Massachusetts District Court Judge Issues Decision that Provides Protection for Whistleblowers

One of the major splits among lower courts has been around the whistleblower provision of the 2010 Dodd-Frank Act.  In July of 2013, the U.S. Court of Appeals for the Fifth Circuit issued a decision holding that an employee must provide information relating to a violation of the securities laws to the SEC in order to qualify as a “whistleblower,” under the Dodd-Frank Act.[1]  The decision, and other district court rulings that followed, appeared to deter employees from reporting violations directly to their employer because they were not guaranteed protection.  However on October 16th, a United States District Judge in Massachusetts ruled that the whistleblower provision of the 2010 Dodd-Frank Act protects employees whether or not they report the violations to the Securities and Exchange Commission (“SEC”) before they bring the information to their employer.[2]  (Read the opinion here)

The plaintiff, Richard Ellington, was employed as a financial planner by defendant, New England Investment & Retirement Group (“NEINV”).  After becoming aware of possible violations of the Investment Advisors Act of 1940, plaintiff discussed his concerns with the principal shareholder of the company compiled a twenty page report and submitted it to NEINV’s compliance officer, who subsequently began investigating.  Shortly thereafter, plaintiff was terminated from the company for emailing company files to himself after being warned that he was likely to be terminated.  After being terminated, plaintiff reported the information to the SEC and assisted in an investigation which ultimately led NEINV to pay $200,000 in civil penalties for violating the security regulations.

The issue in the case was whether plaintiff qualified as a whistleblower under the 2010 Dodd-Frank Act, which prohibits an employer from retaliating against a whistleblower.  The Act defines whistleblower as “any individual who provides..information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission.”  The defendants moved for summary judgment arguing that plaintiff does not qualify as a whistleblower because he did not provide the information to the SEC until after he was terminated.

Judge Richard G. Stearns did not accept the defendant’s argument, which cited the 5th Circuit decision and instead relied on the SEC’s interpretation of the Act, which states that a person is provided protection when the information is provided “[t]o, a person with supervisory authority over the employee or such other person working for the employer who has authority to investigate, discover, or terminate misconduct.”  Judge Stearns stated that a person has a private right of action under Dodd-Frank “whether or not the employer wins the race to the SEC’s door with a termination notice.”

 The decision is in line with the purpose of the whistleblower provision, to encourage employees to report violations when they believe their employer is violating the Securities laws.  However, while the decision is a step in the right direction for employers, until there is clear guidance on the issue that resolves the lower courts split, employers will still be hesitant to report the violations to their employers for fear of being terminated without any avenue of recourse.


[1] Asadi v. G.E. Energy (USA), LLC, No. 12-20522 (5th Cir. July 17, 2013)

[2] Ellington v. Giacoumakis, No. 1:13-cv-11791 (D.Mass. Oct. 16, 2013)

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First Circuit: Wrongfully Incarcerated Protected Under Fourth Amendment from Malicious Prosecution

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Hernandez-Cuevas v. Taylor

Background: In 2004 a joint federal-Commonwealth task force consisting of FBI agents and local police officers opened a special investigation targeting a drug and money laundering conspiracy in Carolina, Puerto Rico.  The task force had two confidential informants (“UI-1”) and (“UI-2”), who had arranged a meeting with a target of the investigation.  After the crime had been committed the surveillance officers observed one of the vehicles drop an individual involved in the crime off at a multi-unit building where the plaintiff lived.  Throughout the next year the FBI was unable to identify the individual who exited the vehicle that day and in a rush to indict someone, two officers and UI-1 conspired to manufacture evidence implicating the plaintiff as the individual from the day of the crime.  The officers carried out a tainted photo identification even though the plaintiff bared very little resemblance to the individual described on the day of the crime.  On December 3, 2007 police arrested Hernandez, charging him with delivering $321,956 in drug proceeds to the undercover informant.  He was transferred to a federal prison in New Jersey where he was held for three months while awaiting further proceedings.  On February 29th he was released and on April 18, 2008 the United States Attorney for the District of New Jersey dismissed the charges against him.

On March 2, 2009, the plaintiff filed his complaint alleging that the conduct of the officers caused him to be held in federal custody for three months without probable cause.  The defendants argued that the case should be dismissed because the statute of limitations had passed as any Fourth Amendment claim had accrued on the day of his arrest.  While the court agreed with the defendants that the statute of limitations had passed on a straight forward Fourth Amendment false arrest claim, the statute of limitations for malicious prosecution does not begin to accrue until the day that the proceedings terminate in the plaintiffs favor (the dismissal of charges in April of 2008).  The defendants then filed another motion to dismiss, arguing that as police officers, they were entitled to qualified immunity.  The court denied their motion and the defendants filed the interlocutory appeal.

