After a legal holiday on Monday, the Supreme Court returns to the bench tomorrow for two complex but fascinating hearings. The first will examine the ancient tradition of “whistleblowing,” in a case testing the rights of employees who get fired after exposing misdeeds by companies in the securities industry. The second involves a decades-long conflict between federal and state law over accidents that happen at sea or on inland waters.
The Court will broadcast “live” the audio (no video) of both hearings on its homepage, supremecourt.gov To listen, click on “Live Audio” and follow the prompt when the courtroom scene appears lower on the page. The audio also will be available, under the title of each case, on C-Span TV at this link: cspan.org/supremecourt
First hearing: Murray v. USB Securities Scheduled for one hour, the hearing will begin at 10 a.m.
Background on this case: “Whistleblowing” – exposure by civic-minded people of wrongdoing or fraud in government or the private sector – has an honorable history, dating back to 17th Century England.
In America, its history began before the Constitution, and even before the Revolution: Benjamin Franklin was one of the first American whistleblowers, circulating among the colonies the secret letters that the royal governor in Massachusetts had written, misleading the British Parliament to persuade it to send more troops to control the rebellious Americans. The letters later became widely public, increasing tension between the colonists and London.
As the Revolution unfolded, the Continental Congress in 1777 passed the first whistleblower protection act, giving legal protection to ten sailors who had protested directly to that legislative body about serious mistreatment at the hands of their commanding officer.
Today, at the federal level, there are at least 11 whistleblower laws, and they all have provisions that are similar to those in the first modern version – the Whistleblower Protection Act of 1989. That law was designed to give federal government employees protection from discrimination on the job after they had disclosed misconduct within their agencies.
The 1989 law, and others enacted after that, had the same kind of two-step process for whistleblower cases. First, an employee has a duty at the outset to show that he or she was disciplined or fired at least in part in response to having exposed such misconduct – in other words, blowing the whistle was a contributing factor. Second, if the employee met that first test, agency supervisors then had to show that they would have removed or disciplined that worker even without the whistle-blowing – in other words, that they had valid reason to act.
This two-step arrangement was included in the so-called Sarbanes-Oxley Act, passed by Congress in 2002 in response to the scandal that led to the collapse of the Enron Corporation. That scandal revealed within the securities industry – brokers and investment bankers – a “corporate code of silence” that discouraged employees from reporting fraud in investment operations. The 2002 law was the first federal law to extend whistleblower protection to employees in those companies, partly with the aim of restoring investor confidence in the securities markets. The law gives employees a right to sue.
The facts of this case: Trevor Murray, a financial analyst, was hired in 2011 to work in a U.S. East Coast office of a global investment banking firm, UBS Securities (based in Zurich, Switzerland). He worked on a research desk, separated from the office’s “trading desk,” which made the decisions about buying and selling securities.
Under federal regulations, Murray’s research was required to be independent of any investment strategies followed by UBS. However, he got into trouble with supervisors when he prepared studies that suggested weaknesses in some of UBS’ trading strategies — in particular, investing in pools of home mortgages. Over time, the disagreements deepened, and Murray ultimately was fired. The management claimed he was let go as part of a series of layoffs.
Murray sued, relying on the 2002 law. The dispute now centers on whether he had to prove that he was fired as a result of a specific intent to retaliate for whistleblowing. He argues that his only requirement was to prove that his reports were only a contributing factor.
A jury in federal court ruled for Murray, awarding him $900,000 in damages and $1.7 million to cover his attorneys’ fees. However, a federal appeals court ruled for UBS, finding that it was Murray’s burden to prove that his firing resulted from management’s intent to retaliate.
Murray took the case to the Supreme Court, and he now has the support of the Biden Administration Justice Department. The federal government helps enforce whistleblower laws.
The question before the Court: In a whistleblower case under federal law, does the employee have a duty to show that firing or discipline was a direct result of intentional retaliation?
Significance: Since all of the federal whistleblower laws have the same kind of two-step proof requirement, the significance of this case is obvious. Burden of proof is a fundamental part of the legal process in general, and who holds that obligation usually makes a real difference.
The burden-shifting approach in law involved in this case – giving the party that sues the first duty of proof, then shifting it to the other side to refute the claim – is also a common feature in civil rights cases. The fundamental policy behind this approach is, first, to encourage people to come forward with legal grievances – especially, acts of discrimination – and, second, to make more even the balance of power between individuals and agency or business leaders.
The Justice Department argues in this case that whistleblower law simply does not require any proof of retaliatory intent. The employee need not prove it, and the management need not disprove it, the Department told the Court.
Tuesday’s second case: Great Lakes Insurance SE v. Raiders Retreat Realty Co. This hearing, scheduled for one hour, will begin as soon as the whistleblower case hearing has ended.
