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From Securities Regulation Daily, July 26, 2013

Retaliation claim allowed to proceed after employee established prima facie case

By Rodney F. Tonkovic, J.D.

A pro se plaintiff’s Sarbanes-Oxley whistleblower claim against his employer was allowed to proceed. The district court concluded that a jury could find that the employee established a prima facie case of retaliation and that the company could not demonstrate that his employment would have been terminated in the absence of his protected activity. The court accordingly denied the employer’s motion for summary judgment (Perez v. Progenics Pharmaceuticals, Inc., July 24, 2013, Karas, K.).

Background. Julio Perez was employed as a Senior Manager of Pharmaceutical Chemistry at Progenics Pharmaceuticals, Inc., a biotechnology company located in New York. Perez’s main responsibility was working on the development of Relistor, a drug used for the treatment of opioid-induced constipation. Perez did not perform any of the drug’s clinical trials and was not responsible for its marketing or commercialization.

Perez claimed that Progenics fired him in retaliation for a memorandum he wrote to the company’s general counsel and a senior vice president regarding a press release the company issued about Relistor. The press release concerned Phase 2 testing of Relistor and touted “statistically significant activity.” Perez’s memo stated that the representations made in the press release were inconsistent with trial’s actual results and that he felt that this was a fraud against shareholders. Perez attached to his memo a statement by Wyeth Pharmaceuticals Division, Progenics’ partner in the development of the drug that indicated that trial targets had not been met.

On the same day that Perez’s memorandum was delivered, he was denied access to his computer and Progenics’ systems. The next day, Perez met with the Progenics’ CFO and general counsel who asked how he had obtained the Wyeth statement, which was confidential. Perez did not answer and was terminated. Perez then filed a complaint with OSHA alleging retaliation; this complaint was dismissed.

Protected activity. The court first found that Perez presented sufficient evidence to establish a genuine issue of material fact as to whether he had engaged in protected activity under SOX’s whistleblower provision. Progenics argued that Perez did not reasonably believe that it violated any antifraud provision or SEC regulation because he relied on selective quotations from the Wyeth statement. The court disagreed, citing Perez’s expertise in chemistry and his deposition statements that he had reviewed the entire statements and had spoken with colleagues. The court concluded that a reasonable jury could find that it was objectively reasonable for Perez to rely on conversations with colleagues, his review of the Wyeth statement and his own work to form his belief that the press release was misleading.

Contributing factor. The court then concluded that Perez was able to show that the protected activity was a contributing factor to his termination. Perez claimed that he was terminated because of his memorandum and that he never “refused” to answer questions about the Wyeth statement, stating further that he was given permission to speak to his attorney before responding. Progenics, on the other hand maintained that the termination was for Perez’s refusal to answer direct questions about his access to the confidential Wyeth statement. Weighing these competing narratives, the court stated, was not appropriate at the summary judgment stage.

Termination in the absence of protected activity? Finally, Progenics was unable to show that it would have terminated Perez even in the absence of the protected activity. Again, Progenics argued that Perez would have been terminated because he misappropriated the Wyeth statement and refused to explain how he got a copy. Perez, for his part, asserted that the statement was widely distributed and that he had access to clinical trial results as part of his job duties. The court found that there was a genuine issue of material fact as to whether Perez “misappropriated” the Wyeth statement at all.

The court noted in addition that Perez’s computer was removed and that he had a “hostile” encounter with the general counsel before there was any discussion of his access to the Wyeth statement. This, the court stated, could be considered as evidence that Perez was terminated because of the protected activity. The court noted additionally that the fact that Perez was terminated less than twenty-four hours after he engaged in the protected activity may be evidence of causation.

This is case No. 10-CV-8278 (KMK).

Companies: Progenics Pharmaceuticals, Inc., Wyeth Pharmaceuticals, Inc.

Attorneys: Eric David Raphan (Sheppard, Mullin, Richter & Hampton) for Progenics Pharmaceuticals, Inc. and Robert Baker.

MainStory: TopStory CorporateGovernance SarbanesOxleyAct NewYorkNews

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