Ninth Circuit Rules Alleged FCPA Violation Cannot Support SOX Claim
In Wadler v. Bio-Rad Labs., Inc., the Ninth Circuit narrowed the circumstances under which a plaintiff can prove a Sarbanes-Oxley Act (“SOX”) claim.
Sanford Wadler, the former general counsel of Bio-Rad Laboratories, Inc., alleged that during his tenure, he raised concerns that Bio-Rad violated the Foreign Corrupt Practices Act (“FCPA”) in connection with certain business dealings in China. The CEO of Bio-Rad allegedly discovered that Wadler had reported his concerns to the Board’s Audit Committee and two days later, the CEO allegedly told human resources that “Wadler had ‘been acting a little bizarre lately’” and that he “might ‘want to put him on an administrative leave.’”
Wadler’s concerns were investigated, but the investigation concluded there was no evidence of an FCPA violation in China. Three days after the investigation findings were reported to the Board, the CEO fired Wadler.
Wadler sued under SOX, the Dodd-Frank Act, and California public policy. The jury returned a verdict in Wadler’s favor, resulting in an approximately $11 million award. The Defendants appealed, claiming the district court erred when it instructed the jury that the FCPA constitutes “‘rule[s] or regulation[s] of the Securities and Exchange Commission’ (‘SEC’) for purposes of whether Wadler engaged in ‘protected activity’ under SOX § 806[.]”
Applying concepts of statutory interpretation, the Ninth Circuit held that “an FCPA provision is not a ‘rule or regulation of the [SEC].’” The Ninth Circuit reasoned: “That the phrase ‘rule or regulation’ is used in conjunction with an administrative agency, the SEC, suggests that it encompasses only administrative rules or regulations,” not statutes such as the FCPA.
Wadler argued that the phrase “rule or regulation” should be interpreted broadly because of “SOX’s remedial purpose.” The Ninth Circuit swiftly rejected Wadler’s plea, reinforcing its conclusion that the statute’s text is paramount.
Ultimately, the Ninth Circuit “vacate[d] the SOX verdict” and remanded to the trial court with instructions “to consider whether a new trial is warranted.”