The Thorny Issues Surrounding an Increasingly
Common Event
house legal departments has increased
dramatically. Consequently, it should be no
surprise that in the same period of time the
prevalence of whistleblower claims by in-
house counsel has increased as well. This
article addresses the most common grounds
for whistleblower claims by in-house
attorneys, as well as two thorny issues that
arise when an attorney turns whistleblower.
Whistleblower Claims
traded company, or any contractor or agent
of such company, from retaliating against
an employee who blows-the-whistle on what
she reasonably believes to be a violation of
statutes regarding mail fraud, wire fraud,
bank fraud or securities fraud; any rule or
regulation of the Securities and Exchange
Commission (SEC); or any provision of
Federal law relating to fraud against
shareholders. See 15 U.S.C. §1514A(a)
(1). Section 307 of SOX instructed the SEC
to issue rules regarding the "standards of
professional conduct for attorneys" and
specifically mandated that such rules
"requir[e] an attorney to report evidence
of a material violation of securities law
or breach of fiduciary duty or similar
violation by the company or any agent
thereof" to the company's general counsel
or CEO, or if those persons fail to respond
appropriately, to the audit committee
of the board of directors. See 15 U.S.C.
§7245. The SEC carried out this mandate
by issuing the "Standards of Professional
Conduct for Attorneys,"17 C.F.R. Part 205,
which require attorneys to report material
violations "up the ladder" until the attorney
receives an "appropriate response." See 17
C.F.R. §205.3(b).
Generally, "attorneys who undertake
actions required by SOX Section 307 are
to be protected from employer retaliation
under the whistleblower provisions of SOX
Section 806." Jordan v. Sprint-Nextel Corp.,
ARB No. 06-105, ALJ No. 2006-SOX-041,
have routinely found that in-house counsel
may be protected under Section 806 if they
engage in other types of protected activity.
See, e.g., Van Asdale v. Int'l Game Tech., 577
F.3d 989, 996 (9th Cir. 2009) ("Nothing in
this section indicates that in-house attorneys
are not also protected from retaliation ...").
from retaliating against whistleblowers
who, inter alia, "mak[e] disclosures that are
required or protected under the Sarbanes-
Oxley Act of 2002 (15 U.S.C. 7201 et
seq.)...." See 15 U.S.C. 78u-6(h)(1)(A)
(iii). This language incorporates Section
307 of SOX and Part 205 of the rules
implementing this provision, and thus, any
in-house attorney who made a disclosure of
a "material violation" under Part 205 would
be protected from retaliation under Dodd-
Frank as well as SOX.
In addition to Dodd-Frank's anti-
retaliation provision, the Act also created a
bounty program under which a whistleblower
providing "original information" relating to
a violation of securities laws which leads to
the recovery of monetary sanctions of more
than $1 million is entitled to a bounty of
between 10 and 30 percent of the recovery.
See 15 U.S.C. 78u-6.
Attorneys may not be able to recover a
whistleblower bounty under Dodd-Frank
because the SEC's rules preclude an award
if the information disclosed was (a) obtained
through a communication subject to the
attorney-client privilege, (b) obtained in
connection with legal representation, or
(c) made by an employee in or based on
information derived from an entity's legal,
compliance or auditing departments.
Ogborn Mihm, LLP. His practice focuses primarily
on the representation of whistleblowers and
the litigation of complex business tort cases,
including legal malpractice claims. He has
previous experience litigating whistleblower
claims in state and federal court, both at trial
and on appeal. He maintains a blog regarding
whistleblower law at whistleblowerblawg.com.
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