Fight Over Definition of Whistleblower

     SAN FRANCISCO (CN) – Biotech firm Bio-Rad Laboratories, fined last year for bribing foreign governments, asked a judge to dismiss a former vice president’s lawsuit claiming it fired him for reporting misconduct.
     Sanford S. Wadler sued Bio-Rad and its board of directors in May, claiming it violated whistleblower laws by firing him for not going along with a cover-up of bribery in China.
     Wadler, who was Bio-Rad’s general counsel for almost 25 years, said he began investigating the company’s misdoings in China after learning that overseas employees and agents had bribed government officials in Russia, Thailand and Vietnam to win public contracts to sell medical diagnostic equipment.
     In 2014, Bio-Rad agreed to pay $55.1 million in fines for violating the Foreign Corrupt Practices Act under nonprosecution agreements with the SEC and Department of Justice.
     In its motion to dismiss in July this year, Bio-Rad claimed that Wadler does not qualify for whistleblower protection and that its board of directors cannot be held liable for alleged whistleblower retaliation.
     In a Sept. 4 hearing on the motion to dismiss, Bio-Rad urged the judge to adopt a narrow interpretation of the words “whistleblower” and “employer” in the Dodd-Frank and Sarbanes-Oxley Acts, which prohibit retaliation against whistleblowers.
     Although Wadler reported his concerns to superiors and auditors hired by the company to investigate bribery allegations, Bio-Rad claimed, whistleblower protections apply only to those who share information with the SEC.
     “Wishing they had conducted a more thorough investigation does not make him a whistleblower,” Bio-Rad’s attorney Linda Inscoe said.
     Wadler’s attorney Kevin Clune countered that his client’s refusal to go along with a cover-up of illegal activities gives him whistleblower protection under the law.
     Bio-Rad also claimed that Wadler cannot sue the board for firing him because the directors are neither an “employer” nor “agents” of the employer. The narrow definition of “employer” excludes the board of directors from liability, Inscoe said.
     Clune disagreed. “Terminating is clearly conducting an act on behalf of the corporation,” he said, adding it would set a bad precedent if the court found a board of directors could not be held liable for firing whistleblowers.
     U.S. Magistrate Judge Joseph Spero said Congress may not have intended to grant boards of directors immunity from liability for retaliation when it passed whistleblower protection laws in 2002 and 2010.
     “How can it possibly be that the highest level individuals in the company can be fired by the board of directors, and it was the intent of Congress that those individuals that conducted that would be immune, even though some much lower level employee could be held liable?” Spero asked. “That makes zero sense to me.”
     But Spero found merit in Bio-Rad’s argument that Wadler’s claims against the board were not timely because Wadler failed to name all the directors, or the fact that they fired him in his original complaint to the U.S. Department of Labor.
     “It doesn’t say anything about what any of the board members did,” Spero said of the DOL complaint. “It just says these are the board members. It doesn’t say they did anything wrong.”
     Spero said that if board members were not notified they could be sued for firing Wadler when the complaint was filed, then his claims against the directors may be considered untimely.
     “I believe because the board was aware they fired him and served with notice of the complaint, that satisfies the requirements,” Clune replied.
     Before concluding the hearing, Spero honed in on two issues he wants clarified before ruling on Bio-Rad’s motion to dismiss – the definitions of “employer” and “whistleblower” under the Dodd-Frank and Sarbanes-Oxley Acts.
     Spero asked the parties to submit supplemental briefings on the legislative history of both laws by Sept. 25 to help ascertain Congress’s intent when it drafted the language and definitions for those statutes.

%d bloggers like this: