Opinion
Docket Nos. 20-4202(Lead) 21-56(Con) August Term, 2021
08-05-2022
Trevor MURRAY, Plaintiff-Appellee-Cross-Appellant, v. UBS SECURITIES, LLC, UBS AG, Defendants-Appellants-Cross-Appellees.
Thomas G. Hungar (Christopher Smith, Anna Casey, Gibson, Dunn & Crutcher LLP, Washington, D.C.; Gabrielle Levin, Gibson, Dunn & Crutcher LLP, New York, NY, on the brief), Gibson, Dunn & Crutcher LLP, Washington, D.C., for Defendants-Appellants-Cross-Appellees. Robert L. Herbst (Robert B. Stulberg, Patrick J. Walsh, Stulberg & Walsh, LLP, New York, NY; Scott A. Korenbaum, New York, NY; Benjamin J. Ashmore, Sr., Herbst Law PLLC, New York, NY, on the brief), Herbst Law PLLC, New York, NY, for Plaintiff-Appellee-Cross-Appellant.
Thomas G. Hungar (Christopher Smith, Anna Casey, Gibson, Dunn & Crutcher LLP, Washington, D.C.; Gabrielle Levin, Gibson, Dunn & Crutcher LLP, New York, NY, on the brief), Gibson, Dunn & Crutcher LLP, Washington, D.C., for Defendants-Appellants-Cross-Appellees.
Robert L. Herbst (Robert B. Stulberg, Patrick J. Walsh, Stulberg & Walsh, LLP, New York, NY; Scott A. Korenbaum, New York, NY; Benjamin J. Ashmore, Sr., Herbst Law PLLC, New York, NY, on the brief), Herbst Law PLLC, New York, NY, for Plaintiff-Appellee-Cross-Appellant.
Before: Park, Menashi, and Pérez, Circuit Judges.
Park, Circuit Judge: Plaintiff Trevor Murray claims that UBS Securities, LLC and UBS AG (together, "UBS") fired him in retaliation for reporting alleged fraud on shareholders to his supervisor. Murray sued UBS under the whistleblower protection provision of the Sarbanes-Oxley Act ("SOX"), 18 U.S.C. § 1514A, and he ultimately prevailed at trial. The district court (Failla, J. ), however, did not instruct the jury that a SOX antiretaliation claim requires a showing of the employer's retaliatory intent. Section 1514A prohibits publicly traded companies from taking adverse employment actions to "discriminate against an employee ... because of" any lawful whistleblowing act. 18 U.S.C. § 1514A(a). We hold that this provision requires a whistleblower-employee like Murray to prove by a preponderance of the evidence that the employer took the adverse employment action against the whistleblower-employee with retaliatory intent—i.e. , an intent to "discriminate against an employee ... because of" lawful whistleblowing activity. The district court's legal error was not harmless. We thus vacate the jury's verdict and remand to the district court for a new trial.
I. BACKGROUND
A. Factual Background
In 2011, UBS hired Murray as a strategist in its commercial mortgage-backed securities ("CMBS") business. Murray was "responsible for performing research and creating reports that were distributed to [UBS's] current and potential clients about CMBS products, services and transactions." Am. Compl. ¶ 2. As a CMBS strategist, Murray was required by Securities and Exchange Commission ("SEC") regulations to certify that his reports were produced independently and that they accurately reflected his own views.
Specifically, Murray was required to "include in [his] research report[s] a clear and prominent certification ... containing ... [a] statement attesting that all of the views expressed in the research report accurately reflect the research analyst's personal views about any and all of the subject securities or issuers; and ... [a] statement attesting that no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the research analyst in the research report." 17 C.F.R. § 242.501(a).
According to Murray, two leaders of UBS's trading desk—Ken Cohen, the head of the CMBS trading desk, and Dave McNamara, the head CMBS trader—improperly pressured him to skew his research and to publish reports to support their business strategies. For example, Murray testified that in September 2011, Cohen told him "if we're going to accomplish what we want to accomplish as a business, it's important that we maintain consistency of message between originations, trading desk, and research," and that "it would be best if you clear your research articles with the [trading] desk going forward," and McNamara agreed. App'x at 254. This made Murray "very concerned" because he "was faced with the dilemma of how to maintain a relationship with [his] client while maintaining integrity as a researcher." Id . at 255.
