Nicholas Tides, et al v. The Boeing Company

Filing

FILED OPINION (ANDREW J. KLEINFELD, A. WALLACE TASHIMA and BARRY G. SILVERMAN) AFFIRMED. , Judge: BGS Authoring. FILED AND ENTERED JUDGMENT. [7737450]

Case: 10-35238 05/03/2011 Page: 1 of 13

ID: 7737450 DktEntry: 45-1

FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
NICHOLAS P. TIDES and MATTHEW
CRAIG NEUMANN,
Plaintiffs-Appellants,
v.
THE BOEING COMPANY,
Defendant-Appellee.





No. 10-35238
D.C. No.
2:08-cv-01601-JCC
OPINION

Appeal from the United States District Court
for the Western District of Washington
John C. Coughenour, District Judge, Presiding
Argued and Submitted
April 15, 2011—Seattle, Washington
Filed May 3, 2011
Before: Andrew J. Kleinfeld, A. Wallace Tashima, and
Barry G. Silverman, Circuit Judges.
Opinion by Judge Silverman

5755

Case: 10-35238 05/03/2011 Page: 2 of 13

5758

ID: 7737450 DktEntry: 45-1

TIDES v. THE BOEING CO.

COUNSEL
John T. Tollefsen (argued), Tollefsen Law PLLC, Lynnwood,
Washington, for the plaintiffs-appellants.
Jonathan P. Harmon (argued), and Eric B. Martin, McGuireWoods, LLP, Richmond, Virginia, for the defendant-appellee.
Stephen M. Kohn (argued), Kohn, Kohn & Colapinto, P.C.,
Washington, D.C., for amicus curiae the National Whistleblowers Center.

OPINION
SILVERMAN, Circuit Judge:
We hold today that by its express terms, the whistleblower
provision of the Sarbanes-Oxley Act, 18 U.S.C.
§ 1514A(a)(1), protects employees of publicly-traded companies who disclose certain types of information only to the
three categories of recipients specifically enumerated in the
Act—federal regulatory and law enforcement agencies, Congress, and employee supervisors. Leaks to the media are not
protected.
I.

BACKGROUND1

In January 2007, plaintiffs Matthew Neumann and Nicholas
Tides began working as auditors in Boeing’s IT SarbanesOxley (“SOX”) Audit group. Tides worked in St. Louis, and
Neumann was based in Seattle. At the time, the IT SOX Audit
group was one of two departments housed within Boeing’s
1

Because Tides and Neumann appeal from an order granting Boeing
summary judgment, we set forth the relevant facts in the light most favorable to them. See Chuang v. Univ. of Cal. Davis, Bd. of Tr., 225 F.3d
1115, 1120 n.3 (9th Cir. 2000).

Case: 10-35238 05/03/2011 Page: 3 of 13

ID: 7737450 DktEntry: 45-1

TIDES v. THE BOEING CO.

5759

Corporate Audit organization. It was charged with helping the
company comply with SOX’s requirement that it annually
assess the effectiveness of its internal controls and procedures
for financial reporting. See 15 U.S.C. § 7262(a). Auditors in
the IT SOX Audit group performed audits and testing on
information technology controls.2 The group was staffed with
about ten Boeing employees, including Tides and Neumann,
and supplemented by approximately seventy contract auditors
from the accounting firm PriceWaterhouseCoopers. Deloitte
& Touche served as Boeing’s external auditor and was
responsible for annually attesting to, and reporting on, the
company’s assessments of its internal controls, as required by
SOX. See id. § 7262(b).
Tides and Neumann claim that tensions were high in the IT
SOX Audit group upon their arrival in January 2007 because
management feared that Deloitte & Touche might declare a
“material weakness” in the company’s internal controls. They
allege that managers pressured IT SOX auditors to rate Boeing’s internal controls as “effective” and fostered a generally
hostile work environment. Beginning in February 2007, Tides
and Neumann began separately expressing concerns about
this perceived pressure and several deficiencies in Boeing’s
auditing practices that they viewed as potential violations of
SOX. Their primary concern related to Boeing’s use of PriceWaterhouseCoopers contractors in the internal auditing of the
company’s IT controls. Tides and Neumann repeatedly complained to management about the practice of giving the contractors managerial authority over Boeing employees, as well
as the involvement of the contractors in both the design and
audit of Boeing’s internal controls. They also expressed concerns about the integrity of data stored in the software system
Boeing used to record its IT SOX audit results. Both auditors
2

