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In a nonprecedential yet significant order, a panel of the Second Circuit vacated the district court's grant of summary judgment in Sharkey v. J.P. Morgan Chase and remanded for further proceedings.
Jennifer Sharkey was a manager in the Private Wealth Management division of JPMorgan Chase & Co. Part of her job involved assessing client risk. One client in particular seemed fishy to her: She was unsure where his money was coming from, the client had a history of having millions of dollars go missing, and he didn't always provide the information she asked for.
Sharkey told her bosses that the client hadn't given her all of the "Know Your Client" documents, which the bank uses to assess risk factors. The supervisors told the client that JPMorgan would terminate its relationship with him because he hasn't supplied the required documents. But as it turned out, Sharkey never told the client any documents were missing. The client provided the documents, and life went on.
Sharkey had repeated difficulties with her managers: They were concerned about "sloppy work," her understanding of JPMorgan's financial products, and her overly casual interactions with clients. She was placed on a "watch list" of "people who were struggling."
After Sharkey admitted to lying about returning a manager's phone call, she was fired. She then sued under the Sarbanes Oxley Act (SOX), claiming she was fired based on her report of the client's activity.
In a 2011 order, the district court said that Sharkey had met the burden required to state a claim under SOX. JPMorgan had argued that SOX protects only employees who report employers' violations of securities laws, not third parties' violations. The district court disagreed and the case went on.
On December 12, 2013, the district court granted summary judgment for JPMorgan, finding that Sharkey's report of the client's activity, which was "money laundering," wasn't one of the enumerated protected categories of activity in SOX. And even if it were, the court said, she couldn't be whistleblowing because JPMorgan hadn't done anything wrong. Sharkey told supervisors she thought the client was money laundering, they agreed with her assessment, and responded by telling the client it was over between him and JPMorgan -- not actions consistent with trying to violate securities laws.
The Second Circuit's order vacating the summary judgment took into account one of its more recent decisions, where it held that SOX protected activities extend beyond the six "enumerated categories of misconduct" found in the statute. SOX, the court said, applies to violations of several federal laws and regulations. In light of this new opinion, the court remanded Sharkey's case for further proceedings -- ostensibly to examine the summary judgment motions against the new backdrop of increased SOX scope.
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