Subscribe

RSSAdd blog to your RSS feed

Follow Us

Twitter LinkedIn

Contributing Editors

Disclaimer
© 2018 Zuckerman Spaeder LLP

Showing 73 posts in Whistleblowers.

Where the Whistle Blows: Justices Express Doubt That Dodd-Frank Protection Shields Internal Whistleblowing

When Congress passed the Dodd-Frank Act in 2010, it bolstered protections for whistleblowers who report certain kinds of misconduct, such as violations of securities law. At the time, the Sarbanes-Oxley Act already provided many of these whistleblowers with a cause of action for retaliation. But the new Dodd-Frank cause of action included a longer statute of limitations, a more generous damages remedy, and a right to proceed straight to federal court rather than first bringing the claim to the Department of Labor (as Sarbanes-Oxley requires).

Sarbanes-Oxley provides protection for individuals who blow the whistle internally. But courts have struggled with whether Dodd-Frank provides that same protection, or if Dodd-Frank protects only individuals who report misconduct to the Securities and Exchange Commission (SEC) directly. Read More ›

Halloween Flashback: Our Scariest Stories for Employers

Ghosts, ghouls, and ghastly liability; the last is certainly enough to spook any employer. For this Halloween, we take a trip down Elm Street to revisit the most startling nightmares we’ve ever covered.

It Came From the General Counsel’s Office. In March of this year, we told the story of an in-house attorney who won a $14.5 million verdict against his employer after he raised concerns about FCPA violations at the company. The company’s case faltered when the trial revealed that a negative review of the attorney had been backdated. Read More ›

Supreme Court Will Decide Whether Internal Whistleblowers Can Bring Dodd-Frank Retaliation Claims

The Dodd-Frank Act, passed in 2010, includes a new cause of action for whistleblowers who claim that their employer retaliated against them for reporting wrongdoing. But it’s not yet certain whether a whistleblower who blew the whistle internally, but not to the Securities & Exchange Commission, can bring a Dodd-Frank claim. As we covered in this post, federal judges have issued conflicting decisions on this issue.

The Supreme Court is now ready to resolve this conflict. Today, the Court granted certiorari in Digital Realty Trust, Inc. v. Paul Somers, which presents the question of whether the Dodd-Frank protection extends to an internal whistleblower. Read More ›

Federal Whistleblower Statutes Aren’t a Cure-All

When Congress passed the Sarbanes-Oxley and Dodd-Frank Acts, it included protections for employees who blow the whistle on wrongdoing by their employers. However, those whistleblower protections don’t apply to every report of wrongdoing. Rather, they come into play only when an employee reports particular types of misconduct.

For example, in a recent decision (Erhart v. BofI Holding, Inc.), a federal court in California dismissed claims by an internal auditor (Erhart) against his employer (BofI Holding), ruling that Erhart didn’t plausibly allege that he had been engaged in the "protected activity" necessary to qualify for the whistleblower protections of those statutes. Read More ›

How Does a Court Decide Whether an Employee's Whistleblowing Caused Termination?

In our last post, we discussed the case of Wiest v. Tyco, in which the Third Circuit held that an employer’s investigation of unrelated wrongdoing by an employee insulated it against the employee’s Sarbanes-Oxley whistleblower retaliation claim. Now, we tackle another piece of the Wiest decision: the court’s holding that Wiest’s protected activity did not contribute to the adverse action against him.

To establish a Sarbanes-Oxley claim, an employee must show that there was a causal connection between his or her whistleblowing and an adverse employment action. If the employee can’t show that link, then he or she can’t prevail. In the Wiest case, the court assumed that Wiest did in fact engage in protected whistleblowing activity. But it held that Wiest didn’t have evidence to show that the whistleblowing caused the employer to take action against him. Read More ›

Investigation Insulates Employer Against Sarbanes-Oxley Retaliation Claim

An employee who has blown the whistle on wrongdoing is not immune from discipline or termination simply because she has engaged in protected activity.

The Third Circuit’s recent decision in Wiest v. Tyco Electronics provides a good example of how an employer can terminate an employee without legal repercussions, even when it is undisputed that the employee was protected against whistleblower retaliation. Read More ›

Sixth Circuit Upholds Financial Planner’s Sarbanes-Oxley Win

Section 1514A of the Sarbanes-Oxley Act shields a whistleblower from retaliation if he reports “conduct [that he] reasonably believes” violates certain laws, including Securities and Exchange Commission regulations.  Last month, the Sixth Circuit held that the question of a whistleblower’s “reasonable belief” is a “simple factual question requiring no subset of findings that the employee had a justifiable belief as to each of the legally-defined elements of the suspected fraud.”  Rhinehimer v. U.S. Bancorp Investments, Inc., No. 13-6641 (6th Cir. May 28, 2015).  Based on this principle, the court affirmed a $250,000 verdict in favor of the plaintiff, Michael Rhinehimer.

