Chemist’s Lawsuit Alleging Retaliatory Termination Under the Sarbanes-Oxley Act Survives Dismissal

In Perez v. Progenics Pharmaceuticals, Inc., the Southern District of New York recently denied defendants’ motion for summary judgment on plaintiff’s claim that his termination violated the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A (SOX).

Plaintiff, a Senior Manager of Pharmaceutical Chemistry at defendant who held a Ph.D and a master’s degree in organic chemistry, alleged that he was fired after delivering a memorandum in which he stated that his employer (Progenics) and its corporate collaborator (Wyeth) were untruthful with the public when disclosing information about clinical trials of the drug Relistor.

Plaintiff wrote:

[Wyeth and Progenics] are committing fraud against shareholders since representations made to the public were not consistent with the actual results of the relevant clinical trial [of the drug Relistor], and [Plaintiff] think[s] this is illegal.

The SOX Act provides that publicly traded companies may not

discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee … to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of [the fraud provisions of Title 18], any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders, when the information or assistance is provided to … a person with supervisory authority over the employee (or such other person working for the employer who has the authority to investigate, discover, or terminate misconduct).

An employee alleging a violation of this statute must prove four elements:

(1) [he] engaged in protected activity; (2) the employer knew that [he] engaged in the protected activity; (3) [he] suffered an unfavorable personnel action; and (4) the protected activity was a contributing factor in the unfavorable action.

The court held that plaintiff engaged in the requisite “protected activity” for purposes of SOX:

In light of Plaintiff’s training, education, and experience, a reasonable jury could find that it was objectively reasonable for Plaintiff to rely on conversations with colleagues, his review of the Wyeth Update, as well as his own work to form his belief that the May 22, 2008 Press Release—which reported “positive activity” and stated that “[w]e are pleased by the preliminary findings,” (May 2008 Press Release)—was “misleading” and not “a true reflection of what [was] being discussed behind closed doors. …

Further, because Plaintiff does not appear to have any knowledge or training in securities law, a jury could find that it was reasonable for Plaintiff to conclude that a press release that he found to be misleading could be securities fraud, or a violation of an SEC rule or regulation or a law relating to fraud against shareholders.

The court found issues of fact as to whether this protected activity was a “contributing factor” to his termination.  For example, evidence that plaintiff was fired less than 24 hours after engaging in this activity was enough evidence of causation to survive summary judgment.

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