In the wake of the financial crisis a decade ago, policymakers faced a stark reality concerning fraud in the financial sector: To prevent future crises, people on the front lines must be willing to come forward and report fraudulent activity. Indeed, the crisis showed that the entire financial services industry must be more vigilant in preventing widespread fraud.
In response, Congress established the Securities and Exchange Commission whistle-blower program as part of the Dodd-Frank Act. The program acknowledges that Wall Street itself must be an important part of any effort to make our laws and regulations more effective, provide restitution to victims and prevent fraud. Accordingly, this program is of particular importance to employees and institutions in New York City and other major financial centers.
For many, doing the right thing and reporting fraudulent activity can seem like a risky endeavor. But it doesn’t have to be. In recent years, the SEC has paid out over $150 million to whistle-blowers who provided information that assisted successful enforcement actions, all while keeping their identities strictly confidential. And yet, the SEC program and the various protections in place for whistle-blowers remain unknown and underutilized by many on Wall Street. Here are three reasons to keep this program in mind when you begin to suspect a company is violating federal securities laws:
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The SEC whistle-blower program is relatively young and the pace with which it acts on tips has steadily increased over time. It issued over $57 million in awards in 2016, which exceeded the cumulative awards issued prior to last year. Ultimately, the success of this vital program depends upon individuals who learn of securities fraud and report it to the government. The SEC is doing everything in its power to make doing so both simple and rewarding for financial professionals.
If you have any questions about the issues raised below or would like to learn more about the SEC’s whistleblower program, please contact one of our Whistleblower Attorneys at 267.479.5700 or whistleblower@cohenmilstein.com to arrange a complimentary confidential consultation. Alternatively, please submit your contact information via the CONTACT US box below, and we will schedule a convenient time to speak.
Charges of workplace sexual harassment have exploded into the news in recent months as allegations by dozens of women have forced the resignations of such high-profile figures as Uber co-founder Travis Kalanick, Fox TV host Bill O’Reilly and — in perhaps the most spectacular fall from grace — iconic Hollywood producer Harvey Weinstein. Many observers believe the scandals, which involve accusations of harassment, sexual coercion and in some cases rape, mark a turning point in the decades-long battle to change corporate culture so that sexual harassment is no longer tolerated. Human resource managers are beginning to evaluate whether anti-sexual harassment programs might be more effective if they focused on teaching employees to avoid and respond to all types of inappropriate and uncivil behavior rather than simply on teaching them the technicalities of anti-harassment law. At the same time, however, businesses increasingly are requiring employees to sign arbitration agreements that forbid them from taking sexual harassment claims to court, a practice some women’s rights advocates say helps perpetuate the behavior.
Cohen Milstein Partner Joseph Sellers tackles this subject in a pro/con debate over whether mandatory arbitration is harmful to victims of harassment. Mr. Sellers takes the pro argument, writing, “when arbitration is used to resolve a private dispute, nobody knows about it except the employer. You lose the benefit of having rulings that are public and could guide people’s conduct in the future.”
See CQ Researcher’s full “Workplace Sexual Harassment” report.
A Leland woman has filed a class action lawsuit against Chemours and its subsidiary Chemours after elevated levels of GenX was found in her home’s water heater.
According to the complaint, a June 2017 sampling of bottom sludge collected from a water heater from the residence of plaintiff Victoria Carey detected GenX levels at 857 parts per trillion in the top layer of sludge and 623 ppt in the bottom layer.
“Can you imagine what it’s like worrying if the water you’re giving your family could kill them? That’s my daily reality and the reality of so many families across areas of North Carolina that get their water from the Cape Fear River,” said Carey. “I’m standing up because I can’t let DuPont and Chemours get away with putting our health at risk and contaminating our properties. DuPont and Chemours need to take responsibility for their years of bad actions and willful misconduct.”
The health goal threshold level established by state officials is 140 ppt.
“For over 35 years, DuPont and Chemours have put the lives and health of hundreds of thousands of men, women and children at risk,” said Ted Leopold, co-counsel for the plaintiff in the suit, in a statement. “Nothing will take away the health risks these North Carolinians have experienced, but it is important that these willful acts by DuPont and Chemours be brought to light so corporate misconduct of putting innocent lives at risk will stop. These defendants need to be held accountable and take full responsibility for their actions.”
