571 U.S. 429 (2014), 12-3, Lawson v. FMR LLC

Docket Nº:12-3
Citation:571 U.S. 429, 134 S.Ct. 1158, 188 L.Ed.2d 158, 82 U.S.L.W. 4144, 24 Fla.L.Weekly Fed. S 580
Opinion Judge:Ginsburg, Justice
Party Name:JACKIE HOSANG LAWSON AND JONATHAN M. ZANG, Petitioners v. FMR LLC et al
Attorney:Eric Schnapper argued the cause for petitioners. Nicole A. Saharsky argued the cause for the United States, as amicus curiae. Mark A. Perry argued the cause for respondents.
Judge Panel:Ginsburg, J., delivered the opinion of the Court, in which Roberts, C. J., and Breyer and Kagan, JJ., joined, and in which Scalia and Thomas, JJ., joined in principal part. Scalia, J., filed an opinion concurring in principal part and concurring in the judgment, in which Thomas, J., joined. Sotom...
Case Date:March 04, 2014
Court:United States Supreme Court
 
FREE EXCERPT

Page 429

571 U.S. 429 (2014)

134 S.Ct. 1158, 188 L.Ed.2d 158, 82 U.S.L.W. 4144, 24 Fla.L.Weekly Fed. S 580

JACKIE HOSANG LAWSON AND JONATHAN M. ZANG, Petitioners

v.

FMR LLC et al

No. 12-3

United States Supreme Court

March 4, 2014

Argued November 12, 2013

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT

SYLLABUS [*]

To safeguard investors in public companies and restore trust in the financial markets following the collapse of Enron Corporation, Congress passed the Sarbanes-Oxley Act of 2002. One of the Act's provisions protects whistleblowers; at the [134 S.Ct. 1159] time relevant here, that provision instructed: " No [public] company . . ., or any . . . contractor [or] subcontractor . . . of [188 L.Ed.2d 168] such company, may discharge, demote, suspend, threaten, harass, or . . . discriminate against an employee in the terms and conditions of employment because of [whistleblowing activity]." 18 U.S.C. § 1514A(a).

Plaintiffs below, petitioners here, are former employees of respondents (collectively FMR), private companies that contract to advise or manage mutual funds. As is common in the industry, the mutual funds served by FMR are public companies with no employees. Both plaintiffs allege that they blew the whistle on putative fraud relating to the mutual funds and, as a consequence, suffered retaliation by FMR. Each commenced suit in federal court. Moving to dismiss the suits, FMR argued that the plaintiffs could state no claim under § 1514A, for that provision protects only employees of public companies, and not employees of private companies that contract with public companies. On interlocutory appeal from the District Court's denial of FMR's motion to dismiss, the First Circuit reversed, concluding that the term " an employee" in § 1514A(a) refers only to employees of public companies.

Held: The judgment is reversed and the case is remanded.

670 F.3d 61, reversed and remanded.

Justice Ginsburg delivered the opinion of the Court, concluding that § 1514A's whistleblower protection includes employees of a public company's private contractors and subcontractors. Pp. ___ - ___, 188 L.Ed.2d, at 174-186.

(a) This reading of § 1514A is supported by the provision's text. Pp. ___ - ___, 188 L.Ed.2d, at 174-179.

(1) The Court looks first to the ordinary meaning of the provision's language. See Moskal v.

United States, 498 U.S. 103, 108, 111 S.Ct. 461, 112 L.Ed.2d 449. As relevant here, § 1514A(a) provides that " no . . . contractor . . . may discharge . . . an employee." The ordinary meaning of " an employee" in this proscription is the contractor's own employee. FMR's " narrower construction" requires inserting " of a public company" after " an employee," but where Congress meant " an employee of a public company," it said so.

Page 430

The provision as a whole supports this reading. The prohibited retaliatory measures enumerated in § 1514A(a)-discharge, demotion, suspension, threats, harassment, or discrimination in employment terms and conditions--are actions an employer takes against its own employees. Contractors are not ordinarily positioned to take adverse actions against employees of the public company with whom they contract. FMR's interpretation of § 1514A, therefore, would shrink to insignificance the provision's ban on retaliation by contractors. The protected activity covered by § 1514A, and the provision's enforcement procedures and remedies, also indicate that Congress presumed an employer-employee relationship between the retaliator and the whistleblowing employee. Pp. ___ - ___, 188 L.Ed.2d, at 174-177.

(2) FMR's textual arguments are unpersuasive. It urges that " an employee" must be read to refer exclusively to public company employees to avoid the absurd result of extending protection to the personal employees of company officers and employees, e.g., their housekeepers or gardeners. This concern appears more theoretical than real and, in any event, is [188 L.Ed.2d 169] outweighed by the compelling arguments opposing FMR's reading of § 1514A. FMR also urges that its reading is supported by the provision's statutory headings, but those headings are " not meant to take the place of the detailed provisions of the text." Trainmen v. Baltimore & [134 S.Ct. 1160] Ohio R. Co., 331 U.S. 519, 528, 67 S.Ct. 1387, 91 L.Ed. 1646. Pp. ___ - ___, 188 L.Ed.2d, at 177-179.

