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Proskauer Whistleblower Defense

Lloyd Chinn Joins Solicitor of Labor For Whistleblower Discussion

Posted in Best Practices

This morning, Lloyd Chinn, co-Chair of Proskauer’s Whistleblowing & Retaliation Group, joined a distinguished panel, including Solicitor of Labor M. Patricia Smith, on a panel discussing the DOL’s recently expanded Whistleblower Protection Program and its recently modified procedures for investigating and adjudicating whistleblower claims.   The expert panel offered practical insights on litigating before the DOL and explored the considerations involved in deciding whether to invoke the “kick out” provisions that allow litigants to bring claims under DOL-enforced statutes in federal court.

Sixth Circuit Dismisses Whistleblower’s Claims Made By Job Applicant

Posted in False Claims Act

This week, the U.S. Court of Appeals for the Sixth Circuit ruled that a job applicant lacks standing to bring whistle-blower claims under the Energy Reorganization Act and the False Claims Act (“FCA”) because those laws’ retaliation provisions apply only to employees.  The Sixth Circuit is the first Court of Appeals to address this issue.

The plaintiff, Gary Vander Boegh (“Plaintiff”), is a former landfill manager in Kentucky who alleged that defendant Energy Solutions, Inc. (“Energy Solutions”) did not hire him because he reported certain environmental violations to his previous employer, the U.S. Department of Energy’s Paducah Gaseous Diffusion Plant.  Plaintiff alleged that Energy Solutions’ failure to hire him was unlawful retaliation because he engaged in protected whistleblowing activity at his prior job.

The United States District Court for the Western District of Kentucky dismissed each of Plaintiff’s claims in December 2013.  Affirming the district court’s grant of summary judgment for Energy Solutions Inc., the Sixth Circuit found that Plaintiff did not fall within either the “plain” or “common law” meanings of the term “employee” because his relationship to Energy Solutions was that of a “mere applicant.”  In reaching this conclusion, the Sixth Circuit consulted various dictionaries, the Second Restatement of Agency, and the legislative history of the FCA and the Energy Reorganization Act.  As the Sixth Circuit noted, Plaintiff never performed work for Energy Solutions for compensation, nor was he at any point under Energy Solutions’ control.

The Sixth Circuit also affirmed the district court’s dismissal of Plaintiff’s whistleblower claims under the Safe Drinking Water Act, the Clean Water Act, the Toxic Substances Control Act and the Solid Waste Disposal Act on the grounds that Plaintiff did not fully exhaust his administrative remedies for those claims before filing his lawsuit.

Highlights of SEC’s 2014 Annual Report

Posted in SEC

On November 17, 2014, the Securities and Exchange Commission’s Office of the Whistleblower (“OWB”) released its fourth Annual Report on the Dodd-Frank Whistleblower Program to Congress, which details information on OWB’s activities and bounty payouts for the fiscal year, as described in our posts on the 2012 and 2013 Annual Reports.

In its 2014 report, the SEC highlights that since the inception of the whistleblower program in 2011, the Commission has granted awards to a total of fourteen whistleblowers, and nine of these awards were issued in 2014.  The SEC also stressed that the magnitude of the award payments was “record-breaking” in 2014 in that it authorized an award of more than $30 million in September 2014.  In addition, the SEC pointed out that it brought its first enforcement action against an employer for retaliating against a whistleblower under Dodd-Frank’s anti-retaliation provision. Continue Reading

5th Circuit: Outing Whistleblower Equals Adverse Action

Posted in SOX Whistleblower Decisions

On November 12, 2014, in Halliburton, Inc. v. Admin. Review Bd., 5th Cir. No. 13-cv-60323, the Fifth Circuit affirmed an ARB’s decision that disclosing the identity of a whistleblower may constitute an “adverse action” under Section 806 of SOX.  This decision presents a number of risks for employers—even when they are acting conscientiously and in good faith—and is mandatory reading for in-house employment counsel and compliance professionals. Continue Reading

Court Follows 5th Circuit Asadi Decision, Dismisses Dodd-Frank Whistleblower Claim

Posted in Dodd Frank

The U.S. District Court for the Eastern District of Wisconsin in Verfuerth v. Orion Energy Systems, Inc., No. 14-cv-352 (E.D. Wis. Nov. 4, 2014) recently ruled that the Dodd-Frank whistleblower protection provision does not protect employees who only report alleged violations of the securities laws internally.  In dismissing a former CEO’s whistleblower retaliation claim, the court followed the Fifth Circuit’s decision in Asadi v. F.E. Energy (USA), L.L.C., 720 F.3d 620 (5th Cir. 2013) and held that the text of the statute requires that a “whistleblower” report an alleged violation to the SEC to be covered by Dodd-Frank’s whistleblower protection provision. Continue Reading

Study: Does The Existence Of Whistleblowers In Enforcement Actions Mean Greater Penalties?

