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Second Circuit: SOX Whistleblower Claims Require Retaliatory Intent – Whistleblowing



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On August 5, 2022, the Second Circuit overturned a nearly $1
million jury award granted to a former employee of UBS Securities
LLC (“UBS”). The Court held that the judge’s
instruction to the jury-that Plaintiff was “not required to
prove that his protected activity was the primary motivating factor
in his termination”-was incorrect as a matter of law. Instead,
the Sarbanes-Oxley Act (“SOX”) requires whistleblowers to
specifically prove that the employer took the adverse employment
action “with retaliatory intent.” Murray v. UBS Securities LLC et
al.
, No. 20-4202.

Background

Trevor Murray sued UBS in 2014, alleging that he was terminated
by UBS after he complained that he was pressured to alter his
research, in violation of SOX’s antiretaliation provision, 18
U.S.C. § 1514A. Section 1514A prohibits publicly traded
companies from taking adverse employment actions to
“discriminate against an employee… because of” any
lawful whistleblowing activity. 18 U.S.C. § 1514A(a). At
trial, the district court instructed the jury on the elements of a
section 1514A claim as follows:

First, that plaintiff engaged in
activity protected by Sarbanes-Oxley;

Second, that UBS knew that plaintiff
engaged in the protected activity;

Third, that plaintiff suffered an
adverse employment action – here, the termination of his employment
at UBS; and

Fourth, that plaintiff’s
protected activity was a contributing factor in the termination of
his employment.

* * *

For a protected activity to be a
contributing factor, it must have either alone or in combination
with other factors tended to affect in any way UBS’s decision
to terminate plaintiff’s employment. Plaintiff is not required
to prove that his protected activity was the primary motivating
factor in his termination, or that UBS’s articulated reasons
for his termination . . . was a pretext, in order to satisfy this
element.

While UBS contended that it had terminated Plaintiff in
connection with a large reduction in force triggered by substantial
recent financial losses, the jury found UBS liable and issued an
advisory verdict on damages awarding Plaintiff $653,300 in back
pay, no front pay, and $250,000 in non-economic damages. The
district court subsequently adopted the jury’s advisory verdict
on damages, and awarded an additional $1,769,387.52 in
attorney’s fees and costs.

At issue on appeal was whether the district court properly
instructed the jury on the fourth element. UBS argued that the
district court erred by failing to instruct the jury that Murray
had to prove UBS’s retaliatory intent to prevail on his section
1514A claim. Plaintiff responded that retaliatory intent is not an
element of such a claim.

Ruling

Relying on the plain meaning of the statutory language and its
interpretation of a nearly identical statute, the Second Circuit
concluded that “retaliatory intent is an element of a section
1514A claim” and that “[t]he district court committed a
non-harmless error by failing to instruct the jury
accordingly.”

First, the Second Circuit determined that the “plain
meaning” of the statutory language makes clear that
retaliatory intent is an element of a section 1514A claim because
the text of the statute prohibits discriminatory actions
“because of” whistleblowing, which necessarily requires
retaliatory intent – i.e., the employer’s adverse
action must be motivated by the employee’s whistleblowing.

Second, the Second Circuit found that reading retaliatory intent
into this provision is consistent with the Court’s previous
interpretation of nearly identical language in the Federal Railroad
Safety Act, and that “[w]e generally interpret identical
language in different statutes to have the same meaning.”

The panel concluded that it was “unconvinced” that the
erroneous jury instruction did not influence the verdict, and
therefore vacated the jury’s verdict and remanded to the
district court for a new trial.

Implications

This narrow interpretation of section 1514A will make it more
challenging for plaintiffs within the Second Circuit’s
jurisdiction to prove causation. As the Second Circuit
acknowledged, however, this decision is at odds with the approach
of the Fifth and Ninth Circuits, which have specifically read the
statute not to require retaliatory intent. It remains to be seen
whether the United States Supreme Court will ultimately resolve
this circuit split.


Second Circuit: SOX Whistleblower Claims Require Retaliatory
Intent

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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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