The US Supreme Court agreed on Monday to take a case and examine the burden of proof on financial whistleblowers in retaliation cases against their employers.
In taking up a case involving Switzerland-based UBS Group AG, the justices will hear an appeal from Trevor Murray, a former UBS bond strategist, of a lower court decision to overturn his 2021 lawsuit accusing the company of unlawfully firing him for refusing to publish misleading research reports and then complaining about being so pressured.
SOX and ‘retaliatory intent’
The appeal revolves around this question: Do whistleblowers who sue their employers for retaliation under the Sarbanes-Oxley Act of 2002 (SOX) need to prove that their employer acted with retaliatory intent?
SOX protects whistleblowers who report financial wrongdoing at publicly traded companies. The law states that a whistleblowing employee meets the burden of proof in allegations of retaliatory conduct by their employers if he or she shows the protected activity (of complaining) “was a contributing factor in the unfavorable personnel action alleged in the complaint”.
The law was adopted with the mission of creating enhanced accounting standards for publicly traded US companies after a series of accounting scandals (culminating with Enron), and the law came with new legal protections for employees who report illegal conduct.
If the employee meets that burden, the employer can prevail only if it “demonstrates by clear and convincing evidence that the employer would have taken the same unfavorable personnel action in the absence of that behavior”.
“The question presented has broad practical ramifications and arises in an area of federal law where uniformity is particularly needed.”
Petition from Trevor Murray to the Supreme Court
The New York-based Second Circuit court of Appeals last year decided that Murray was required to prove UBS acted with retaliatory intent in firing him after complaining (and that he failed to do so), which was a departure from what four other federal court of appeals have held in previous decisions on this point.
Decisions by those courts stated that defendants in SOX retaliation cases can raise the lack of intent as a defense, but that plaintiffs need not prove employers acted with intent.
The high court’s decision in favor of UBS in this case could blunt whistleblower lawsuits because it can be very difficult for plaintiffs to prove an employer’s true motive for a firing, demotion, or other negative employment consequence.
As Murray’s petition to the Supreme Court states: “The question presented has broad practical ramifications and arises in an area of federal law where uniformity is particularly needed.”
Murray’s case
Murray worked in UBS’s mortgage securitization unit and accused UBS upper management of having pressured him to issue skewed and more bullish research on commercial mortgage-backed securities so as to support the bank’s trading and underwriting operations.
He said he was fired in 2012, about two months after complaining to supervisors and despite having received excellent performance reviews.
At the district court level, the jury found for Murray, saying he had met his burden of proof by showing: (1) his activity was protected; (2) his employer knew about the activity; (3) he suffered an adverse action in being fired; and (4) his protected activity contributed to his termination.
The jury also found that UBS had not proved by clear and convincing evidence its affirmative defense – that it would have fired Murray “even if he had not engaged in protected activity”.
The appeals court reversed the decision, siding with UBS and requiring Murray to show as part of his central case that UBS had acted with retaliatory intent.
The Supreme Court is due to hear the case in its next term, which begins in October.