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12-3 LAWSON V. FMR, LLC DECISION BELOW: 670 F.3d 61 CERT. GRANTED 5/20/2013 QUESTION PRESENTED: Section 806 of the Sarbanes-Oxley Act, 18 U.S.C. § 1514A, forbids a publicly traded company, a mutual fund, or "any ... contractor [or] subcontractor ... of such company [to] ... discriminate against an employee in the terms and conditions of employment because of" certain protected activity. (Emphasis added). The First Circuit held that under section 1514A such contractors and subcontractors, if privately-held, may retaliate against their own employees, and are prohibited only from retaliating against employees of the public companies with which they work. The question presented is: Is an employee of a privately-held contractor or subcontractor of a public company protected from retaliation by section 1514A? LOWER COURT CASE NUMBER: 10-2240
The Lawson v. FMR LLC case in 2013 revolved around the interpretation of whistleblower protections under the Sarbanes-Oxley Act (SOX). The plaintiffs, Jackie Hosang Lawson and Jonathan M. Zang, were former employees of private companies that contract as advisers to and managers of mutual funds. They claimed they faced retaliation after reporting alleged fraud relating to these mutual funds - a violation under SOX's whistleblower protection provisions. However, their employers argued that SOX only protects employees of public companies from such retaliation, not those working for private contractors or subcontractors. In a 6-3 decision by Justice Ginsburg, the Supreme Court ruled in favor of Lawson and Zang stating that Sarbanes-Oxley’s whistleblower protection includes employees of privately held contractors who perform work for publicly traded companies. This ruling expanded the scope beyond just direct employees but also included contractors, subcontractors or agents providing services to public firms.
In the dissenting opinion for Lawson v. FMR LLC, Justice Sonia Sotomayor argued that the majority's interpretation of Sarbanes-Oxley Act’s whistleblower protection was too broad. She contended that the language and structure of Section 806 clearly indicated Congress intended to protect employees of public companies, not those employed by private contractors or subcontractors. The legislative history also supported this narrower reading as there was no evidence Congress considered extending protections beyond public company employees when drafting Sarbanes-Oxley Act. Furthermore, she expressed concern about potential unintended consequences from a broader interpretation such as frivolous lawsuits and unnecessary costs for private businesses which were never meant to be covered under this law in first place.