Preserving Some “Bite”: The Fourth Circuit Approves Summary Judgment for Employer in a SOX Retaliation Case

by Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
Contact

As we have discussed in earlier posts, the recent trend in court decisions under the Sarbanes-Oxley Act (SOX) has been to lighten the burden on complainants and to expand the universe of cases that proceed to decisions on the merits. Consequently, the direction has been away from victories for employers on summary judgment motions, which the U.S. Department of Labor’s Administrative Review Board (ARB) has indicated it disfavors strongly. The Fourth Circuit Court of Appeals, however, has taken a narrower view, and found that entry of summary judgment is correct in cases where a complainant’s proof is lacking.

To survive summary judgment on a SOX retaliation claim, a plaintiff must show by a preponderance of the evidence that,

  1. he or she engaged in protected activity;
  2. the employer knew that the plaintiff engaged in such activity;
  3. he or she suffered an unfavorable employment action; and
  4. the protected activity was a “contributing factor” in that action.

Assuming that the first three factors are satisfied, a plaintiff’s causation hurdle is typically easy to satisfy. A “contributing factor” is any factor or combination of factors that tends to influence the employer to undertake an adverse employment action against the whistleblowing employee. There is no requirement for the protected activity to be a significant, major, or motivating factor in any subsequent personnel decision. The leniency of this causation standard has left many publicly-traded companies to wonder under what circumstances—if any—protected activity would not be deemed a contributing factor to the adverse employment decision.

On May 12, 2014, the Fourth Circuit, in Feldman v. Law Enforcement Associates Corporation, No. 13-1849 (May 12, 2014), went a long way toward answering that question, reminding us all that, while lenient, the causation standard applicable to SOX retaliation claims is not “toothless,” but in fact can bite a plaintiff who has insufficient proof.  The Feldman court held that an employee’s termination at some point after filing a known SOX complaint is not automatically dispositive of the issue of causation. Rather, an in-depth review of the timeline of events, as well as the facts underlying the long-standing relationship of the parties, is essential to a proper decision. The court homed in on three core facts which, taken together, necessitated a summary judgment ruling in favor of the employer.

First, the lapse of time between the protected activity and the adverse employment action is important. In Feldman, the plaintiff, a former president and member of the employer’s board of directors, was not discharged until 20 months after he complained to the U.S. Department of Commerce. The Fourth Circuit further noted that even a 10-month time lapse could preclude proof of the required causative link.

Second, the existence of mutual animosity before the protected activity can also weigh against a finding of causation. In Feldman, the parties’ relationship began to sour more than two months before the plaintiff filed a complaint. A history of antagonism that predates the protected activity tends to negate a plaintiff’s argument that the protected activity was a contributing factor to his or her termination. This is especially true when, as in Feldman, there is no evidence that the protected activity further soured the relationship.

Third, an employee’s detrimental action towards the company after engaging in protected activity can be a significant intervening event that breaks a chain of causation. In Feldman, the plaintiff’s termination came only one month after he, while still serving in his role as president and board member, encouraged shareholders to sue the company over a contract dispute and personally wrote a letter to other board members threatening that they would be sued if they refuse to resign. Those activities constituted a legitimate intervening event and further eroded the plaintiff’s causation argument.

The Fourth Circuit’s detailed review of the foregoing factual evidence relating to the plaintiff’s termination clearly establishes that the causation standard for a SOX retaliation claim is indeed not “toothless”—and neither is the risk to plaintiffs of summary judgment when the facts proving causation are weak. It remains to be seen whether the ARB will follow the Fourth Circuit’s lead. Moving forward, it is essential that employers be in a position to articulate and demonstrate, by solid evidence, both the facts precluding proof of causation and the non-retaliatory reason for the decision to take adverse action against a complaining employee.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ogletree, Deakins, Nash, Smoak & Stewart, P.C. | Attorney Advertising

Written by:

Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
Contact
more
less

Ogletree, Deakins, Nash, Smoak & Stewart, P.C. on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!