An information technology (“IT”) control is a policy or procedure
implemented by a company to ensure the confidentiality and integrity of
its IT functions, such as a procedure requiring the testing and approval of
software before installation on a company computer.

Case: 10-35238 05/03/2011 Page: 4 of 13

5760

ID: 7737450 DktEntry: 45-1

TIDES v. THE BOEING CO.

believed that the system permitted unauthorized users to alter
the ratings given to the company’s internal controls.
At some point in late April 2007, Andrea James, a reporter
with the Seattle Post-Intelligencer, left messages on Tides’
and Neumann’s work phones asking each of them to speak
with her about an article she was writing on Boeing’s compliance with SOX. Neither Tides nor Neumann immediately
responded to her requests, hoping instead to resolve their concerns internally with the help of management and human
resources. At the time, both were aware that Boeing had in
place a policy that restricted the release of company information to the news media. Boeing’s policy, PRO-3439, required
employees to refer “[i]nquiries of any kind from the news
media” to the communications department and also prohibited
the release of company information without prior review by
that department.
In late May 2007, James contacted Neumann again, this
time showing up uninvited at his home with another PostIntelligencer reporter. Neumann agreed to speak with them
about Boeing’s compliance with SOX. He described the pressure he felt to render positive audit results and detailed a
recent meeting where he and other IT SOX auditors expressed
concerns over the role of PriceWaterhouseCoopers contractors in audits of Boeing’s internal controls. James asked Neumann if he knew of any examples of significant deficiencies
in Boeing’s internal controls going unreported or of any auditors being instructed to change their findings, but he said he
didn’t know of any specifics. Several days after their meeting,
James emailed Neumann an excerpt of a draft of her article.
Neumann responded that the excerpt looked good and sent
James the text of an email that he and other IT SOX auditors
recently received from a manager. The manager’s email
reminded employees that Boeing policy prohibited the release
of information to the media without prior approval from the
communications department.

Case: 10-35238 05/03/2011 Page: 5 of 13

ID: 7737450 DktEntry: 45-1

TIDES v. THE BOEING CO.

5761

Tides contacted James in July 2007 after receiving what he
viewed as a negative and unsubstantiated performance evaluation for the second quarter of the year. He forwarded her a
series of work-related emails from his Boeing computer. Most
of the emails documented the concerns he previously raised
with management and human resources regarding perceived
problems with the IT SOX Audit group’s auditing practices.
Tides also forwarded James several internal Boeing documents, including copies of the company’s policies governing
contract labor.
On July 17, 2007, the Post-Intelligencer published the article “Computer security faults put Boeing at risk,” co-authored
by James. The article reported that “[f]or the past three years,
The Boeing Co. has failed, in both internal and external
audits, to prove it can properly protect its computer systems
against manipulation, theft and fraud.” It detailed, among
other things, a threatening company culture perceived by
employees involved in SOX compliance, a record of poor
internal audit results indicating that many of the company’s
computer system controls were failing, and an internal allegation that audit results were being manipulated.
At some point prior to the publication of the PostIntelligencer article, Boeing caught on that several employees
were likely releasing company information to the media. As
a result, it authorized an investigation that included the monitoring of both Tides’ and Neumann’s work computers and
email accounts. The investigation revealed that the two auditors were communicating with James without permission.
Two months after the publication of the Post-Intelligencer
article, Tides and Neumann were interviewed separately by
HR investigators about their communications with James.
Both admitted to speaking with her about Boeing’s auditing
practices and to providing her with company documents.
After the interviews, Boeing suspended Tides and Neumann
indefinitely. Their cases were then referred to an Employee
Corrective Action Review Board, a committee composed of