Read Leland Woman Files Lawsuit After High GenX Levels Found in Water Heater.
Imagine that you are an employee working your way up the corporate ladder. You’ve spent years following the rules, paying your proverbial dues, and seemingly excelling in your current position. With your sights set on a move to management, you apply for a promotion. It’s denied.
Disappointed but not defeated, you apply for a promotion again the next year. And the next several years after that. Each time, you are passed over for advancement while other people, colleagues with mediocre performance and less experience, are promoted over you. Although you tried to overlook it the first few times you lost the promotion, it is now undeniable that the company is only promoting people of a certain race — people who look nothing like you. Your patience runs thin, but then again, so does the company’s rationale for denying your promotion; their reasons simply don’t add up. You consider pursuing legal action, but the idea of playing David to your company’s Goliath is terrifying. You can’t afford to lose your job, and the only evidence you have is your own story.
Now imagine you later learn that a number of other employees at your company — coworkers who look like you, sought similar jobs, and reported to the same managers — were denied promotions under nearly identical circumstances. Armed with access to this additional evidence and backed by your peers, you see a clear pattern of misconduct and become more confident in your conclusion that the promotion denials were not a matter of bad luck or mere chance; the pattern is evidence of discrimination, and you set out to prove it as such. The battle undoubtedly will be difficult, but by joining your claim with similarly situated coworkers and accessing companywide data, information that was always in your employer’s possession, you have the potential to level the playing field.
One need not stretch the imagination very far to appreciate the core premise of this scenario and others like it. Whether it is confronting discriminatory denials of promotion, exposing dangerous working conditions, opposing policies that surreptitiously shave time off employee timesheets or challenging other workplace offenses, the idea of strength in numbers — that insurmountable challenges can be overcome when tackled by a group — is part of this nation’s DNA. Indeed, this country sprang from the revolutionary decision of a few individuals to unite against a foe so formidable that collective action was not just the best option, it was the only option. And for more than 80 years, the National Labor Relations Act has been protecting the rights of workers to engage in “concerted activity” — conduct such as picketing, striking and pursing legal claims together with other workers.
This right to join together to challenge workplace misconduct is under siege and its very survival will be before the U.S. Supreme Court in early October. The court will consider whether the NLRA allows employers to require that workers, as a condition of their employment, surrender their right to jointly pursue claims challenging workplace misconduct. If our ability to challenge workplace wrongs is to have any meaning, the answer to this question must be a resounding no.
In each of the three related cases, Epic Systems Corp. v. Lewis; Ernst & Young v. Morris and NLRB v. Murphy Oil USA, Inc., an employer demanded of its employees, as a condition of employment, that they submit every workplace dispute over the entire course of their employment to private arbitration. Their claims would only be tried individually and arbitration would be conducted in secret before a private arbitrator.
The right to join together to challenge common grievances has long been an essential component of our nation’s slow but deliberate progress toward a “more perfect union.” Without this bedrock right, our country would have fallen far short of achieving many of the protections against discrimination on which we now depend and may take for granted.
Many of the workplace protections we enjoy today were achieved through legal action brought by groups of workers. They include routine protections, such as the right to work as a flight attendant regardless of your gender; to work beyond the age of 60 as an engineer; to work in the front of a showroom regardless of your skin color; to be compensated when your boss asks you to stay past your shift to restock the shelves; to seek and keep certain jobs even if you’re pregnant, and many other protections established by courts through cases brought by workers who joined together to challenge a common injustice.
Achieving these victories would have been far more difficult, if not impossible, had the challenge fallen to a single person rather than a group of workers. It is rare that people who engage in discrimination or harassment publicly state their intentions. Much more often, claims of discrimination and other workplace misconduct rely on evidence of a pattern of misconduct that can be proven only when claims challenging the same conduct are tried together. And, where workers who proceed alone do succeed in proving discrimination, the remedy may be limited to the individual worker. The chance to eradicate more deep-seated discriminatory policies and longstanding bias is typically reserved for occasions where groups of workers prove a pattern of bias. Indeed, had the bans on bringing worker claims together, now before the Supreme Court, been the law of the land over the last half century, more than 120 landmark civil rights cases would never have been brought.
