for her contribution to this post.  Should you have questions, please contact <a href="mailto:tbracken@wcmlaw.com">Thomas Bracken</a>.</p>