Chris Ronnie v. U.S. Department of Labor

[PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 20-14214
____________________
CHRIS RONNIE,
Petitioner,
versus
OFFICE DEPOT, LLC,
Intervenor,
ADMINISTRATIVE REVIEW BOARD,
U.S. DEPARTMENT OF LABOR,
Respondents.
____________________
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2 Opinion of the Court 20-14214
Petition for Review of a Decision of the
Department of Labor
Agency No. 2018-SOX-00006
____________________
Before WILSON, NEWSOM , and L AGOA , Circuit Judges.
WILSON, Circuit Judge:
This case presents us with an opportunity to clarify what a
whistleblower plaintiff must allege to prove he had a “reasonable
belief” that his employer violated the Sarbanes-Oxley Act (SOX),
18 U.S.C. § 1514A. After careful review, and with the benefit of
oral argument, we deny the petition.
I.
The petitioner, Christian Ronnie, was employed at Office
Depot as a senior financial analyst. He was responsible for, among
other things, ensuring data integrity. One of Ronnie’s principal du-
ties was to calculate and report a metric called “Sales Lift.” Sales
Lift is a metric designed to quantify the cost-reduction benefit of
closing redundant retail stores. Essentially, it measures the change
in sales at one Office Depot location after the closure of another
nearby Office Depot store. A higher Sales Lift indicates that the
customers of the closed Office Depot are taking their business to
the other Office Depot location, rather than switching to a compet-
itor. A higher Sales Lift thus justifies the store-closure strategy.
To calculate Sales Lift, Office Depot sent sales figures to a
third-party analytics company, Applied Predictive Technologies
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20-14214 Opinion of the Court 3
(APT). APT calculated future sales projections without assuming
any store closures. Office Depot then compared the APT projec-
tions with the actual sales figures following the closures. The dif-
ference between these figures was interpreted as the Sales Lift—a
metric important to Office Depot and its shareholders seek to opti-
mize as a “key strategic initiative.”1
Ronnie identified two potential accounting errors that he be-
lieved signaled securities fraud related to the Sales Lift. First, he
alleged that Office Depot pulled from the wrong data set to estab-
lish projected sales, which overinflated Sales Lift anywhere from
30% to 55% and consequently overinflated revenue retention after
store closures. Second, Ronnie identified that Office Depot calcu-
lated Sales Lift incorrectly by using two different base pre-closure
sales data sets. Office Depot provided APT a pre-closure revenue
data set (APT sales) that APT then used to calculate projected sales.
Later, Office Depot used a different pre-closure revenue data set
(GSC sales) to compare against the APT projected sales data. In
other words, the base pre-closure revenue data that Office Depot
provided to APT should have been identical to the set later used to
calculate Sales Lift. Ronnie discovered that they were not.
Ronnie reported both issues to his superiors the week he dis-
covered them—on February 25, 2016. For the first issue, he was
able to correct the model. That error was significant, as one
1 Office Depot’s 2015 and 2016 Security and Exchange Commission 10-K filings
identified “store closures may not result in the benefits or cost savings at levels
anticipated” as a major risk.
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4 Opinion of the Court 20-14214
supervisor, Lauren Goldberg, feared that she would lose her job
over it. For the second issue, Ronnie recommended that the super-
visors correct the Sales Lift error by only using the APT pre-closure
data in the future for both the projected sales calculation and the
ultimate Sales Lift calculation. The supervisors appeared to appre-
ciate the gravity of the Sales Lift error, as they memorialized in
writing that Ronnie had found “a significant difference in APT sales
and GSC sales.”
Ronnie expected that his team would implement his sug-
gested change immediately; however, they claimed they first
needed to understand the discrepancy before they could correct the
error. Ronnie’s supervisors thus assigned him the task of investi-
gating the root cause of the discrepancy—first on March 3, 2016,
and then again on March 8, 2016, and March 15, 2016. Ronnie was
also told multiple times not to make any changes to the calculation
until the team understood the reason for the differences. For ex-
ample, Goldberg specifically told him they could not make the
change “without being 100% confident that it is the right thing to
do.” And Ronnie’s supervisors indicated that they looked forward
to Ronnie’s report on his research into the discrepancy.
