In Lawson v. FMR LLC, No. 10-2240 (1st Cir., Feb. 3, 2012), a divided First Circuit reversed the district court’s denial of a motion to dismiss, holding that the whistleblower protection provision of the Sarbanes-Oxley Act of 2002 (“SOX”) does not cover employees of certain contractors or subcontractors retained by public companies.

Jackie Hosang Lawson and Jonathan M. Zang (“Plaintiffs”) were employees of FMR LLC and of other related private companies that served as investment advisers to the Fidelity family of mutual funds.  In 2005 and 2006, Plaintiffs filed SOX whistleblowing complaints.  See 18 U.S.C. § 1514A(b)(1)(A).  Zang alleged that he was discharged for reporting inaccuracies in a draft registration statement and Lawson alleged that she was discharged for raising concerns related to cost accounting methodologies.

SOX’s whistleblower protection provision states that no public company or “officer, employee, contractor, subcontractor, or agent…of such company” may “discriminate against an employee” for engaging in a protected activity.  18 U.S.C. § 1514A(a).  Plaintiffs argued that this protection extended to employees of any of the listed agents of that company, including contractors and subcontractors.  Defendants argued that the list of agents merely identified those who may not retaliate and was not intended to define the boundaries of those who were protected under the statute.

In interpreting the statute, the court found no evidence that Congress intended the list of agents barred from discriminating to also define those protected from discrimination. In contrast, both the title of SOX § 806 and the caption of § 1514A(a) provided guidance: both referred to “employees of publicly traded companies.” The court also examined similar statutory provisions in SOX and other acts, and found that Congress was explicit when extending broader whistleblower protection.  Finally, the legislative history of SOX specifically showed that the protection of § 1514A(a) was intended for employees of publicly traded companies.  

Finding that the protections of § 1514A(a) only extend to employees of publicly traded companies, and not to employees of private contractors or subcontractors to those companies, the court reversed and remanded to the district court with instructions to dismiss.

The primary materials for this case may be found on the DU Corporate Governance website.

A previous post on the district court decision may be found here.