Murray v. UBS Securities, LLC

Issues

Does a plaintiff bringing a claim for retaliation under §1514A of the Sarbanes-Oxley Act of 2002 bear the burden of establishing the employer acted with retaliatory intent, or must the defendant employer demonstrate a lack of retaliatory intent as part of its defense?

Oral argument:

October 10, 2023

Court below:

United States Court of Appeals for the Second Circuit

This case asks the Supreme Court to clarify whistleblowers’ evidentiary burden when they allege retaliation for conduct protected under the Sarbanes-Oxley Act of 2002. Petitioner Trevor Murray argues that he does not need to prove retaliatory intent to establish a claim against his employer because the language of §1514A and the statutory and administrative precedent establish that the protected activity only needs to be a contributing factor in the adverse personnel action. Respondent UBS argues that employees should be required to prove that their employers acted with retaliatory intent in their initial complaints because the texts of the statute and statutory precedent reflect Congress’s intention to create an intent element. The outcome of this case will determine the amount of proof required for whistleblowers to prove retaliation for protected activities.

Questions as Framed for the Court by the Parties

Whether, following the burden-shifting framework that governs cases under the Sarbanes-Oxley Act of 2002, a whistleblower must prove his employer acted with a “retaliatory intent” as part of his case in chief, or whether the lack of “retaliatory intent” is part of the affirmative defense on which the employer bears the burden of proof.

Facts

In 2011, Respondent UBS Securities, LLC hired Petitioner Trevor Murray as a strategist, a role that required him to certify that his reports “accurately reflected his own views” and that his compensation was not tied to his views. Murray v. UBS Sec. at 256. During Murray’s tenure as a strategist, Ken Cohen and Dave McNamara (two of Murray’s supervisors) told him to produce research that supported UBS’s business strategies by maintaining a consistent perspective across “organizations, trading desk, and research.” Id. In December 2011, Murray reported this pressure to his supervisor, Michael Schumacher, who expressed sympathy with Murray’s position but did not contradict Cohen and McNamara’s instructions. Id. at 257. In January 2012, Murray met with Schumacher again to discuss his performance evaluation. Id. During the meeting, Murray reported that his relationship with McNamara and Cohen was “getting worse.” Id. Schumacher explained to Murray that his worries about undue influence were not a cause for concern and that he would have to conform his reports to Cohen and McNamara’s expectations and produce work that aligned with the “business line.” Id. After their meeting, Schumacher emailed his supervisor, Larry Hatheway, recommending Murray for termination unless UBS could find a different position for him within the company. Id. Cohen declined to hire Murray into another position within the company where he would not be subject to SEC regulations, and Murray was fired in February 2012. Id.

Murray sued UBS in the United States District Court for the Southern District of New York in 2014 under the Sarbanes-Oxley Act of 2002 (“SOX”), alleging that he was fired in retaliation for his complaints about internal pressure to produce research favorable to UBS’s business strategies in violation of federal regulations. Id. at 257. At the close of trial, the District Court instructed the jury that Murray was required to prove four elements under SOX, including that Murray’s activity was a “contributing factor in the termination of his employment.” Id. at 257-58. The District Court instructed the jury that Murray did not have to prove that his activities were the “primary motivating factor” for his termination or that UBS’ explanation for Murray’s firing was pretextual. Id. at 258. UBS objected to the jury instructions, arguing that Murray should have been required to prove retaliatory intent. Id. UBS further argued that it should be entitled to judgment as a matter of law because Murray could not prove retaliatory intent. Id. The District Court overruled UBS’s objection and motion for judgment as a matter of law; the jury found for Murray. Id. After trial, UBS renewed its motion for judgment as a matter of law and moved to limit the damages award. Id. The District Court again denied the motions, reaffirming its view that retaliatory intent was not an element of Murray’s claim. Id. UBS appealed with respect to the District Court’s denial of the motion for judgment as a matter of law, and Murray cross-appealed his damages award. Id.

On appeal, the United States Court of Appeals for the Second Circuit found that retaliatory intent should be an element of Murray’s claim. The Second Circuit vacated the jury’s verdict and remanded the case to the Southern District of New York. Murray petitioned for a writ of certiorari to the United States Supreme Court on January 13, 2023 and the Supreme Court granted certiorari on May 1, 2023. Brief for Petitioner at 1.

Analysis

STATUTORY INTERPRETATION

Murray argues that the statute’s term, “contributing factor,” means that an employee meets his burden of proof when he shows that his protected conduct had any influence on an adverse personnel action. Brief for Petitioner at 22. Murray insists that Congress would have used stronger language, such as “retaliatory intent” or “motivating factor,” if it had intended the employee to meet a higher standard of proof. Id. at 23-24. Further, Murray argues that the Second Circuit was wrong to interpret the word “discriminate” as a standard requiring animus because “discrimination” only means differential treatment, not malice. Id. at 35. Murray asserts that an employment discrimination claim only needs to prove causation, not intent; for instance, in EEOC v. Abercrombie & Fitch, the Supreme Court upheld a Title VII claim without requiring a showing that the employer intended to discriminate. Reply Brief for Petitioner at 13.