Ronnie alleges that after he reported the issue, his relation-
ship with his boss, James Hoganson, became strained. According
to Ronnie, he stopped receiving invitations to the weekly all-hands
meeting and instead was asked to do clerical work like stapling pa-
pers. Hoganson also frequently reprimanded Ronnie when his re-
ports were incomplete or late, even though Ronnie had no control
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20-14214 Opinion of the Court 5
over when he received the reports to compile. Ronnie began to
fear he was being retaliated against and, on March 8, 2016, he
emailed Human Resources (HR) to ask for protection from retalia-
tion for reporting the inaccuracies.
On March 10, 2016, he emailed Office Depot’s Information
Technology (IT) department to investigate why the data they ex-
tracted was different from the APT data. On March 16, 2016, he
emailed his supervisors with a more granular analysis detailing the
exact differences between the APT and GSC data, but this analysis
did not identify the cause of the differences. He alleges, without
evidence in the record, that he asked IT to meet with him to discuss
the cause and he did not hear back.
By April 7, 2016, Ronnie still had not figured out the discrep-
ancy, and his supervisor issued a Performance Correction Docu-
ment with a “final warning” stating that he had failed to timely
complete the task of determining the cause of the discrepancy be-
tween the APT and GSC data.
On April 15, 2016, Ronnie finally met with IT. A few days
later, on April 19, 2016, he planned to meet with his supervisors to
report the results of his conference with IT. Instead, he was termi-
nated at that meeting for failing to perform the task of identifying
the cause of the data discrepancy.
Ronnie timely filed a pro se complaint with the Department
of Labor’s Occupational Safety and Health Administration
(OSHA), claiming Office Depot violated 18 U.S.C. § 1514A. OSHA
dismissed his complaint. Ronnie appealed, requesting a hearing
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6 Opinion of the Court 20-14214
before an administrative law judge (ALJ). Following discovery, Of-
fice Depot moved for summary decision, arguing that Ronnie had
neither shown either he was engaged in protected activity or that
any alleged protected activity caused his termination and that the
undisputed facts showed Ronnie was discharged due to his poor
work performance and unprofessionalism. In support of its mo-
tion, Office Depot attached Ronnie’s deposition, copies of perfor-
mance evaluations of Ronnie, several email chains between Ronnie
and his superiors, and the Performance Correction Document that
Ronnie received.
The ALJ granted Office Depot’s motion for summary deci-
sion, finding “there was no genuine issue of material fact as to an
essential element of Complainant’s claim—whether complainant
engaged in protected activity.” The ALJ concluded that Ronnie
failed to establish an objectively reasonable belief that fraud had
occurred.
Ronnie appealed the ALJ’s ruling to the Administrative Re-
view Board (ARB). The ARB affirmed. Christian Ronnie v. Office
Depot, Inc., ARB No. 2019–0020, 2020 WL 6117919 (ARB Sept. 29,
2020).
Ronnie timely petitioned for review of the ARB’s decision in
this court, and we appointed counsel. Office Depot also intervened
at that time. This Court issued the following question to the par-
ties: “What evidence must a Sarbanes-Oxley whistleblower plain-
tiff present to establish that he ‘reasonably believe[d]’ that the
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20-14214 Opinion of the Court 7
conduct he reported violated one of the statutes or rules identified
in 18 U.S.C. § 1514A(a)(1)?”
II.
For whistleblower complaints under SOX, the Administra-
tive Procedure Act (APA) governs. See 18 U.S.C. § 1514A(b)(2)(A);
49 U.S.C. § 42121(b)(4)(A); 5 U.S.C. § 706(2). Under the APA, this
Court will only overturn an ARB decision if it is “arbitrary, capri-
cious, an abuse of discretion, or otherwise not in accordance with
law.” 5 U.S.C. § 706(2)(A); Stone & Webster Constr., Inc. v. U.S. Dep’t
of Lab., 684 F.3d 1127, 1132 (11th Cir. 2012). This Court “does not
reweigh the evidence or substitute its judgment for that of the
ARB, but reviews the entire record to determine if the decision
reached is reasonable and supported by substantial evidence.”
