As we’ve previously covered here and here on Suits by Suits, a battle is raging in the federal courts over whether the new whistleblower protections in the Dodd-Frank Act of 2010 apply only to individuals who report misconduct to the SEC. But the fight, to this point, is as one-sided as Pickett’s Charge.
In a May 2013 decision, Judge Jesse Furman of the U.S. District Court for the Southern District of New York joined four other judges who have accepted employees’ expansive reading of the Act. Murray v. UBS Securities, LLC, No. 12-cv-5914 (May 21, 2013).
2013 has been a banner year for followers of the Sarbanes-Oxley whistleblower protection provision, 18 U.S.C. § 1514A. As we’ve previously discussed on Suits by Suits, the Supreme Court will decide in its next term whether Sarbanes-Oxley protects employees of privately-owned corporations, in Lawson v. FMR, LLC. The Third Circuit also recently held, in Wiest v. Lynch, that an employee does not have to allege that he “definitively and specifically” reported a known legal violation in order to state a Sarbanes-Oxley claim.
Most recently, on Tuesday, the Tenth Circuit held that an employee is protected under Sarbanes-Oxley for reporting misconduct even when the misconduct does not involve a fraud against shareholders (Lockheed Martin Corp. v. Administrative Review Board, Department of Labor).
The facts of Lockheed involve tawdry letters, military affairs, and humiliation in the workplace.
Only a handful of employment cases make it all the way to the Supreme Court’s august chambers at One First Street. That’s largely because the Court has discretion whether or not to review cases decided by lower courts of appeals. Thousands of unhappy litigants file petitions for writ of certiorari every year, asking for review from the highest court in the land. Almost all are turned away.
Tomorrow, the Court will consider whether to accept an appeal by Jonathan Zang and Jackie Lawson in a case that has significant implications for the Sarbanes-Oxley whistleblower protection provision, 18 U.S.C. § 1514A. Section 1514A, which was passed as a response to the Enron and other financial scandals of the early 2000s, prohibits public companies, as well as “any other officer, employee, contractor, subcontractor, or agent of such company,” from retaliating against “an employee” for protected activity. The issue in Zang and Lawson’s case is whether Section 1514A protects employees of privately-held companies, if those companies are working as contractors for public companies.
In the first part of this series, we raised the question of whether a public employee’s rights under the First Amendment to the Constitution – primarily the right to speak freely on public issues – is limited by the fact that she works for the government. It’s the curious mix of the Constitutional rights we all enjoy, and the duty of the government to act as an employer when it hires and manages people to get things done. We looked briefly at how the Supreme Court addressed this issue: in short summary, public employees keep their rights to free speech on issues of public concern – but when they are speaking as part of their official duties, or their speech creates a disruptive atmosphere for the government agency, the employee can be fired for speaking out.
Two recent cases dealing with deputy attorneys-general illustrate this difficult intersection between public employment and speech. In both cases, the attorneys – a breed not known for silence – lost their jobs for speech: one for speaking out, and the other for refusing to speak when she was told to do so. Let’s see how their cases against their public employers are faring.
Some days when I look over the possible stories here, they’re filled with disputes between attorneys. It almost makes me think that my fellow editors at Suits-by-Suits and me are the only attorneys that can get along. Most of the time, at least.
Because if you are, or have ever dealt with, Attornicus Americanus, then you know two things about our profession: 1) we don’t like to be told to be quiet when we have something important to say; and 2) even worse, though, is telling us we have to say something that we don’t want to say. The two cases at issue in this two-part series feature lawyers working for the government who were in just those situations, and were fired. We look at recent interesting developments in their claims for retaliation. In passing, too, we’ll note what one of these lawyers was fired for saying, and what the other lawyer was fired for refusing to say.
All in all, these are posts about whistleblowing and retaliation claims by public employees – and not just attorneys, either. The public nature of the employment here is important because government employees keep some of their First Amendment rights to free speech when they go to work for the government. The government employer, for its part, has some limited right to limit its employees’ speech in order to get its mission accomplished. So before we turn to the two cases, a brief tour through the First Amendment rights of public employees is in order.
Late last week, Rutgers announced that it reached a $475,000 settlement with former men’s basketball coach Mike Rice and that no cause for Rice’s termination would be provided. Recently-publicized videotapes show Rice at practices hitting, kicking and throwing basketballs at his players and taunting them with obscenities and anti-gay slurs (not to be confused with this shocking video of Middle Delaware State women’s basketball coach Sheila Kelly throwing toasters at her players). The announcement came more than two weeks after Rutgers President Robert Barchi told reporters that Rice was fired, but not for cause. And that announcement came several months after Rice was suspended from work for three days, following an internal investigation by outside counsel, resulting in this report.
