A Look at the Concurring and Dissenting Opinions in the Supreme Court's Sarbanes-Oxley Whistleblower Decision

| Jason M. Knott

In yesterday's post, we covered the background of Tuesday's Supreme Court decision in Lawson v. FMR, LLC, and took an in-depth look at Justice Ginsburg's majority opinion.  Today, we look at what the other Justices had to say.

Justice Scalia, joined by Justice Thomas, signed on to Justice Ginsburg's opinion in principal part, but also authored his own opinion.  Justice Scalia and Justice Thomas subscribe to the position that a judge, in reading and interpreting a statute, should not examine what Congress said in places other than the statutory language, such as in committee reports and floor speeches.  Based on that judicial philosophy, Justice Scalia criticized Justice Ginsburg for her “occasional excursions beyond the interpretative terra firma of text and context, into the swamps of legislative history.” 

Further, Justice Scalia rejected Justice Ginsburg’s view that the Court might later be able to limit the application of 18 U.S.C. § 1514A (the Sarbanes-Oxley whistleblower retaliation provision).  Justice Ginsburg contemplated that the Court might bar some Sarbanes-Oxley claims by private employees, if the employees had only complained about fraudulent conduct that did not involve fraud against shareholders.  Thus, in the hypothetical situation where a gardener reported on mail fraud by his private employer, and that employer happened to be a contractor for a public company, the gardener might not have a claim.  Justice Scalia wrote that although limiting Sarbanes-Oxley's protections to complaints about fraud against shareholders "may be appealing from a policy standpoint, it has no basis whatsoever in the statute’s text.  So long as an employee works for one of the actors enumerated in § 1514A(a) and reports a covered form of fraud in a manner identified in § 1514(a)(1)–(2), the employee is protected from retaliation.”  Thus, Justice Scalia actually took the position that the statutory language at issue should be read even more broadly, and clearly allows whistleblowers to bring Sarbanes-Oxley lawsuits even if they have reported conduct that does not involve fraud against shareholders. 

The dissenters were an unusual group: Justice Sotomayor wrote the dissenting opinion, joined by Justices Kennedy and Alito.  She said that the Court had held that § 1514A “encompasses any household employee of the millions of people who work for a public company and any employee of the hundreds of thousands of private businesses that contract to perform work for a public company.”  Thus, a “babysitter” may now “bring a federal case against his employer—a parent who happens to work at the local Walmart (a public company)—if the parent stops employing the babysitter after he expresses concern that the parent’s teenage son may have participated in an Internet purchase fraud.”  Justice Sotomayor stated that the statutory language was in fact “deeply ambiguous,” and “[t]hree indicators of Congress’ intent clearly resolve this ambiguity in favor of a narrower interpretation of § 1514A: the statute’s headings, the statutory context, and the absurd results that follow from the majority’s interpretation.”  Among those absurd results: "a babysitter can bring a § 1514A retaliation suit against his employer if his employer is a checkout clerk for the local PetSmart (a public company), but not if she is a checkout clerk for the local Petco (a private company)."

It remains to be seen whether Fidelity’s parade of horribles, including lawsuits by nannies, gardeners, and other claims that have nothing to do with fraud against shareholders, will in fact ensue, and if so, whether the Department of Labor and the lower courts will accept Justice Scalia's view or take Justice Ginsburg's lead and limit those claims.  But for now, the Court has handed -- at minimum - a significant victory to employees of private contractors of public companies who complain about shareholder fraud, because it is now clear that those employees may bring claims under Sarbanes-Oxley's whistleblower retaliation provision.

Information provided on InsightZS should not be considered legal advice and expressed views are those of the authors alone. Readers should seek specific legal guidance before acting in any particular circumstance.

As the regulatory and business environments in which our clients operate grow increasingly complex, we identify and offer perspectives on significant legal developments affecting businesses, organizations, and individuals. Each post aims to address timely issues and trends by evaluating impactful decisions, sharing observations of key enforcement changes, or distilling best practices drawn from experience. InsightZS also features personal interest pieces about the impact of our legal work in our communities and about associate life at Zuckerman Spaeder.

Information provided on InsightZS should not be considered legal advice and expressed views are those of the authors alone. Readers should seek specific legal guidance before acting in any particular circumstance.