Legal Malpractice

On March 22, 2021, the Seventh Circuit affirmed a decision by the ARB dismissing a whistleblower retaliation complaint under SOX for failure to file within the 180-day statutory deadline.  Xanthopoulos v. U.S. Department of Labor, No. 20-2604.  The court rejected the plaintiff’s equitable tolling arguments. Background Plaintiff was an employee of an investment company, and his employment was terminated on October 3, 2017.  Prior to and after his discharge, Plaintiff filed several reports on the SEC’s whistleblower website by submitting a “tips, complaints, and referrals” electronic form (“TCR Form”).  The TCR Forms focused on allegations that Plaintiff’s employer was…
On December 17, 2020, the Administrative Review Board (“ARB”) of the U.S. Department of Labor affirmed the dismissal of a former employee’s whistleblower retaliation claim under Section 806 of SOX.  The ARB concluded that the Complainant did not engage in protected activity, noting that his complaints regarding a lack of what he characterized as “internal controls” were inadequate.  The ARB also concluded that the Respondent showed it would have terminated Complainant’s employment even in the absence of his alleged protected activity.  Thibodeau v. Wal-Mart Stores, Inc., ARB Case No. 2017-0078. Background Complainant worked for Respondent as a Senior…
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. Background 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…
The Commodity Futures Trading Commission (“CFTC”) recently released its 2020 Annual Report on the status of its whistleblower program for the fiscal year ending on September 30, 2020. The report, prepared by the CFTC’s Whistleblower Office (“WBO”), contains statistics on the tips received and awards granted during the previous fiscal year, describes the WBO’s recent outreach and education initiatives, and provides an update on the CFTC Customer Protection Fund, which finances these efforts. Under the CFTC’s whistleblower program, whistleblowers who voluntarily provide original information about violations of the Commodity Exchange Act are eligible to receive between 10 and 30 percent…
On September 30, 2020, the U.S. District Court for the Northern District of Georgia granted an employer’s motion to dismiss a Dodd-Frank whistleblower claim on the ground that the alleged whistleblower did not complain to the SEC prior to his termination.  The court also granted Plaintiff’s SOX whistleblower claim as against three affiliates of Plaintiff’s employer, holding that Plaintiff had failed to exhaust administrative remedies as to those defendants because he did not specify the allegedly wrongful conduct attributable to each of them in his administrative complaint.  Slawin v. Bank of America Merchant Services., et al., No. 19-cv-04129…
On September 23, 2020, by a vote of 3 to 2, the U.S. Securities and Exchange Commission announced the adoption of a final rule implementing several changes to its whistleblower program, citing the need to “provide greater clarity to whistleblowers and increase the program’s efficiency and transparency.”  The following addresses the key provisions of the final rule. The Commission Clarifies Its Award-Setting Procedures One of the most notable provisions of the final rule changed how the Commission sets award amounts.  Under the terms of the Dodd-Frank Act which established the whistleblower program, awards must equal between 10 percent and 30…
On September 14, 2020, the SEC announced payment of more than $10 million to a whistleblower who provided original information to the SEC that led to a successful enforcement action.  (The order granting the award can be accessed here.) In explaining the reason for its award determination, the SEC noted that the whistleblower had “provided extensive and ongoing assistance to the investigative team over the course of the investigation, including identifying witnesses and helping staff understand complex fact patterns and issues related to the matters under investigation.” Since issuing its first whistleblower award in 2012, the SEC has awarded…
On July 16, 2020, the Third Circuit affirmed the dismissal of a former IT analyst’s whistleblower retaliation claim, holding that he lacked an objectively reasonable belief that his complaints implicated one of the enumerated forms of fraud in the SOX whistleblower provision.  Reilly v. GlaxoSmithKline, LLC, No. 19-cv-2897. Background Plaintiff was an IT analyst for the Company, where his duties included maintaining the Company’s AS/400 computer servers and addressing performance and security issues related to them.  Beginning in 2011, Plaintiff allegedly began complaining to his supervisor about performance issues caused by the decision to “uncap” the servers’ processors,…
On June 15, 2020, Senator Kamala Harris and Representatives Jackie Speier and Jamie Raskin introduced the COVID-19 Whistleblower Protection Act (the “Act”), which seeks to provide protections for employees who blow the whistle on employers who misuse federal funds received through various measures enacted by Congress aimed at mitigating the impact of the coronavirus pandemic.  (The text of the proposed bill can be found here.)  Many of the whistleblower protections in the Act echo those contained in the American Recovery and Reinvestment Act of 2009 – the economic stimulus bill signed by President Obama in the wake of the…
On May 5, 2020, a Magistrate Judge in the U.S. District Court for the Western District of Pennsylvania issued a report and recommendation recommending that a defendant-employer’s motion for summary judgment dismissing a SOX whistleblower retaliation claim be granted, finding that the plaintiff had not engaged in protected activity.  Wutherich v. Rice Energy Inc, No. 18-cv-00200. Background Plaintiff was a manager at the defendant-employer, an energy company involved in fracking.  In July 2016, Plaintiff allegedly overheard a co-worker discussing data regarding wells that the co-worker had obtained from a previous employer.  Plaintiff reported this incident to his supervisor and…