Second Circuit Requires Proof Of Retaliatory Intent In Sarbanes-Oxley Whistleblower Claim

• Published date: 13 September 2022
• Subject Matter: Corporate/Commercial Law, Employment and HR, Criminal Law, Securities, White Collar Crime, Anti-Corruption & Fraud, Whistleblowing
• Law Firm: Cahill Gordon & Reindel LLP
• Author: Mr Bradley J. Bondi, Cyrus N. Bordbar and Jason M. Ecker

On August 5, 2022, the United States Court of Appeals for the Second Circuit reached a decision in Murray v. UBS Securities, LLC, ¹ overturning a nearly $1 million award to a former UBS strategist who had filed a lawsuit under Sarbanes-Oxley's ("SOX") whistleblower protection provision, 18 U.S.C. ' 1514A. The Court held that the jury should have been instructed that such a claim requires a showing of the employer's retaliatory intent.² The Second Circuit's decision in Murray creates a circuit split, as the Fifth and Ninth Circuits have both held that "retaliatory intent" is not a required element for a Section 1514A claim. ³

I. Background

Under the SOX anti-retaliation provision, a publicly traded company may not "discriminate against an employee . . . because of" the employee's lawful involvement in providing information or otherwise assisting a government investigation of securities or fraud violations.⁴ The statute provides a private right of action to any employee who allegedly suffered such retaliation.⁵

In 2011, Trevor Murray was hired as a strategist at UBS, tasked with researching and reporting on the commercial mortgage-backed securities ("CMBS") business. In this role, Murray had a duty under Securities and Exchange Commission ("SEC") regulations to certify the accuracy and independence of his reports. Murray alleged that members of UBS's trading desk inappropriately pressured him to alter his research findings and author reports that aligned with the trading desk's business strategy. Murray reported these actions to his supervisor in December 2011 and again in January 2012. Soon after Murray raised his concerns, his supervisor recommended that he either be terminated or moved to the CMBS desk, as a desk analyst unregulated by the SEC. The CMBS desk declined to take Murray on as a desk analyst, and he was ultimately terminated in February 2012.

In 2014, Murray filed a lawsuit in the Southern District of New York claiming that his termination was retaliation for whistleblowing. UBS contended that Murray was terminated due to a reduction in the workforce brought on by poor financial performance. Ultimately, the case went to trial before a jury. The district court instructed the jury that Murray would need to prove that his protected activity was a "contributing factor" in his termination, explaining that for a protected activity to be a "contributing factor, it must have either alone or in combination with other factors tended to affect in any way...