Employees ?of ?Private Subsidiaries ?of ?Public?Companies May Sue Under SOX
In Lawson, the Plaintiffs were former employees of private companies that contract? to advise or manage mutual funds. ?The mutual funds serviced ?by? the ?employer ?are ?public ?companies with no employees.?? The employees claimed that there existed fraud relating to the mutual funds and that they were thereafter subjected to retaliation by their employer.? ?They brought suit under the Sarbanes-Oxley Act, 18 U.S.C. Section 1514A(a). The employers moved to dismiss arguing that provision of SOX only protects employees of publically traded corporations, and not employees of private companies that contract with public companies.? The motion to dismiss was denied, and the First Circuit reversed and dismissed the claim. The?? Supreme?? Court? ?granted? ?certiorari,? ?and reversed the Court of Appeals.
The Court looked to the ordinary meaning of the provision?s language and ruled that the retaliation provision of SOX protects employees of a public company?s private contractors and subcontractors.? ?The Court acknowledged that without that broad reading of the statute the entire mutual fund industry would be exempt since virtually? all ?mutual ?funds ?are ?structured ?so ?that they have no employees of their own.?? The anti- retaliation provision of SOX applies to employees of publically held corporations and also to employees ?of ?private? contractors ?and subcontractors of publically held corporations.
Lawson v. FMR LLC, 134 S. Ct. 1158 (3/4/14). Opinion by Ginsburg, J, in which Roberts, C.J. and Breyer,? ?and? ?Kagan,? ?JJ.,? ?joined.???? ?Scalia? ?and Thomas, JJ., joined in principal part. ?Sotomayor, J., filed a dissenting opinion, in which Kennedy and Alito, JJ., joined.