Federal District Court Deepens Divide Over SOX Whistleblower "Protected Activity"

On February 21, 2014, the District of Puerto Rico strayed from a prominent decision out of the First Circuit that employed the "definitively and specifically" standard governing protected activity under Section 806 of SOX, choosing instead to defer to the ARB's rather expansive standard.  Stewart v. Doral, No. 13-cv-1349 (D.P.R. Feb. 21, 2014).   This decision underscores the conflicts in this evolving area of SOX jurisprudence and the attendant risks to employers saddled with SOX whistleblower retaliation claims.

Background

Plaintiff Ronald Stewart (Plaintiff), who was a Senior Vice President and Principal Accounting Officer at Doral Financial Corporation (Bank), allegedly expressed concerns regarding "deficiencies in the Bank's program of internal controls."  He allegedly sent a letter to the Bank's Audit Committee stating that the Bank's CEO's statements expressing indifference to regulators and a down-sizing program without consideration for lack of internal