By Rodney F. Tonkovic, J.D.
In denying a petition for review, an Eleventh Circuit panel took the opportunity to clarify what a "reasonable belief" is in the whistleblower context. In this case, a financial analyst at Office Depot said that he was fired in retaliation for uncovering what he argued was the intentional manipulation of sales data. To determine what evidence is required to establish a reasonable belief that there was a SOX violation, the panel adopted a "totality of the circumstances test" requiring sufficient information for a reasonable person to believe that there was a violation. In this case, the petitioner's claims were mere speculation, which was insufficient (Ronnie v. Office Depot, LLC, September 25, 2023, Wilson, C.).
Sales lift. Petitioner Christian Ronnie was a senior financial analyst at Office Depot. One of his principal duties was calculating a metric called "sales lift," a measure of how sales change at an Office Depot retail store after another nearby Office Depot closes. Ronnie discovered two potential accounting errors that he believed showed securities fraud related to sales lift. He claimed that Office Depot used the wrong data set for projected sales and that Office Depot calculated sales lift incorrectly by using different data sets to calculate pre-closure revenue data when it should have used identical data.
Ronnie reported both issues to his superiors on February 25, 2016. He was able to correct the model for the first issue, but while his superiors seemed to appreciate the seriousness of the second issue, no immediate action was taken. Ronnie was then tasked with investigating and reporting on the root cause—but not to make any changes to the calculation.
After reporting the issue, Ronnie alleged that his relationship with his boss became strained. Ronnie was asked to perform menial clerical work and was frequently reprimanded when his reports were incomplete or late. Suspecting retaliation, Ronnie emailed HR to ask for protection on March 8, 2016.
Terminated. By early April, Ronnie had not been able to figure out the discrepancy and he was given a "final warning" for failing to timely complete the task. On April 19, 2016, Ronnie was terminated for failing to perform his task. He then filed a timely pro se complaint with OSHA, which dismissed his complaint.
Ronnie appealed, and Office Depot moved for a summary decision, arguing that Ronnie failed to show a protected activity and that he was fired for poor work performance. The ALJ concluded that Ronnie failed to establish an objectively reasonable belief that fraud had occurred. The ARB affirmed.
Reasonable belief. The question before the court on appeal was: what evidence must a whistleblower show to establish a reasonable belief that the reported conduct by the employer violated SOX Section 1514A? As the ARB sees it, reasonable belief is determined by a mixed subjective and objective test, that is, the employee must believe that the alleged conduct violated SOX and a reasonable person would see it the same way. The court's task, then, was to inquire what evidence is required to establish reasonableness.
The panel adopted a "totality of the circumstances test" as used by the Second and Fourth Circuits. Under this test, the petitioner does not have to articulate a specific provision of Section 1514A that is being violated, but must set out sufficient information for a reasonable person (in the same circumstances as the complainant) to believe the wrongdoing amounted to a SOX violation. The totality of the circumstances can include elements of fraud such as scienter, materiality, reliance, and economic loss; while these elements do not need to be proved, there must be more than a conclusory allegation.
Applying this test, the panel concluded that Ronnie failed to show that a reasonable person would find Office Depot's conduct to be violative of SOX. While Ronnie argued that Office Depot intentionally manipulated sales data in order to mislead, he did not support this conclusion. The court pointed out that Ronnie's supervisors' insistence that he find the cause of the discrepancy did not comport with the allegation that they sought to cover it up. Ronnie's assertion that his investigation was a stalling tactic to hide the alleged manipulation of sales data was mere speculation, the panel said, and not enough to create a genuine issue of fact as to the objective reasonableness of his belief.
The panel then concluded that the ARB's decision was not arbitrary or capricious or an abuse of discretion. The petition for review was accordingly denied.
The case is No. 20-14214.