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.
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.
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).
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.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) required every public company to disclose its incentive-based compensation and to adopt a policy to recover from current and former executives, in the event of a restatement, any such compensation that would not have been awarded under the restated financial statements. As a result of the Act, many public companies in America have adopted new compensation “clawback” policies, even though the SEC has yet to promulgate regulations as required by the statute and there is no effective date for implementing these requirements.
As we’ve previously discussed in a number of posts, the Dodd-Frank Act of 2010 created a bounty program to reward whistleblowers who report useful information to the Securities & Exchange Commission (SEC), and also instituted new legal protections for whistleblowers. The SEC’s Inspector General recently took a hard look at the SEC’s implementation of these reforms, and reported his conclusions in a 43-page audit report.
So how’s the SEC doing?
As of now, SEC whistleblowers have a one-in-3,001 chance of receiving a whistleblower award. That’s according to the latest annual report from the SEC’s Office of the Whistleblower, which was established to administer the whistleblower bounty program established by the Dodd-Frank Act of 2010.
We’ve previously covered the only award made to date under the whistleblower program – a $50,000 payout, nearly 30% of what the SEC recovered in that particular case. But what we didn’t know at the time was how many tips had actually been made to the SEC by potential whistleblowers.
As we’ve previously discussed, Section 922 changed whistleblower law in two important ways. First, it created a bounty program, under which qualified whistleblowers can receive payments from the SEC for submitting information about violations of the securities laws. In the first fourteen months of the program, the SEC has handed out the grand total of one award.
Second, Dodd-Frank enhanced the legal remedies for whistleblowers who are victims of retaliation, expanding the scope of prior protections found in the Sarbanes-Oxley Act of 2002 and creating new ones.
Employers, however, have identified a tension in Section 922 that they are seeking to use to defeat whistleblower retaliation claims.
The Dodd-Frank Act, passed in 2010, has been a hot issue on the campaign trail. One provision of Dodd-Frank that hasn’t gotten a lot of play, politically speaking, is Section 922 – the law’s whistleblower protection provision.
But in the federal courts, Dodd-Frank whistleblower law is heating up. We previously covered how a New York federal court allowed one such whistleblower’s claim to proceed. Now, the District of Connecticut brings us the case of Kramer v. Trans-Lux Corp.
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.)
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.