Case: 10-35238 05/03/2011 Page: 6 of 13

5762

ID: 7737450 DktEntry: 45-1

TIDES v. THE BOEING CO.

five voting members and one non-voting ethics advisor to
evaluate charges of employee misconduct. After reviewing
the applicable Boeing policies and the investigative reports
detailing the two auditors’ contacts with the media, the Board
unanimously voted to terminate Tides and Neumann effective
September 28, 2007 and October 1, 2007, respectively. Both
were later informed in writing that:
It has been determined that you created an unacceptable liability for the Company. Specifically, you violated PRO-2227, Information Protection, by
disclosing Boeing information3 to non-Boeing persons without following appropriate procedures,
obtaining necessary approvals and putting in place
appropriate safeguards. In addition, you violated
PRO-3439 by not referring inquiries from the news
media to Communications, and by releasing information without approval in accordance with the
requirements of said PRO. Your actions are aggravated by the fact that the information had an adverse
effect on the Company’s reputation and its relations
with its employees, customers, shareholders, suppliers and other important constituents, causing significant liability. The Company deems your behavior in
this incident as unacceptable and in violation of its
expectations as defined in PRO-1909.
Following their terminations, Neumann and Tides filed
SOX whistleblower complaints with the Occupation Safety
and Health Administration4 on December 21, 2007 and
3

PRO-2227 defines “Boeing information” as “all non-public information that is owned by Boeing.” Under the policy, “[a]ll Boeing information
is presumed to have value and be proprietary, confidential, and/or trade
secret information.”
4
The Secretary of Labor has delegated responsibility for receiving and
investigating whistleblower complaints to OSHA, an agency within the
Department of Labor. See Day v. Staples, 555 F.3d 42, 53 n.4 (1st Cir.
2009); 29 C.F.R. § 1980.103(c).

Case: 10-35238 05/03/2011 Page: 7 of 13

ID: 7737450 DktEntry: 45-1

TIDES v. THE BOEING CO.

5763

December 26, 2007, respectively. After over nine months of
delay, the agency issued letters acknowledging Tides and
Neumann’s right to proceed de novo in federal court.5 Tides
and Neumann filed separate complaints in district court, alleging that they were terminated in violation of 18 U.S.C.
§ 1514A(a)(1) for reporting violations of SOX and other
securities laws. Their cases were later consolidated. Boeing
moved for summary judgment. On February 9, 2010, the district court granted Boeing’s motion. This timely appeal followed. We have jurisdiction to hear this case under 28 U.S.C.
§ 1291.
II.

STANDARD OF REVIEW

We review the district court’s grant of summary judgment
de novo. Evanston Ins. Co. v. OEA, Inc., 566 F.3d 915, 918
(9th Cir. 2009). In doing so, “[w]e must determine, viewing
the evidence in the light most favorable to [Tides and Neumann], whether there are any genuine issues of material fact
and whether the district court correctly applied the substantive
law.” Olsen v. Idaho State Bd. of Med., 363 F.3d 916, 922
(9th Cir. 2004). We also review de novo questions of statutory
interpretation. Beeman v. TDI Managed Care Servs., Inc., 449
F.3d 1035, 1038 (9th Cir. 2006).
III.

DISCUSSION

[1] SOX’s whistleblower provision, 18 U.S.C. § 1514A,
protects employees of publicly-traded companies from discrimination in the terms and conditions of their employment
when they take certain actions to report conduct that they rea5

If the Secretary of Labor does not issue a final decision within 180
days of the filing of the complaint and there is no showing that such delay
is due to the bad faith of the claimant, then the claimant may seek de novo
review in district court, which will have jurisdiction over the action
regardless of the amount in controversy. 18 U.S.C. § 1514A(b)(1)(B); see
also Day, 555 F.3d at 53 n.5.