Posted in DOJ, SEC

According to an academic study published on October 6, 2014 by Andrew C. Hall, Gerald S. Martin, Nathan Y. Sharp, and Jaron H. Wilde, the presence of whistleblowers may have a meaningful impact on the outcomes of enforcement actions brought by the SEC and DOJ.  The study involved an analysis of the effect of whistleblowers on enforcement actions for alleged financial misrepresentation, as measured by regulatory penalties (and criminal prison sentences).  The study’s authors reviewed the outcomes of SEC and DOJ enforcement actions between 1978 and 2012 associated with alleged financial misrepresentation.  According to the study, the involvement of whistleblowers in enforcement actions is associated with an average penalty of $90.16 to $92.88 million higher than when no whistleblower is involved.   The study also found that whistleblower involvement is associated with executives and employees at firms being fined $50.22 to $56.50 million more than in actions without whistleblowers. Continue Reading

California Court Allows Dodd-Frank Whistleblower Claims to Proceed Despite Absence of Complaint to SEC

Posted in Dodd Frank

In a case of first impression within the Ninth Circuit, the U.S. District Court for the Northern District of California ruled that the whistleblower protection provision in Dodd-Frank protects whistleblowers who report alleged violations both internally and to the U.S. Securities and Exchange Commission.  Connolly v. Wolfgang Remkes, 2014 U.S. Dist. LEXIS 153439 (N.D. Cal. Oct. 28, 2014).  More specifically, in this case, the court determined that a former employee qualified as Dodd-Frank whistleblower (at least for purposes of surviving a Rule 12(b)(6) motion to dismiss) even though she only reported suspected securities law violations within the company. Continue Reading

Third Circuit Sizes Up Dodd-Frank’s Anti-Arbitration Provision

Posted in Dodd Frank

On October 24, 2014, in Khazin v. TD Ameritrade Holding Corp, et al., the U.S. Court of Appeals for the Third Circuit heard oral argument on an issue of first impression (within that forum):  whether Dodd-Frank applies retroactively to invalidate pre-dispute arbitration agreements.  Dodd Frank expressly invalidates pre-dispute arbitration agreements of whistleblower claims brought under Section 1057,  SOX and the Commodities Exchange Act.  Notably, however, Dodd-Frank does not invalidate pre-dispute arbitration agreements of whistleblower claims under Securities Exchange Act (“SEA”), 15 U.S.C. §78u-6(h)(1)(A).  Nor does Dodd-Frank explicitly address the retroactivity of its anti-arbitration provisions.       Continue Reading

Administrative Review Board Clarifies Causation Burdens in SOX Whistleblower Cases

Posted in SOX Whistleblower Decisions

The ARB recently clarified the competing burdens of proof on issues of causation for whistleblower retaliation cases arising under SOX Section 806 and other whistleblower protection statutes.  In particular, in Fordham v. Fannie Mae, ARB No. 12-061 (Oct. 9, 2014), a 2-1 decision, the ARB reversed an ALJ’s decision that had considered the Respondent’s affirmative defense in deciding that an employee had not demonstrated that her whistleblowing was a “contributing factor” in the termination of her employment. Continue Reading

False Claims Act Does Not Protect An Employee Disclosing His Whistleblower History

Posted in False Claims Act

On October 20, the United States District Court for the Southern District of Ohio found that the False Claims Act (“FCA”) did not protect an employee who was fired after revealing his history as a whistleblower and offering to help his new employer prevent overcharges on a government contract.  The court held that the employee failed to state a claim under the FCA because he did not act “in furtherance of” efforts to stop one or more specific or potential FCA violations. Continue Reading