Decision Alert: Supreme Court Unanimously Rules In Favor of Sarbanes-Oxley Whistleblower Protections

On February 8, 2024, the Supreme Court unanimously held in Murray v. UBS Sec., LLC that an employee seeking whistleblower protection under the Sarbanes-Oxley Act (SOX) anti-retaliation provision must prove that his protected activity was a contributing factor in the employer’s adverse personnel action, but need not prove the employer acted with “retaliatory intent.” The opinion, authored by Justice Sotomayor, reasoned that the word “discriminate” found in the section did not necessitate a finding of “retaliatory intent” and that such a finding otherwise would ignore the statute’s mandatory burden-shifting framework.

As previously summarized in Dykema’s November 2023 edition, this case was brought by Murray, a research strategist in UBS’s commercial mortgage-backed securities business, who reported to his supervisor that members of UBS’s trading desk had pressured him to manipulate his research to be more favorable to certain outcomes. Murray alleged that he was terminated because of his report. The central issue was whether the Second Circuit improperly shifted the burden of proving retaliatory intent under the Sarbanes-Oxley Act to the whistleblower in his case in chief rather than as part of an employer’s affirmative defense.

The Supreme Court’s opinion noted that the germane statutory text does not reference or include a “retaliatory intent” requirement. So although a whistleblower must prove that his protected activity was a contributing factor in the unfavorable personnel action, he does not need to also prove that his employer acted with “retaliatory intent.” The Justices also looked to the burden-shifting framework of the statute, which they held was purposely designed to be more lenient than most standards, an outcome which would change under the Second Circuit’s ruling. The Court acknowledged that the statute’s burden-shifting framework was not as protective of employers as other frameworks, but again, held that this was by design. As the Court noted, the health, safety, and well-being of the public often depends on whistleblowers coming forward, which is more than adequate justification for a less protective framework for employers.

Justice Alito concurred in the judgment but wrote separately to elaborate and clarify that the Court’s rejection of an “animus” requirement does not read intent out of the statute. Justice Alito read the whistleblower-protection provision as requiring a showing of differential treatment by a plaintiff “because of” his or her protected conduct, which in turn requires proof of intent

As noted by the Court, the decision to keep the burden-shifting framework in place will provide for a lower threshold for whistleblower actions. Employers may have to reevaluate their procedures for handling whistleblower actions in light of the Court’s firm stance upholding the burden-shifting framework.

For more information, please contact Chantel Febus, James Azadian, Cory Webster, Christopher Sakauye, McKenna Crisp, Monika Harris, or Puja Valera.