Source: https://fcablog.sidley.com/category/courts/u-s-supreme-court/page/4/
Timestamp: 2020-05-25 15:00:40
Document Index: 541183793

Matched Legal Cases: ['§ 3287', '§ 3730', '§ 1514', '§ 1514', '§ 1514', '§ 1514', '§ 1514', '§ 1514']

Sidley False Claims Act Blog U.S. Supreme Court Archives - Page 4 of 4 - Sidley False Claims Act Blog
Supreme Court Agrees To Hear Important Case Involving First to File and Statute of Limitations
On July 1, the Supreme Court granted the petition for a writ of certiorari in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, a case which will have significant implications for two key issues under the False Claims Act: statute of limitations and the first-to-file bar. The petition raises two questions. The first is “[w]hether the Wartime Suspension of Limitations Act – a criminal code provision that tolls the statute of limitations for “any offense” involving fraud against the government “[w]hen the United States is at war,” 18 U.S.C. § 3287, and which this Court has instructed must be “narrowly construed” in favor of repose – applies to claims of civil fraud brought by private relators, and is triggered without a formal declaration of war, in a manner that leads to indefinite tolling.” As we have previously written, courts are divided on whether the Wartime Suspension of Limitations Act in effect permanently tolls the statute of limitations on civil FCA claims. Notably, the Supreme Court has agreed to address this question notwithstanding the fact that the Solicitor General opposed the request.
The second, equally important issue raised by the petition is “whether, contrary to the conclusion of numerous courts, the False Claims Act’s so-called “first-to-file” bar, 31 U.S.C. § 3730(b)(5) – which creates a race to the courthouse to reward relators who promptly disclose fraud against the government, while prohibiting repetitive, parasitic claims – functions as a “one case- at-a-time” rule allowing an infinite series of duplicative claims so long as no prior claim is pending at the time of filing.” As we have discussed in previous posts, there is a split among the circuits on this issue, which the Court has now apparently agreed to resolve – again, over the government’s objection.
The case will not be heard until the Court’s 2015 term (starting in October 2014), meaning a decision is unlikely before next year. We will be following the case closely and provide updates on key developments.
Supreme Court Extends SOX’s Whistleblower Protections to Employees of a Public Company’s Private Contractors
Kristin Graham Koehler and Kristen Mann
Retaliation, U.S. Supreme Court
Posted by Kristin Graham Koehler and Kristen Mann
In Lawson v. FMR LLC, 571 U.S. ___ (2014), the Supreme Court held that the whistleblower protections in the Sarbanes-Oxley Act of 2002 extend to the employees of a public company’s private contractors and subcontractors. SOX provides that “[n]o [public] company … , or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment” because of whistleblowing activity. 18 U.S.C. § 1514A(a).
The plaintiffs, two former employees of FMR LLC (“FMR”) subsidiaries that provided management and advisory services to publicly traded Fidelity mutual funds, brought suit respectively alleging that their employers retaliated against them for raising concerns about cost accounting methodologies and inaccuracies in a draft SEC registration statement. FMR moved to dismiss the complaints, contending that the plaintiffs were not “employees” within the meaning of § 1514A(a). The district court denied FMR’s motions, concluding in each case that SOX’s whistleblower protections extend to the employees of a public company’s private contractors. On interlocutory appeal, a divided panel of the First Circuit reversed, holding that the retaliation provision’s protections extend only to employees of public companies, but not to the employees of a contractor of a public company.
The Supreme Court reversed the First Circuit’s decision. The Court looked first to the text’s ordinary meaning. It concluded that the operative language of § 1514A “means what it appears to mean”—that a contractor to a public company may not retaliate against its own employee for whistleblowing activity (slip op. 10). The Court found that the provision as a whole confirmed this reading. The Court further concluded that interpreting SOX’s whistleblower protections to apply to the employees of a public company’s private contractors was consistent with the Act’s aim to prevent another Enron scandal. The Court found that the legislative history demonstrated that Congress understood, and was motivated by concern about, the significant role outside professionals (such as accountants) play in reporting fraud by the public companies with whom they contract. In addition, Congress had modeled SOX’s retaliation provision on a retaliation provision from an earlier act that had been interpreted to cover employees of contractors and subcontractors.
