David Stone blew the whistle while in a management position at the Instrumentation Laboratory Company when he discovered that the company was misrepresenting its finances to investors. But instead of making changes to comply with the law, the company instead retributed against Stone, eventually firing him.
The question of the case was what type of review the court could conduct when assessing the merits of Stone’s case. As the Fourth Circuit Court noted, both sides of the case,
“acknowledged that the Sarbanes-Oxley Act expressly provides a U.S. District Court jurisdiction to entertain a whistleblower action. However, they disagree as to whether a whistleblower plaintiff, during the pendency of an administrative appeal of an Administrative Law Judge’s (“ALJ”) ruling, has the right to a de novo proceeding in district court.”
As described by the Legal Information Institute at Cornell Law, a respected legal resource, de novo is defined as,
From Latin, meaning “from the new.” When a court hears a case de novo, it is deciding the issues without reference to any legal conclusion or assumption made by the previous court to hear the case. An appellate court hearing a case de novo may refer to the lower court’s record to determine the facts, but will but rule on the evidence and matters of law without deferring to that court’s findings. A trial court may also hear a case de novo following the appeal of an arbitration decision. De novo review occurs when a court decides an issue without deference to a previous court‘s decision. Trial de novo occurs when a court decides all issues in a case, as if the case was being heard for the first time.
The National Whistleblower Center and the Government Accountability Project worked together to file an amicus brief in support of the whistleblower. The amicus brief noted that the SOX provision provides that if the Department of Labor (DOL) does not issue a final order within 180 days, then the complainant can file a de novo civil action in U.S. district court. The brief also argued that,
“that the plain and clear language of SOX controls, and it was an error for the judge to refuse to hear Stone’s case… [And that the] legislative history need not be considered when the statute’s language is clear. Nevertheless, the history of SOX supports what the language says.”
The district court refused Stone’s appeals on the dismissal of his case. Yet the Fourth Circuit found that the lower court had “strayed from the plain and unambiguous meaning,” and that such “a literal interpretation of the statute does not lead to an “absurd result.” Moreover, the Fourth Circuit found that,
In summary, the plain language of § 1514A(b)(1)(B) unambiguously establishes a Sarbanes-Oxley whistleblower complainant’s right to de novo review in federal district court if the DOL has not issued a “final decision” and the statutory 180-day period has expired…. Therefore, notwithstanding the Secretary’s view on the soundness of Congress’s decision to create a framework allowing for duplication of efforts, such framework is precisely what Congress reasonably and unambiguously provided for in the controlling statute.
As a result, the Fourth Circuit reversed and remanded the lower court’s prior decision, instructing that whistleblowers throughout their jurisdiction be granted de novo review, leading to enhanced whistleblower protections for Stone and other whistleblowers in the future.