Case: 10-35238 05/03/2011 Page: 8 of 13

5764

ID: 7737450 DktEntry: 45-1

TIDES v. THE BOEING CO.

sonably believe constitutes certain types of fraud or securities
violations. Section 1514A claims are governed by a burdenshifting procedure under which the plaintiff is first required to
establish a prima facie case of retaliatory discrimination. See
id. § 1514A(b)(2)(A); 49 U.S.C. § 42121(b)(2)(B)(i). To
make out a prima facie case, the plaintiff must show that: (1)
he engaged in protected activity or conduct; (2) his employer
knew or suspected, actively or constructively, that he engaged
in the protected activity; (3) he suffered an unfavorable personnel action; and (4) the circumstances were sufficient to
raise an inference that the protected activity was a contributing factor in the unfavorable action. Van Asdale v. Int’l Game
Tech., 577 F.3d 989, 996 (9th Cir. 2009); 29 C.F.R.
§ 1980.104(b)(1)(i)-(iv). If the plaintiff meets his burden of
establishing a prima facie case, then “the employer assumes
the burden of demonstrating by clear and convincing evidence
that it would have taken the same adverse employment action
in the absence of the plaintiff’s protected activity.” Van
Asdale, 577 F.3d at 996.
[2] The issue in this case comes down to whether the plaintiffs’ disclosures to the Post-Intelligencer were protected
under § 1514A(a)(1).6 To answer that question, we turn to the
statute’s language to determine whether it has a plain meaning. See McDonald v. Sun Oil Co., 548 F.3d 774, 780 (9th
Cir. 2008). “The preeminent canon of statutory interpretation
requires us to presume that [the] legislature says in a statute
6
Amicus curiae the National Whistleblowers Center argues that disclosures to the media may also be protected under § 1514A(a)(2). We decline
to address this argument. The plaintiffs brought their complaints under
§ 1514A(a)(1), and the district court did not explicitly address whether
their disclosures were protected under § 1514A(a)(2). We generally do not
review issues raised only by an amicus curiae. See Russian River Watershed Prot. Comm. v. City of Santa Rosa, 142 F.3d 1136, 1141 n.1 (9th Cir.
1998). Nor will we review issues that are not raised in district court,
absent special circumstances not present here. See Int’l Union of Bricklayers & Allied Craftsman Local Union No. 20 v. Martin Jaska, Inc., 752
F.2d 1401, 1404 (9th Cir. 1985).

Case: 10-35238 05/03/2011 Page: 9 of 13

ID: 7737450 DktEntry: 45-1

TIDES v. THE BOEING CO.

5765

what it means and means in a statute what it says there. Thus,
our inquiry begins with the statutory text, and ends there as
well if the text is unambiguous.” Id. (quoting BedRoc Ltd.,
LLC v. United States, 541 U.S. 176, 183 (2004) (internal citation and quotation marks omitted)). If the statutory language
is ambiguous, however, then we may refer to legislative history to discern congressional intent. United States v. Gallegos,
613 F.3d 1211, 1214 (9th Cir. 2010). We may also look to
other related statutes because “statutes dealing with similar
subjects should be interpreted harmoniously.” United States v.
Nader, 542 F.3d 713, 717 (9th Cir. 2008) (internal quotation
marks omitted).
Section 1514A(a)(1) provides that:
(a) No [publicly-traded company] . . . may discharge,
demote, suspend, threaten, harass, or in any other
manner discriminate against an employee in the
terms and conditions of employment because of any
lawful act done by the employee—
(1) to provide information, cause information to be
provided, or otherwise assist in an investigation
regarding any conduct which the employee reasonably believes constitutes a violation of section 1341
[mail fraud], 1343 [wire fraud], 1344 [bank fraud],
or 1348 [securities fraud], any rule or regulation of
the Securities and Exchange Commission, or any
provision of Federal law relating to fraud against
shareholders, when the information or assistance is
provided to or the investigation is conducted by—
(A) a Federal regulatory or law enforcement agency;
(B) any Member of Congress or any committee of Congress; or

Case: 10-35238 05/03/2011 Page: 10 of 13

5766

ID: 7737450 DktEntry: 45-1

TIDES v. THE BOEING CO.

