District Court Judge Green-Lights Whistleblower Suit Brought Under Dodd-Frank Act

On September 26, a federal district court denied a Motion to Dismiss in a whistleblower case under the Dodd-Frank Act Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), holding that the plaintiff could establish a prima facie violation of the Dodd-Frank Act based on the allegations contained in the complaint. The decision in Kramer v. Trans-Lux Corp., 3v11cv1424 (SRU) is significant because the Dodd-Frank Act, which was signed into federal law in 2010, provides greater protection against whistleblower retaliation than past legislation aimed at financial reform.

The case was brought by a corporate employee who was discharged after informing the company’s board of directors and the SEC that his supervisors had violated the company’s pension plan. In 2009, then-Vice President of Human Resources Richard Kramer informed the company’s board members that his supervisors were violating company pension plan rules. Specifically, Kramer voiced his concerns about the appointment of Angela Toppi, Chief Financial Officer of Trans-Lux, to the company’s pension plan committee about her role as sole trustee of the company pension plan. Kramer told board members that Toppi’s position as a trustee created a conflict of interest, because she had inside knowledge of the company’s financial situation, and continued to hold company bonds as a pension investment, even as the bonds’ value dropped dramatically. Kramer also alerted board members that Toppi had failed to bring the 2009 amendments to the pension plan to the board or file the amendments with the SEC. Shortly thereafter, Trans-Lux began stripping Kramer of his responsibilities, and ultimately discharged him.

Richard Kramer filed a whistleblower’s suit against Trans-Lux Corporation under the Employment Retirement Income Security Act (“ERISA”) and the Dodd-Frank Act, a federal statute that provides protection against whistleblower retaliation. Trans-Lux moved to dismiss the Dodd-Frank Act claim, arguing that Kramer was not a “whistleblower” entitled to relief under the statute. Kramer countered that those who make disclosures that are required or protected under Sarbanes-Oxley or the Securities Act of 1934 are entitled to whistleblower protection under the Dodd-Frank Act. The District Court agreed, holding that Trans-Lux’s narrow reading of the term “whistleblower” was inconsistent with the goals of Dodd-Frank Act, which creates new incentives and protections for whistleblowers. Trans-Lux also alleged that Kramer was not entitled to whistleblower protection because his disclosures were not required by Sarbanes-Oxley. The Court rejected this argument, holding that Kramer’s disclosures were entitled to protection because they related to violations of securities laws and that Kramer had a reasonable belief that violations had occurred. In its conclusion, the Court denied Trans-Lux’s Motion to Dismiss with regard to the Dodd-Frank Act claim, allowing the case to proceed.

Chaired by Partner Brett J. Schneider, our Labor and Employment Law Group regularly defends employers against claims brought under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Family Medical Leave Act, the Equal Pay Act, the Florida Civil Right Act, the Florida Whistleblower’s Act, and similar Federal, State and local laws. The Group defends lawsuits in Federal and State courts across Florida, including class actions and multi-plaintiff cases. Our employment law counselors are litigators at heart, and know how to win cases and/or reach favorable settlements. Additionally, attorneys in our Litigation Division have prosecuted a wide-variety of general commercial and business disputes in both individual and class action settings, including securities litigation.

Oral arguments in Kramer are scheduled to begin in March 2013.

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Author(s): Brooke P. Dolara