The Sarbanes-Oxley Act is also known as the Public Company Accounting Reform and Investor Protection Act of 2002, Pub.L. No. 107-204 § 804, 116 Stat. 745, 801, codified in part at 28 U.S.C. § 1658(b). The Act states that all business records, including electronic records and electronic messages, must be saved for “not less than five years.” The consequences for non-compliance are serious. They include substantial fines, imprisonment, or both. The Act states that corporate accounting records must be certified by those responsible for them, protection for workers who report corporate financial wrongdoings, and a requirement that all business communications be kept for a certain length of time including recorded phone calls and emails.

Among the many provisions contained in the law, Sarbanes-Oxley requires that the Chief Executive Officer and Chief Financial Officer certify “[e]ach periodic report containing financial statements filed by an issuer with the Securities and Exchange Commission …” 18 U.S.C. § 1350(a). The statute also provides for imprisonment of up to 10 years or a fine of $1,000,000 for any person who “certifies a periodic financial statement … knowing that the periodic report accompanying the statement does not comport with all the requirements set forth in [section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d))] …” 18 U.S.C. § 1350(c). An individual who “willfully certifies” such a statement is subject to a prison term of 20 years and a fine of up to $5,000,000. Any independent accounting firms which are hired for purpose of SEC compliance and accounting companies are also bound by the Act.

The following sections of Sarbanes-Oxley contain the three main rules that affect the management of electronic records. The first rule deals with destruction, alteration, or falsification of records.
Sec. 802(a) “Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.”

The second rule clearly defines the retention period for records storage. Most lawyers agree that corporations securely store all business records using the same guidelines set for public accountants.
Sec. 802(a)(1) “Any accountant who conducts an audit of an issuer of securities to which section 10A(a) of the Securities Exchange Act of 1934 (15 U.S.C 78j-1(a)) applies, shall maintain all audit or review workpapers for a period of 5 years from the end of the fiscal period in which the audit or review was concluded.”

This third rule refers to the type of business records which need to be stored. It includes all business records and communications, including electronic communications.

Sec. 802(a)(2) “The Securities and Exchange Commission shall promulgate, within 180 days, such rules and regulations, as are reasonably necessary, relating to the retention of relevant records such as work papers, documents that form the basis of an audit or review, memoranda, correspondence, communications, other documents, and records (including electronic records) which are created, sent, or received in connection with an audit or review and contain conclusions, opinions, analyses, or financial data relating to such an audit or review.”

The Public Company Accounting Reform and Investor Protection Act of 2002. It established a public company accounting oversight board to monitor corporate responsibility and protects employees of public companies who “blow the whistle” on securities law and other violations from retaliation. Section 806 of the Act (codified as 18 U.S.C. § 1514A) creates a right of civil action in federal court that protects whistleblowers against retaliation in securities fraud cases. Section 1107 (codified as 18 U.S.C. § 1513(e)) provides for criminal penalties of up to ten years in prison and a fine for retaliation against informants.

The whistleblower protection provision codified in 18 U.S.C. § 1514A is a minor part of the Sarbanes-Oxley Act which is designed to protect investors. The “whistleblower protection statute” creates a formal administrative complaint procedure and a federal civil cause of action, designed to protect the “employees of publicly traded companies” who lawfully “provide information … or otherwise assist in an investigation regarding any conduct which the employee believes constitutes a violation” of the federal mail, wire, bank, or securities fraud statutes, any rule or regulation of the Securities and Exchange Commission (“SEC”), or other provision of the Federal law relating to fraud against the shareholders. 18 U.S.C. § 1514A(a).

3. 18 U.S.C. § 1514A(a) provides:

1. (a) Whistleblower Protection for Employees of Publicly Traded Companies.—No company with a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l), or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)), or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee—

(1) to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of section 1341, 1343, 1344, or 1348, any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders, when the information or assistance is provided to or the investigation is conducted by—

(A) a Federal regulatory or law enforcement agency;

(B) any Member of Congress or any committee of Congress; or

(C) a person with supervisory authority over the employee (or such other person working for the employer who has the authority to investigate, discover, or terminate misconduct); or

(2) to file, cause to be filed, testify, participate in, or otherwise assist in a proceeding filed or about to be filed (with any knowledge of the employer) relating to an alleged violation of section 1341, 1343, 1344, or 1348, any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders.

