Michael Rhinehimer v. U.S. Bancorp Investments, Inc.
787 F.3d 797
| 6th Cir. | 2015Background
- Michael Rhinehimer, a certified financial planner and long‑time USBII advisor, learned while on disability leave that colleague Patrick Harrigan placed two trades in elderly client Norbert Purcell’s accounts that altered title and risk exposure and withdrew trust assets.
- Rhinehimer warned Harrigan (allegedly) not to trade for Purcell, learned of the trades via his assistant, complained to supervisors, and emailed supervising principal Susan Gattermeyer that the trades “destroyed his estate plan” and should never have been approved.
- After returning from leave, Rhinehimer received a written reprimand tied to the email, was threatened and placed on a performance‑improvement plan, and was later terminated; he sued under the Sarbanes–Oxley whistleblower provision, 18 U.S.C. § 1514A.
- A jury found Rhinehimer had an objectively reasonable belief that the trades constituted “unsuitability fraud,” that his email was a contributing factor in his termination, and awarded damages; the district court denied USBII’s Rule 50 motion.
- On appeal the sole legal issue was whether Rhinehimer engaged in protected activity under § 1514A (i.e., whether his belief that unlawful fraud occurred was objectively reasonable). The Sixth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rhinehimer engaged in §1514A protected activity (reasonable belief standard) | Rhinehimer reasonably believed Harrigan’s trades were unsuitable and constituted fraud given Purcell’s estate plan, advanced age, and the trades’ effects | USBII: plaintiff needed evidence supporting each legal element of securities/unsuitability fraud (misrepresentation/omission, scienter); must “definitively and specifically” approximate elements | Court rejected the rigid “definitively and specifically” rule and held the proper test is whether plaintiff subjectively believed and that belief was objectively reasonable in light of his training and the facts known to him; jury verdict upheld |
| Proper legal standard for assessing objective reasonableness | Use a totality‑of‑circumstances test considering employee’s training/experience; no need to prove elements of underlying fraud | Apply Platone/Day/Riddle approach requiring complaint to approximate basic elements of fraud | Adopted Sylvester/Nielsen/Weist approach: objective reasonableness is fact‑dependent; employee need only reasonably (even if mistakenly) believe a violation occurred |
| Deference to ARB interpretations of §1514A | ARB’s Sylvester persuasive under Skidmore; its rejection of the Platone test should guide courts | (Implicit) ARB rulings not necessarily controlling; earlier cases applied Platone with Chevron deference | Court applies Skidmore deference and finds Sylvester persuasive, declining to apply Platone’s heightened rule |
| Application of standard to facts | Rhinehimer’s knowledge of Purcell’s estate plan, diminished capacity, prior warning to Harrigan, and the trades’ effects made belief objectively reasonable | USBII argued gaps (no direct evidence of misrepresentations or scienter) undermine reasonableness | On the totality of circumstances and giving plaintiff all reasonable inferences, reasonable minds could find Rhinehimer’s belief objectively reasonable; judgment affirmed |
Key Cases Cited
- Nielsen v. AECOM Tech. Corp., 762 F.3d 214 (2d Cir. 2014) (adopting Sylvester‑style reasonable belief standard and rejecting Platone rule)
- Weist v. Lynch, 710 F.3d 121 (3d Cir. 2013) (rejecting the “definitively and specifically” requirement and applying Sylvester approach)
- Van Asdale v. Int’l Game Tech., 577 F.3d 989 (9th Cir. 2009) (earlier opinion applying Platone/heightened specificity standard)
- Welch v. Chao, 536 F.3d 269 (4th Cir. 2008) (applied Platone framework to §1514A claims)
- Robert N. Clemens Trust v. Morgan Stanley DW, Inc., 485 F.3d 840 (6th Cir. 2007) (describing “unsuitability” in broker‑dealer liability context)
- Lawson v. FMR LLC, 134 S. Ct. 1158 (2014) (Supreme Court decision discussing ARB adjudicative role and §1514A interpretation)