Murray v. UBS Securities and Whistleblower Retaliation Burdens of Proof

On May 1, the Supreme Court granted certiorari in Murray v. UBS Securities. Congratulations to KCNF’s George Chuzi and Richard Renner, who were among other top DC-area attorneys who volunteered as counsel for Amici Curae Senators Charles Grassley and Ron Wyden and the Government Accountability Project.

Murray is a whistleblower retaliation case brought under the Sarbanes Oxley Act (SOX).  Plaintiff Trevor Murray alleges he was terminated in retaliation for raising concerns to his supervisor about his employer (UBS) committing fraud on shareholders. The jury delivered a $1 million verdict for Murray, but the Second Circuit Court of Appeals vacated and remanded the case for a new trial, finding the jury was not properly instructed that an anti-retaliation claim under SOX requires a showing of retaliatory intent. In so finding, the Second Circuit split with the Fifth, Ninth, Fourth, and Tenth Circuits on a whistleblower’s burden of proof under SOX.

This is especially significant because 17 nearly identical whistleblower statutes, including SOX, were all modeled after the Wendell H. Ford Aviation Investment and Reform for the 21st Century (AIR 21), and thus they all share the same burden of proof. Moreover, AIR 21 itself was modeled after the Whistleblower Protection Act (WPA), the whistleblower protection statute that protects federal employees. Thus, the burden-shifting framework of the WPA applies in AIR 21, SOX, and the 16 other whistleblower protection statutes modeled after AIR 21 since 2000.

The WPA’s Burden-Shifting Framework

Congress’ first effort to protect whistleblowers was the Civil Service Reform Act of 1978, which covered federal employees exclusively. That effort prohibited taking any personnel action “as a reprisal for . . . a disclosure of information by an employee or applicant which the employee or applicant reasonably believes evidences” certain wrongdoing. The courts, primarily the Federal Circuit, interpreted that language to mean the employee had to show their disclosure was a motivating or significant factor in the employer’s decision to take the personnel action. In response, Congress passed the WPA in 1989 with the intent of substantially reducing a whistleblower’s burden of proof to showing only that the disclosure was a contributing factor. Since then, courts have held that a contributing factor is any factor that, alone or in conjunction with other factors, played any role in the employer’s decision-making process. See Marano v. Dept. of Justice, 2 F.3d 1137, 1140 (Fed. Cir. 1993). In the WPA, Congress also dealt with the Agency’s burden. Once a whistleblower demonstrates that their whistleblowing was a contributing factor to the employer’s decision, the Agency must prove by clear and convincing evidence that it would have taken the same adverse action even absent the whistleblowing. This places a heavy burden on the Agency/employer, which was Congress’ intent – an employer has an advantage from the start because they control the documentation, evidence, and most of the witnesses in any employment retaliation case. By placing a more stringent burden on the Agency, Congress attempted to level the playing field somewhat.

Significantly, under the WPA, the employee does not have to prove that the Agency targeted them for whistleblowing. Rather, the employee merely has to show that they made a protected disclosure; the Agency was aware of the disclosure; and the disclosure was a contributing factor in the personnel action. (One typical way to meet this last element is to show that the action occurred within a few months after the disclosure.) At that point, the burden shifts to the Agency. Notably, the employee is not required to prove the Agency intended to retaliate against them.

The Second Circuit’s Decision

As noted above, Congress adapted the WPA’s structure into other statutes protecting whistleblowers, notably AIR 21 and SOX. In Murray, however, by holding that a whistleblower must prove retaliatory intent, the Second Circuit significantly heightened the burden on whistleblowers. In doing so, the Second Circuit also effectively erased the second step of the WPA, AIR 21, SOX, and 16 other whistleblower statutes’ burden shifting framework – instead of the employer bearing the burden of showing the absence of intent, the employee must prove the existence of retaliatory motive. To show retaliatory intent is a nearly impossible burden to meet because an employer – if they can help it – will not admit wrongdoing, and absent other, incredibly rare evidence of an intent to retaliate, the whistleblower’s case will fail. This change in the burden of proof contravenes Congress’ intent in passing the WPA, AIR 21, and their progeny, including SOX, and it is also inconsistent with the express findings of four other circuit courts.

The Effect of the Second Circuit’s Decision If It Holds

Although the Second Circuit currently stands alone in its requirement that a whistleblower prove retaliatory intent, the court has an outsized influence in securities law cases. The Second Circuit encompasses New York, and thus it hears many of the most high-profile securities laws cases in the country. Therefore, the circuit courts that have not yet issued a decision on SOX’s burden-shifting framework could look to the Murray decision for guidance. Moreover, courts across the country could also use Murray as an example of how to decide questions concerning burdens of proof in the WPA, AIR 21, and other similar whistleblower protection statutes.

The Importance of the Court’s Decision

Thus, the Supreme Court’s decision next year in Murray v. UBS Securities will be essential in the world of whistleblower protection. Hopefully, the Court will correctly conclude that, consistent with Congress’ wish, a whistleblower need not show that the employer acted with retaliatory intent when it took an adverse employment action following a protected disclosure. Rather than agreeing with the Second Circuit, the Court should side with Congress, four circuit courts, and countless whistleblower advocates and find that if an employee’s whistleblowing played any role in an employer’s decision to take an adverse action, the employer engaged in illegal retaliation and should be found liable.

 


This article also appeared in HR Daily Advisor on May 25, 2023.