In a major setback for whistleblowers, a panel of the Ninth Circuit U.S. Court of Appeals has decided that going to the media can never be protected activity under the Sarbanes-Oxley Act (SOX).

The decision, issued in the case of Tides v. Boeing Corporation, upheld the firing of two Boeing employees, Nicholas P. Tides (a compliance specialist) and Matthew C. Neumann (an auditor) after they provided the Seattle Post-Intelligencer with credible allegations of unethical activity and fraud.

The National Whistleblowers Center (NWC) filed an amicus curiae (“friend of the court”) brief on behalf of the whistleblowers. The employees were represented by Seattle attorney John J. Tollefsen, of Tollefsen Law PLLC.

According to Stephen M. Kohn, Executive Director of the NWC: “This ruling is a major setback. Permitting companies to fire workers who talk to the press will have a chilling effect on whistleblowers, and stifle the ability of the government to learn about misconduct.”

Mr. Kohn added, “The ruling is illogical. Under this decision, corporate insiders can discuss fraud among themselves, but if an employee attempts to alert investors or the news media, they can be fired. The news media has historically played a vital role in informing government officials and the public about potential wrongdoing. We hope that Nicholas Tides and Matthew Neumann appeal this ruling.”

Loyola Law School professor Michael Waterstone told the Los Angeles Times that this decision, “certainly makes it less likely that [employees will] report behavior to journalists or members of the media.”

I am disappointed that the panel did not even mention the prior Ninth Circuit cases that adopted a balancing test to determine if employee disclosures are protected under other laws.  See Wrighten v. Metropolitan Hosp., Inc., 726 F.2d 1346, 1355 (9th Cir. 1984) (protecting a press conference under Title VII); O’Day v. McDonnell Douglas Helicopter Co., 79 F.3d 756 (9th Cir. 1996) (ADEA). On page 8, footnote 6, the Tides court says that it would not consider whether going to the media might be protected under 18 U.S.C. § 1514A(a)(2). The court now points practitioners to raise media disclosure cases under § 1514A(a)(2), Hopefully, though, the rest of the Ninth Circuit will be moved to correct this unfortunate panel decision before any new cases reach the court.

CASE UPDATE:  On May 16, 2011, attorneys for Nicholas Tides and Matthew Neumann filed a petition for rehearing en banc. This means that the other judges of the Ninth Circuit will have a chance to vote on whether they want to reconsider this terrible panel decision that denied protection for disclosures to the media.  Hopefully, the other judges of the Ninth Circuit will remember the Wrighten and O’Day decisions and apply their holding here for the benefit of Tides and Neumann.