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The standard for evaluating a whistleblower’s state of mind when making a complaint under the Sarbanes-Oxley Act of 2002 has been clarified by the U.S. Court of Appeals for the Second Circuit.

The circuit said it was abrogating the standard on whistleblower retaliation claims it had previously applied in a non-precedential order, making clear that someone who reports a violation must only “reasonably believe” that an entity is violating certain enumerated federal statutes, rules or regulations of the Securities and Exchange Commission or, in the words of Sarbanes-Oxley, “any provision of Federal law relating to fraud against shareholders ” 18 U.S.C.§1514A(a)(1).

In a 2010 decision, Vodopia v. Koninklijke Philips Elecs, N.V., 398 F. App’x 659 (2d Cir.), the circuit had held that a whistleblowing employee’s communications “must definitively and specifically relate to one of the listed categories of fraud or securities violations” in §1514A(a)(1).

But on Friday, Judges Robert Sack (See Profile), Peter Hall (See Profile) and Debra Ann Livingston (See Profile) said that the old standard is no more because of an intervening opinion of the U.S. Department of Labor’s Administrative Review Board—an opinion the court said in Nielsen v. AECOM Technology Corp., 13-235-cv., was entitled to deference.

While clarifying the law, the court’s decision did not help whistleblower Christian Nielsen, a fire engineering manager whose job was to assure that AECOM and AECON Middle East, Ltd., complied with applicable fire safety standards.

In March and June of 2011, Nielsen had complained to several managers in the company’s offices in Dubai that one of his employees was allowing fire safety designs to be marked as approved even though the employee had not reviewed them.

When no action was taken after a series of meetings, Nielsen told executives that, unless the situation was resolved, he could not continue working for the company.

He was fired on June 23, 2011, and he was informed by AECOM’s global compliance team that there was no evidence of wrongdoing and his termination was justified. A Department of Labor administrator rejected his complaint in a decision that would be upheld by an administrative law judge and then by a Department of Labor Administrative Review Board.

Nielsen filed suit under Sarbanes-Oxley claiming he was fired for his complaints about the company’s “fraudulent business practices,” but Southern District Judge Katherine Forrest (See Profile) granted AECOM’s motion to dismiss, finding both a lack of personal jurisdiction under New York’s long-arm statute and that Nielsen had not plausibly alleged that he had engaged in a “protected activity” under §1514A.

The circuit heard oral argument on the appeal on Nov. 8, 2013 and Livingston wrote for the court Friday, saying the lower court had relied in part on the “definitively and specifically” language in the 2010 Vodopia decision, language that the Administrative Review Board “has since repudiated.”

The initial question for the court was the level of deference to accord that repudiation, as “this circuit has not yet decided whether Congress delegated interpretive authority over §1514A to the ARB in Sarbanes-Oxley, and the Supreme Court recently declined to resolve this issue.”

But whether under the highest level of deference or a lesser one, Livingston said “the ARB’s rejection of its earlier standard is persuasive.”

In Sylvester v. Parexel Int’l, ARB No. 07-123, 2011 WL 2165854 (ARB May 25, 2011) (en banc), Livingston said, “The Board interpreted §1514A to hew more closely to what its text expressly provides: that the plaintiff have a subjective belief that the challenged conduct violates a provision listed in §1514A, and that this belief must be subjectively reasonable.”

Relief under §1514A, she said, “turns on the reasonableness of the employee’s belief that the conduct violated one of the enumerated provision—which is contrary to the ‘definitively and specifically’ standard.”

Having abrogated the old standard, the court nonetheless said Nielsen was out of luck, because he “has failed to allege that it was objectively reasonable for him to believe that the activity he reported constituted a violation of the laws and regulations listed in §1515A: the federal mail fraud, wire fraud, bank fraud, and securities fraud statutes” as well as SEC rules and regulations or laws relating to a fraud against shareholders.

“In essence,” she said, “Nielsen alleges that a single employee failed properly to review fire safety designs. There is no claim that this fire safety review is required by any federal statute or regulation, that these designs had ever been submitted by AECOM for approval by any outside body, or even that the allegedly inadequate fire safety review posed any specified hazard.”

Daniel Kaiser and Henry Saurborn of Kaiser Saurborn & Mair represented Nielsen.

“It’s a fairly significant decision because it makes it easier for plaintiffs to get past the pleading stage and into the meat of the case,” Saurborn said Tuesday. “It doesn’t help our client in this case, but we are doing a lot of work in this area and the issue keeps coming up again and again. With ARB and the district courts struggling with this, it’s clear the court meant to expand the protection under the statute, and I think that this comes from the Second Circuit carries more weight.”

William Roberts, John Shane and Todd Bromberg, partners at Wiley Rein in Washington, D.C. represented AECOM.

In a statement Tuesday, Roberts said, “We believe the U.S. Court of Appeals for the Second Circuit correctly decided this case on the facts and the law. AECOM took a principled position from the outset of this action and refused to settle what it knew to be a case wholly without merit.”