Murray reported this conduct to his direct supervisor, Michael Schumacher, in December 2011 and again in January 2012. In December, Murray met privately with Schumacher and told him:
[M]y relationship with my client had become untenable, that [Cohen and
McNamara] had told me to preclear my articles, which I had been doing; that they wanted me ... to be nothing more than a shill for the market. The only feedback I had gotten [about the articles] for the most part was just negative .... [I] [t]old [Schumacher] about the reaction I got from both [Cohen] and [McNamara] about [one of my research] article[s] and that I was like I don't know how [Cohen] got away with this. ... But this type of relationship was completely foreign to me; and that it wasn't just unethical, it was illegal, and I wanted it to stop.
Id . at 283. According to Murray, Schumacher responded: "I sympathize with your situation. It is a tough position to be in when you have a dour view of the market that is in conflict [with] ... your internal client but it is very important that you do not alienate your internal client." Id .
The following month, Murray met with Schumacher to go over his performance review. Afterwards, Murray "told [Schumacher] once again that the situation with [his] client," referring to the UBS trading desk, "was bad and getting worse." Id . at 294. Murray explained that he had been left out of meetings that "would normally be a normal part of [his] job function" and outlined Cohen and McNamara's "constant efforts to skew [his] research dating back to the beginning." Id . at 294–95. Schumacher responded that "these were the confines under which [you] should expect [your] job to be, ... [you're] going to have to operate, and ... just ... write what the business line wanted." Id . at 295.
Shortly after this, Schumacher emailed his supervisor, Larry Hatheway, recommending that UBS "remove [Murray] from our head count." Id . at 539, 1,544. Alternatively, he suggested that "[i]f Ken Cohen and the CMBS team want to keep a presence in analysis, they can move [Murray] onto the desk" as a desk analyst, unregulated by the SEC. Id . at 539–40, 1,544. Schumacher continued that "[o]therwise, we will make the tough call," which Schumacher later explained meant that "[Murray] would be a candidate for termination." Id . at 540, 1,544. The CMBS trading desk declined to take Murray on as a desk analyst, and UBS terminated him in February 2012.
Murray contends that his termination was retaliation for whistleblowing. UBS asserts that it terminated Murray due to a shift in strategy prompted by financial difficulties. Indeed, UBS had implemented a series of reductions in force, including one in February 2012 which resulted in the elimination of Murray's position.
B. Procedural History
Murray sued UBS in 2014. He alleged that he was terminated by UBS in response to his complaints about fraud on shareholders in violation of the Sarbanes-Oxley Act's antiretaliation provision, 18 U.S.C. § 1514A. The case went to trial before a jury. UBS moved for judgment as a matter of law, which the district court denied. The district court then instructed the jury on the elements of a section 1514A claim:
Murray first sued UBS in 2012 for violating the Dodd-Frank Act's antiretaliation provision, 15 U.S.C. § 78u-6(h), but the district court granted UBS's motion to compel arbitration.
Murray also sued for violation of 12 U.S.C. § 5567(b), but that cause of action is not at issue in this appeal.
First, that plaintiff engaged in activity protected by Sarbanes-Oxley;
Second, that UBS knew that plaintiff engaged in the protected activity;
Third, that plaintiff suffered an adverse employment action -- here, the termination of his employment at UBS; and
Fourth, that plaintiff's protected activity was a contributing factor in the termination of his employment.
* * *
For a protected activity to be a contributing factor, it must have either alone or in combination with other factors tended to affect in any way UBS's decision to terminate plaintiff's employment. Plaintiff is not required to prove that his protected activity was the primary motivating factor in his termination, or that UBS's articulated reasons for his termination ... was a pretext, in order to satisfy this element.
