Tag: retaliation

Jury Awards $1.6M to Sarbanes-Oxley Whistleblower

A New York federal jury awarded $1.6M in compensatory damages to a whistleblower in a Sarbanes-Oxley whistleblower retaliation lawsuit. The verdict is consistent with a recent trend of large jury verdicts in whistleblower retaliation claims, including a six million dollar verdict in the Zulfer SOX case. According to the verdict form, the full amount of the verdict awarded to whistleblower Julio Perez was for compensatory damages. Under the whistleblower provision of SOX, there is no cap on compensatory damages.

While employed at Progenics Pharmaceuticals as a Senior Manager of Pharmaceutical Chemistry, Perez worked with representatives of Progenics and Wyeth to develop Relistor, a drug that treats post-operative bowel dysfunction and opioid-induced constipation. In May 2008, Progenics and Wyeth issued a press release stating that the second phase of trials “showed positive activity” and that the two companies were “pleased by the preliminary findings of this oral formulation” of Relistor. Within two months of the issuance of the press release, Wyeth executives sent a memo to Progenics senior executives informing them that the second phase of clinical trials failed to show sufficient clinical activity to warrant a third phase of trials. The Wyeth memo specifically stated: “Do not pursue immediate initiation of Phase 3 studies with either available oral tablets or capsule formulations.”

Perez saw the confidential Wyeth memo and on August 4, 2008, he sent a memo to Progenics’ Senior Vice-President and General Counsel in which he alleged that Progenics was “committing fraud against shareholders since representations made to the public were not consistent with the actual results of the relevant clinical trial, and [Plaintiff] think[s] this is illegal.” The next day, Progenics’ General Counsel questioned Perez about the confidential Wyeth memo. Progenics then terminated Perez’s employment, claiming he had refused to reveal how he had obtained the Wyeth memorandum.

Perez brought suit under SOX, alleging that Progenics terminated his employment because of his August 4, 2008 Memorandum, and denying that he refused to answer questions about his access to the Wyeth memo. Progenics again claimed that it terminated Perez’s employment because he failed to explain how he got the memo. The memo’s intended recipients denied giving Perez a copy of the memo. During the litigation, Perez argued that the memo was distributed widely within Wyeth and that he had not “misappropriated” it.

Following an investigation, OSHA did not substantiate Perez’s SOX complaint. Perez removed his SOX complaint to federal court in November 2010. On July 25, 2013, Judge Kenneth Karas issued an order denying Progenics’ motion for summary judgment. The case was hard-fought, with more than 120 docket entries concerning pre-trial matters. Perez was represented by counsel when he filed his SOX claim in federal court, but proceeded pro seshortly before Progenics moved for summary judgment through trial.

Recent Sarbanes-Oxley Whistleblower Jury Verdicts

On March 5, 2014, a California jury awarded $6 million to Catherine Zulfer in her SOX whistleblower retaliation against Playboy, Inc. (“Playboy”).  Zulfer, a former accounting executive, alleged that Playboy had terminated her in retaliation for raising concerns about executive bonuses to Playboy’s Chief Financial Officer and Chief Compliance Officer.  Zulfer v. Playboy Enterprises Inc., JVR No. 1405010041, 2014 WL 1891246 (C.D.Cal. 2014).  She contended that she had been instructed by Playboy’s CFO to set aside $1 million for executive bonuses that had not been approved by the Board of Directors.  Id.  Zulfer refused to carry out this instruction, warning Playboy’s General Counsel that the bonuses were contrary to Playboy’s internal controls over financial reporting.  Id.  After Zulfer’s disclosure, the CFO retaliated by ostracizing Zulfer, excluding her from meetings, forcing her to take on additional duties, and eventually terminating her employment.  Id.  After a short trial, a jury awarded Zulfer $6 million in compensatory damages and also ruled that Zulfer was entitled to punitive damages.  Id.  Zulfer and Playboy reached a settlement before a determination of punitive damages.  The $6 million compensatory damages award is the highest award to date in a SOX anti-retaliation case.  Id.

The Ninth Circuit recently affirmed a SOX jury verdict awarding $2.2 million in damages, plus $2.4 million in attorneys’ fees, to two former in-house counsel.  Van Asdale v. Int’l Game Tech., 549 F. App’x 611, 614 (9th Cir. 2013).  The plaintiffs, both former in-house counsel at International Game Technology, alleged that they had been terminated in retaliation for disclosing shareholder fraud related to International’s merger with rival game company Anchor Gaming.  Id.  Specifically, plaintiffs alleged that Anchor had withheld important information about its value, causing International to commit shareholder fraud by paying above market value to acquire Anchor.  Van Asdale v. Int’l Game Tech., 577 F.3d 989, 992 (9th Cir. 2009).  When the plaintiffs discovered the issue, they brought their concerns about the potential fraud to their boss, who had served as Anchor’s general counsel prior to the merger. Id. at 993.  International terminated both plaintiffs shortly thereafter. Id. 

