In the following guest post, Gregory A. Markel, Christopher F. Robertson, and David J. Winkler of the Seyfarth Shaw law firm take a look at the Second Circuit’s August 5, 2022 decision in Murray v. UBS Securities LLC. As the authors discuss, the Second Circuit’s ruling creates a split within the federal judicial circuits on the question of whether or not a SOX whistleblower retaliation claimant must prove retaliatory intent in order to prevail. I would like to thank the authors for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.
In a decision with potentially wide-ranging implications for federal whistleblower protection law, the Second Circuit has held that plaintiffs who allege they were punished by their employers for whistleblowing activity, and who then file suit under the Sarbanes-Oxley Act, must now put forward specific proof of the employer’s “retaliatory intent” to prevail. In addition to raising the bar for such lawsuits, the court’s August 5, 2022 decision in Murray v. UBS Securities LLC et al. also creates a clear circuit split, pitting the Second Circuit against two other federal circuits that have specifically held retaliatory intent not to be an element of Sarbanes-Oxley whistleblower claims.
Under Sarbanes-Oxley’s antiretaliation provision, a publicly-traded company may not “discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of” the employee’s participation in either an investigation or a formal proceeding regarding alleged violations by the company of certain securities and antifraud laws. 18 U.S.C. § 1514A(a). An employee who feels he or she has faced such retaliation may, after first seeking redress from the Department of Labor, sue the employer in federal court. Id. §§ 1514(b)-(c).
Trevor Murray was one such employee. Hired in 2011 as a strategist in UBS’s commercial mortgage-backed securities (“CMBS”) business, Murray’s job was to research and report on CMBS products for current and potential clients. He was also required by federal regulation to certify that the views expressed in the reports accurately reflected his own, and were not tied to his compensation. Yet Murray was pressured, he would later allege, by two senior employees at the CMBS desk to skew his research and reports in favor of their business strategies. After he complained about this pressure to his direct superior, he was excluded from routine meetings and ultimately terminated. For its part, UBS claimed that Murray was laid off as part of a strategic reorganization prompted by the company’s financial difficulties.
Murray took UBS to court, and eventually before a jury, on a Sarbanes-Oxley antiretaliation claim. The court instructed the jury that to find for Murray, it must find (among other things) that his whistleblowing activity was a “contributing factor” in his termination, which meant that the protected activity “must have either alone or in combination with other factors tended to affect in any way UBS’s decision to terminate [his] employment.” The jury instruction also clarified that Murray was “not required to prove that his protected activity was the primary motivating factor in his termination, or that UBS’s articulated reasons for his termination … was a pretext.” With these instructions in mind, the jury awarded Murray $903,300 in damages and approximately $1.76 million in attorney’s fees.
On appeal, the Second Circuit vacated the verdict and remanded for a new trial because the district court had failed to instruct the jury that the “contributing factor” element required Murray to show that UBS had “retaliatory intent” in terminating his employment. Such a finding is necessary to sustain any Section 1514A antiretaliation claim, the panel held, according to the Second Circuit for two reasons. First, the statute’s text—which contemplates an employee being fired “because of” whistleblowing activity—inherently implies an intention to retaliate, whereas the district court’s language of “tended to affect [the decision] in any way” is broad enough to include scenarios that lack any retaliatory animus at all (and could even extend to “a scenario in which, by virtue of his whistleblowing activity, Murray was insulated from a termination to which he would otherwise have been subjected sooner”). Second, the panel stated, “The unambiguous, ordinary meaning of section 1514A’s statutory language, along with our identical interpretation of the FRSA antiretaliation provision, thus compel the conclusion that a SOX antiretaliation claim requires a showing that the employer took the adverse employment action against the whistleblower-employee with retaliatory intent”. However, the Second Circuit in describing the standard said retaliation intent need not be the sole factor in taking action against the employee. For these reasons, and because the district court’s instruction had left it unclear whether the jury had believed UBS in fact acted with retaliatory intent, the Second Circuit held that the error was not a harmless one and compelled reversal.
The effects of Murray could be dramatic. For one, the Second Circuit’s holding that Section 1514A claims require proof of retaliatory intent cuts directly against the holdings of Courts of Appeals in at least two other circuits—a fact which, somewhat unusually, the Murray panel openly acknowledged—and circuit splits like this tend to create significant outcome disparities between jurisdictions which can take the form of en banc review and/or a grant of certiorari by the United States Supreme Court.
Moreover, from the individual litigant perspective, the Second Circuit has seriously raised the threshold for Sarbanes-Oxley whistleblower plaintiffs. Before last week, and still in at least two other circuits, the adjudication of Section 1514A claims depended squarely on a burden-shifting mechanism: after a plaintiff showed that his or her protected activity contributed in some way to an adverse employment action, he or she would likely win the case unless the employer could “present clear and convincing evidence that it had a nondiscriminatory justification” for taking the action it took. Bechtel v. Admin. Rev. Bd., U.S. Dep’t of Lab., 710 F.3d 443, 448 (2d Cir. 2013). After Murray, in the Second Circuit, the onus is now on the plaintiff to also produce some evidence of the employer’s subjective intent to retaliate, and although the burden will still shift to the employer if the plaintiff can do so, a potentially significant number of cases will likely not be able to make it that far.
Finally, Murray could have an impact on laws other than Sarbanes-Oxley. As U.S. Representative Jackie Speier pointed out in an amicus curiae brief, there are approximately two dozen other whistleblower-protection statutes that use burden-shifting mechanisms akin to Section 1514A’s, and the Second Circuit’s recalibration of the standard in Murray could be cited by other courts to bring about similar changes in those laws as well.
Quote in Bloomberg
In a September 12, 2022 Bloomberg column, one of the authors of this article is quoted as saying as to his personal opinion on the Second Circuit ruling:
“Greg Markel, a partner at Seyfarth Shaw LLP who has defended companies against whistleblower claims, thinks the appeals court was right to call for a retrial. It is arguable, he said, that the district court had too broad a definition of what might violate whistleblower protections. On the other hand, Markel said the appeals court may have set too high a standard for these types of claim,” in reference to the Second Circuit’s finding of plaintiff’s need to show retaliatory intent to state a claim.
Bloomberg columnist Lydia Wheeler, responded in her excellent September 12 column, “If the district court’s standards are too low and the appellate court’s standard is too high, maybe a sort of Goldilocks test would be just right. But a midpoint may not be what Congress intended.”