S.D.N.Y. Takes Broad Approach To SOX and Dodd-Frank Whistleblower Claims

by Proskauer - Whistleblowing & Retaliation
Contact

The U.S. District Court for the Southern District of New York recently denied a motion to dismiss a plaintiff’s SOX and Dodd-Frank whistleblower claims, ruling that (i) the plaintiff engaged in SOX protected activity even though her purported protected activity was part and parcel of her job duties as Chief Risk Officer, and (ii) she qualified as a Dodd-Frank whistleblower even though she did not lodge a complaint with the SEC.  Yang v. Navigators Group, Inc., Case No. No. 13-cv-2073, 2014 LEXIS 63876 (S.D.N.Y. May 8, 2014).

Background

Plaintiff Jennifer Yang (Plaintiff) was employed from June 25, 2012 through November 2, 2012, as Chief Risk Officer for Defendant Navigators Group, Inc. (Company).  She was responsible for enterprise risk management oversight and tasked with improving the risk management function.  She alleged in her complaint that, in executing these responsibilities, she discovered: (i) the Company’s previous risk assessment results were grossly underestimated; (ii) the Company’s 10-K falsely represented that its reinsurance recoverable credit risk was monitored by a subcommittee; (iii) the Company lacked proper risk control procedures; and (iv) the Company’s SEC filings and presentations to rating agencies inaccurately reflected the its risk management program.  Plaintiff alleged that shortly after she communicated her concerns to Company’s leadership, she suffered a retaliatory termination in violation of the whistleblower protection provisions in SOX and Dodd-Frank.

Ruling

The Company moved to dismiss Plaintiff’s SOX and Dodd-Frank whistleblower claims, asserting her communications to her supervisors were not “protected activity” under SOX, and that she was not a Dodd-Frank whistleblower because she did not report the purported securities law violations to the SEC.  The court disagreed on both counts.

In ruling that Plaintiff engaged in protected activity under SOX, the court determined that “an employee may engage in protected activity even where the employee is discharging her duties.”  It further ruled that Plaintiff had a reasonable belief (at least in the motion to dismiss context).  According to the court, although Plaintiff never explicitly communicated that shareholder fraud was being committed, improper risk management could influence shareholder investment decisions and thus an individual with Plaintiff’s training and experience could reasonably believe that such faulty management constituted fraud on shareholders and/or violated a SEC rule or regulation.

In addition, in ruling that Plaintiff qualified as a whistleblower under Dodd-Frank’s anti-retaliation provision even though she never reported the Company’s purported violations to the SEC, the court expressly strayed from the Fifth Circuit’s decision to the contrary.

Implications

Courts continue to grapple with the contours of the protected activity requirements in Section 806 of SOX and the Dodd-Frank anti-retaliation provisions. Employers can be expected to continue to battle on this front, but need to be prepared for disparate rulings. In addition, in considering the above-referenced defense to the SOX claim that the court rejected, see our recent blog post here on recent activity in New Jersey focused on whether an employee can qualify as a whistleblower where his or her alleged protected activity is part and parcel of his or her job.

 

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.

© Proskauer - Whistleblowing & Retaliation | Attorney Advertising

Written by:

Proskauer - Whistleblowing & Retaliation
Contact
more
less

Proskauer - Whistleblowing & Retaliation 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.