App'x at 1,389–90, 1,393. UBS objected to these jury instructions, arguing that they lacked a key element of a section 1514A claim: proof of UBS's retaliatory intent in taking the adverse employment action. The district court overruled UBS's objection and the case went to the jury, which found UBS liable. The jury also returned an advisory damages verdict, determining that Murray should be awarded $653,300 in back pay, no front pay, and $250,000 in non-economic damages.
In post-trial briefing, UBS renewed its motion for judgment as a matter of law or, in the alternative, for a new trial, and moved to limit Murray's back-pay award. The district court denied UBS's motions. The district court reasoned that "there is evidence to support the jury's finding as to each of the elements of the Section 1514A offense, principally derived from Mr. Murray's testimony." Sp. App'x at 10. In reaching this conclusion, the district court again did not view retaliatory intent as an element of a section 1514A claim. The district court also adopted the jury's advisory verdict on damages.
Murray then moved for statutory attorney's fees and costs. The district court entered judgment, awarding Murray $1,769,387.52 in attorney's fees and costs, as well as $653,300 in back pay, no front pay, and $250,000 in non-economic damages—identical to the jury's advisory verdict on damages. UBS appealed the district court's denial of its motion for judgment as a matter of law or, in the alternative, a new trial, while Murray cross-appealed the damages and attorney's fees awards.
II. DISCUSSION
This appeal presents the question whether the Sarbanes-Oxley Act's antiretaliation provision requires a whistleblower-employee to prove retaliatory intent. We review this legal question de novo . See United States v. Williams , 733 F.3d 448, 452 (2d Cir. 2013).
UBS argues that the district court erred by failing to instruct the jury that Murray had to prove UBS's retaliatory intent to prevail on his section 1514A claim. Murray responds that there was no such error because retaliatory intent is not an element of a section 1514A claim. We conclude based on the plain meaning of the statutory language and our interpretation of a nearly identical statute that retaliatory intent is an element of a section 1514A claim. The district court committed a non-harmless error by failing to instruct the jury accordingly. We thus vacate the judgment and remand for a new trial on liability and do not reach the cross-appeal.
A. The Plain Meaning of the Sarbanes-Oxley Act's Antiretaliation Provision
First, the plain meaning of the statutory language makes clear that retaliatory intent is an element of a section 1514A claim. To interpret statutory language, "we begin with the statute's text because ‘we assume that the ordinary meaning of the statutory language accurately expresses the legislative purpose.’ " Friends of the E. Hampton Airport, Inc. v. Town of E. Hampton , 841 F.3d 133, 147 (2d Cir. 2016) (quoting Marx v. Gen. Revenue Corp. , 568 U.S. 371, 376, 133 S.Ct. 1166, 185 L.Ed.2d 242 (2013) ). "[U]nless otherwise defined, words will be interpreted as taking their ordinary, contemporary, common meaning." Harris v. Sullivan , 968 F.2d 263, 265 (2d Cir. 1992) (citation omitted). "If the statutory language is unambiguous and the statutory scheme is coherent and consistent ... the inquiry ceases." Friends of the E. Hampton Airport , 841 F.3d at 147–48 (citation omitted).
The unambiguous, ordinary meaning of section 1514A ’s statutory language requires retaliatory intent. Section 1514A directs that no covered employer "may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee ... because of " whistleblowing. 18 U.S.C. § 1514A(a) (emphasis added). To "discriminate" means "[t]o act on the basis of prejudice," which requires a conscious decision to act based on a protected characteristic or action. Discriminate , WEBSTER'S II NEW RIVERSIDE UNIVERSITY DICTIONARY (1994); see Discriminate , THE NEW OXFORD AMERICAN DICTIONARY (2001) (to "make an unjust or prejudicial distinction in the treatment of different categories of people"). And "because of" means "by reason of" or "on account of," connoting a causal relationship between the parts of the sentence the phrase connects. See Because of , THE AMERICAN HERITAGE DICTIONARY (4th ed. 2000); Because of , WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY (1993).
