U.S. Supreme Court to Decide Whether SOX’s Whistleblower Provision Protects Employees of Publicly Traded Company’s Contractors

On May 20, 2013, the United States Supreme Court granted a petition for a writ of certiorari to review the United States Court of Appeals for the First Circuit's decision holding that SOX's whistleblower protection does not extend to employees of a publicly traded company's contractors. Lawson v. FMR LLC, 670 F.3d 61 (1st Cir. 2012). Notably, this is the first time the Supreme Court has been called upon to resolve an issue under Section 806 of the Sarbanes-Oxley Act.

Background

Section 806 of the Sarbanes-Oxley Act of 2002 ("SOX"), codified at 18 U.S.C. § 1514A, prohibits retaliation against employees of public companies who report suspected violations of Securities and Exchange Commission rules or federal laws relating to fraud. The SOX whistleblower protection provisions of § 1514A(a) state that no public company (i.e., registers securities under Section 12 of the Securities Exchange Act of 1934, required to file reports under Section 15(d) of the Securities Exchange Act of 1934 or certain subsidiaries thereof) or "officer, employee, contractor, subcontractor, or agent...of such company" may "discriminate against an employee" for engaging in a protected activity. 18 U.S.C. § 1514A(a).

Two former employees, Jackie Hosang Lawson and Jonathan M. Zang , brought separate suits alleging unlawful retaliation under § 806 of SOX against FMR LLC and other related private companies ("FMR") that provide, pursuant to contract, investment advising services to the Fidelity family of mutual funds. The Fidelity mutual funds were not parties to either suit and are investment companies organized under the Investment Company Act of 1940. The Fidelity mutual funds are not owned, controlled by or affiliated with FMR.

After initially filing complaints with the Occupational Safety & Health Administration ("OSHA"), Lawson and Zang commenced de novo actions in federal district court. FMR moved to dismiss plaintiffs' claims in district court, arguing that plaintiffs were not "covered employees" under § 1514A(a) because the statute does not protect employees of private subsidiaries of public companies. FMR maintained that the listing of "contractor" and "subcontractor" (along with other possible actors) merely identifies those who are barred from retaliating against employees of public companies, but does not extend protection to the employees of those contractors and subcontractors. Plaintiffs took the position that both the employees of public companies and those...