Barring workers from joining together to challenge injustice in their workplace could set back by a century this nation’s progress toward social justice for all Americans.
Published in the September 25, 2017 edition of the The Los Angeles ❘ San Francisco Daily Journal. Joe Sellers is a partner and Shaylyn Cochran is an associate in the Civil Rights & Employment practice at Cohen Milstein Sellers & Toll PLLC.
Last month marked 45 years since the U.S. Supreme Court’s ruling in Affiliated Ute Citizens of Utah v. United States, which established a rebuttable presumption of reliance for securities fraud claims based on omissions of material fact. This Expert Analysis special series explores the decision’s progeny in the Supreme Court and various circuits.
Affiliated Ute Citizens of Utah v. United States held that investors need not prove they relied on a defendant’s omission of material information to establish their injury. Affiliated Ute v. United States, 406 U.S. 128 (1972). Instead, reliance is inferred from the importance of the information withheld.[1] Since that ruling, various courts of appeals have explained that Affiliated Ute offers only a presumption of reliance, which is rebuttable.[2] Once the presumption is invoked, the burden of proof then switches to a defendant who withheld information material to investment decisions despite having a duty to disclose. The defendant can only avoid liability by demonstrating that even if the investors had been fully informed, their investment decision would have remained the same.
The rationale underlying Affiliated Ute is common in civil law — a party that is unable to present evidence supporting her position will lose that issue. As a practical matter, it is nearly impossible for an investor to demonstrate that the opposite of the omission was the basis for her investment decision. Accordingly, Affiliated Ute relieves investors of that burden and deems reliance to exist where a defendant owes a duty to disclose the truth, yet omits material information.
The Seventh Circuit Court of Appeal has cited the Affiliated Ute decision 145 times.[3] The most significant of these decisions was the Seventh Circuit’s rejection of the “fraud created the market” theory as an extension of Affiliated Ute. Eckstein v. Balcor Film Investors, 8 F.3d 1121 (7th Cir. 1993) (Easterbrook, J.). What could have been a major blow for investors has had far less impact because the decision acknowledges that investors may establish reliance indirectly.
[1] Justice Harry Blackmun explained, “[u]nder the circumstances of this case, involving primarily a failure to disclose, positive proof of reliance is not a prerequisite to recovery. All that is necessary is that the facts withheld be material in the sense that a reasonable investor might have considered them important in the making of this decision.” Affiliated Ute Citizens v. United States, 406 U.S. 128, 153-154 (1972) (citations omitted).
[2] See Panter v. Marshall Field & Co., 646 F.2d 271, 284 (7th Cir. 1981) (“The Mills-Ute presumption is essentially a rule of judicial economy and convenience, designed to avoid the impracticality of requiring that each plaintiff shareholder testify concerning the reliance element. Mills v. Electric Auto-Lite Co., 396 U.S. 375, 385 (1970); see Chris-Craft Industries Inc. v. Piper Aircraft Corp., 480 F.2d 341, 375 (2d Cir.), cert. denied, 414 U.S. 910, 94 S. Ct. 231, 38 L. Ed. 2d 148, 94 S. Ct. 232 (1973) (“These impracticalities are avoided by establishing a presumption of reliance where it is logical to presume that such reliance in fact existed”); Kohn v. American Metal Climax Inc., 458 F.2d 255, 290 (3d Cir.), cert. denied, 409 U.S. 874, 93 S. Ct. 120, 34 L. Ed. 2d 126, 93 S. Ct. 132 (1972) (Adams, J., concurring in part, dissenting in part) (10b-5 action). However, when the logical basis on which the presumption rests is absent, it would be highly inappropriate to apply the Mills-Ute presumption. “(W)here no reliance (is) possible under any imaginable set of facts, such a presumption would be illogical in the extreme.” Lewis v. McGraw, 619 F.2d 192, 195 (2d Cir. 1980).
Read Legal Issues in the Use of Pre-Employment Testing.
