The record indicates that Special Projects, which calculated refunds and payoffs, had a significant backlog and was attempting to remedy the problem. We agree with the ARB that substantial evidence supports the ALJ’s factual finding that Stewart did not act with a mental state embracing intent to deceive, manipulate, or defraud its shareholders in addressing this refund backlog problem. Thus, the Petitioners’ complaints regarding the untimely refunds do not fall within the six enumerated category of protected activity found in § 1514A.
c. POS Account Problem
The ARB found that substantial evidence supports the ALJ’s factual finding that Breaux and Allen did not reasonably believe that Stewart was violating some provision of federal law relating to fraud against shareholders by issuing incorrect POS statements to its customers. We agree. Both Breaux and Allen knew that Stewart’s customers were contractually obligated to pay any balance remaining when a third party refused to take responsibility for payment and that Stewart collected any remaining balances through its customer service office and outside collection agencies. Substantial evidence supports the ALJ’s and ARB’s factual finding that Stewart was not losing any money on its POS accounts and that Breaux and Allen could not reasonably believe that the incorrect POS statements adversely affected Stewart’s shareholders. Breaux and Allen complained about Stewart’s allegedly inadequate response to an unintended computer programming problem. Thus, substantial evidence supports the ALJ’s and ARB’s factual finding that Breaux and Allen did not
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engage in protected activity when they complained about the POS billing problem because Stewart did not possess the requisite scienter.
III. Conclusion
The Petitioners have failed to establish the first element of their SOX whistleblower claims. Regarding the fifth enumerated category of protected activity, a reasonable person could conclude that Stewart did not violate a rule or regulation of the SEC because Waldon knew that Stewart’s internal financial documents did not need to be SAB-101 compliant. Regarding the sixth enumerated category of protected activity, the Petitioners must reasonably believe that Stewart acted with a mental state embracing intent to deceive, manipulate, or defraud its shareholders. Stewart’s unsuccessful attempts to remedy the AS400 interest calculation, untimely refund, and POS billing problems do not qualify as a fraud on the shareholders because Stewart did not possess the requisite scienter. A reasonable person could conclude that Stewart did not intentionally cause these three problems, did not conceal their existence, and attempted to remedy them. At most, Stewart inadequately responded to three unintended problems that arose in the regular course of business, and substantial evidence supports the ALJ’s and ARB’s factual finding that Stewart did not intend to defraud its shareholders in failing to disclose these problems. We decline to address the Petitioners’ remaining arguments because we conclude that they did not engage in protected activity.
AFFIRMED.
[ENDNOTES]
1 The employee is entitled to the relief provided by § 1514A(c) "only if the [employee] demonstrates that [her protected activity] was a contributing factor in the unfavorable personnel action alleged in the complaint." 49 U.S.C. § 42121(b)(2)(B)(iii). The term "demonstrates" means to prove by a preponderance of the evidence. See Dysert v. Sec’y of Labor, 105 F.3d 607, 610 (11th Cir. 1997) (addressing analogous statutory burden-shifting framework under the Energy Reorganization Act of 1974 ("ERA")).
2 In AIR 21 cases, the ARB has adopted the definition of "adverse employment action" set forth in the recent Supreme Court case of Burlington Northern & Santa Fe Railway Co. v. White, 126 S. Ct. 2405 (2006). See Hirst v. Southeast Airlines, Inc.,ARB Case No. 04-116, 2007 WL 352447, at *4-*5 (ARB Jan. 31, 2007) (AIR 21 case) (using the term "adverse employment action" and "unfavorable personnel action" interchangeably). Burlington held that "a plaintiff must show that a reasonable employee would have found the challenged action materially adverse, which in this context means it well might have dissuaded a reasonable worker from [engaging in the protected activity]." 126 S. Ct. at 2415 (internal quotation marks and citations omitted). Based on the similarity of the whistleblower protections afforded under SOX and AIR 21, we find that the Burlington definition of "unfavorable personnel action" applies to SOX whistleblower claims. Compare 18 U.S.C. § 1514A(a) (SOX protections), with 49 U.S.C. § 42121(a) (AIR 21 protections).
3 A contributing factor is "any factor, which alone or in combination with other factors, tends to affect in any way the outcome of the decision." Klopfenstein v. PCC Flow Techs. Holdings, Inc., ARB Case No. 04-149, 2006 WL 3246904, at *13 (ARB May 31, 2006) (quoting Marano v. Dep’t of Justice, 2 F.3d 1137, 1140 (Fed. Cir. 1993)).