The Court’s reading of “employee” potentially exposes public companies to suits brought by their employees’ personal employees (for example, a public company employee’s nanny or a gardener). Although the Court acknowledges that this is a “curious[]” result (slip op. 15), it dismissed concerns that its decision would open the floodgates for whistleblowing suits. It pointed to the Department of Labor’s longstanding interpretation that § 1514A applies to contracting employees and further noted that FMR could not identify a single case in which a contracting employee had asserted a claim based on allegations unrelated to shareholder fraud. The Court declined, however, to explicitly adopt limiting principles suggested by the plaintiffs and the Solicitor General, leaving the bounds of § 1514A to be determined in a future case.
The opinion can be accessed here. This decision is consistent with how agents and contractors are treated under the False Claims Act, which affords such individuals protection against retaliation. (31 U.S.C. 3730(h)(1) “any employee, contractor, or agent shall be entitled to all relief necessary … if that employee, contractor, or agent is discharged.”)
United States Supreme Court To Take Up Important Case Regarding the Scope of SOX’s Whistleblower Protection Provisions
Ben Mundel and Jonathan F. Cohn
Posted by Jonathan Cohn and Benjamin Mundel
On Monday, the United States Supreme Court granted certiorari in Lawson v. FMR LLC, No. 12-3 (certiorari granted May 20, 2013). The issue presented is whether an employee of a privately held contractor or subcontractor of a public company is protected from retaliation by Section 806 of the Sarbanes-Oxley Act, 18 U.S.C. § 1514A. The statute prohibits retaliation by a public company—or an officer, employee, contractor, subcontractor, or agent of a public company—against “an employee” who reports fraud or a violation of securities regulations. This is an important case that may interpret the scope of Sarbanes-Oxley’s whistleblower protection provisions.
The two plaintiffs, former employees of subsidiaries of publicly traded Fidelity mutual funds, brought suit in federal district court after allegedly suffering adverse employment action as a result of their whistleblowing. The first plaintiff allegedly blew the whistle on the fund for improperly attributing expenses to increase fees. The second plaintiff raised an issue regarding the categorization of a particular fund which he alleged led to the fund improperly charging a management fee. Fidelity filed a motion to dismiss on the grounds that the plaintiffs, who were not employees of a publicly traded company, were not “employees” within the meaning of statute. The district court denied Fidelity’s motion to dismiss. Relying on legislative history, the district court held that the statute protected employees of contractors. Fidelity filed an interlocutory appeal.
The First Circuit reversed in a 2-1 decision, holding that the term “employee” in the statute covers only those at publicly traded companies. The panel refused to grant any deference to the Department of Labor and SEC’s position and instead relied on the title of the statute and caption that reads: “employees of publicly traded companies.”
Before granting certiorari, the Supreme Court first called for the views of the Solicitor General. On behalf of the United States, the Solicitor General asked the court to deny certiorari even though he believed that the First Circuit’s interpretation was erroneous. As to the merits, the Solicitor General argued that the plaintiffs were covered under the plain terms of the act and the legislative history supported a broad reading. Furthermore, the Solicitor General argued that, if the statute were vague, the Department of Labor’s decision in Spinner v. David Landau & Assocs., LLC, ARB Case NOS. 10-111; 10-115 was entitled to Chevron deference. Regardless, the Solicitor General concluded that certiorari was not appropriate at this time because there was no disagreement in the circuits on the question, the issue has arisen infrequently, and no circuit had the opportunity to consider the Department of Labor’s recent Spinner decision.
Nevertheless the Supreme Court granted certiorari and will hear the case next term. This case will likely resolve the disagreement between the First Circuit and the Department of Labor regarding the scope of the term “employee” under Section 806 of the Sarbanes-Oxley Act. If the Supreme Court reverses the First Circuit, there may be increased exposure for companies because employees of privately held companies that contract with public companies will be entitled to whistleblower protections under SOX.