In addition, a former financial planner at Bancorp Investments, Inc. who alleged that he was terminated for disclosing trade unsuitability obtained a $250,000 jury verdict in the Eastern District of Kentucky in late 2013.   Rhinehimer v. Bancorp Investment, Inc., 2013 WL 9235343 (E.D.Ky. Dec. 27, 2013), aff’d 2015 WL 3404658 (6th Cir. 2014).

Zulfer, Van Asdale, and Rhinehimer highlight the importance of the removal or “kick out” provision in SOX that authorizes SOX whistleblowers to remove their claims from the Department of Labor to federal court for de novo review 180 days after filing the complaint with OSHA.

ARTICLE BY Jason Zuckerman of Zuckerman Law

© 2014 Zuckerman Law

Oklahoma Federal Court Denies Summary Judgment to Employer on Professor’s Allegations He Was Denied Tenure After Reporting Inappropriate Facebook Posts by Fellow Professors

Allen Matkins Leck Gamble Mallory & Natsis LLP

A federal court in Oklahoma recently denied summary judgment to Northeastern State University, finding that a professor’s discrimination and retaliation claims, among others, could proceed to trial. The professor, Dr. Leslie Hannah, was appointed chair of his department in 2009. The previous assistant chair, Dr. Brian Cowlishaw, was ineligible for the chair position pursuant to the University’s nepotism policy (his wife, Dr. Bridget Cowlishaw, was a professor in the department). During that period, Dr. Brian Cowlishaw posted the following comment on his Facebook page:

“Brian Hammer Cowlishaw /salutes in NSU’s direction / Good luck with that, then! [translation: I won’t be entering the ‘election’ for department chair, because what I offer, no one wants] Good luck! / salute!”

Then in response to a comment, he wrote:

“There will be an ‘election’ the first week of February. They’re making a f*****g indian chair.”

In 2010, Drs. Brian and Bridget Cowlishaw, and another professor, Dr. Donna Shelton, made disparaging comments on Facebook after Dr. Hannah scheduled a department meeting to be held outdoors by the river. In response to a post by Dr. Bridget Cowlishaw about not looking forward to the beginning of the academic year, Dr. Shelton wrote:

“Wonder if they sell body armor for use under regalia…”

In response to a post by Dr. Brian Cowlishaw about the camping trip, Dr. Bridget Cowlishaw wrote:

“Nah, our chair will bring all the handbaskets we need. He’s probably woven them himself.”

In response to a post about whether anyone attended, Dr. Bridget Cowlishaw wrote:

“Maybe they were all eaten by wolves.”

Dr. Hannah reported the posts to the University. The University found that the posts were inappropriate, and reprimanded the professors. Dr. Bridget Cowlishaw entered into a settlement agreement with the University whereby she resigned.

In 2011, Dr. Hannah reported to Human Resources: “I think the time has come for me to leave NSU. This seems to be an unsafe place for American Indians. I will be submitting my resignation . . . ” He then did not resign his position, but he did resign as department chair.

Dr. Hannah ultimately submitted his application for tenure and early promotion when he became eligible in late 2012. The committee that reviewed his application consisted of seven people, including Dr. Brian Cowlishaw and Dr. Shelton. The vote regarding Dr. Hannah was split 3/3 with one abstention, with Dr. Brian Cowlishaw and Dr. Shelton voting to deny the application. Thereafter, in early 2013, the University’s Dean reviewed the committee’s findings and denied Dr. Hannah’s application, stating that Dr. Hannah had “polarized the Department and displayed hostility toward other faculty and staff.” The Dean later stated that, while he was aware of past conflicts in the department, he was unaware of the inappropriate Facebook posts. Dr. Hannah filed a complaint with the University, and the University placed Dr. Hannah on administrative leave with pay for the remainder of his contract.

Dr. Hannah filed suit, including for discrimination and retaliation. The University brought a summary judgment motion. With respect to the discrimination and retaliation claims, the University’s main argument was that there was no causal connection between the Facebook posts in 2009 and 2010 and the denial of Dr. Hannah’s tenure in 2013.