Whistleblower protection for employees of publicly traded companies.—No company with a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. § 781), or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. § 78o(d)), or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee—

(1) to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of section 1341, 1343, 1344, or 1348, any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders …; or

(2) to file, cause to be filed, testify, participate in, or otherwise assist in a proceeding filed or about to be filed (with any knowledge of the employer) relating to an alleged violation [of the above].

The Sarbanes-Oxley Act also created a new governmental body called The Public Company Accounting Oversight Board. The Board operates under the Securities and Exchange Commission and supervises and regulates the activities of public accounting firms. Section 106 of the Act, with certain limited exceptions, deals expressly with foreign accounting firms, requiring them to register with the Board if they audit public companies. See 15 U.S.C. § 7216(c) (2005) (providing that the SEC or the Board may, as it “determines necessary or appropriate in the public interest or for the protection of investors,” exempt a foreign public accounting firm from the Act). The accounting provision reflects Congress’s recognition that the application of domestic U.S. regulatory statutes to persons abroad presents problems in addition to those of purely domestic application, and of the need to address those problems specifically.

In addition to the whistleblower statute found in Section 806 of the Act, there two other separate provisions in Sarbanes-Oxley deal with whistleblower protection. Section 301 of the Act requires the audit committees of issuers (which include foreign issuers)6 to implement internal procedures that facilitate and encourage “anonymous” whistleblowing by employees concerning “questionable accounting or auditing matters.” See 15 U.S.C. § 78j-1(m)(4) (2005).

The other whistleblower provision found in the Sarbanes-Oxley Act, Section 1107, amended 18 U.S.C. § 1513 (2000 & Supp.2005) by adding subsection (e)9 provides criminal sanctions for retaliation against anyone giving truthful information to law enforcement officers relating to the commission of any federal offense. There is also a provision for extraterritorial jurisdiction of § 1513 including subsection (e). See 18 U.S.C. § 1513(d) (“There is extraterritorial Federal jurisdiction over an offense under this section.”). That Congress provided for extraterritorial reach as to Section 1107 but did not do so as to Section 806 (the provision relevant here) conveys the implication that Congress did not mean Section 806 to have extraterritorial effect

18 U.S.C. § 1513(e) provides:

Whoever knowingly, with the intent to retaliate, takes any action harmful to any person, including interference with the lawful employment or livelihood of any person, for providing to a law enforcement officer any truthful information relating to the commission or possible commission of any Federal offense, shall be fined under this title or imprisoned not more than 10 years, or both.

As part of Sarbanes-Oxley, enacted on July 30, 2002, Congress amended the 1-and-3-year limitations scheme for private securities fraud actions, previously established by the Supreme Court in Lampf. Section 804 of Sarbanes-Oxley provides:

(a) …. [A] private right of action that involves a claim of fraud, deceit, manipulation, or contrivance in contravention of a regulatory requirement concerning the securities laws, as defined in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. [§] 78c(a)(47)), may be brought not later than the earlier of—

(1) 2 years after the discovery of the facts constituting the violation; or

(2) 5 years after such violation.

(b) EFFECTIVE DATE.-The limitations period provided by section 1658(b) of title 28, United States Code, as added by this section, shall apply to all proceedings addressed by this section that are commenced on or after the [July 30, 2002,] date of enactment of this Act.

(c) NO CREATION OF ACTIONS.-Nothing in this section shall create a new, private right of action.

Public Company Accounting Reform and Investor Protection Act of 2002, Pub.L. No. 107-204 § 804, 116 Stat. 745, 801, codified in part at 28 U.S.C. § 1658(b).

Sarbanes-Oxley extended the limitations periods for “private right[s] of action that involve[] a claim of fraud, deceit, manipulation, or contrivance in contravention of a regulatory requirement concerning the securities laws.” Id. § 804(a), 28 U.S.C. § 1658(b). Such actions now have the benefit of a two-year statute of limitations and a five-year statute of repose.

