The U.S. Supreme Court has agreed to take up a case that will address the question of whether or not a claimant alleging that his employer fired him in retaliation for whistleblowing must prove that the employer acted with retaliatory intent. The court’s consideration of the case has important implications for claimants under the Sarbanes-Oxley Act’s anti-retaliation provisions, because claimants could face significantly greater difficulty in establishing their claims if they must prove that the employer acted with subjective intent to retaliate. The case could also have important implications for retaliation claims under other federal whistleblower protection laws. The Court’s May 1, 2023, order agreeing to take up the case can be found here.
Trevor Murray was research analyst for UBS Securities LLC. He researched and wrote reports about Commercial Mortgage-Backed Securities. He claimed that he was pressured by colleagues to shape his reports to confirm to colleagues’ trading strategies. He complained to his supervisor about the pressure. After he complained, he found that he was left out of meetings. In February 2012, UBS terminated Murray.
In 2014, Murray sued UBS under Section 1514A of the Sarbanes-Oxley Act, alleging that his termination was in retaliation for whistleblowing. Section 1514A provides that no covered employer “may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee … because of whistleblowing.” UBS contended that it terminated Murray because of a shift in strategy prompted by the firm’s financial difficulties in the wake of the global financial crisis.
The case was tried before a jury. The court instructed the jury that in order to reach a verdict in favor of Murray, the jury needed to conclude that his whistleblowing activity was a “contributing factor” in his termination. The jury returned a verdict in Murray’s favor and the court ultimately entered judgment for Murray in the amount of over $2.6 million in attorneys’ fees, back pay, and non-economic damages. UBS appealed.
In an August 3, 2022, opinion written by Judge Michael Park for a unanimous three judge panel, the Second Circuit held that the trial court had erred in failing to instruct the jury that in order to establish his claim, Murray had to show that the employer took the adverse action with retaliatory intent. The appellate court vacated the jury’s verdict and remanded the case to the district court for a new trial.
In reaching its decision, the appellate court said that “the unambiguous, ordinary meaning of section 1514A’s statutory language requires retaliatory intent.” The court focused on the meaning of the words “discriminate” and “because of” in the statute – the statute’s requirement that the claimant must show that the adverse action was taken “because of” the whistleblowing activity inherently implied an intention to retaliate. The appellate court also relied on its recent holding in a case involving similar anti-retaliation provisions in the Federal Railroad Safety Act, in which the Second Circuit had held that a retaliation claim under that statute required “some evidence of retaliatory intent.”
The Cert Petition
In January 2023, Murray filed a petition to the U.S. Supreme Court for a writ of certiorari. In his petition, Murray urged the court to take up the question whether, under SOX’s whistleblower anti-retaliation provisions, a whistleblower alleging that he was retaliated against must show that his employer acted with “retaliatory intent.” In support of his petition, Murray argued that the Second Circuit’s decision was contrary to the statutory framework of SOX’s anti-retaliation provisions, which, he argued, required a retaliation claimant to show only that retaliation was only a “contributing factor” in the job action, and that the question of absence of retaliatory intent merely was an affirmative defense that the defendant must prove.
Murray also argued that the Second Circuit’s holding requiring a showing of retaliatory intent was contrary to the holdings of four other circuit courts, none of which, he argued, had required the retaliation claimant to prove the employer’s motivation. He also argued that the Second Circuit’s holding, if sustained, would undermine the remedial purposes of the anti-retaliation provisions, because whistleblower suits “cannot serve their intended deterrent purposes” if retaliation claims are too difficult to prove. Finally, Murray also argued that resolving the circuit split would benefit at least ten other whistleblower statutes that protect workers in a variety of industries.
In opposing the petition, UBS argued that Murray had substantially overstated the extent of the circuit split on the question of whether or not proof of retaliatory intent is required. In addition, UBS argued, the Second Circuit had correctly ruled that proof of retaliatory intent is an unambiguous requirement of the SOX anti-retaliation framework.
Senators Grassley and Wyden, in conjunction with the Public Accountability Project, submitted an amicus brief in support of Murray’s petition, urging the court to take up the case to resolve the circuit split and also arguing that the Second Circuit’s holding was contrary to the statutory requirements and had important implications for other federal whistleblower protection laws. Public Citizen also filed an amicus brief, stating that “the Second Circuit’s decision in this case, which imposes on plaintiffs alleging unlawful whistleblower retaliation the burden of proving retaliatory motive, is contrary to both the text and purpose of SOX and significantly weakens the statute’s protections of workers and the public,” and could have an adverse impact on the implementation on anti-retaliation provisions of a number of federal whistleblower statutes.
As a result of granting Murray’s cert petition, the Court will now take up the question of whether or not the SOX whistleblower anti-retaliation provisions require a whistleblower to show that his employer acted with retaliatory intent. The outcome of the case could have a significant impact on other prospective SOX whistleblower retaliation claimants. The Second Circuit’s requirement of a showing of retaliatory intent “significantly raised the threshold for Sarbanes-Oxley whistleblower plaintiffs,” as the Seyfarth Shaw law firm put it in a memo published just after the Second Circuit issued its opinion. As the memo also noted, “a potentially significant number of cases will not meet the requirement” for the claimant to show retaliatory intent.
Moreover, this case not only has important implications for SOX whistleblowers; a number of other federal statutory provisions have anti-retaliation provisions that operate similarly to the provisions in SOX. As Senators Grassley and Widen put it in their amicus brief, at least 17 other federal statutes have “virtually identical whistleblower protection” provision, and so the Second Circuit’s holding, if not addressed, could significantly affect the level of protection available under a variety of whistleblower statutes.
The Supreme Court will hear argument on the case in the fall and it will likely issue its ruling in the case in early 2024. The case will be interesting to watch as it could significantly affect the difficulty for whistleblower plaintiffs to establish claims that they were retaliated against for the whistleblower activities.
Largest Ever SEC Whistleblower Award: Speaking of whistleblowers, it should be noted that last week the SEC made the largest-ever whistleblower award. As reflected in the agency’s May 5, 2023 press release (here), the SEC awarded a single whistleblower $279 million, saying that the whistleblower’s information and assistance “led to the successful enforcement of SEC and related actions.”
The press release also specifically stated that the award is “the highest in our program’s history.” Gurbir Grewal, the SEC Enforcement Division director stated with reference to the award that “there is a significant incentive for whistleblowers to come forward with accurate information about potential securities law violations.” The press release also quoted the head of the SEC’s Office of the Whistleblower as saying that, in this case, the whistleblower’s sustained assistance including multiple interviews and written submissions was critical to the success of these actions.
The SEC Whistleblower program was created by the Dodd-Frank Act. Whistleblowers who provide information that leads to an SEC enforcement action can be eligible for awards ranging from 10 to 30 percent of the money collected when the sanctions exceed $1 million. Under the Dodd Frank Act, the SEC protects the name of the whistleblower as well as the matter to which the whistleblower’s report related.
A list of the ten largest SEC whistleblower awards can be found here. The $279 million award is more than double the size of the previously largest award, an award of $114 million in 2020.
The Director of Enforcement is correct, a $279 million award is going to capture the imagination of many would-be whistleblowers.