(C) a person with supervisory authority
over the employee (or such other person
working for the employer who has the
authority to investigate, discover, or terminate misconduct).
18 U.S.C. § 1514A(a)(1).
[3] The plaintiffs contend that their disclosures of perceived SOX violations to the Post-Intelligencer were protected under § 1514A(a)(1) because reports to the media may
eventually “cause information to be provided” to members of
Congress or federal law enforcement or regulatory agencies.
We decline to adopt such a boundless interpretation of the
statute. The plain language of § 1514A(a)(1) protects employees of public companies from retaliation only when they “provide information, cause information to be provided, or
otherwise assist in an investigation” concerning specified
types of fraud or securities violations “when the information
or assistance is provided to or the investigation is conducted
by” one of three individuals or entities: (1) a federal regulatory or law enforcement agency, (2) a member or committee
of Congress, or (3) a supervisor or other individual who has
the authority to investigate, discover or terminate such misconduct. 18 U.S.C. § 1514A(a)(1). Members of the media are
not included. If Congress wanted to protect reports to the
media under § 1514A(a)(1), it could have listed the media as
one of the entities to which protected reports may be made.
Or, it could have protected “any disclosure” of specified
information, as it did with the Whistleblower Protection Act,
5 U.S.C. § 2302. But it took neither course, opting instead to
limit protected activity to employees who raise certain concerns of fraud or securities violations with those authorized or
required to act on the information.
[4] When Congress wants to protect the disclosure of any
information to any entity, it knows how to do so. The
Whistleblower Protection Act prohibits retaliation against

Case: 10-35238 05/03/2011 Page: 11 of 13

ID: 7737450 DktEntry: 45-1

TIDES v. THE BOEING CO.

5767

government employees and job applicants for “any disclosure
of information” that the employee or applicant reasonably
believes constitutes “a violation of any law, rule, or regulation, or . . . gross mismanagement, a gross waste of funds, an
abuse of authority, or a substantial and specific danger to public health or safety” as long as “such disclosure is not specifically prohibited by law and if such information is not
specifically required by Executive order to be kept secret in
the interest of national defense or the conduct of foreign
affairs.” 5 U.S.C. § 2302(b)(8) (emphasis added). Relying on
this language, courts and administrative bodies have interpreted the Whistleblower Protection Act to protect government employees who expose wrongdoing to members of the
press. See, e.g., Horton v. Dep’t of Navy, 66 F.3d 279, 282
(Fed. Cir. 1995); Costin v. Dep’t of Health & Human Servs.,
72 M.S.P.R. 525, 536 (M.S.P.B. 1996). But the expansive language of that Act stands in stark contrast to the limiting text
of § 1514A(a)(1). While the Whistleblower Protection Act
protects “any disclosure” without limitation or qualification as
to the specific types of entities to which protected whistleblower reports may be made, § 1514A(a)(1) is not so generous. This distinction lends further support to our conclusion
that § 1514A(a)(1) does not protect employees of public companies who disclose information regarding fraud or certain
securities violations to members of the media. See White v.
Lambert, 370 F.3d 1002, 1011 (9th Cir. 2004), overruled on
other grounds by Hayward v. Marshall, 603 F.3d 546 (9th
Cir. 2010) (en banc) (“[W]hen Congress uses different text in
‘adjacent’ statutes, it intends that the different terms carry a
different meaning.”).
[5] Construing § 1514A(a)(1) in the manner urged by the
plaintiffs would essentially read the terms “a Federal regulatory agency or law enforcement agency” and “any Member of
Congress or any committee of Congress” out of the statute.
Such a result is one we must avoid, as “it is not within the
judicial province to read out of the statute the requirement of
its words.” Quarty v. United States, 170 F.3d 961, 973 (9th

Case: 10-35238 05/03/2011 Page: 12 of 13

5768

ID: 7737450 DktEntry: 45-1

TIDES v. THE BOEING CO.

