Lawson v. FMR LLC

Decision Date04 March 2014
Docket NumberNo. 12–3.,12–3.
Parties Jackie Hosang LAWSON and Jonathan M. Zang, Petitioners v. FMR LLC et al.
CourtU.S. Supreme Court

571 U.S. 429
134 S.Ct. 1158
188 L.Ed.2d 158

Jackie Hosang LAWSON and Jonathan M. Zang, Petitioners
v.
FMR LLC et al.

No. 12–3.

Supreme Court of the United States

Argued Nov. 12, 2013.
Decided March 4, 2014.


Eric Schnapper, Seattle, WA, for the petitioners.

134 S.Ct. 1161

Nicole A. Saharsky, for the United States as amicus curiae, by special leave of the Court, supporting the petitioners.

Mark A. Perry, Washington, DC, for the respondents.

Eric Schnapper, Counsel of Record, Seattle, WA, Indira Talwani, Segal Roitman, LLP, Boston, MA, Kevin G. Powers, Rodgers, Powers & Schwartz, LLP, Boston, MA, Counsel for Petitioners.

Stephen M. Shapiro, Timothy S. Bishop, Mayer Brown LLP, Chicago, IL, Mark A. Perry, Counsel of Record, Porter N. Wilkinson, Geoffrey C. Weien, Gibson, Dunn & Crutcher LLP, Washington, DC, Rachel S. Brass, Gibson, Dunn & Crutcher LLP, San Francisco, CA, Counsel for Respondents.

Justice GINSBURG delivered the opinion of the Court.

571 U.S. 432

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.).
571 U.S. 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 public companies that have no employees. Hence, if the whistle is to be blown on fraud detrimental to mutual fund investors, the whistleblowing employee must be on another company's payroll, most likely, the payroll of the mutual fund's investment adviser or manager.

Taking the allegations of the complaint as true, both plaintiffs blew the whistle on putative fraud relating to the mutual funds and, as a consequence, suffered adverse action by their employers. Plaintiffs read § 1514A to convey that "[n]o ... contractor ... may ... discriminate against [its own] employee [for whistleblowing]." We find that reading consistent with the text of the statute and with common sense. Contractors are in control of their own employees, but are not ordinarily positioned to control someone else's workers. Moreover, we resist attributing to Congress a purpose to stop a contractor from retaliating against whistleblowers employed

134 S.Ct. 1162

by the public company the contractor serves, while leaving the contractor free to retaliate against its own employees when they reveal corporate fraud.

571 U.S. 434

In the Enron scandal that prompted the Sarbanes–Oxley Act, contractors and subcontractors, including the accounting firm Arthur Andersen, participated in Enron's fraud and its coverup. When employees of those contractors attempted to bring misconduct to light, they encountered retaliation by their employers. The Sarbanes–Oxley Act contains numerous provisions aimed at controlling the conduct of accountants, auditors, and lawyers who work with public companies. See, e.g., 116 Stat. 750–765, 773–774, 784, §§ 101–107, 203–206, 307. Given Congress' concern about contractor conduct of the kind that contributed to Enron's collapse, we regard with suspicion construction of § 1514A to protect whistleblowers only when they are employed by a public company, and not when they work for the public company's contractor.

Congress borrowed § 1514A's prohibition against retaliation from the wording of the 2000 Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR 21), 49 U.S.C. § 42121. That Act provides: "No air carrier or contractor or subcontractor of an air carrier may discharge an employee or otherwise discriminate against an employee with respect to compensation, terms, conditions, or privileges of employment" when the employee provides information regarding violations "relating to air carrier safety" to his or her employer or federal authorities. § 42121(a)(1). AIR 21 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, we read the words "an employee" in AIR 21 and in § 1514A to have similar import.

I

A

The Sarbanes–Oxley Act of 2002 (Sarbanes–Oxley or Act) aims to "prevent and punish corporate and criminal fraud, protect the victims of such fraud, preserve evidence of such fraud, and hold wrongdoers accountable for their actions."

571 U.S. 435

S.Rep. No. 107–146, p. 2 (2002) (hereinafter S. Rep.).1 OF PARTICULAR CONcern to congress was abuNdant evidence that enron had succeeded in perpetuating its massive shareholder fraud in large part due to a "corporate code of silence"; that code, Congress found, "discourage[d] employees from reporting fraudulent behavior not only to the proper authorities, such as the FBI and the SEC, but even internally." Id., at 4–5 (internal quotation marks omitted). When employees of Enron and its accounting firm, Arthur Andersen, attempted to report corporate misconduct, Congress learned, they faced retaliation, including discharge. As outside counsel advised company officials at the time, Enron's efforts to "quiet" whistleblowers generally were not proscribed under then-existing law. Id., at 5, 10. Congress identified the lack of whistleblower protection

134 S.Ct. 1163

as "a significant deficiency" in the law, for in complex securities fraud investigations, employees "are [often] the only firsthand witnesses to the fraud." Id., at 10.

Section 806 of Sarbanes–Oxley addresses this concern. Titled "Protection for Employees of Publicly Traded Companies Who Provide Evidence of Fraud," § 806 added a new provision to Title 18 of the United States Code, 18 U.S.C. § 1514A, which reads in relevant part:

"Civil action to protect against retaliation in fraud cases

"(a) WHISTLEBLOWER PROTECTION FOR EMPLOYEES OF PUBLICLY TRADED COMPANIES .—No company with a class of securities registered under section 12 of the Securities Exchange Act of 1934 ( 15 U.S.C. § 78l ), or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934 ( 15 U.S.C. § 78o (d) ), 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 any lawful act done by the employee—

"(1) to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of section 1341 [mail fraud], 1343 [wire fraud], 1344 [bank fraud], or 1348 [securities or commodities fraud], any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders, when the information or assistance is provided to or the investigation is conducted by [a federal agency, Congress, or supervisor]...." § 806, 116 Stat. 802.2

Congress has assigned whistleblower protection largely to the Department of Labor (DOL), which administers some 20 United States Code incorporated whistleblower protection provisions. See 78 Fed.Reg. 3918 (2013). The Secretary has delegated investigatory and initial adjudicatory responsibility over claims under a number of these provisions, including § 1514A, to DOL's Occupational Safety and Health Administration (OSHA). Ibid. OSHA's order may be appealed

571 U.S. 437

to an administrative law judge, and then to DOL's Administrative Review Board (ARB). 29 CFR §§ 1980.104 to 1980.110 (2011).

In common with other whistleblower protection provisions enforced by DOL, see 77 Fed.Reg. 3912 (2012), the ARB's determination on a § 1514A claim...

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