Section 10(b) of the Act provides that “[i]t shall be unlawful for any person . . . (b) [t]o use or employ, in connection with the purchase or sale of any security . . ., any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities and Exchange] Commission may prescribe . . .” 15 U.S.C. § 78j. In turn, SEC Rule 10b-5 provides that

[i]t shall be unlawful for any person, directly or indirectly . . .

(a) [t]o employ any device, scheme, or artifice to defraud,

(b) [t]o make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

(c) [t]o engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.

17 C.F.R. § 240.10b-5. We refer to claims brought pursuant to 15 U.S.C. § 78j(b) and Rule 10b-5 as “§ 10(b) claims.”

5. Section 20(a) of the Act provides that

[e]very person who, directly or indirectly, controls any person liable under any provision of this chapter or of any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action. 15 U.S.C. § 78t(a).

The Sarbanes-Oxley Act creates “whistleblower” protection for employees of publicly-traded companies by prohibiting employers from retaliating against employees because they provided information about potentially unlawful conduct. Specifically, the Sarbanes-Oxley Act provides:

No [publicly-traded company], or any officer [or] employee … of such company, may discharge … an employee … because of any lawful act done by the employee —

(1) to provide information … regarding any conduct which the employee reasonably believes constitutes a violation of section 1341 [mail fraud], 1343 [wire fraud], 1344 [bank fraud], or 1348 [securities fraud], any rule or regulation of the [SEC], or any provision of Federal law relating to fraud against shareholders, when the information … is provided to …

… a person with supervisory authority over the employee ….

18 U.S.C. § 1514A(a); Livingston v. Wyeth, Inc., 520 F.3d 344, 351 (4th Cir.2008); Allen v. Admin. Review Bd., 514 F.3d 468, 475 (5th Cir.2008).

The whistleblower protection provision of the Sarbanes-Oxley Act adopts the burden-shifting framework applicable to whistleblower claims brought under the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century, 49 U.S.C. § 42121(b) (2000). See 18 U.S.C. § 1514A(b). Accordingly, an employee bears the initial burden of making a prima facie showing of retaliatory discrimination; the burden then shifts to the employer to rebut the employee’s prima facie case by demonstrating by clear and convincing evidence that the employer would have taken the same personnel action in the absence of the protected activity. 49 U.S.C. § 42121(b)(2)(B).

The Department of Labor (DOL) regulations implementing § 1514A provide that in order to make a prima facie showing, an employee’s complaint must allege that: (1) the employee engaged in protected activity; (2) the employer knew, actually or constructively, of the protected activity; (3) the employee suffered an unfavorable personnel action; and (4) the circumstances raise an inference that the protected activity was a contributing factor in the personnel action. 29 C.F.R. § 1980.104(b)(1) (2007).

To satisfy the first element and establish that he engaged in protected activity, an employee must show that he had both “a subjective belief and an objectively reasonable belief” that the conduct he complained of constituted a violation of relevant law. Livingston, 520 F.3d at 352. Additionally, an employee must show that his communications to his employer “definitively and specifically relate[d]” to one of the laws listed in § 1514A

Section 1514A(a)(1) of Title 18 prohibits employers of publicly-traded companies from “discriminat[ing] against an employee in the terms and conditions of employment” for “provid[ing] information … regarding any conduct which the employee reasonably believes constitutes a violation of section 1341 [mail fraud], 1343 [wire fraud], 1344 [bank fraud], or 1348 [securities fraud], any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders.”

Section 1514A(b)(2) further specifies that § 1514A claims are governed by the procedures applicable to whistle-blower claims brought under 49 U.S.C. § 42121(b). Section 42121(b)(2)(B), in turn, sets forth a burden-shifting procedure by which a plaintiff is first required to make out a prima facie case of retaliatory discrimination; if the plaintiff meets this burden, the employer assumes the burden of demonstrating by clear and convincing evidence that it would have taken the same adverse employment action in the absence of the plaintiff’s protected activity. We first address whether the Van Asdales have made out a prima facie showing of retaliatory discrimination.

