UPDATE: California Federal Court Permits Former Bank Internal Auditor's Whistleblower Claims To Proceed

A California federal court—in Erhart v. BofI Holding, Inc., 2017 U.S. Dist. LEXIS 14755, Case No. 15-cv-02287 (S.D. Cal. Sept. 11, 2017)—recently denied BofI Federal Bank's ("BofI's") motion to dismiss the Sarbanes-Oxley whistleblower claims plead in their former internal auditor Charles Erhart's amended complaint. The court also denied BofI's motion as to Erhart's defamation claim, allowing it to proceed, but dismissed Erhart's claims for (i) violation of the Confidentiality of Medical Information Act ("CMIA"); (ii) intentional infliction of emotional distress; and (iii) breach of the implied covenant of good faith and fair dealing.

Prior Rulings

We posted about this case in March, shortly after the court denied (in part) BofI's motion for summary judgment. In response to Erhart's complaint, BoFI had filed counterclaims alleging, among other things, breach of a confidentiality agreement predicated on Erhart's self-help appropriation of his employer's documents, and subsequent disclosure of that information to the government and press. Erhart's affirmative defenses were premised on the assertion that his actions constituted protected activity pursuant to various whistleblower statutes. BofI moved for summary judgement on Erhart's affirmative defenses. But the court sided with Erhart and ruled, among other things, that a confidentiality agreement was not applicable to communications with the government, and that an employee may be able to engage in limited self-help to the extent necessary to support their allegations.

Whistleblower Claims Sufficiently Alleged

BofI's motion to dismiss Erhart's amended complaint was pending at the time of that earlier decision regarding Erhart's affirmative defenses. Earlier this month, the court issued its decision denying in part and grating in part BofI's motion to dismiss. The court applied the same "reasonable belief" standard that had been recognized by the Ninth Circuit in Rocheleau v. Microsemi Corp., Inc., 680 F. App'x 533, 535 n.2 (9th Cir. 2017) to analyze the whistleblower claims. The court found that Erhart properly alleged he engaged in protected activity by meeting both the subjective and objective components of the reasonable belief standard: that he reasonably believes that the conduct complained of is a violation of the laws enumerated in 18 U.S.C. § 1514A. The court also held he met the other whistleblower pleading requirements by alleging that BofI knew or suspected that he engaged in the...