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Supreme Court To Consider Fund Adviser Retaliation Claims

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  • Baker, John
    The Supreme Court has granted certiorari to consider whether the anti-retaliation provisions of the Sarbanes-Oxley Act of 2002 extend protection to employees
    Message 1 of 1 , May 20, 2013
      The Supreme Court has granted certiorari to consider whether the anti-retaliation provisions of the Sarbanes-Oxley Act of 2002 extend protection to employees of contractors or subcontractors of public companies. Lawson v. FMR LLC, No. 12-3 (cert. granted May 20, 2013). The issue is of particular importance to the fund industry, as almost all investment companies are public companies covered by the statute, but most fund advisers and other service providers are privately held. This is just such a case, since the plaintiffs are two employees of the adviser to the Fidelity family of funds.

      Section 806 of the Sarbanes-Oxley Act, 18 U.S.C. ยงย 1514A, provides a private right of action for whistleblower employees of public companies who are the subject of retaliation, and it also refers to contractors, subcontractors, and agents of public companies, but it is not clear whether the right of action is available only to public company employees or also extends to employees of the contractors, subcontractors, and agents. The key language reads, "No [public company] . . . or any officer, employee, contractor, subcontractor, or agent of such company . . . may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment . . . ."

      In the instant case, the U.S. Court of Appeals for the First Circuit ruled in a 2 - 1 decision written by Chief Judge Lynch that Congress intended to protect only public company employees, and the references to contractors, subcontractors, and agents means only that they too are forbidden to retaliate against the public company employees. The district court had taken the opposite view, as did a long dissenting opinion by Judge Thompson. The Administrative Review Board of the Department of Labor subsequently rejected the First Circuit's reasoning.

      After the original briefing on the petition for certiorari, the Supreme Court requested the views of the United States. The Solicitor General took the view that the First Circuit was in error, but that the question presented did not warrant review at this time, since there is not yet a conflict between the circuits. The Court is apparently disinclined to wait. An opinion is likely sometime in the first half of 2014.

      SCOTUSblog has a convenient page with links to the various filings before the Supreme Court; the opinions below are included in the petition for certiorari, as is the opinion of the Administrative Review Board in Spinner v. David Landau and Associates:


      John M. Baker
      Stradley Ronon Stevens & Young, LLP
      1250 Connecticut Avenue, NW, Suite 500
      Washington, DC 20036
      202.419.8413 phone
      202.822.0140 fax
      FundLaw Listowner http://groups.yahoo.com/group/FundLaw/
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