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Murray v. UBS Securities

Introduction

In Murray v. UBS Securities, the Supreme Court of the United States interpreted the phrase “discriminate against an employee . . . because of,” found in 18 USC § 1514A(a). This statute is designed to establish protections for employees at publicly traded companies who shine light on their employer’s fraudulent activity. The issue is whether the statute necessitates a whistleblower to establish that the employer acted with animosity or “retaliatory intent.” Through a thorough examination of statutory interpretation and considerations of public policy, the court concluded that retaliatory intent was not an additional requirement for the employee to demonstrate. This unanimous decision in favor of the employee not only clarified the burden of proof requirements, but also provided guidance to employers on how to proceed in accordance with this ruling.


Factual Background

In response to the wave of accounting scandals in the early 2000s, Congress enacted the Sarbanes-Oxley Act (SOX). This act was designed to shield whistleblowers at certain companies and encourage reporting conduct they believe involves fraud in violation of Securities and Exchange Commission (SEC) regulations, or federal law violations. SOX provided a framework for employees to bring their concerns to their supervisor or directly to the government while being protected from retaliation.


Trevor Murray was employed as a research strategist at securities firm UBS. In accordance with the SEC, Murray was required to certify that his reports were produced independently and reflected his personal views on commercial mortgage-backed securities (CMBS) markets. This independence, however, was undermined. Murray reported that two leaders of the CMBS team exerted improper pressure on him to manipulate reports in favor of their business strategies, thus compromising the integrity of independent report creation. 


Following SOX regulations, Murray reported this conduct to his direct supervisor as “unethical” and “illegal.” Despite past records of Murray receiving praise for his success and performance, Murray began to lose out on opportunities in the workplace after informing his supervisor of such behavior by the team leaders. Shortly thereafter, UBS fired Murray.


Credit: Ank Kumar | Wikimedia


Murray v. UBS Securities

Murray filed an action in federal court alleging that his termination violated Section 1514A of Sarbanes-Oxley because he was fired in response to his internal reporting about fraud on shareholders. This statute sets forth that no covered employer may “discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of” protected whistleblower activity. Essentially, Murray argued that his report to his supervisor aligns with the whistleblower activity envisioned by SOX. Therefore, his termination constituted a SOX violation.


While the District Court found in favor of Murray, the Second Circuit vacated the jury’s verdict. The Second Circuit determined that “discriminate . . . because of” meant the employee must prove the employer took the adverse employment action with retaliatory intent—a mental state that can be especially challenging for an employee to prove. The Supreme Court granted certiorari to resolve a circuit split between the Second Circuit, which required retaliatory intent, and the Fifth and Ninth Circuits, which did not—thus questioning: Is retaliatory intent a required element?


Statutory Breakdown: Murray’s Discharge Explained

 In interpreting the statutory text, the Supreme Court determined the word “discriminate” is a part of the section’s catchall provision. Therefore, this word is intended to encapsulate all other forms of adverse employment actions that are not specifically enumerated. For instance, although the statutory text may not explicitly mention the word “reprimand,” the catchall provision serves the purpose of encompassing words that align with the legislative intent. 


The Court simplifies the matter: Murray was discharged from UBS. The disputed phrase—“or in any other manner discriminate”—holds no relevance to his claim. Thus, if the argument for retaliatory intent being an essential element is derived from this phrase, and it is covered in the catchall, then retaliatory intent is not necessary for this claim.


In UBS’s arguments, they suggested that the word “discriminate” characterizes “discharge.” Essentially, the discharge must be done in a discriminatory way. UBS likened the word “discrimination” to “animus,” which implies retaliatory intent. However, the Court does not buy UBS’s argument. The Court clarified that intent is not required for discrimination. The mere act of treating someone unfavorably due to whistleblower activity forms the foundation of what SOX stands for; hence, the employer's motivation for retaliation is irrelevant.


Legislative Choice: Contributing Factor

In the interest of public safety, Congress created a more lenient burden of proof aimed to empower employees in industries that they deemed in critical need of enhanced whistleblower protections. This standard changed the plaintiff’s burden to simply show that the protected activity was a “contributing factor in the unfavorable personnel action.” The contributing-factor framework simply requires an employee to show their protected activity played some part in the adverse action, even if not the main reason. In contrast, had Congress used a motivating factor standard, employees would be required to prove their protected activity was the main reason for the action, making it a higher threshold to meet. Rejecting this higher standard, Congress specifically employed the contributing-factor framework to empower whistleblowers to come forward. Courts and legislatures agree that “personnel actions against employees should quite simply not be based on protected [whistleblowing] activities.” Therefore, demonstrating any mistreatment should suffice to warrant a claim against the employer who acted improperly.


Once the employee shows this, the burden moves to the employer to “demonstrat[e] by clear and convincing evidence, that the employer would have taken the same unfavorable personnel action in the absence of that behavior.” Here, Murray demonstrated that his protected whistleblowing activity was indeed a “contributing factor” in his dismissal. Meanwhile, UBS failed to demonstrate that it would have terminated Murray even without the whistleblowing activity. Consequently, under this burden-shifting framework, Murray prevailed.


Legal Implications: Promoting Accountability

The outcome in Murray is overall favorable to employees. The decision to forgo the requirement of a retaliatory intent furnishes employees with a greater ability to act ethically and report potentially unscrupulous behavior to the relevant authorities. Additionally, employees can now feel assured that their risk of experiencing negative repercussions from their reporting has been lowered as long as their allegations were reasonable. The additional support for whistleblowers can contribute to the creation of a more lawful and accountable financial service industry. This, in turn, will bolster consumer satisfaction and enhance the public’s trust.


An important implication of this opinion is what employers can extract from it, despite the unfavorable decision, in terms of understanding how to navigate similar situations in the future. UBS set forth a hypothetical where an employee’s whistleblowing leads to a client severing ties with the company, consequently resulting in the whistleblower losing their job and the eventual elimination of their position. UBS argues that according to this decision, employers could be held accountable for “retaliation” even without intending to retaliate, thus emphasizing the necessity of proving retaliatory intent. The Court disagrees.


The analysis boils down to one question: Would the employer have taken the same action if performed by an otherwise identical employee who had not engaged in the protected activity? If the answer is yes, then the employer will likely succeed in court. They simply need to prove, with clear and convincing evidence, that the whistleblowing activity did not influence their decision. Relating back to the hypothetical, the employer would have to ask themselves: Would we fire this employee if the client had left for some other reason?


As the court makes clear, whistleblowing should not be the basis for any unfavorable actions an employer makes against an employee. Given the statutory and public policy reasoning behind this decision, employers should not only embrace, but also adapt to what is expected of them. Employers should be encouraged to document employees’ work more closely, detailing exactly why and how employees are discharged, demoted, suspended, etc., in order to be better prepared for questioning in court. When having to prove that they would have taken the same measure despite the whistleblowing activity, this would be enhanced by a better understanding of past practices that can be directly paralleled to the specific case. Most importantly, whistleblowing, when done in good faith and for the right reasons, serves to uncover flaws and potential illegal activities within a company or organization. This decision informs employers that the Supreme Court is concerned not with whether the employer acted with retaliatory intent, but rather with whether, for any reason, the employer changed their behavior because of whistleblowing activity.


*The views expressed in this article do not represent the views of Santa Clara University.


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