Whistleblowers must show only that they called attention to what they believed was fraud in order to sue their employers for wrongful termination under the Sarbanes Oxley Act, an appeals court ruled Thursday.
The court also made it clear that the plaintiffs, two former in-house lawyers for International Game Technology, can use confidential information in their lawsuit.
The case offered the Ninth U.S. Circuit Court of Appeals a first stab at defining the requirements employees must meet under a whistleblower provision of the Sarbanes Oxley Act.
Shawn Van Asdale and his wife, Lena Van Asdale, served as intellectual property lawyers for IGT between 2001 and 2004, and were terminated after the company came under new management in a merger with Anchor Gaming, the opinion showed.
The Van Asdales contended in a 2004 lawsuit that they were fired for reporting possible shareholder fraud in connection with that merger, the opinion showed.
Specifically, the Van Asdales alleged in their lawsuit that the patents IGT acquired in the merger with Anchor were overvalued on IGT’s financial statements.
In a 2007 statement, IGT said an independent review found the allegations to be “entirely without merit.”
APPEALS COURT REVERSES TRIAL COURT
A trial court issued a summary judgment in favor of IGT, finding the Van Asdales had not shown that they had discussed the suspected fraud specifically enough with IGT before they were terminated, as required by the whistleblower provision.
The appeals court reversed that decision, reinstated the case and sent it back to the Nevada district court.
“The success or failure of the Van Asdales’ lawsuit does not depend on their ability to show any actual fraud, only that they reasonably believed that fraud had occurred,” the appeals court wrote in its unanimous ruling.
The court also rejected IGT’s argument that the case should be dismissed because it was based on information protected by the attorney-client privilege.
IGT had no comment on the opinion, but believes the Van Asdales’ claims are without merit and plans to vigorously defend against them, attorney Mark Robertson of O’Melveny & Myers said.
Attorney Mark Lenz, who represents the Van Asdales, said his clients were “very happy with the results of the case.”
“The court went beyond what we had expected,” Lenz, of Piscevich & Fenner, said.
The case is Van Asdale v. International Game Technology, Case No. 07-16597, U.S. Court of Appeals for the Ninth Circuit.
(Reporting by Gina Keating; editing by Carol Bishopric)
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