Background on this case: It is human nature to fear that something could go wrong when one ventures forth on the sea. Recall this stanza in a famous hymn: “Oh, hear us when we cry to thee, for those in peril on the sea.” That’s from an 1803 poem by English writer and hymn composer William Whiting, written to comfort a student who was about to sail to America.
And, of course, when there is peril in any circumstance, there will be law — to mitigate it or clean up after it. That’s why there is – and has been, since about 900 B.C. – the law of the sea. It is sometimes known as admiralty law, sometimes as maritime law. Often, it is about assigning blame for accidents or mishaps that occur on the water.
This field of law has deep roots in American history. The Declaration of Independence of 1776, for example, protested the abuses of the English admiralty courts, which enforced the trade laws on colonists in proceedings that occurred only in England, so those accused were transported there; no juries were allowed.
When the Constitutional Convention met in Philadelphia in 1787, the Founders were aware of how a variety of differing and conflicting admiralty laws previously enforced by the states had made the law of the sea chaotic. They were determined to have uniform, nationwide admiralty laws, and chose to assign “admiralty and maritime jurisdiction” to the federal courts as part of Article III. Congress also can pass maritime laws as part of its overall legislative powers.
Backing up national law in this field, as in others, the Constitution’s Article VI specifies that federal law is “the supreme law of the land,” and prevails over conflicting state laws.
Maritime shipping is one of America’s most vital industries. It is a major player in a global industry that transports by sea about 80 percent of the world’s cargo – around 11 billion tons in a recent year.
The maritime industry in America, however, has chafed for the past seven decades, trying to cope with a 1955 Supreme Court decision in the case of Wilburn Boat Co. v. Fireman’s Fund Insurance Co. That case involved a small houseboat, destroyed by fire at a Texas lake. The boat was insured, but a demand for payment for the loss was rejected because, the insurer said, the boat had been wrongly used for commercial boating, not for private use.
The Supreme Court ruled that states have broad power over insurance in general, and over marine insurance. It declared that the case had to be decided under Texas state law because there was no provision in federal admiralty law that would apply, and the Court refused to create such a rule. The Court majority said there were possible ways that it could itself fashion an admiralty rule, “but such a choice involves varied policy considerations and is obviously one which Congress is peculiarly suited to make. And we decline to undertake the task.”
The maritime insurance industry has adopted one specific tactic in trying to adjust to that legal reality: it insists in its contracts on having any disputes resolved under the state law in a preferred state, when there is no governing rule under federal admiralty law. That tactic, however, was frustrated – and the impact of the 1955 ruling was deepened – by another ruling.
In the 1972 case of The Bremen v. Zapata Off-Shore Co., growing out of a dispute over towing an offshore oil-drilling rig from place to place, it ruled that a state law preference clause in a marine insurance contract would not be enforced if it would contradict a “strong public policy” of the state where the case was filed.
The facts of this case: A Pennsylvania company, Raiders Retreat Realty Co., owned a yacht that it insured for $550,000. The policy, specifying that it covered “all risks,” was issued by a German company, Great Lakes Insurance SE, and was sold to Raiders by an agent in Pennsylvania.
In 2019, when the yacht was underway near Fort Lauderdale, Fla., it went aground. The damage was about $300,000. The insurance company refused to pay, concluding that the contract could not be enforced because the owner had not kept the fire extinguisher up to date. Fire was not a cause of damage, but the company said that did not matter.
Raiders sued in federal court, making its own claims – based on Pennsylvania state law – against the insurer. Great Lakes Insurance replied that the contract specified that any dispute under it should proceed under New York state law. Ultimately, however, a federal appeals court rejected that plea, ruling that New York law did not recognize Raiders’ legal claims, while Pennsylvania law does, so Pennsylvania law controlled.
Great Lakes Insurance took the case to the Supreme Court, and has drawn broad support there from business groups, including maritime insurance associations.
The question before the Court: Does federal admiralty law require courts to enforce marine insurance contracts that specify which state’s law governs a dispute over accident coverage?
Significance: In the hands of the courts, the field of admiralty law – chaotic when the Founders sought to make it nationwide, uniform and predictable – has grown chaotic again, with the varying and sometimes conflicting state laws governing insurance disputes.
The Court has been an important part of that trend, and Congress has also contributed, because it has strongly favored – since at least 1945, and the McCarran-Ferguson Act – state regulation of insurance, including maritime insurance.
No one involved in this case appears bold enough to ask the Court to overrule its own 1955 decision that was the origin of the breakdown of uniform national policy on maritime law, especially on maritime insurance law. The key to decision in this case appears to be whether the Court considers that the selection of which state’s laws govern such disputes is a national issue under admiralty law.
On Wednesday, the Court will hold one hearing, looking anew at when race can be taken into account in drawing new election maps for choosing House of Representatives members.