5th Circuit Court Revives a SOX Whistleblower Action

The Fifth Circuit Court recently revived Wallace v. Tesoro Corp, a Sarbanes-Oxley whistleblower complaint that had previously been dismissed by the U.S. District Court for the Western District of Texas. The Fifth Circuit found the plaintiff’s alleged belief that the company was in violation of certain Securities and Exchange Commission (SEC) rules was not unreasonable. The court also affirmed the dismissal of other claims that were not included in an original Occupational Safety and Health Administration (OSHA) complaint, ruling that they were not administratively exhausted.

The plaintiff was Kevin Wallace, who had served as the vice president of pricing and commercial analysis at Tesoro, the defendant. He filed a complaint with OSHA, claiming that the company had retaliated against him because he made a protected whistleblower report. Wallace said he issued his complaint after the company allegedly counted its taxes as revenue on some of its financial forms, which would be a violation of Generally Accepted Accounting Practices (GAAP).

OSHA initially dismissed the complaint, so Wallace took his case to the federal district court and filed some slightly amended complaints, alleging for the first time that he engaged in protected activity while reporting and investigating his suspicions of wire fraud within the company. The district court ruled that Wallace’s charge that the company was in violation of SEC rules was “objectively unreasonable” and dismissed his wire fraud claim.

The Fifth Circuit affirmed the dismissal of wire fraud claims, but ruled the district court was wrong to rule the plaintiff did not have reasonable cause to believe the company was violating SEC rules. By deciding in this manner, the court opened the door for the claim to continue.

For more information on how to proceed when someone files a complaint within your business or organization, contact a skilled Dallas attorney at Whistleblower Law for Managers right away.