Dietz v. Cypress Semiconductor Corp.
711 F. App'x 478 (2017)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
For a whistleblower's complaint to constitute protected activity under the Sarbanes-Oxley Act, the employee must have an objectively reasonable belief that the employer's conduct constitutes one of the statute's enumerated federal offenses, which, in the case of mail or wire fraud, requires a reasonable belief that the employer acted with the specific intent to deprive a victim of property.
Facts:
- In November 2012, Cypress Semiconductor Corporation acquired Ramtron International Corporation and extended at-will employment offers to some Ramtron employees, including Timothy Dietz.
- The offer letters did not disclose Cypress's 'Design Bonus Plan,' a compensation scheme involving a mandatory 10% wage deduction each quarter, with a bonus paid out later based on project performance.
- Cypress executives justified the omission by stating they did not know at the time of the acquisition which specific employees would be subject to the plan.
- Between December 2012 and April 2013, before any deductions began, Cypress held training sessions and provided information on the company intranet explaining the Bonus Plan to the former Ramtron employees.
- On April 12 and April 22, 2013, Dietz complained to his supervisor and Cypress's General Counsel that omitting the Bonus Plan from the offer letters constituted mail and wire fraud.
- In late May 2013, Dietz's supervisor raised performance concerns, which were documented in a disciplinary memo placed in Dietz's file on June 4, 2013.
- On June 5, 2013, Dietz responded to the memo by giving notice of his resignation, and on June 7, 2013, he made his resignation effective immediately.
- Cypress did not begin making deductions from the paychecks of former Ramtron employees under the Bonus Plan until August 2013, approximately nine months after they were hired.
Procedural Posture:
- Timothy Dietz filed an unlawful retaliation complaint with the Occupational Safety and Health Administration (OSHA).
- The OSHA Regional Administrator denied Dietz's claim.
- Dietz appealed to an administrative law judge (ALJ), who found in his favor and awarded damages and fees.
- Cypress Semiconductor Corporation, the employer, appealed the ALJ's decision to the Administrative Review Board (the Board).
- The Board affirmed the ALJ’s decision in favor of Dietz.
- Cypress petitioned the United States Court of Appeals for the Tenth Circuit for review of the Board's decision.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a whistleblower's complaint constitute protected activity under the Sarbanes-Oxley Act when the employee alleges conduct that, while potentially deceptive, does not provide an objectively reasonable basis to believe the employer intended to deprive employees of their property as required for federal mail or wire fraud?
Opinions:
Majority - David M. Ebel
No, the whistleblower's complaint did not constitute protected activity under Sarbanes-Oxley. For an employee's belief to be objectively reasonable under the statute, the facts known to the employee must reasonably align with the elements of an enumerated offense. Federal mail and wire fraud require a specific intent to deprive a victim of property, not merely an intent to induce action through fraudulent pretenses. Here, Dietz could not have reasonably believed Cypress intended to deprive employees of property because Cypress had a plausible, non-nefarious reason for the omission, the employees were at-will, and most importantly, Cypress fully informed employees about the Bonus Plan months before any deductions began, giving them the opportunity to quit if they disagreed with the policy. The evidence does not support a reasonable belief that Cypress engaged in a scheme to cheat employees out of their money, and thus Dietz's complaint was not protected activity.
Analysis:
This decision clarifies the 'objectively reasonable belief' standard for Sarbanes-Oxley whistleblower protection, particularly for claims based on mail or wire fraud. It heightens the standard by requiring that the employee's belief align with the specific legal elements of the underlying federal offense, including the element of intent. The ruling distinguishes general corporate deception or fraudulent inducement from the specific intent to deprive someone of property required for criminal fraud, potentially narrowing the scope of protected whistleblowing. This precedent makes it more difficult for employees to sustain retaliation claims where the alleged corporate misconduct, while perhaps improper, does not clearly map onto the technical elements of a federal crime listed in the Sarbanes-Oxley Act.
