Source: https://kcnfdc.com/blog/supreme-courts-lawson-decision-is-a-landmark-for-whistleblowers/
Timestamp: 2019-04-19 20:57:34+00:00

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Supreme Court's Lawson decision is a landmark for whistleblowers | Kalijarvi, Chuzi, Newman & Fitch, P.C.
Yesterday, the U.S. Supreme Court issued its first decision about the whistleblower protection in the Sarbanes-Oxley Act (SOX). In Lawson v. FMR, the Court decided that corporate fraud whistleblowers are protected when they raise concerns about violations of SEC accounting rules, even if they work for a contractor of a publicly traded company.
Justice Ginsberg wrote the majority opinion, joined by Justices Breyer, Kagan and Chief Justice Roberts. Her opinion goes farther by explaining the importance of deciding cases based on the remedial purpose of the law. For SOX, that purpose was to, “safeguard investors in public companies and restore trust in the financial markets following the collapse of Enron Corporation[.]” Justice Ginsberg made this line the first line of her opinion, giving emphasis to the idea that the Court should help Congress reach the goals of the law.
Lawson had worked for the Fidelity organization for years, and she raised concerns about its cost accounting methods. These methods obviously affect the reports filed with the SEC. In 2006, while still working for Fidelity, she filed a whistleblower retaliation claim with OSHA. In September 2007, while her complaint was still pending with OSHA, she resigned and claimed that she was constructive discharged by Fidelity. In 2008, she brought her retaliation case to the U.S. District Court in Massachusetts. Zang let his case proceed further to a decision by an Administrative Law Judge (ALJ). He appealed to the Administrative Review Board (ARB) and then brought his case to the same court as Lawson’s case. The Fidelity companies made motions to dismiss, which the judge denied. The judge, however, granted special permission for the defendants to appeal before the case proceeded any further.
On appeal, the Secretary of Labor and the SEC both filed amicus briefs urging the Court of Appeals to agree that the Sarbanes-Oxley Act (SOX) covers Lawson and Zang.
On February 3, 2012, two judges of the U.S. Court of Appeals for the First Circuit dismissed the SOX whistleblower claims of Jackie Lawson and Jonathan Zang. The case is Lawson v. FMR, LLC, 670 F.3d 61 (1st Cir. 2012). To justify this dismissal, the two judge majority held that the SOX whistleblower statute was not remedial, that it is but a “relatively small part” of SOX, that the Department of Labor (DOL) deserves no deference in SOX cases, and that the SOX whistleblower protection does not apply to the employees of contractors of publicly traded companies. Judge Thompson, dissenting, got it right.
On page 2, Justice Ginsberg recognizes that at the motion to dismiss level, courts must take “the allegations of the complaint as true[.]” The Supreme Court did not require any special pleading, and did not apply the Iqbal or Twombly decisions.
On pages 8 and 26, Justice Ginsburg lauded the dissent in the First Circuit written by Judge Ojetta Rogeriee Thompson. This dissent said the First Circuit had “impose[d] an unwarranted restriction on the intentionally broad language of [SOX]” and “bar[red] a significant class of potential securities-fraud whistleblowers from any legal protection.” Quoting 670 F.3d 61 at 83. This is a nice honor for the new appellate judge who got it right.
On page 9, Justice Ginsburg reaches her main conclusion quickly. When SOX says “no … contractor … may discharge … an employee,” the natural meaning is that the contractor cannot fire its own employees. It is too bad that the First Circuit majority could not read this text for its natural meaning. “[W]e presume the operative language means what it appears to mean[.]” Page 10.
On pages 12-13, Justice Ginsburg reviews each of the ways SOX refers to “the employee” and “the employer” and concludes that Congress clearly meant to protect employees from discharges by their own employers. Prof. Eric Schnapper, who represented Lawson and Zang at the Supreme Court, developed this argument in rich detail in his merit brief. It is nice to see his insightful and detailed legal analysis pay off in the text of the majority opinion.
On page 16, the opinion states, “Our textual analysis of [SOX] fits the provision’s purpose.” That purpose is, “to ward off another Enron debacle.” Page 17.
On page 23, Justice Ginsburg says that if the Court is wrong, “Congress can easily fix the problem by amending [SOX.]” Having participated in many efforts to get Congress to amend laws to better reflect their remedial purposes, I would not say it is so easy. Sometimes the political winds align and Congress does act, such is with the Lilly Ledbetter Fair Pay Act of 2009. I am still waiting on Congress to correct the restrictive holdings in Garcetti v. Ceballos, Gross v. FBL and now University of Texas Southwestern Medical Center v. Nassar.
On page 24, the Court states, “The potential impact on shareholders of false or misleading registration statements needs no elaboration.” This sentence makes what I think is an obvious point: all concerns about the correctness of SEC filings are protected. Many companies have tried to argue that employee concerns are not protected unless the meet the company’s threshold of significance. For big companies, that threshold is a surprisingly high dollar amount. With this sentence, I hope that such arguments will no longer let companies off the hook for retaliating against those who raise concerns they consider to be too small. If it is big enough to cause retaliation, then it is big enough for SOX to correct.
On page 29, the Court’s majority opinion concludes with a finding that SOX and AIR 21 should be interpreted together. “The provisions’ parallel text and purposes counsel in favor of interpreting the two provisions consistently.” I hope this is a step toward a unified body of whistleblower law. Given that such laws serve “parallel” remedial purposes, it is logical that decisions under one law should apply to others. The Supreme Court has unified the law for awards of attorney’s fees, and whistleblower protection would be another area that deserves the efficiency and efficacy of becoming a single body of law.
Justice Scalia, joined by Justice Thomas, wrote a concurring opinion to take issue with a few of the statements made in the majority opinion by Justice Ginsburg. First, he disagrees with the whole idea of congressional “intent.” He lambasts use of the Senate Report because, “[m]any of them almost certainly did not read the report[.]” He presumes they did not agree with it. I noticed that in another decision written by Justice Scalia, he reached the right outcome without ever mentioning the law’s remedial purpose. Staub v. Proctor Hosp., 131 S. Ct. 1186 (2011). There, a jury held that Vincent Staub lost his job because of his need for leave to attend to his Army Reserves duties. Congress passed the Uniformed Services Employment and Reemployment Rights Act (USERRA) to protect service members, and encourage people to enlist through the promise of government protection of their jobs. However, one would never know this purpose from reading Justice Scalia’s opinion. For this reason, I am glad that Justice Ginsburg wrote the majority opinion for Lawson, and not Justice Scalia. Justice Scalia also disagrees with using AIR 21 to interpret SOX, and he rejects the idea of any “limiting principl[e]” as the text provides no basis for any limitation.
Many congratulations to Lawson’s attorneys, Prof. Eric Schnapper of Seattle and Indira Talwani of Boston. R. Scott Oswald was the lead author of NELA’s and GAP’s amicus brief, assisted by Kelly Kruse, Michael Anderson, Tom Devine, Rebecca Hamburg and myself. Together, this team effort has advanced whistleblower rights with legal principles that will resonate for years to come.
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