Yesterday. the Supreme Court issued its opinion in Lawson v. FMR LLC (opinion here). The Court interpreted Sarbanes Oxley's whistleblower retaliation provision:
No [public] company . . . , or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of [whistleblowing or other protected activity].18 U.S.C. § 1514A(a) (2006 ed.). Protected activity under SOx includes reporting fraud against shareholders of publicly traded companies. The opinion describes the issue presented as:
This case concerns the definition of the protected class: Does §1514A shield only those employed by the public company itself, or does it shield as well employees of privately held contractors and subcontractors—for example, investment advisers, law firms, accounting enterprises— who perform work for the public company?Of course, my ears perked up at "law firms." So, what's the bottom line? The Court concluded that the "whistleblower protection extends to employees of contractors and subcontractors."
We got an interesting lineup in the majority opinion. Justice Ginsberg wrote for Justices Roberts, Breyer, Kagan, Scalia, and Thomas. However,. Justices Scalia and Thomas broke off in a concurring opinion by Scalia.
The gist of that opinion was that Ginsberg was spot on with her interpretation of the text of the statute and its context - but, her reliance on congressional intent was misplaced. Anyone who has followed Justice Scalia's career is familiar with this rant (does he just cut and paste these from one case to the next?). In any event, he and Thomas believe that we should look to the original meaning of the text of the law, and that congressional intent is "fiction."
Justice Sotomayor wrote a dissent, joined by Justices Kennedy and Alito (another odd matchup). She opens with a colorful description of how the Court's majority opinion may be applied:
The Court’s interpretation gives §1514A a stunning reach. As interpreted today, the Sarbanes-Oxley Act authorizes a babysitter to bring a federal case against his employer—a parent who happens to work at the local Walmart (a public company)—if the parent stops employing the babysitter after he expresses concern that the parent’s teenage son may have participated in an Internet purchase fraud. And it opens the door to a cause of action against a small business that contracts to clean the local Starbucks (a public company) if an employee is demoted after reporting that another nonpublic company client has mailed the cleaning company a fraudulent invoice.She concludes by noting that Congress has the power to restrict the reach of SOx to preclude the broad reach of the Court's majority interpretation.