FULL TEXT US Supreme Court Lawson V. FMR

March 4, 2014

Below are select extracts from the Opinion.
At the end of the blog, find links to 
Transcript and Tape of Oral Arguments


GINSBURG, J., delivered the opinion of the Court, in which ROBERTS,
C. J., and BREYER and KAGAN, JJ., joined, and in which SCALIA and THOMAS, JJ., joined in principal part. SCALIA, J., filed an opinion concurring in principal part and concurring in the judgment, in which THOMAS, J., joined. SOTOMAYOR, J., filed a dissenting opinion, in which KENNEDY and ALITO, JJ., joined

To safeguard investors in public companies and restore trust in the financial markets following the collapse of Enron Corporation, Congress passed the Sarbanes-Oxley Act of 2002. One of the Act's provisions protects whistleblowers; at the time relevant here, that provision instructed: "No [public] company . . ., or any . . . contractor [or] subcontractor . . . of such company, may discharge, demote, suspend,threaten, harass, or . . . discriminate against an employee in the terms and conditions of employment because of [whistleblowing activity]." 18 U. S. C. §1514A(a). 

Plaintiffs below, petitioners here, are former employees of respondents (collectively FMR), private companies that contract to advise or manage mutual funds. As is common in the industry, the mutual funds served by FMR are public companies with no employees. Both plaintiffs allege that they blew the whistle on putative fraud relating to the mutual funds and, as a consequence, suffered retaliation by FMR. Each commenced suit in federal court. Moving to dismiss the suits, FMR argued that the plaintiffs could state no claim under §1514A, for that provision protects only employees of public companies, and not employees of private companies that contract with public companies. On interlocutory appeal from the District Court's denial of FMR's motion to dismiss, the First Circuit reversed, concluding that the term "an employee" in §1514A(a) refers only to employees of public companies.

Held: The judgment is reversed and the case is remanded. 670 F. 3d 61, reversed and remanded.

JUSTICE GINSBURG delivered the opinion of the Court, concluding that §1514A's whistleblower protection includes employees of a public company's private contractors and subcontractors.
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Petitioners Jackie Hosang Lawson and Jonathan M. Zang (plaintiffs) separately initiated proceedings under §1514A against their former employers, privately held companies that provide advisory and management services to the Fidelity family of mutual funds. The Fidelity funds are not parties to either case; as is common in the mutual fund industry, the Fidelity funds themselves have no employees. Instead, they contract with investment advisers like respondents to handle their day-to-day operations, which include making investment decisions, preparing reports for shareholders, and filing reports with the Securities and Exchange Commission (SEC). Lawson was employed by Fidelity Brokerage Services, LLC, a subsidiary of FMR Corp., which was succeeded by FMR LLC. Zang was employed by a different FMR LLC subsidiary, Fidelity Management & Research Co., and later by one of that company's subsidiaries, FMR Co., Inc. For convenience, we refer to respondents collectively as FMR.

Lawson worked for FMR for 14 years, eventually serving as a Senior Director of Finance. She alleges that, after he raised concerns about certain cost accounting methodologies, believing that they overstated expenses associated with operating the mutual funds, she suffered a series of adverse actions, ultimately amounting to constructive discharge. Zang was employed by FMR for eight years, most recently as a portfolio manager for several of the funds. He alleges that he was fired in retaliation for raising concerns about inaccuracies in a draft SEC registration statement concerning certain Fidelity funds. Lawson and Zang separately filed administrative complaints alleging retaliation proscribed by §1514A. After expiration of the 180-day period specified in §1514A(b)(1), Lawson and Zang each filed suit in the U. S. District Court for the District of Massachusetts.

Pages 6-7 of the Opinion