In a case of first impression, the U.S. District Court for the Northern District of California has held that individual members of a company’s Board of Directors can be held liable under Dodd-Frank and Sarbanes-Oxley for whistleblower retaliation.
In addition, the court ruled that a whistleblower qualifies for protection under Dodd-Frank, even if he or she has not brought a complaint to the Securities and Exchange Commission (SEC).
In Wadler v. Bio-Rad Laboratories, Sanford Wadler was in-house general counsel for Bio-Rad for 25 years. In 2011, he reported to the company’s Board the results of his investigation into whether Bio-Rad’s management team in China had potentially violated the Foreign Corrupt Practices Act. The Board engaged outside counsel to investigate the potential FCPA violations and outside counsel found no evidence of the purported violations.
Wadler was fired in 2013 by a unanimous vote of the Bio-Rad Board. He then sued the company, alleging he was fired for reporting the alleged FCPA violations and that this retaliation was in violation of the whistleblower protections provided by Dodd-Frank and Sarbanes-Oxley (SOX).
Bio-Rad argued that Wadler’s claims against the individual Board members should be dismissed because Dodd-Frank and SOX do not allow for litigation against individual directors and that his Dodd-Frank claim should be dismissed because he never reported any complaints to the SEC, a qualifying factor for whistleblower protection.
The federal district court disagreed with both of Bio-Rad’s arguments. The court found that company directors can be held individually liable under both SOX and Dodd-Frank, saying that the terms “agent” in SOX and “employer” in Dodd-Frank are ambiguous and could be understood to include directors.
In addition, the court found that Wadler did qualify for whistleblower protection under Dodd-Frank, even though he did not bring his complaints to the SEC, saying that his internal complaints were enough to warrant such protection.
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