On February 8, 2024, the United States Supreme Court, in Murray v. UBS Securities, LLC, issued a decision that expands the ability of whistleblowers to seek anti-retaliation protections under federal whistleblower laws. Specifically, the Supreme Court reversed a Second Circuit decision in a Sarbanes-Oxley Act, Title 18 U. S. C. §1514A (SOX) whistleblower retaliation case, holding that “retaliatory intent/animus” is not required to establish an entitlement to relief.
Congress enacted SOX in the wake of the Enron Scandal to prohibit publicly traded companies from retaliating against employees who report what they reasonably believe to be instances of criminal fraud or securities law violations. Specifically, SOX provides that employers 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” protected whistleblowing activity. If an employer violates this provision, the employee can file a complaint with the Department of Labor seeking reinstatement, back pay, and compensation for any special damages sustain (which would include litigation costs, expert fees, and attorney’s fees). 18 U.S.C. §§1514A(b)(1)(A), (c). If there is no final decision from the Secretary of Labor within 180 days, the employee can file suit in federal court seeking the same relief. 18 U.S. C. §§1514A(b)(1)(B), (c). If the whistleblower does bring an action in federal court, Sarbanes-Oxley directs the court to apply the “legal burdens of proof set forth in section 42121(b) of title 49, United States Code”—a provision of the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR 21). This incorporated burden-shifting framework provides that the whistleblower bears the burden to prove that their protected activity “was a contributing factor in the unfavorable personnel action alleged in the complaint.” 49 U. S. C. §42121(b)(2)(B)(i). If the whistleblower makes that showing, the burden shifts to the employer to show “by clear and convincing evidence” that it “would have taken the same unfavorable personnel action in the absence of” the protected activity. 49 U.S.C. §42121(b)(2)(B)(ii).
In Murray, claimant worked as a research strategist in a role that required him to certify (consistent with applicable Securities and Exchange Commission regulation) that his reports to customers on the firm’s securities business were independently produced and reflected his own views. The company terminated him shortly after he informed his supervisor that he believed two of his colleagues were engaging in, what he “reasonably believed” to be, unethical and illegal efforts to skew his independent reporting. The claimant originally filed a whistleblower action with the DOL but when the agency did not issue a final decision on his complaint within 180 days, he initiated his “kick out” and filed an action in federal court. The claim went to a jury and the trial court instructed the jury that in order to prove his SOX claim, claimant needed to establish four elements:
1. that he engaged in whistleblowing activity protected by Sarbanes-Oxley;
2. that the employer knew that he engaged in the protected activity;
3. that he suffered an adverse employment action (i.e., was fired); and
4. that his “protected activity was a contributing factor in the termination of his employment.
As to the “contributing factor” element, the trial court further instructed the jury that for protected activity to be a contributing factor, it must have either alone or in combination with other factors tended to affect in any way the employer’s decision to terminate his employment. The jury found that the claimant met his burden and the employer failed to prove, by clear and convincing evidence, that it would have taken the same adverse employment action in the absence of the protected activity. In all, the jury awarded the claimant nearly $1,000,000 in damages. The trial court adopted the jury’s verdict and added an additional $1.769 million in attorney’s fees and costs to his recovery.
The employer appealed to the Second Circuit, which vacated the jury’s verdict and remanded the case to the trial court for a new trial. The court identified that the central question is whether SOX’s anti-retaliation provision requires a whistleblower to prove retaliatory intent, and, contrary to the trial court, it concluded that the answer was yes. The US Supreme Court disagreed with the Second Circuit and remanded the case holding that the word “discriminate” does not import a “retaliatory intent” requirement because requiring a whistleblower to prove his employer’s retaliatory animus would ignore the statute’s mandatory burden-shifting framework.
This case represents an important development regarding the statutory framework relating to whistleblower cases and the standards that employers must meet in order to successfully defend them in the future.
[View source.]