1. Prima Facie Case

Regulations promulgated by the Department of Labor set forth four required elements of a prima facie case under § 1514A: (a) “[t]he employee engaged in a protected activity or conduct”; (b) “[t]he named person knew or suspected, actually or constructively, that the employee engaged in the protected activity”; (c) “[t]he employee suffered an unfavorable personnel action”; and (d) “[t]he circumstances were sufficient to raise the inference that the protected activity was a contributing factor in the unfavorable action.” 29 C.F.R. § 1980.104(b)(1)(i)-(iv). We address each element in turn.

a. Protected Activity

Platone v. FLYi, Inc., 25 IER Cases 278, 287 (U.S. Dept. of Labor Sept. 19, 2006), the Administrative Review Board of the Department of Labor (“ARB”) held that, to constitute protected activity under Sarbanes-Oxley, an “employee’s communications must `definitively and specifically’

[577 F.3d 997]

relate to [one] of the listed categories of fraud or securities violations under 18 U.S.C.[ ] § 1514A(a)(1).” The three circuits that have addressed the issue have all agreed with the ARB’s interpretation, Day v. Staples, Inc., 555 F.3d 42, 55 (1st Cir.2009) (“The employee must show that his communications to the employer specifically related to one of the laws listed in § 1514A.”); Welch v. Chao, 536 F.3d 269, 275 (4th Cir.2008) (“[A]n employee must show that his communications to his employer definitively and specifically relate to one of the laws listed in § 1514A.”) (internal alteration and quotation marks omitted);

Section 304 of the Sarbanes-Oxley Act of 2002 provides for the forfeiture of certain bonuses and profits when corporate officers fail to comply with securities law reporting requirements. The statute provides in relevant part:

(a) Additional compensation prior to noncompliance with Commission financial reporting requirements

If an issuer is required to prepare an accounting restatement due to the material noncompliance of the issuer, as a result of misconduct, with any financial reporting requirement under the securities laws, the chief executive officer and chief financial officer of the issuer shall reimburse the issuer for—

(1) any bonus or other incentive-based or equity based compensation received by that person from the issuer during that 12-month period following the first public issuance or filing with the Commission (whichever first occurs) of the financial document embodying such financial reporting requirement; and

(2) any profits realized from the sale of securities of the issuer during the 12-month period.

15 U.S.C. § 7243(a). The statute also allows the Securities and Exchange Commission to exempt “any person” from the effect of the forfeiture penalty. 15 U.S.C. § 7243(b).

“[T]he fact that a federal statute has been violated and some person harmed does not automatically give rise to a private cause of action in favor of that person.”

SECTION 1103

Section 1103 of the Sarbanes-Oxley Act gives the SEC authority to ensure that assets of an issuer of securities which have been fraudulently obtained are not dissipated during the investigation and litigation of securities fraud cases. See 15 U.S.C. § 78u-3 (2002). Specifically, section 1103 provides that:

[w]henever, during the course of a lawful investigation involving possible violations of the Federal securities laws by an issuer of publicly traded securities or any of its directors, officers, partners, controlling persons, agents, or employees, it shall appear to the Commission that it is likely that the issuer will make extraordinary payments (whether compensation or otherwise) to any of the foregoing persons, the Commission may petition a Federal district court for a temporary order requiring the issuer to escrow, subject to court supervision, those payments in an interest-bearing account for 45 days.

15 U.S.C. § 78u-3(c)(3)(A)(i). Such an order can be secured only with notice and after a hearing, unless “impracticable or contrary to the public interest.” 15 U.S.C. § 78u-3(c)(3)(A)(ii).

Section 1103 authorizes one additional 45-day extension of the temporary escrow order on a showing of good cause. 15 U.S.C. § 78u-3(c)(3)(A)(iv). However, once the subject of an investigation is charged with a securities violation by the commencement of a civil action, “the order shall remain in effect, subject to court approval, until the conclusion of any legal proceedings related thereto, and the affected issuer or other person, shall have the right to petition the court for review of the order.” 15 U.S.C. § 78u-3(c)(3)(B)(i).

