5th Circuit Rejects Whistleblower Claim of Former Charter Sales Manager
A 5th U.S. Circuit Court of Appeals panel affirmed the district court’s dismissal of the complaint of Darrell Seybold, a former Charter Communications sales manager, who alleged that Charter violated the Sarbanes-Oxley (SOX) Act’s whistleblower protections when it fired him for reporting that the company was cooking the books (see 2304040022). Charter asserts it properly terminated Seybold for his unprofessional conduct.
Tuesday’s opinion (docket 23-10104) came two days before the three-judge panel originally was to hold oral argument on Seybold’s appeal (see 2310020002). But Judges Leslie Southwick, Kurt Engelhardt and Cory Wilson in an Oct. 19 reversal, determined under Federal Rule of Civil Procedure 34(a) that oral argument wouldn’t be required.
Seybold failed to “plausibly plead” his whistleblower claim, said the 5th Circuit’s opinion Tuesday. Seybold alleged he emailed four reports documenting Charter’s episodes of securities and shareholder fraud with his direct supervisor, plus Charter’s regional vice president and its group vice president. One alleged abuse involved a 2019 policy change in which Charter double-counted senior homes as both commercial and residential accounts, resulting in overreporting.
The district court dismissed Seybold’s original complaint, directing his attention to the complaint’s lack of detail about what he knew to be unlawful at the time he made the four reports and what those reports actually contained. It granted Seybold leave to amend his complaint to address these failings. But the court dismissed his amended complaint, finding it offered no meaningful new detail about his allegations, and it denied him leave to file a second amended complaint because he ignored the court's instructions for curing his complaint's deficiencies.
On appeal, Seybold argued the district court improperly dismissed his SOX claim under Rule 12(b)(6), and abused its discretion by denying him leave to file a second amended complaint under Rule 15(a). But the “fatal flaw” in Seybold’s pleadings “is the lack of any concrete detail regarding what Seybold reported to his supervisors and whether he thought the reported conduct was illegal at the time,” said the 5th Circuit opinion.
Seybold tried to explain why he couldn’t provide the court with physical copies of his emails to his supervisors, “but this misses the point,” said the opinion. “Seybold needed to describe, with particularity,” what was contained in the emails so as to demonstrate that he was engaging in protected whistleblower activity under SOX "at the time the reports were filed," it said.
So while providing the emails themselves would perhaps have been “beneficial” to his case, Seybold “could have provided the detail requested by the district court without them,” but he simply didn’t do so, said the opinion. He instead summarized his actions as reporting, opposing and disputing certain Charter policies, it said. But that didn’t show that Seybold held a “reasonable belief” that Charter’s conduct violated securities laws, it said.
Because Seybold didn’t show specifically what he reported to Charter, he couldn’t demonstrate “that his actions constituted protected activity under SOX, or that Charter believed it to be protected activity,” said the opinion. “In sum,” Seybold didn’t demonstrate “that he actually blew the whistle,” it said. His allegations “paint a picture of an employee criticizing internal company policies, not of an employee highlighting potential illegal conduct by his employer,” it said.
Other than asserting that he complained about four areas of Charter’s business, Seybold’s pleadings “fail to show that he alerted Charter of his belief that its actions were unlawful -- not merely ‘improper’ or subject to ‘opposition’ from an employee, but actually unlawful,” said the opinion. Because Seybold didn’t demonstrate “that he engaged in protected activity, or that Charter believed Seybold was engaging in the same, his SOX claim fails as a matter of law,” it said.