Issue: Whether the facts alleged show that the officer’s conduct violated some constitutional right

Analysis: The court began by highlighting the fact that neither the First Circuit nor the Supreme Court has determined that the Fourth Amendment includes a malicious prosecution claim.  However, each of the eight Courts of Appeals who have directly tackled the issue has concluded that individuals are protected under the Fourth Amendment against pretrial detention without probable cause.  In a common law malicious prosecution claim, the plaintiff must demonstrate that the officer acted with subjective malice.  In a purely constitutional Fourth Amendment claim, the plaintiff only needs to establish that his seizure was objectively unreasonable.  The approach taken by the Court was similar to that of other Court of Appeals who had been presented with the issue in the past; Fourth Amendment protection does not end when an arrestee becomes held pursuant to legal process.

The Court further stated that a plaintiff may bring such a claim under Section 1983 if he or she can establish that the Defendant (1) caused (2) a seizure of the plaintiff pursuant to legal process unsupported by probable cause, and (3) criminal proceedings terminated in plaintiffs favor.  In this case, the police officers acted with reckless disregard by blatantly making false statements in the warrant to arrest the Plaintiff in addition to the fact that the description given by the surveillance officer on the day of the incident did not resemble the plaintiff at all.  Finally, the case ended in the Plaintiff’s favor as the prosecutor dismissed the charges against him.

Probe Into US Attorney’s Prosecution of Swartz Continues

The power of government prosecutors has been heavily scrutinized recently following the suicide of internet activist Aaron Swartz.  Swartz, who co-founded the social news website Reddit and was the founder of internet activist group Demand Progress, was found dead on January 11.  In July of 2011 Swartz was indicted on federal charges including wire fraud, computer fraud, unlawfully obtaining information from a protected computer, recklessly damaging a protected computer and several other charges.  However this was not the typical hacking case in which a hacker broke into an online system to seek financial gain or cause havoc and shutdown the website.  Swartz managed to download more than four million documents from the not for profit website JSTOR, a digital library that provides academic journals, books, and primary sources to its users.  Swartz intended to distribute these documents to the public, but before he could do so they were returned to JSTOR without any damage being done.

Following Swartz’s arrest, it was evident that JSTOR was not pressing the government to indict Swartz, and actually appears to be against any legal charges being brought against Swartz; following the indictment JSTOR released a statement on the matter which read in part,

“We stopped this downloading activity, and the individual responsible, Mr. Swartz, was identified.  We secured from Mr. Swartz the content that was taken, and received confirmation that the content was not and would not be used, copied, transferred, or distributed.

The criminal investigation and today’s indictment of Mr. Swartz has been directed by the United States Attorney’s Office. It was the government’s decision whether to prosecute, not JSTOR’s. As noted previously, our interest was in securing the content. Once this was achieved, we had no interest in this becoming an ongoing legal matter.”

However, despite JSTOR’s position, the United States Attorney’s office refused to drop charges, with US Attorney Carmen Ortiz being quoted as saying, “Stealing is Stealing, whether you use a computer command or a crowbar, and whether you take documents, data or dollars.” Rep. Darrell Issa (R-Vista) and Elijah Cummings (D-MD.), on behalf of the committee on oversight and government reform, recently requested a briefing from the United States Attorney General seeking clarity about the decisions of the US Attorney’s office to bring criminal charges against Swartz.  In the request, the committee questions the tactics of the prosecutors, which allegedly included offering a 7-8 month sentence if a guilty plea was accepted and a statement to Swartz that if he did not accept and was convicted, then the government would seek a prison sentence of 7-8 years.

Among the specific questions that the committee has requested in the briefing by the Attorney General are

  1. Was Mr. Swartz’s opposition to SOPA or his association with any advocacy groups among the factors considered?
  2. What specific plea offers were made to Mr. Swartz, and what factors influenced the decisions by prosecutors regarding plea offers made to Mr. Swartz?
  3. Why was a superseding indictment necessary?

The full text of the committee’s request can be found here.

Part of the problem of prosecutorial overreach stems from the pressure of the prosecutors to secure convictions, and this often includes the tactic used against Swartz of offering plea deals and indicating to defendants that if they do not accept the plea deal and go to trial, the time spent in prison could be significantly higher if convicted.  As mentioned earlier, in the Swartz case prosecutors allegedly offered a plea deal of 7-8 months with the threat of a 7-8 year prison sentence if convicted.  Even a completely innocent person would have to double question themselves in this position with nothing being certain in jury trials.

Scholar Glenn Harlan Reynolds, a Beauchamp Brogan Distinguished Professor of law, makes several convincing arguments in his essay on prosecutorial overreach.  One potential response could be to analyze the grand jury process as it is in place now.  The grand jury is meant to be a major bar, or a hurdle to prosecutorial overreach, but as Reynolds states, the historic phrase that “a good prosecutor could persuade a grand jury to indict a ham sandwich” establishes that this process needs to be revamped.  Another cause of this is prosecutorial immunity, which Reynolds describes as a “judicial invention.”  Reynolds argues that while this immunity may prevent prosecutorial misconduct, it also in a way enables it because it removes one form of accountability.  Reynolds’s essay provides great insight on this topic and the full text can be found here.

