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Supreme Court’s Unanimous Decision Provides Important Protections for Sarbanes-Oxley Whistleblowers

In a unanimous ruling, the Supreme Court reaffirmed the whistleblower protections of the Sarbanes-Oxley Act in the case, Murray v. UBS Securities, LLC et al. (February 8, 2024).  The Supreme Court’s decision reaffirms an ongoing trend — to protect and encourage whistleblower reporting as a means to enforce proper corporate governance.  The European Union’s Whistleblower Directive and new United States whistleblower incentive programs continue to grow.  In the end, whistleblower reporting around the globe is likely to mature to a system comparable to the False Claims Act qui tam relator program, where whistleblowers and reporters will be rewarded for uncovering and reporting fraud schemes against corporations and the government.

Returning to the recent Supreme Court case, Trevor Murray, a UBS research strategist filed a whistleblower action against UBS, claiming that he was fired in retaliation after he reported that two leaders of the UBS trading desk were engaged in unethical and illegal efforts to skew his independent and objective research.  Under Title 18 U.S.C. §1514A(a), employers may not “discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of” protected whistleblower activity.”

The District Court rejected UBS’ motion to dismiss Murray’s claim because Murray failed to produce any evidence that his boss acted with any retaliatory animus against him. Further, the District Court instructed the jury that, to prove his claim under the Sarbanes-Oxley Act, Murray had to establish by a preponderance of the evidence that his “protected activity was a contributing factor in the termination of his employment.”  If Murray met this burden, the burden would shift to UBS to “demonstrate by clear and convincing evidence that it would have terminated Murray’s employment even if he had not engaged in protected activity.”  The jury returned a verdict in Murray’s favor. On appeal, the Second Circuit vacated the jury’s verdict and ruled that Murray had to prove “retaliatory USB’s retaliatory intent.”

The Supreme Court reversed the Second Circuit’s decision and ruled that a whistleblower who invokes §1514A(a) must prove this his protected activity was a “contributing factor” in the employer’s unfavorable personnel action, but need not prove that his employer acted with “retaliatory intent.”

In support of its ruling, the Supreme Court interpreted the term “discriminate” in §1514A(a) did not require “retaliatory intent” but referenced the normal definition of “discriminate” which is simply “differential treatment.”  As explained by the Supreme Court, when an employer treats a whistleblower differently, and worse, “because of” his protected whistleblowing activity, that is actionable discrimination and the employer’s lack of “animosity” is “irrelevant.”

Significantly, the Supreme Court cited Congress’ evident intent to protect whistleblowers and that the “contributing factor” requirement is more consistent with Congress’ intent than requiring plaintiffs to come forward with a showing of “retaliatory intent.”

Under the “contributing factor” standard, a jury is instructed to consider whether anyone with knowledge of the plaintiff’s protected activity affected in any way the decision to terminate the plaintiff’s employment. This standard broadly creates liability when an employer takes an employment action against a whistleblower.  In these cases, the employer than carries the burden to demonstrate by clear and convincing evidence that the employer would have terminated the whistleblower’s employment even if he  had not engaged in protected activity, meaning that the employer had independent and justifiable reasons to terminate the employee. 

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