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9th Circuit Holds FCPA Is Not A "Rule Or Regulation" Of The SEC

In 2013, Sanford Wadler, the General Counsel of Bio-Rad Laboratories, Inc., delivered a report to the company's audit committee.  His report expressed his belief that the company had engaged in serious and prolonged violations of the Foreign Corrupt Practices Act in China.  The Audit Committee authorized Mr. Wadler to hire a well-known law firm which after an investigation found no evidence of a violation, or attempted violation, of the FCPA in China.  A few days later, Bio-Rad's Chief Executive Officer fired Wadler.  Although Bio-Rad eventually paid $55 million to resolve FCPA issues in other countries, it paid nothing with respect to FCPA issues in China.  Wadler then sued Bio-Rad, its directors and its CEO.  Magistrate Judge Joseph C. Spero found that Wadler's claims against the directors (other than the CEO) were untimely.    Wadler v. Bio-Rad Labs., Inc., 141 F. Supp. 3d 1005 (N.D. Cal. 2015).  Two years later, a jury  delivered an $11 million verdict for, among other things, violating the anti-retaliation provisions of the Sarbanes-Oxley Act.  The SOx verdict was significant because it resulted in a doubling of the SOx award against Bio-Rad and its CEO pursuant to the Dodd-Frank Act (15 U.S.C. § 78u-6(h)(1)(C)(ii)) .

Section 806 of the SOX Act prohibits retaliation against an employee who lawfully reports "any conduct which the employee reasonably believes constitutes a violation of . . . any rule or regulation of the Securities and Exchange Commission . . .".  In Wadler v. Bio-Rad Labs., Inc., No. 17-16193 (9th Cir. 2019), the Ninth Circuit held that Section 806 "is clear: an FCPA provision is not a 'rule or regulation of the [SEC]'".  As a result, the SOx verdict was vacated and remanded to the District Court to decide whether a new trial is warranted.  

Bio-Rad was not successful, however, in overturning the judgment based on violation of California public policy under Tameny v. Atlantic Richfield Co., 27 Cal. 3d 167 (1980).  Wadler did not bring a Tameny claim against Bio-Rad's CEO.

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Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
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Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...

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