The US Attorney’s response to the Committee’s request will hopefully provide answers that many have been asking since the death of Mr. Swartz.

First Circuit Upholds Planned Parenthood “Buffer Zone” Against Protestors

The First Circuit Court of Appeals recently upheld a Massachusetts law creating a “buffer zone”[1] — a 35 feet radius around a reproductive health care facility that is off-limits to protestors[2].  The Act states[3]:

 (b) No person shall knowingly enter or remain on a public way or sidewalk adjacent to a reproductive health care facility within a radius of 35 feet of any portion of an entrance, exit or driveway of a reproductive health care facility or within the area within a rectangle created by extending the outside boundaries of any entrance, exit or driveway of a reproductive health care facility in straight lines to the point where such lines intersect the sideline of the street in front of such entrance, exit or driveway. This subsection shall not apply to the following:—

(1) persons entering or leaving such facility; (2) employees or agents of such facility acting within the scope of their employment; (3) law enforcement, ambulance, firefighting, construction, utilities, public works and other municipal agents acting within the scope of their employment; and (4) persons using the public sidewalk or street right-of-way adjacent to such facility solely for the purpose of reaching a destination other than such facility.

Although viewpoint neutral, the intent of this law is mainly to prevent protestors from harassing, intimidating, or otherwise interfere with, women seeking certain reproductive services, like abortions.  Opponents of the law regularly challenge such statutes under the First Amendment’s right to free speech.  While Americans enjoy freedom of speech, that freedom is not unfettered.  The District Court previously ruled against the plaintiffs and upheld the constitutionality of the statute[4].

The First Circuit Court of Appeals affirmed that decision, stating:

Few subjects have proven more controversial in modern times than the issue of abortion. The nation is sharply divided about the morality of the practice and its place in a caring society. But the right of the state to take reasonable steps to ensure the safe passage of persons wishing to enter healthcare facilities cannot seriously be questioned. The Massachusetts statute at issue here is a content-neutral, narrowly tailored time-place-manner regulation that protects the rights of prospective patients and clinic employees without offending the First Amendment rights of others.[5] 


[3] Mass. Gen. Laws ch. 266, § 120E 1/2

[4] McCullen v. Coakley, 573 F. Supp. 2d 382 (D. Mass. 2008)

1st U.S. Circuit Court of Appeals Weighs In On GPS Evidence

 

The technological advances over the years, particularly with the emergence of smart phones, have made Global Positioning Systems (GPS) software commonplace and ubiquitous.  “The Global Positioning System (GPS) is a U.S.-owned utility that provides users with positioning, navigation, and timing (PNT) services.”[i]  Most smartphones have GPS technology as a built-in feature.

The information obtained from GPS can be a critical role in law enforcement, and late last week, the Court of Appeals ruled on the admissibility of GPS evidence.  In United States v. Espinal-Almeida, et al[ii], the court held that GPS evidence could be admitted against a defendant without expert testimony.

United States v. Espinal-Almeida, et al,

The facts of the case were pretty straightforward.  The Defendant Carlos Espinal-Almeida and three others were convicted of conspiracy and attempt to distribute a controlled substances and conspiracy to import controlled substances.  The defendants were arrested on sea.  The defendants allege that they were on an innocent fishing trip and not executing a drug trade.  The GPS technology was used by Government officials to capture the defendants’ movements.

The defendants argued that due to the specialized and technical nature of GPS evidence, an expert witness was required, which the Government did not present.  The court disagreed, stating: A court may “take judicial notice of the foundational facts if the evidence resulted from ‘a process or system that is generally known or accepted.’”[iii] They went on to state: The issues surrounding the processes employed by the GPS and software, and their accuracy, were not so scientifically or technologically grounded that expert testimony was requirement to authenticate the evidence of Durand [a Customs forensic scientist dealing with portable media], someone knowledgeable, trained, and experienced in analyzing GPS devices, was sufficient to authenticate the GPS date and software generated evidence.”

Evidence obtained from GPS technology is bound to appear in more criminal trials moving forward.  Defense counsel will still challenge the evidence’s authenticity and the chain of custody.  But as far as data analysis of the GPS evidence is concerned, it appears that an expert witness will not be required.

If you would like more information please contact Wassem M. Amin, Esq. at wassem@dharlawllp.com or (617)880-6155.


[ii] _F.3d _ (1st Cir. Nov. 14, 2012) (Nos. 10-1086, 10-1440, 10-1090, 10-1134)

[iii] 31 Wright & Gold, Federal Practice and Procedure § 7114 (2012).