The statute thus prohibits discriminatory actions caused by—or "because of"—whistleblowing, and actions are "discriminat[ory]" when they are based on the employer's conscious disfavor of an employee for whistleblowing. Cf. Vega v. Hempstead Union Free Sch. Dist. , 801 F.3d 72, 85 (2d Cir. 2015) (explaining that, in the Title VII context, "an action is ‘because of’ a plaintiff's [protected characteristic] where it was a ‘substantial’ or ‘motivating’ factor contributing to the employer's decision to take the action"). A discriminatory action "because of" whistleblowing therefore necessarily requires retaliatory intent—i.e. , that the employer's adverse action was motivated by the employee's whistleblowing. The plain meaning of section 1514A ’s statutory language thus compels our conclusion that retaliatory intent is required to sustain a SOX antiretaliation claim.
We have previously articulated the elements of a SOX antiretaliation claim in Bechtel v. Admin. Rev. Bd. , 710 F.3d 443 (2d Cir. 2013). There, we explained that "an employee must prove by a preponderance of the evidence that (1) [he] engaged in protected activity; (2) the employer knew that [he] engaged in the protected activity; (3) [he] suffered an unfavorable personnel action; and (4) the protected activity was a contributing factor in the unfavorable action." Id . at 447 (citation omitted). The district court instructed the jury that "[f]or a protected activity to be a contributing factor, it must have either alone or in combination with other factors tended to affect in any way UBS's decision to terminate plaintiff's employment." App'x at 1,393. But this explanation of the contributing factor element fails to account for the statute's explicit requirement that the employer's conduct be "discriminat[ory]." We therefore hold that to prevail on the "contributing factor" element of a SOX antiretaliation claim, a whistleblower-employee must prove that the employer took the adverse employment action against the whistleblower-employee with retaliatory intent—i.e. , an intent to "discriminate against an employee ... because of" lawful whistleblowing activity.
The inadequacy of the "contributing factor" standard utilized by the district court is illuminated by the fact that "tended to affect in any way UBS's decision to terminate plaintiff's employment" could include a scenario in which Murray's whistleblowing resulted in termination, but also a scenario in which, by virtue of his whistleblowing activity, Murray was insulated from a termination to which he would otherwise have been subjected sooner. In addition, "tended to affect" increases the level of abstraction such that a jury might look beyond whether the whistleblowing activity actually caused the termination to whether it was the sort of behavior that would tend to affect a termination decision.
B. Consistency with Our Interpretation of a Nearly Identical Provision in the Federal Railroad Safety Act
This reading of the SOX antiretaliation provision is consistent with our interpretation of nearly identical language in the Federal Railroad Safety Act, 49 U.S.C. § 20109(a) ("FRSA"). See Tompkins v. Metro-N. Commuter R.R. Co. , 983 F.3d 74 (2d Cir. 2020). We generally interpret identical language in different statutes to have the same meaning. See, e.g. , Northcross v. Bd. of Educ. , 412 U.S. 427, 428, 93 S.Ct. 2201, 37 L.Ed.2d 48 (1973) ("The similarity of language in § 718 and § 204(b) is, of course, a strong indication that the two statutes should be interpreted pari passu."); Wasser v. N.Y. State Off. of Vocational & Educ. Servs. for Individuals with Disabilities , 602 F.3d 476, 479 (2d Cir. 2010) ("Given the similarity between, and in fact the nearly identical wording of, 29 U.S.C. § 722(c)(5)(J)(ii) and 20 U.S.C. § 1415(i)(2)(C), we see no basis for interpreting the standard of review required by these provisions differently.").
We note that the district court did not have the benefit of our decision in Tompkins during the pendency of Murray's trial; Tompkins was decided one day after the district court entered final judgment in this case.
