On July 12, 2018, the U.S. Commodity Futures Trading Commission (CFTC) issued its largest whistleblower award ever, approximately $30 million, as part of its Dodd-Frank whistleblower program. This is the first award under the Trump Administration, and only the fifth award that the CFTC has issued since the inception of
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Third Circuit Affirms Dismissal of SOX Whistleblower Suit
On June 27, 2018, the U.S. Court of Appeals for the Third Circuit affirmed the dismissal on summary judgment of a SOX whistleblower retaliation claim, concluding that the Plaintiff’s purported belief that the Defendant had committed fraud was not objectively reasonable. Westawski v. Merck & Co., No. 16-4075, 2018…
California Federal Court Grants Motion to Compel Arbitration of Dodd-Frank Whistleblower Claim
On June 27, 2018, the U.S. District Court for the Central District of California granted Snap Inc.’s motion to compel arbitration of a Dodd-Frank whistleblower retaliation claim. Pompliano v. Snap Inc., No. 17-cv-3664 (2018 WL 3198454).
Background. Plaintiff signed an employment agreement (the “Agreement”) with Snap Inc. (the “Company”)…
Update on BofI Whistleblower Litigation
We previously reported in March and last October on a whistleblower litigation brought by Charles Erhart, a former Bank of Internet Holding, Inc. (BofI) internal auditor. On December 3, 2015, in a separate action, the shareholders of BofI brought a derivative suit, based in part on the facts of the…
ARB Rejects SOX Claim Due to Complainant’s Harassment
The ARB recently affirmed a motion for summary decision against a Complainant claiming retaliatory discharge under SOX, finding that he failed to demonstrate that he engaged in protected activity and that the Company would have discharged him in the absence of any protected activity given his misconduct. Latigo v. ENI…
Federal Court Rules That Providing Testimony to FINRA Is Not Protected Activity Under Dodd-Frank
On April 19, 2018, the United States District Court for the District of New Jersey held that providing testimony to FINRA (which is overseen by the SEC) does not constitute protected activity for purposes of establishing a Dodd-Frank whistleblower claim. Price v. UBS Financial Services, Inc., No. 2:17-01882.
Background. Plaintiff,…
SDNY Grants Summary Judgment Against Plaintiff in SOX Blacklisting Suit
The U.S. District Court for the Southern District of New York recently granted a motion for summary judgment against a Plaintiff claiming retaliatory blacklisting under SOX, holding that a former employer’s policy of refusing to conduct business with plaintiff was not actionable under the circumstances of the case. Kshetrapal v. Dish Network, 2018 U.S. Dist. Lexis 48493 14-CV-3527 (PAC) (S.D.N.Y. Mar. 23, 2018).
DC Circuit Upholds SEC’s Denial of Dodd-Frank Bounty Award
On March 20, 2018, the DC Circuit upheld the SEC’s denial of a Claimant’s application for a Dodd-Frank whistleblower bounty award because the SEC did not rely on the information provided by the Claimant in pursuing an enforcement action against Management Solutions. In upholding the SEC determination, for first time, the court identified the standard of review for an appeal of the SEC’s denial of an award in a whistleblower action, holding that the appropriate standard under 5 U.S.C.A. § 706(2)(E) is whether the SEC’s determination was based on “substantial evidence.” Doe v. SEC, 2018 U.S. App. Lexis 7449 No. 16-1414 (D.C. Cir. Mar. 20, 2018).
Seventh Circuit Affirms Grant of Summary Judgment on Terminated CEO’s SOX And DFA Claims
Last week, the Seventh Circuit Court of Appeals held that a terminated CEO’s complaints about his board of directors’ managerial decisions did not qualify as protected whistleblowing under the Sarbanes-Oxley Act of 2002 (“SOX”) nor under the Dodd-Frank Act of 2010 (“DFA”). Verfuerth v. Orion Energy Sys., Inc., No. 16-3502, 2018 WL 359814 (7th Cir. Jan. 11, 2018).
Background. Plaintiff was the founder and former CEO of a company that specializes in energy-efficient lighting. In November 2012, following a series of disputes between Plaintiff and the company’s board of directors, Plaintiff was terminated for incurable cause. A year and a half after his termination, Plaintiff brought a lawsuit that alleged that he was retaliated against, in violation of SOX and DFA, for his complaints to various board members about the company’s business practices. Practices about which Plaintiff alleged to have complained included attorney over-billing, intellectual property disputes, conflicts of interest, and violations of internal company protocol. The Company moved for summary judgment, arguing in part that Plaintiff’s complaints did not qualify as whistleblowing entitled to protection from adverse employment actions.
Rulings. Chief Judge Griesbach granted the Company’s Motion for Summary Judgment on Plaintiff’s SOX and DFA claims. Chief Judge Griesbach held (1) that SOX protects complaints about securities fraud, not “run-of-the-mill corporate problems,” which is what he believed Plaintiff raised here, and (2) that Plaintiff’s complaints to various board members about what he thought they should be doing did not amount to whistleblowing, because “[s]imply telling a person he might be committing fraud is not whistleblowing” and “airing concerns is not whistleblowing.” Verfuerth v. Orion Energy Sys., Inc., No. 14-CV-352, 2016 WL 4507317 (E.D. Wis. Aug. 25, 2016).
The Seventh Circuit Court of Appeals agreed, holding that “[a]n executive who advises board members to disclose a fact that the board already knows about has not ‘provide[d] information’ about fraud. At most, he has provided an opinion.” Verfuerth No. 16-3502, 2018 WL 359814 at *4. The Court emphasized that nothing in SOX, or any other federal statute, prevents a company from firing its executives over differences of opinion.
SEC Issues $4.1 Million Award to Overseas Whistleblower
On December 5, 2017, the SEC announced a whistleblower award of more than $4.1 million to an overseas former company insider. The SEC declined to disclose the identity of the whistleblower or the company at issue.
The order noted that the tipster voluntarily reported original information that prompted an SEC…