Fifth Circuit Affirms Dismissal of SOX Whistleblower Claim for Lack of Employer-Employee Relationship

Proskauer - Whistleblowing & Retaliation

Proskauer - Whistleblowing & Retaliation

[co-author: Rebecca Fishbein]

On January 29, 2021, the U.S. Court of Appeals for the Fifth Circuit affirmed the dismissal of a SOX whistleblower retaliation claim where the plaintiff failed to establish an employer-employee relationship with the defendant. Moody v. Am. Nat’l Ins. Co., No. 20-cv-40462.


Plaintiff was the owner and president of Moody Insurance Group (“MIG”). MIG contracted with American National Insurance Company (“ANICO”) to sell ANICO’s insurance products. During the term of the contract, Plaintiff complained to the ANICO Board that ANICO was in violation of certain SEC regulations. He also filed a shareholder derivative suit. The ANICO Board subsequently terminated ANICO’s contract with MIG.

In June 2019, Plaintiff filed suit in the U.S. District Court for the Southern District of Texas, alleging that ANICO retaliated against him in violation of Section 806 of SOX for his complaints by canceling his company’s contract, among other things. In June 2020, the district court granted ANICO’s Rule 12(b)(6) motion to dismiss the SOX claim, holding that Plaintiff failed to allege facts showing that he was a covered employee of ANICO under SOX (our post on that decision is here). The district court agreed with ANICO’s argument that the U.S. Supreme Court’s decision in Lawson v. FMR (2014) (discussed here), only permits the employees of a contractor to bring suit against their actual employer, and not against the public company with which their employer contracts.


The Fifth Circuit affirmed the district court’s grant of ANICO’s motion to dismiss, explaining that the Supreme Court made clear in Lawson that SOX only covers “actions an employer takes against its own employees” and, therefore, “the whistleblower entitled to protection must be an employee of the retaliator.” Because Plaintiff was an employee of MIG (a private company), and not ANICO (a public company), Plaintiff failed to plead sufficient facts to show that he is a covered employee protected by SOX.


This decision clarifies that even under the Lawson, employees of private companies that contract with public companies can only pursue a SOX claim against their actual employer.

[View source.]

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.

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