Supreme Court to Hear Disputes Over Whistleblower Protections, Maritime Law

The U.S. Supreme Court in Washington on Sept. 18, 2023. (Madalina Vasiliu/The Epoch Times)

The Supreme Court is expected to hear oral arguments for cases involving questions about maritime law and protections for whistleblowers in the financial industry on Oct. 10.

The first, Murray v. UBS Securities LLC, pertains to the Sarbanes-Oxley (SOX) Act of 2002, which Congress passed in the wake of corporate scandals such as the one at Enron. A provision of the law protects whistleblowers from retaliation if they report illegal behavior, but there is debate over how whistleblowers prove they were retaliated against.

Trevor Murray, a former strategist for UBS, alleged that the company’s leaders pressured him to skew his research. After he was fired in 2012, Murray took his case to a federal district court and won. However, the U.S. Court of Appeals for the 2nd Circuit vacated that judgment while agreeing with UBS’s complaint that the district court had failed to tell the jury that Mr. Murray had to prove that his employer acted with retaliatory intent.

The Supreme Court is set to consider whether Mr. Murray had a burden to prove retaliatory intent or if the lack of that intent is part of the company’s defense. In discussing burdens of proof for alleged retaliation, the SOX Act reads: “An action brought under paragraph (1)(B) shall be governed by the legal burdens of proof set forth in section 42121(b) of title 49, United States Code.” That section of U.S. law requires that the whistleblower’s action be “a contributing factor in” the “unfavorable personnel action” they allege.

The logo of Swiss bank UBS in Zurich, Switzerland, on Oct. 25, 2018. (Arnd Wiegmann/Reuters)

Employers can defend themselves by demonstrating “by clear and convincing evidence that the employer would have taken the same unfavorable personnel action in the absence of” the employee’s action.

UBS claims that it terminated Mr. Murray after encountering “significant financial difficulties” and because his position had become “unnecessary.” Mr. Murray maintains that he faced retaliation.

Sen. Chuck Grassley (R-Iowa), the Securities and Exchange Commission (SEC), and the U.S. solicitor general have filed amici briefs supporting Mr. Murray. Two SEC commissioners released a statement in July dissenting from the agency’s decision to join the solicitor general’s amicus brief, criticizing the agency for a purported lack of “full and careful consideration.”

Insurance Question

The second set of oral arguments scheduled for Oct. 10 are for Great Lakes Insurance SE v. Raiders Retreat Realty Co. LLC, which involves an insurance company refusing to cover a claim for a yacht that had run aground near Fort Lauderdale, Florida. Great Lakes Insurance (GLI) argued that its policy with Raiders Realty was void because the latter hadn’t recertified or inspected the yacht’s fire equipment in a timely manner.

In maritime law, companies may use a choice-of-law clause to settle which state’s law applies in a contract. According to SCOTUSBlog, this particular contract selected federal admiralty law and New York state law. Raiders has filed its suit in Pennsylvania and argued that the state’s rules about bad-faith insurance denial would protect them in a way that New York law wouldn’t. It further wants the choice-of-law clause to be rendered unenforceable since enforcing it would run contrary to Pennsylvania’s “strong public policy.”

The Supreme Court ruled in Bremen v. Zapata Off-Shore Co. that a forum-selection provision is unenforceable “if enforcement would contravene a strong public policy of the forum in which suit is brought.” That case prompted the 3rd Circuit Court of Appeals to vacate a lower court ruling in favor of GLI.

The Supreme Court is expected to wrestle with what standard should be used for judging the enforcement of this type of clause and with whether a “strong public policy” contrary to the clause’s enforcement can render it unenforceable.