Fields v. U.S. Dep’t of Lab. Admin. Rev. Bd., 173 F.3d 811, 814 (11th
Cir. 1999) (per curiam). Additionally, this Court reviews the ARB’s
legal conclusions de novo, Stone & Webster, 684 F.3d at 1132, alt-
hough this Court gives “[a]ppropriate deference” to “statutory in-
terpretation by the ARB,” Fields, 173 F.3d at 813.
Further, “[a] party may move for summary decision, identi-
fying each claim or defense—or the part of each claim or defense—
on which summary decision is sought.” 29 C.F.R. § 18.72(a). Sum-
mary decision is permitted where “there is no genuine dispute as
to any material fact and the movant is entitled to decision as a mat-
ter of law.” Id.
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8 Opinion of the Court 20-14214
III.
The whistleblower protection provision of SOX, 18 U.S.C.
§ 1514A, prohibits publicly traded companies from retaliating
against their employees who provide information or assist in an in-
vestigation regarding conduct the employee reasonably believes vi-
olates SEC regulations.
To prevail on a SOX claim, an employee must prove by a
preponderance of the evidence that (1) he engaged in protected ac-
tivity, (2) the employer knew or suspected that the employee en-
gaged in a protected activity, (3) the employee suffered an adverse
action, and (4) an inference could be made that the protected activ-
ity was a contributing factor in the unfavorable action. 29 C.F.R.
§ 1980.104(e)(1)–(2).
SOX statutory language articulates that in order to establish
“protected activity,” the complainant must show that he “reasona-
bly believes” that the conduct complained of constitutes a violation
of the laws listed at Section 1514. Sylvester v. Parexel Int’l LLC, No.
07-123, 2011 WL 2517148, at *11 (Dep’t of Labor May 25, 2011). As
a threshold matter, the complainant must report conduct that falls
into one of six categories enumerated by Congress in 18 U.S.C.
§ 1514A(a)(1): mail fraud, wire fraud, bank fraud, securities fraud,
any SEC rule or regulation, or any federal law relating to fraud
against shareholders.
The ARB maintains that whether an employee reasonably
believes his employer’s conduct is violative is determined by a
mixed subjective and objective test. That is, a court must find that
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20-14214 Opinion of the Court 9
the employee himself believed that the alleged conduct violated
SOX, and that a reasonable person would believe the conduct vio-
lated SOX. Sylvester, 2011 WL 2517148, at *11.
In order to satisfy the objective requirement, the complain-
ant must present evidence to establish his reasonable belief of the
alleged violation. The key inquiry, then, becomes what evidence
is required to establish reasonableness. Our consideration of this
issue attempts to articulate a balance between protecting employ-
ees from retaliation and protecting employers from baseless allega-
tions.
To find this balance, we look to other circuits who have ad-
dressed this same question. The Third and Sixth Circuits found Syl-
vester to provide the best guidance and do not require plaintiffs to
put forth “information sufficient to form an objectively reasonable
belief” of fraud. Wiest v. Lynch, 710 F.3d 121, 132 (3rd Cir. 2013);
accord Rhinehimer v. U.S. Bancorp Invs., Inc., 787 F.3d 797, 811 (6th
Cir. 2015). By contrast, the Second and Fourth Circuits employ a
totality of the circumstances test where the petitioner does not
have to identify the SOX provision at issue, but must make some
showing of scienter, materiality, reliance, or loss in order to enjoy
SOX protection.2
2 See Northrop Grumman Sys. Corp. v. U.S. Dep’t of Labor, Admin. Rev. Bd., 927 F.3d
226, 235 n.9 (4th Cir. 2019) (“[T]he plain text of the statute compels us to con-
clude that the reasonableness of an employee’s belief must be measured
against the specific statutory provisions in § 1514A(a)(1) requiring approxima-
tion of the elements of shareholder fraud in this case.”); Nielsen v. AECOM
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10 Opinion of the Court 20-14214
To make a showing of protected activity, the complainant
must put forth sufficient information about the alleged wrongful
conduct to show that a reasonable person in his position would be-
lieve the wrongdoing amounted to a SOX violation. To be clear,
this does not require the complainant to articulate the specific pro-
vision of § 1514A he alleges his employer’s conduct violates. Syl-
vester, 2011 WL 2517148, at *15–17. While doing so may
strengthen his proposition, a complainant will not be penalized for
failing to identify the specific SOX provision at issue.
