On Tuesday, another New York federal district court ruled that an employee need not report a disclosure directly to the Securities and Exchange Commission (“SEC”) to be afforded the protections under the anti-retaliation provisions of the Dodd-Frank Act, but that internal disclosures within a company are covered. Read More
Renee B. Phillips
Renee Phillips, a senior associate in the New York office, is a member of the Employment Law Group. Her practice includes a full range of employment litigation and counseling, with particular emphasis on discrimination, sexual harassment and Sarbanes-Oxley/Dodd-Frank whistleblower issues.
Ms. Phillips has successfully defended employers in federal and state court litigations as well as administrative proceedings and arbitrations involving claims of discrimination, harassment, wrongful termination, Sarbanes-Oxley whistleblowing, trade secret misappropriation and other employment-related claims. She regularly counsels employers on a variety of employment-related issues and assists clients in creating and implementing human resources policies, whistleblower policies, negotiating and drafting executive contracts and other employment agreements, and conducting internal investigations.
Ms. Phillips is the co-author of the first treatise to be published on the subject of Sarbanes-Oxley/Dodd-Frank whistleblower law.
Two federal district courts recently issued decisions adopting a broad interpretation of the anti-retaliation provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) and allowed Dodd-Frank whistleblower claims to proceed past motions to dismiss. Significantly, these cases stand for the proposition that to be protected as a whistleblower under the retaliation provision of Dodd-Frank, an individual does not have to meet the definition of a whistleblower for purposes of obtaining a bounty under Dodd-Frank and in particular, does not necessarily have to make a disclosure to the Securities and Exchange Commission (the “SEC”) in the manner required in connection with the bounty provision of the statute. While the issue is far from settled as Dodd-Frank retaliation cases are just beginning to work their way through the federal courts, these decisions could contribute to further increases in the number of Dodd-Frank whistleblower retaliation claims filed against employers. Read More
Last month the Seventh Circuit Court of Appeals reinstated a $3.5 million punitive damages award against an employer for failure to “stiffen its efforts” to respond to an employee’s harassment complaints. See May v. Chrysler Group, LLC, Nos. 11-2012 and 11-3109, U.S. App. LEXIS 17820, at *30 (7th Cir. Aug. 23, 2012). May, who is Cuban Jewish, worked as a pipefitter at a Chrysler assembly plant and was subjected to racist, xenophobic, homophobic, and anti-Semitic graffiti over the course of a three-year period. The harassment involved over 70 incidents of hateful graffiti, death-threat notes left in May’s toolbox, and threatening phone calls. The harassers vandalized May’s car, struck him in the back with a flying object, punctured his bike and car tires several times, poured sugar in his car tank twice, and left at his work station a dead bird wrapped in toilet paper to look like a Ku Klux Klansman. At Chrysler’s request, May identified 19 employees he had reason to suspect, including two employees who had a history of making racist comments, as well as the husband of the human resources supervisor assigned to May’s case. Chrysler did not interview any of the suspects. The only issue at trial and on appeal was whether Chrysler was liable for the hostile work environment to which May had been subjected—that is, whether Chrysler failed to respond “promptly and adequately” in a manner likely to end the harassment.
Chrysler’s response to the harassment included a meeting with the head of HR reminding employees at the plant about Chrysler’s harassment policy, implementation of a protocol for handling incidents of harassment against May, an investigation of who was at the plant at the time of the incidents, and retaining a forensic document examiner. The jury found that Chrysler “did not take steps reasonably intended to stop the harassment” and awarded compensatory damages against Chrysler in the amount of $709,000, as well as punitive damages in the amount of $3.5 million. On a post-trial motion for judgment as a matter of law, the District Court agreed that there was sufficient evidentiary basis for the jury to find the employer liable, particularly in light of the “long period of time” during which May endured the harassment, the fact that Chrysler’s response did not adapt or escalate as the harassment continued, Chrysler’s reliance on the same reactionary response despite its obvious ineffectiveness as a deterrent, and Chrysler’s failure to investigate every incident of harassment. May v. Chrysler Group LLC, No. 02 C 50440, 2011 U.S. Dist. LEXIS 73378, at *11-15 (N.D. Ill. July 7, 2011). The district court nonetheless remitted the compensatory damages award from $709,000 to $300,000 on the ground that there was no rational connection between the award and the evidence since the plaintiff had not presented any evidence of actual damages, such as medical bills, and emotional distress alone did not justify such a high award. Furthermore, the district court vacated the punitive damages award, finding that while Chrysler’s response was potentially “imperfect and somewhat lacking,” it did not reach the level of “callousness and intentional disregard of plaintiff’s right” to support a punitive damages award. Read More
On August 21, 2012, the Securities and Exchange Commission (SEC) announced that it has awarded its first whistleblower bounty, just over one year after the SEC’s Dodd-Frank whistleblower rules became effective. The SEC’s Claims Review Staff issued a short order, Release No. 34-67698, granting the whistleblower’s award, which notes that the SEC declined to award a claim to a second whistleblower involved in the action. Read More
On June 28, 2012, a Texas District Court held that the Dodd-Frank’s anti-retaliation provision per se does not apply extraterritorially. In Asadi v. G.E. Energy (USA), LLC, Case No. 4:12-cv-00345 (S.D. Tex. June 28, 2012), the district court determined that Dodd-Frank’s anti-retaliation provision did not extend to or protect the plaintiff’s extraterritorial whistleblowing activity. Note that this decision does not apply to Dodd-Frank’s whistleblower bounty provisions, pursuant to which whistleblowers outside of the U.S. may be eligible for bounties for making reports of violations to the SEC.
