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.
SDNY Dismisses Extraterritorial SOX and Dodd Frank Whistleblower Claims
Overseas plaintiffs are continuing to seek to pursue SOX and Dodd-Frank whistleblower claims. On September 30, 2014, the Southern District of New York in Ulrich v. Moody’s Corp., 2014 U.S. Dist. LEXIS 138082 (S.D.N.Y. Sept. 30, 2014), dismissed SOX and Dodd-Frank whistleblower claims on the grounds that the statutes’ respective anti-retaliation provisions do not apply extraterritorially.
Second Circuit To Decide Retroactivity of Dodd-Frank Bounty Provision
As discussed in a Law360 article by Ed Beeson, the Second Circuit Court of Appeals will decide in Stryker v. SEC, No. 13-cv-4404, whether the SEC needs to pay Dodd-Frank whistleblower bounties to tipsters who provided information to the SEC prior to July 21, 2010, the date the law was enacted.
Watchdogs Petition SEC to Strengthen Prohibitions Against Impeding Complaints to SEC
On July 18, 2014, a coalition of plaintiff-side lawyers and government watchdog groups proposed ways to strengthen the SEC whistleblower program in two petitions filed with the SEC. The groups urged the SEC to update Rule 21F-17, which prohibits any action that would “impede” an individual from communicating with the SEC about securities law violations, by expanding its rules governing the use of nondisclosure agreements and increasing the scope of protections for whistleblowers.
Fifth Circuit: FCA Inapplicable to Claims Involving Private Funds Administered by Government-Created Programs
In United States of America ex rel Rene Shupe v. Cisco Systems, Inc. and Avnet, Inc., No. 13-40807 (5th Cir. July 7, 2014), the Fifth Circuit reversed a district court’s order denying a motion to dismiss a qui tam whistleblower suit, holding that the False Claims Act does not apply to submissions by telecommunications companies to a federal service providing a program when the program was not funded by government money.
$53 Million Paid To IRS Whistleblowers in 2013
As reported by The Washington Post, on April 4, 2014, the IRS issued its “Fiscal Year 2013 Report to the Congress on the Use of Section 7623” revealing that it paid whistleblowers $53 million in 2013. The agency said that it paid out 122 awards last year, making the average payout a whopping $435,000.
$6 Million SOX Whistleblower Verdict In California
On March 5, 2014, a California jury awarded $6 million to a former accounting executive at Playboy Enterprises Inc. (the “Company”), finding that the Company discharged the former employee in violation of Section 806 of SOX. The case is Zulfer v. Playboy Enterprises Inc. et al., No. 2:12-cv-08263 (C.D. Cal.). The award is reported to be the largest verdict awarded to date under Section 806 of SOX.
District Court Denies Summary Judgment On Internal Audit/SOX Administrator’s Whistleblower Claim
In denying a bank’s bid for summary judgment on an Internal Audit and SOX Administrator’s SOX whistleblower claim, the U.S. District Court for the Western District of Washington highlighted the present conflict on the standard governing protected activity under Section 806 of SOX—i.e., the “definitively and specifically” standard or the more liberal “reasonable belief” standard. McEuen v. Riverview Bancorp., Case No. 12-cv-5997 (W.D. Wash. Dec. 19, 2013). However, without expressly embracing one standard over the other, the court denied the employer’s motion on protected activity and causation grounds.
New York Lawyers Generally Cannot Seek Bounties Under Dodd-Frank, Says New York Ethics Committee
The New York County Lawyers Association Committee on Professional Ethics released Formal Opinion 746 on October 7, in which the Committee considered whether New York lawyers can ethically collect bounties for submitting confidential information about their clients under the whistleblower provisions of the Dodd-Frank Act. According to the Formal Opinion, New York lawyers may not disclose confidential information relating to current or previous clients except to the extent permissible under the New York Rules of Professional Conduct.
Recent Multi-Million Dollar Whistleblower Jury Awards — A Wake-Up Call For Employers
In what might be an unsettling trend for employers, juries in Philadelphia and Anchorage have recently issued multi-million dollar jury awards in favor of whistleblowers. Specifically, on March 22, 2013, a Philadelphia Common Pleas Court jury awarded Plaintiff-whistleblower Marla Pietrowski $1.7 million for her claims under the New Jersey Conscientious Employee Protection Act, and Ms. Pietrowski’s fee petition, which could result in an additional $500,000 in attorneys’ fees and costs, is pending. A few days after the Pietrowski award, an Anchorage, Alaska jury awarded Plaintiff-whistleblower Paul Blakeslee $3.5 million for his claim under the federal False Claims Act (FCA). These awards are concerning for additional reasons discussed below.