SCOTUS Sides with Whistleblowers in UBS Case

On February 8, 2024, the Supreme Court issued a decision in Murray v. UBS Securities LLC, et al., siding with whistleblower Trevor Murry in holding that whistleblowers seeking protection from retaliation under federal law needn’t show retaliatory intent on the part of their employers.

The case analyzed the retaliation provisions of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A (“SOX”), which prohibits publicly traded companies from retaliating against employees who report what those employees reasonably believe to be examples of securities law violations or criminal fraud.  The provision states that a company may not “discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of” protected whistleblowing activity undertaken by an employee.

The plaintiff in this action, Trevor Murray, alleged that UBS, his former employer, violated this provision when they terminated his employment.  Murray was a research strategist, and part of his role requires him to certify, under SEC regulations, “that his reports to UBS customers on the firm’s securities business were independently produced and reflected his own views.”  Murray’s termination followed his internal report to his supervisor, in which set forth concerns that “two leaders of the UBS trading desk were engaged in what he believed to be unethical and illegal efforts to skew [Murray’s] independent reporting.”

At the close of Murray’s 2017 trial, the District Court (SDNY) instructed the jury that Murray was required to prove four elements under SOX: (1) that he was covered by SOX, which generally applied to employees and contractors of publicly traded companies; (2) that he had engaged in “protected activity” under SOX, including raising concerns about fraud of securities law violations; (3) that he had been subject to an “adverse action,” that is, an action that would dissuade a reasonable individual from whistleblowing; and (4) that there was a causal connection between the protected activity and the adverse action.  This case focused on the fourth factor, with the Court instructing the jury that Murry had only to prove that the protected activity was a “contributing factor in the termination,” and not, as UBS argued, that that protected activities were the “primary motivating factor” for the termination, or that UBS’s stated reasons for the firing were pretextual.  UBS objected to these jury instructions and moved for judgment as a matter of law, which the District Court denied. The jury subsequently found for Murray, awarding him $903,000.    

UBS subsequently appealed, and the Second Circuit found in its favour.  See Murray v. UBS Sec., LLC, 43 F.4th 254 (2d Cir. 2022).  Relying on the “discriminate against” and “because of” language in 18 U.S.C. § 1514A(a), quoted above, the Second Circuit held that, for an employee to prevail on the “contributing factor” element, “a whistleblower-employee must prove that the employer took the adverse employment action against the whistleblower-employee with retaliatory intent—i.e. an intent to ‘discriminate against an employee…because of’ lawful whistleblowing activity.”  (internal citations omitted.)  In addition to heightening a whistleblower-employee’s evidentiary requirements, this ruling also created a circuit split on the SOX whistleblower claim standards— the Fifth and Ninth Circuits had previously held that retaliatory intent was not an element of a SOX retaliation claim. 

Murray appealed the Second Circuit decision, and the Supreme Court granted cert in May 2023.  With Justice Sonia Sotomayor writing for a unanimous court, the February 2024 decision firmly rejected the Second Circuit’s holding.  “Showing that an employer acted with retaliatory animus is one way of proving that the protected activity was a contributing factor in the adverse employment action, but it is not the only way.”  (emphasis added.)  The Court noted that “Section 1514A(a)’s text does not reference or include a ‘retaliatory intent’ requirement, and the provision’s mandatory burden-shifting framework cannot be squared with one,” then went on to observe that, while “the Second Circuit and UBS both rely heavily on the word ‘discriminate’ in §1514A to impose a ‘regulatory intent’ requirement on whistleblower plaintiffs,” that word “cannot bear the weight” placed on it.  This is because the “placement of the word ‘discriminate’ in the section’s catchall provision suggests that it is meant to capture other adverse employment actions that are not specifically listed, drawing meaning from the terms ‘discharge, demote, suspend, threaten, [and] harass,’ rather than imbuing those terms with a new or different meaning.”  Because an “animus-like ‘retaliatory intent’ requirement is simply absent from the definition of the word ‘discriminate,” it does not matter, when an employer fires, demotes, or makes some other unfavorable employment change after protected whistleblowing activity, that “the employer was motivated, for example, by the belief that the employee might be happier in a position that did not have SEC reporting requirements.” 

In resolving the circuit split and preventing the imposition of the heightened standard posited by UBS and the Second Circuit, this ruling represents an important protection of whistleblower rights.  As Murray’s attorney, Robert B. Stulberg, commented, “this decision represents a resounding vindication” for Murray’s 12-year battle against UBS, but also “represents the Supreme Court’s uncompromising recognition that Sarbanes-Oxley—and similar statutes—were designed to empower whistleblowers to come forward in order to protect public health, safety, and security.” 

If you are interested in becoming a whistleblower, or are concerned about potentially retaliatory actions taken by your employer, contact Lundin PLLC Senior Attorney Alexandra Douglas at [email protected].

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