Sarbanes-Oxley does not define “extraordinary payments.” The SEC is empowered to adopt regulations for the implementation of Sarbanes-Oxley. See 15 U.S.C. § 78w. To date the SEC has not done so. Neither Congress nor the SEC has given any indication as to the meaning of the words “extraordinary payments.”

Section 1514A(a) of the Sarbanes-Oxley Act provides whistleblower protection for employees of publicly-traded companies by prohibiting employers from retaliating against them for “any lawful act done by the employee … to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes” mail fraud, bank fraud, securities fraud, or violation of any rule or regulation of the SEC, or any federal law relating to fraud against shareholders, when the information or assistance is provided to a person with investigatory authority. 18 U.S.C. § 1514A(a). That provision adopts the burden-shifting framework applicable to whistleblower claims brought under the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century, 49 U.S.C. § 42121(b) (2000), and the relevant burdens of proof are set forth in 29 C.F.R. § 1980.104(b)(1) (2007) and numerous court opinions:

To prevail under this provision, an employee must prove by a preponderance of the evidence that (1) she engaged in protected activity; (2) the employer knew that she engaged in the protected activity; (3) she suffered an unfavorable personnel action; and (4) the protected activity was a contributing factor in the unfavorable action…. If the employee established these four elements, the employer may avoid liability if it can prove “by clear and convincing evidence” that it “would have taken the same unfavorable personnel action in the absence of that [protected] behavior.”

Allen v. Administrative Review Board, 514 F.3d 468, 475-76 (5th Cir.2008); Livingston v. Wyeth, Inc., 520 F.3d 344, 351 (4th Cir.2008); Welch v. Chao, 536 F.3d 269, 275 (4th Cir.2008); 18 U.S.C. § 1514A(b)(2)(C); 49 U.S.C. § 42121. The Act requires that the employee “reasonably” believe in the unlawfulness of the employer’s actions.

Following the Enron and Worldcom accounting scandals that exposed serious weaknesses in industry self-regulatory reporting requirements for certain publicly held companies, Congress enacted the Sarbanes-Oxley Act of 2002, 15 U.S.C. §§ 7201 et seq.1 Title I of the Act established the Board “to oversee the audit of public companies that are subject to the securities laws … in order to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports.” 15 U.S.C. § 7211(a). The five members of the Board are appointed by the Commission after consultation with the Chairman of the Board of Governors of the Federal Reserve and the Secretary of the Treasury. Id. § 7211(e)(4)(A). The Act empowers the Board, subject to the oversight of the Commission, to, among other things, register public accounting firms, establish auditing and ethics standards, conduct inspections and investigations of registered firms, impose sanctions, and set its own budget, which is funded by annual fees. Id. §§ 7211(c), 7219(c), (d).

The Commission’s authority over the Board is explicit and comprehensive. Id. §§ 7217, 7218. Indeed, it is extraordinary. The Board could commence operations only upon the Commission’s determination that it was properly organized and had appropriate rules and procedures in place, id. § 7211(d), and “[n]o rule of the Board shall become effective without prior approval of the Commission,” id. § 7217(b)(2). The Commission is empowered to “abrogate, add to, and delete from” the Board’s rules “to assure the fair administration of the [Board], conform the rules promulgated by that Board to the requirements of title I of the [Act], or otherwise further purposes of that Act, the securities laws, and the rules and regulations thereunder applicable to that Board.” Id. §§ 7217(b)(5), 78s(c). In addition to these ex ante controls, all Board adjudications are subject to the Commission’s de novo review, id. § 7217(c)(2); Nat’l Ass’n of Sec. Dealers, Inc. v. SEC, 431 F.3d 803, 804 (D.C.Cir.2005) (“NASD”), upon an immediate stay when an application for review is filed or sua sponte by the Commission, 15 U.S.C. §§ 7215(e)(1), 7217(c)(2)(A). The Commission is empowered to “enhance, modify, cancel, reduce, or require the remission of a sanction imposed by the Board.” Id. § 7217(c)(3). The Commission alone determines whether the Board may “sue and be sued” in any court. Id. § 7211(f)(1). A member of the Board may be censured or removed from office “for good cause shown,” id. § 7211(e)(6), upon a finding by the Commission, after notice and opportunity for a hearing, that the member willfully violated the Act or abused authority, or failed to enforce compliance with a rule or standard without reasonable justification, id. § 7217(d)(3). The Commission is further empowered, by rule, to relieve the Board, consistent with the public interest, of any enforcement authority whatsoever, id. § 7217(d)(1), as well as, by order, to censure the Board and, after notice and opportunity for a hearing, to “impose limitations upon the activities, functions, and operations of the Board” upon finding that the Board has failed to abide by its statutory duties, id. § 7217(d)(2).