The relevant statutory language of the SOX and the FRSA is nearly identical. Compare 18 U.S.C. § 1514A(a) (No covered employer "may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee ... to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of [federal law]."), with 49 U.S.C. § 20109(a) (A covered railroad carrier "may not discharge, demote, suspend, reprimand, or in any other way discriminate against an employee if such discrimination is due, in whole or in part, to the employee's lawful, good faith act done, or perceived by the employer to have been done or about to be done ... to provide information, directly cause information to be provided, or otherwise directly assist in any investigation regarding any conduct which the employee reasonably believes constitutes a violation of any [federal law]."). Accordingly, our articulations of the elements of these claims must likewise be consistent. In Tompkins , we interpreted the whistleblower antiretaliation provision of the FRSA and held that "some evidence of retaliatory intent is a necessary component of an FRSA claim." 983 F.3d at 82 ; see also Armstrong v. BNSF Ry. Co. , 880 F.3d 377, 382 (7th Cir. 2018) ("The [FRSA] prohibits intentional discrimination in response to an employee's performance of a protected activity. That is to say, an employer violates the statute only if the adverse employment action is, at some level, motivated by discriminatory animus." (citation omitted) (emphasis in original)). We pointed to the language specifically referencing discrimination—i.e. , "that a rail carrier may not discharge ‘or in any other way discriminate against’ an employee for engaging in protected activity"—as requiring evidence of retaliatory intent for an FRSA claim. Tompkins , 983 F.3d at 82 (citations omitted) (emphasis in original). We also explained that "the essence of such a tort is discriminatory animus, which in turn requires the employee to prove that she was the victim of intentional retaliation prompted by her protected activity." Id . (cleaned up).
Compare Bechtel , 710 F.3d at 447 (To prevail on a SOX antiretaliation claim, "an employee must prove by a preponderance of the evidence that (1) [he] engaged in protected activity; (2) the employer knew that [he] engaged in the protected activity; (3) [he] suffered an unfavorable personnel action; and (4) the protected activity was a contributing factor in the unfavorable action." (citation omitted)), with Tompkins , 983 F.3d at 80 (To prevail on an FRSA antiretaliation claim, "a plaintiff must show by a preponderance of the evidence that (1) the plaintiff engaged in protected activity; (2) the employer knew that the plaintiff engaged in the protected activity; (3) the plaintiff suffered an unfavorable personnel action; and (4) the protected activity was a contributing factor in the unfavorable action." (cleaned up)).
The unambiguous, ordinary meaning of section 1514A ’s statutory language, along with our identical interpretation of the FRSA antiretaliation provision, thus compel the conclusion that a SOX antiretaliation claim requires a showing that the employer took the adverse employment action against the whistleblower-employee with retaliatory intent. As in Tompkins , the whistleblower-employee need not show that retaliatory intent "was the sole factor affecting the discipline or that the employer acted only with retaliatory motive." 983 F.3d at 82. There must, however, be "more than a temporal connection between the protected conduct and the adverse employment action." Id . (internal quotation marks omitted); see also Armstrong , 880 F.3d at 382 ("[W]hile a FRSA plaintiff need not show that retaliation was the sole motivating factor in the adverse decision, the statutory text requires a showing that retaliation was a motivating factor.") (emphasis in original). C. The Jury Instruction Error Was Not Harmless
We recognize that our conclusion departs from the approach of the Fifth and Ninth Circuits as to the elements of a section 1514A claim. See Halliburton, Inc. v. Admin. Rev. Bd. , 771 F.3d 254, 263 (5th Cir. 2014) (holding that retaliatory intent is not an element of a section 1514A claim); Coppinger-Martin v. Solis , 627 F.3d 745, 750 (9th Cir. 2010) (same). In our view, those courts overlooked the plain meaning of the text. Moreover, we note that the Second, Seventh, and Eighth Circuits have interpreted the same language in the FRSA to require a showing of retaliatory intent. See Tompkins , 983 F.3d at 82 ; Armstrong , 880 F.3d at 382 ; Kuduk v. BNSF Ry. Co. , 768 F.3d 786, 791 (8th Cir. 2014). But see Frost v. BNSF Ry. Co. , 914 F.3d 1189, 1196 (9th Cir. 2019) (holding that an FRSA antiretaliation claim does not require proof of retaliatory intent); Araujo v. N.J. Transit Rail Operations, Inc. , 708 F.3d 152, 158 (3d Cir. 2013) (same). We also note that three circuits have declined to decide the issue of whether retaliatory intent is an element of a section 1514A claim. See Wiest v. Tyco Electronics Corp. , 812 F.3d 319, 330 (3d Cir. 2016) ; Feldman v. Law Enforcement Assoc's Corp. , 752 F.3d 339, 348 (4th Cir. 2014) ; Lockheed Martin Corp. v. Admin. Rev. Bd. , 717 F.3d 1121, 1136 (10th Cir. 2013).
