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 whistleblower case, claiming BofI’s board of directors engaged in multiple schemes that caused a drop in stock price.  On May 11, 2018, the United States District Court for the Southern District of California tentatively dismissed a sizeable portion of the suit due to the claims being “unripe.”  In Re: BofI Holding, Inc. Shareholder Litigation, No. 3:15-cv-02722.

BofI shareholders filed a putative class action securities fraud suit when BofI’s stock price fell over 30% after news broke of the whistleblower litigation. The suit was dismissed March 2017. The present suit was brought against the bank’s directors and officers for knowingly breaching their duties, taking no action after learning Erhart was fired despite his whistleblower status, disregarding internal controls, and producing misleading securities disclosures, among other actions.

The company moved for a judgment on the pleadings, and the court found  “derivative plaintiffs do not state a ripe claim when it is dependent on the conclusion of securities or whistleblower litigation regarding the same conduct.”  As a result, the plaintiffs have two options: (1) filing an amended complaint and proceeding with the claims that are ripe and supported by sufficient allegations of Article III standing, or (2) seeking to stay the case until the whistleblower litigation concluded.

As for the original whistleblower case, Erhart v. BofI Holding, Inc., No. 15-cv-02287, a jury trial has been set for June 11, 2019.

We will continue to monitor developments in these related matters.  This decision highlights that issues arising from employee whistleblower claims can have implications beyond the employment litigation itself.

 

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Photo of Lloyd B. Chinn Lloyd B. Chinn

Lloyd B. Chinn is a partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative…

Lloyd B. Chinn is a partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative agencies in New York and across the country. Lloyd’s practice ranges from litigating compensation disputes to defending whistleblower, discrimination and sexual harassment claims. Although he represents employers in a wide range of industries, including law, insurance, health care, consulting, media, education and technology, he focuses a substantial portion of his practice on the financial services sector. He has tried to final verdict or arbitration award substantial disputes in this area.

Due to Lloyd’s litigation experience, clients regularly turn to him for advice regarding the full range of employment matters, including terminations, whistleblower policy and procedure, reductions in force, employment agreements, and employment policies. For example, in the wake of the financial crisis, he has counseled a number of firms through reductions in force and related bonus and deferred compensation disputes. Lloyd has also been retained to conduct internal investigations of allegations of workplace misconduct, including claims leveled against senior executives.

Lloyd has represented global businesses in matters involving Sarbanes-Oxley and Dodd-Frank whistleblower claims. He has taken an active role in the American Bar Association on these issues, currently serving as Co-Chair of the Whistleblower subcommittee of the ABA Employee Rights and Responsibilities Committee. Lloyd has spoken on whistleblowing topics before a numerous organizations, including the American Bar Association, ALI-ABA, Association of the Bar of the City of New York, and New York University School of Law. He has testified twice before Congressional subcommittees regarding whistleblower legislation and has also published blog postings, articles and client alerts on a variety of topics in this area, including the Dodd-Frank Act’s whistleblower provisions. Lloyd is a co-editor of Proskauer’s Whistleblower Defense Blog, and he has been widely quoted by on whistleblower topics by a number of publications, including the New York Times, the Wall Street Journal, the National Law Journal and Law 360.

Lloyd has also become active in the International Bar Association, presenting on a variety of subjects, including: the #MeToo movement, the COVID-19 pandemic and employment law, and cross-border harmonization of employment provisions in transactions. Lloyd also hosts a quarterly roundtable discussion among financial services industry in-house employment lawyers. He has also published articles and given speeches on a variety of other employment-law topics, including non-solicitation provisions, FINRA arbitration rules, cross-border discovery, e-discovery, and the use of experts.

Photo of Austin McLeod Austin McLeod

Austin D. McLeod is a law clerk in the Labor & Employment Department.

Austin assists clients in a range of labor and employment matters. Prior to joining Proskauer, Austin interned at the PGA TOUR and worked as a litigation paralegal at a major…

Austin D. McLeod is a law clerk in the Labor & Employment Department.

Austin assists clients in a range of labor and employment matters. Prior to joining Proskauer, Austin interned at the PGA TOUR and worked as a litigation paralegal at a major financial services company.

During law school, Austin worked as a labor relations law clerk for the National Football League. He also served as a staff editor of the NYU Journal of Intellectual Property and Entertainment Law and President of the Student Lawyer Athletic Program.