In a recent Wall Street Journal (“WSJ”) article (subscription required), Lloyd Chinn, Co-head of Proskauer’s Whistleblower & Retaliation Group, commented on Lawson v. FMR LLC, a case before the U.S. Supreme Court concerning whether Section 806 of the Sarbanes-Oxley Act of 2002 (“SOX”) protects an employee of a privately held contractor or subcontractor of a public company. Chinn, who attended Tuesday’s oral argument, told the WSJ that the justices appeared to be virtually unanimous in expressing concerns “around what limitations there should be” to the application of Section 806.
Chinn elaborated in a National Law Journal article (subscription required) that, although some members of the Court showed ”concern” about leaving private firms out of the equation altogether, justices across the spectrum seemed “uncomfortable about placing no limitations” on the scope of the law.
And, in a Law360 article (subscription required), Chinn similarly characterized the justices as “universally uncomfortable” with the plaintiffs’ expansive view of Section 806, even if some of the justices expressed concerns with a narrow reading of the statute.
The question before the Court is an important one – whether SOX whistleblower protection is intended to cover the employees of the roughly 5,000 public companies in the United States alone or whether it is additionally designed to provide claims to the employees of millions of private companies in the US who may happen to be contactors or subcontractors of a public company.
The former employee Petitioners have taken the latter position before the Supreme Court, that any employee of any private company that may happen to be a subcontractor or subcontractor of a public company is covered by the statute. FMR has – we think correctly – maintained that there is absolutely no indication from the statute or its legislative history that Congress had such a broad scope in mind when enacting SOX. Indeed, as pointed out by FMR’s counsel during the oral argument, it any member of Congress had suggested such a scope at the time SOX was under consideration, “it would have been met with debate, derision and defeat.”
Stay tuned for further developments.