Earlier this month, we blogged about an important decision by the U.S. Court of Appeals for the Second Circuit in Bechtel v. Administrative Review Board, a Sarbanes-Oxley whistleblower case. In Bechtel, thecourt upheld the Department of Labor’s denial of a whistleblower claim, even though it found that the administrative law judge (“ALJ”) had applied the wrong legal standard.
So how did the ALJ get the law wrong?
To understand the ALJ’s error, it’s important to understand how the governing law defines the burden of proof in a Sarbanes-Oxley case.
Based on the statistics, it is nearly impossible to win a whistleblower claim brought under the Sarbanes-Oxley Act. In 2010, the Center for Public Integrity wrote that the U.S. Department of Labor, which administers those claims, had only upheld 25 out of the 1,091 claims brought since the Act was passed in 2002. That’s only a 2% success rate.
Although Scott Bechtel’s case took a longer path than most, it is now another statistic on the side of failure.
In Latin, it’s “Finis Coronat Opus”: the finish crowns the work. It’s a reminder that when you’re leaving a job, it’s important to exit with the same grace, charm, and respect for your colleagues and the business’s stakeholders that helped get you the job in the first place.
You can also talk about Battletoads, which Groupon’s CEO Andrew Mason did in a memo he sent to the company’s employees last Friday, shortly after he was fired by Groupon’s board.
You should, however, be careful what you say.
This week in suits by suits:
Dig down and find the employee handbook that’s likely buried in there. There’s a good chance you got this on your first day of work, put in in the drawer, and haven’t looked at it since. But move those ketchup packets aside and pull it out, because the question for today is: does that book form a contract between you and your employer (or you and your employees, if you’re the owner of the business)?
This week, our search for intriguing precedent has taken us all the way to the County of Lewis and Clark, Montana, and the case of Shannon Marsden.
Marsden, an employee of Blue Cross Blue Shield Montana (“BCBSMT”), had an employment agreement with a clause that required arbitration of any dispute arising under it. The agreement was for a two-year term, but provided that Marsden could be fired if the president of the company “believed that it would be in the best interest of BCBSMT.”
After BCBSMT terminated Marsden’s employment, she brought a claim under Montana’s Wrongful Discharge from Employment Act (“WDEA”), alleging that she was fired because she reported illegal rebates of insurance commissions.
However, Marsden’s claim came with a catch.
NLRB Holds Facebook Kvetching Among Co-Workers Is Protected “Concerted Activity,” But Caution Is Reasonable As Social Media Meets Established Legal Framework
Let’s be clear: this is not a blog about social media. It’s a blog focused on disputes between executives and the companies they work for and manage. Through that prism, we look at many different issues that affect these employment relationships, including pregnancy, politics, sports teams and even – ahem – insurance.
We’ve also written a lot recently about social media -- specifically the impact of Facebook, Twitter, LinkedIn and their kin on employee-employer relations. Social media are rather quickly changing many of the dynamics of how employees and companies interact, and the law is rapidly trying to catch up. That means there’s a fast flow of new developments in this area.
It’s important to write so much about this, we think, to be true to our core purpose of trying to keep you current on these developments. So at the risk of appearing to dominate our pages with references to Facebook, today we’ll introduce you to a new and unique wrinkle to come out of the intersection of the employment world and social media: a limited protection against being fired for workers who use their social media accounts to kvetch together about their jobs or their employers. Readers, meet the recent decision by the National Labor Relations Board in Hispanics United of Buffalo, Inc. and Carla Ortiz.
Some companies have concluded that having a social media policy in place is enough to avoid problems with Facebook, Twitter, Instagram, and whatever other means to communicate have come down the pike. But to work, a social media policy needs to meet at least two other conditions.
First, a social media policy has to be clear. Second, it also has to be communicated to, and clearly understood by, the company’s employees.
It may need more than that. But at a minimum, if the policy doesn’t have those two operating elements, then enforcing it can do a company and its managers more harm than good – at least when it comes to their reputations. That, at least, appears to be the lesson we can learn from the case of Rhonda Lee, a Shreveport, Louisiana TV meteorologist.
On Thursday, a 4-3 majority of the Virginia Supreme Court held in VanBuren v. Grubb that individuals such as supervisors or managers could be sued as individuals and held personally liable for the common law tort of wrongful termination (also known as wrongful discharge) in addition to whatever corporate liability the employer may have.