This framework is consistent with the goal of section 1514A to "combat what Congress identified as a corporate culture, supported by law, that discourages employees from reporting fraudulent behavior ... [by] protect[ing] employees when they take lawful acts to disclose information or otherwise assist ... in detecting and stopping actions which they reasonably believe to be fraudulent." Bechtel , 710 F.3d at 446 (cleaned up); see also Guyden v. Aetna, Inc. , 544 F.3d 376, 383 (2d Cir. 2008) (Section 1514A "protects ‘employees when they take lawful acts to disclose information or otherwise assist ... in detecting and stopping actions which they reasonably believe to be fraudulent.’ ") (quoting S. Rep. No. 107–146, at 19 ).
We must next determine the appropriate remedy for the district court's jury-instruction error. "We review a claim of error in jury instructions de novo , reversing only where appellant can show that, viewing the charge as a whole, there was a prejudicial error." Warren v. Pataki , 823 F.3d 125, 137 (2d Cir. 2016) (cleaned up). "An erroneous instruction requires a new trial unless the error is harmless and an error is harmless only if the court is convinced that the error did not influence the jury's verdict." Id . (cleaned up).
Because we need to be convinced that the error did not influence the jury's verdict, the district court's failure to instruct the jury on Murray's burden to prove UBS's retaliatory intent in terminating him was not harmless. Indeed, the district court itself remarked that this was "one of the closest [cases] [it] has ever observed." Sp. App'x at 55. UBS offered evidence at trial of non-retaliatory reasons for its decision to terminate Murray. For example, UBS witnesses testified that the company was experiencing significant financial difficulties, resulting in company-wide layoffs when Murray reported the alleged misconduct and was ultimately terminated. In response to a question about why UBS imposed layoffs, a UBS witness testified: "[In] 2011 our financial performance or the performance of the firm was not good. We lost billions of dollars that year and, therefore, we had to layoff people." App'x at 573; see id . at 575 (citing "a two billion dollar trading loss" as a cause of "more financial hardship to [UBS]"). Cohen, the head of the CMBS trading desk, also testified that Murray's position as a CMBS strategist was "not necessary" to generate revenue, but instead was "nice to have." Id . at 867. This evidence supports UBS's position that it terminated Murray without retaliatory intent—specifically, that it did so for the non-retaliatory reason of saving money during a time of financial difficulty. To be sure, there was circumstantial evidence at trial that UBS terminated Murray in retaliation for whistleblowing. See, e.g. , App'x at 649 (testimony explaining close temporal proximity between Murray's whistleblowing and termination); id . at 447 (testimony of Schumacher stating that he gave Murray a "good" performance evaluation in December 2011, prior to Murray's purported whistleblowing). But we do not know whose reasons—UBS's or Murray's—the jury credited, as the jury instructions did not require the jury to find retaliatory intent. And although the jury did not find that UBS "prove[d] by clear and convincing evidence that it would have taken the same unfavorable personnel action in the absence of [Murray's] protected behavior," Bechtel , 710 F.3d at 447 (citation omitted), this does not mean that Murray proved by a preponderance of the evidence that UBS acted with retaliatory intent in terminating Murray. In other words, even though the jury found that Murray's whistleblowing was a contributing factor to his termination, we cannot know whether it would have found that UBS acted with retaliatory intent. We are thus unconvinced that the erroneous jury instruction did not influence the verdict, and we accordingly remand to the district court for a new trial.
III. CONCLUSION
Retaliatory intent is an element of a section 1514A claim. This conclusion flows from the plain meaning of the statutory language and is supported by our interpretation of nearly identical language in the FRSA. The district court erred by failing to instruct the jury on Murray's burden to prove UBS's retaliatory intent in terminating him. The jury instructions were incorrect as a matter of law, and the error was not harmless. We thus vacate the jury's verdict and remand to the district court for a new trial.