By Anne Sherry, J.D.
In amicus briefs before the Supreme Court, SIFMA and the U.S. Chamber of Commerce argue that the Sarbanes-Oxley whistleblower statute requires the plaintiff to prove the employer’s retaliatory intent. The Second Circuit’s holding to that effect created a circuit split that the Supreme Court will resolve. As amicus in support of the petitioner, the U.S. government has asked to participate in oral argument, using part of the petitioner’s allotted time (Murray v. UBS Securities LLC, August 15, 2023).
The Court granted certiorari in May 2023 on the question whether a SOX whistleblower must prove retaliatory intent as part of his case in chief, or whether the employer bears the burden of proving the lack of retaliatory intent as an affirmative defense. The Second Circuit had held on the basis of the statutory language, which prohibits companies from taking adverse employment actions to "discriminate against an employee ... because of" any lawful whistleblowing act, that the employee bears the burden.
Government’s position. Last month, the U.S. government filed an amicus brief in support of the petitioner, in which the SEC joined by a 3-2 vote. The government argues that if Congress had intended a showing of retaliatory intent, it would have said so. The Second Circuit was wrong to focus on the term “discriminate” in the statutory language, when the word is used simply as a catchall to encompass all forms of adverse treatment and does not speak to an employer’s intent. The longstanding interpretation of the Department of Labor's Administrative Review Board that the statute does not require proof of retaliatory intent is entitled to Chevron deference, the government believes.
The government has now requested leave to participate in oral argument and for a divided argument, having obtained the petitioner’s consent to use 10 of his 30 allocated minutes. The government submits that the United States has a significant interest in the question presented because the DOL enforces the SOX provision and the SEC has an interest in protecting whistleblowers. The government participated in the oral argument of the Court’s only prior case concerning the SOX provision in question, and its participation is therefore likely to be of material assistance to the Court, it writes.
Amici for employers. Among others, SIFMA and the U.S. Chamber have filed briefs as amici curiae in support of the UBS entity respondents. Both amici support the Second Circuit’s interpretation of the SOX whistleblower provision as requiring the whistleblower to prove retaliatory intent.
SIFMA. SIFMA writes that the petitioner’s interpretation of SOX deviates from the text of the statute and from longstanding principles governing intentional torts. The brief says that the Second Circuit got it right by focusing on the word “discriminate” as a key phrase in the statute and says that a contrary interpretation is “nonsensical, especially given that the purpose of section 1514A is precisely aligned with the definition of discrimination, i.e., to ensure that an individual is not treated worse than any other because he or she engaged in protected activity.”
SIFMA’s brief points to tort law and federal discrimination and retaliation statutes as further support for its position. Modern tort law recognizes fault as a governing principle, in contrast to the earlier strict-liability system. The Supreme Court has adopted similar principles in its interpretation of constitutional and statutory protections against discrimination. SIFMA also cites circuit appellate cases characterizing retaliatory discharge as an intentional tort.
In SIFMA’s view, removing retaliatory intent from the statutory analysis “leads to unpredictable and nonsensical outcomes.” The brief examines the district court decision in this very case, which instructed the jury that the plaintiff had to show that his whistleblowing activity “tended to affect in any way” the employer’s decision to terminate him. Some courts have suggested that temporal proximity is enough to meet this “contributing factor” standard, potentially giving way to a scenario where an honest employer cannot terminate an underperforming employee simply because the employee has raised unfounded claims of a SOX violation.
U.S. Chamber. Also in support of the employee’s position, the Chamber brief includes many of the same arguments as SIFMA’s regarding the statutory text and the nature of the SOX provision as an anti-discrimination statute. Like SIFMA, the Chamber asserts that the petitioner’s read of the statute would interfere with the employer-employee relationship. As one example, public companies may be unable to reprimand a compliance officer charged with ensuring that the company complies with SEC regulations and federal laws. If the compliance officer incorrectly reports that the employer’s conduct violates SEC regulations, this would be a but-for cause of a reprimand.
The Chamber also addresses the petitioner and government’s argument that the statute’s incorporation of the burden-of-proof provisions of the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR-21) shows that retaliatory intent is not an element of a whistleblower’s SOX claim.
This argument is premised on the suggestion that retaliatory intent cannot be an element of a SOX retaliation claim because AIR-21’s burden-of-proof provisions do not mention retaliatory intent. This premise “improperly conflates burdens of proof with the elements of a claim,” the Chamber writes. And because the petitioner and the government get this wrong, many of their arguments—like that the phrase “contributing factor” does not impose an intent requirement—are beside the point.
The case is set for oral argument on October 10.
The case is No. 22-660.