The Dodd-Frank and Sarbanes-Oxley whistleblower laws are hot topics right now. A split of authority is developing in the federal courts over how an employee can qualify as a whistleblower and bring a retaliation claim under Dodd-Frank. And the Supreme Court will hear argument next Tuesday in a case, Lawson v. FMR LLC, that will require it to decide whether private employers can be subject to Sarbanes-Oxley retaliation claims by their employees.
As we at Suits by Suits continue to watch these issues, we thought it would be helpful to step back for a broader view of these important whistleblower laws. In the table linked here, we have summarized the important facets of each law. This table will serve as a reference point for new developments, placing them in the broader context of these whistleblower protections.
A judge in the U.S. District Court for the Southern District of New York ruled Monday that the Dodd-Frank Act’s whistleblower protection provision does not protect an employee in China who was allegedly fired for raising concerns about corruption. Judge William H. Pauley III found “no indication” that Congress wanted Dodd-Frank’s anti-retaliation provision to apply extraterritorially, and as a result invoked the “strong presumption” against the international application of U.S. laws. Liu v. Siemens A.G., No. 13 Civ. 317 (WHP) (S.D.N.Y. Oct. 21, 2013).
The plaintiff in the case, Meng-Lin Liu, is a Taiwanese resident who worked as a compliance officer for Siemens China. Liu alleged that he was fired after giving a speech, attended by the Siemens China CEO, in which he claimed that Siemens would lose 30% of its business if it started following its compliance guidelines. Two months after his firing, Liu reported to the SEC that Siemens had violated the Foreign Corrupt Practices Act (FCPA). He then brought his suit for whistleblower retaliation, asserting that although Siemens is a German company, it has listed American depository receipts on the New York Stock Exchange.
The federal government is closed, but the Suits by Suits news continues to roll in:
Here at the Suits by Suits Global Operations Center, we’re a bit bummed that our beloved Washington Nationals Baseball Club has now exhausted any chance it ever had of making the playoffs, as have the almost-local Baltimore Orioles. All is not lost, however, because now we can turn our undivided focus to our Washington football team – the one with the name that is something of a point of dispute. The football season here will be exciting, even if it is off to a rough start.
Glum as our sporting life may be, it’s a worthwhile distraction from the possibility of a government shutdown, although perhaps not as fun as our other new Washington fad: debating the merits of green eggs and ham.
In any event, news of disputes between employers and executives – and news in related areas – continues to come in over our electronic transom. Here are the highlights:
Even in the pre-Labor Day lull, things still happen here at the Suits by Suits Global Operations Center in our Nation’s Capital. This week, we welcomed a new panda cub at the National Zoo, and celebrated the 50th anniversary of the famous March on Washington for Civil Rights, which remembered Martin Luther King Jr.’s historic “I Have A Dream” speech.
Things happened elsewhere in the broader world of disputes between executives, other employees and employers, too, including:
As we’ve covered here and here, the Supreme Court will decide this term whether a whistleblower can pursue a Sarbanes-Oxley claim for retaliation by a privately-owned employer. Jackie Lawson and Jonathan Zang, former employees of Fidelity investment advisory companies, say yes. The First Circuit said no.
Lawson and Zang have now filed their opening brief in their attempt to persuade the Supreme Court to disagree with the First Circuit and reinstate their claim. And they have even included a non-gratuitous George Clooney reference. (Hat tip to scotusblog.com for making this and numerous other Supreme Court resources available.)
Lawson and Zang’s argument involves the interpretation of 18 U.S.C. § 1514A, the provision of Sarbanes-Oxley that allows whistleblower claims. They argue that the plain language of Section 1514A applies to protect not only employees of publicly-traded companies and mutual funds, but also employees of contractors of those companies, such as the Fidelity investment advisers at issue in their case. The statute bars contractors from retaliating against an “employee”: Lawson and Zang contend that this should be read to refer to those contractors’ “own employees,” in addition to the employees of public companies with whom the contractors work. Br. at 15. They argue that it wouldn’t make any sense to only prohibit retaliation by contractors against others’ employees, since it would be very difficult, if not impossible, for a contractor to terminate someone else’s employee. Br. at 22.
