An individual who convinced a divided U.S. Supreme Court in 2014 that Sarbanes-Oxley’s (“SOX”) whistleblower protections extend to the employees of a public company’s contractors and subcontractors has ultimately lost her case before a federal jury in Massachusetts, thus ending her ten-year legal saga.
Lawson claimed that in 2005 she spotted what she believed were accounting irregularities at Fidelity that allowed the company to charge millions of dollars in excessive fees to mutual fund shareholders. She never called Fidelity’s information hotline to report the inaccuracies, but instead filed a whistleblower tip a year later with the SEC regarding the alleged fraud. While the SEC did not pursue an enforcement action against the company, Lawson claimed that Fidelity managers and employees harassed her and retaliated against her for the reporting by giving her lower performance ratings and bonuses. Lawson resigned in 2007 and sought whistleblower protections under SOX.
Over the course of a three week trial, attorneys for Fidelity cast the plaintiff as a poor performing employee who resigned not because of harassment or retaliation, but because she failed to receive a sought-after promotion. Attorneys for Fidelity further argued that the company corrected any potential accounting mistakes as soon as they were brought to the company’s attention, and the inconsistencies had no effect on the shareholders. After one day of deliberation, a 12-person jury returned a full defense verdict for Fidelity, answering “No” to the following dispositive questions:
- Has Ms. Lawson proven by a preponderance of the evidence she had an actual subjective belief Fidelity’s conduct could constitute violation of Federal law relating to fraud against Fidelity’s Mutual Fund shareholders? No.
- Has Ms. Lawson proven by a preponderance of the evidence she had an objectively reasonable belief Fidelity’s conduct could constitute violation of Federal law relating to fraud against Fidelity’s Mutual Fund shareholders? No.
As a result, the jurors did not have answer further questions as to whether the company had engaged in retaliation against her for the alleged reports she made.
In the end, Lawson’s ten-year quest failed, but not before she convinced the Supreme Court to issue a murky expansion of SOX’s whistleblower protections. For more information on the Supreme Court’s precedent in Lawson v. FMR, LLC and how it may shape future whistleblower actions, contact an Orrick attorney.