U.S. Supreme Court Holds That Under Sarbanes-Oxley Act, Whistleblower Who Was Fired By Employer Does Not Have To Prove “Retaliatory Intent”

The U.S. Supreme Court recently issued a decision clarifying what a Whistleblower must show to win a retaliation claim brought against their employer under the Sarbanes-Oxley Act (SOX Act). The SOX Act mandates practices in financial record keeping and reporting for corporations. The federal law was passed by Congress in 2002 in reaction to several major corporate and accounting scandals, including Enron and WorldCom.

On February 8, 2024, the Supreme Court issues its decision in Murray v. UBS Securities, LLC. Trevor Murray was hired by UBS in 2011 as a strategist in its commercial mortgage-backed securities (CMBS) business. In that role, Murray was responsible for reporting on CMBS markets to current and future UBS customers. Under federal regulations from the Securities and Exchange Commission, Murray was required to certify that his reports were produced independently and that they accurately reflected his own views. According to Murray, two leaders at UBS improperly pressured him to skew his research in favor of the CMBS trading desk. Murray repeatedly reported this conduct to his supervisor, who declined to take action. Instead, the supervisor told Murray not to alienate the trading desk and to write what the business line wanted. He eventually recommended that Murray be removed from his position, even though he had recently given Murray a strong performance review. When the trading desk did not accept Murray as a transfer, he was fired.

Murray sued UBS alleging that the company terminated him in response to his complaints about fraud on shareholders in violation of Sarbanes-Oxley’s antiretaliation provision, 18 U.S.C. § 1514A. Following a trial, Murray was awarded over a million dollars plus attorney’s fees. UBS appealed, arguing that the district court erred by failing to instruct the jury that Murray had to prove UBS's retaliatory intent to prevail. The U.S. Court of Appeals for the Second Circuit agreed with UBS and vacated the judgment. The Second Circuit reasoned that the whistleblower protection provision requires an employee to prove retaliatory intent, and the jury instruction did not make that clear.

The U.S. Supreme Court disagreed, instead holding that the whistleblower protection provision of the SOX Act does not require an employee to prove retaliatory intent to succeed on claims under the Act’s anti-retaliation provision. The Court acknowledged that a whistleblower must prove that his protected activity was a contributing factor in the adverse employment action against him, but that the text of the statute does not include or refer to a requirement of proving retaliatory intent. The Court noted that the statute contains a burden-shifting framework, requiring the whistleblower to show that their protected activity was a contributing factor in the adverse action, after which the employer must show that it would have taken the same action anyway. It found that a requirement of proving retaliatory intent would be incompatible with this burden-shifting framework. As the Court noted, “the incorporation of the contributing-factor standard in Sarbanes-Oxley reflects a judgment that under that statute, personnel actions against employees should quite simply not be based on protected [whistleblowing] activities—not even a little bit.”

This ruling will help employees ultimately prevail on a retaliation claim.

Supreme Court Opinion