4 We have previously declined to address whether the "reasonable belief" element of a Title VII retaliation claim includes both a subjective and objective component. Payne v. McLemore’s Wholesale & Retail Stores, 654 F.2d 1130, 1140 n.11 (5th Cir. Unit A Sept. 1981); see also Cartagena v. Aegis Mortgage Corp., No. 01-20324, 2001 WL 1268730, at *8 (5th Cir. Oct. 16, 2001).
5 SAB-101 states the following: "The statements in the staff accounting bulletins are not rules or interpretations of the Commission, nor are they published as bearing the Commission’s official approval. They represent interpretations and practices followed by the Division of Corporation Finance and the Office of the Chief Accountant in administering the disclosure requirements of the Federal securities laws." SAB-101, 71 S.E.C. Docket 590, 1999 WL 1100908, at *1(Dec. 3, 1999).
6 Waldon has a Bachelor of Science degree in management accounting and has been licensed as a CPA since 1999.
7 We express no opinion on whether Waldon’s SAB-101 complaint would rise to the level of protected activity if made by a layperson without her extensive accounting knowledge.
8 Because the issue is not before us, we express no opinion on whether the first five enumerated categories of protected activity found in § 1514A require some form of scienter related to fraud against shareholders. Compare Reyna, 506 F. Supp. 2d at 1381-82 ("The statute clearly protects an employee against retaliation based upon that employee’s reporting of mail fraud or wire fraud regardless of whether that fraud involves a shareholder of the company."), with Platone, 2006 WL 3246910, at *7 ("[W]hen allegations of mail or wire fraud arise under the employee protection provision of the Sarbanes-Oxley Act, the alleged fraudulent conduct must at least be of a type that would be adverse to investors’ interests."). We note that several ALJs have held that fraud is an essential element of all whistleblower claims arising under § 1514A, which necessarily includes an element of intentional deceit. Gale v. World Fin. Group, ALJ Case No. 2006-SOX-43, 2006 WL 3246898, at *4 (ALJ June 9, 2006) (Romero, J.); Wengender v. Robert Half Int’l, Inc., ALJ Case No. 2005-SOX-59, 2006 WL 3246887, at *11 (ALJ March 30, 2006) (Kennington, J.); Marshall v. Northrup Gruman Synoptics, ALJ Case No. 2005-SOX-8, 2005 WL4889013, at *3 (ALJ June 22, 2005) (Price, J.); Hopkins v. ATK Tactical Sys., ALJ Case No. 2004-SOX-19, slip op. at 6 (ALJ May 27, 2004) (Wood, J.).
9 We are troubled by the Petitioners’ attempt to shoe-horn their complaint that Stewart intentionally failed to disclose these three problems into the sixth "catch-all" category of protected activity. It appears that this generic fraudulent omission claim is essentially a watered-down Rule 10b-5 claim. In cases involving an alleged fraudulent omission in violation of Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, the objective reasonableness of the employee’s belief is evaluated in part through reference to the elements of a Rule 10b-5 claim. See, e.g., Platone, 2006 WL 3246910, at *11 ("Platone’s . . . allegation that ACA violated SEC Rule 10b-5 is baseless. Her revelations to Rodgers and others at ACA do not even approximate any of the basic elements of a claim of securities fraud—a material misrepresentation (or omission), scienter, a connection with the purchase, or sale of a security, reliance, economic loss and loss causation."); see also Regents of Univ. of Cal. v. Credit Suisse First Boston (USA), Inc., 482 F.3d 372, 382 (5th Cir. 2007) (regarding the elements of a Rule 10b-5 claim). Although an employee who makes a complaint concerning an alleged fraudulent omission does not need to prove that an actual violation of federal law occurred, the employee does need to prove that his or her belief was objectively reasonable under the circumstances. Because we conclude that substantial evidence supports the ALJ’s and ARB’s factual finding that Stewart did not act with fraudulent intent in failing to disclose these three problems to its shareholders, we need not decide whether the objective reasonableness of all generic fraudulent omission complaints must be evaluated in part through reference to the elements of a Rule 10b-5 claim.
10 Even assuming that a company's intentional failure to disclose alleged state law violations to it shareholders might constitute a violation of Section 10(b) and Rule 10b-5, that issue was not raised by the Petitioners, so we decline to address it.