A few federal judges have been reluctant to follow a provision in the 2002 Sarbanes-Oxley (SOX) law that allows corporate fraud whistleblowers to have a de novo trial in federal court. One judge in Maryland ordered a SOX case back to the Department of Labor’s Administrative Review Board (ARB) saying that the de novo provision was “absurd.”  Yesterday, I filed an amicus brief with the Fourth Circuit Court of Appeals explaining why this is the law, and why it is not “absurd” to follow the law.


The amicus brief was filed on behalf of the National Whistleblowers Center (NWC) and the Government Accountability Project (GAP). GAP attorneys Kasey Dunton-Dermont and Tom Devine assisted with the brief.

The SOX provision at issue is 18 U.S.C. §1514A(b)(1)(B).  It provides that if the Department of Labor (DOL) does not issue a final order within 180 days, then the complainant can file a de novo civil action in U.S. district court.

Between 1999 and 2005, David Stone became a quick climber of the corporate ladder at Instrumentation Laboratory Company (IL).  Promoted twice, we went from a Sales Representative to Director of National Accounts.  In this national management position, Stone learned that IL had not been paying required administrative fees to Group Purchasing Organizations (GPOs). Combined with internal control problems, this meant that IL was misrepresenting its financial condition to investors. Stone reported these problems to corporate officials who promptly began retaliating.  First they gave Stone a bad performance appraisal.  Then, in March 2006, they fired him.

Stone filed a SOX whistleblower complaint with DOL’s Occupational Safety and Health Administration (OSHA) which (as it does in most cases) found no merit in the complaint.  Stone appealed to an administrative law judge (ALJ) who dismissed the case without allowing Stone to have discovery or a hearing.  It is no wonder then that Stone decided to leave the DOL process and file in federal court.

The federal judge, however, also did not want to hear the case.  Citing a decision from Louisiana, and a comment by the Secretary of Labor, the judge said that allowing Stone to have a trial after the ALJ had issued a recommended decision was an “absurd result.”  Ignoring the plain language of SOX, the judge ordered that the case go back to DOL for a final decision.  Stone appealed.

In our amicus brief, NWC and GAP argue that the plain and clear language of SOX controls, and it was an error for the judge to refuse to hear Stone’s case.  The brief notes that the Fourth Circuit reached the same conclusion for discrimination cases under Title VII, holding that de novo review “makes clear” that the trial in district court “proceeds as if no earlier proceedings had been completed at all.” Laber v. Harvey, 438 F.3d 404, 421 (4th Cir. 2006). Other courts have also followed SOX the way it is written, allowing de novo litigation. JDS Uniphase Corp. v. Jennings, 473 F.Supp.2d 705, 710 (E.D. Va. 2007); Collins v. Beazer Homes USA, Inc., 334 F. Supp. 2d 1365, 1374 (N.D. Ga. 2004).

The brief argues that legislative history need not be considered when the statute’s language is clear. Nevertheless, the history of SOX supports what the language says.  Senator Patrick Leahy stated “Only if there is not a final decision within 180 days of the complaint (and such delay is not shown to be due to the bad faith of the claimant) may he or she bring a de novo case in federal court with a jury trial available.” Legislative History of Title VIII of HR 2673, the Sarbanes-Oxley Act of 2002, Section 806, 148 Cong. Rec. S7418, S7420 (July 26, 2002).  Congress clearly knew what it was saying.  In fact, Congress has said it six more times in the whistleblower laws it has passed since enacting SOX in 2002:  Energy Reorganization Act, 42 USC 5851(b)(4); Surface Transportation Assistance Act, 49 USC 31105(c); National Transit Systems Security Act of 2007, 6 USC 1142(c)(7); Federal Rail Safety Act, 49 USC 20109(d)(3); Defense Authorization Act, 10 USC 2409(c)(2); and Consumer Product Safety Improvement Act, 49 USC 2087(b)(4).

The brief concludes that it is not “absurd” to follow the law as Congress wrote it.  A decision is expected by the end of 2009.