Recent SOX Decisions May Yield Unforeseen Consequences for Victors

February 25, 2019

Katz Banks Kumin partner Michael Filoromo spoke at an ABA Section of Labor and Employment conference on how two recent court decisions could change the incentives for whistleblowers and potentially further complicate issues of privileged and confidential evidence.

Mr. Filoromo’s session, “In a SOX World: Be Careful What You Wish For,” examined Digital Realty v. Somers, in which the Supreme Court concluded that whistleblowers must report directly to the Securities and Exchange Commission (SEC) to be protected whistleblowers under the Dodd-Frank Act.  While theoretically the decision was a win for employers, since it restricted access to the double back pay and longer statute of limitations available under Dodd-Frank, it could also increase the frequency with which employees report potential securities violations to the SEC before giving their employers an opportunity to proactively address the issues internally.

The other case, Wadler v. Bio-Rad, found that a former in-house counsel who blew the whistle on apparent violations of the Foreign Corrupt Practices Act could use privileged communications and confidential information to prove his retaliation claim. This case could have major implications on what evidence plaintiffs, and particularly those in compliance and legal roles at companies, can use when asserting SOX retaliation claims.  But such decisions also present challenges for attorneys who must deal with thorny questions regarding what evidence they can legally and ethically review and use in representing their clients.

Mr. Filoromo was joined by Hal Wellford of Littler Mendelson PC.

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