Arbitrability of SOX Whistleblower Claims

A court determining whether to stay proceedings pending arbitration must resolve four issues:

First, it must determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable; and fourth, if the court concludes that some, but not all, of the claims in the case are arbitrable, it must then decide whether to stay the balance of the proceedings pending arbitration.

Under the Federal Arbitration Act (“FAA”), arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The FAA embodies the “liberal federal policy favoring arbitration agreements” and “establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). “This duty to enforce arbitration agreements is not diminished when a party bound by an agreement raises a claim founded on statutory rights.” Shearson/Am. Express Inc. v. McMahon, 482 U.S. 220, 226, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987). When statutory claims are involved, a party can prevent enforcement of the arbitration agreement only by showing that “Congress intended to preclude a waiver of judicial remedies for the statutory rights at issue.” Id. at 227, 107 S.Ct. 2332. Proof of that intent could “be discoverable in the text of the [statute], its legislative history, or an inherent conflict between arbitration and the [statute's] underlying purposes.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (internal quotation marks omitted).

Prior to Sarbanes-Oxley, civil penalties obtained pursuant to the Remedies Act were paid to the Treasury, and thus were unavailable to injured investors. Thomas L. Hazen, Law of Securities Regulation § 16.2[5] (2006). Sarbanes-Oxley’s Fair Fund provision provides the SEC with flexibility by permitting it to distribute civil penalties among defrauded investors by adding the civil penalties to the disgorgement fund:

If in any judicial or administrative action brought by the [SEC] under the securities laws … the [SEC] obtains an order requiring disgorgement against any person for a violation of such laws or the rules or regulations thereunder, or such person agrees in settlement of any such action to such disgorgement, and the [SEC] also obtains pursuant to such laws a civil penalty against such person, the amount of such civil penalty shall, on the motion or at the direction of the [SEC], be added to and become part of the disgorgement fund for the benefit of the victims of such violation.

The Sarbanes-Oxley Act of 2002 was enacted on July 30, 2002. See Procedures for Handling of Discrimination Complaints Under Section 806 of the Corporate and Criminal Fraud Accountability Act of 2002, Title VIII of the Sarbanes-Oxley Act of 2002, 29 C.F.R. § 1980 (2003) (hereinafter “Sarbanes-Oxley Regulations” or “the Regulations”).3 Title VIII of Sarbanes-Oxley is designated as the Corporate and Criminal Fraud Accountability Act of 2002. Section 806, codified at 18 U.S.C. § 1514A, is the provision that provides “whistleblower” protection to employees of publicly traded companies. Pursuant to section 806, an employer may not discriminate against any employee in the terms and conditions of employment because of any lawful act done by the employee

(1) to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of section 1341, 1343, 1344, or 1348, any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders, when the information or assistance is provided to or the investigation is conducted by —

(A) a Federal regulatory or law enforcement agency;

(B) any Member of Congress or any committee of Congress; or

(C) a person with supervisory authority over the employee (or such other person working for the employer who has the authority to investigate, discover, or terminate misconduct); 18 U.S.C. § 1514A(a)(1).