The court was unconvinced that the passage of time between the Facebook posts and the denial of tenure defeated causation, stating: “Two years is not a significant amount of time. It is more than plausible and rather likely that after two years, Dr. Cowlishaw and Dr. Shelton still held some animosity toward Dr. Hannah for his reporting their Facebook posts, which resulted in their reprimands and possibly in the resignation of Dr. Cowlishaw’s wife.”

The Hannah case is another reminder for employers regarding the importance of implementing a good social media policy and training all employees to abide by it. Training employees not to make inappropriate posts in the first place trumps effective corrective action once the employer becomes aware of such posts. Although inHannah, the University’s initial response to the inappropriate posts was sufficient, the fact that the professors had made the posts in the first place played a key role in precluding the University from prevailing on summary judgment during later litigation.

ARTICLE BY

Alexander Nestor
Nisha Verma
Allen Matkins Leck Gamble Mallory & Natsis LLP

United States Supreme Court Round-Up: Key Opinions from 2013 to 2014 and Upcoming High-Profile Business Disputes

Andrews Kurth

The 2013–2014 term of the United States Supreme Court resulted in a wide range of decisions of importance to business. In this article, we highlight some of the key opinions and explore their likely impacts. We also preview a few of the high-profile business disputes the Supreme Court has agreed to hear next term.

Key Business Cases from the 2013–2014 Term

American Chemistry Council v. Environmental Protection Agency: Holding: The Environmental Protection Agency (EPA) reasonably interpreted the Clean Air Act to require sources that would need permits based on their emission of chemical pollutants to comply with “best available control technology” for greenhouse gases. Effect: The decision reinforces the Supreme Court’s previous recognition that the EPA has the power to regulate greenhouse gases as pollutants. However, portions of the decision strongly cautioned the EPA against overreach, stating that the agency may not “bring about an enormous and transformative expansion in [its] regulatory authority without clear congressional authorization.” These comments suggest that the Supreme Court may take a hard line when the Obama Administration’s other climate regulations eventually go to court.

Daimler AG v. Bauman: Holding: A foreign company doing business in a state cannot be sued in that state for injuries allegedly caused by conduct that took place entirely outside of the United States. Effect: Daimler makes it much harder for plaintiffs to establish general jurisdiction over foreign entities. The opinion re-characterizes general jurisdiction as requiring the defendant to be “at home” in the state, a circumstance that the Supreme Court suggested will generally be limited to the places where the defendant is incorporated or where it has its principal place of business. Moreover, the fact that a domestic subsidiary whose activities are imputed to the foreign parent may be “at home” in the state will not make the foreign parent “at home” in that locale for purposes of general jurisdiction.

Halliburton v. Erica P. John Fund, Inc.: Holding: Plaintiffs in private securities fraud actions must prove that they relied on the defendants’ misrepresentations in choosing to buy stock. Basic v. Levinson’s holding that plaintiffs can satisfy this reliance requirement by invoking a presumption that the price of stock as traded in an efficient market reflects all public, material information, including material misstatements, remains viable. However, after Halliburton, defendants can defeat the presumption at the class certification stage by proving that the misrepresentation did not in fact affect the stock price. Effect: While investors will continue to pursue class actions following large dips in stock prices, the Halliburton decision helps to level the playing field by providing defendants a mechanism to stop such suits at the class certification stage.

Lawson v. FMR LLC: Holding: Employees of privately held contractors or subcontractors of a public company are protected by the anti-retaliation provision of the Sarbanes-Oxley Act of 2002 (SOX). Effect: Following Lawson, there will likely be an increase in SOX litigation against public and non-public companies. Because many of the issues concerning the scope and meaning of SOX have yet to be resolved, lower courts will continue to wrestle with defining the parameters of the law. Questions left unanswered byLawson include whether the whistleblower’s accusation must be related to work he or she performed for the company and whether the contract with the public company must have some relation to public accounting or securities compliance.

Chadbourne & Park LLP v. Troice: Holding: The Securities Litigation Uniform Standards Act of 1988 (SLUSA) does not preclude state-law class actions based on false representations that the uncovered securities that plaintiffs were purchasing were backed by covered securities. Effect: SLUSA bars the bringing of securities class actions “based upon statutory or common law of any state” in which the plaintiff alleges “a misrepresentation or omission of a material fact in connection with a purchase of sale of covered securities.” The statute defines “covered securities” to include only securities traded on a national securities exchange or those issued by investment companies.

