Labor & Employment Law Daily Wrap Up, WHISTLEBLOWERS—N.D. Tex.: First Trust Portfolios employee’s whistleblower claims fail in post-trial motions, (Jun 17, 2025)

By Rebecca E. Hoffman, J.D.

The employee alleged that the company’s gift policy violated SEC rules, but his superiors’ and colleagues’ testimony refuted his purported belief that his activity was protected.

In an action invoking the whistleblower protections of the Sarbanes-Oxley Act (SOX) and the Dodd-Frank Act, the Northern District of Texas, on post-trial motions, upheld a jury’s findings in favor of First Trust Portfolios L.P. on an employee’s claim that he was fired in retaliation for reporting a violation of SEC and FINRA rules (Edwards v. First Trust Portfolios L.P., No. 3:23-cv-2239 (N.D. Tex. Jun. 13, 2025)).

The employee claimed that First Trust’s Year-End Gift Policy was an illegal sales contest, and reported as much to the SEC and internally, but the court found that a reasonable person would not believe the policy violated SEC rules or regulations, and, in any event, that there was no causal connection between the employee’s report of an alleged violation and his termination.

At trial, the court empaneled a jury to decide the employee’s SOX claim, and to serve as advisory jury for his Dodd-Frank claim. The jury found in favor of the partnership on both claims, and the plaintiff subsequently moved for a new trial on the SOX claim.

Dodd-Frank. The court first determined that the employee succeeded in showing that he was a “whistleblower,” because he informed the SEC about First Trust’s “Year-End Gift Policy,” and thus reported information to the SEC about a possible violation. Three days later, he was terminated, satisfying the adverse employment action element. Therefore, his Dodd-Frank claim “turns on whether he engaged in a protected activity and, if so, whether there was a causal connection between the adverse employment action and the protected activity,” the court explained.

The activity is protected only if the plaintiff had a reasonable belief that First Trust’s policy violated SEC rules, and, to establish a reasonable belief, he must show both an objective and subjective belief that the complained-of conduct ran afoul of SEC rules, the court said.

Subjective. The court noted that the partnership’s head of compliance explained to the plaintiff that the policy did not break any rules, and the plaintiff’s manager testified that the plaintiff had been involved in year-end gift-giving previously and had not voiced concerns. Testimony also revealed that the employee told a coworker “he might have to use his belief—that First Trust’s Year-End Gift Policy constituted an illegal sales contest—as ‘leverage’ to keep his job at First Trust.” This evidence weighs against a finding of subjective belief.

Objective. Objective belief is shown if a reasonable person in the same circumstances would believe the policy might violate an SEC rule or regulation. But the employee’s coworkers testified to the contrary. Therefore, the court agreed with the jury that the plaintiff did not engage in protected activity.

The claim fails on the causal connection element as well, the court added, based on evidence that the plaintiff’s manager had decided to terminate the plaintiff before he submitted his report to the SEC, and at the time of termination, the manager was unaware of the plaintiff’s report. And even though Dodd-Frank protects a whistleblower who reports to the SEC and an internal supervisor, and is fired due to the latter report, the firing decision had been made before the plaintiff’s internal reports as well, the court said.

Sarbanes-Oxley. The plaintiff’s motion for a new trial on his SOX claim was denied. The jury answered “no” to the special verdict form question whether the plaintiff proved “‘by a preponderance of the evidence that he engaged in protected whistleblower activity [under SOX] before First Trust terminated his employment.’” If the plaintiff reasonably believed his employer’s conduct “constituted mail fraud, wire fraud, bank fraud, securities fraud, violation of a [SEC] rule or regulation, or violation of a federal law relating to fraud against shareholders,” and told a supervisor, he would be a protected whistleblower, but the court found that the jury’s verdict was not “against the great weight of the evidence,” as the plaintiff claimed.

There was no subjective or objective belief that the policy possibly violated SEC rules, as described in the Dodd-Frank analysis, the court found.

The case is No. 3:23-cv-2239.

Judge: Horan, D.

Attorneys: Chase J. Potter (Iacuone McAllister Potter PLLC) for Aaron Edwards. Aaron Z. Tobin (Condon Tobin Sladek Sparks Nerenberg PLLC) for First Trust Portfolios LP.

Companies: First Trust Portfolios LP

Cases: Whistleblowers Retaliation Discharge Procedure TexasNews