A. Administrative procedure & federal court jurisdiction

An employee who alleges that she has been discharged or discriminated against may bring an enforcement action under 18 U.S.C. § 1514A(b). Before an employee may file in federal court, she must file a complaint with the Occupational Safety and Health Administration (“OSHA”), id. § 1514A(b)(1)(A), within ninety days of the date on which the violation occurred. Id. § 1514A(b)(2)(D); see 29 C.F.R. § 1980.103.5 The Regulations governing OSHA’s handling of discrimination complaints under Sarbanes-Oxley provide for an investigation, a hearing before an administrative law judge, a review by an administrative review board, and an appeal to the Circuit Court of Appeals. 29 C.F.R. § 1980. The administrative scheme underlying the Sarbanes-Oxley Act has been described as “judicial in nature” and designed to resolve the controversy on its merits. Willis v. Vie Fin. Group, No. 04-435, 2004 WL 1774575, at *5 (E.D.Pa. Aug. 6, 2004) (holding that plaintiff’s failure to raise a claim in his administrative complaint with OSHA precluded him from pursuing it in district court).

B. Legal burdens of proof

Given the scarcity of caselaw on Sarbanes-Oxley, the Court must look to caselaw applying provisions of other federal whistleblower statutes for guidance.10 The Sarbanes-Oxley Regulations specifically indicate that consideration was given to the regulations implementing the whistleblower provisions of the Wendell H. Ford Aviation Investment Reform Act for the 21st Century (“AIR 21″), 29 C.F.R. § 1979; the Surface Transportation Assistance Act (“STAA”), 29 C.F.R. § 1978; and the Energy Reorganization Act (“ERA”), 29 C.F.R. 24. See 29 C.F.R. § 1980 at 2. Moreover, the legal burdens of proof in Sarbanes-Oxley are taken from AIR 21, 49 U.S.C. § 42121. See also 42 U.S.C. § 5851(b)(3)(legal burdens of proof for whistleblowing under ERA).

18 U.S.C. § 1514A(b)(1)(B). The evidentiary framework for a claim under Sarbanes-Oxley is specifically set forth in the statute. Id. § 1514A(b)(2)(C).11 An action brought under Sarbanes-Oxley “shall be governed by the legal burdens of proof set forth in section 42121(b) of title 49, United States Code.” Id.12

Under the statutory framework, a plaintiff in federal court must show by a preponderance of the evidence that the plaintiff’s protected activity was a contributing factor in the unfavorable personnel action alleged in the complaint. 49 U.S.C. § 42121(b)(2)(B)(iii).13 That is, the plaintiff must show by a preponderance of the evidence that (1) she engaged in protected activity; (2) the employer knew of the protected activity; (3) she suffered an unfavorable personnel action; and (4) circumstances exist to suggest that the protected activity was a contributing factor to the unfavorable action. See Stone & Webster, 115 F.3d at 1573 (analyzing these factors under provisions of ERA); Bechtel Constr. Co. v. Sec’y of Labor, 50 F.3d 926, 933-34 (11th Cir.1995) (same). Proximity in time is sufficient to raise an inference of causation. Bechtel, 50 F.3d at 934. The defendant employer may avoid liability if it can demonstrate by clear and convincing evidence that it “would have taken the same unfavorable personnel action in the absence of [protected] behavior.” 49 U.S.C. § 42121(b)(2)(B)(iv).

1. Whether Plaintiff engaged in protected activity

Sarbanes-Oxley protects employees who provide information which the employee “reasonably believes constitutes a violation of section 1341, 1343, 1344, or 1348, any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders.” 18 U.S.C. § 1514A(a)(1). Therefore, a plaintiff is not required to show an actual violation of the law, but only that she “reasonably believed” that there was a violation of one of the enumerated laws or regulations. Id.; see Passaic Valley Sewerage Comm’rs v. United States Dep’t of Labor, 992 F.2d 474 (3d Cir.1993)(noting that even where “the [employee's] perceived oversights were a matter of employee misunderstanding” an employee should be protected in his intracorporate disclosure to provide the company with the first opportunity to justify or clarify its policies). The legislative history of Sarbanes-Oxley states that the reasonableness test “is intended to impose the normal reasonable person standard used and interpreted in a wide variety of legal contexts.” Legislative History of Title VIII of HR 2673: The Sarbanes-Oxley Act of 2002, Cong. Rec. S7418, S7420 (daily ed. July 26, 2002), available at 2002 WL 32054527 (hereinafter “Legislative history”) (citing Passaic Valley, 992 F.2d 474 (3d Cir.1993)). “The threshold is intended to include all good faith and reasonable reporting of fraud, and there should be no presumption that reporting is otherwise, absent specific evidence.” Id.