Yes, yes, we’ve asked you before to nominate us to the you-know-what, but we swear this is the very last time because nominations for that prestigious list close today. We only ask because for lawyers who blog, this list is like the Academy Awards, and the Emmys, and the Grammies, and the Country Music Awards, all rolled into one. And at Suits by Suits we are, in fact, ready for our close-up, Mr. DeMille (take the afternoon off if you know what movie that’s from). Thanks if you’ve already nominated us.
We’re not all about awards around here, though. We’re hard at work. While the streets around our Suits by Suits Global Headquarters are notoriously quiet while most folks are at the beach and Congress has left town, we’ve been scouring the planet looking for interesting stories to bring to your attention. We have much to do – the CEO of Amazon is not yet paying $250 million for our work, unlike the venerable blog-printed-on-dead-tree just up the street. Perhaps it’s because they have horoscopes and we don’t.
In any event, here are some more items to add to that stack of must-read beach books:
In federal courts across the country, employers have sought to limit the Dodd-Frank Act’s definition of “whistleblower.” Just last week, this challenge seemed futile. Both the SEC (in its regulations) and a number of federal district courts had rejected employers’ reading of the statute, under which the “whistleblower” term – and the accompanying right of action for retaliation – would be limited to those employees who reported misconduct to the SEC.
Last Wednesday, the Fifth Circuit flipped the script, holding that “the plain language of the Dodd-Frank whistleblower-protection provision creates a private cause of action only for individuals who provide information relating to a violation of the securities laws to the SEC.” Asadi v. GE Energy (USA), L.L.C., No. 12-20522 (5th Cir. Jul. 17, 2013), slip op. at 5.
Here in the Baltimore-Washington area, we’re trapped under a dome - a heat dome. Like the inside of my car on these 100-degree days, disputes involving executives are also heating up, as the latest in Suits by Suits news shows:
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).
You’re gonna be interested in this week’s Suits by Suits news – I guarantee it:
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.
Yesterday, the Supreme Court announced that it will hear the case of Jackie Hosang Lawson and Jonathan Zang, two former Fidelity employees who seek to reverse the dismissal of their Sarbanes-Oxley whistleblower claims. In this post last week on Suits by Suits, we outlined Lawson and Zang’s petition to the Court and described the long odds that petitioners face when they ask the Supreme Court to review their cases. The U.S. government also didn’t do Lawson and Zang any favors when it told the Court that it shouldn’t take their case. Now that Lawson and Zang have bucked the odds, they might be feeling like they bought that lucky PowerBall ticket.
The Court has outlined the question presented by Lawson and Zang’s case as follows:
Section 806 of the Sarbanes-Oxley Act, 18 U.S.C. § 1514A, forbids a publicly traded company, a mutual fund, or “any ... contractor [or] subcontractor ... of such company [to] ... discriminate against an employee in the terms and conditions of employment because of” certain protected activity. (Emphasis added). The First Circuit held that under section 1514A such contractors and subcontractors, if privately-held, may retaliate against their own employees, and are prohibited only from retaliating against employees of the public companies with which they work.
. . .
Is an employee of a privately-held contractor or subcontractor of a public company protected from retaliation by section 1514A?
To prevail, Lawson and Zang must convince the Court that the answer is yes.
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.
As you probably know, we here at Suits by Suits have been fascinated by the strange case of Kirby Martensen, the former Oxbow Group executive who alleged that he was kidnapped and falsely imprisoned by billionaire William Koch. We teased for you last week that Koch’s motion to dismiss, to strike, and in the alternative to transfer venue of the case from California to Colorado was denied, and the case will proceed.
Now, we’ve gotten our hands on the judge’s decision and had a chance to review it in depth; particularly if you’re a civ pro geek like me, it’s worth a read. Even if you’re not, the decision helps any potential litigant -- and really, isn’t that all of us? -- understand where we can expect to sue or be sued. Read on....
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.
April showers bring May flowers, which, as the old joke goes, usually bring these. At Suits by Suits, however, April brought a mix of interesting stories involving non-compete agreements, the mechanics of employment contracts, and all sorts of other topics:
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.
Who doesn’t like all-expense-paid trips to the Atlantis Resort, the Venetian Hotel, or the Wintergreen Resort? A recent decision from a federal court of appeals gives us the answer: Jeffrey Wiest, an accountant for Tyco Electronics Corporation.
In Wiest v. Lynch, the Third Circuit tackled Wiest’s whistleblower claim, brought after he refused to approve corporate expenditures for conferences at luxurious lodgings.
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.
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.