Moreover, Murray argues that the statute does not contain an implied retaliatory intent element because the intentional tort doctrine only requires that the tortfeasor intend a result, such as an employee’s termination, not that the tortfeasor also have a particular type of animus. Id. at 13-14.

Murray further contends that the statute’s second step functionally tests for retaliatory intent because the employer avoids liability if it proves that it would have made the same decision regardless of the employee’s protected conduct. Brief for Petitioner at 24-26. Murray asserts that the second step conclusively determines whether the employer intended to penalize whistleblowing because the Supreme Court advocated a similar test for sex-based discrimination in Bostock v. Clayton County. Id. at 25.

UBS argues that the statute’s stated purpose, to prevent “discrimination . . . because of” whistleblowing, creates an intent element because anti-discrimination laws like the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, and the Dodd-Frank Act’s whistleblower protection provisions require proof of intent and use the same language. Brief for Respondent at 15-17. UBS contends that the statute is best understood as a federal anti-discrimination law because its grammar and vocabulary consistently refer to discrimination. Id. at 25-26. UBS adds that Murray’s language analysis is misplaced because the phrases “contributing factor” and “motivating factor” only refer to degrees of causality, not the employer’s intent. Id. at 22, 27-28. UBS further argues that Murray’s definition of "discrimination” as differential treatment is misleading because disparate treatment claims inherently require a showing of discriminatory intent or motive. Id. at 26.

UBS further argues that the statute definitionally requires intent because it is a federal intentional tort claim. Id. at 18-20. UBS argues that federal intentional torts have an implied wrongful intent element: for instance, the Supreme Court required a showing of wrongful intent for a federal retaliation tort in Staub v. Proctor Hospital. Id. at 19-20.

UBS argues that the second step of the burden-shifting framework is unfair to the employer because it only reliably tests for but-for causation, not retaliatory intent, and because the standard of proof is onerous. Id. at 23, 30-32. UBS also insists that whistleblowing is particularly unsuited to but-for cause tests because whistleblowing inevitably causes the employer to act, whether its acts involve retaliation against whistleblowers or internal investigation of wrongdoing. Id. at 33. UBS also argues that Murray’s reading of Bostock is inaccurate because the Bostock Court insisted that discrimination claims on the basis of sex require proof of intent because intent inevitably plays a role in proving discrimination. Id. at 16.

STATUTORY AND ADMINISTRATIVE PRECEDENT

Murray argues that the controlling precedent in this case is the Whistleblower Protection Act of 1989 (WPA), which protects public sector whistleblowers, because SOX’s burden-shifting language mirrors that of WPA. Brief for Petitioner at 26-27. Murray reasons that SOX should not require proof of intent in its initial claims because the WPA does not; both the Federal Circuit and the Merit Systems Protection Board uniformly uphold WPA claims without requiring proof of retaliatory intent. Id. at 28-31. Murray argues that the WPA is a more important precedent than the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR21) because SOX only incorporates the AIR21 burden of proof. Reply Brief for Petitioner at 15-16. Murray further asserts that the AIR21 language, “contributing factor,” does not require an employee to prove retaliatory intent. Id. at 6.

The United States, as amicus curiae, argues that Murray’s interpretation is entitled to Chevron deference because it comports with the view of the Department of Labor’s Administrative Review Board (ARB). Brief for the United States as Amicus Curiae Supporting Petitioner at 31. The United States argues that courts should defer to the ARB as opposed to other agencies because the ARB has authority to adjudicate whistleblower complaints. Id. at 31-32. The United States insists that Chevron deference decides the case in Murray’s favor because the ARB has consistently held that a “contributing factor” test does not require a showing of retaliatory intent. Id. at 33.

UBS contends that AIR21 is a more important precedent than the WPA because SOX directly adopts AIR21’s language, which differs significantly from the WPA’s. Brief for Respondent at 37-38. UBS argues that the WPA retaliation framework is also irrelevant to SOX because the WPA uses the word “reprisal” and avoids the word “discrimination” in describing whistleblower retaliation while SOX’s language characterizes whistleblower claims as “discrimination.” Id. at 36-37. Further, UBS argues that AIR21 and SOX purposely impose less stringent regulations on private employers than the WPA does for public employers because the WPA must additionally consider governmental accountability. Id. at 39-40.