If Congress had intended to limit the protection of Sarbanes-Oxley to accountants, or to have required complainants to specifically identify the code section that they believe was being violated, it could have done so. It did not. Congress instead protected “employees” and adopted the “reasonable belief” standard for those who “blow the whistle on fraud and protect investors.” Legislative history at S7420; see 18 U.S.C. § 1514A(a).

2. Whether Defendants knew of Plaintiff’s protected activity

Sarbanes-Oxley protects employees who provide information to any “person with supervisory authority over the employee (or such other person working for the employer who has the authority to investigate, discover, or terminate misconduct).” 18 U.S.C. § 1514A(a)(1)(C). Plaintiff made numerous complaints to her supervisors, including complaints to Gardner, a meeting with Jones, an email to Gardner, an email to McCarthy and her final meeting with Shaffer. Defendants do not contest that they were aware of Plaintiff’s complaints. Defendants, however, assert that Shaffer was the sole decision maker in Plaintiff’s termination and that he did not know of Plaintiff’s letters to Gardner and McCarthy. Shaffer did, however, discuss Plaintiff with Jones including Plaintiff’s series of complaints, discussion of payment of the Montello invoices (Jones Dep. at 50), and the circumstances in which it would be acceptable for him to terminate her. (Jones Dep. at 71-74.) To permit an employer to simply bring in a manager to be the “sole decisionmaker” for the purpose of terminating a complainant would eviscerate the protection afforded to employees by Sarbanes-Oxley. The Court finds that Defendants were aware of Plaintiff’s protected activity.

3. Whether Plaintiff suffered an unfavorable personnel action

Plaintiff suffered an unfavorable personnel action when she was terminated on August 19, 2002.

4. Whether circumstances exist to suggest that the protected activity was a contributing factor to the unfavorable action

Under the evidentiary framework, Plaintiff must also establish that there are circumstances which suggest that the protected activity was a contributing factor to the unfavorable action. 49 U.S.C. § 42121(b)(2)(B)(iii); see Marano v. Dep’t of Justice, 2 F.3d 1137, 1140 (Fed.Cir.1993)(stating that under the Whistleblower Protection Act, 5 U.S.C. § 1221(e)(1), “[t]he words `a contributing factor’ … mean any factor which, alone or in connection with other factors, tends to affect in any way the outcome of the decision” and noting that “[t]his test is specifically intended to overrule existing case law, which requires a whistleblower to prove that his protected conduct was a `significant,’ `motivating,’ `substantial,’ or `predominant’ factor in a personnel action in order to overturn that action.”). Defendants contend that Plaintiff cannot establish the causal connection because the person responsible for firing her, Shaffer, was not aware of Plaintiff’s letters to McCarthy and Gardner and because she did not bring any illegal activities to Shaffer’s attention.20 Defendants further state that temporal proximity is not sufficient to create circumstances to suggest causation. Plaintiff responds that Shaffer was in fact aware of prior complaints that she made alleging violations of company policy and that the fact that she was fired fourteen days after complaining to Jones establishes the circumstances sufficient to demonstrate causation.

The Sarbanes-Oxley Regulations define an employee as “an individual presently or formerly working for a company or company representative … or an individual whose employment could be affected by a company or company representative.” 29 C.F.R. § 1980.101. A “company representative” is defined as “any officer, employee, contractor, subcontractor, or agent of a company.” Id. Plaintiff is within the definition of employee because her employment could be affected by officers of Beazer USA. (See Jones Dep. at 24-25 (stating that officers of Beazer USA had authority to affect the employment of employees of subsidiaries).)