In an unpublished decision in Yang v. Navigators Grp., Inc., the Second Circuit recently clarified a Sarbanes-Oxley whistleblower’s burden at the summary-judgment stage.
Jennifer Yang was hired as chief risk officer for Navigators Group, Inc., in June, 2012, after working for more than five years at another large insurance company. At Navigators, Ms. Yang reported directly to the CFO.
The same year that Ms. Yang was hired, she says, she notified her superiors multiple times of misconduct that amounted to “fraud” or “shareholder fraud.” First, Ms. Yang notified the CFO of certain misrepresentations that constituted “fraud” or “shareholder fraud.” Ms. Yang later emailed the CEO because she was “so concerned” about untrue statements that were being made to Navigators’ board of directors and rating agencies, which, she testified, constituted “shareholder fraud.” Finally, Ms. Yang informed Navigators’ general counsel that the company’s SEC filings misrepresented its risk-management programs and risk subcommittees. Navigators claims that none of Ms. Yang’s disclosures mentioned that the conduct was “illegal” or constituted “fraud” or “shareholder fraud.”
Ms. Yang was fired in November, 2012, less than two weeks after her disclosure to the general counsel. Navigators claims that her termination resulted from a “disorganized and incoherent presentation” that she made to the company’s senior executives in late October, 2012, as well as from general performance issues. Ms. Yang testified, however, that such issues were never brought to her attention, and that she was told that she simply failed to mesh with “Navigators’ culture” and to take a “hands on” approach to her duties there.
Ms. Yang filed suit in the U.S. District Court for the Southern District of New York, claiming that Navigators violated section 806 of SOX by discharging her in retaliation for her protected disclosures. Yang v. Navigators Grp., Inc., 155 F. Supp. 3d 327 (S.D.N.Y. 2016), vacated, 2016 WL 7436485. Navigators filed a motion for summary judgment, which the district court granted. Ms. Yang appealed, and the U.S. Court of Appeals for the Second Circuit vacated and remanded the district court’s grant of summary judgment
On appeal, Ms. Yang disputed two conclusions reached by the district court: first, that she did not engage in protected activity; and second, that she failed to demonstrate that her protected activity was a “contributing factor” in Navigators’ decision to fire her.
The district court found that Ms. Yang had not engaged in protected activity because she provided insufficient evidence, besides her “own deposition testimony and statements made in her own Declaration,” to demonstrate that she reported potential shareholder fraud to her superiors.
The Second Circuit, however, found that the district court’s exclusion of Ms. Yang’s testimonial evidence was inappropriate because that evidence was admissible. Since the district court was reviewing Navigators’ summary-judgment motion, moreover, “the testimony should have been viewed in the light most favorable to Yang.” The Second Circuit concluded that Ms. Yang’s testimony alone was sufficient to create a genuine issue of material fact regarding her protected activity, thereby precluding summary judgment.
The district court also found that Ms. Yang failed to establish that her protected conduct was a “contributing factor” in Navigators’ decision to fire her. The district court conceded that the temporal proximity of less than two weeks between Ms. Yang’s final disclosure and her firing raised an inference of contributing-factor causation. This inference was weakened, however, because of the “purportedly terrible presentation” that Ms. Yang gave during those two weeks. That presentation, the district court found, constituted a “legitimate intervening basis” for Ms. Yang’s termination, meaning that Ms. Yang had to provide evidence “linking her termination to her complaint.” The district court found that none of Ms. Yang’s evidence accomplished this, and so credited Navigators’ claim that it fired her for performance issues.
On appeal, the Second Circuit pointed out that summary judgment is precluded where there are “disputed facts as to the intervening basis.” Ms. Yang and her former supervisors provided conflicting explanations of her October, 2012, presentation and of the other reasons for her termination. While Navigators cited general performance issues, Ms. Yang testified that the reason she was given was her failure to fit into corporate culture and to take a hands-on approach to her job. At the summary-judgment stage, these disputes must be resolved in favor of Ms. Yang. Thus, the Second Circuit concluded, Ms. Yang “adequately placed these issues in dispute,” thereby precluding summary judgment on the issue of contributing-factor causation.
The whistleblower protection provision of the Sarbanes-Oxley Act provides robust protection to corporate whistleblowers, and indeed some SOX whistleblowers have achieved substantial recoveries. For example, a former in-house counsel at a biotechnology company recovered $11 million in a SOX whistleblower retaliation case alleging that the company fired him for disclosing violations of the Foreign Corrupt Practices Act.
On the fifteenth anniversary of SOX, leading whistleblower law firm Zuckerman Law released a free guide to the SOX whistleblower protection law: “Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers.” The guide summarizes SOX whistleblower protections and offers concrete tips for corporate whistleblowers based on lessons learned during years of litigating SOX whistleblower cases.
The goal of the guide is to arm corporate whistleblowers with the knowledge to effectively combat whistleblower retaliation, avoid the pitfalls that can weaken a SOX whistleblower case, and formulate an effective strategy to obtain the maximum recovery.
The SOX whistleblower guide addresses the following topics:
WHISTLEBLOWERS PROTECTED BY THE SARBANES-OXLEY ACT
ELEMENTS OF A SOX WHISTLEBLOWER RETALIATION CLAIM
PROTECTED WHISTLEBLOWING
KNOWLEDGE OF PROTECTED CONDUCT
PROHIBITED WHISTLEBLOWER RETALIATION UNDER SOX
PROVING SOX WHISTLEBLOWER RETALIATION (CAUSATION)
EMPLOYER AFFIRMATIVE DEFENSE
DAMAGES
LITIGATING SOX WHISTLEBLOWER CLAIMS
To schedule a free preliminary consultation, click here or call us at 202-262-8959.
Leading whistleblower law firm Zuckerman Law has written extensively about whistleblower protections and is quoted frequently in the media on this topic. A sample of those blog posts and articles appears below:
In an article about the scope of Sarbanes-Oxley protected conduct, Law360 quotes Jason Zuckerman about…
NDAA Protected Whistleblowing The scope of protected whistleblowing under the NDAA whistleblower protection provisions…