The complaint alleged that Asadi was a U.S.-based employee who was working from an office in Jordan to secure and manage energy contracts with the Iraqi government. Asadi alleged that he notified his supervisors and a company ombudsperson of a potential violation of the Foreign Corrupt Practices Act (“FCPA”), whereupon GE Energy pressured him to step down, attempted to negotiate a severance, and eventually terminated his employment.
Applying the Supreme Court’s 2010 decision in Morrison v. National Australia Bank, Ltd., 130 S. Ct. 2869 (2010), the district court held that the absence of language regarding the extraterritoriality of Dodd-Frank’s anti-retaliation provision led to a presumption that it did not apply extraterritorially. The district court noted that Section 929P(b) of Dodd-Frank gave extraterritorial jurisdiction over specific enforcement actions brought by the SEC or the DOJ, but not to private actions such as the plaintiff’s. The district court also found persuasive a Department of Labor Administrative Review Board en banc holding that, because Dodd Frank’s amendments to SOX were silent as to extraterritoriality, the amendments could not be construed to extend the reach of SOX extraterritorially. See Villanueva v. Core Labs, NV, 2001 WL 6981989, ARB Case No. 09-108, ALJ Case No. 2009-SOX-6 (ARB Dec. 22, 2011). Thus, the district court concluded that Dodd-Frank’s anti-retaliation provision did not protect Asadi from alleged retaliation and granted GE Energy’s motion to dismiss.
On July 9, 2012, a Southern District of New York court held that the Dodd-Frank Act applies retroactively to protect whistleblowers employed by subsidiaries of publicly-traded companies.
In Leshinsky v. Telvent GIT, S.A., Case No. 1:10-cv-04511-JPO (S.D.N.Y. July 9, 2012), the plaintiff, an employee of a non-publicly-traded subsidiary of a public company, brought a retaliation claim under Sarbanes-Oxley (“SOX”) Section 806. The plaintiff’s claims arose prior to Dodd-Frank’s amendments to Section 806 providing that no public company, including any subsidiary or affiliate whose financial information is included in the consolidated financial statements of such company, may retaliate against a whistleblowing employee.
In analyzing whether the Dodd-Frank amendment to SOX applied to the plaintiff’s claims, the court explained that generally speaking, a statute does not apply retroactively to conduct that occurred prior to a statute’s enactment; there is a presumption against retroactive legislation. When an amendment merely clarifies existing law, rather than substantively changing existing law, however, retroactivity may be appropriate. The court applied three factors to determine whether Dodd-Frank clarified Section 806: (1) whether Congress expressed legislative intent that Dodd-Frank Section 929A was a clarification that should be applied retroactively; (2) whether there was a conflict or ambiguity in the pre-amendment statutory text; and (3) whether the amendment was consistent with a reasonable interpretation of the original statute. The court determined that the Dodd-Frank amendment clarified the legislative intent of Dodd-Frank’s predecessor retaliation provision under SOX.
The court noted that the First Circuit’s April decision in Lawson v. FMR LLC, 690 F.3d 61 (1st Cir. 2012), did not preclude its holding and arguably supported its conclusion that the Dodd-Frank amendments were a necessary clarification to prevent an improper reading of the statute’s protections. See previous blog entry.
There is a new OSHA Whistleblower Protection Program Web site. The site includes SOX complaint and outcome statistics at OSHA, as well as statistics for all of the other whistleblower statutes administered by OSHA. Here is a link to the statistics OSHA is tracking.
Current data on the site runs through 3/31/12 (Q2 of FY2012). So far this year there has been a slight uptick in SOX complaints compared to last year, but not by much, and not yet approaching complaint levels from prior years (2005-2010). According to the statistics, there have been zero merits findings for SOX complainants in OSHA investigations so far in FY2012, and there were only 2 such findings in FY 2011.
In Spinner v. David Landau and Associates, LLC, the Department of Labor’s Administrative Review Board (“ARB”) held that an accountant for a private firm was a covered employee under SOX where the firm performed services for publicly traded clients. In so holding, the ARB rejected the First Circuit’s contrary interpretation of SOX in Lawson v. FMR LLC. The Spinner decision provides new ammunition for employees of non-public companies seeking to bring SOX whistleblower claims against their firms and raises significant liability concerns for firms that have operated under the assumption that their employees were not covered by SOX’s whistleblower provisions. Read More
In Iskanian v. CLS Transportation Los Angeles, LLC, (Cal. Ct. App. June 4, 2012), the California Court of Appeal for the Second Appellate District affirmed a decision to compel individual arbitration of wage-and-hour claims pursuant to an employment agreement that contained class and representative action waivers, holding that the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion was controlling. Read More