In determining what information sufficiently paints a picture
of reasonable belief, we employ a totality of the circumstances test
based on knowledge available to a reasonable person in the same
factual circumstances—and with the same training and experi-
ence3—as the complainant. Relevant to the totality of the circum-
stances is whether the employer acted with the requisite scienter,
whether the misstatement was material, whether the misstatement
was relied upon, and whether it yielded economic loss.
In adopting a totality of the circumstances test, we also note
that while the employee need not “definitively and specifically”
prove each element of fraud, he must make more than a
Tech. Corp., 762 F.3d 214, 221 n.6 (2d Cir. 2014) (observing that “to be reasona-
ble, the purported whistleblower’s belief cannot exist wholly untethered from
these specific” crimes).
3 Sylvester, 2011 WL 2517148, at *12; Thibodeau v. Wal-Mart Stores, Inc., ARB
No. 2017–0078, 2020 WL 8182902, at *6 (ARB Dec. 17, 2020) (per curiam) (en
banc).
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20-14214 Opinion of the Court 11
conclusory allegation. See Nielsen, 762 F.3d at 224. Mere specula-
tion or suspicion is insufficient to establish a genuine issue of mate-
rial fact as to reasonable belief. See Livingston v. Wyeth, 520 F.3d
344, 354 (4th Cir. 2008).
IV.
As an initial matter, the ARB applied the correct legal stand-
ard to assess whether Ronnie engaged in protected activity. The
ARB explained that the complainant must have “an objectively rea-
sonable belief” and must “complain about conduct that he or she
believes would reasonably fall under one of the enumerated cate-
gories.” Ronnie, 2020 WL 6117919, at *3.
We now turn to the ARB’s summary decision that there was
no genuine issue of material fact as to whether the complainant
engaged in protected activity. Reviewing the totality of the circum-
stances, Ronnie did not set forth sufficient evidence to support an
inference that a reasonable person in his position would find Office
Depot’s conduct to be violative of SOX.
Ronnie asserts that Office Depot intentionally manipulated
sales data in order to mislead or deceive, but he did not support his
conclusion. He does not allege any scienter on the part of Office
Depot, nor does he identify the materiality of the data error.4 He
merely claims that the error was important and that his
4 We also note that, in his deposition, Ronnie testified that he was “not saying
[Office Depot] intentionally” used GSC sales instead of APT sales for calculat-
ing the Sales Lift metric.
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12 Opinion of the Court 20-14214
management tried to “cover it up” by requesting—openly and re-
peatedly—that he complete the difficult task of identifying the
cause of the error. It is unclear how managers insisting on finding
the cause of a data inconsistency comports with an allegation that
they sought to cover it up.5
Simply put, Ronnie’s assertions that Office Depot intention-
ally manipulated sales data and that his assigned task of investigat-
ing the discrepancy was a stalling tactic are mere speculation,
which alone is not enough to create a genuine issue of fact as to
the objective reasonableness of Ronnie’s belief. See Livingston, 520
F.3d at 353–54.
Additionally, while Ronnie did not identify which SOX pro-
vision he believed Office Depot violated, it is worth noting that the
failure to do so is not weighed against him. Such a showing may
have strengthened his case, but his failure to do so is not what
makes his allegations unreasonable. Instead, Ronnie’s failure to
demonstrate key factors of fraud—notably, scienter and material-
ity—does not support a conclusion that a reasonable person in his
same position with his same education, training, and experience
would believe the data error constituted a violation.
Therefore, it was not arbitrary or capricious for the ARB to
conclude that Ronnie did not engage in protected activity.
5 Cf. Day v. Staples, 555 F.3d 42, 58 (1st Cir. 2009) (“A company’s explanations
given to the employee for the challenged practices are also relevant to the ob-
jective reasonableness of an employee’s belief in shareholder fraud.”).
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20-14214 Opinion of the Court 13
V.
Because Ronnie failed to allege sufficient facts to establish
that a reasonable person with his training and experience would
believe this conduct constituted a SOX violation, the ARB’s deci-
sion was not arbitrary or capricious, an abuse of discretion, or oth-
erwise not in accordance with law. Accordingly, we DENY the pe-
tition for review.
PETITION DENIED.
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