Despite finding flaws in the jury instructions, the Ninth Circuit on Tuesday left in place a significant chunk of a jury verdict that former Bio-Rad Laboratories Inc. general counsel Sanford “Sandy” Wadler won against the company in a 2017 whistleblower trial.

Wadler was awarded $11 million in damages after a San Francisco federal jury found in February 2017 that the company had fired him in retaliation for raising concerns internally about potential violations of the Foreign Corrupt Practices Act within Bio-Rad's China operations.

In a 23-page published decision, a three-judge Ninth Circuit panel issued a mixed ruling that left standing the jury's award of $5 million in punitive damages and $2.96 million in compensatory damages. The panel, however, found that U.S. Magistrate Judge Joseph Spero, who oversaw the trial, erred in a section of the jury instructions that listed the Foreign Corrupt Practices Act's anti-bribery and books-and-records provisions as “rules or regulations of the SEC,” falling under Section 806 of the Sarbanes-Oxley Act. The FCPA, the court clarified, is a statute.

“Although the words 'rule' and 'regulation' could perhaps encompass a statute when read in isolation, the more natural and plain reading of these words together and in context is that they refer only to administrative rules or regulations,” wrote Circuit Judge Mark Bennett. “That the phrase 'rule or regulation' is used in conjunction with an administrative agency, the SEC, suggests that it encompasses only administrative rules or regulations,” he wrote.

The Ninth Circuit vacated Wadler's win on his claim under Sarabanes-Oxley, but found that the juror instruction error was “harmless” with respect to his parallel California public policy claim—a so-called 'Tameny' claim named after the seminal 1980 California Supreme Court wrongful termination decision Tameny v. Atlantic Richfield.

“We have repeatedly held that an instructional error is harmless when the jury necessarily would have reached the same verdict under a proper instruction,” Bennett wrote. “In these circumstances, the SOX instructional error was harmless as to the Tameny verdict because Wadler's Tameny claim—that Bio-Rad retaliated against him for reporting conduct that he reasonably believed violated the FCPA—did not depend on SOX.”

In an unpublished memorandum decision also issued Tuesday, the panel reversed Wadler's win on his whistleblower claim under the Dodd-Frank Act. The court cited Digital Realty Trust Inc. v. Somers, a Supreme Court decision handed down after the Wadler verdict, which held the Dodd-Frank whistleblower provisions don't apply to internal reports like Wadler's. That decision will trim $2.96 million awarded under Dodd-Frank's doubling provision from the $11 million verdict.

The Ninth Circuit remanded the case to Spero to consider whether to hold a new trial on Wadler's Sarbanes-Oxley claims.

Wadler's lead appellate lawyer, Michael von Loewenfeldt of WVBR, called the Ninth Circuit decision “a big vindication.”

“We're happy that the court affirmed the Tameny claim and upheld the jury's verdict that Bio-Rad retaliated against our client,” von Loewenfeldt said. He said he was still reviewing issues relating to any potential new trial.

Bio-Rad's lead appellate lawyer, Kathleen Sullivan of Quinn Emanuel Urquhart & Sullivan said that the company was “pleased that the Ninth Circuit set aside the judgment on two of the three claims against it and directed the lower court to reduce damages by nearly $3 million.” The company, she said, is evaluating its “further appellate options as to the sole remaining claim.”

Michael Koehler, a professor at Southern Illinois University School of Law and the author of the FCPA Professor blog, said the ruling is narrow, given the wording of Section 806 of Sarbanes-Oxley, but important nonetheless.

“Words matter and the court found that Congress' use of the phrase 'rule or regulation of the SEC' in Section 806 of SOX was intentional, and thus should not be interpreted to include the FCPA which is, after all, a law—not a 'rule or regulation of the SEC,” Koehler said. “More broadly though, the statutory construction analysis of the appellate court is interesting because the FCPA contains a number of words that Congress intended to mean something and conversely does not contain certain words that Congress intended to omit from the FCPA. This statutory construction analysis is relevant to so many FCPA issues.”

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