Welcome back to another edition of Opening Argument, a reported column where I dig into complicated novel questions of law and unpack disputes that are dividing appeals courts. Today: A look at the burden of proof for whistleblowers who are fired in retaliation.
It’s been nearly five years since Trevor Murray convinced a jury that his former employer, UBS Securities LLC, had unlawfully fired him in retaliation for reporting he’d allegedly been pressured to mislead clients.
Now he has to do it all again.
Murray won over $2 million in attorneys fees, back pay, and damages in his first trial. But the US Court of Appeals for the Second Circuit wiped out that win last month and raised the bar to a standard that’s nearly impossible to meet for employees trying to prove they were retaliated against for blowing the whistle on their employer.
Federal appeals courts now disagree on what that standard should be, which could “cause a massive amount of confusion,” said David Colapinto, a whistleblower attorney. The uncertainty could extend to dozens of other health, safety, and anti-fraud whistleblower laws that could be interpreted the same way, Colapinto said.
In order for employee whistleblowers to claim they were unlawfully fired under the Sarbanes-Oxley, or SOX Act, the Second Circuit said they must prove “by a preponderance of evidence” that a publicly traded company fired them with retaliatory intent. The 2002 SOX Act was designed to protect investors by improving auditing and public disclosures.
The district court, however, told the jury the statute only requires whistleblowers to prove their whistleblowing was a contributing factor in the company’s decision to fire them. The onus is then on the employer to prove there was no retaliatory intent behind it.
What the Second Circuit is doing in this particular case is rewriting the statute, “which I thought was a big no, no,” Colapinto said.
Other courts, including the Third, Fourth, and Ninth circuits, have adopted the easier to prove contributing factor standard without requiring proof of retaliatory intent.
Murray has asked the Second Circuit to rehear the case with its full panel of judges. If the court refuses, his attorney, Robert Herbst, said he will appeal to the US Supreme Court.
“Congress specifically imposed that higher burden on the employer and a lower burden on the whistleblower and what the Second Circuit has done has basically stood that framework on its head,” Herbst said.
“It’s imposed a burden not just to show the protected activity was a contributing factor but now it’s the whistleblower that has to prove retaliatory intent,” he said.
Some lawmakers say that’s not what Congress meant to happen.
In a friend-of-the-court brief, Sen. Ron Wyden (D-Ore.) and Rep. Jackie Speier (D-Calif.) said Congress deliberately designed different burdens of proof for employee-complainants and employer-respondents in SOX Act cases “in order to advance important congressional policies of preventing and punishing corporate fraud.”
A spokesperson for UBS declined to comment for this column, but the company argued it fired Murray in 2012 to save money during a difficult time for the company financially, not because he accused leaders on UBS’s trading desk of trying to defraud clients.
While an analyst at UBS, Murray says he was pressured to skew research and publish reports to support UBS business strategies.
Greg Markel, a partner at Seyfarth Shaw LLP who had defended companies against whistleblower claims, thinks the appeals court was right to call for a retrial.
It is arguable, he said, that the district court had too broad a definition of what might violate whistleblower protections. On the other hand, Markel said the appeals court may have set too high a standard for these types of claims.
If the district court’s standard is too low and the appellate court’s standard is too high, maybe a sort of Goldilocks test would be just right. But a midpoint may not be what Congress intended.
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