U.S. v. Quality Stores: Holding: Severance payments to employees who are involuntarily terminated are taxable wages for purposes of the Federal Insurance Contributions Act. Effect: Employers should, under most circumstances, treat severance payments to involuntarily terminated employees as wages subject to FICA taxes. There are exceptions, however, and employers should therefore seek legal counsel to assist in determining the tax status of a particular severance arrangement.

Business Cases to Watch in the 2014–2015 Term

Integrity Staffing Solutions v. Busk: Whether time spent in security screenings is compensable under the Fair Labor Standards Act.

Mach Mining v. Equal Employment Opportunity Commission: Whether and to what extent a court may enforce the Equal Employment Opportunity Commission’s mandatory duty to conciliate discrimination claims before filing suit.

Omnicare v. Laborers District Council Construction Industry Pension Fund: Whether, for purposes of a claim under Section 11 of the Securities Act of 1933, a plaintiff may plead that a statement of opinion was untrue merely by alleging that the opinion itself was objectively wrong, or must the plaintiff also allege that the statement was subjectively false through allegations that the speaker’s actual opinion was different from the one expressed.

Young v. UPS: Whether, and in what circumstances, an employer that provides work accommodations to non-pregnant employees with work limitations must provide work accommodations to pregnant employees who are similar in their ability or inability to work.

As in recent years, the Supreme Court continues to grant review on more and more cases involving matters of concern to U.S. businesses. Andrews Kurth attorneys are available to provide further detail and guidance on the decisions highlighted here, and on any other issues of concern to your company that have reached the high court.

ARTICLE BY

Kelly Sandill
OF
Andrews Kurth

Employee’s Complaint About Union Officials Watching Porn is Deemed “Human Imperfection” But Not Grounds for Retaliation

Barnes Burgandy Logo

 

A union employee was suspended then terminated after being indicted – as part of an identity theft investigation by the prosecutor – which involved the public posting of names, salaries and Social Security numbers of the company’s managers during a previous strike. During her suspension, the employee claimed that she witnessed the union president and vice president looking at pornography during business hours, which she then reported to the union’s regional leaders. The employee also alleged that the union sabotaged her post-termination grievance process.

As a result, the employee sued the union under section 101 of the Labor-Management Reporting and Disclosure Act, alleging that she was retaliated against for raising a matter of union concern relating to the general interest of its members (i.e., her complaint about union officials watching porn during business hours). The Fourth Circuit found that the employee’s complaint did not rise to the level needed to meet the test and added that “human imperfection must be kept in some perspective.”

On Monday, the United States Supreme Court denied the employee’s bid for certiorari. (see Melissa H. Trail v. Local 2850 United Defense Workers of America et al., case number 13-332).

Article by:

Adam L. Bartrom

Of:

Barnes & Thornburg LLP

Employee Retaliation Claims: Will the Supreme Court Stem the Tide?

Barnes & Thornburg

It was no surprise for practitioners and their clients alike to learn that, statistically, retaliation claims remain the largest number of claims brought before the EEOC (in 2012, almost 38,000 charges alleged retaliation—38.1% of all charges). Worse, retaliation claims are expensive to defend. This point is painfully highlighted in this week’s submissions with the U.S. Supreme Court.

Last week, the U.S. Chamber of Commerce (along with the Retail Litigation Center) filed with the Supreme Court an amici curiae brief in a case in whichretaliation is the central issue. The case, captioned Univ. of Texas Southwestern Medical Center v. Nassar (U.S. No. 12-484), has been appealed from the 5th Circuit.

The underlying case arose when a doctor was not hired after he complained about his treatment at another organization. But, his complaint is of little consequence on the big stage. The central question before the Court—and the one on which the U.S. Chamber focuses—is the standard required to prove retaliation under the Civil Rights Act of Title VII.   Should employees be required to prove that their employers would not have taken an adverse action against them but for an improper motive?  Or, does the standard require employees only to show that an improper motive was one of multiple factors? The latter—a mixed-motive standard—is the one the 5th Circuit applied.

The U.S. Chamber’s brief argues that the “mixed-motive standard” lowers the bar for retaliation claims, resulting in increased costs for employers. The Chamber’s brief is boldly specific—it cites research estimating that in 1988, the cost of defending a wrongful discharge claim averaged more than $80,000.  The brief cites research supporting that today, it costs employers “possibly over $500,000 to defend a case at trial.”

As businesses on the front line, we, of course, already knew that.

Oral argument is scheduled for April 24, 2013.

You can follow the case and read the U.S. Chamber of Commerce’s brief at the SCOTUS Blog by clicking on the following link: University of Texas Southwestern Medical Center v. Nassar.

© 2013 BARNES & THORNBURG LLP