(b) Other considerations support the Court's textual analysis. Pp. ___ - ___, 188 L.Ed.2d, at 179-185.

(1) The Court's reading fits § 1514A's aim to ward off another Enron debacle. The legislative record shows Congress' understanding that outside professionals bear significant responsibility for reporting fraud by the public companies with whom they contract, and that fear of retaliation was the primary deterrent to such reporting by the employees of Enron's contractors. Sarbanes-Oxley contains numerous provisions designed to control the conduct of accountants, auditors, and lawyers who work with public companies, but only § 1514A affords such employees protection from retaliation by their employers for complying with the Act's reporting requirements. Pp. ___ - ___, 188 L.Ed.2d, at 179-181.

(2) This Court's reading of § 1514A avoids insulating the entire mutual fund industry from § 1514A. Virtually all mutual funds are structured so that they have no employees of their own; they are managed, instead, by independent investment advisors. Accordingly, the " narrower construction" endorsed by FMR would leave § 1514A with no application to mutual funds. The Court's reading of § 1514A, in contrast, protects the employees of investment advisors, who are often the only firsthand witnesses to shareholder fraud involving mutual funds. Pp. ___ - ___, 188 L.Ed.2d, at 181-182.

Page 431

(3) There is scant evidence that today's decision will open any floodgates for whistleblowing suits outside § 1514A's purposes. The Department of Labor's regulations have interpreted § 1514A as protecting contractor employees for almost a decade, yet FMR is unable to identify a single case in which the employee of a private contractor has asserted a § 1514A claim based on allegations unrelated to shareholder fraud. Plaintiffs and the Solicitor General suggest various limiting principles to dispel any overbreadth problems. This Court need not determine § 1514As bounds here, however, because, if plaintiffs' allegations prove true, plaintiffs are precisely the " firsthand witnesses to [the shareholder] fraud" Congress anticipated § 1514A would protect. S. Rep. No. 107-146, p. 10. Pp. ___ - ___, 188 L.Ed.2d, at 182-183.

(4) The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act does not affect this Court's task of determining whether Congress in 2002 afforded protection to whistleblowing contractor employees. Pp. ___ - ___, 188 L.Ed.2d, at 183-185.

(c) AIR 21's whistleblower protection provision has been read to cover, in addition to employees of air carriers, employees of contractors and subcontractors of the carriers. Given the parallel statutory texts and whistleblower protective aims, the Court reads the words " an employee" in AIR 21 and in § 1514A to have similar import. Pp. ___ - ___, 188 L.Ed.2d, at 185-186.

[188 L.Ed.2d 170] Justice Scalia, joined by Justice Thomas, relying only on 18 U.S.C. § 1514As text and broader context, agreed that § 1514A protects employees of private contractors from retaliation when they report covered forms of fraud. Pp. ___ - ___, 188 L.Ed.2d, at 186-188.

Eric Schnapper argued the cause for petitioners.

Nicole A. Saharsky argued the cause for the United States, as amicus curiae.

Mark A. Perry argued the cause for respondents.

Ginsburg, J., delivered the opinion of the Court, in which Roberts, C. J., and Breyer and Kagan, JJ., joined, and in which Scalia and Thomas, JJ., joined in principal part. Scalia, J., filed an opinion concurring in principal part and concurring in the judgment, in which Thomas, J., joined. Sotomayor, J., filed a dissenting opinion, in which Kennedy and Alito, JJ., joined.

OPINION

Page 432

[134 S.Ct. 1161] Ginsburg, Justice

To safeguard investors in public companies and restore trust in the financial markets following the collapse of Enron Corporation, Congress enacted the Sarbanes-Oxley Act of 2002, 116 Stat. 745. See S. Rep. No. 107-146, pp. 2-11 (2002). A provision of the Act, 18 U.S.C. § 1514A, protects whistleblowers. Section 1514A, at the time here relevant, instructed: " No [public] company . . ., or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of [whistleblowing or other protected activity]." § 1514A(a) (2006 ed.).

Page 433

This case concerns the definition of the protected class: Does § 1514A shield only those employed by the public company itself, or does it shield as well employees of privately held contractors and subcontractors--for example, investment advisers, law firms, accounting enterprises--who perform work for the public company?

We hold, based on the text of § 1514A, the mischief to which Congress was responding, and earlier legislation Congress drew upon, that the provision shelters employees of private contractors and subcontractors, just as it shelters employees of the public company served by the contractors and subcontractors. We first summarize our principal reasons, then describe this controversy and explain our decision more comprehensively.

Plaintiffs below, petitioners here, are former employees of private companies that contract to advise or manage mutual funds. The mutual funds themselves are...

To continue reading

FREE SIGN UP