In a recent decision, Trevor Murray v. UBS Securities, LLC, the United States Court of Appeals for the Second Circuit considered section 1514A of the Sarbanes-Oxley Act (SOX), which protects employees of publicly traded companies from adverse employment actions that “discriminate against an employee . . . because of” any lawful whistleblowing act. On appeal, the Court found that section 1514A requires a whistleblower-employee to prove by a preponderance of the evidence that the employer had retaliatory intent when it took adverse action against the employee.
The trial of the matter involved a former employee of UBS Securities, LLC and UBS AG (UBS) who was required by the Securities and Exchange Commission (SEC) to certify that his reports were produced independently and that they accurately reflected his views. The employee claimed that two leaders of UBS’s trading desk pressured him to skew his research and to publish reports to support their business strategies. He eventually reported the conduct to his direct supervisor, shortly after which, his employment was terminated.
The employee sued UBS in the United States District Court for the Southern District of New York, arguing that he was subjected to retaliation for reporting the conduct to his supervisor. During a jury trial, and despite objection from UBS, the district court failed to instruct the jury that proof of UBS’s retaliatory intent was a key element of a section 1514A claim. The employee prevailed at trial, in what the district court remarked was one of the closest cases it had ever observed. The district court entered judgment, awarding the employee $653,300 in back pay, no front pay, and $250,000 in non-economic damages – which were identical to the jury’s advisory verdict on damages – as well as over $1.7 million in attorney’s fees and costs. UBS appealed, and the employee cross-appealed the damages and attorney’s fee awards.
On appeal, the Second Circuit overturned the district court’s judgment, holding that the district court erred by failing to instruct the jury that a SOX anti-retaliation claim required the employee to prove UBS’s retaliatory intent by a preponderance of the evidence. The Court reached this conclusion based on the plain language of the statute. Specifically, the Court considered that the words “because of” showed that the law requires this intent. The Court looked to precedential interpretation of another, similarly worded, statute to support its finding. It also found that the jury instruction was not a harmless error, and therefore required a new trial.
Importantly, the Court determined that an employee is not required under section 1514A to prove that the employer’s retaliatory intent is the sole motivating factor in the adverse decision, but rather that it is sufficient to show that retaliation is a motivating factor. This decision is a helpful clarification of the elements required to be proven by the whistleblower employee to succeed in a SOX anti-retaliation claim under section 1514A.
We wish to thank Benita Ikpo for assisting in the preparation of this article.