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News
07.12.2012
Looking Back: Dodd-Frank Amendment Applies Retroactively to Whistleblower’s Claim Against Nonpublic Subsidiary
On July 9, 2012, a judge in the Southern District of New York held that Section 929A of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”)—which extends whistleblower protection to nonpublic subsidiaries of public companies—operates retroactively to permit claims against subsidiaries that arose prior to the passage of Dodd-Frank. Judge J. Paul Oetken classified the Dodd-Frank amendment as a clarification of Congress’s original intent when it passed the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”).
Section 806 of Sarbanes-Oxley, codified at 18 U.S.C. § 1514(a), provides protection from retaliation to an employee who provides information or otherwise assists in an investigation regarding any conduct that the employee reasonably believes constitutes a violation of the federal mail, wire, bank, or securities fraud statutes, any rule or regulation of the Securities and Exchange Commission, or any Federal law relating to fraud against shareholders.
On July 21, 2010, Section 806 was amended by Section 929A of Dodd-Frank to provide that no public company, “including any subsidiary or affiliate whose financial information is included in the consolidated financial statements of such company,” may retaliate against a whistleblower. (emphasis added). Now, with the issuance of Judge Oetken’s opinion in Leshinsky v. Telvent GIT, S.A., Case No. 1:10-cv-04511, an employee with a pending whistleblower claim that arose in New York prior to the enactment of Dodd-Frank can seek relief from a nonpublic subsidiary.
Judge Oetken’s ruling is consistent with the view of the United States Department of Labor (“DOL”)—the agency charged with administering Dodd-Frank and Sarbanes-Oxley. On March 31, 2011 the DOL’s Administrative Review Board (“ARB”) in Johnson v. Siemens Building Technologies, Inc., ARB No. 08-032 (ARB 2011), held that Section 806 covers a subsidiary whose financial information is included in the consolidated financial statements of a parent company subject to the registration and reporting requirements of Sections 12 and 15(d), respectively, of the Securities Exchange Act of 1934.
The ARB in Johnson found that Dodd-Frank clarifies, rather than changes, Sarbanes-Oxley. Because Dodd-Frank merely made “what was intended all along ever more unmistakably clear,” it did not create retroactive effects that would preclude application of Dodd-Frank to the plaintiff’s case on appeal. Judge Oetken found the ARB’s ruling in Johnson to be “independently persuasive” on the question of the retroactive application of Dodd-Frank and held that the plaintiff, as an employee of the subsidiary of a public company whose financial information is included in the consolidated financial statements of the public company, is a covered employee under Sarbanes-Oxley—despite the fact that he was terminated two years prior to the enactment of Dodd-Frank.
Judge Oetken’s decision in Leshinsky offered no opinion on the retroactive application of Dodd-Frank in general or of any other specific provisions of Dodd-Frank.
For more information about this topic, please contact the author or any member of the Williams Mullen Whistleblower Defense Team.
Please note:
This newsletter contains general, condensed summaries of actual legal matters, statutes and opinions for information purposes. It is not meant to be and should not be construed as legal advice. Readers with particular needs on specific issues should retain the services of competent counsel. For more information, please contact us.
07.12.2012
BY: MARY E. PIVEC & ASHLEY W. WINSKYOn July 9, 2012, a judge in the Southern District of New York held that Section 929A of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”)—which extends whistleblower protection to nonpublic subsidiaries of public companies—operates retroactively to permit claims against subsidiaries that arose prior to the passage of Dodd-Frank. Judge J. Paul Oetken classified the Dodd-Frank amendment as a clarification of Congress’s original intent when it passed the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”).
Section 806 of Sarbanes-Oxley, codified at 18 U.S.C. § 1514(a), provides protection from retaliation to an employee who provides information or otherwise assists in an investigation regarding any conduct that the employee reasonably believes constitutes a violation of the federal mail, wire, bank, or securities fraud statutes, any rule or regulation of the Securities and Exchange Commission, or any Federal law relating to fraud against shareholders.
On July 21, 2010, Section 806 was amended by Section 929A of Dodd-Frank to provide that no public company, “including any subsidiary or affiliate whose financial information is included in the consolidated financial statements of such company,” may retaliate against a whistleblower. (emphasis added). Now, with the issuance of Judge Oetken’s opinion in Leshinsky v. Telvent GIT, S.A., Case No. 1:10-cv-04511, an employee with a pending whistleblower claim that arose in New York prior to the enactment of Dodd-Frank can seek relief from a nonpublic subsidiary.
Judge Oetken’s ruling is consistent with the view of the United States Department of Labor (“DOL”)—the agency charged with administering Dodd-Frank and Sarbanes-Oxley. On March 31, 2011 the DOL’s Administrative Review Board (“ARB”) in Johnson v. Siemens Building Technologies, Inc., ARB No. 08-032 (ARB 2011), held that Section 806 covers a subsidiary whose financial information is included in the consolidated financial statements of a parent company subject to the registration and reporting requirements of Sections 12 and 15(d), respectively, of the Securities Exchange Act of 1934.
The ARB in Johnson found that Dodd-Frank clarifies, rather than changes, Sarbanes-Oxley. Because Dodd-Frank merely made “what was intended all along ever more unmistakably clear,” it did not create retroactive effects that would preclude application of Dodd-Frank to the plaintiff’s case on appeal. Judge Oetken found the ARB’s ruling in Johnson to be “independently persuasive” on the question of the retroactive application of Dodd-Frank and held that the plaintiff, as an employee of the subsidiary of a public company whose financial information is included in the consolidated financial statements of the public company, is a covered employee under Sarbanes-Oxley—despite the fact that he was terminated two years prior to the enactment of Dodd-Frank.
Judge Oetken’s decision in Leshinsky offered no opinion on the retroactive application of Dodd-Frank in general or of any other specific provisions of Dodd-Frank.
For more information about this topic, please contact the author or any member of the Williams Mullen Whistleblower Defense Team.
Please note:
This newsletter contains general, condensed summaries of actual legal matters, statutes and opinions for information purposes. It is not meant to be and should not be construed as legal advice. Readers with particular needs on specific issues should retain the services of competent counsel. For more information, please contact us.
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