According to the Court’s opinion, Rhinehimer was a financial planner for U.S. Bancorp who helped his elderly customer, Norbert Purcell, set up a trust and a brokerage account.  In November 2009, Rhinehimer went on disability leave, and asked a colleague not to conduct any transactions with Purcell.  The colleague didn’t follow the instructions, and instead put Purcell into investments that Rhinehimer believed were unsuitable.  (Unsuitability fraud under the securities laws occurs when a broker knows or reasonably believes certain securities to be unsuitable to a client’s needs, but recommends them anyway.)    Rhinehimer complained about the trades, but his superiors warned him that he should “stay out of the matter” and stop criticizing the colleague.  After Rhinehimer hired a lawyer, he was placed on a performance improvement plan and fired after he failed to meet it. Read More ›

L’Oreal Lawyer Claims Company Fired Him When He Wouldn’t Pursue Problematic Patents

After firing its head patent attorney, Steven Trzaska, L’Oreal is now under fire from Trzaska in New Jersey federal court.  On April 16, 2015, Trzaska sued L’Oreal, claiming that his firing violated New Jersey’s Conscientious Employee Protection Act (“CEPA”).

In his complaint (available at Law360), Trzaska alleges that L’Oreal had a quota for its New Jersey office of 40 filed patent applications in 2014.  But, Trzaska contends, an outside consultant had previously found that many of L’Oreal’s patent applications were purely cosmetic, saying that “the vast majority of its inventions were of low or poor quality.”  Trzaska alleges that his superiors pressured him to file applications to meet the quota.  However, he told them that “neither he nor the patent attorneys who reported to him were willing to file patent applications that the attorneys believed were not patentable.”  Soon after, L’Oreal terminated him, saying that it was hiring a new “head of patents of the Americas.”  Trzaska claims that this explanation was pretext and that the company in fact fired him because he refused to file applications that were not patentable.

How do Trzaska’s claims line up with CEPA?  Read More ›

The Inbox – This One’s for the Birds

Craig Watts, a chicken farmer from North Carolina, recently brought a whistleblower complaint against Perdue, claiming that the poultry seller retaliated against him for bringing certain animal welfare claims to light.  Mr. Watts owns the farm on which the chickens are raised, but, according to the Government Accountability Project, the terms and conditions of the farm operations are strictly governed by the poultry giant. The Food Integrity Campaign (a program operated by the Government Accountability Project) filed the action on behalf of Mr. Watts, defending his right to speak out about the conditions on the farm, which Watts claims run far “afowl” of Perdue’s marketing claims of “cage-free” and “humanely-raised” chickens. After publicizing the conditions on his farm, Watts was placed on a performance improvement plan and is routinely subjected to surprise audits of his farm.

A former executive at L.A.’s Fashion Institute of Design and Merchandising is seeing red over the school’s termination of her employment, which allegedly came after she demanded more diverse branding in the school’s publications. Tamar Rosenthal filed a civil rights complaint in Los Angeles Superior Court alleging that the school, seemingly interested only in shades of white, opposed her attempts to showcase student diversity on the website and explicitly advised her not to showcase gay, black or non-white students in any school publications.  According to My News LA, the complaint further alleged that Ms. Rosenthal’s supervisors created an “ultra-conservative, anti-Arab and anti-Muslim political atmosphere in the school’s front office.” Read More ›

Fourth Circuit Upholds Jury’s Sarbanes-Oxley Award of Emotional Distress Damages to Fired CFO

The Sarbanes-Oxley Act’s whistleblower protection provision, 18 U.S.C. § 1514A, allows a wrongfully terminated whistleblower to recover “all relief necessary to make [her] whole.”  18 U.S.C. § 1514A(c)(1).  The statute then goes on to say that compensatory damages include reinstatement, back pay, and “special damages,” including expert fees and reasonable attorneys fees.  In an opinion issued this week, the Fourth Circuit held that Sarbanes-Oxley damages don’t just include these enumerated damages.  Rather, an employee can obtain other compensation for harm, including emotional distress damages.  Jones v. SouthPeak Interactive Corp. of Delaware, Nos. 13-2399, 14-1765 (4th Cir. Jan. 26, 2015).

The plaintiff in the case, Andrea Gail Jones, was the former chief financial officer of SouthPeak, a video game manufacturer.  According to the opinion, in 2009, SouthPeak wanted to buy copies of a video game for distribution, but didn’t have the cash to buy the games up front.  Instead, SouthPeak’s chairman, Terry Phillips, personally fronted Nintendo over $300,000.  When SouthPeak didn’t record this debt, Jones raised a stink, eventually telling the company’s outside counsel that the company was committing fraud.  The same day, the company’s board fired her.  Read More ›