UBS Whistleblower Case Creates Avenue to Upend Retaliation Test
This article features Government Accountability Project, and was originally published here.
Whistleblowers across various industries potentially face a heightened standard for proving retaliation now that the US Supreme Court is on course to clarify the burden-shifting framework in a case involving a former UBS employee.
The justices agreed earlier this week to hear a former UBS Securities LLC research strategist’s whistleblower case, the crux of which turns on whether the Sarbanes-Oxley Act requires him to show that the bank fired him with retaliatory intent, not just that the protected disclosure was a contributing factor to the decision.
The US Court of Appeals for the Second Circuit last year overturned a $1.7 million jury verdict against UBS Securities and parent UBS AG, finding that the jury should’ve been told that former employee Trevor Murray had to show that the company retaliated because of his lawful whistleblowing activity.
Requiring proof of retaliatory intent would make it virtually impossible for whistleblowers to pursue Sarbanes-Oxley retaliation claims, attorneys say. The Second Circuit is an outlier from other circuits that have addressed the issue, and the Supreme Court would undercut the legal safeguards for corporate whistleblowers if the justices affirm the decision below, they said.
The Tenth, Ninth, Fifth, and Fourth circuits instead have applied the contributing factor test, according to Murray.
“The worry is that high burden undermines the logic of the statute itself, if it’s on the plaintiff,” said Shayne Stevenson of Hagens Berman Sobol Shapiro LLP, who leads the firm’s whistleblower practice. “Most of the time, it’s extraordinarily difficult to establish intent because corporations are particularly adept at not leaving a paper trail, and muddying the water and masking their obvious intent to punish and retaliate against a worker.”
Robert Thomas, co-founder of Whistleblower Law Collaborative, agreed that the Second Circuit’s logic appears to go against the intent of the law.
“One question that might be asked here is why we want to make it harder for whistleblowers to prove their claims of retaliation when Congress wanted to make it easier for them to come forward,” said Thomas, who represents whistleblowers under various federal and state laws.
Otherwise, workers would be discouraged from blowing the whistle, and “fraud would get a little more immunity, if you will,” he said.
Domino Effect
“The Second Circuit’s decision flies in the face of the text of the burden-shifting framework established by Congress decades ago to govern how Sarbanes-Oxley and other whistleblower trials are conducted,” Murray’s attorney, Robert Lloyd Herbst of Herbst Law PLLC, told Bloomberg Law in a statement. “We look forward to arguing this case on the merits, and advancing our contention that the Second Circuit’s decision should be reversed.”
An attorney for the bank didn’t reply to a request for comment. But UBS maintained in court papers that Murray was never a whistleblower, and instead was fired as part of a broader staff reduction.
Depending on how the justices rule, anti-retaliation protections for corporate whistleblowers in other industries like nuclear energy, railways, and aviation could also be implicated, attorneys said.
Congress created a similar burden-of-proof framework for employee whistleblowers under various statutes and modeled those provisions after each other.
“The logic is consistent application,” Thomas said.
“The alarm bells are ringing” because “this is a very important pubic policy question that would not only impact Sarbanes-Oxley” cases, he said.
Those sentiments were echoed by Sens. Charles Grassley (R-Iowa) and Ron Wyden (D-Ore.), who supported Murray’s high court bid in a joint amicus brief with the Government Accountability Project.
The lawmakers, who lead the Senate Whistleblower Protection Caucus, identified more than a dozen federal whistleblower protection statutes that have “virtually identical legal burdens.”
A plaintiff need only demonstrate that their whistleblowing was a contributing factor to the adverse employment action, the amicus brief said. The burden then shifts to the employer to show that it would’ve taken the same action in the absence of the whistleblowing.
The whistleblower prevails unless the employer meets this heightened burden, the brief said.
‘Workable’ Test
Mike Delikat, a partner in Orrick, Herrington & Sutcliffe LLP’s employment law practice group, said the Second Circuit got it right.
The Sarbanes-Oxley Act punishes employers who retaliate “because of” an employee’s protected activity, he said.
But Delikat acknowledged that affirming the Second Circuit’s test would significantly reduce the number of whistleblower cases that otherwise would’ve survived the summary judgment stage, or resulted in a verdict after trial.
DLA Piper partner David Priebe, who defends companies in securities litigation, said he believes the Second Circuit’s standard is “workable” for whistleblowers to successfully litigate their retaliation claims.
The intent element is common in securities fraud cases, he said.
“I don’t think it will gut the cause of action or put a tight burden on plaintiffs that doesn’t exist in other statues where intent is required,” Priebe said.