As a practical matter, this gives plaintiffs and their lawyers additional leverage when bringing suits that contain a cause of action for wrongful termination in Virginia by being able to name the former employee’s boss as a co-defendant. From the boss's perspective, this decision means that you, personally, could be named as a defendant and ultimately forced to satisfy a judgment for improperly firing an employee from your own pockets -- not just your company's. It also means that employers and their executives who operate in Virginia need to review their D&O insurance coverage with this potential exposure in mind.
In short: whether you're an executive or an employer, you need to know about this case and its implications on the employment relationship.
Just to reaffirm what My Esteemed Colleague from Baltimore has already said (twice): we are still not a political blog. We look at employment disputes, with a real focus on those involving a contract between an employer and an executive. We keep our political views to ourselves (or at least out of the blog).
But the problem is that many folks don’t keep their political views to themselves, either in or out of the workplace. And that means disputes between companies and executives about political speech – whether it’s companies encouraging employees to vote for a certain candidate, or employees getting fired for their political views – are dominating the field of employment disputes between companies and high-level employees right about now. Maybe it’s because we’re less than three weeks from the election. Maybe it’s pent-up tensions in the workplace caused by economic stress.
We don’t know why. But we do know that here in Washington, coverage of a dispute between Gallaudet University and one of its executives, centered on the executive’s signature on a petition, has dominated the news. Given that there is no more coverage of the Washington Nationals this season, the story is being followed avidly. It draws into sharp relief an issue that comes up often this time of year: can you be fired for your political views?
For a baseball player, batting .100 won’t get you into the Hall of Fame. But for Rosanne Ott, a former Black Hawk helicopter pilot turned portfolio manager, batting .100 kept her case alive. See Ott v. Fred Alger Mgmt., Inc., No. 11 Civ. 4418 (LAP) (S.D.N.Y. Sept. 27, 2012).
Ott sued her former employer Fred Alger Management (“Alger”), associated companies, and Alger’s CEO/CIO for alleged violations of the Investment Advisors Act, breach of contract, and the Dodd-Frank Act’s whistleblower provisions. She also filed a derivative claim against the CEO/CIO on behalf of Alger’s shareholders for breach of fiduciary duty. In her 10-count, 65-page amended complaint, Ott alleged that Alger had adopted a trading policy for her fund (the Health Sciences Fund) that allowed other Alger funds to make better trades at her fund’s expense.
Alger and the other defendants moved to dismiss. For four counts, Ott didn’t respond, and for five others, the district court decided that she had not adequately alleged supporting facts. That left only her whistleblower claim, based on the anti-retaliation provision of the Dodd-Frank Act, 15 U.S.C. § 78u-6(h)(1)(A)(i). (Say that cite three times fast.)
News in suits by suits for you to ponder once you’ve tired of reading about replacement refs and bacon:
This isn’t a political blog; although the lawyers here at Suits by Suits certainly have political opinions (and often strong ones at that!), we’re more of a roll-up-your-sleeves-and-get-things-done bunch. We want to help high-level employees and their employers be aware of the potential pitfalls that exist in the workplace and to rely on our experience as litigators when something does go wrong.
But sometimes those pitfalls are red or blue; sometimes employers (Chick-Fil-A, anyone?), or high-profile employees get into trouble precisely because they’ve made their political opinions public.
Eleven years ago today – and one day after the 9/11 attacks on the World Trade Center and the Pentagon – then-University of Colorado Professor Ward Churchill published an essay entitled “Some People Push Back: On the Justice of Roosting Chickens.”
Through some strange circumstances (which we discuss below), that 9/12 essay sparked controversy nearly three and a half years later, after which, Prof. Churchill alleges, he was wrongfully terminated by the University of Colorado in retaliation for the opinions he expressed. Although he won at trial, the jury verdict was set aside by the trial court judge on a motion for judgment as a matter of law; on Monday, that ruling was upheld by the Colorado Supreme Court. Professor Churchill has vowed to appeal to the U.S. Supreme Court. If and when he does – and if the Supreme Court grants certiorari – we’ll continue to cover this case.
Although Professor Churchill’s 9/12 article is unusual, we know that individuals – whether speaking for themselves or on behalf of their employer – are going to speak out on the issues that matter most to them, particularly in an election year, just as Professor Churchill did on the day after 9/11. Is there anything we can learn from those 9/12ers?
This week's latest in Suits by Suits:
We cover a broad range of issues that arise in employment disputes. Occasionally, we also spotlight other topics of relevant legal interest, ranging from health care to white-collar defense to sports, just to keep things interesting.
Led by Jason Knott and Andrew Goldfarb, and featuring attorneys with deep knowledge and expertise in their fields, Suits by Suits seeks to engage its readers on these relevant and often complicated topics. Comments and special requests are welcome and invited. Before reading, please view the disclaimer.