Dodd-Frank Amendment to SOX Whistleblower Provision Protecting Employees of Nonpublic Subsidiaries is Retroactive: SDNY | Practical Law

Dodd-Frank Amendment to SOX Whistleblower Provision Protecting Employees of Nonpublic Subsidiaries is Retroactive: SDNY | Practical Law

In Leshinsky v. Telvent GIT S.A., the US District Court for the Southern District of New York held that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) amendment to the Sarbanes-Oxley Act of 2002 (SOX), protecting employees of public companies' nonpublic subsidiaries, can be applied retroactively in a case alleging wrongful termination in violation of the SOX whistleblower provision.

Dodd-Frank Amendment to SOX Whistleblower Provision Protecting Employees of Nonpublic Subsidiaries is Retroactive: SDNY

by PLC Labor & Employment
Published on 10 Jul 2012 • USA (National/Federal)
In Leshinsky v. Telvent GIT S.A., the US District Court for the Southern District of New York held that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) amendment to the Sarbanes-Oxley Act of 2002 (SOX), protecting employees of public companies' nonpublic subsidiaries, can be applied retroactively in a case alleging wrongful termination in violation of the SOX whistleblower provision.
On July 9, 2012, the US District Court for the Southern District of New York issued an opinion in Leshinsky v. Telvent GIT S.A. In this case, which alleged wrongful termination in violation of the SOX whistleblower provision, the court denied the defense motion to dismiss for lack of subject matter jurisdiction and held that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) amendment to the whistleblower provision of the Sarbanes-Oxley Act of 2002 (SOX) giving whistleblower protections to employees of privately owned subsidiaries of publicly traded companies can be applied retroactively. The case alleged wrongful termination in violation of the SOX whistleblower provision because of events occurring before the Dodd-Frank amendments.
In its opinion, the court denied the defendant's motion to dismiss and:
  • Held that the Dodd-Frank amendment applies retroactively because it is a clarification of Congress's intent with respect to the SOX whistleblower provision.
  • Held that retroactive application was consistent with the amendment's legislative history.
  • Concluded that because the Dodd-Frank amendment applies retroactively:
    • the plaintiff, as an employee of the subsidiary of a public company whose financial information is included in the consolidated financial statements of the public company, is a covered employee under Section 806 of SOX; and
    • the court has subject matter jurisdiction over the case.
Although this case does not create binding legal precedent, other courts may look to it in evaluating the amendment's retroactive application. However, SOX has a limited 180-day statute of limitations period that is likely to limit the application of this case to claims currently pending (see Whistleblower Protections under Sarbanes-Oxley and the Dodd-Frank Act: Whistleblower Adjudication: Under SOX).
Court documents: