On February 8, 2024, the United States Supreme Court issued its decision in Murray v. UBS, 22-660, _S.Ct._(2024), a case involving the Sarbanes-Oxley Act of 2002. Sarbanes-Oxley was passed as a result of the Enron scandal, where the company used illicit accounting practices to inflate their revenue to appear more profitable. Enron employees who raised concerns about Enron’s corrupt practices faced unfavorable treatment and even termination of employment. Sarbanes-Oxley provides protection for whistleblowers who reasonably believe a company is engaging in criminal fraud or Security and Exchange Commission (SEC) violations.
Like many other anti-retaliation laws, the plaintiff must prove by a preponderance of the evidence that the whistleblower’s protected activity was a contributing factor in the unfavorable employment action. The burden then shifts to the employer, who, by clear and convincing evidence, must prove that it would have taken the same unfavorable employment action absent the protected activity.
The question before the Court was whether the plaintiff must also show “retaliatory intent” to satisfy the burden. The answer is no.
Murray, the plaintiff in this case, was employed by UBS as a research strategist within their commercial mortgage-backed securities business. As part of his regular duties, he had to certify that his reports were produced independently and accurately reflected his own views. Murray’s protected activity came when he raised concerns with his supervisor that he had been pressured to align his reports to the business strategies of their clients. This, Murray reported, was illegal and unethical. As the conduct continued, Murray was left out of meetings and ultimately was terminated from UBS in 2012.
Murray claimed he was fired in response to his reporting of illegal and unethical practices. After a jury trial, the Federal District Court of New York found in his favor. UBS appealed the decision to the Second Circuit, who disagreed with the lower court’s holding and ordered a new trial. Specifically, the Second Circuit found “retaliatory intent” was a requisite to prove retaliation under Sarbanes Oxley. The Supreme Court granted certiorari and held argument in October 2023.
Justice Sotomayor, writing for the Court, disagreed with the Second Circuit’s holding that plaintiff’s must prove “retaliatory intent.” The Court found the Second Circuit had improperly read into the elements “retaliatory intent,” which was not required under a plain reading of the statute. It further explained that the word “discriminate” was a catchall to the enumerated prohibited employment actions (discharge, demote, suspend, etc.), and did not implicate the need for “retaliatory intent” to be proven by the plaintiff.
The Court stated that intent was difficult to prove, and the burden shifting framework “provides a means of getting at intent, and Congress here has decided that the plaintiff’s burden on intent is simply to show that the protected activity was a ‘contributing factor in the unfavorable personnel action.’” The Court noted that proving “retaliatory intent” was but one way to prove that the protected activity was a contributing factor, “but it is not the only way.”
Finally, the Court was not persuaded that UBS and other employers would fall victim to nonretaliatory personnel decisions. Again, the Court pointed to the burden shifting framework as a means to combat such claims, stating that the employer need prove only that the employer would have taken the same action absent the protected activity.
The Murray decision was watched by several practitioners, not just for additional gloss on the complexities of retaliation claims, but also to evaluate the Supreme Court’s tendencies. With the bench split as it is, many wondered whether conservative justices would lean in favor of stricter requirements to prove retaliation, or if they would side with the more liberal wing.
With several more employment-relevant cases before the Court this term, employers should continue to consult with their employment attorneys to determine if any changes to their employment practices are necessary.