Proskauer has bolstered its Labor & Employment Law Department with the hiring of a former co-chair of the Sarbanes-Oxley Whistleblower team at Seyfarth Shaw.
Steven J. Pearlman, who worked as a partner at Seyfarth Shaw for six years, joins Proskauer’s Chicago office as a partner. He will serve as co-head of Proskauer's new Whistleblowing and Retaliation Practice Group. Pearlman’s specialty lies in representing companies faced with various types of single-plaintiff and class-action claims and lawsuits. In a discussion with IFLR1000, Pearlman outlined some of the issues facing employers in a transformed regulatory landscape following the enforcement of the Dodd-Frank Act.
“This is a nascent and, in many respects, green area of law where there is a tremendous risk to companies, not only monetarily, but also to good will, reputations and relationships. Employers are only starting to learn what the risks are, and realizing that they are enormous in many cases,” Pearlman said.
Although employers often found themselves embroiled in lawsuits in the years prior to Dodd-Frank, the statute has vastly widened the field for litigation, with its nearly 850 pages of new regulations and, in particular, with the whistleblower provision found in Subtitle B. The clause offers employees 10% to 30% of settlements over $1 million in successful enforcement actions by the SEC.
“It’s a critical time to make sure that companies are focusing on whistleblower issues. Dodd-Frank’s whistleblower bounty provision is a sea change. All the other whistleblower laws, putting aside the False Claims Act, just prevent retaliation. Now people have an incentive to bring a claim outside of the internal compliance channels. Employers have tried to encourage employees to complain internally through various channels, such as HR, compliance and legal, but now an employee has a monetary incentive to go outside the company, to the SEC,” Pearlman commented.
Just over two years from the passage of Dodd-Frank, we are headed for a critical juncture when incentives for whistleblowers may be even greater.
“Now making the problem even more timely and acute is the likelihood that, in the near future, we are going to see bounties paid out. The SEC has had its bounty program up and running for quite a while. We will soon see sizable bounties, which will tell employers, ‘Hey – look how much money employees can make by running to the SEC.’ In False Claims Act cases, we have seen employees recovering tens of millions.”
In this context, it is hardly surprising that financial law firms throughout the country are actively seeking to lure lawyers who understand employment litigation inside and out.
“Many firms in the marketplace handle a case of this kind as a one-off. As I’ve litigated many of these cases, I’ve found that there are certain levels of subject matter expertise that a successful law firm needs to bring to bear in order to protect and defend companies before litigation ensues, during litigation, and in the remedial phase afterward,” Pearlman said.