In Murray v. UBS Securities, LLC, No. 12 Civ. 5914 (JMF), 2013 WL 2190084 (S.D.N.Y. May 21, 2013), the United States District Court for the Southern District of New York denied the motion to dismiss brought by defendants, UBS Securities, LLC and its parent company UBS AG (“UBS”), finding that plaintiff, Trevor Murray (“Murray”), plausibly stated a claim pursuant to the Securities Whistleblower Incentives and Protection provisions of the Dodd-Frank Act (“Dodd Frank”).
As a Senior Commercial Mortgage-Backed Security Strategist for UBS, Murray asserted that his immediate supervisors pressured him to craft reports more favorable to UBS and repeatedly informed his UBS managing superiors of these pressures. Murray was later fired and subsequently brought suit alleging that UBS violated the whistleblower protection provisions codified in § 78u-6(h)(1)(A)(iii) of Dodd Frank. Specifically, Murray asserted that UBS’s decision to terminate his employment resulted, in part, from Murray making disclosures protected by the Sarbanes-Oxley Act. UBS moved to dismiss Murray’s complaint for failure to state a claim under Fed. R. Civ. P. 12(b)(6) arguing that Murray was not a statutory “whistleblower” under the Dodd Frank definition.
Added by Section 922 of Dodd Frank, Section 21F(1)(A)(iii) of the Securities Exchange Act of 1934, § 78u-6(h)(1)(A)(iii), provides that “[n]o employer may discharge . . . a whistleblower in the terms . . . of employment because of any lawful act done by the whistleblower . . . in making disclosures that are . . . protected under the Sarbanes-Oxley Act . . . .” Sarbanes-Oxley protects those who disclose information to supervisors regarding SEC rule violations. Dodd Frank defines a “whistleblower” as one who provides information to the SEC about violations of the securities laws. Rule 21F-2(b)(1) further clarified that “whistleblowers” includes three categories of persons, including “individuals who report to persons or governmental authorities other than” the SEC. 17 C.F.R. § 240.21F-2(b)(1).
In its motion to dismiss, UBS asserted that the “whistleblower” definition in § 78u-6(a)(6) excluded Murray because he only provided information to his UBS superiors and not to the SEC. The court, however, cited four other district court cases, all of which found that § 78u-6(h)(1)(A)(iii) protected employees like Murray who made disclosures to supervisors as protected.
The court also determined that the SEC’s interpretation that “whistleblowers” include employees who reported to supervisors warranted deference. When interpreting a statute, the court first had to determine whether Congress’s intent was ambiguous. If ambiguous, the court must then decide whether the administering agency’s interpretation was reasonable. Here, the court found that Dodd Frank’s statutory text was ambiguous as to Congress’s intent (noting that the statute gave rise to “competing, plausible interpretations”) and that the adoption of a rule that protected persons reporting violations to their supervisors was a reasonable interpretation. The court also noted that four other district court cases agreed with this analysis.
Therefore, because Murray alleged that UBS’s decision to fire him was partially motivated by his making disclosures protected under Sarbanes-Oxley and in turn, protected under Dodd Frank’s whistleblower provisions, the District Court for the Southern District of New York held that he plausibly stated a claim and denied UBS’s motion to dismiss.
The primary materials for this case may be found on the DU Corporate Governance website.