UBS asserts that the ARB is the incorrect executive body for Chevron deference purposes because the SEC has lawmaking power under SOX, and Occupational Health and Safety Administration (“OSHA”) has the relevant policymaking power within the Department of Labor. Id. at 44-45. Additionally, UBS argues that SOX disputes should be left up to the courts rather than executive agencies because the statute heavily emphasizes judicial review. Id. UBS also posits that deference would be impractical even if the ARB were correctly authorized because the ARB has made unexplained, inconsistent decisions on retaliatory motive, and the statutory language is clear. Id. at 46-47. Finally, UBS argues that Chevron deference is itself improper, endorsing the petitioner’s arguments from another case before the Supreme Court this term, Loper Bright Enterprises v. Raimondo. Id. at 44.

LEGISLATIVE INTENT

Murray asserts that Congress did not seek to require a retaliatory intent because congressional statements indicate that SOX’s purpose was to extend WPA-like protections to private sector employees. Brief for Petitioner at 27. Further, Murray argues, legislative history reveals that Congress purposely placed the burden to prove intent on the employer; the Congressional Record acknowledges that an employer is far better positioned than an employee to provide background evidence about an employment decision. Id. at 39.

UBS argues that Murray’s legislative intent arguments are unreliable because they rely on statements from the House sponsors. Brief for Respondent at 40-43. UBS insists that Murray's proof is particularly weak because Congress did not vote on those statements, which had the support of at most three legislators. Id. Finally, UBS posits that Congress would have avoided the language “discrimination . . . because of,” which has been interpreted to require intent in the past, if it had not intended to imply an intent element. Id. at 20.

Discussion

IMPACT ON EMPLOYERS’ AND EMPLOYEES’ CONDUCT

The Anti-Fraud Coalition, in support of Petitioner, argues that requiring employees to prove employers’ intent would undermine the remedial purpose of SOX. Brief of Amicus Curiae Anti-Fraud Coalition, in support of Petitioner at 25. The Anti-Fraud Coalition asserts that whistleblower protections permit employees to come forward about wrongdoing without fear of retaliation, thereby encouraging individuals to make the difficult decision to become a whistleblower. Id. at 23-24. The Anti-Fraud coalition further urges that whistleblowers not only expose wrongdoing but are also critical to proving in court that wrongdoing has occurred. Id. at 22. The Anti-Fraud Coalition argues that, in light of the economic and social stresses that come with whistleblowing, strong whistleblower protections that incentivize disclosure fraudulent activity to shareholders are appropriate. Id. at 24-25. The Anti-Fraud Coalition urges that, because such incentives are desirable and in line with Congress’ objectives in passing the SOX, there is a strong basis for broader, rather than narrower, protections. Id. at 22, 24-25.

The Chamber of Commerce of the United States, in support of Respondent, argues that the District Court’s interpretation of §1514A would hamper employers’ ability to make necessary personnel decisions when employees’ actions reveal misconduct. Brief of Amicus Curiae Chamber of Commerce of the United States (“Chamber of Commerce”), in support of Respondent at 22. The Chamber of Commerce contends that many protected activities result in internal investigations, which often uncover wrongdoing committed by the protected employee. Id. The Chamber of Commerce argues that, under such circumstances, businesses would be hesitant to take disciplinary actions falling short of termination because employees’ protected activity might be the but-for cause of the discipline. Id. at 22-23. Finally, the Chamber of Commerce argues that, because of liberal pleading standards and the availability of discovery, meritorious claims would still be able to succeed if Respondent’s proposed standard were adopted. Id. at 24.

CLARITY OF WHISTLEBLOWER PROTECTIONS IN FEDERAL LAW

The Academy of Rail Labor Attorneys ("ARLA"), in support of Petitioner, argues that the Supreme Court’s interpretation should interpret §1514A similar to other federal whistleblower protections, such as those in the Affordable Care Act and the Consumer Financial Protection Act, which rely on the same contributing-factor framework. Brief of Amicus Curiae Academy of Rail Labor Attorneys, in support of Petitioner at 4, 6-7. ARLA contends that, because these laws are meant to provide whistleblower protections, the Court’s interpretation here would establish the extent of whistleblower protections across more than a dozen other federal whistleblower statutes. Id. at 7-8. ARLA further argues that the Court should adhere to the District Court’s interpretation because Congress meant to lower plaintiffs’ evidentiary burden when it imposed the contributing-factor framework. Id. at 14.

The Society for Human Resource Management ("SHRM"), in support of Respondent, argues that the Second Circuit’s decision brings the SOX whistleblower provision into alignment with other federal whistleblower protections such as the Americans with Disabilities Act, Dodd-Frank and the Fair Labor Standards Act. Brief of Amicus Curiae Society for Human Resource Management, in support of Respondent at 5-6. SHRM asserts that Petitioner’s standard would cause confusion by making what types of employer conduct might give rise to liability under SOX less clear. Id. at 8. SHRM contends that a clear definition across federal laws would not only improve clarity but also make it easier for human resources professionals to comply with the law by clarifying which standard applies in whistleblower cases. Id. at 7-8. SHRM argues that such clarity would facilitate human resources professionals’ development, implementation, and enforcement of corporate policies and trainings in alignment with the statute. Id. at 10.