Babysitters at the Gate: The Supreme Court’s Radical Expansion of SOX’s Whistleblower Protections

Yesterday, in Lawson v. FMR LLC, a divided U.S. Supreme Court decided its first case addressing the whistleblower protections of the Sarbanes-Oxley Act (SOX).  The question before the Court: do those protections extend only to the employees of public companies, or do they also reach the employees of contractors and subcontractors of public companies?  You can see our prior posts on the case here (June 19, 2012), here (October 8, 2013), here (January 7, 2014), and here (January 28, 2014). READ MORE

Dodd-Frank Amendment Applies Retroactively, “Clarifies” SOX Section 806


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.

ARB Holds Private Firm Accountants Are Covered By SOX


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