Sharkey v. JPMorgan Chase & Co.: Summary Judgment Was Improper And Sharkey’s Case Lives To See Another Day In Court
Monday, February 6, 2017 at 06:00AM
Donovan Gibbons

In Sharkey v. JPMorgan Chase & Co., 2016 BL 296030 (2d Cir. Sept. 12, 2016), the Court of Appeals for the Second Circuit vacated the District Court for the Southern District of New York’s grant of the motion for summary judgment by J.P. Morgan Chase (“Defendant”) and remanded the case for further proceedings.

Jennifer Sharkey (“Plaintiff”) filed a complaint alleging that she was discharged in retaliation for protected whistleblowing activity in violation of Section 806 of Sarbanes-Oxley. Plaintiff was terminated approximately one week after she recommended that J.P. Morgan Chase end its relationship with a client after she suspected the client had been engaged in “illegal activity” for a number of months. Defendant asserted that Plaintiff had lied to her supervisor, a superior officer, about a different client.

The district court dismissed the claim.  Although the termination was temporarily proximate to the recommendation, the “purported lie to a superior about communicating with a different client convincingly demonstrated a legitimate intervening basis for her discharge.”   

To prevail on a Section 806 claim, the employee must show by a preponderance of the evidence that: (1) the employee engaged in protected activity; (2) the employer knew he or she engaged in the protected activity; (3) the employee suffered an unfavorable personnel action; and (4) the protected activity was a contributing factor in the unfavorable action. To survive summary judgment, a party must only show there is a triable issue of fact after drawing all inferences in their favor.

Defendant argued that Plaintiff failed to demonstrate a reasonable belief the client violated federal law, a necessary component to support a Section 806 claim, making summary judgment proper. In reviewing the record in the light most favorable to the Plaintiff, the court determined that Plaintiff sufficiently plead a reasonable belief of illegality since there was evidence the client had performed a number of activities that JP Morgan had identified in training materials as “red flags” for money laundering.  Although JP Morgan produced evidence indicating that the concerns were “unfounded,” the court found that this gave rise to a factual dispute. 

Further, the temporal proximity between the protected activity of reporting and her termination supported a prima facie inference that the protected activity was a contributing factor to the termination. Without deciding if a legitimate intervening basis, such as lying to a superior officer, could defeat this prima facie inference, the court noted that Plaintiff “dispute[d] lying to her supervisor”.  Thus, there were triable issues of fact for a jury to decide and summary judgment was improper.

Accordingly, the court vacated Defendant’s motion for summary judgment to dismiss the Section 806 claim, and remanded the case for further proceedings.

The primary materials for this case may be found on the DU Corporate Governance website.

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