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June 6 — A fired Oracle America Inc. sales manager lacks a Sarbanes-Oxley Act retaliation claim because he can't show he had a reasonable belief the company was defrauding shareholders, the U.S. Court of Appeals for the Eighth Circuit ruled ( Beacom v. Oracle Am., Inc. , 2016 BL 178950, 8th Cir., No. 15-1729, 6/6/16 ).
The Eighth Circuit becomes the fourth federal appeals court to endorse the Labor Department's standard that a fired employee may pursue a SOX Act claim if a “reasonable employee” under the same circumstances “would believe that the employer violated securities laws.”
But Vincent Beacom, a former Oracle vice president of sales, can't pursue a SOX Act retaliation claim even under the DOL standard, the court decided.
Beacom alleged he was fired for complaining that his supervisors' practice of “intentionally forecasting false revenue commitments” was misleading shareholders. Oracle's America division in the first three quarters of 2012 over-projected its sales by amounts ranging from about $3 million to $10 million a quarter, the court said.
A reasonable employee in Beacom's shoes would understand $10 million is “a minor discrepancy” to a company that annually generates billions of dollars in revenue, Judge Duane Benton said.
In 2011, the DOL's Administrative Review Board modified its SOX Act protected activity standard in Sylvester v. Parexel Int'l LLC (Dep't of Labor A.R.B. 2011) (104 DLR A-12, 5/31/11).
The DOL said that under the SOX Act, an employee must prove “a reasonable person in the same factual circumstances,” including the same training and experience, would believe the employer's conduct violated securities laws.
The Sylvester standard replaced a tougher test that said an employee's complaint must “definitively and specifically” relate to one of the SOX Act-listed categories of fraud or securities violations and “approximate” the “basic elements” of that claim.
The Second, Third and Sixth circuits have deferred to the DOL's Sylvester standard in deciding if an employee has a SOX Act claim, the Eighth Circuit said. No federal appeals court has rejected the standard.
But Beacom didn't engage in protected activity even under the more employee-friendly Sylvester standard, the court decided.
In 2011, Michael Webster, Oracle's general manager of retail global business, changed the method for projecting quarterly sales revenues. Oracle issued higher sales projections than under its prior method.
After Oracle's projections overstated its actual sales revenue, Beacom said Webster ordered sales employees to record deals that weren't yet closed so actual sales numbers would more closely approximate the projections.
Beacom expressed concern to Webster that “wrong, incorrect, non-fact-based expectations” were being conveyed to Wall Street and hurting Oracle's stock value.
In January 2012, Beacom challenged Webster's practice of “intentionally forecasting false revenue commitments.” Two months later, Beacom was fired for alleged poor performance and insubordination.
Whether a reasonable person in Beacom's position would have believed Oracle was violating securities laws is a “fact-dependent inquiry” that is “typically inappropriate” for summary judgment, the Eighth Circuit said.
But Oracle missed its sales projections by no more than $10 million in any quarter, a relative pittance for a company bringing in billions of dollars a year, the court said.
“Beacom's belief that Oracle was defrauding its investors was objectively unreasonable, even under the less-stringent Sylvester standard,” Benton wrote.
Judges Lavenski Smith and Kermit Bye joined in the decision.
Nichols Kaster PLLP represented Beacom. Morgan Lewis & Bockius and Felhaber Larson represented Oracle.
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Text of the opinion is available at http://www.bloomberglaw.com/public/document/Beacom_v_Oracle_Am_Inc_No_151729_2016_BL_178950_8th_Cir_June_06_2.
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