This paper, which was presented at the 2017 Pacific Coast Labor & Employment Conference, addresses pre-employment testing and the legal issues surrounding it.
On Thursday, April 20, 2017 a federal jury returned a verdict in the first of the test trials against DynCorp International, the defense contractor that did the aerial fumigations in Plan Colombia. The International Rights Advocates (IRAdvocates) first filed this case in 2001 on behalf of over 2,000 Ecuadoran farmers who live near the border with Colombia and allege that they had their farms destroyed when the toxic chemicals used by DynCorp to kill coca and poppy plants was also sprayed on their farms. The Ecuadoran farmers also alleged that they received personal injuries and suffered battery and intentional infliction of emotional distress. After many delays and a lengthy appeal process, the case was finally set for trial on behalf of six (6) test plaintiffs. Theodore Leopold, Leslie M. Kroeger and Poorad Razavi from Cohen Milstein joined the case in late 2016 to prepare the case for the April 3, 2017 trial.
The issues of battery and intentional infliction of emotional distress proceeded to trial. DynCorp’s major defense was that they were not responsible for any of the damages to the Ecuadoran farmers because they were not flying the spray missions themselves. They asserted the missions were flown by two groups of pilots, one from EAST, a U.S. subcontractor, and the other from the Colombian National Police (CNP). DynCorp argued the pilots were not under their control and they could not be held liable if the pilots wrongfully fumigated the Ecuadoran farmers. The jury concluded that DynCorp was responsible for the EAST pilots, but that the CNP pilots were independent contractors and not under the control of DynCorp. The jury also found that in April, 2003, EAST took over control of the CNP pilots, making DynCorp liable for all spray pilots fumigating after that date. Unfortunately, all of the first six test Plaintiffs had claims that pre-dated April, 2003, so they could not determine whether DynCorp or the CNP was responsible for spraying them. The jury was accordingly unable to award damages to these Plaintiffs because they could not prove which group of pilots sprayed them.
Moving forward, DynCorp will be estopped from arguing they are not responsible for any harm caused by the spray pilots post-April, 2003. We look forward to the future trials for the remaining 2,000 Ecuadoran farmers that will focus on damages and the reckless actions of the DynCorp pilots.
Terry Collingsworth, Executive Director of the IR Advocates stated, “we have been fighting for justice for the 2,000 Ecuadoran farmers for over 16 years, and we will continue the fight until we achieve justice.”
Contact: Desmond Lee or Denise Luu at cohenmilstein@berlinrosen.com.
Here we go again. H.R. 985 places a bulls’ eye squarely on the back of every securities class action. It does so under the guise of attempting to fix a supposedly broken litigation system for class actions, which the bill’s proponents allege is rife with abuse. But in fact this bill is designed to eliminate all class actions — including securities class actions. Not only is the “abuse” the bill’s proponents claim exists illusory; they ignore the critical role securities class actions play in maintaining the integrity of our financial markets and providing recourse to investors, retirees, pension funds, health and welfare funds, states and municipalities invested in the market when fraud is committed.
H.R. 985 shot out of the House at record speed. In fact, the bill was introduced on a Thursday and voted out of committee the following Wednesday without so much as a hearing. The House voted along mainly party lines, with fourteen Republican members joining all Democratic members in opposing the legislation. H.R. 984 is now in the Senate, before the Judiciary Committee, where one can only hope that Senators will reject this brazen attempt to close the courthouse doors.
There is much to say about the H.R. 985. It shamelessly seeks to erect hurdles where none should exist, complicates class certification proceedings, buries the judiciary with class certification appeals and data collection and seeks to tie up the payment of attorneys’ fees and require funding disclosures. This is all with a view to make cases much more difficult to litigate and take far longer to resolve than they do now, and disincentivize plaintiffs’ firms from taking on these cases, thereby denying investors their ability to hold those who defraud them accountable.
This paper was presented at the 2017 NELA Spring Seminar “Litigating Wage & Hour Cases: Challenges & Opportunities.”
This paper, presented at the American Bar Association EEO Committee Mid-Winter Meeting, addresses the process of obtaining and analyzing data in class action litigation.
The Numbers Game: Demystifying the Use of Data in Class Actions