On September 18, 2019, the U.S. District Court for the Southern District of New York granted a defendant-employer’s motion to dismiss a SOX whistleblower retaliation claim, finding that the plaintiff failed to adequately plead protected activity.  Tonra v. Kadmon Holdings, Inc., No. 18-cv-9028.


The defendant-employer is a publicly traded biopharmaceutical company that develops and produces several drugs.  Around August 2011, Plaintiff was hired as the company’s Vice President of Preclinical Pharmacology.  About six years after his hiring, Plaintiff met with Defendant’s upper management to present preliminary animal testing results for a new drug that was designed to treat a rare kidney disease.  Plaintiff’s study allegedly showed that the drug had proven ineffective and potentially harmful.  Two months later, Plaintiff received the final test results for the drug, which allegedly confirmed the effects Plaintiff had forecasted.  Plaintiff allegedly proceeded to inform company representatives present at a regulatory compliance meeting that Defendant was required to report the negative test results to the U.S. Food and Drug Administration within the coming months.  Defendant terminated Plaintiff’s employment one day later.  Plaintiff filed suit in federal court claiming, inter alia, that he was retaliated against in violation of SOX for having drawn attention to Defendant’s alleged reporting obligations.


Defendant moved to dismiss the SOX claim pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that the complaint failed to adequately plead protected activity.  The court granted the motion, finding the complaint did not plausibly allege facts that would support a reasonable belief that Defendant was at risk of violating any of the enumerated securities laws.  In particular, the court noted that Plaintiff’s allegations did not demonstrate a subjectively and objectively reasonable belief that the information at issue would be material to investors.  According to the court, for information to be “material,” it must “significantly alter the ‘total mix’ of information made available” to potential stockholders.  Additionally, the fact that Plaintiff recommended that the disclosures be made within multiple months after the information was first conveyed to management showed Plaintiff did not believe a securities violation to be imminent.


This decision favors defendant employers in cases where a plaintiff does not show that the complained-of violation would be material.

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Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular…

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular focus on defending companies against claims of employment discrimination, retaliation and harassment; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations. He has successfully tried cases in multiple jurisdictions, and defended one of the largest Illinois-only class actions in the history of the U.S. District Court for the Northern District of Illinois. He also secured one of only a few ex parte seizures orders that have been issued under the Defend Trade Secrets Act, and obtained a world-wide injunction in federal litigation against a high-level executive who jumped ship to a competitor.

Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Steven was recognized as Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He is a Fellow of the College of Labor and Employment Lawyers.  Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven has served on Law360’s Employment Editorial Advisory Board and is a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is regularly quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.