Cir. 1999) (quoting United States v. Felt & Tarrant Mfg. Co.,
283 U.S. 269, 273 (1931)). If, as the plaintiffs contend, the
disclosure of information to the media is protected on the
ground that it may ultimately fall into the hands of a member
of Congress or a federal regulator, then virtually any disclosure to any person or entity would qualify as protected
whistleblower activity, provided the information pertains to
one of the statutorily-defined categories of unlawful conduct
set forth in § 1514A(a)(1). We decline to afford such an
expansive meaning to the statutory language.
[6] Although we need not resort to the legislative history
of § 1514A because the plain meaning of the statute is clear,
see United States v. Hall, 617 F.3d 1161, 1167 (9th Cir.
2010), we can sleep well knowing that it reinforces our conclusion above. Section 1514A was passed in response to “a
culture, supported by law, that discourage[d] employees from
reporting fraudulent behavior not only to the proper authorities, such as the FBI and the SEC, but even internally.” S.
Rep. No. 107-146, at 5 (2002) (emphasis added); see also
Day, 555 F.3d at 52. In its report discussing the scope of
SOX’s protections for whistleblowers, the Senate Judiciary
Committee explained that the whistleblower provision was
intended to protect “employees of publicly traded companies
who report acts of fraud to federal officials with the authority
to remedy the wrongdoing or to supervisors or appropriate
individuals within their company.” S. Rep. No. 107-146, at
18-19 (emphasis added). The Committee also clarified that
SOX’s whistleblower provision protects employees of public
companies “when they take lawful acts to disclose information or otherwise assist criminal investigators, federal regulators, Congress, their supervisors (or other proper people
within a corporation), or parties in a judicial proceeding in
detecting and stopping actions which they reasonably believe
to be fraudulent.” Id. at 19. Each of these statements makes
clear that, in enacting § 1514A(a)(1), Congress intended to
protect disclosures only to individuals and entities with the
capacity or authority to act effectively on the information pro-

Case: 10-35238 05/03/2011 Page: 13 of 13

ID: 7737450 DktEntry: 45-1

TIDES v. THE BOEING CO.

5769

vided. Nowhere in the Committee’s report is there any indication that Congress intended § 1514A(a)(1) to be interpreted so
broadly as to protect employee disclosures to members of the
media.
[7] In sum, the plain meaning of the statutory language
excludes the expansive interpretation advanced by the plaintiffs. We therefore hold that § 1514A(a)(1) does not protect
employees of publicly-held companies from retaliation when
they disclose information regarding designated types of fraud
or securities violations to members of the media. Though
unnecessary to this result, the legislative history gives no reason to doubt that Congress said what it meant to say. Boeing
was within its rights under § 1514A(a)(1) to terminate the
plaintiffs for violating company policy prohibiting unauthorized disclosures of Boeing information to the media. Because
the district court properly granted summary judgment on the
ground that the plaintiffs’ disclosures to the Post-Intelligencer
did not fall within the scope of § 1514A(a)(1)’s protection, we
need not address whether the disclosures “definitively and
specifically” relate to one of the listed categories of fraud or
securities violations, see Van Asdale, 577 F.3d at 996-97, or
whether there is any triable issue of fact as to whether Boeing’s reason for terminating the plaintiffs was pretextual, see
id. at 996.
AFFIRMED.