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Lawson v. FMR LLC

Supreme Court of the United States

November 12, 2013, Argued; March 4, 2014, Decided

No. 12-3

Opinion

 [*432]  [**1161]   Justice Ginsburg delivered the opinion of the Court.

To safeguard investors in public companies  [****7] 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.).

 [*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  [****8] 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  [***171]  to control someone else’s workers. Moreover, we resist attributing to Congress  [****9] a purpose to stop a contractor from retaliating against whistleblowers employed  [**1162]  by the public company the contractor serves, while leaving the contractor free to retaliate against its own employees when they reveal corporate fraud.

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571 U.S. 429 *; 134 S. Ct. 1158 **; 188 L. Ed. 2d 158 ***; 2014 U.S. LEXIS 1783 ****; 82 U.S.L.W. 4144; 97 Empl. Prac. Dec. (CCH) P45,023; Fed. Sec. L. Rep. (CCH) P97,838; 37 I.E.R. Cas. (BNA) 1193; 2014 OSHD (CCH) P33,358; 24 Fla. L. Weekly Fed. S 580; 2014 WL 813701

JACKIE HOSANG LAWSON AND JONATHAN M. ZANG, Petitioners v. FMR LLC et al.

Notice: The LEXIS pagination of this document is subject to change pending release of the final published version.

Prior History:  [****1] ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT

Lawson v. FMR LLC, 670 F.3d 61, 2012 U.S. App. LEXIS 2085 (1st Cir. Mass., Feb. 3, 2012)

Disposition: Reversed and remanded.

CORE TERMS

employees, contractor, public company, retaliation, whistleblower, subcontractor, mutual fund, protections, regulations, headings, contract employee, lawyers, investors, Sarbanes-Oxley Act, shareholder, provisions, publicly traded company, demote, AIR, ambiguous, investment adviser, accounting firm, private company, air carrier, deference, reporting, privately held, Appeals, extends, harass

Labor & Employment Law, Retaliation, Statutory Application, General Overview, Wrongful Termination, Business & Corporate Law, Corporate Governance, Directors & Officers, Whistleblower Protection Act, Whistleblower Protection Act, Administrative Law, Judicial Review, Reviewability, Jurisdiction & Venue, Remedies, Governments, Legislation, Interpretation, Securities Law, Recordkeeping & Reporting Requirements, Issuers of Securities, Accounting & Audit Oversight, Investment Companies, Investment Advisers