SOX retaliation claim is thrown out over a bad jury charge

The plaintiff in this retaliation case brought under the Sarbanes-Oxley Act (SOX) prevailed at trial on his claim that the financial services firm that he worked for terminated his employment because he had reported an unethical practice in the workplace. That verdict is now gone because the district court did not properly charge the jury on the elements of a SOX retaliation claim. The Court uses this case to clarify the correct legal standard guiding these claims.

The case is Murray v. UBS Securities, LLC, issued on August 5. Plaintiff was responsible for performing research and creating reports that went to UBS's clients about the company's products and services. He testified that two company officials told him to skew his reports in a manner that would support the company's business strategies. Plaintiff worried this would compromise his integrity as a researcher and would make him "a shill for the market." After complaining about this, Plaintiff was fired. Defendant said Plaintiff was instead fired in a reduction-in-force, but the jury found in plaintiffs favor and awarded him $653,000 in lost wages and $250,000 in pain and suffering. The judge awarded plaintiff over $1.7 million in attorneys' fees. 

The Court of Appeals orders a new trial because the trial court charged the jury improperly. The jury was charged that plaintiff had to prove in part that his "protected activity was a contributing factor in the termination of his employment." The trial court further told the jury that this means the protected activity (plaintiff's complaints to management about having the skew the reports) "must have either alone or in combination with other factors tended to affect in any way UBS's decision to terminate plaintiff's employment." In addition, the jury was instructed, "Plaintiff is not required to prove that his protected activity was the primary motivating factor in his termination, or that UBS's articulated reasons for his termination ... was a pretext." 

This looks like a motivating factor charge, which does not require the plaintiff to prove his protected activity was the determining, or but-for, cause of his termination. (We see charges like this under Title VII disparate treatment claims). A motivating factor charge asks if the unlawful factor (retaliation, etc.) played any role in the termination. The problem, says the Court of Appeals (Park, Menashi and Perez) is that the SOX statute says the employer cannot "discriminate against an employee . . . because of" whistleblowing. Under the common definition of "discriminate" and "because of," the Court says, the statute "prohibits discriminatory actions cause by -- or 'because of' -- whistleblowing, and actions are 'discriminatory' when they are based on the employer's conscious disfavor of an employee for whistleblowing." This means the plaintiff has to prove retaliatory intent "that the employer's adverse action was motivated by the employee's whistleblowing." SOX does not permit a motivating factor charge but a "but-for" or determining factor charge.

Other statutes that use nearly identical language have been interpreted to require the but-for causation, and that retaliatory intent is an element of the claim, including the Federal Railroad Safety Act. The Second Circuit notes that the Fifth and Ninth Circuits have interpreted the SOX law to hold that retaliatory intent is not an element of a SOX claim. So we have a circuit-split that may reach the Supreme Court at some point. We have seen a steady trend by the courts to interpret most employment statutes to require "but-for" causation and not motivating factor causation, a more plaintiff-friendly test. This case furthers that trend. My guess is that if the Supreme Court takes on this issue, it will agree with the Second Circuit in this case.

What it means for plaintiff is that the bad jury charge is not harmless error. The best way to win an appeal when you lost the trial is to challenge the jury charge, because a bad charge will mislead the jury about the elements of the case, and the Court of Appeals holds this was a close case in any event, which means with the right charge, the employer can win the trial.