Show posts for: Whistleblowers

  • 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.  

     

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  • 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.

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  • The Inbox

    | Jason M. Knott

    The federal government is closed, but the Suits by Suits news continues to roll in:

    • Johnson & Johnson shareholders are amending their derivative suit against the company and its directors, alleging that the company didn’t act properly when it decided that the lawsuit was not in J&J’s best interest.  According to Joshua Alston of Law360 (subscription required), the shareholders argue that an investigation conducted by K&L Gates was a whitewash and that former CEO Bill Weldon shouldn’t have been paid $175 million over a six-year period.  On the bright side, Weldon may have had a better tenure than the similarly well-compensated Alex Rodriguez.
    • In more J&J news, subsidiary DePuy Synthes sued three of its former sales reps and their new company, Globus Medical, Inc., for allegedly violating noncompete agreements.  Brad Perriello of Mass Device described the allegations, which accuse Globus of recruiting the reps “in an effort to rapidly build its own business . . . by appropriating and capitalizing on the goodwill, customer relationships, and confidential information that DePuy Synthes necessarily entrusts to its sales employees.” 
    • It’s not hard to translate how Rosetta Stone wants this forum dispute to come out.  Carolina Bolado of Law360 (again, subscription required) reports that competitor Open English sued the company, along with several new hires, in Florida for allegedly breaching noncompete agreements.  Rosetta filed a lawsuit in the employees’ home state of California seeking a declaration that the agreements weren’t violated, and has now asked the Florida judge to dismiss in favor of that lawsuit.  Open English, meanwhile, argues that it won the race to the courthouse and is entitled to take its legal talents to South Beach.
    • Big whistleblower news last week, as the SEC announced an award of $14 million to a whistleblower under its Dodd-Frank bounty program.  Further details were not forthcoming, as the law protects recipients of bounties from having their identities revealed.  Given all the press about miserable lottery winners, this could be a very good thing for them.
    • A Virginia sheriff’s deputy is suing his former boss, claiming that he was fired after he reported that another officer slapped an inmate at the county jail.  Rhonda Simmons of the Culpeper Star-Exponent writes that the deputy, who is pursuing a wrongful termination claim, was rehired after the sheriff who fired him was voted out of office.
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  • The Inbox, Transition to Football Edition

    | Zuckerman Spaeder Team

    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:

    • Here’s a story related to the Affordable Care Act that you may not have expected: a whistleblower suit arising out of the District of Columbia’s work to establish one of the exchanges called for by the new law.  This week, a federal judge in D.C. allowed Jennifer Campbell’s suit against the District to proceed.  Campbell, who seeks $5 million, alleges she was fired after she spoke out publicly about problems with a contract to set up the insurance exchange. 
    • We’ve written about former TV anchorman Larry Connors’ suit against his employer and the non-compete clauses at the heart of it.  But non-competes are apparently common in the radio business too: this interesting article looks at a few different ones being used in the Atlanta market. 
    • Not sure how well this translates (sorry), but language education company Rosetta Stone is trying to dismiss a Florida lawsuit brought against it by competitor Open English.  Open English alleges two employees violated non-compete clauses and stole trade secrets when they joined Rosetta Stone.   Shortly after Open English sued Rosetta Stone in Florida, Rosetta Stone filed its own case against Open English in California; Rosetta Stone argues that the Florida case should be thrown out to allow the California case to go forward.  The parties disagree over whether Florida or California law would apply to the dispute, as well – what’s Californian for “conflict of laws?”
    • Esteemed colleague P. Andrew Torrez wrote last year about this suit against Abercrombie & Fitch, alleging the clothing retailer violated Title VII by discriminating against employees who wore hijabs; now, the case is apparently settled for just over $70,000 – details here and here.   
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  • The Inbox, Panda-monium And Dreams Edition

    | Zuckerman Spaeder Team

    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:

    • The news anchor is still mad-as-h-e-double-hockey-sticks, and he’s not going to take it anymore:  We’ve covered the public and somewhat bitter dispute between TV newsman Larry Connors and his former employer KMOV-TV in St. Louis; now, Connors has sued the station for defamation.
    • J. Edgar Hoover, please call your office: An FBI special agent alleges the bureau retaliated against him after he reported that two colleagues had “allegedly engaged in sexual misconduct in addition to a ‘clear pattern of fraud, waste and abuse over a period of years.’” 
    • And another involving the FBI: Media giant Thomson Reuters is stridently rejecting a former employee’s argument that he was fired after he leaked information about alleged insider trading violations to the FBI.  The company’s motion to dismiss the suit also says the former employee doesn’t qualify as a whistleblower under Dodd-Frank.  Interesting fact about our modern trading exchanges: the case involves the disclosure of some economic data Thomson Reuters compiles to certain customers two seconds before others get it. 
    • Maybe he tried to steal that nasty Mucinex guy: A cough syrup manufacturer lost its bid to reinstate claims for breach of contract and unfair competition against a former employee when a New Jersey appellate court affirmed the lower court’s dismissal of them.  The court ruled that the confidentiality provision in the manufacturer’s employment agreement was too broad to be enforceable under New York’s law, which applied to the dispute: “In sum, the confidentiality provision is unenforceable under New York law because it is overly restrictive in time and scope, does not further a legitimate business interest, is contrary to established public policy, and is unduly burdensome” to the employee.  No word on any other side effects.     
    • Smashing a printer with a baseball bat may no longer be the real problem departing employees pose: “Half of all departing employees retain confidential company files following their termination,” concludes a study by Symantec reported here.  
    • “No severance pay but still crazy rich”: That’s the headline on this CNNMoney article about retiring Microsoft executive Steve Ballmer, and it says it all.  The article explains that Microsoft doesn’t have retirement or severance for its executives, but Ballmer won’t be complaining too loudly: as the 22nd richest person in America, his Microsoft shares alone are worth over $11 billion.  
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  • 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.

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  • 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:  

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  • 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.

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  • 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:

    • We’ve covered again and again the fact that district courts are broadly interpreting the Dodd-Frank whistleblower retaliation provision to include employees who don’t report misconduct to the SEC.  The Fifth Circuit has now bucked that trend, in Asadi v. GE Energy (USA) LLC.  We’ll cover this important development in depth next week.
    • In close-to-home news, St. John Barned-Smith of the Montgomery Gazette writes that a Montgomery County, Maryland judge denied the Landon School’s request for summary judgment on a wrongful termination claim brought by its former chief operating officer.  Timothy Harrison contends that Landon’s headmaster ignored his reports that supervisors were discriminating against Hispanic employees.  According to the article, Harrison also complained about the headmaster’s annual $800,000 salary.  (Thanks in advance for finishing this blog post instead of dropping everything and applying for headmaster jobs.)
    • Viacom convinced Judge Sue Robinson of the U.S. District Court for the District of Delaware to throw out a shareholder lawsuit alleging that company directors improperly awarded tax-deductible bonuses.  The July 16 opinion in Freedman v. Redstone, Civ. No. 12-1052-SLR, is here.  But what Delaware giveth, it also taketh away: Viacom suffered a $300 million loss in the Delaware Supreme Court this week in a different shareholder dispute.
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  • 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). 

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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.

Contributing Editors
John J. Connolly

John J. Connolly
Partner
Email | +1 410.949.1149


Man

Andrew N. Goldfarb
Partner
Email | +1 202.778.1822


Sara Alpert Lawson_listing

Sara Alpert Lawson
Partner
Email | +1 410.949.1181


Nicholas DiCarlo

Nicholas M. DiCarlo
Associate
Email | +1 202.778.1835


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