What does a plaintiff have to prove to sustain a whistleblowing claim under the Sarbanes-Oxley Act? Must whistleblowers show that the employer who fired them acted with the intent to retaliate because of protected whistleblower activity? Or is it sufficient for the employee only to show that the whistleblower activity was a “contributing factor” in the employer’s action, shifting the burden to the employer to show that the employee still would have been fired in the absence of the whistleblowing?
On this important question, the U.S. Supreme Court ruled unanimously that an employee fired by an investment bank need prove only that his whistleblower conduct contributed to his dismissal but “he is not required to make some further showing that his employer acted with “’retaliatory intent.’” In Murray v. UBS Securities, Inc., No. 22-660 (Feb. 8, 2024), the Court reversed and remanded a holding by the Second Circuit Court of Appeals that overturned a jury verdict in favor of Trevor Murray, a former UBS research strategist who alleged that he was fired after telling his supervisor that he was being pressured to “skew” required reports in violation of Securities and Exchange Commission (“SEC”) rules. The Court’s ruling demonstrates that Sarbanes-Oxley is a powerful pro-employee statute and that employers risk substantial liability by punishing whistleblowers.
Rejecting the argument that Murray had to prove that UBS acted with retaliatory intent in firing him, the Court significantly held that the whistleblower protection provisions of Sarbanes-Oxley are violated whenever an employer treats someone worse – whether by firing or demoting them or imposing some other unfavorable change in the terms or conditions of employment – because of protected whistleblower activity.
Although Murray’s claim concerned the whistle-blowing protections under Sarbanes-Oxley, the Court’s ruling will affect the analysis of burden-shifting provisions in other federal statutes. A ruling affirming the Second Circuit would have significantly impaired whistleblowing claims because it is often difficult to prove that an employer’s intent to retaliate was the exclusive reason for an employee’s dismissal. Further, the Court resolved a conflict among the Circuit Courts, since the Second Circuit’s requirement that whistleblowers must prove retaliatory intent was in direct conflict with the Fifth and Ninth Circuits. See Coppinger-Martin v. Solis, 627 F. 3d 745 (9th Cir. 2010).
Murray’s responsibilities at UBS included reporting on CMBS markets to current and future customers. SEC rules required him to certify that his reports were prepared independently and accurately reflected his own views. Murray allegedly told his direct supervisor that two leaders on the CMBS trading desk improperly pressured him to make his reports more supportive of their trading strategies and to clear his reports with the trading desk. When he again complained, the supervisor, who previously had given Murray a strong performance report, recommended that Murray be fired.
Murray filed a lawsuit under 18 U.S.C. § 1514A, which was added by Sarbanes-Oxley, and prohibits publicly traded companies from retaliating against employees who report what they reasonably believe to be instances of criminal fraud or securities laws violations. §1514A references other federal law that requires a plaintiff to show that his whistleblowing was a contributing factor in any adverse personnel action but allows the employer to still prevail by demonstrating by clear and convincing evidence that the employer would have taken the same action even in the absence of the whistleblowing.
After a trial, the jury awarded Murray approximately $900,000 in damages while the court added $1.769 million in attorney’s fees and costs. But the Second Circuit reversed, holding that the trial court erred in instructing the jury that Murray need not prove that UBS acted with retaliatory intent. Murray v. UBS Securities, LLC, 43 F. 4th 254 (2d Cir. 2022).
Justice Sotomayor, writing for the Court, held that the text of § 1541A does not reference or include a retaliatory intent requirement nor does the burden-shifting framework support such a requirement. Further, the text provides that an employer may not “discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of” protected whistleblowing conduct. The Second Circuit and UBS argued that the company had not discriminated against Murray. But the Court stated that the term “discriminate” applied to conduct not covered by the other terms, and there was no doubt that Murray was discharged. Also, an animus-like retaliatory intent is absent from the definition of discriminate. “Showing that an employer acted with retaliatory animus is one way of proving that the protected activity was a contributing factor in the adverse employment action, but it is not the only way.” The jury had found that Murray’s protected activity was a contributing factor in his firing while UBS failed to show that it would have taken the same action anyways. To the extent that the contributing-factor framework is not as protective of employers as other federal statutes, that was a policy decision made by Congress.
For more information regarding Alto Litigation’s litigation practice, please contact one of Alto Litigation’s partners: Bahram Seyedin-Noor, Bryan Ketroser, or Joshua Korr.
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